Survive an economic slowdown using five strategies

Can you be a business survivor?

Reading the news headlines at this time certainly indicates the economy is in a slowdown.

In fact, the word "recession" probably does apply in some regions of the country. Some examples are as follows:

n Gross Domestic Product (GDP) growth, which is one of the factors to measure the economy, has slowed significantly and is close to turning negative.

n Even though home foreclosures are a small percentage of total mortgages, they receive front page coverage daily.

n Employees are being laid off. Jobs are being outsourced. The unemployment rate is on the edge of going higher than 5 percent.

n Credit lending for businesses is now much tighter.

n The U.S. dollar is faltering against foreign currencies.

Can you be a survivor under these "perceived catastrophic" conditions when perception creates the feeling of reality?

In ad hoc research talking with owners of small to mid-size businesses and with bankers, the three most common responses to answer the question "what are your biggest issues in today's economic environment?" are:

1. How do I correct flat or declining sales and profitability?

2. How do I position and differentiate myself competitively to attract more customers?

3. How do I understand the current financial ramifications to my business going forward?

Fortunately, the reality in South Central Wisconsin is the economic and business conditions are not nearly as severe as is reflected across many parts of the country. However, complacency is not a characteristic for success.

Now is the time to review your business as it fits into this slower economy, how it relates to the competitive market situation and how to structure your business financially and develop forward marketing plans to turn the current conditions into a business advantage.

Rules good anytime

The following five business building strategies not only apply in an economic downturn but should also be the business strategies in good times to optimize the growth and profitability of any business.

1. Emphasize marketing to your current customers rather than dependence on the expensive process of finding new customers. Accepted experience indicates that it costs as much as six times to convert a new customer as to make an extra sale to an existing customer. Your current customers know you, identify with you, and trust you.

2. Provide products and services with a clear market positioning and differentiation from your competitors that will allow you to enlarge the size of each of your transactions. Look for appropriate strategic partnerships as cooperative marketing allows for continuing aggressive support while reducing marketing investment.

3. Provide superb value and customer service in your products and services from the perspective of your customers. It is important to communicate in the selling process that it is crucial not to waste money. Therefore, buyers should protect their money by spending wisely and not making a mistake in an economic slowdown. Acknowledge that you are aware of the economic conditions, be truthful and target customers who are searching for value and acknowledge that they have to be extra careful when buying products and services. This is a competitive positioning of your business but must be continuously supported by your actions recognizing that it costs three dollars for every dollar formerly spent to reach the same level of consumer recognition and share of mind previously enjoyed.

4. Focus on leveraging the power of referrals from your existing customers. Referrals don't just happen; you must have a process with the correct timing to ask for referrals, particularly from your satisfied current customer base. And you will have a much higher probability of converting a new customer from a referral than from traditional media… and at a much lower cost.

5. Utilize disciplined financial modeling to represent the future conditions of your vision for your business rather than the historical financial reports that only show where you have come from. In circumstances where economic conditions are changing from month to month, it is critical to reforecast your most likely revenues and expenses every month based on best judgment assumptions to allow you to make forward looking decisions rather than wait to see what happens.

Flexibility helps

Small to mid-size companies have an advantage over large companies in difficult economic conditions… the ability to make changes in relatively short time frames. It is possible to attack in the marketplace when competition retreats, when retreating companies leave a void in the marketplace. Flexibility is an asset.

Operating a small to mid-size company as a business owner or CEO in an economic downturn may seem to be daunting. With a positive, flexible and aggressive attitude and a confidence that strategies are available to address these circumstances, an economic downturn can be the basis to strengthen your market position and to be poised for more rapid growth than your competitors when the marketplace turns positive … and it will turn positive again as the U.S. economy does operate in cycles over time.

Iain Macfarlane is the president and founder of BizCOACHING & Associates in Madison, a franchise of ActionCOACH Business Coaching. He was named "Coach of the Year 2005."