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Carl Gerhardt

Business Sense & Sensibility

By Carl Gerhardt

About Carl

Carl Gerhardt is the chairman of Allegra Network, one of the world’s largest print, marketing and graphic communications franchisors, linking more than 500 locations in North America under the brands Allegra, Signs Now, Insty-Prints, and American Speedy Printing.

Carl and his wife, Judy, owned and operated their own successful Allegra Network franchise for nearly 20 years before selling the $2.3 million operation in 2003. He is a PrintImage International/NAQP Honorary Lifetime Member and was inducted into NAPL’s prestigious Soderstrom Society in 2010 in recognition of his contribution to the industry.
 

Recessions are Great?

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I wrote the headline as a question because I assume most of you will heartily disagree. Let’s see if I can make a case for you to reconsider your position. Maybe I can move you to “good” if not “great.” Consider the following:

Companies of all sizes across all industries have been forced to take a hard look at their cost structure and become lean during the past two years. Not too surprising, most business owners and their key managers are reluctant to make the necessary, but tough, decisions required to “skinny” down the company. Some talk a good game about lean manufacturing or Six Sigma, which in the end amounts to little more than lip service.

The sad fact: When sales decrease, we either get lean or we die. With a strong motivator, the smart ones choose the former, making it the thread of a recession’s silver lining.

Once we “go lean” and then achieve even a modest uptick in sales, measurable changes begin to occur to the bottom line...in most cases. Those that fail to see improvement are the companies that tend to start spending like drunken sailors, thinking they are now freed up to again be the “nice guy.”

Don’t let it happen to you. Take this opportunity to keep your cost structure low and keep some money on the bottom line. I am not, however, advocating short-sightedness. A portion of the improved bottom line should be reinvested in future growth. Update your technology to stay on the leading edge, and make other investments appropriate to keep your company competitive.

This is also a strong message to take to your customers when you are talking to them about their marketing projects: “Be sure to market, but market smart. Keep your cost structure low, reinvest in new technologies, and let us help you to reach your strategic marketing goals.”

If you need a good closing line, you can take one I’ve used during dozens of Allegra Network franchise member consulting visits—which we call Profit Mastery Assessments. One of my parting recommendations is typically to fire one or two people and raise prices 5 or 10 percent...then I get out of Dodge and leave the heavy lifting to the owner.

I say this tongue-in-cheek and somewhat jokingly. However, it is interesting to note how common excessive staff costs and lack of attention to intelligent pricing are the primary causes for poor profitability.

Recessions are really great to force down the cost structure, but growing economies are a lot more fun. We are not in a very strong growing economy yet, but hopefully, it is not far away. The economists will let us know...once we are already in it for a year or longer.
 

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COMMENTS

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Most Recent Comments:
Robert Johannes - Posted on December 27, 2010
Carl, Well, I can't quite join you in the good or great category, I can say I believe it to be a necessary part of healthy capitalist "evolution". We had a 17 year run of "managed" soft landings which seemed like a good thing at the time, but defies the necessary exhale of a healthy and breathing economy. So here we are. As is evidenced in the Q3 numbers, the industry is doing quite well, thank you, on the profit side. The leaning you refer to has done it's job; now we will see if companies successfully downsized by trimming fat and not muscle on the uptick side and can improve profits further or must suffer the rebuilding costs of a strong organization that they gave up in cost cutting. Always tricky business, this cost cutting.
Jack Crowley - Posted on December 23, 2010
Some excellent points! From my vantage point, there just isn't enough marketing! Businesses need to reach out to existing customers more first and then go after new business. Must develop consistent communications. JRC
Gene Hayes - Posted on December 22, 2010
After this current recession has ended, there will also be a lot less competition. Those that were barely in business 3 years ago have already failed. Unfortunately, it's going to be the end for more in the next few months. That's good for the survivors, I think!
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Archived Comments:
Robert Johannes - Posted on December 27, 2010
Carl, Well, I can't quite join you in the good or great category, I can say I believe it to be a necessary part of healthy capitalist "evolution". We had a 17 year run of "managed" soft landings which seemed like a good thing at the time, but defies the necessary exhale of a healthy and breathing economy. So here we are. As is evidenced in the Q3 numbers, the industry is doing quite well, thank you, on the profit side. The leaning you refer to has done it's job; now we will see if companies successfully downsized by trimming fat and not muscle on the uptick side and can improve profits further or must suffer the rebuilding costs of a strong organization that they gave up in cost cutting. Always tricky business, this cost cutting.
Jack Crowley - Posted on December 23, 2010
Some excellent points! From my vantage point, there just isn't enough marketing! Businesses need to reach out to existing customers more first and then go after new business. Must develop consistent communications. JRC
Gene Hayes - Posted on December 22, 2010
After this current recession has ended, there will also be a lot less competition. Those that were barely in business 3 years ago have already failed. Unfortunately, it's going to be the end for more in the next few months. That's good for the survivors, I think!