The Economy is No Excuse!

Officially we're 12 months into this recession, and let me tell you there's one thing I'm already very tired of - people using the economy as an excuse! Yes, times are bad. Yes, credit markets are tight, financing is more difficult. Yes, more people are unemployed, and exponentially more people are anxious about the future. Some industries are struggling, particularly some real estate, automotive, and tourism-related areas. Some geographies are struggling, particularly parts of Florida, California, Michigan, Ohio, and some pockets around New York City and Washington DC. If your business is heavily dependent on these factors, then you are being impacted by the bad economy, and there are few if any businesses entirely unaffected right now. And there is certainly no doubt that businesses and individuals are hurting right now, and I'm not meaning to minimize that pain.

But I've been in this industry for three recessions now (four if you count the post-9/11 downturn), and even though this situation is unique among all of them, one thing is still the same - people like to blame things on the economy. Having a bad sales month? It's not your lack of marketing or a bad sales staff - it's the economy! Need to let an unproductive employee go? It's not you making a management decision - it's the economy! Going out of business? It's not poor management, it's the economy!

It came to me this morning when someone sent me a news item about one of our competitors, who is reporting their 7th straight annual loss (this one nearly $5 million), is being sued by 10 of their franchisees, and had to report that their auditors expect them to run out of cash and potentially shut down operations within 6 months. In their regulatory filing do they accept responsibility for the problems? Of course not - it's the economy! They mention the "current financial turmoil" in the banking industry, and blame the lack of franchise sales on the inability of candidates to get financing. If they do go under, as appears likely, will they apologize to the orphaned franchisees for not running a healthy organization? I don't think so - the economy is too easy a scapegoat for that.

The thing is, anyone who scratches beneath the surface can see another picture. They haven't ever had a profit - ever, not since they started in 2001. Their fiscal 2008 operating expenses were $5 million more than their revenues, and their revenues were $2 million less than the previous year. (Just for comparison's sake Computer Troubleshooter's franchise network is double theirs, and our total franchisor operating budget is a comparatively miniscule $600k/year - apparently we're the "lean & mean" franchising system here!). What exactly in today's economy caused them to lose money in 2001, 2002, 2003, etc? And how exactly, if we were not in a recession today, would spending $5 million more than you bring in look like a smart move?

No, the economy gets the blame but the economy is just the magnifying glass today, showing all the faults in the systems people previously claimed were healthier than perhaps they really were. Today's recession gives management teams carte blanche to escape any personal responsibility in the failings of their businesses, and that's doubly-unfortunate since its' that same lack of responsibility on a larger scale that seems to have gotten us into this mess!

Now I'm not intending this diatribe to make it sound like I'm the perfect manager. Lord knows I'm not! In fact we just got the new Entrepreneur magazine with the Franchise 500 rankings for 2009, and for the first time since 2001 Computer Troubleshooters is not ranked. At all. Even though we're by far the largest in our industry, even though we grew by 5% last year, we got no ranking at all. Why? Entrepreneur doesn't disclose their formula for rankings, but I'm sure it's based on our financials, and because the rankings are done in July they use the financials from our last full year, which for us was fiscal 2007. And in fiscal 2007 we posted a substantial financial loss - well, substantial for us anyway, since we lost $111k that year. (By comparison our parent company, MerryMeeting, posted a nearly $4 million profit, so we're definitely the small fry in the family as far as financials go). Still, a loss is a loss, and our $111k loss was due entirely to a write off of $198k in bad debt - old receivables that we never cleaned up or monies that we didn't do a good job of collecting. As the CEO for Computer Troubleshooters that loss is entirely my fault, and thus our lack of Entrepreneur ranking for 2009 is entirely my fault as well. (But our 2008 financials are strong, and we're seeing a TON of new folks opening new CT franchises, so watch us bounce back strong in next year's ranking!)

My point though is that business is business and management is management, and if you want to run a business you have to be prepared to manage it during economic booms and economic busts. The world has not stopped turning just because unemployment has hit 7%. The economy has changed, in some ways temporarily and in some ways perhaps permenently, but there is still an economy, and that means people are buying and selling goods and services right now. Some of the buying patterns have changed, and a good manager needs to adjust for that.

For example what we're seeing with Computer Troubleshooters is that nervous business owners are less likely to buy our "all you can eat" BEST plan (managed services), which is normally our best seller. But we offer 4 plans, and we're finding that there's good demand for our next plan down the ladder, so we're adjusting our monthly marketing upates to focus more on those. We're also seeing that as people cut back on discretionary spending on things like vacations and eating out, they're exhibiting traditional "nesting" patterns by spending more on things they can enjoy at home - so we've ramped up our focus on our residential managed service plans and home entertainment offerings. I can't give away all our secrets of course, but things like flexibility, customer choice, and clear productivity enhancement are the buzzwords that are driving a lot of our marketing development for the first half of 2009.

Today's economy is an opportunity. It's an opportunity for stronger, healthier companies to distinguish themselves and grow, sometimes by acquiring other less healthy companies (and yes, CT may do some of that as well). It's also an opportunity to make excuses for poor performance, but don't fall into that trap. Use this opportunity to start or grow your own business - there are customers out there right now who need you. And the economy needs you too.