MA Business Success 54: How to Survive an Economic Downturn & Be Profitable in the Long-Term

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Graham: It's probably across the globe. I don't believe that anybody is sheltered from this, and it’s talking about the economic downturn.

Having spoken with quite a few friends in the industry, everybody's feeling the pinch. Whether they like to admit it or not, it's out there. So, what do we do to weather the storm? How do we get through this, how do we make sure that we keep our staff and our team motivated even when sometimes the numbers are lower coming to your business, or you might be losing people or again, there's your financial burdens put on you, and there's some challenges there. Let's tackle the first and foremost.

Phil: Yeah, I just think I'll mention to you also, when Graham and I first went into business together in 2008, there was a massive downturn. It's just circumstantial, I guess with the relationship we had, the business that we were trying to do, we actually grew exponentially. We doubled student numbers, tripled revenue in a downturn. So, we've got tips and advice of what we did then. But also now, especially where we are, there’s a bit of a mining boon…well, lack of, actually. We live in a sort of mining state of Australia, and there's not a lot going on. People are starting to lose work, having to look for jobs. It gets tight, and I guess you’ve got to make some hard decisions as a business owner, whether you're a solo driver of your machine, but also if you've got a team behind you as well. So, I think question number one is, how do you break it to your staff, if you have staff? Or let's just say maybe even your family. How do you break it to the people who are supporting you?

Graham: Look, it's one of those things...It's like a Band-Aid, you’ve got to rip it off, you can't hide but there’s strategy in how to approach it. We definitely find it with us as a teaching technique, I'm sure that some of you guys would have heard this phrase before, PCP -- Praise, Correct, Praise. Well, I think the thing is, you’ve got to identify what you’re doing well. Yes, there are areas to improve. But again, we'll get through this. And again, you’ve got to put it in that sort of sandwich so it's not doom and gloom, because really at the end of the day, you've got to know where you at right now, and a lot of people makes it worse than what it is.

Accept that, "Okay, jeez, the income that we've got versus the expenses going out, we need to adjust a few things here." Really taking stock and not putting your head in the sand is really, really important. But when you go to speak to your family and whatnot, sometimes by communicating, they may have a completely different insight into what's going on, or some advice there that you might not have listened before, or heard before, or even sort of sitting across the table at you. It's really important to just, I would say, be honest. Know where you're at, and then when it comes to communicating with first and foremost your family, be straight, upfront and just say, "Okay, what do we need to do to get out of this hole?"

Phil: A saying comes to mind like, "Firings will continue until morale improves.” That's not the way to go, but I was just carried away. But as you were saying, I think we've joked about that before previously. But yeah, look I think…as you said, Graham, you want to be up and open and honest with your family and the people who are supporting you. And I believe truly, it comes down to -- I know we've probably done a podcast on this previously -- is your metrics and your stats.

So, if you don't track your metrics and check you stats, you can't look back at the times where you had tough times before. You can't look at where you're going well, where you're not going well. And you can't sort of change the dials to be able to say, "All right, we need to put more focus on referral by staff. We need to put more focus on developing our staff, more focus on events, so that people want to be here at our school."

When it is doom and gloom, when people are demotivated, stressed about life, what better place would you want be in than a martial arts school? I think that as long as...and here's the thing, we're not going to go backwards in our fees, because we justify our value. But what we will do is we'll outlay complete expectations of the value of being here. And it's not necessarily the value of the punch and the kick, it's the value of the environment that you're in.

Graham: Oh, most definitely. And Phil, you’ve pretty much hit them now in the head there. I was sort of thinking it would get into my head, that what we've done for ourselves through these sort of downturns is made our product and our service here a necessity item, not a luxury item. And again, that's something where you're not just an expendable service where there are plenty of things. When people are tight with money, they would definitely get rid of certain things to make sure they’d just keep the necessities. And what we've done is we really put ourselves at a standpoint of being that necessity item that when things are tough...jeez, you do want to be around like-minded people, you want to be around good people that helps to lift your spirits. Again, making sure that we are there, to make sure you've got that confidence that way to help people. Like anything, it’s going to get down to it's always going to come back up, simple as that. So, make yourself that necessity product rather than a luxury item.

