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The Wile E. Coyote Economy?

Just saw a comment from Larry Summers, the noted economist, who opined recently that the economy is about ready to go through a Wile E. Coyote moment and fall off a cliff.

And a few more large companies laid off some more workers. And Biden thinks the sky is falling.

On the other hand, Beth Van Dyne, the Texas congresswoman, just reported that the Dallas-Fort Worth area added more jobs than some blue states.

And Florida continues to truck along well, because of low taxes. Their unemployment rate is actually below the 3% what we used to think of as full employment.

And two of my clients sales are actually running ahead of last year, although both say that they’re hustling more to get the sales. I have a Solutions Forum group meeting with some more clients this coming week, and we’ll find out how they’re doing.

So, we don’t think there’s a Wile E. Coyote moment in the offing for small businesses but be careful out there and continue to hustle.

Profit Opportunity in Gluten Free Bread

I recently did the bread and milk run for my wife, and I was shocked at how expensive gluten free bread is compared to normal bread.

I got to thinking, did a quick Google search of gluten free breads and discovered that there isn’t a mainline bakery making gluten free bread.

All of the bakeries are small, artisan shops, and the prices of gluten free bread reflect that: about twice the price of regular bread.

Several years ago, after Bimbo Bakeries which is owned in Mexico bought Oroweat, our favorite bread company and then took it off the market, since it was a slow month in consulting, I called and asked them why. I got a rather nonresponsive answer (the customer service person didn’t know and wouldn’t look into it) and Bimbo eventually reestablished distriubtion, so all is well.

Bimbo, here’s another opportunity: introduce a gluten free bread in larger sizes. I don’t know how big the gluten free market is, but my hunch is that it’s 10-15% of the total bread market. Other gluten free products are selling well, IMHO, so why not introduce a gluten free bread?

We’ll do the focus group for Bimbo for a great rate: not free, but certainly reasonable. In fact, I’ll call a couple of research houses I know (having done focus group work for them) and ask them. One never knows.

In the meantime, I might talk to my alma mater, the Wharton School of the University of Pennsylvania, and see if they want to look into gluten free bread. Back in the day, it wasn’t uncommon to have Wharton rented out to consumer marketeers doing studies; I participated in a few myself.

 

What’s Behind the 517K Jobs Increase in January

Seems like the media is missing a trend that we spotted last month: the hiring is going to come from smaller firms, as the larger firms lay off people, they overhired during COVID.

Smaller companies largely kept their powder dry during this period and rode out the pandemic. Sure, in some big Dem-run cities and states, there were closures, but it seems that most of those have all gone.  California and New York seem to have patches of masks and interference, but it’s minor nationally.

But the bulk of the hiring increase in January, in our opinion, came from smaller firms deciding to hire that extra person in January, because they’re relatively optimistic about 2023. Hiring was spread all over the categories, with hospitality leading the way.

Our guess is that, if these firms continue to think the economy is at least ok, they’ll keep the hires and consider more in the June/July timeframe.

There are some early signs that the Biden Bunch might free up some energy, as they realize for 2024 what a miscalculation they’ve made. The baloon incident, being and incompetent negative, might push the energy drilling.

We’ll see.

The Big Company Recession

All the media mavens seem to be trying to talk us into believing there’s going to be a recession.

From where I sit, in Arizona, it doesn’t really look like it among my clientele.

Of course, they have me advising them on boosting marketing expenses and improving sales execution, but even so, business conditions don’t look that bad here. They look worse in Democratic-led states. Yeah, we’ve got a Dem governor here in Arizona, but maybe only temporarily.

All of the companies doing the layoffs are large, publicly held companies, many in the tech field. In many cases, it seems they overhired after the COVID pandemic, and growth hasn’t lived up to their expectations at the time. So their stock price goes down, reflecting reduced growth.

Reduced growth doesn’t mean recession. It means reduced growth.

And the Biden crew hasn’t done anything to improve economic conditions, since the House won’t let them spend money, and they’re a one trick pony.  But they haven’t been able to raise taxes, either, because the House is sitting on their tax increases.

And I expect McCarthy to negotiate spending reductions, since he’s got all the cards in the negotiation. Joe hasn’t figured out that yet, but he’s well, slow.

So, dear readers, hang in there.

 

 

Customer Service 134

It seems like I’ve written 134 posts about customer service, or lack of it, since this blog launched 10 years ago.

Clearly, some companies just don’t get the message.

One of our neighbors is having Anderson windows installed, to reduce heating and cooling bills.

Fair enough.

My wife decided to call Anderson, to get an idea of what it might cost to install their windows in our house.

But Anderson pretty much mishandled the call.

Rather than asking some probing questions about the nature of our installation, the Anderson inside salesperson started spouting all sorts of numbers about costs, without really knowing much about our installation.

And then offered to send a salesperson out to look at our planned installation. It would be a waste of time, because they didn’t establish a need on our part. We look at ROI, Anderson.

So, they succeeded in turning off my wife. And on house matters, she’s the decision maker.

Poorly played, Anderson.

And There’s NPR

When I did the last post, it occurred to me that I’d overlooked any new product or service revenue (NPR) that you might get in 2023.

The reason is simple: there are lots of steps to take to get to market, and at any point you might have to abandon the project, make product or service changes, find more financing, develop a new set of customers, etc. All of these take time, with an uncertain outcome.

You might also have to add personnel.

NRR and ENCR: Good Ways to Plan Sales

In the recent issue of CEO Magazine, there was an important article in the back or the magazine that has a useful tool in forecasting revenues for 2023.

So, if you’re still pondering your sales forecast for the rest of this year, read on. Otherwise, read on for next year, or midyear adjustments.

