Covid, This Ain’t Our First Rodeo
A tale of two rural businesses and what we can learn from their mistakes during the foot and mouth crisis of 2001.
The City of Hereford on the Welsh/English border in the UK grew up around a crossing point over the River Wye that was first a ford, the only shallow, safe crossing point for your livestock for many miles, then a bridge in one form or another for over a thousand years. Its railway bridge still connects North and South Wales and provides access to Birmingham, the Midlands and beyond as does its position on the major road link the A49.
As such it is in a fairly unique and highly advantageous position of being the only accessible shopping centre for most of Mid Wales, a population of some 130,000 and Herefordshire itself another 140,000. There are no large towns in the interior of Wales to the West of Hereford of any significance and the only other large towns to the East are Worcester, Gloucester and Birmingham. So as an inhabitant if you wanted access to those major markets you had to travel through Hereford. As a result it became a hub in the 19th and particularly the 20th century for commerce and community to grow. If you lived anywhere in Mid Wales you went to Hereford for your shopping and took your goods and livestock to the large market that developed there.
The population inevitably increased and more businesses were set up to service their growing needs. One was a covered market selling everything from buttons to cheese which in turn spawned a shopping centre and the other was an open market on certain days of the week. Once established, these businesses provided a footfall which attracted other businesses, even national multiples and two large department stores set up on the high street.
Another relevant factor to this story is the growth of local media in the shape of newspapers, (including a Hereford edition of Berrows Journal, the oldest continually published newspaper in Britain founded in 1690) and the growth of local BBC and commercial radio stations.
In Spring 2001 disaster struck rural UK in the form of Foot and Mouth disease. By the time it was halted by that October, the crisis was said to have cost the UK more than £8 billion (US$13 billion) and more than six million sheep and cattle had had to be destroyed.
Henry Ford in 1916 said “history is more or less bunk”. But maybe he was wrong, there are many parallels to be drawn with that epidemic and our current challenges.
Let’s take a look at two particular small businesses that were successfully servicing the prosperous town, what happened to them as a result of the outbreak, how they managed to survive it and what we can learn from their catastrophic mistakes. We ignore these at our peril.
Company 1 was a forward looking business bringing cutting edge technology to the Welsh Marches and Company 2 was a killer combination of brain, brawn and outstanding creativity. How did they fare?
Company 1
Set up in the late 70s, it originally started as a small photo lab providing a fast turnaround for people who needed their photographs printed and ready to take home at the end of their once a fortnight/month shopping trip. This fast service attracted the attention of businesses also wanting rapid photo processing. So the father and son team invested in a number of high speed machine printing systems. This in turn led on to lucrative contracts with local newspapers, commercial photographers, media, estate agents and companies needing photographic material for their own publicity. The fortunate business found itself to be in a market of one at that level. With huge orders they were able to employ a large staff and by automation delivered rapidly, good quality results.
This growth suddenly came to a halt when foot and mouth disease caused the closure of the prosperous cattle market and the restrictions on movement led to the sudden collapse of a number of ancillary agricultural businesses. Foot and mouth lasted just under a year but decimated cash flow for many rural businesses. It takes years to establish new herds and although new regulations were put in place to make sure this didn’t happen again, the profits had pretty well disappeared. This had a knock on effect. The shops discovered they weren’t getting the same footfall and the two department stores had to amalgamate in an attempt to rescue their enterprise, and that only lasted a short while before closing permanently. Butchers and meat distribution were badly affected. Many farmers went out of business completely taking whole rural economies with them. Despite everyone’s hopes and best efforts, there was no return to the previous status quo. For the first time the phrase “a new normal” came into use.
The problem for the photo lab was that they still had to repay their investment without getting the throughput to justify the use of such large and expensive equipment. So the first thing they did to cut overheads was reduce the number of employees. Without the trained staff to operate the machinery the delivery times became longer, a step backwards in service and detrimental to cashflow. Meanwhile people discovered new ways of storing their photographs digitally. Most of the companies requiring large prints had downsized, were no longer in the area, or gone bust. Firms like estate agents abandoned their large promotions in fact several of the largest estate agents withdrew altogether from Hereford as farms were devalued and adequate profits were no longer to be found in the rural market.
