Counter-recessionary intelligence

Recession Week continues here at Canadian Entrepreneur. Here are a few recent media items that may help you cope with what's going on.

1. The Globe Explains it All for You: For those who don't understand what exactly is going on in the financial markets and why it's hitting you where you live (which includes most of us), GlobeandMail.com is running a regular series of articles answering common questions about the fiscal crisis.

Some of the questions are basic ("What is the TED spread?", "Should you lock in your mortgage?"), while some would have been unthinkable a month ago (e.g., "Who owns CMHC and can it go under?", and "Can a country actually go bankrupt?").

Follow the long, meandering meltdown here.

2. National Post had a good interview recently with Les Mandelbaum, owner of Umbra Ltd., a household knicknacks design company that's been globally successful - until recently. This spring, in response to rising costs, Umbra laid off 10% of its workforce and shut down a warehouse in Buffalo, NY.

But Mandelbaum remains confident that useful, well designed products will always find a market. He sees three criteria for products that will do well in a downturn: they must fulfill a function that previous products don't, they must look good, and they must be priced reasonably. "You get those three things working, it doesn't matter about the economy."

Read the whole story here.

3. To find out how small business is coping, Inc. Magazine asked some of its top "30 under 30" entrepreneurs about their experiences in the latest crisis. Here's a sample.

Q: How is the crisis affecting your business? "From consumers, while we haven't seen overall sales suffer too much, we have seen a drop-off in big purchases in the last week, quite remarkably."

Q: Has credit been harder to get? "Definitely. I still haven't been able to get anything but very basic credit, and I've recently seen requirements for loans and other growth capital increasing in scope and complexity. As for investment, the last month has been a rollercoaster with investors, but I'm also seeing the appetite for angel investments increasing as brick and mortar investments actually start to look safe compared to the stock markets. This is a good thing."

Lots of variations, lots of opinions. Check out the full story here.

This didn't have to happen

Brett Popplewell of the Toronto Star has a touching story today about the pending closure of one of Canada’s oldest businesses: Gibbard Furniture Shops of Napanee, Ont. The furniture maker is 173 years old, and one of Canada’s last pre-Confederation factories.

Gibbard makes carefully detailed, lovingly finished high-end furniture. It was once described by Eaton’s as “the aristocrat of cabinetmakers.” Its website still boasts of “our twenty-step finishing and rubbing process.”

Closing the doors "was the hardest decision that we ever had to make," said Bruce McPherson Jr., who owns the business along with his two brothers and his father. "The company has been up for sale for 15 months, and although we had a lot of interest, it just wasn't happening."

The Star blames Gibbard's pending demise on cheaply manufactured offshore imports. Well, that and the fact that a mahogany dining table and chairs from Gibbard sell for $7,900, vs about $900 for an imported set made with veneered particleboard.

The writer says “it's a source of pride to McPherson” that Gibbard never lowered its standards. Yet he also notes that McPherson “lowers his eyes to the floor and speaks with a hint of regret” as he says, "We maybe didn't need to pay as much attention to detail."

McPherson knows the real problem. He says, "We make furniture that lasts a lifetime... People don't want that anymore."

I hate to see old traditions and heritage industries die. But the fact remains that business is about creating what the market wants – not what you feel like making. If you just want to amuse yourself, you become an artist and starve. If you want your business to survive and thrive, you do what the market tells you.

As I told an audience in Markham the other day in my speech on Marketing in an Uncertain Economy, “Change is part of life and a key part of business. Stability is the exception. We must always be ready for change, and ready to change.”

You can't fall in love with your product. Popplewell writes that a highlight of Gibbard's factory showroom is an 1869 walnut buffet table. According to McPherson, “An elderly lady had this piece in her family for years. She was getting old and wanted to give it away as an heirloom but none of her family wanted it. So she gave it to us.”

I feel for the McPhersons and the 85 employees who stand to lose their jobs. Hopefully, many of them will stick with their work as artisans, and keep the spirit and craft alive.

But when people can't give your product away, it’s change or die.

Read the original story here. It’s terrific, sad and enlightening.

Recession Watch, part V

On the recession front, I just read an interesting report in a recent issue of Fortune magazine.

“Affordable luxury” brands such as Tiffany & Co. and Coach are suffering in the current U.S. economic slowdown. As the middle class trims its sails, upscale retailers are abandoning the mid-priced luxury market. In tight times, the middle is no place to be.

