Maybe It’s Not Just The Economy That Has Changed…

In 1999, a partner and I started a business called Red Wine With Fish?.  We delivered price fixed gourmet three course dinners to professionals on Wall Street who worked late.  For a time, we really thought we had something.  The economy was booming, everyone was working crazy hours and companies were happy to pay for their employees' $25 dinners.  We decided to expand our space and (over) build a kitchen to support all of the new business that would continue to come our way.  With the new kitchen we thought it would be a snap to get into the lunch delivery and corporate catering business serving all of our dinner customers.  So we raised money from family and friends, borrowed more and shut down the business while we built our kitchen.  Needless to say, construction took longer than we thought and was twice as much as we expected.  We had almost no working capital when we reopened.  Customers still loved our dinner business, but lunches and catering not so much.  The tech bubble popped in early 2001 and the economy really started to slow down.  Companies weren't so happy to pay for their employees' $25 dinners any more.  We had to lower our prices to what the companies would spend, face competition from restaurants that figured out what we were doing AND we had huge overhead to pay for.  Then 9/11 happened and, in an instant, everything changed.  The kitchen was 2 blocks from the Trade Center and suffered no damage at all, save for some spoiled food.  Most of our customers left for Midtown and those that stayed weren't exactly happy to be working late.  We closed a year and a half later. (The blunders I made during that time and the painfule life-lessons learned are the subject of another post).

 

So why tell the story?  Because, for a long time, I said that 9/11 was THE reason for RWWF's demise.  It was a huge game changer, no doubt.  But it wasn't THE reason.  Our growth ideas were based on expansion into hugely competitive areas where we had no advantage over existing well-established players.  Our own market was pretty limited in terms of growth potential.  Competition grew and the economy went south.  Add onto all of it the incredible risks associated with running a business based on perishables.  This with no money.  Would we have survived with no 9/11 — who knows, but likely not.

 

The recession is horrible and a game changer, but it is not THE reason your business is suffering (if it is).  Advancements in technology, the Internet and Social Media over the last 5-10 years have removed almost all barriers to entry for most of your businesses.  Competition is fierce and the ability for customers to differentiate among you is now so much easier than even say 5 years ago.  And your markets haven't exactly exploded during the same time, save for maybe interior and graphic designers.  Like 9/11, all the recession is doing is exposing latent fundamental shifts that are only going to grow.  Don't tell yourself that you will be ok when the economy improves.  You won't.  Instead, look at your market and your business relative to that market and ask what changes you can make now.  Focus on lowering fixed expenses.  Outsource as much as you can — let people do what they do best so you can focus on what you do best.  Then think about how what you do is unique to your market and how it might apply to other markets.  As Rebecca said in her tweets yesterday, there is now a huge flight to quality with brands that represent authentic value.  Be one of those brands and be ready to evolve.