The photo lab struggled on for a while answering the needs of a locally developing middle class who had moved from larger cities to pick up cheaper properties and live a healthier rural life style. These people initially wanted a fast turn around but frequently wouldn’t collect orders for anything up to a month which strangled cashflow. Soon the lab had to abandon their expensive town centre premises especially as the whole area was being redeveloped as the cattle market was demolished and turned into a shopping mall whose own fortunes were mixed. Local footfall continued to decline in spite of the council’s best efforts to rejuvenate the high street and the only discernible effect of the mall development was to siphon even more people away from the city centre. A matter of 400 yards made all the difference.
The demographic had changed irreparably and the amount that people were prepared to spend on photography dwindled. Digital photography soon started gaining ground and with each new technological development the demand for larger social photographers for weddings, family occasions and events shrank as automatic cameras made their role increasingly irrelevant for most people’s tastes, convenience and pocket.
Meanwhile one of the local newspapers became part of a larger group centralising picture resources with freelance photographers able to send digital photographs directly to the editorial team without the need for photo processing.
So what did they do? They looked backwards for the old normal where they were comfortable. They moved to a much smaller operation in a large town some twenty miles away only to find themselves in a state of terminal decline. Mobile phones had good photographic capability and digital storage became the new norm, leaving them way behind. The company finally died in 2019 when the lease ended after years of misery worrying every month how they would pay the rent all the while spending huge amounts on innovative marketing to no avail. A waste of the son’s youth and talents who now has to retrain as a middle aged man searching for meaning and purpose in a world he doesn’t understand.
Company 2
This enterprise was the dream of a talented young man with a solid head for business who went into hairdressing because he figured that whatever happens in the world, “everybody always needs their hair cutting”. He found the perfect premises and teamed up with an accountant to take care of the financial and admin side. A killer team, they couldn’t fail.
As the town grew and prospered in its hey day they built up their wealthy landed clientele for whom the farmers were the tenants, and grew an increasing offering of salon services and products to help them part with even more money. They opened a second salon only streets away in bigger, swisher and more expensive premises but had no trouble filling the appointments diary. The artistic director based himself there and having proved his abilities started started to dream about training apprentices to continue his brand of hairdressing. Encouraged by his suppliers (of course), the team made plans to expand the empire and open an academy. The accountant was happy, he saw yet another great opportunity to create an additional revenue stream.
This is where things began to wrong because the accountant also saw the opportunity to cut his business partner out of the expansion. It occurred to the man who had been bankrolling the venture that as he ‘owned’ the name of the salon chain, that he could build the new academy solely on the goodwill built up.
This inevitably led to friction and the hairdresser found himself alone in his new large central and expensive premises. Worse was to come for not only was he devastated by the betrayal, the accountant had come to realise that he couldn’t find teaching staff qualified and talented enough to measure up to the brand created. His solution? He poached Company 2’s two top senior stylists from under his former partner.
The artistic director now had several problems:
- The accountant left the partnership and with him went the financial expertise and support that insulated and underwrote the cashflow.
- Instead of doing what he did best, the hairdresser now had to manage the financial side of running a company, renegotiate all his contracts and learn how to set up all the administration side of trading.
- He had to find and train up new stylists to his standards.
- The apprentices trained by the accountants competing academy left to set up their own salons directly competing with Company 2.
- Foot and Mouth disease struck and his wealthy clientele and fan club disappeared overnight.
How did he cope?
He had to put emotion and frustration aside and move quickly with the fast changing times:
- He admitted to himself that he could not thrive as a jack of all trades and learnt to outsource what he didn’t enjoy so he could return to rebuilding his own brand doing what he excelled at and nothing else.
- He reframed the search for and training up of his new stylists as the foundation of his own in-house academy and his business and reputation grew again in the same fertile soil he’d neglected during the ‘break-up’.
- Yes his rich farmers’ wives had disappeared, but as city professionals flocked to buy up the cheap properties he appealed to their need for high value services rarely found outside large cities. Celebrity presenters and new wealthy inhabitants vied for his specialist services. He niched with a higher price point, fewer customers and less work for very much more profit.
