“WHO BRAVELY DARES must sometimes risk a fall.” — Chinese proverb
It was a great couple of years, wasn't it? We basked in the glow of a super-charged economy. For my Bay Area-based catering/events company, Now We're Cooking!, it meant lavish weddings, extravagant birthday parties, dazzling corporate launches, and more company picnics and holiday events than would fit into our calendar.
Whoops! It ended. Already struggling with the crash of the dot-com wave, we were hit hard by the economic consequences of Sept. 11.
After 12 years, I've become keenly aware of various fluctuations that affect my business, but those are often seasonal and predictable. Even in the best times, one needs to be prepared for sudden changes. Many successful businesses have been caught off guard by unexpected shifts. I know.
Event-related businesses need to run lean, profiting from busy months to store away the dollars they will need during inevitable slowdowns. However, an economic slowdown can also be a great time to promote your business and diversify the markets you serve and the products you sell.
Taking good times for granted can lead to despair. As does a captain of a ship, one must expect times of smooth sailing and times of treacherous waters. A smart business owner prepares for both. So, what to do until things return to “normal”?
Normal, of course, is relative. In my years as a business owner and, prior to that, general manager of Along Came Mary! in Los Angeles, one constant in the event industry has been, well, inconsistency. In the Bay Area we say, “Winter is slow, summer is fair, and fall until the holidays is crazy.” But it doesn't always work out that way.
Our industry is affected by unique, often seasonal, fluctuations in the business market that vary depending upon the size and type of your business and the influences of your city or region. San Francisco has cool summers, so many of our weddings take place in the fall, which usually has warmer weather … you hope!
So how do you chart those waters in a recession? How do you ensure you're prepared next time? Each business is different; you must evaluate your situation with the help of your professional team. My five-point strategy has helped guide me through lots of ups and downs over the years:
- WATCH YOUR MONEY
Know how much you make, and understand your bottom line. Take time to understand the cash flow needs of your business — each company has its own special set of circumstances. Find a good CPA who understands this industry and determine your monthly overhead and what you need to make it through all the fluctuations.
Most event businesses have a few good months a year, then a lot of slow ones, so you must be watchful at all times. Keep overhead as low as possible so during those busy months you can reap profits that you can store, as squirrels store nuts for winter.
Look at your pricing structure, and make sure you're making a profit on everything. Those little “extras” you throw in to please a client must be accounted for elsewhere. Folks tend to panic during recessions and cut prices. Be careful! Don't sacrifice profits for short-term cash flow.
You say, “One needs to be flexible at times like this!” Yes, but don't give away the store. Being flexible means working with a client to offer the best possible product for the price — it doesn't mean giving it away.
Lowering prices may come back to haunt you! A caterer selling a $40 menu for $25 to get a job not only undercuts his profit margin, but will have trouble justifying an increase when stability returns.
- DIVERSIFY THE RANGE OF SERVICES YOU OFFER AND MARKET AREAS YOU SERVE
Many companies in the Bay Area that built entire businesses on the dot-com craze struggled after losing almost all their corporate clients.
Target different types of clients in diverse industries. I had a sense early in 2000 that the dot-com bust was inevitable, so I hired a wedding specialist to bolster that end of business. Thank goodness for weddings — they are recession-proof! People will always marry, and they've usually saved for that special day. But there's so much competition in this market that distinguishing yourself becomes very important. Play to your strengths — give prospective clients great service.
Offer convenience. Busy consumers love one-stop shopping, so don't send them away because you can't offer them everything they need. Develop alliances with colleagues in related areas, offer clients a great range of options — and everyone wins.
- STAY COMPETITIVE
In a weak economy, companies often make a mistake of reducing marketing efforts to save money. Do the reverse: Work your client database, call old clients, ask for referrals, send announcements of new products and services. Competition is greater at times like these, so don't fall behind!
Hang on to existing customers by enhancing services you provide. Even in a recession, customers demand and appreciate good service, which is where you can lead the pack. Attentive staff, a bright telephone greeting and a “can-do” attitude go a long way when the consumer is looking for added value. Don't underestimate the value of great service to attract and retain your customers.
- REMEMBER TO TREAT YOUR EMPLOYEES WELL
If you're preoccupied with your own worries, you may forget your staff is going through this as well. They may be worried about losing their jobs. Share your concerns, paint a realistic picture of what you need as a team, and express your vision. Allow your crew to become part of the solution by creating equilibrium in your organization. These principles apply whether you're a tiny Mom-and-Pop or a large concern. Your staff is your best asset. If they feel they are appreciated and their contributions valued, their efforts will help keep your ship from running aground.
- CHIN UP!
Remember: This too shall pass. There's a spirit that led you to start your own business — hold on to that feeling! Chart your course like that ship's captain, keep an eye on your instruments and your position.
Through struggle and challenge, we emerge stronger and more resilient, both as people and in business. If it's worth it to you, then you'll find ways to get through the scariest roller-coaster ride. Most in this industry have a bit of the gypsy, the wanderer, the adventurer — or else you would've been an accountant (as I was once). You've chosen a rollicking, unpredictable endeavor, with rewards far greater than anything money could buy. But it's still business — and all the usual rules apply.
Stay alert! Be grateful for your opportunities, and more will come your way. Recessions are fed by fear and doubt — so believe in yourself, and lead the wave back to prosperity!
Laurence Whiting founded San Francisco-based Now We're Cooking in 1989. He may be reached at 415/255-6355; www.nowcook.com.