Small business during the recession
by Andrew on 04/06/09 at 1:34 pm
3 comments
I was interviewed today on Radio 2000 about running and growing small business during tough times. Shane managed to catch the second-half on video:
Here are the questions that I prepared. The last questions were thrown at me out of the blue, so they’re not written down here.
How do you ensure that your business benefits from the current recession?
Most importantly, you make sure that your business survives!
The rest of this year is going to be hard, and don’t think you’re on your own.
I heard that liquidations for the first 4 months of this year were up 40% from last year.
History shows that the economy always recovers from hard times, and you’ve got to still be in business when it starts heading up.
You can use this opportunity to trim the fat from your business so that its lean and mean when the upturn comes.
Make sure all your staff are operating at 100% effectiveness.
Fly economy instead of business class and downscale the bosses company car. Entertainment and consultants get the chop.
Think of it as a “crash diet“.
It’s also a great time to tighten up on your debt collection policies and procedures.
Cashflow is the lifeblood of business, but in good times we can let things slip.
How can you identify opportunities within the market at this time?
Business has always been about identifying the pain and providing a solution.
Nothing has changed with that basic formula, except that the pain might be different now.
Don’t become an estate agent or travel agent, but you could look into opening a second-hand store.
If your business needs assets to grow, now could be a time to buy them from struggling competitors or suppliers. Just be careful of over-spending yourself!
Which industries are growing?
I wouldn’t mind owning a liquidation firm right now!
The mobile and telecommunications industry is growing strongly locally and in Africa.
The new undersea cables that are landing in South Africa over the next few years means that internet related businesses have got exciting times ahead.
E-commerce is growing at 30% a year, where most other retail has stagnated
Even though it seems counter-intuitive, there is often a “flight to quality” during tough times.
It seems extra painful to replace cheap rubbish again and again when money is tight.
Hand-made, custom-made, and “authentic” are becoming more popular than the mass-produced and imported.
Even though we care less about “feel-good” issues like the environment when times are tough, there is still growth in everything “green” at the moment.
Recycling, carbon-offsets, alternative energies are all hot topics.
A lot of big businesses are cutting down their marketing budget, how can a small business develop a good marketing strategy without the extra costs?
As Lever Brothers founder Lord Leverhulme famously said, “I know that half of my advertising budget is wasted. But I’m not sure which half”.
The key at this time is not to cut all marketing and advertising, but to try and cut the ineffective half.
This probably means shifting towards mobile and online marketing, which are much more accountable.
Instead of a billboard or print advertisement which is almost impossible to measure, online you can pay when someone clicks on your advert or even when they buy your product.
This is why Google is so rich at the moment.
Incentivise your sales team.
Identify which clients you would like to work for, and target them directly. Don’t just shoot your advertising out in broad strokes.
Should people wanting to start businesses wait for things to get better?
Any new business is going to take a few years to really get going, so now is actually the perfect time to start something slowly.
If it can get traction in this market, you know that you’re in for a bright future when things pick up.
Any ideas on how small businesses can ensure growth?
Do what you say you’re going to do, when you said you were going to do it.
If you do that, you’ll shine out from your competitors.
Andrew Smith is the pedantic systems guy behind Live Alchemy, a SA e-commerce company. Andrew writes for Ideate in an attempt to make the world a more efficient place. View more articles by Andrew.
Tags: advertising, recycling
Gino
Jun 4th, 2009
Andrew, I agree with your point about marketing and advertising.
The best time to secure a greater market share percentage, would be while your competitors are cutting back or getting out of the industry.
The right kind of spending could have a dual effect. While you are growing your business, your competitors are actually losing more clients and under more pressure.
Also the benefit of offering a truly quality service or product is certainly highlighted during tougher economic times.
Discover Lapeer County
Jun 5th, 2009
Thanks for the heads up! Learning how to reduce start up costs and ongoing operating expenses, could mean the difference between small business success, or ultimate shut down and failure. So how can you reduce these costs and give your new venture a better chance of survival? My answer is bootstrapping.
Lapeer County
James
Jun 11th, 2009
Thanks Andrew for the encouraging article. Its so important to keep a positive mental attitude and to view the current recession as an opportunity.