Business Details

BY FRANK A. STASIOWSKI, FAIA

Identify Great Opportunities in a Slow Economy

BusinessWeek.com recently ran a provocative article about the slowing economy: What do MTV, Trader Joe's and the iPod have in common — aside from being ubiquitous brands that make the lives of many of us much more agreeable? All three of these successful and well-respected brands were born during recessions (Trader Joe's, 1958; MTV, 1981; iPod, 2001). The point is, if you look at a slowdown as an opportunity to be better and smarter, you can do very well.

As a design professional, here's how you can elevate your brand and be even more successful — even when the economy slows down.

A Sustainable Business Toolkit

These seven tips are good advice to follow in any economic scenario — but even more critical when you think work might slow down.

1. Watch your hiring. When possible, use overtime and short-term contract personnel to handle peak work periods. Push up current utilization rates so that if a downturn occurs, your rate will be in an acceptable range. Commit to keeping your best performers and make cutting staff a last resort.
2. Increase your marketing. It's always best to market your services when you are busy because this is when there are the greatest opportunities for adding new work to your pipeline from existing clients and client referrals. You must make time to do this. Marketing in a slow period is like waiting until you are thirsty to drink on a hot day. You are much more likely to take on bad work and under-price your services, which are habits that can hamper you long after the down cycle is over.
3. Look for more public-sector work. Increase your percentage of government work. During downturns, government expenditures generally increase.
4. Focus on long-term clients. Market now for clients with strong long-term workloads, especially those who are relatively recession-resistant, such as utilities. Several of these can help carry you through a downturn. You may prefer long-term, smaller-profit-margin projects to more profitable but short-term endeavors.
5. Expand your markets. Identify client types, market segments and geographic areas related to your current practice, and prepare to market in these areas. Try to pick up a small share of other markets to replace any drop in activity in your current markets.
6. Add facilities renovation services. Find ways to offer services in remodeling and facility upgrading and management. In a slow economy, clients tend to rehab existing facilities instead of constructing new ones. Once you bring on these services, you will have expanded your practice into life-cycle integration when the downturn ends.
7. Don't give away work. Refrain from doing initial phases of projects at a loss as a lead-in to more profitable stages. In a downturn, projects tend to be put on hold or abandoned as clients respond to lower profits and competitive restrictions on their own prices.

The Sky Is Not Falling, So Don't Act Like It Is

It's a fact: Well-managed firms with loyal client bases stay strong for the long term. For example, King & King was founded in 1868 and is the longest-practicing architecture firm in New York State. That doesn't happen by accident. Here are four business directives that make sense in any economic environment:

1. Billing and collection. If you do experience a slowdown, cash flow may continue positively from built-up accounts receivable and work-in-process for some time. You need to take steps to ensure you can still thrive if cash flow tightens. Enhance the strength of your balance sheet accounts, such as shortening billing and collection periods. The cost of working capital to fund these short-term assets can increase your firm's financial risk and weaken your balance sheet, which is not a good combination in a slow economy.
2. Lower overhead. In heady economic times, you can cover up many "sins" by increasing the number of new projects and raising your prices. In leaner times, you need to push to reduce each overhead item to its absolute minimum, thus maximizing profits. Do not relax your cost controls, especially if the impact of an economic slowdown becomes more apparent.
3. Keep investing in automation and training. Improving your IT capabilities and the skills of your key people will continue to positively affect your business processes and make your staff more productive and efficient.
4. Establish goals that are both reasonable and aggressive. Don't allow near-term caution to prevent you from stretching your team's expectations toward the upper quartile of benchmarking results. Don't target the median results.

What About Your Clients?

As your clients' trusted advisor, you have the ability to get the current scuttlebutt on their business and near-future outlook. Clients are often more comfortable talking to you than anyone else, and their take on the prognosis for their business may be very different from what you expect. Here are six key questions to ask your clients:

• How's your business doing?
• Are you having problems with our projects?
• Are you thinking at all about not going forward with it? Stretching it out?
• What's the status with your other building projects? Are they stalled? Moving forward?
• How are your clients? Are they having a tough time with the recession?
• Are you laying off staff? Bringing in new people?

If you feel uncomfortable asking these types of questions, remember that clients like to know you are interested in their organization and that you want to work more with them. Knowing you care makes them more inclined to tell you what's happening.

Business cycles are nothing new. How you respond to them is what makes the real difference in whether your firm can capitalize on the opportunities these cycles create.

Frank A. Stasiowski, FAIA, is president of PSMJ Resources, Inc. in Newton, MA. For more information, visit www.psmj.com.