Doing Good Business at All Times
As part of its response to the COVID-19 pandemic, TenFour has asked some leading team members to explore how our business partners and colleagues can overcome this challenging time. In the piece below, Carl Ring, Chairman of TenFour’s Board of Directors, shares his advice for businesses facing adversity and explains through his own hard-earned experience how good business sense and smart investments can bring success, even during down times.
Adversity Is an Opportunity
Every business person on this planet enjoys bull markets and a generally expansive economic environment. And why wouldn’t they? Customers are flush, great products abound, enthusiasm permeates the air; life is good.
Those with superior, smartly marketed products enjoy high sales, profits, economic wellbeing, and all of the rewards that go with them. Second tier companies also do well as the compounding benefits of economic expansion do, in fact, “raise all boats.” Even the marginal players get a shot in up markets.
But nothing lasts forever; just like life, business can be messy and tends to run in cycles that throw even more variety and spice into the mix. There are different types of cycles manifested by a variety of underlying causes, including over production (usually bringing on the classic recession), over speculation, political unrest, natural disaster, war, and all manner of discontinuities. On top of the already devastating, far-reaching effects COVID-19 has had on society and business I expect, along with my esteemed colleague, Dan Nacinovich, that we’ll soon find ourselves in the midst of another recession.
But the purpose of this piece isn’t to spout doom in gloom; there’s already quite enough of that out there and I doubt another harried voice will improve the chorus. No, I intend quite the opposite: to assure you, good friend, that through it all, life goes on.
Yes, the reaffirming aspects of thriving business have declined due to COVID-19, but so too have the stressors and pressures of recent hyper growth and activity. Now is the time to take a breather, recalibrate, grab a helmet and get back into the game. Those aren’t the words of a cock-eyed optimist; they’re no more than recorded history speaking. The sun will come up tomorrow and there are always, always, opportunities at hand.
I aim to demonstrate how small- to medium-sized entrepreneurial, private businesses with the desire to expand can make the best of a bad situation to come out on top. It should be underscored that such businesses are the fundamental building blocks of our economy, as they are 1) the greatest in number, 2) provide most of the growth in employment, and 3) enjoy a number of tactical benefits accruing from their size. Such benefits include speed, flexibility, and the ability to get closer to customers on a personal basis, so as to brand both the company and its boss or owner as a guiding spirit. Well-organized small companies can operate according to timetables and ensure levels of responsiveness that are difficult—if not impossible—for larger organizations to achieve.
It’s been said (with some validity) that when it comes to business operations the smaller guys use a stopwatch while the bigger guys use a calendar. While this is typically framed as a shortcoming, it can also be a tremendous advantage… if the company takes the time and effort to cultivate two indispensable attributes: 1) knowledge of your relevant market, including composition, dimensions, and metrics, and 2) the ability to plan a sound course of action. Though activity may be down, market excitement has abated, and many have taken a heads-down “glass half empty” posture, I’d argue now is a better time than any for spirited businesses to reach for more.
The Power of Knowledge & Planning
As I asserted above, essential to overcoming the business challenges of our time are two must-have attributes: market knowledge and the ability use it to set a plan (including a way to validate goals and measure progress) that capitalizes on that knowledge.
With respect to the first attribute, knowledge, you must be convinced—logically, empirically, and factually—that your business has a large market opportunity. I leave it to the individual to define “large,” but to me it certainly means that you have enough potential growth to support a sustainable business over the long term. That you have to have some accounting savvy and know your costs is a basic tenant of Business 101. And as a marketer you have to build on a decent (“outstanding,” if you can) value proposition that improves a customer’s life in a meaningful way. This might be a financial benefit, ease of use, a specific function, or something more; there’s plenty of room for ingenuity.
Regarding the second attribute, planning, you must have the ability to set concrete, achievable objectives that are consistent with your assessment of the market and, critically, your knowledge of your potential customer(s). For instance, nearly everyone on the planet is experiencing the COVID-19 crisis, and in innumerable ways. What are your customers looking for as they deal with these novel circumstances and how can you address their needs or desires? What elements of your business operation could you realistically shift or replace to take advantage of a new opportunity? How are you most judiciously using your capital to invest and when are you seeking alternatives? The answers to these questions and more will serve as your plan’s guideposts.
It’s worth pausing to illuminate the attitude that’s essential to employing these attributes to their greatest advantage amid down markets.
While it’s easy for me to tell you that all efforts to succeed are well spent in down markets, human nature is not usually so disposed. The folks that are so upbeat during good times are often the same who toss in the towel and expend their energies discussing the horrible times that now plague them. But in order to succeed you must know—not hope—that things will turn up and that most individual markets will come back as well.
Some will have run their course through one form of obsolescence or another, so it’s left to you to be aware of your surroundings, including industry transformations and market shifts, so as to use them to your company’s and customer’s benefit. Enthusiasm and confidence are remedies for pessimism, and through their contagiousness can make a sale by themselves. Being a “student of one’s market” is always good, but being regarded as such by others is even better, and this characteristic is what constitutes a true professional.
