Martin Thorborg Video Blog 3

We have to think creatively in a crisis, including when it comes to our own business. If customers can no longer afford the product we usually sell, working even harder at exactly the same thing won’t necessarily help. We have to ask what they can afford instead and how we can still create value for them.

This video blog is from November 2008, in the middle of the financial crisis. From the USA, I talk about my experiences at Jubii and the changes we’re working on at Amino.

I can see the crisis around me

The crisis is bloody annoying, to put it mildly. I’m in the USA at the moment, and I see restaurants and hotels closing. The latest thing I’ve heard is that there are far fewer flights to Orlando, where Disney World is.

People have to pay for flights, admission and all the other costs of a trip like that. When money gets tighter, it’s one of the things they cut back on.

A friend has also told me that the amount of waste in Gladsaxe Municipality has fallen by around 20 percent. His explanation is that people aren’t buying as many televisions or doing as much building work, so there’s less waste.

That may be good for nature, but behind it are businesses that will struggle. Customers are cutting back, and you can feel it.

When Jubii lost 40 percent of its revenue

I remember the crash around 2000. Jubii was a business in full swing, with lots of employees and everything moving fast. Then customers suddenly started going bust.

Some went bankrupt. Others went back to the USA, where they’d come from, or simply cut back heavily. In three or four months, we lost 40 percent of our revenue.

Just think about what kind of business can take that much revenue disappearing in such a short time without difficulty.

Among other things, we made our living selling banner campaigns for 100,000 kroner. But when customers no longer had the money, we had to find another way to earn ours. Fortunately, we saw the change coming in good time and began to shift direction.

A smaller product could still create value

There were still lots of people searching on Jubii, and they still needed to find businesses. You could be listed for free, but there was of course a difference in how visible you were.

So we focused on PlusLinks. These were links highlighted in bold, and you could also buy extra search terms. It was a smaller product that far more businesses could afford.

If master baker Hansen wanted to be found by people searching for kringle or Danish pastries, he could buy those words. Imagine that otherwise one in 100 searchers found him. If the extra visibility meant it became two in 100, we’d created value for him.

That’s an example of the thinking: We had to sell something that made sense for the customer, even when he had less money to spend.

We managed to shift practically all the revenue from the big campaigns into PlusLinks, extra search terms and other smaller products. We changed what we sold rather than simply insisting on selling the same big campaigns.

Thinking creatively in a crisis at Amino

I’m facing a similar challenge at Amino now. From the outside, an entrepreneurship portal may look like a piece of software you’ve bought that then runs itself. It isn’t that simple.

I spend a lot of energy answering emails and dealing with various things myself. I also translated Amino myself, and that work probably took at least 40–60 hours.

There’s programming to do, graphics to make, banners to sell and plenty of other things to sort out. Four of us work full-time running the business. On top of salaries, there are servers, bandwidth, software and updates.

Altogether, we have around 200,000 kroner in monthly costs. That money has to come in.

So far, we’ve earned some of it through banner campaigns costing 10,000, 20,000 or 30,000 kroner. We give advertisers good value and bring customers to their businesses. But during a crisis, they start asking whether they can afford to spend that much money and what happens if the campaign doesn’t work.

The number of advertisers hasn’t fallen yet as I make this video. But I see some trends, so I’d rather think ahead now.

What can more entrepreneurs afford?

We’re working on small advertising formats that more entrepreneurs can buy. Many can find 1,000 kroner if they can see value in it.

If a business could, for example, buy three months of advertising for 1,000 kroner and make 2,000 kroner from it, the numbers would work. That is the kind of calculation we are thinking about in the Amino team. It is an example of a product we would like to create, not a promise of a particular result.

Perhaps we will not be able to sell as many large campaigns in future. But perhaps we can sell smaller products to a larger group of entrepreneurs instead. We hope to launch some of the small formats in the near future.

Customers still want a good life

If you used to sell big Rolls-Royces, the answer may not simply be to work even harder to sell the same cars. Perhaps you should consider selling used Rolls-Royces instead.

If your target customers could only just afford your expensive product, they may suddenly no longer have the money for it. People cut back on taxis, expensive trips abroad and other things they can do without. Then you need to turn the question around: What can they afford now?

Rising house prices have made many people wealthier and moved their aspirations up Maslow’s hierarchy of needs. They have grown used to luxury and spending more.

They do not necessarily want to give that up overnight. If they have been buying Gucci and Louis Vuitton, they may start looking for ways to keep some of that lifestyle at a lower price.

There may be opportunities for businesses that sell good, expensive goods more cheaply, for example because they are second-hand. Customers still want quality of life, but they are looking for a price their finances can handle.

Find a segment you can help

If your business starts struggling because spending is falling, consider whether there is another market segment you could serve. Or whether you could make your product smaller and cheaper so more people can afford it.

That was the thinking we used very successfully at Jubii. We avoided losing money and did not need to lay anyone off. And that is exactly how we are trying to think at Amino now. I share my own experiences of developing businesses in Iværksætter til jeg dør.