Examples: Coach recently announced it would shift 40 of its nearly 300 stores into a more exclusive format offering higher-end bags (no more $300 handbags for luxe-class wannabes) and personal concierge service.

Taking the opposite tack, Tiffany is opening a new California store that will forgo the Audrey Hepburn diamonds and focus on inexpensive jewelry, such as $200-and-under silver baubles.

Clearly, these marketers are betting that the high end and the low end will both do better than the muddy middle through the current economic slowdown.

What is your business doing to adjust to today’s emerging consumer realities?

Entrepreneurs' confidence sinks in U.S.

A Bloomberg story in today’s National Post reports that small business confidence has sunk to a 28-year low. Business owners say they're scaling back their hiring and spending plans.

The National Federation of Independent Business's "Optimism Index" declined last month from 92.9 in February to 89.6, the lowest reading since the second quarter of 1980.

"These are recession readings," says NFIB chief economist William Dunkelberg. "The sharp decline in job creation plans does not augur well for economic growth in the near term."

The share of owners expecting to create jobs over the next three months dropped 8 percentage points to 3%, the lowest reading since March 2003. Those expecting to spend more on new equipment and construction over the next six months fell 1 percentage point, to 25%.

You can read more depressing statistics here.

Continuing the recession theme, my column in yesterday’s Post dealt with marketing in tough times – a topic which now looks even more apt. While the business slowdown will be less pronounced in Canada than in the U.S., all marketers should be reviewing their budgets and revising their plans given the gloomy outlook in the U.S. (which is not only our nearest neighbour but by far our most important trading partner).

What should marketers do? Focus on direct marketing for faster payback. And tweak your approaches (and measure the results) so you know which initiatives, offers and pitches work best.
Here's the link to "Market wisely in tough times."

Your recession survival guide

More and more signs point to an upcoming recession in the United States. Canada is insulated in two ways - by its booming energy industry (which is mostly western-based, although it generates a lot of activity in central Canada), and by its healthier real estate market.

Nonetheless, the two economies are closely entwined, and the overall slowdown will hurt a lot of businesses in central and eastern Canada.

Three points:

1) Agile, nimble entrepreneurs can escape the worst of a recession. There are many strong markets in Canada, from energy and health care to affluent, luxury-loving baby boomers. Look for sources of strength, and aim your marketing activities in those directions.

2) Recessions can be a time of tremendous opportunity. If you fine-tune your marketing plan and conserve your cash, you have the opportunity to invest and expand in your market when others are retreating or selling out. Cash is king.

For more managing-in-tough-times tactics, click here for my column from Nov. 2006, Get ready for recession!

3) The federal government showed great timing over the past year or two in orchestrating a series of tax breaks for business. If markets are off a percentage or two, maybe sending fewer bucks to Ottawa will help. The corporate tax rate fell three percentage points last week, and the small business rate dipped from 13.12% to 11%. The GST went from 6% to 5%, and the feds are increasing the rate at which we can write off computers, buildings, and (temporarily) processing equipment.

For more information, see Susan Ward's tax-change update at Small Business Canada.

Things may get tougher. But we've seen a lot worse.

In the News: RiM and Recession

A couple of items in the press caught my eye today.

In the Globe, Eric Reguly files a fascinating piece on how RiM retooled to make the BlackBerry a hit in status-conscious Italy. RiM worked with local cell provider Telecom Italia Mobile to change the pricing (apparently, Italians prefer pay-as-you-go), and founder Mike Lazaridis himself called on Milan designers Dolce & Gabbana to ask them to design BlackBerry carrying cases.

It's a great example of the fundamental (and oft-forgotten) need to know your market and customize your pitch. And of the rewards that can accrue for doing so. Read the story here.

The Financial Post today runs a little Reuters item titled "No U.S. Recession: Bernanke", in which U.S. Federal Reserve chairman Ben Bernanke announced yesterday that the U.S. economy "does not appear headed for recession." But he warned growth could prove weaker than expected.

The economy is fueled by confidence. My experience is that when the authorities start trying to reassure us that there is no recession, it doesn't really matter: things are slowing down regardless, and businesses have to be ready.

Trim your sails, hoard your cash. Avoid investments that rely on customers continuing to spend stupidly. Our economy has been defying gravity long enough.