Phil: Yeah, I guess and I know I have spoken to that before like, "What comes after winter?" Spring and summer. After devastating times like a bushfire, what comes after that? Growth. So, you’ve just got to know and truly believe that if you can just stay true and hold on, grab the bull by the horns through this dip, that at the end it will come out, you'll be all right. And that's another way also, when things are going well, when you're bringing the money and your students are growing, that doesn't mean you go and spend frivolously with all the money that's coming in. You've got to start putting yourself in a position to combat that down time as well.

Graham: Look, I couldn't agree more. If you have a look at some of the really successful companies that are out there, they know that all peaks and trough cycles, that's what just happens. And I think for me in particular, I've got a great mindset in regards to sometimes these low downturns, and I guess it’s a leveler. And what that means is, there's a lot of businesses out there that do really, really well for themselves, and operate with ethics and really kind of great morales. There are others out there that have the old cowboy mentality. They’ll just come in when the money’s there and they kind of want to take it and just leave quickly, and drop people in the crap when the time comes.

But I believe that sometimes through these downturns here, it really makes you take stock of, “Okay, what am I doing well?" Make sure that you really are being conscious of providing that excellent service in everything that you do. And I guarantee, if you can survive through this, you come out the other end, you'll be a much better company from it. And you’ll have some great successes on the other side of it.

Phil: So Graham, we've talked about a little bit about the strategies and mindsets, but how would you, if you’ve got staff, how do you break it to them? What would you do? Really you’ve got some decisions to make in a business. If you get to that critical moment where you’ve really got some options -- there's grow, you got no choice to grow like burn the boat, burn the bridge. We have to grow by x amount or guess what? Maybe some of us have to go down in our wage, maybe your pay rate has to go down. Or maybe we have to fire someone. What would be the strategy to go with step one, once you've identified damn, if we don't do something now it could potentially be bad for us?

Graham: Well, I think what we've learned on our journey with everything that we do is again, be upfront and honest with the guys. As a strong leader, don't just dictate and tell them what they need to do, because what that does, it gives them that uncertainty. Acknowledge that, "Hey guys, I'm sure you're well aware that were in a place where it's been a bad year. But we will get better. But here's the strategies, and I'd love your opinion about on what you think. At the moment, we've got a gap of say X…in other words, income. We've got to grow or again, we need to grow and trim some of the expenses. What do you think would be some strategy?”

And in the back of your mind as the owner and the leader, you already know, but you're looking towards getting some input from your staff, getting some buy-in. And if they can weather it with you and stand strong besides you, you will definitely have a greater success of coming out there with all team intact, rather than just going there and headhunting and going, “Right, who's the expendable one?” Because remember, when you come out of that dip, this downturn, you're going to need more staff eventually. And if you lose the faith in your staff and you lose their respect for you because you're just ruthless, you’re going to create some issues down the track.

So I would definitely get a sit down, a brainstorming session with your team and go, “Right, guys. Here's where we need to be, what do you think we can do to get there?" And you can lead the conversation. You may be able to offer some strategies. They may have some different insights to bring to their frontline on certain things, but I certainly know that open communication is really key. And let them know that it's just a moment in time, it's not a destination. It's not the end, it's just "Hey, team let's get through this." And I guarantee you'll have a stronger business, stronger culture, and a stronger team at the end of it.

Phil: I guess us as business owners and all the business owners out there, once you’ve have that conversation or maybe even before, because you want to go into these things with a pre-conceived idea. It's your ship, you've got to sail it. You're going to guide them through this conversation, and hope that they come up with great ideas that you’ll agree with. At the end of the day, the decision is yours.

Graham: Definitely.

Phil: But I guess, what I want to try to get at is, once you've done that, I think it will be important to go to your profit and loss and start looking at all your expenses. So, off the top of your head, Graham -- and I'll mention a couple or two -- but what are some of the things that you'd be looking at like in our business, if we we're going to go, "We need to trim up." What are the things that we need look at? I know you could probably trim up on assistant instructors. That's if you've got lots. I know we've got lots of assistant instructors. The amount of wage that goes into the assistant instructors when you look back you go, “Well, maybe we’ve got too many to give the lead instructors a bit more time to do other things.”

