In this the fourth of a multipart series of posts started with:”Why Small and Mid Sized Firms Grow”. This conversation deals with what you should know about the economy and how it impacts your business.
You don’t need to be an economist to understand that you can’t easily swim upstream and be successful when the economy is either declining or growing very slowly; as it is today. For large companies you often have economic guidance. But for small and mid sized companies you need to do this yourself or find someone to help grow when the market as a whole is not. This is not to say that a rising economy raises all boats, just as all companies fall when the tide drops. But it takes a forward thinking leader who understands their options to get through the tough times.
So what do you need to know about the economy? First of all, we need to recognize that we are in unchartered waters and the old 8-10 year boom-bust cycle as far as we can tell is over. The new economy is one likely to grow slowly at best and the risk of another shock to the system is quite possible as the government which used to work smoothly no longer does. We don’t have to look too far back or ahead to see for example The Economic Cliff, The Sequester, Defaulting on our National Debt, etc. All of these things create a lack of confidence and uncertainty and business people don’t like to make decisions in this climate. One should develop alterative strategies to deal with each opportunity or threat that may impact ones business as soon as possible.
Secondly, as the economy inches along you really have to be on top of your game to gain market share as well as defend your client base. Your competitors are felling the pressure you are and will be looking for ways to do the same thing you are. For you to avoid this fate you need to exercise one or more of the following economic strategies that we will go into more depth in future blogs:
- Find those markets that are recession proof or do business with those customers who will be survivors
- Price your services so that the value your client receives will immunize you from a poor or tepid economy
- Cultivate special relationships anyway you can to remain their favorite, from simply being the best to providing perks
- Get into a growing market, be it a new service or new location so you have only one direction to go and that is up
- Create a value proposition so that you are seen as a profit center not a cost center
- Establish a relationship with prospects that they can’t refuse due to the savings that you will document
- Get even closer to your clients to make sure no one replaces you with a better offer
Lastly, there are both counter cyclical economic markets and quirky business environments that react uncharacteristically to change and the economy. Here’s some examples: one company was in a small market where the competition was exiting faster then the market was declining, and gained market share, raised prices and made a hefty profit. Another client entered a niche market that no one else dared to because of the potential economic risk of failure. There business model found a way to mitigate this risk and they also charged a premium price and made very high profits.
In the last blog, we discussed the importance of treating everyone fairly and finding out what is critical to them. Dealing with economic uncertainty is a very different process and requires people with different skill sets.