Running a business in a recession is difficult. It requires adaptability, changes to operations, innovative ideas and sometimes hard cuts. Launching a business despite a recession, while dealing with the same issues, demands a totally different strategy and considerations.
Al La Kebab
Popular and affordable eatery Al La Kebab started its first restaurant location at the Marquee seven and a half years ago.
Alan Silverman was a waiter at Rum Point before launching Al La Kebab. He worked until 4am in the morning to offer a place where restaurant and bar staff and the party scene could go late at night to get some healthy and fast Mediterranean and Middle Eastern food.
From exploiting this gap in the market, Al La Kebab, which employs 26 people, evolved into a full breakfast to dinner restaurant that now serves coffee, pancakes and eggs benedict in the morning in addition to the regular Pita wraps, skewers or salads during the day and at night.
One and a half years ago, just when the economic downturn started to hit, Silverman added a second restaurant in the heart of George Town.
“We launched our second location just as it all collapsed,” he says.
He estimates that subsequently 10 to 20 per cent of his customers were laid off.
This was significant, because most of Al La Kebab’s customers downtown are locals and not as one might expect cruise ship tourists.
He agrees that this put a significant dent in his turnover forecasts.
At the same time the sourcing of food products and business costs in general increased.
Unlike other businesses that immediately adjust prices and pass any increases on to their customers, this was not an option for Al La Kebab.
“The company vision and mission is to offer value for money,” says Silverman.
This means essentially to offer quality meals for not more than ten dollars.
Major price increases would therefore have compromised the brand and business concept of the chain.
In response to the economic downturn Al La Kebab tried to keep the prices down and find alternative ways to deal with the economic environment.
“We have negotiated with suppliers and cut our margins and theirs,” says Silverman, rather than having to resort to putting up prices and potentially losing customers.
The preservation of what the brand stands for and the focus on why customers are coming to Al La Kebab paid off.
“We had great local support in George Town,” Silverman says, who is grateful that regular customers have not stopped coming.
But to be able to do this it was important that the business was well managed before the economic downturn hit.
“I have definitely learned that keeping overheads low is the key to survival in these conditions,” says Silverman.
Cost control and customer service are the main keys to success.
“When times are good it is easy to forget about the needs of customers,” reckons Silverman, but one should “always remember who your customers are and deliver good customer service.”
Cayman web design company Netclues launched two years ago, just when it became clear that there was going to be a severe economic downturn. Yet, although it took a long time to plan the start of the business, the economy was not a daunting prospect, says head of web development, Kartik Mehta.
Netclues is one of the pioneers in strategic offshore outsourcing of software and web services in the Cayman Islands. The company’s business concept, which makes extensive use of outsourcing with India where the web designer has access to 50 web developers and programmers, results in savings that benefit not only the business in terms of lower expenses, but ultimately its customers, who receive a quality product at an affordable price.
Netclues offers web development, Internet marketing, software solutions and graphic design services. This wide service range also helped in the difficult economic environment, says Mehta, as the diversity enabled the company to switch to areas that were more in demand.
At the same time, Netclues addressed the needs of its clients with products that helped them respond to the new economic environment. “For example when most companies considered slashing their marketing budget, we helped them with cost-effective online marketing or search engine optimisation,” says Mehta.
A recession is not necessarily the time to stop advertising and cut marketing, says Mehta. Netclues in fact increased its marketing efforts during that time to gain momentum and better exposure amidst the overall lower advertising volume.
But it is important to monitor your advertising and find out which form of marketing and media are working best, he advises. Netclues tracks the effects of online advertising, so customers can immediately see results and savings. The company designs websites for maximum lead generation to help companies from day one.
Software development is another where Netclues delivers cost savings for clients. Even though new software applications will mean an initial investment, the systems are generally designed to make companies run more efficiently and ultimately save money. Whether in software development or in web design, Netclues analyses a client’s business processes and requirements, assesses spending and determines a way for the company to reduce expenditures.
Every company should for example build a client database, says Mehta, to leverage existing clients and generate new sales leads.
Netclues differentiates itself in the market through quality of service. Even in the recession clients are looking for customer service more than anything else, says Mehta.
This means in Netclues’ case to be available 24/7 for clients that have a request, he adds.
Clients are also less likely to opt for a lower quality product they may still be stuck with when the economy recovers.
Some competitors offer cheap, open source systems and templates but the clients often don’t know what they are getting, he says.
“In Cayman we deal with a lot of real estate companies and we study how they want to market themselves,” Mehta says. In the end each solution is different and tailor-made according to the specific wants and needs of each client.
This is where outsourcing has enabled Netclues to maintain the balance between offering a high-quality services and affordability. While the economic conditions may necessitate that service providers, especially new ones, must initially be flexible with their pricing, companies are generally still willing to spend a little more for a difference in quality, finds Mehta.
“Our benefit is that we offer a high quality product, our services are the best, we are cost-effective and our customers receive a whole new system designed to their needs,” he says.