Published in Imaging Spectrum issue January 2009 and Recycler Trade Magazine issue January 2009
Staying positive is not an easy task in today’s economic climate. Businesses, large and small, are closing their doors for good, banks are reluctant to lend and/or increase lines of credit and consumer spending is at an all-time low. “There’s no way around it,” said Alan Beaulieu, senior analyst, economist and principal with the Institute for Trend Research in Concord, N.H.
But at the New York Times Fourth Small Business Summit, held Nov. 17 in New York City, business and financial experts shed some light on the current and future small-business climate and shared things you can do today to keep your business thriving. Whether it’s navigating through financial uncertainties or preparing the necessary pay stub requirements for your mortgage application, proactive measures can make all the difference.
Recessions are not new in American history, and throughout each economic downturn, businesses have not only survived, some have flourished.
In one panel discussion, Dawn Fotopulos, founder of DC Consulting in Chicago, Ill., and faculty member of The King’s College in New York, N.Y., noted that Hewlett-Packard opened during the Great Depression. Microsoft opened during the 1970s recession. MTV launched during the 1981 recession and the iPod was released right after the dot-com crash.
What factors contributed to such success during a time of great adversity?
Be Optimistic
First, the experts said, they were driven by optimism. “Optimism is born from the fact that business owners have too much at stake not to be realistic. And we certainly know—we’re all aware—of the economic realities,” said Marcy Shinder, vice president of brand strategy and marketing at American Express Open based in New York, N.Y. “But at the same time, even in this climate, we see that business owners tend to be more optimistic than the average person—looking for opportunities, finding them and sometimes not even seeing the obstacles—just moving forward in a way that helps you to grow. Pragmatic optimism—it’s the life blood of small business.”
An optimist is open to opportunities that present themselves and is able to adapt. Although the business and financial climate is looking bleak, there are many tools in today’s marketplace that can help small business owners stay positive and compete.
Michael Rogers, principal of Practical Futurist in New York, N.Y., said, “There’s one group that I am actually quite optimistic about the future, and that is small business, and there’s a few reasons for that.” Today’s technology, he said, does more than support small businesses—it puts them on par with large corporations. Some of this technology includes collaborative networking, cloud computing and Google Apps.
Rogers also believes small businesses have a structural advantage over large ones. In times of recession, businesses cut back. Large businesses have to pare down and function with less and less, which in many cases they are not accustomed to doing. Small businesses, however, have been doing this for years. They know how to survive with less. In addition, large businesses seek to outsource for services and supplies. This is a great opportunity for small businesses to gain business.
“And finally,” Rogers continued, “There’s a socio-cultural element to all of this. As we watch the mega-corporation continue to stumble and have difficulty out there in the market place, it’s becoming clearer and clearer that the only real reliable employer these days is yourself. All of these things are driving small business,” Rogers said.
Lead Your Team
So what’s an employer in this down economy to do? Be a strong, positive leader. Just as much as employers question their business’ survival, employees question their job survival.
“Get a vision that you believe in and make it clear. Be able to talk about it crisply and succinctly. And make sure you are committed to it because people really are looking for leadership now,” said Nell Merlino, founder and CEO of Count Me In for Women’s Economic Independence in New York, N.Y.
Having a plan and a positive attitude will motivate employees and assure them that you know what you are doing. It’s when employees lose confidence in their jobs and employers that companies start to falter. If your employees get discouraged, their productivity will drop, which will take down your products, customers and eventually your business.
“If we don’t communicate, doubt-free, that we have a vision; that we have a plan; that we’re going to be OK; that we’ve been through this before or we have a way of getting through this, they’re going to get discouraged,” Beaulieu said. “You and I have to lead in a very special way during a downturn. We have to be the ones who say ‘I have a plan—state it in the positive—to get us through this economy. Follow me, and I’ll lead you to the promise land.’”
Cut, Cut, Cut
It is especially important to be as lean as possible in this climate. Cutting back will help keep your bank account in the positive and keep your business going. “You build your business around being very lean and using your resources very well,” said Tariq Farid, president and CEO of Edible Arrangements International, headquartered in Wallingford, Conn. “What’s very important to do in a financial crisis is to adapt within your business. And if you’ve done well and adapted it well, and you are aware of what’s going on, you’ll get through this just fine.”
Jim Kock, founder of The Boston Beer Company in Boston, Mass., talked about the culture of scarcity, which is essential for the survival of a small business. “Focus on the things that really matter,” Kock advised. Business owners should be thinking past “Is this a nice to have or a need to have?” to “Is this a need to have or an absolutely must have?” This mentality forces you to use your resources wisely and get creative.
Unfortunately, in a time of economic downturn, many companies lay off employees. Panelists at the summit suggested looking at your staff and asking if you really need each and every one position. If you believe your business can function well by letting an employee go, do it as soon as possible. That salary can be used for something else.
