Bottom Line: If you are making important business decisions in these challenging economic times, always consider the big picture. Making knee-jerk reactions to economic fears may cause you to shoot yourself in the foot.
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Ben’s Story
In October I had an email from a client I’ll called Ben. Ben wanted some advice on updating his business plan for 2009.
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What he had in mind was some major changes to handle the current economic downturn.
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Ben’s company provides specialised electronic equipment and services to the building industry. They have been in business for about eight years.
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In a telephone conversation I learned that the proposed changes involved dropping several low or no profit products and services. The advice he was seeking was on how severe he should be with his cutbacks.
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At a first glance, Ben’s thinking seems logical and appropriate for these times of economic uncertainty. However, there was another factor that it appeared Ben was not taking into consideration. A factor that I was surprised he did not mention.
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I suspect that economic fears were getting in the way of common-sense decision making.
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Background
For the past two and a half years, Ben and his team have been developing and introducing some very specialised products and services. Their strategy was based on being able to better solve some industry problems that their competitors were not competent or cost effective at providing.
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This strategy had had its ups and downs. A plus factor was that it got them into several high end building contracts. Some of these have developed into very worthwhile business relationship.
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On the down side, Ben and his team had underestimated the time and cost it takes to develop and promote new problem solving approaches.  Thus cost recovery was a slow process.
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Another down side was that three of their ‘work-in-progress’ development projects still require considerable time and cost before they were marketable.
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My Suggestion
My suggestion to Ben was to take a big picture approach to responding to current economic conditions.

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I suggested he make up a spreadsheet list of products and services that should be vetted for retrenchment. I also suggested that all work-in-progress developments be included in this list.
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Next I suggested that he create two additional columns in the spreadsheet. One for a “Profitability Rating” i.e. Low, Medium or High. The second column I suggested he name “Opportunity Factor”. The purpose of this column is to indicate the likely value of other business that this product or service could attract.
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In other words, what I suggested to Ben is that is that he thinks about a bigger picture when making profit and loss decisions. In management circles they refer to this as a “Strategic Switch”. It’s about using longer term strategic thinking rather than short term (knee-jerk) tactical thinking.
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I’ll update you on Ben’s decisions and outcomes.
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Conclusion
Next time you are under pressure to make important business decisions,  pause for a moment and use some brain power to consider the big picture consequences.
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Andrew Smith
The Business Plan Guy