Just over a year ago I wrote an article for Furniture World titled “Planning for Uncertainty”. [If you missed it or want to refresh your memory in light of current events, visit Furniture World's website at https://www.furninfo.com/furniture-world-articles/3769] The geo-political events at that time led me to think home furnishings retailers should plan for an eventual recession. I never thought that the trigger for this economic turn-down would be a flu-like virus. Regardless of the cause, the game plan outlined in the article is still valid.
Here, are some additional ideas — a quick checklist of 11 important considerations that can help you to either prevent a large downturn in your business or at least reduce the damage. In a recession, both short and long-term thinking is required. Hopefully, many of you will be able to take advantage of the current situation to sling-shot your sales and profitability higher when all of this blows over.
Be a strong and
Communicate with your employees, with your customers and with the public at large. Let them know that together you will move beyond the current challenges. Do not panic! Panic is not part of any success equation. Be strong. If you lead, people will follow. If you hide, people will seek an alternate leader.
Carefully monitor your traffic numbers.
Most of you should have traffic counters by now to measure customer traffic accurately. During this virus spell, depending on your area, you may see an immediate drop. Know that this drop will be temporary. If, after the virus blows over, the drop persists it will also be temporary. You may need to make adjustments in various operating activities such as non-lean staffing, advertising and business processes, if this occurs.
Take advantage of any government business incentives.
At the time of this writing, these incentives are unclear. However, it is clear that there will be some. They may include lower payroll taxes, cheaper loans, filing extensions, and reduction in labor-related costs. Regardless, ensure you capture all of what is possible to benefit your business.
Negotiate leasing costs. An economic downturn is a buyers’ market.
I have been through many successful lease renegotiations, so it definitely is possible. Whether it be short-term or permanent, it is definitely worth a try. You ideally want to get to an occupancy cost that is a maximum of 10 percent at your lowest possible volume. Or, better yet, negotiate a temporary percent of written sales lease.
If looking to expand, take advantage of lower than normal site costs.
This could be a huge longer-term play if you have a five year time horizon. Or, if you are currently renting, maybe it is a good time to buy.
Take a good look at the reliability of your vendors' supply chains.
Move towards vendors that have best sellers available. Whether stocking frames or customized, the customers who want to buy will likely want speed. Align with reliability and speed.
Increase gross margin when traffic goes down.
When traffic goes down, the close rate should go up if you focus on providing a pristine service. Best-sellers can often fetch a slightly higher price. As well, in times of uncertainty, insurance (aka product protection) can grab more attention if presented correctly. If you are successful in growing margin, you need less traffic.
Mine your list of past customers.
In times of challenge, people must “lean in”. Those who wait will lose. Dust off your follow-up systems and processes and set yourself apart from everyone else.
Roll out new products and services that you have not tried before.
Roll out new products and services that you have not tried before. Some examples are In-home design, annual delivery clubs, in-store work-shops, realtor referral programs, customer point loyalty systems, text follow-up systems, curbside delivery drop-off, face-time shopping. If you have more time on your hands, launch something new! Pick or create at least one of the suggestions listed above and make it awesome.
Employee-wise, focus, on revenue earners rather than revenue burners.
Seek to get as many of your employees interacting with customers as possible. Directly or indirectly, this is what makes money. Eliminate fixed costs that do not produce at least three times the cost in revenue. This is based on my rule of thumb equation using contribution margin. [For more information on fixed costs and contribution margin see furninfo.com/furniture-world- archives/12522.] You may need to downsize and it might be better for your employees to take a temporary layoff and come back with full benefits when things normalize.
Try to take the emotion
out of the equation.
Consistently analyze your business for possible areas of improvement, prioritize your strategy, actualize/execute the results you need to achieve your strategy and continuously seek improvement.
There will be a period of inactivity, maybe even closure for a time. But you will open up again and your employees, vendors and customers will be ready to get back to work. It will be sluggish at first and then I predict a rapid period of growth back to, and for some, above normal. Hopefully, we will soon put this bio-economic anomaly to rest and get back to normal business. I truly believe that those who take calculated, strong actions of leadership without panic will be those who come out of it on top in their market areas.