Something about decomposing fish . . .

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Judging from recent activity in my business, I think that the issue of staff training has come to the forefront again. This follows a difficult economic period where most of our clients were in survival mode rather than business development mode. For the first six months of this year our training course bookings have been down about 60% on the same period in the previous year, while consulting work has increased substantially. That should tell you something.

To contrast with the first six months, the new financial year kicked-in and the phone ran hot. Everybody seemed to be in the same boat — awaiting fresh budgets. Healthy profit margins have all but disappeared due to a complex set of factors that include the GST, rising fuel prices, falling Aussie dollar, reduction in inbound tourism, rising produce prices and a general reluctance on the part of the community to spend disposable income. The realisation has dawned on a lot of operators that the situation is not going to magically get better and they’ve reached for the phone.

We’ve been inundated with enquiries from business owners who’ve had enough and want to sell their businesses. Most of them are in for a rude shock — without a good profit history, leased businesses are worth next to nothing at the moment; it’s a buyers market and buyers are very thin on the ground right now.

Those who are in it for the long haul are looking for ways to reverse the negative financial trend that has been affecting most hospitality businesses ever since the Olympics. I can sum up the current situation in the industry in a nutshell: At present there are too many hospitality businesses and not enough customers.

So, the name of the game now is how do you steal customers from the business down the road, and how do you get them to spend the same or more than they used to? I won’t pretend it’s easy, but I do have a few humble observations on the process — starting with a blunt observation: If you keep doing what you have been doing in the past, in the faint hope that things will return to the way they were, you will probably go broke.

It’s time to throw away all the baggage you are carrying about the way ‘it’s always been done’, and embrace change. The God given bottom line you have been used to making has now been eroded by competition — look at how many new restaurants, hotels, conference centres, etc have sprung-up in the last few years, and they’re still coming.

In my opinion, staying financially healthy is no longer a matter of having good product and service as it used to be. I see lots of places that are full but don’t make any money. To make a dollar now you have to be both innovative and very efficient. Throwing resources into staff training is unlikely to achieve the result you want. Rather than spending money on training at the middle and lower levels of your business, I would advise you to spend it on the top levels for a while.

If the basic strategies that underpin your business are flawed or based on false assumption, you can train your staff till the cows come home without getting the result you intend. I believe that the best place to spend the lion’s share of your training dollars in the near future is at the owner and senior manager levels. In other words, I believe that a complete review of your business plans and general strategies are a very good idea right now. The economy that has been so generous to you in the immediate past has now done a u-turn, and it is time to critically reassess everything that you do. It is easier to do this if you have someone challenging your thinking.

Please try to resist the temptation to commit large sums of money to new sections of your business on a whim. To illustrate this thinking, I have had some, shall we say, full and frank discussions with clients about the advisability of building a $500,000 conference facility because “There’s money in conferences”. There used to be; maybe not now. Have they done a proper feasibility? What if they’re wrong?

There’s some pretty desperate, seat-of-the-pants stuff going on right now. Business concepts are being abandoned and replaced with equally badly performing concepts, money is being thrown at renovations when the problem is the service or the product, businesses are moving up-market when they should be moving down-market — you name it and it’s happening.

That’s why I think it is appropriate to step away and have a good long look at the big picture. If what you are doing is not working too well, then maybe you should consider doing something quite different, starting with taking on some new skills yourself. Think about how frustrating it is for your staff when they are sent away for a training course only to run into a brick wall when they return and try to apply what they have learned?

We get this all the time and it’s extremely frustrating. A steady stream of people attending our training courses complain that they are unable to get permission for beneficial changes in their businesses in spite of the fact that the business is not doing too well financially. Why send them to training in the first place? You may as well stand on the road out the front and tear-up $100 bills. We often find ourselves training the wrong people.

A fish goes rotten from the head down . . .

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