How to Win Big in Today’s Economy
The altered economic landscape presents innovative and nimble businesses with opportunities for capturing the attention of new groups of customers and discovering more efficient methods of operation. By achieving these goals now, businesses are able not only to survive the present but to thrive when demand for products and services grow in the future.
Although government statistics indicate the economy has survived the Great Recession, slow growth continues to plague small businesses. Entrepreneurs are being cautious as they navigate their way through today’s economic challenges. However, savvy small and medium-sized enterprises are seizing the moment as an opportunity to reassess their processes and strengthen their market positions.
Why are smaller companies more able to take advantage of this opportunity?
- Small and medium-sized enterprises have greater flexibility than large companies for adjusting operations in ways that improve efficiency.
- They are able to act quickly in responding to opportunities.
- Smaller businesses require less effort to implement changes throughout the organization.
- They have fewer systems in place that inhibit organizational repositioning.
What steps should a business owner take to correctly position a small business even though the future remains unknown?
Start with a simple examination of the state of your market.
- Determine if it is increasing and why.
- Recognize current changes in consumer preferences.
- Consider what is likely to be transformed in the next two, five, and 10 years.
- Identify potential market alterations that could improve your customer experience, advance your supplier relationships and impact your competitors.
Assess macro trends that are expected to power the future of your industry. Some examples are an aging population; growing consumer focus on health and nutrition; environmental concerns; globalization; and advances in technology.
Decide what will be the strongest channels in a rising economy: which industries will take leadership positioning and which will lag. This will give you insight into which sectors will achieve the greatest wealth and have the most money to spend.
With these macro concepts in mind, create a vision of how they impact your business. Here are some important considerations:
- Cash flow. Generating cash is vital to implementing changes in your business, such as marketing to a new customer base, introducing new products or increasing efficiency by acquiring new assets. Cash allows you to capture advantages when your competitors cannot. You advance while they retreat. You’re best prepared for confronting both opportunities and obstacles when you maintain liquidity and have plenty of cash on hand.
- Inventory. Controlling inventory is one of the best ways to release pressure on small business. The optimal inventory level is when items are acquired just before you need them for resale. Conversely, inventory surpluses tie up cash, utilize storage space and may require liquidation due to obsolescence.
- Products and Services. Slow economic conditions are ideal for evaluating what your business really sells. A small business cannot afford to offer too many low-margin items, especially those that are not part of the core operation. Remember that your customers are facing the same economic factors as you are; they want products and services that represent the greatest value. In fact, they will pay handsomely for things that increase their efficiency and productivity.
- Personnel. The most valuable asset a small business has is its employees; they are conduits to your customers. Of course, workers are expensive, but employee turnover is even more so. Win over your employees to your vision for the company. Communicate long-term goals and the pay model that corresponds with meeting stated objectives. Give the highest rewards to leaders.
- Mergers and Acquisitions. A rough economy leaves behind the laggards that fail to adjust. But many of them have valuable customer lists, supply chains and employees. There will be opportunities to acquire smaller competitors or merge with an equal. Make sure these arrangements add capacity for a reasonable price. For example, in some markets, buying a building rather than continuing to rent a location is appropriate.
- Marketing. Advertising is the most commonly cut expense in a recession; many small businesses believe it’s an extravagance. It isn’t. As the economy picks up, consider the most efficient way to spend precious marketing dollars: Think about how customers find you, and determine the best way to make your business stand out.
- Profit Margin. As revenue rises in an economic recovery, a small business must remain vigilant against spending that incoming cash. Shrinking profit margins means you may be spending yourself out of business, and the situation might require price adjustments to maintain your profit margins. Remaining competitive price-wise may necessitate investing in more efficient systems to meet customer demand. Fortunately, the recession has made equipment, real estate, and workers available at bargain costs.
- Cost Control. A small business with growing sales orders more from suppliers. To control cash flow, ask your suppliers for assistance. After all, they have a stake in helping you succeed. Request extended payment terms when your business is ordering more. A period of renewed sales growth is also a time for considering new ways of addressing higher overhead costs. Looks for ways to outsource certain functions that save money.
- Customer Service. Building strong relationships with customers provides security for a small business. Create loyalty with rewards programs and special promotions to select customers. The emphasis on service allows you to hold prices steady during a period of slow economic recovery.
While the economy is crawling out of bad times, small businesses still face considerable challenges that didn’t exist when it was growing steadily. The post-recession economy demands careful planning and resourceful action by business owners, but the opportunities to win big are there for the taking.