One does not need to be an economist to understand that they can not easily swim upstream and be successful when the economy is either declining or growing very slowly — as it is today. Large companies often have economic guidance. But small and mid-sized companies need to do this for themselves or find someone to help them 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 eight- to 10-year boom-bust cycle is over, as far as we can tell. 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 examples: 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 alternative strategies to deal with each opportunity or threat that may impact one’s business as soon as possible.
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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 feeling the same pressure you are and will be looking for ways to do the same thing you are. To avoid this fate, you need to exercise one or more of the following economic strategies that we will go into with more depth in future blogs:
- Find those markets that are fairly recession proof and do business with those who will survive
- Price your services so that the value your client receives will immunize you from a poor economy
- Cultivate special relationships to become a favorite, from being the best to providing perks
- Get into a growing market 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 those where they can see documented savings that you will provide
- 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. 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.
MORE: How Businesses Should Plan in an Uncertain Economy