You’ve also got to go, "If I cut that, what is the repercussion over here?" You might go, “Well, we’re spending this much on social media or marketing, but if I cut that, what's going to be the outcome?” Maybe that doesn’t bring in new members, so you have to be careful what you cut. It definitely it has to be a strategic move, and it definitely has to...you still have to keep your finger on the pulse.

Graham: I couldn't agree more. It's looking at the ripple effect and instantly think well, look. I’ve saved $1,000, $2,000, $5,000, whatever it might be. But as you’ve pointed out, what happens in a month, or two months, or five months? What happens next year when we actually come out of this? Did it make an effect, or did that cut actually in your marketing budget make it even worse? Because now you’ve stopped yourself the opportunity to come out of the hole by simply not just getting your brand back out there.

I certainly know for us, what we do in these times where you really do need to be just mindful of what you spend. You become a little bit more creative with how you market, how you spend the money. And that's something I'm going to encourage you guys to really do, is have a bit of a listen in to some of our previous podcasts. We’ve got some great tips and strategies on there on new age marketing, but really low-cost marketing. I think that's a big one, whereas gone are the days of going right, you need to spend 10% of your income of your school on your marketing. Jeez, that's a luxury that would be great, but sometimes that doesn't always lend to the reality. So, what can you do to help to maybe trim that marketing budget, but still make sure that you're not sacrificing getting yourself out there.

Phil: Yeah, cool. And one last strategy just to finish up on this particular topic. I think one thing we can do to turn around, and it depends where you at your business. I mean, if you're heavily involved in your business, you're on the floor teaching, this may not be as relevant for you, whereas if you've got staff and you've moved a while a little bit. I think what motivates and inspires your staff and your instructors more than anyone else is you -- you as the owner, you as the instructor. You taught them from when they were white belt to where they are now, and I think they need that inspiration, motivation to see the guys at the top getting back in on the ground floor like you've been doing lately. And getting in meetings, and just really taking the bull by the horns as I've said before, and going, "Hey guys, we're in this with you. Don't think we're at the ivory tower, pointing at you going, ‘You've got to do this, you've got to do that, or everyone’s out.’” It’s like, "Hey guys, things have got to tighten up. This is the position we’re in. We’re going to come and join you.” We’re going to be the leader that pulls the guy, rather than the guy pointing, if you've ever seen that image. I think that's important, that your staff know that you've got their back, and you’re in the trenches with them..

Graham: I couldn't agree more. And part of the value system that we have at WAIMA is, I think our supportive team, and that is knowing that it's something we stand by thick and thin. We stand side by side when the time comes, and that is where when the good times are good, everyone's enjoying. When things are tight you’ve still got to get in there and rally the troops and help them out. And I couldn't agree more with the fact and the saying. And it goes from the teaching point of view, but also operating a business -- lead by example. Show the guys that hey, this is what you need to do. This is that guidance. And again, it just really will motivate your team to rally behind you, do what they can, go the extra mile. And I guarantee you'll come out of these tough times.

Phil: Excellent. Well guys, that's some great strategies there, some ways to think about how you deal with your business. The topic was how to deal with the tough economic downturn. Look, if you have any questions, or thoughts, or feelings about this, we'd love to hear. Don't forget to leave a review on iTunes. Leave some comments, give us a thumbs up, thumbs down on Facebook. But also, and more importantly, if you love the content and you want to get more, I have some really exciting news. Graham and I are literally behind the camera right now setting up for almost a 10 hour shoot. We're re-doing all our online content. We're re-branding, re-delivering some old stuff and some new stuff, because that's what it's all about…staying ahead of the game.

So, stay tuned, it's not released yet but I will let you know. So, if you are enjoying the content and want more tips, let us know. You can check out our website at www.tima.com.au. Take care guys, have a great week and we'll see you on the flipside.