Time to attack

Published in the Sunday Times, February 2009 by Grahame Armstrong

There is more a crisis of confidence than an economic crisis, according to some experts who say now is the time for businesses to spend on advertising and hire skilled workers.

With National Australia Bank chief economist Alan Oster predicting the Australian economy will start growing again in the middle of next year, a US expert visiting Perth said recessions were a time for businesses to be more aggressive, not retreat.

Dennis Fromholzer, the president of CRM Associates, a firm that specialises in valuing and analysing the effectiveness of Yellow Pages advertisements, said the secret to surviving the economic downturn was to invest and increase market share.

It would help the economy a lot if people were not so scared, he said. In a matter of months, people had started saving instead of spending.

"We've gone from over confidence to fear," Dr Fromholzer said.

"Businesses should continue to do their research so that when the tough times end you come out much stronger than everybody else.

"It's gutsy, but a lot of businesses have been born in recessionary times - Federal Express was born in tough economic times. Just before I came down here to Australia I got a phone call from a guy who a year ago bought a franchise in Florida, one of the hardest hit places in the economy. He sells garage doors.

"I asked him how business was and he said I grew my business 30 per cent in the last year. I asked him why and he said because all his competitors are cutting back and he increased his spending, his advertising spending. It's a time when you have to get sharper about running your business. The smart businesses are doing it."

NAB chief economist Alan Oster said confidence readings around the globe had fallen to levels that were overly pessimistic.

"The problem you are now seeing, however, is that it is having a real impact," he said.

"You had this financial fire going on that sort of didn't get into the economy, but now it has. If you get this (no) confidence thing, people don't open a new factory or build a new mine."

Dale Gillham, author and share market analyst for Wealth Within, said most investors would sit on their hands and do nothing, rather than create opportunities.

"In my opinion, it will be the investors who educate themselves and who take an active approach to their share market investments that will be profitable in the next one to two years," Mr Gillham said.

Rebekah Horne, vice president of MySpace.com Australia, said despite tough economic times people needed to maintain their marketing spending to keep their businesses visible and viable. "It's do or die," she said.

Jenny Craig Weight Loss Centres managing director Amy Smith said the answer to survival in the economic crisis was strategic focus, not spending levels.

"The real challenge is to set strategic priorities within the limitation of our financial capacity,"

Ms Smith said. "Where should we invest, where should we maintain spending and where should we cut back? That's the important question."