Is Your Business Well-Positioned for Growth?
This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.
When companies encounter an economic downturn, they invariably reduce expenditures, cut costs, and take a "wait and hold" mentality. It's understandable given the decrease in consumer demand and the impetus to save money. However, no matter how long the recession lasts or how severe it becomes, there is always a period of growth that follows. It may be slow or it may be sudden, but when the economy rebounds it's those companies that are well-positioned for growth that are able to capitalize, grow sales, and increase market share.
What does it mean to be well-positioned for growth? How does a company ensure they'll be ready when the economy recovers? More importantly, how can a company anticipate the recovery and remain one step ahead of their competition?
Every recession is followed by a growth period
When it comes to the economy, what goes down always comes back up. After every recession there's a period where the economy recovers and grows. Even in those cases where the economy experiences a "double-dip" recession, there is still a period of growth where customers and business can be had. In fact, a number of companies increase their marketing and sales efforts during recessions. The mindset is that during recessions, companies are reducing marketing expenditures and are therefore susceptible to losing customers.
Why some companies aren't able to capitalize when the economy turns
Recessions aren't any fun. When faced with a decline in consumer spending, companies cut costs. The problem arises when those cost-cutting measures result in a decrease in service capabilities. These cuts in service capabilities often come back to haunt companies when the economy suddenly rebounds and they simply aren't ready to capitalize. In this case, companies are often left chasing their tails and are in more of a reactionary mode than a proactive one. It's perhaps for this reason why some companies prefer recessions when it comes to increasing market share.
So, companies must be vigilant about spending and investment, but also be able to anticipate potential opportunities before they occur. They must be ready and be proactive instead of reactive. While this might seem like a tall order, it's actually not as difficult as it sounds. It requires some discipline on behalf of management and employees, and a couple of simple and straightforward approaches to stay one step ahead of the game. The key lies in looking for the signs of a market rebound. What are these signs and where do they come from?
Market information from customers and competitors
The best companies always have a pulse on their given market. They maintain their market presence and are keenly aware of what their competition is doing. Regardless of how bad it gets, companies must be fully indoctrinated in their customers' future. This involves a thorough understanding of the market and industry the company services. It's not uncommon for businesses to lose touch with their customers during recessions and be completely caught off guard when the economy rebounds. Customers and competitors are a fantastic source of information on when and how the market will rebound.
When times are tough, everyone seems more willing to discuss the realities behind a bad economy. Even competitors are willing to discuss issues and information they would never discuss in good times. In a sense, everyone is in the same boat. As such, they are more willing to share pertinent information. One of the surest ways to know a rebound is forthcoming is when your competitor suddenly stops sharing that information!
Information from complimentary markets
Staying in touch with a market's customers and competitors is one proven way of being proactive, but another equally effective way is to be aware of complimentary markets that may show signs of recovery. Every market or industry has a complimentary market or synergy with another market. The housing market is forever tied to construction materials. News of a possible increase in home or hotel construction should immediately resonate with manufacturers of doors and windows, cabinet manufacturers, appliance wholesalers, and furniture stores.
Companies must be able to quantify this information into something tangible that will allow them to plan for the increase in demand. Being proactive involves being able to gather information from various references and sources. What does this increase in home construction mean in terms of the demand for doors and windows? By how much will it increase and will manufacturers need to ramp up production, or maintain its current rate? The best companies take information and quantify it into numbers that speak to the reality of the opportunity and what it means. They then take this information and act on it accordingly.
Companies have several sources of information to draw upon. There's the market itself, complimentary markets, the news, as well as industry newsletters and trade magazines. Information is all around. Companies need only learn how to gather and disseminate that information into something tangible that can be used to plan for growth once the market rebounds.
Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.
Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.
