The Outlook for 2010
by Don Libey

Every December I attempt to look ahead to the coming year. This is the 20th year that these thoughts have been gathered, and it is the 10th year under the current newsletter and sponsorship of the good people of MeritDirect.

Is the Great Recession over?

This is the question, isn’t it?

The direct marketing community has been on edge for some time now. The economics are not what they were. But I’m unsure if the Great Recession is over or if it will continue. I have looked at the fundamentals and the technical elements of the economy, read everything I can find regarding future potentials, talked to experts with long perspectives and experience, and visited with many of you to gauge your views. The result is, I just don’t know; there is equal justification for recovery and for a deepening recession. But, more important, it may not matter.

For the past ten years or so, we have repeatedly heard an expression that has made its way into our daily conversations: “It is what it is.” It’s a fairly profound philosophical sound-bite, similar to Doris Day’s “Que sera, sera” of the 1950s. You and I can do nothing about the economy. It is what it is. We can only influence our own micro-economy, our businesses. The more we worry about the future, the more we allow it to constrain our businesses, the more we create self-fulfilling outcomes. Whether the Great Recession is over or not is not important. It is what it is, so what are you going to do with what you’ve got? That is the issue for 2010.

What Have We Got?

Mostly we have a very slow-growth economy for 2010. You may be fortunate if you get a one percent growth from where you are now. Don’t look at growth based on pre-recession sales. Look at growth based on sales right now. One percent on sales right now may not be exciting, but at least it is a positive increase. If the economy can deliver a one percent increase, it would signal the beginning of future growth and I would look for signs of strengthening momentum throughout the last half of 2010 and into 2011.

Perhaps there is another growth factor. If you can produce an additional one or two percent growth through diligent application of solid, proven customer and investment prospecting tactics, that is where the meaningful results will come from over the next two years. Two percent growth from you and one percent from the economy: for me that is a realistic objective.

One percent of your internal growth can be expected simply by repairing the damage done to your customer list. I am seeing upwards of forty percent of the names on customer lists no longer at those companies. If you go into 2010 using your existing customer lists without a monumental cleaning effort, you are going to shrink and waste money, not grow. Your list has been permanently damaged by the Great Recession; only you can fix that. You need to turn your call center into a voracious list updating operation, otherwise your most valuable asset will deteriorate and your business will decline precipitously.

Another thing we seem to have going into 2010 is stable prices. With the exception of drug companies, health care insurance, banks, lobbyists, politicians and the other parasites plaguing our society, prices have somewhat declined. My research tells me this is temporary. The only possible way out of our debt is to print money and that can only result in inflation. These are absolute relationships, not potentials. Inflation will occur. But, for 2010 it seems prices will be reasonably stable, at least through the first six months.

We also seem to have a slight increase in money available to businesses. In several recent acquisitions I have been involved with as an intermediary, I see fairly decent financing available for larger deals, but not for small deals. Larger deals are above $40 million. The average deal size for 2009 in the under $100 million market was around $17 million, up from about $8 million in 2008. Banks want to loan money to large, successful, sustainable companies, not small companies with higher risk. Nothing new there.

While unfortunate, some of us also have a slight decline in competition as we enter 2010. There are direct marketers exiting their businesses for a variety of reasons. There is also a quiet consolidation taking place, especially in business-to-business direct marketing. I have been privy to acquisition “roll-ups” of small companies by larger strategic buyers in four distinct market areas. It appears that those entities with money and financing are quietly on the move and are beginning to acquire sizeable portions of specific niches, often buying companies they have been following for years. This is a transition period; all recessions produce transition periods. Following this period of consolidation, we can expect a period of new business formation. Whenever consolidation occurs and companies become large and lumbering, opportunities for small, fast-moving, innovative competitors always follow. It is the classic American cycle of business that is almost never seen in other countries.

That decline in competition provides you with a five-year window to gain market share if you are positioned to do so. You will need a “re-think” about your products, prices, propositions, services and customer relationships—and your channels.

And, at the moment, you have available a growing talent pool. People are in transition due to the Great Recession. People are always in transition during any recession. However, “transition” means something other than just movement. In the period following recessions, the talent pool is always refreshed. Those with the skills of the pre-recession period are flushed out of the pool and replaced with people having the necessary skills for the post-recession years. If you look at the channel controversies, you see a clear demarcation between the past and the future. The growth companies with their vision on the future are gathering talent to compete with 2011-2015 market technologies and strategies. The knowledge and skills for 2011-2015 are very different from those that served 2005-2010, and vastly different from those that served 1995-2005. Read, heed, weep or rejoice; it is what it is.

Finally, we have some improvement from the causative elements of the decline of 2007-2009. Probably most of the toxic mortgages have been resolved. Some of the toxic banks have been stabilized or have been taken over. It appears the American people have recognized that they cannot continue spending more than they make; that is the prerogative only of congress and politicians. The securities markets have improved significantly. Yes, there are still very troubling and dangerous patches in the economy, but it has at least pulled back from the brink of the abyss.

What Do We Need?

The “Six Cs”: customers, courage, confidence, care, conservatism, capital.
Put your capital to work investing in the growth of your business through internal and external investment prospecting to grow your customer base and expand your products and service capacity. Do so with courage, confidence, care and conservative practices. Take calculated risks; concern yourself with facts, measurements, realities, and the supremacy of the customer.

Keep these timeless basics as your 2010 strategy and you can’t go wrong. We begin where we are at the end of 2009. We move forward into 2010 and do everything in our power to take advantage of a one percent economic growth and a two percent internal growth. It is what it is and we will wind up 2010 with whatever we create. The only thing that matters is progress forward and a steady hand on the controls.

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