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Feature: Don't Just Survive, Prosper |
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Don't Just Survive, Prosper
Use creativity and expand your business in uncertain economic times.
By Sally Huggins
 When economic waters are rough, small businesses shouldn't pull back but instead should take advantage of the void created by others who do. Experts advise taking the opportunity to increase sales and expand into new markets.
"A good business owner will assess the situation and make a plan based on the opportunities around them. If you're creative, you can really do well," said Steve Kaplan, business strategist and author of Be the Elephant: Build a Bigger, Better Business.
Don't Hunker Down
A common reaction to bad economic news is to get into a bunker and wait until the downturn passes. But those who have survived previous economic scares say that is the last thing you should do.
"If you are going to be a longtime survivor and a longtime growth company, you have to take your train and go 100 miles per hour all the time. The moment you relax, it's the moment when competitors come in," said Gina Danner, CEO of Mail Print Inc. "You always have to be moving forward."
When her company faced a difficult market 18 years ago, it increased its marketing. Instead of mailing to 1,000 businesses, they upped the ante to 4,000 businesses.
"What was key was that while our costs did go up, our responses did too," Danner said. "Sales solve all problems."
J. Schmid & Associates uses times like these to go after new customers. "This is the time to fish. If everyone is cutting back on their advertising dollars, this is the time to find new customers. It's contrarian marketing-contrary to what you would think you should do. Everyone is afraid to spend money. That's the time you should be investing because the opportunity is broader," said Lois Boyle-Brayfield, president of J. Schmid & Associates, a direct marketing company.
Work Smarter
Most small businesses are small enough that they can thrive in a down market. A bad market is an opportunity to work smarter and harder.
"Small businesses are nimble and can make changes," Danner said. "Some of the huge housing companies or real estate companies are not as nimble and can't turn on a dime. Small ones are surviving and thriving because they were able to be nimble and make changes."
J. Schmid looked ahead and saw trouble last year when larger companies were swallowing smaller ones, which were the company's primary customers. Using creativity, the company made a decision that turned out to be huge and salient. By developing new products to address the market change,
Boyle-Brayfield said, they created a branding product that is now a big-ticket item for the company. Instead of losing market share, they have gained it.
"Now we can sell to a much bigger market," she said.
Examining what you already do can help you to shift your market or product, said Kaplan. If you ship your product but your trucks usually are only 60 percent full, find companies that want to buy the other 40 percent of space, he said, thus bringing in additional revenue while cutting your own shipping costs.
"What areas of expertise do you have? Take a look at your operation. If you have someone who has expertise in shipping, determine how you can utilize that," he said.
One company he works with was faced with a major loss in sales when Katrina struck New Orleans. It refurbished equipment such as air conditioners for small businesses and homes. When those customers disappeared, the company did some quick thinking and went to the insurance companies offering a service of repairing damaged equipment so they wouldn't have to pay for new machines. Kaplan said the company developed a whole new business and increased sales 100 fold.
"That kind of thinking is what you have to do," he said.
Talk to Your Customers
Just talking with your customers can help you retain business as well as find new avenues. When a company is in touch with its customers, it develops a greater loyalty base, said Beth Goldstein, president of Marketing Edge and author of The Ultimate Small Business Marketing Toolkit.
"It sounds basic, but something most businesses unfortunately don't do," she said. "They aren't in touch with their customer base. Even the most micro business should be doing that continually through customer surveys and customer feedback systems."
By communicating with its customers, the company will know if it is meeting their needs. Just as a business has cycles, a customer's needs cycle, Goldstein said. It may lead you to a new service or product.
"It's an easy way for a small business to constantly innovate and constantly re-create itself. What are the next needs of the customers that they can fulfill?" she said.
The Value of a Strategic Plan
To be sure you know your customers, even in boom times, a company should have create customer loyalty built into a strategic plan. In peak economic times, the plan may lead your company to new services you can offer. In downtimes, it can be a lifesaver.
Laura Maver Ward, president of Dovetail Business Advisors, said the value of a strategic plan is that it prepares a company to foresee outside influences rather than reacting to them. Ward said the plan is really an action plan and should have action items that everyone in the company is constantly working toward. It is not something to create and shelve.
"A strategic plan should be re-evaluated monthly and adjusted accordingly. If your plan is sitting on a shelf and no action items are involved, it's not a working plan," Ward said.
Boyle-Brayfield said that too many companies operate at the will of the outside environment because they haven't developed a plan. J. Schmid has one that outlines different strategies depending on the economy.
