Six Ways to Grow in a Down Economy
In the 1990s, it looked like we could do no wrong. The economy was growing. The stock market was rising. Venture capital was plentiful. Young people became instant millionaires in the dot.com world.
Then came the new millennium and somehow that all changed. The economy started to shrink and layoffs became commonplace. The stock market dropped 35 percent from its late 1990s peak. The dot.coms folded en masse and venture capital dried up overnight.
Some say the best course of action in a down economy is to sit tight and ride out the storm. That may be the easiest solution, but it's far from the best. It is possible to operate smart in a slow economy and grow your business to new heights—if you do the right things at the right time.
There are six key principles that I've come to believe in for having a successful business in times like these:
1. Diversify your product lines. Change is one constant you can count on. Customers' needs change over time, and how you approach satisfying those needs will be key to growing your business.
For example, in recent years, the trucking industry has experienced a record number of bankruptcies, which strain the remaining available capacity. By developing a service designed to shift truck traffic to the rails when it was practical for the customer to do so, one company was able to convert more than $11 million in truck traffic to the rails. And this figure will most likely increase in the coming year.
2. Provide superior customer service. Don't give your customers reasons to look elsewhere. Providing a poor level of service will accomplish just that. Service is often the key differentiator among competitors, especially in a market where you are selling what is perceived as a "commodity" to many buyers. It's an investment, not an expense.
3. Shore up your management team. When the economy declines, one of the first areas companies begin to cut back is middle management. I would argue that is the last place you look for reductions. The strength of any organization truly lies in the management team that directs your business. These people have likely risen through the ranks and understand what is going on in the organization above and below them.
4. Empower your people. One of the surest ways to drive your business levels down is by making all your decisions at the top. This takes your management focus away from the bigger picture. No single decision is likely to ruin a company.
Empower your people at all levels to make decisions regarding matters that pertain to their realm of expertise. Don't look to the boss to do it all. By doing it this way, you'll find just how agile and responsive your organization can be to the needs of its customers. Plus you will accomplish much more and increase morale because everyone feels involved.
5. Communicate, communicate, communicate. Communications can make or break a company. The frequency and detail to which you communicate with your employees is critical to success. And it must be a two-way street. Channels must be available for communication to move back to the top and employees must feel comfortable in knowing that management will listen to what they have to say—and make decisions based upon the best information available, not based on who it comes from.
6. Don't over-manage expenses. Prudent spending habits shouldn't be a function of a slow economy. It should be a regular way of doing business. It should be part of the company culture and not a reaction to things going on around it. Make the investments that should be made and don't spend money on things you don't need. But don't over-manage. Get caught up in watching how much is spent on paper clips and you fail to focus on driving the top-line business.
A common mistake many companies make in a down economy is assuming that by cutting costs they will be able to stay above water until the market picks up. While this may buy companies some time, it is not a long-term solution. By adopting a proactive approach to business, companies can not only ride out the rough waters of a down economy, but also continue to grow.