Successfully growing a small business is challenging in any environment. It’s even more difficult in economically troubled times. In conducting research for our book, Let Go to Grow; why some businesses thrive and others fail to reach their potential, we discovered five tips that can help entrepreneurs overcome these challenges.
Focus on low cost solutions. Dollar Tree, Inc. operates a nationwide chain of retail stores where every item on the shelves sells for one dollar. It caters to bargain hunters―people who want to spend as little as possible to get the things they need. In January of 2008, the firm’s stock price dipped below $15. By October of 2011, it had eclipsed $80. That’s more than a five-fold increase in the stock price during the most economically difficult period we’ve experienced in our working lifetimes. Why? Because in economically troubled times, people look for the low cost solution. Price sensitivity is dramatically increased. Conspicuous consumption is gauche. Even people who have money like to brag about the bargains they’ve found. It’s chic to be frugal. To grow your business in a downturn, focus on offering lower cost solutions.
Allow customers flexibility. AT&T and T-Mobile are touting cell phone plans with no contracts. Websites such as LeaseTrader.com and SwapALease.com are offering to help people get out of expensive car leases years early. In trying economic times, people are uncertain about their future income and are hesitant to make long-term financial commitments. Allay your potential customer’s fears by not locking them into extended contracts. Consider leasing rather than selling products. Think about whether some sort of buyback provision makes sense. How can you make a potential customer comfortable that if his or her economic situation changes, there is a way out?
Offer short-term, tangible paybacks. Customers are sometimes willing to spend money now with the hope of making it back in the future. Companies such as Kyocera encourage customers to pay more up front to get products with lower operating costs. They argue that this will lead to a lower total cost of ownership. This approach may work when people have money to invest, but in economically tough times, customers are looking to make ends meet today, this week and this month. For many, spending more now to save in the long run is not an option. Take advantage of this by focusing on those parts of your business that offer economic advantage in the short-term. Deliver tangible paybacks quickly. In this environment, people are less willing to spend more now with the hope of future benefit.
Answer the critical question. Every business owner must be able to answer one critical question, “Why should a prospective customer buy our product or service rather than a competitor’s?” If you can’t answer this question clearly and concisely, cut your losses and seek employment elsewhere. When times are tough, getting the answer right is even more important. You have to separate your business from the competition to survive.
Once you understand how what you offer is different, you need to make sure that the segment of the market that values what you are offering is large enough to support your business. You could market a skunk flavored Popsicle. It would be different. There is nothing remotely similar to this on the shelves of your local supermarket. However, it’s unlikely that enough consumers would value this difference for you to build a successful business. This is a silly example, but it makes the point that just being different doesn’t guarantee success.
Finally, you’ll need a clear plan to reach this segment. Whoever said, “If you build a better mousetrap, the world will beat a path to your door,” was just simply and unequivocally wrong. If no one knows that you have built a better mousetrap, people won’t be knocking on your door. To succeed, you’ll need a plan to inform your target market segment that you have what they want.
Don’t be afraid to ask for help. If you want to build a house, you could learn how by trial and error. You could try different approaches to see what works. You could read books on carpentry, plumbing, residential wiring and HVAC. But, you wouldn’t. You’d talk to an architect or a contractor. You’d build on the accumulated knowledge regarding residential construction. It would still be your house. You would determine the square footage, the number of bedrooms and bathrooms, the floor coverings and the chandelier that hangs in the foyer. You wouldn’t abdicate these important decisions to others, but you would seek the help of experts. The thing is that successfully growing a business in economically difficult times is way more complex than building a house. If you haven’t navigated these waters before seek the help of those who have. When times are tight, missteps can be fatal.
Growing a small business in a downturn is tough. Many entrepreneurs won’t make it, but some will thrive. Do you and your business have what it will take not only weather the storm, but to flourish? Following these five tips will help you to clear the hurdle.