"Without a goal, you are floundering," she said. "We firmly believe in having a strategic plan. We have a financial goal and we have developed strategies to attain that goal depending on what might happen in the economy."
With a plan in place, a company is constantly re-evaluating its place in the market and adjusting as needed.
"The marketplace changes and companies need to change with it. You have to know what is going on out there," Boyle-Brayfield said.
Part of knowing the marketplace is being aware of what your competition is doing.
"Find out what your competition is doing. You may find out they are innovating in a way you hadn't thought of," said Goldstein.
Discounting Doesn't Hold Customers
In difficult times, some businesses look at cutting prices, but often that is not effective. When customers do business with small companies they are looking for value, Danner said.
"Discounting doesn't usually help. People don't buy off price with small businesses. They buy off value," she said.
Always, but especially in difficult economic periods, a company needs to be clear on its value proposition and what it offers customers. The key is to be unique and to provide more value.
Montica Alexander, owner of Best of Kansas City, said that price is always a factor, but that you have to something more to offer.
"You can never be cheap enough," she said.
Alexander also said you have to find a niche in your market. That niche can be being fastest at some service or providing a service that your competitors don't. For Best of Kansas City, it is customer service, Alexander said.
"Our goal is to make it a clean, perfect buying experience," she said.
For J. Schmid, the niche was developing advertising for companies with multi-channels, including Internet sales, catalogs and a retail outlet.
"That's who we market to. Nobody understands the nuances of the multi-channel world like we do. It has idiosyncrasies," Boyle-Brayfield said.
Developing a product to meet those needs took the company to large businesses, such as The Hershey Company, where as before they were dealing primarily with small companies-those ones being swallowed up in acquisitions.
Recession or Hype?
Is this recession real or just good material for the media? Kelly Edmiston, senior economist with the Federal Reserve Bank of Kansas City, said the economy has definitely slowed-and slow growth can feel like a recession even when there isn't one. Whether a true recession develops depends somewhat on consumers, he said.
"The risk of recession is hinged on what consumers do and what happens in the credit market. There are some dangers out there. Banks are reporting tightening lending, and housing prices are falling. There is a risk of consumer entrenchment. We haven't seen a lot of that, but it is a risk," Edmiston said.
Chris Kuehl, economist and founder of Armada Corporate Intelligence in Kansas City, said a recession is two consecutive quarters of negative gross domestic product, which is difficult to achieve. But whether it will be a textbook recession or an economic downturn, Kansas City is likely to be less affected than the coasts, he said.
Because Kansas City is not a city with numerous corporate headquarters, it is somewhat insulated from corporate retrenchment, he said. It also has recession proof industries, such as engineering and insurance, and no dominant industry. Booming agriculture markets also help.
"My guess is Kansas City is going to weather this slow down better than other parts of the country," Edmiston said.
The Economy Is Not an Excuse
Regardless of what the economy does, it can't be an excuse for a small company.
"The first thing a business has to do is make the decision that they have a choice to not participate in an economic downturn. It is a conscious decision." Danner said. "You can't blame the poor market for[U1] your lack of innovation or performance."
Small businesses need to be prepared for business cycles regardless of the economy so that changes in customers or trends don't derail them, Goldstein said.
"It's not just recessionary times that have an impact on small businesses. You have to have a plan in place and a constant supply of clients in the pipeline. You can't rely solely on one or two clients," she said.
When the 2001 recession came following Sept. 11, Best of Kansas City made a point of telling their customers that it still was important for them to take care of their own customers, even if they spent less per client.
"We let our customers know that if you aren't taking care of your customers, someone else will," Alexander said. "The types of gifts the corporates were sending changed a little bit but the quantities were still there."
Boyle-Brayfield saw many in the industry cut back on their budgets for finding customers in 2001 because they felt they couldn't afford it. But you need to constantly be finding new customers, no matter what, she said. For a few years after a downturn, companies will feel the effect of a recession; but if they haven't prospected during that time, they will feel it much longer, she said.
You Can Grow
The most important strategy for small businesses is not to panic, said Kaplan.
"Step back and give yourself a couple of days to think. Call it an opportunity. Get your salespeople, or whoever, in your organization together, get a pizza and brainstorm," he said.
"These economic times can force you to have a lot of fun with your business. The entrepreneurial spirit has to outweigh the negativity of the economy. You can grow your business in an economic downtime."
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