Experience Isn’t Everything, but It Helps
Light always follows darkness, and to use an extremely homely example: “Rock bottom may not be a pleasant place, but it is a foundation.” Throughout the many years of my career I’ve learned the wisdom of optimism amid down markets firsthand. I do not mean the following personal experiences to be puffery, but rather to exemplify an axiom or two.
For those who don’t know, I’ve worked for the last several decades as a business leader, advisor, and investor and throughout that time I’ve encountered a wide range of characters and circumstances. First, I had the good fortune of spending significant time with Sir John Templeton, both as a financial advisor/investment banker and later as a friend. Throughout the 20th century Templeton was long known—domestically and internationally—as one of the top equity investors on the planet; his annual meetings were “standing room only” and rivaled those of Warren Buffet for attendance, with investors, financial analysts, and others eager to hear his assessment of the past year and its highlights. Sir John had seen many cycles and worked through the down parts with such mastery that his opinions and strategy were invaluable to attendees.
In the late 80s I was selected by Sir John to raise capital for two opportunities; one in the U.S. and one in Japan. As it happened, we were in a down market and people, while anxious to listen to John’s impressions and outlook, were a rather disheartened lot. Sir John tried to convince his audience that such periods were the greatest investment opportunities, which was a well-known fact, but seldom put into practice. He noted that many people buy stocks well after they had begun to increase in value, but then wonder why returns are lackluster.
He eventually prevailed by briefly and powerfully making his case with three simple questions and answers: 1) “Would you rather buy shares at a low price or a high price? Most would prefer low.” 2) “Are share prices high or low in a recession? Most would say low.” 3) “Well if we’re in a recession—and we are—what should you be doing?” The answer to the final question was self-evident. And I don’t know how far his message traveled with others, but I ultimately prevailed as well, using down times to my advantage and raising the capital I sought. To capitalize on Sir John’s advice meant a shift in mental and emotional attitude
A second example of my learning this lesson occurred in the 70s, during a particularly bleak time in history: tensions were high as the Vietnam War came to an ignominious close, a worldwide recession had taken hold, the impending Watergate fiasco complicated politics, and the U.S. was being dragged into the international economy. Certainly a down time. As a junior investment banker it was an unexciting time for me. Financial activity was low to the point of being moribund and most of my colleagues read the paper at their desks and waited for a deal to drop from above.
Being who I am, I determined that if clients weren’t knocking our doors down, maybe I should get out and knock on some doors. I got many “Don’t bother me!”s, but that only encouraged me. Before long I met a man from Philadelphia who referred to himself as “just a butcher with a high school degree” (he was a meat purveyor), but after two years had managed to convince McDonald’s to transition to frozen beef patties. Unfortunately his company was perceived as having only “one product and one customer,” so it didn’t generate much excitement. And though I believed he had a bright future not many agreed.
Regardless, I researched the market and saw an opportunity. After we got to know one another I handled his Initial Public Offering (IPO), which was greeted with a resounding thud. As we took it on the road we argued that although the company only supplied one thing, McDonalds sells a millions of burgers, representing a tremendous opportunity. Over time the stock took off and as the butcher’s company grew he added chicken to his repertoire. It was a success, leading him to design McDonald’s chicken entrees and eventually processing as many chickens as Tyson and Perdue.
My client and friend of forty years died at age 81 as a billionaire philanthropist and taught me along the way that though timing is critical, it’s nothing without knowledge and planning. I gained a great client and close friend because I went knocking at doors during a down time.
More recently, I was the Lead Investor on a high tech computer chip metrology company my private equity firm had acquired for about $35 million. We got off to a good start largely because we had a good book of business in the U.S. and in the Asia-Pacific region. But when the U.S. business flagged in 1998, and our strong Asia presence began to wane as well, our CEO believed we were in troubled waters. Despite an enviable customer base, revenues continued to sag. The CEO brought a plan to the Board to pull in costs and wait out the business environment, but I deemed this suicide and noted that we were third in our space and that if we cut costs we would likely drop to fifth when tough times subsided, if we survived at all.
I argued then (as I do herein) that this downturn was a time for investment and to bring new products to market. The board noted that more capital was needed, and embracing the opportunity I informed my firm that we should invest more, which thankfully we did. The new products exceeded projections and after an IPO I left the company’s board as their market cap approached $1 billion. By accelerating us through the turn we came out with more speed than we could have imagined.
Optimism Trumps Cynicism, Always
An old political adage says, “Never let a good crisis go to waste,” but those who adhere to that are cynics.
At TenFour we’re optimists. Our singular focus is upon IT infrastructure and how it can help our customers—existing and new—explore new avenues of enhanced financial and operational performance. We’re not only optimistic; we’re ready. We look the situation square in the face, reassess your recent past, determine what can be done better, and seize the day by implementing a plan to not only help you prosper, but to outpace the recovery process when growth resumes.
Yes, we’re in a down part of the cycle. But now is a perfect time for true business leaders to gather new knowledge about their market, reassess costs and organizational structures, and plan for opportunities their competitors may be missing. If, for instance, one was in the midst of reviewing IT organization expenses and trying to make due with scarce resources, perhaps a look at an alternative approach to IT infrastructure is not just prudent, but necessary.
Whatever the future may hold—recovery or recession—TenFour’s prepared to be of valuable assistance to you as growth resumes, which I know from experience it most certainly will.