This short article is 5-star advice for any enterprise facing a threat — from veteran entrepreneur Norm Brodsky (Inc.’s Street Smarts).
Facing the giant disruption of a 1979 NYC transit strike in the first year of his start-up Perfect Courier, Brodsky goes looking for advice from a customer who’s been through strikes before. The dialogue he retells is priceless — a remarkable insight into adaptive enterprising.
By pivoting on a dime into providing a contingency car service during the strike, Perfect Courier survives and Brodsky gets wiser:
Aside from the additional cash and the new sales, I took away from the episode one of the most important lessons I’ve learned in business: When in doubt, go to your customers. They will tell you what they want and lead you to solutions you’d never come up with on your own. Indeed, just about every successful new initiative I’ve taken in business since then has come from listening to customers.
Topics: Adaptation, Customers, Opportunity, Pivoting, Survival
Here’s my online “kiosk” explaining the credit crunch:
Three exquisitely complementary articles pull back the curtain on how this crisis happened and why it will take years before we’re on solid ground again.
Links and brief excerpts below the fold.
Topics: Economy, Opportunity, Productivity
Truly scary graph.
www.visualizingeconomics.com
To me, this trend is exhibit A for why we have to pursue health care reform sooner rather than later. To solve the problem and create a sustainable health care system for the future, we need to unpack the sources of the increases. I heard a statistic once (hope it’s right!) that in the 1950s, we spent $500 on health care per person per year. Now we spend $5,000. Adjusted for inflation? I don’t know. But think about it: all the new procedures, treatments, prescriptions.
And the medical revolution is just getting started.
Rationing is a dirty word in health care, but look at that graph and tell me how we crack this nut without applying an 80/20 mentality to what we fund and what we don’t.
And note that we’re at about $2.3 trillion — about 16% of GDP and climbing.
This is the kind of “turbulence” where entrepreneurial opportunity resides. To find it though, segmenting costs by funding source doesn’t tell us much. Instead, what are we spending money on? Where are the big expenditures ripe for innovation and process efficiency? Where can innovators substitute more cost-effective substitute products and processes?
To that end, there’s a article today about Wal-mart entering the market with a high-volume, low-cost scheme to sell electronic medical records to the millions of small physician offices that are now paper-based.
For entrepreneurs looking for opportunities, I recommend learning a bit about the vision of strategy gurus Michael Porter and Elizabeth Teisberg to apply innovation and “volume-based competition” to develop highly efficient, cost-effective treatment protocols for the most common and expensive medical conditions. Diabetes, for example. Two resources for those who want to learn more:
Review of their 2006 book Redefining Health Care: Creating Volume-Based Competition on Results
Link to Porter and Teisberg’s resource-rich Web site
To bring this back to recessioneering, find the greatest pain points for suppliers, patients, and payers, and go from there.
Topics: Economy, Health care, Innovation, Opportunity, Substituting
Arnold Goldstein’s books on small business are pragmatic and tactical. I was able to locate a copy of his out-of-print 1983 book How to Save Your Business. He’s got some very good tips which I will be passing along here.
Here are excerpts from The Care and Feeding of Creditors:
Creditors head my list of culprits who can drain cash more quickly than you can take it in. It’s an interesting paradox. When creditors know you’re in trouble, they push as hard as possible for as much as possible before your business collapses….
Survival means saying “no” to creditors pushing for payment on past debts….A “no-nonsense” policy [i. e. desperation plan] can keep money in your till:
- Make absolutely no payment on past bills owed trade creditors.
- If a supplier refuses to ship C.O.D. without payment on a prior debt, switch suppliers. Few suppliers enjoy a monopoly….Once you call their bluff, most suppliers will agree to ship C.O.D. without payment on a past debt.
- Don’t allow creditors to recoup payment by withholding trade or volume discounts, promotional allowances or other purchasing incentives. You want the same price and allowances as any other cash customer.
- If you return goods for credit, insist on a credit agains future purchases. Don’t let anyone apply the credit to the prior balance.
- Refuse to provide collateral, a mortgage on business assets, or a personal guarantee, unless you are receiving a big benefit, such as additional credit, in return.
- Forget excuses. Your check is not in the mail. Your accountant does not have the checkbook….Be honest. Say you need time to decide what to do with your creditors’ old bills. You know it, and your creditors know it, so why not be honest and just say it? Creditors will respect you and won’t badger you for payment every day until you run out of excuses.
- Never acknowledge your debt or the fact you’re in trouble in writing. Do it verbally but avoid specifics. A written admission of insolvency can give your creditors ammunition to throw you into bankrupcy.
- Don’t be intimidated. That’s the key to success. Creditors can be intimidating. They’ll threaten…. In reality, general creditors can do very little harm. They’re toothless dogs who love to bark.
- Refer all legal correspondence to your attorney….
- Post these rules by your phone….You face hostile creditors every day and it can be tempting to write them a check to get them off your back. Yet survivors know how to say “no.”
Obviously, Goldstein is describing a last-ditch defense when you have to sacrifice supplier relations in order to get through. When things aren’t yet at that stage, paying suppliers quickly in a recession (and other times) can garner enormous good will. When I have a tight month, I sometimes send 10% as a message of intent to pay.
Topics: Cash positive, Credit
Today’s WSJ column by Meredith Whitney is must reading for any business that depends on credit cards or has customers dependent on credit cards. Armed with statistics, Whitney predicts trouble ahead as credit card companies aggressively reduce credit lines to limit their exposure.
Currently, there is roughly $5 trillion in credit-card lines outstanding in the U.S….My revised estimates are that over $2 trillion of credit-card lines will be cut inside of 2009, and $2.7 trillion by the end of 2010.
Inevitably, credit lines will continue to be reduced across the system, but the velocity at which it is already occurring and will continue to occur will result in unintended consequences for consumer confidence, spending and the overall economy. Lenders, regulators and politicians need to show thoughtful leadership now on this issue in order to derail what I believe will be at least a 57% contraction in credit-card lines.
…Without doubt, credit was extended too freely over the past 15 years, and a rationalization of lending is unavoidable. What is avoidable, however, is taking credit away from people who have the ability to pay their bills. If credit is taken away from what otherwise is an able borrower, that borrower’s financial position weakens considerably.
Whitney calls for national action to avoid a train wreck.
If your business relies on credit cards for cash flow management, it might be a good idea to speak with a bank about a line of credit instead. Be prepared.
And, think about it, beyond the potential constriction on existing businesses and consumers, credit card borrowing is the primary way that new business startups are financed. Startups contribute millions of new jobs each year to the economy…when they can get financing. Ouch!
Topics: Credit, Economy, Middle class
