Entrepreneur’s Notebook—Downturns Offer Opportunity to Set Businesses Apart

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Recessions are self-fulfilling prophecies. At the first hint of a slowdown, businesses start to worry. They lay people off and pull back their investments in new initiatives because no one wants to be the last one off the train. Other businesses then react to hearing of the layoffs and pullbacks. They start to stockpile cash, too scared to carry out their plans for promotion and expansion. Fear and negativity rule. Once they decide things will get bad, they do get bad.

Fortunes were made during the Depression. No one ever writes about that. There are incredibly huge opportunities in a down market, especially for entrepreneurial businesses. Think about it. During prosperous times everyone feels confident. They’re promoting their businesses and investing aggressively. Because everyone is spending money on marketing, it’s difficult to differentiate yourself from the competition. In slower times, only the smart entrepreneur is aggressively spending on promotion while the competition is tightening its belt. This creates a significant gap between marketing efforts and results. In other words, in a recession, one way to succeed is to adopt a contrarian view.

The brave entrepreneur sees a recession as an opportunity and takes advantage of the contrarian flow. The reality is that the competition is retrenching. That means that what you do now to grow your business will have a much more significant impact. Anything you do is wholly differentiated, not marginally differentiated as in “hotter” economic times when everyone is spending on marketing and promotion.


Best for small firms

This approach works for smaller, entrepreneurial businesses that have not gained dominant market share. It does not apply to businesses that have captured a significant percent of their market. Because the big players own the market, any market pullback will cause their businesses to shrink along with it. Businesses with smaller market share, on the other hand, can increase that percentage even if there is a recession. They still have room to grow. When the larger companies are cutting back, smaller ones still have a large chunk of market to pursue. This is the time to move forward and take your company to the next level of growth and profitability.

There is a second type of opportunity that comes with a recession. When your customers have to cut back, it creates new needs that you can step in to fill. Ask how you can serve them differently today. Listen for the opportunities. A printing company, for example, can step in to take over the printing needs of a larger company that has to close its in-house printing department. A human resources consultant or accounting firm can replace in-house HR and accounting personnel. When your customers are cutting back, instead of solving their problems, they have created new ones. New problems for your customer mean new opportunities for you. They may just be waiting for your solution.

Instead of worrying about lost sales and business, be perceptive about the changes occurring around you. Ask what it is that other businesses no longer have the resources to do. This may mean adding new ways of doing business to your repertoire. You may need to develop complementary products or services rather than going down the same road with the same products. What your customers need now may not be what you have been selling. Be willing to pursue a different strategy, perhaps new services.


Understand changes

Enhance your product line to support your new environment. Work with and understand the changes and see what support you can give to those new situations. Focus your marketing to take advantage of your competition’s retrenchment. Thinking outside the box is a must in times like this. Let the competition adapt to go with the flow, leaving gaps, while you adopt a winning contrarian position.

A third opportunity in a recession lies in the area of attracting new talent to your company. When corporations are laying off, highly skilled people enter the job market. How can they help you enhance your existing staff and develop new products and services? If you make the right investment now, chances are it will pay big dividends in the future.

Companies that haven’t maintained a healthy balance sheet, improved the efficiency of their processes, and regularly solicited customer and market feedback are going to find it difficult to take advantage of opportunities created by a recession. They are either too cash strapped or are trying to build on a faulty foundation.

Pursuing all these great opportunities that come with a recession doesn’t mean you should spend indiscriminately. Wisely placed and targeted investments for market expansion, new products and services or new talent will propel your company past the competition.

Taking the contrarian view is not for the faint-hearted. It takes an accurate and thorough understanding of your market, competition and product viability. It also takes the confidence to move against conventional wisdom and the courage to stand alone.

So remember: What the media may be calling a recession may just be the opportunity of a lifetime to expand your services and sales to existing customers, gain new customers, pick up great new staff and beat the competition large and small. On top of that, you can help get the economy back on track. What more can you ask?

Barri Carian is a partner with the Enterprise Advisory Group, which works with successful businesses to get to the next level of profitability and growth. She can be reached at [email protected].

Entrepreneur’s Notebook is a regular column contributed by EC2, The Annenberg Incubator Project, a center for multimedia and electronic communications at the University of Southern California. Contact James Klein at (213) 743-1759 with feedback and topic suggestions.

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