Growing a business in Today’s Economy

This post is actually a stripped-down version of the preface of my first book,

Today’s Growth: Bridging Yesterdays strategies with Today’s Technology

The goal of the book is twofold.

1.  Growth PRINCIPLES need to stay, STRATEGIES need to change
2.  Business Models evolve

Let’s start with number one.  Growth Principles need to stay, Strategies need to change.

Let’s look at the oldest  Growth Principle:  TELL MORE – SELL MORE

Talk to any business owner, entrepreneur or manager and they will confirm the obvious principle of Tell More – Sell More.  This principle has been taught many different ways but suffice it to say that if you expose 100 people to your product in one city and 1000 people to your product in another city, the odds are pretty strong that you’ll sell more products in the city that had 1000 people exposed to your product.

My book is going to deliver case studies that include the likes of singer Colbie Callait and the shoe company Zappos.  They both embraced the good old Growth Principle Tell More – Sell More, they simply did it without advertising.  When I explain to clients how Colbie Callait used MySpace and how Zappos used Google Product Search, Google Alerts and Twitter Follow,  they are amazed that hundreds of millions of dollars of business was generated without an ad campaign or paid marketing of any kind.

The principle of Tell More – Sell More did work, they just used a more current strategy.  Instead of good old fashioned advertising, they used free Google tools and social media.  Many people ended up hearing about the now Grammy nominated singer and Grammy nominated songwriter, they just didn’t hear about her on T.V., on the radio or read about her in the paper.  This is an example of embracing technology to the fullest.  Zappos has now credited close to 25% of their Billion dollar shoe and clothing company to free Google tools and Twitter.  I devote a complete chapter to what went into Colbie’s and Zappos’  meteoric rise and how any company can embrace these technologies.  While many business owners are turning their noses up to twitter and facebook, Time magazine is writing cover pages that read, “How twitter is changing the way we live”.

Point number two.  Business Models evolve.

Let’s start with an obvious one, Real Estate.  Looking specifically at the short term model of buying properties, fixing them up and selling them.  For nearly 50 years this simple model of buying a property, fixing it up and selling it within 90 days to 5 years was a very solid model.  Ask anyone today if this is currently a “Working” model and you will get mixed reviews.  On one side you’ll get the savvy investor that will tell you that if you buy foreclosures it will still work.  On the other hand, it is believed that the market has weeded out maybe up to 20% of all real estate investors in just the last 36 months.  What happened?  Very simply, the model evolved.

For nearly 50 years residential property has appreciated approximately 1% – 10% per year across the country.  For example, my parents bought their first house in 1972 for $27,000 and sold it in 1981 for $72,000.  They turned around and bought their next house in 1981 for $115,000 and today, 29 years later, it’s worth approximately $320,000.  On  paper it looks like everyone should jump right in to real estate and make their fortune.  What the above numbers don’t tell you is that my dad’s house was worth $370,000 just 2 years ago.  It has dropped almost 15% in value the last 2 years, and by all accounts, it’s still dropping.

When it comes to business models, they change.

The real estate business model of buying and selling homes has been altered by the economy.  When the economy caused median home prices to drop consecutively, the model was drastically altered.

The easiest way to understand how a business model works is to understand how a cake is baked.  To bake a cake you need 3 items:

Ingredients
A Recipe
Steady Temperature

When it comes to a business model, they also need three items:

A Product or Service  (Ingredients)
Management of a Business Plan (Recipe)
Economy to Support the Product or Service (Temperature)

In the case of short term real estate investing someone turned the oven from 400 to 325 degrees.

Now if we were able to call the late Julia Child and tell her that we have a cake recipe that calls for 400 degrees, but our oven only goes to 325 degrees ( the down economy ), there is a chance that master chef might have said something like “Well, swap out the butter for good old fashioned lard and just cook it longer” meaning that if you truly understand your model you can adjust the ingredients or the recipe and still come out with a pretty good cake.

Along these lines, we were recently contracted to strategize and build the site www.buyfixandprofit.com.  The client is a company right in the middle of the short term buying and selling market.  Barely surviving the last 36 months, they want to ensure their success in the future by helping others in real estate stay laser focused on the “profit” side of the short term market.  It has been very enlightening strategizing with this client and learning how quickly the real estate market changed.

I was very excited when the client included the word “profit” in the domain name.  It is a constant reminder in our strategy sessions to make sure we remember that one of the main points of any business is to “profit”.  It continually reminds us to provide the future readers the best real estate resources and materials to help them navigate the turbulent industry.

I’m writing this book for 2 reasons.

