Planning for the recovery

Ryan Spillane, managing director of Correct Solutions, a computer reseller operating out of Castle Hill in Sydney, believes the downturn will finish in June 2010. He has it marked down in his schedule.

A serial entrepreneur – his other businesses include a bookkeeping business and one that sells bite-sized cakes – Spillane is now getting ready for the middle of next year. He has already boosted his staff to 15 and expects to hire more when the market recovers.

Correct Solutions is now taking advantage of the quiet period to touch base with customers and suppliers, building relationships that will hold firm when things are busy again. His company is also working to get its systems right to ensure it will hit the ground running. And it is sounding out potential acquisition targets. When prices are low, it’s a good time to buy.

“It’s not as busy and as hectic as it once was but we are not slow either,” Spillane says.

“We talk to clients all the time. It’s something we have been doing with clients who deal with us on a daily basis but now we have started doing that with clients who don’t deal with us on a daily basis. We are talking to them, looking at their 2010 spend so that they don’t have any surprises next year.

“The other thing we are doing is we are about to send out a newsletter to clients we haven’t heard from in awhile, just to remind them we’re still here and to say hello. We are touching base with them and seeing whether they might not be satisfied at the moment. They might be coming over. We will pick up quite a few.”

The other critical part is keeping in touch with his suppliers. He says it’s important to stay on their radar.

“You need to be engaging with your vendors right now when things are quiet so that when the busy time comes, they’ll know who you are instead of you just arriving on their doorstep,” he says.

“You take advantage of the fact that they aren’t busy. You let them know how you are using their products in ways they mightn’t have thought of before. You spend time with them and let them know who you are so that when the busy time comes, you are in their minds already.”

“In busy times, there is nothing worse than dealing with a supplier when they’re run off their feet.”

Correct Solutions is also taking advantage of the quieter period to put more time into innovation, developing new management systems. “We are doing more documentation of our systems and how we deploy them. We are cleaning up a lot of things. We will have better KPIs on sales performance and percentage of closed sales to quotes. We will be getting better figures very shortly to help us make better decisions.”

The offensive/defensive strategy

Correct Solutions has the approach that the consultants at Deloitte say is critical for companies to use in preparing for the recovery. It’s an offensive-defensive strategy and the key is the flexibility to move between the two.

John Meacock, Deloitte’s managing partner for New South Wales, says initiatives companies take now are even more important than what they do when markets are strong.

“All the research shows that the moves organisations make in a downturn, be it acquisition, be it investment in products or in innovation, have far greater impact and tend to stick with the organisation when they come out of recession than they do in a boom time,” Meacock says.

“We believe businesses need to be planning now, whether it’s six months, 12 months or whatever you view. Clearly it’s not an ‘if’ but a ‘when’.

“Organisations understandably have been in survival mode. They need to start thinking through the recession and how they are positioned.”

For some, that might mean setting up a special recovery committee, or leaving it to an executive committee.

Meacock says organisations need to be both offensive and defensive. An offensive strategy means planning for the future so that the business comes out of the downturn in better shape than it was 18 months ago. Going defensive means getting through the tail end of the downturn and finding ways to maximise value. The trick is doing both simultaneously. The worst thing, he says, is to do nothing.

The offensive-defensive strategy, and the mix of each element, will vary from business to business. It will depend on the state of the balance sheet and bottom line.

“Clearly, there are a lot of companies that despite the bad times, are extremely well positioned, so they are looking from an M&A perspective of taking a more offensive position where there are lower asset values and opportunities for consolidation. They are starting to come and they’re coming reasonably quickly.

“The organisations that are not well-positioned need to look strategically. How are you going to defend or maximise value by being, for example, an acquisition target?

“At either end, you need to start thinking about that now and putting some plans and positions into place.”