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Regrouping After Business Losses
IMR, June 15, 2004
With the collapse of the World Trade Center in 2001, Harriet Beckman watched the demise of most of her business with a large brokerage house headquartered there. Beckman, president of Whitman Printing Corp., a distributorship in Mineola, N.Y., sold the firm mostly buy-sell tickets and documents for security deals. After 9/11, the brokerage house re-established itself in a new location, but opted for a largely paperless office.
"They were slowly going away from forms before 9/11," says Beckman. "With the demise of the World Trade Center, they rebuilt the company and did it without forms." Beckman has continued as a supplier to the brokerage house by offering different products, primarily stationery. In addition to letterhead and business cards, Beckman sells the firm pocket folders and some 4-color printing.
Losing business is difficult: The problems are compounded when you suffer more than one loss, an all too common occurrence in a tight economy. Early this year, the French parent company of one of Beckman's clients declared bankruptcy. It sold the American business, which was solvent, to retrieve some money. Beckman was paid for her previous work, but the account was gone.
Whitman Printing is working hard to recover from lost business and a sluggish economy. "We're struggling, and I can't deny it," says Beckman. The following is advice from Beckman and two turnaround specialists on how to prevent some of the devastation associated with business loss:
- Be proactive. "Unexpected tragedies, such as hurricanes, that wipe out a business are rare," says Peter Tourtellot, managing director of ALTMA Group LLC in Greensboro, N.C. "Most companies know what's happening to their business, but they get in the habit of saying, 'I'll do that tomorrow.' Tomorrow never comes." ALTMA Group specializes in crisis management, restructuring and reorganization in out-of-court environments as well as Chapter 11 bankruptcies. "Examine your business now while you still have business," says Tourtellot.
- Manage the customer relationship, says Robert Katz, managing director of Executive Sounding Board Associates in Philadelphia. "Be attentive to your customers," says Katz. "If business with a customer is 5 percent off from the same time last year, either business is soft or they're going elsewhere." Katz, whose company focuses on business turnarounds and crisis management, encourages distributors to visit clients regularly and ask about their businesses.
- Make marketing a priority. In tough times, companies often slash marketing efforts to save money. That's the wrong approach for printing firms trying to gain new clients. Whitman Printing has employed a couple marketing strategies to build business, including telemarketing and direct mail. It sends post cards with variable printing to attract customers.
- Diversify your client base. "Most companies conduct too much of their business with two or three companies," says Tourtellot. "When Wal-Mart sneezes and you have 75 percent of your business with them, you get pneumonia." Tourtellot says that no single customer should represent more than 10 to 15 percent of your business, but admits that's "easier said than done." In addition, he encourages companies to branch into different industries: If all your business is in health care, you'll feel the pinch when that industry does.
- Expand your product offerings. When the brokerage firm stopped buying forms, Beckman began selling it stationery. She encourages distributors to focus on value-added products rather than commodities. "The low end of the market is going to disappear," warns Beckman. "Distributors have to be positioned higher than the sell sheet routine." Consider branching into promotional products or offering design services, says Beckman.
- React quickly. "If you lose business abruptly, you have to reduce costs, overhead and expenses immediately," says Katz. You can't maintain the status quo and assume sales will pick up, he adds. You'll probably need to layoff staff or reduce their work hours and suspend non-critical spending. "Plan the rebuilding process in conjunction with revenue growth," says Katz. As sales increase, rehire employees.
- Keep key people in the loop. "Consult the people you trust for advice," says Katz. "They will tell you the truth." This might include formal or informal boards of directors, industry peers and business consultants. "If you have a lender, let them know you've lost business," says Katz. "But be prepared to let them know how you'll solve the problem." Katz admits it's tough to fess up to banks and other lenders, but he adds, "If they find out at the end of the quarter, you'll do irreparable damage." Keeping people informed "shows you're on top of the situation and managing through the crisis," he says.