First, I’m in shock at how many companies today are still using growth strategies from 1975 and watching their businesses slowly slip away.  To make it worse, many managers are increasing their same ad and marketing campaigns while not knowing their model is now “broken”.  What they aren’t realizing is that they are adding more ingredients to the same recipe without understanding that the oven ( the economy ) may not heat up in time to bake their cake.  The question is, how do you explain to businesses that have been very successful for many years that if they don’t change HOW they are going about growing their business, they may soon not HAVE a business?  How do you explain to the previously wildly successful company that while they are slowly slipping in market share many companies in their industry are growing quite well?

I’m writing this book to explain, in plain English, what some companies can’t seem to see is the very thing that some companies can’t live without.

They say that hindsight is very clear and I’m living proof.

The second reason I’m writing this book is because 15 years ago I owned 2 very different companies. The first company was a marketing and advertising company that had 30 reps in 6 states.  In that company we built a working model that was able to double the company’s gross sales 5 out of the first 7 years.  At the same time, I also owned a small chain of video stores that grew rapidly for a handful of years, only to hit a brick wall.

Remember the independent video store?  They were the stores you would walk in and give the clerk a few dollars and leave with 3 VHS tapes.  For a few years, the video store chain was on the same hyper growth as my marketing and advertising company but unfortunately we came face to face with 1998.  This was the coming out party for DVD’s.  Although we brought in DVD’s, these little discs were the pre-curser to “DVD’s through the mail” and what is now “movies on demand”, movies downloaded right to your laptop or HD T.V..

I was making the same mistakes I see so many businesses making today.  I was pushing my “Tell More – Sell More” button without checking what other buttons I had available.  As I was pressing harder with more balloons on rooftops, radio promos, grand re-openings and cross promotions, I was paying no attention to the strategy called “STACK  IT  DEEP,  RENT   IT  CHEAP”.   I was so ENTREPRENEURIALLY   BLIND  that I dismissed major chain stores offering very large amounts of money to buy my stores.

Sometimes the most obvious is also the most invisible.

As Tiger Woods famously said, I have a coach because I can’t see my own swing.

I didn’t realize at the time that the independent video store model was dying.  The national chain model was growing.  The model of “stack it deep, rent it cheap” was beating the model of “support your local business owner”.

Oh how I fought that one.

Instead of building something to be proud of and selling to a larger outfit, I blindly missed the change in the business model from the “independent store with customer service” to the “national chain with a deeper selection”.  I missed it so badly we ended up selling the inventory for 30 cents on the dollar to others that wanted to gut it out in the video business.

It wasn’t until recently when I noticed that one of the largest national video store chains of all time showed a stock price of $.40 per share that I realized that in only 48 months the whole video rental model of “national chain with a deeper selection” shifted again to “movies through mail and immediate downloads”.  We didn’t see movies through the mail until 2005.  The model had evolved again. Sounds a little like the real estate industry?

Today, in the video industry, technology is leading the way.  It is a battle to see which 2 or 3 companies can get there first and fast to dominate the immediate download market of HD and BluRay videos.  You see, in my video stores,

NO MATTER WHAT WE DID,

we never had a chance.  The model had BROKEN.

The business model evolved.  The Ingredients and the Recipe no longer mixed.

The real question involves you.  Is your industry going through something similar?  I’ll bet it is.
I don’t know you and I don’t know your industry but I’m going to make a few assumptions ( and we all know never to assume ).

You are not as sure about your growth as you were 36 months ago
Your industry is hovering or downsizing
You have found yourself saying, “We should try this” much more often.
You know your business plan or business model should be revisited but you don’t have time
Your spending time on the expense side when you’d rather be on the growth side
You know in your gut you are in the right industry, you just don’t know exactly how to navigate right now
Instead of “causal” management, you’ve found yourself in “reactal” management

My hope in -

Today’s Growth: Bridging yesterdays strategies with Today’s Technology

is to present enough solid and current evidence of growth in Today’s market, that causes you to rethink your current growth strategies.

I believe we can all add a dash of technology to our high-touch companies and prosper in years to come.
If this book does it’s job you will be forced to ask yourself the following  few questions:

Are we using the most current technology to grow our business?
Are there others in our industry progressing faster than us?
Are we operating in a “Working Model”?
Can we predict our gross sales and net profit 6 – 12 months out,  and if not, can we build one?
Do we have our hands on a product or service people need or want?
Do we have proven management of a solid business plan?
Does the economy support our plan or are we selling VHS tapes?

Here’s to Bridging Yesterday’s Strategies with Today’s Technology.
Here’s to Growing Today !!

-Ken Courtright