NRR is Net Revenue Retention, or the sales coming from customers that you had at the beginning of 2022.

ENCR is Earned New Customer Revenue, the revenue that you’d like to get from new customers in 2023.

Figuring these two out might give your bookeeper a headache, but it seems doable. We’re going to talk to our Solutions Forum members and see what they think about how easy it is split their revenues into the two buckets.

Other things, such as your promotion budget, flow from this revenue breakdown.

If you’re leaning on existing customers for the bulk of your 2023 revenues, you’re going to use ‘reminder’ promotions that you’re still here and you’d like their business.

On the other hand, if you’re tilting towards new customers that you don’t have yet, you may have to find out what media and people influence them to buy from you, tune up your Unique Selling Proposition and use promotional vehicles designed to attract new customers. Maybe add some sales reps, inside and out.

The two sets of promotional vehicles might not be the same, and the messages surely won’t be the same.

So, it’s one more thing to ponder, folks.

Exit This Way

We helped two of our clients exit their businesses in 2022, and both of them seem to have turned out well.

One still holds 10% of the company stock, and his five kids have 90%, but if they disagree, a feature of the buyout is that they have to get at least 51%, and they need the 10%. We approved this deal. And the former owner has returned to his roots, which is product innovation. We’re doing some research for him to round up some grant funds.

In the other case, the owner sold to his two sons, and has no formal role, but he’s developing his photography business, which he’s had as a hobby for many years, and travelling, which he and his wife have put off for years. So, he’s likely to have another viable business to run, but he can do it around the travel and the travel fits with photography.

The point of these two vignettes is to exit the right way. Here are some other tips (most cribbed from Marshall Goldsmith writing in CEO Magazine):

  1. Continue caring about the long-term strategy of your company.
  2. Do not overstay your welcome as head of your company. You know when you’re burned out, and you’re not contributing to the success of the company.
  3. Do your best to develop great successors. Have the successors work in the family business.
  4. If you have an exciting future after your company, you’ll leave happy. Otherwise, you won’t. I know in both cases above, the former owners are happy.
  5. Plan your post-owner roles. What do you ‘really’ want to do? Take some time off to think about it, but not too much, lest you go stale in your thinking.
  6. Would a venture capitalist invest in your new venture? Did you write down a business plan? (Even if you didn’t do the biz plan for your first company.)
  7. Don’t forget the fun factor. Your next venture should be fun; otherwise it’s too much like work.

What Do You See in ’23?

There’s a lot of talk about a recession in 2023, but we’re not sure we buy it.

For starters, as my uncle Dave Loehwing, the long-time editor of Barron’s would say, ‘if you think you’re going to be in a recession, you will’, meaning that you would pull back from opportunities that you’d take if you were feeling more optimistic.

Personally, when I ran my first company through two recessions, we’d use the opportunity to ‘put the hammer down’ boost marketing expenditures and hire more sales representatives as my competitors were shedding theirs.

We also boosted our support for the sales reps, usually by giving them more pricing flexibility than our competitors did, usually with good results. Yeah, we had a series of people in Los Angeles that specialized in giving away the store in pursuit of market share, but we eventually curbed that.

We also found out that at times we were in danger of expanding too rapidly, when our plans worked too well.

We also did a major product introduction during one recession, which worked very well, because we were able to expand our margins, which helped keep the financial wheels on.

It might be necessary in 2023 to pay more attention to keeping the financial wheels on, because we understand that some of the big banks are pulling back in lending.

On the other hand, smaller banks, seeing what the bigger banks are doing, might see ’23 as an opportunity to pry quality customers away from their competition.

On the government front, it appears that the investment tax credit is dead for the moment, as is accelerated depreciation. Thank you, Fancy Nancy and Chucky Cheese.

Pay attention to what’s going on in your state government too, because they can whack you with state taxes. Not here in AZ, but we’re an anomaly.

We’re starting a new small business program at Solutions Forum which our San Diego licensee has tested and done well with, and launching a new division of our School, called the Small Business Success School, so you can see that we’re putting our money where our pen is.

And, lastly, pay attention to your personnel: keep the good ones, compensate them well, and counsel the less than stellar performers.

So, all in all, we’re keeping the hammer down, listening the customers and our licensees (a good idea came in from one of them this morning) and are optimistic about what we see in ’23.

Southwest’s PR Plan

When I was more of a marketing consultant than a business owner consultant, I used to do a lot of crisis consulting, because no one else was doing it.

So, in that vein, I’d like to offer Southwest Airlines some advice on how to deal with their meltdown over the last few days.

1. Bob Jordan and his team need to be all over the news explaining what happened, as painful as               it may be the admit some serious mistakes. Get out in front of the crisis.

2.Explain what they did with the $7 billion in COVID relief money that they got; did they fix                      operations, keep operations going (likely), go to St. Croix, what?

3. Offer free tickets to anywhere to any passenger that feels as though they or their family was                   inconvenienced by the mess of operations. Southwest has done this in the past.

4. Offer to pay for any alternative routes that Southwest can put passengers on, along with hotels              and meals for those who can’t be alternatively routed. I thought I heard a Southwest                                spokesperson say this, but I haven’t seen a repeat of the offer. It’s standard practice for airlines              to make such an offer, so Southwest should do it, or more.

5. Over the next few months, explain what Southwest is doing to fix the procedures that caused                  the problem. Part of the problem is in Soutwest’s route layout, which is point to point, rather                than hub and spoke, which may not be fixable, but Southwest executives need to explain this to           the travelling public.

6. Run big ads in all the media (print in all your markets, radio and television) you can find with               the apology and the fixes.

There are probably more things that Southwest could do, but the above ideas are ones that we’ve advocated to clients before, and they work.