- Rather than sending his apprentices out into the world, he set up another salon and offered them work there keeping up his style ethos and standards. His fortunes and reputation recovered to their previous height.
Take away 1
Don’t wait for the old normal to return, it won’t.
Company 2 survived Foot and Mouth by recognising that:
There was no return to their old customer base, so they hunted down the new. They needed let go of the pain and old emotional investment in partnership and focus on what they do best, build their personal brand and improve their specialist services and profit margin.
It would be great if the story ended there wouldn’t it? But fast forward fifteen or so years…
The hairdresser, always ambitious, opened a second and third salon, in the same city, to cater for his freshly qualified apprentices, still enticed by the vision of an expanding empire, or was it revenge?
Being run by his newly qualified hairdressers these salons attracted only customers not prepared to pay for top stylists. While successful, they diluted his brand. He lost his celebrity and wealthy clients and became known for only offering a middle of the road salon experience. The salons had to work harder and longer for an increasingly dwindling profit margin as they competed on a level playing field with everyone else with no customer loyalty, desire being driven by price rather than brand.
Company 2 had overcome many challenges by staying true to its core values of high quality service but by trying to hold on to a dream of an academy, they were left holding a baby that had eventually corrupted their model, its needs and hunger stripping the brand of its uniqueness, casting it out to compete in a sea of ordinariness.
The salon chain has now broken up, the premises have recently changed hands and the empire is no more.
But — SUCCESS — when Covid hit us this year, a couple of his graduates who had decided to launch a portable hair business focussing on appointments in the many care homes that abound in the area are doing well. With lower overheads and an endless supply of much less demanding elderly customers, they are surviving in turbulent times. Whether they will prosper is yet to be seen but their prospects are better than a salon with high overheads that has just been forced to shut down again, with little offer of the financial support previously available from a frantically failing government.
Take away, take 2…
Don’t wait for the old normal to return, it won’t.
Be flexible, challenge every ‘norm’. Examine everything about what you’re doing now. Throw it against an imaginary wall, break it, tear it up, burn it, stamp on it. What survives? What’s unique? What can adapt to any eventuality? Develop that.
Look at your customers and suppliers with a new set of filters: What restrictions, changes and advances will your suppliers and customers be forced to invest in that will alter how they see and need you? Will they even still exist come 2022? Run that through your team now and discuss, you may be surprised about their take on what they hear your customers saying.
Take a minute to think what we’ve learnt about human behaviour at its very worst this year and how that may apply to your particular set of skills and diversify, move your business or profession along those lines:
HUMANS: We will not be kept indoors, we are social we need to meet up somewhere even if we know it may kill us.
We crave experience outside our home. As that experience may lead to our demise, we have to value and justify it to ourselves and thus seek out a higher quality experience in line with risk reward ratio.
How does your product or service differentiate itself amongst all the other similar and now desperately price reducing offerings? Can you go more artisan/niche/specialist to justify the investment in you?
We hate being told what to do, just look at the no mask lunacy on your own street.
Can your business resonate somehow with that vibe?
Who is your tribe, is it still there? Does it need redefining? Is it changing? Have your old hunting grounds moved or disappeared? Should you be getting on your bike? Learning a new language?
Can you control or adapt your own ingredients/supply lines when current sources run dry?
Are you harbouring or haemorrhaging resources hanging onto old ideas?
If you’re match fit, are you ready for the next challenge?
Long after Covid 19 is a distant memory, there’s plenty more of the proverbial waiting to hit the fan.
More pandemics are forecast: You must stay lean and flexible and look to build up your reserves while building a grateful fanbase. Let go of the parts of your business that will eat you from the inside and focus on keeping your customers informed about how you are solving their fast evolving problems.
Climate change has happened and the effects are looming ever closer. The big companies in the know are already diversifying away from carbon intensive processes and regardless of any government legislation are specifying ‘carbon zero plus’ in the performance of their contracts.
Are you ready for the effects of Brexit in the UK or a contested US election, both of which are going to have a disastrous effect on global business.
Do your research and be prepared to change everything you know about how things work. You’ve read this far, so I have complete faith in your ability to change your paradigm and maybe your entire business or profession and succeed where many sadly will fail thrashing around looking to the past.
