Came across this interesting post in the “Financial Times”…
“Five Myths About Business Failure In A Downturn”
…and there are some relevant points for business owners in Australia.
Plus, the proper use of direct response marketing would have prevented many problems arising in the first place.
The five myths are…
- The downturn caused the problems
- Companies fail quickly
- No one saw it coming
- Things will return to normal after the downturn
- It couldn’t happen to us
Looking at each of these in turn…
1. The downturn caused the problems
In most cases, untrue. What’s happened is that the downturn has exposed fundamental flaws in business models. In the good times, pretty much anyone can make money and problems can be glossed over.
Lesson? Take a good look at your business model, how you actually make money, and make sure it’s robust.
2. Companies fail quickly
Not usually. They bleed to death over a long period of time and then “suddenly” collapse when they can’t go on any longer. And by that time, they’ve usually had to sell off assets, borrowed whatever they can and generally run the company into the ground.
Lesson? It’s pretty clear if there are problems. For example, if “Temporary cash flow problems” turn into permanent debts, there’s a problem. Don’t ignore it.
3. No one saw it coming
Well, usually somebody did, but the CEO or the Board either didn’t pay attention (blinded by their own genius, usually) or the “somebody” was too scared to tell them.
Lesson? Don’t ignore the bad news!
4. Things will return to normal after the downturn
…or maybe they won’t. In any case, the downturm might go on a lot longer than you think.
Lesson? Problems come back to fundamental flaws in a business model. Regardless of what happens to the economy, a flaw is going to stay a flaw until you fix it.
5. It couldn’t happen to us
I think that’s what the guys at General Motors have been telling themselves for the last 20 years or so and are probably still telling themselves right now as this one-time business giant hovers on the edge of bankruptcy.
Lesson? Of course it can happen to you!
So what’s this got to do with direct response marketing?
Well, when you take a look back at these five myths, the problems are the result of…
- A flawed business model; and
- Not paying attention to warning signs before it’s too late
With direct response marketing, properly applied, this can’t happen.
That’s because direct response marketing is scientific and accountable.
You know what’s working and whether it’s profitable or not because of testing and tracking.
If a campaign or a strategy is not profitable, you know that pretty much straight away and can take action.
Now, I’m not saying that a business is guaranteed to succeed by using direct response marketing.
If there are fundamental problems with the market or your offer, then no amount of smart marketing is going to result in long term success.
But you’ll certainly detect problems early and be able to take action before it’s too late.
To end this post, here’s a clip from the movie “Other People’s Money”. It’s a speech by Danny De Vito playing “Larry The Liquidator” and sums up a lot of the points I’ve touched on here.
Enjoy!