Although adjustments will have to be made, Linda Kaplan Thaler, CEO and chief creative officer of The Kaplan Thaler Group, said, “If you have fewer employees than you need, it enables people who are at the bottom rung to wear some more hats, and work and fill in [at] more superior levels, and they always rise to the occasion.”
But if you do need every employee on your staff, take a step back and evaluate if they are worth what you are paying them. “Pay your employees on their performance at all levels,” advised George Cloutier, founder, chairman and CEO of American Management Services in Orlando, Fla. “Don’t pay them on promises. Don’t pay them on woulda , coulda, gotta. Don’t pay them on business coming in next month. Pay them on performance. They promised they were a good receptionist or manufacturing manager or salesman. Well, it’s time to get them up to the bar and start performing.”
Have a Superior Product
One thing that will differentiate you from your competitors is having a superior, value-packed product or service.
“If your product or service is not superior to what’s out there, go back to the drawing board before you go out to market. Because you’re never going to compete with a larger company who has deeper resources unless you have superior quality, unless you have a USP [unique selling proposition],” said Gary Hirshberg, chairman, president and CEO of Stonyfield Farm in Londonderry, N.H.
“We have to know our competitive advantages,” Beaulieu echoed. “If you can’t tell me in 30 seconds what makes you different from your competitor, you’re at a disadvantage and you risk becoming a commodity provider in a downturn. None of us can afford that. We need to be unique and have unique propositions and competitive advantages have to be clearly stated.”
Always ask: How can I add value for this customer? How can I go above and beyond? How can I get more creative with what I’m offering the customer? By asking these questions and following through with the answers, you are giving your customers more reason to spend their dollars with you rather than your competitors.
Transferring Value
With the current state of the economy, it is imperative that you know your business’ inherent value and that others do too. This climate lends itself to many mergers and acquisitions in any industry. Even if you are not interested in selling or buying a company, it is still important to know your value, said Philip Clements, managing director of Cathedral Consulting based in New York, N.Y.
“You need to know your customers. You need to know your value propositions. Those are identifiable value,” Clements said. “But it is also really important to have transferable value.”
Consider Partnerships
Now is a good time to find companies with a similar mission or service as your business and consider piggy-backing with them. They might have customers who are like-minded and interested in your product or service.
“Everything now is about collaboration,” Thaler said. “Share the spotlight. It’s the best way to get ahead.”
Partnerships open the door to more creativity and innovation. “Don’t be afraid,” advised Claudia Chan, president and co-founder of Shecky’s Media in New York, N.Y. “A lot of new opportunities and new revenue opportunities may pop up.”
Listen and Adapt
The positive side of a slowdown in society is that it provides the opportunity to step back and evaluate. It forces you to analyze your business plan, your products and services and your customers. Now is the time to ask and listen to what your customers are really looking for and cater to that.
“The advantage [in a recession] is that it really gives you the opportunity to energize your company. You can then use that energy within the company to do the things you have talked about with a sense of urgency,” Kock said.
Merlino told a story about one woman she works with who owns and runs a bicycle accessory store in Portland, Ore. The woman started her business catering to recreational cyclists. But in the last year, the business owner started seeing a change in her clientele. With gas prices up, the store started attracting customers who were riding their bikes as a means of alternate transportation. The business owner adapted by offering more accessories for the commuter. Her income has increased and she expanded her customer base, Merlino reported.
This is what all businesses need to be doing. First, listen to your customers and their needs, and second, be flexible enough to change your offerings. Ask yourself, what are the opportunities in this culture? You have to look at what people need. If you’re ever involved in a workplace accident or encounter legal issues related to workplace safety, seeking assistance from a personal injury lawyer specializing in workplace accidents can provide necessary legal guidance and support.
Another aspect you should consider adapting is your selling priorities. Now is not the time to be seeking new business; rather, turn your average customers into loyal customers. “Five percent improvement in retention of a profitable customer has a 25 percent to 85 percent improvement in your bottom line,” Fotopulos said. “So the game right now is not about new clients or new client acquisition. But the bottom line is that you need to focus on retention. Just because someone buys from you does not mean they are loyal to you. Invest in solidifying that relationship after the sale and your bottom line will be dramatically more healthy and sustainable.”
Loyal customers not only come back to you, they spread the word about your business. In this climate, they can help your marketing and promotions. By being optimistic, being a good leader, having a superior product, creating value, and listening to your customers and adapting to their needs, you will be able to change your one-time customers into loyal lifetime customers, which will help you survive and thrive in this recession.
“A lot of us in small business, we feel humble, we feel beholden, we feel meek, we feel not up to it. But the fact that you were even so courageous to go into small business is alone a measure of your incredible statue and courage. So stand up taller,” Hirshberg said. “And just remember, there’s no point in being pessimistic. It probably won’t work anyway.”
If you’re interested in this topic, you should also read and learn about Express Liquidation.