Is your business feeling the crunch of a slow economy?
Last week a client of mine, Kim (name changed to protect the innocent) told me that her business had slowed almost 40% over the past 18 months. As we talked, she explained that she’s doing nothing different with her advertising and marketing – “what worked 18 months ago just isn’t working as well now,” she said.
The reason, Kim felt, is that people have less money to spend.
That certainly makes sense. All our living expenses are on the rise. Groceries cost more, utility bills have increased – in some places dramatically – and the price of a gallon of gas is through the roof. So it only makes sense that consumers have less to spend on what they may perceive as ‘non-essential’ services.
When I asked Kim what she was going to do about it she said, “Well, I’m going to have to cut back on my business expenses.”
“What’s the first place you’re considering cutting back,” I asked?
“My advertising and marketing is my biggest expense. I just don’t think I can continue to pay for print ads in local magazines. And I should probably look at how much I’m spending on Google Adwords. And maybe I need to look at sharing my office space with someone else.”
Interesting strategy I thought. Kim’s ideas were to cut the things that were costing her business the most money. Yet cutting her marketing budget would also affect her ability to reach new clients. She seemed stuck.
Trimming fat from your business is smart in lean times. But it can also send your business into a downward spiral which leads to going out of business. When revenues are low, you cut back on marketing – which brings less clients, which, in turn decreases revenue further leading to more cutbacks. You can see, a few cycles of this and you’ll be out of business.
What small business owners seldom think of in lean times is growth. But look at the example of big business and wealthy people. They’re often the most active when the economy is slow. Investors often buy in when times are lean. And they all make a killing in the long run.
The small business owner, if they want to stay in business, needs to take a similar approach. In lean times, sure, cut back on unnecessary expenses. Readjust your books so you can loosen up some cash. But even more importantly, get active. In other words – sell.
Seems like a simple solution, right? Times are tough…sell more. But seldom do small businesses in slight downturns think of this. Or if they think about it, they don’t actually follow through on it.
Yet the key to coming out of a difficult financial period – be it your own business cycle or that of a slow economy – is to focus on growing your business. Utilize all the selling techniques you know about to stir your way out of stagnation.
Remember that marketing is most effective when you’re solving problems for your clients and customers. Refine your marketing to meet potential customers where they’re facing problems. It might be that you have a perfect solution for their needs.
So how is your business in this economy? Do you have a growth strategy for slow times – whether you face them now or not? What would it be?
Let’s talk about it.
(note: image from Pulpolux !!! on Flickr, 
some rights reserved)
When the going gets tough, the tough get going. A cliche if ever there was one but, as valid today as ever.
The answer stares at your face. You take business away from someone else, in other words, go aggressively after the competition.
You are also right that it is in the downturn that you invest for the future. When revival takes place you will be ready when the others are scrambling to build capacity.
I agree that marketing your business is essential, especially in economically challenging times. Adjusting your marketing to better reflect the needs of your prospective clients during these times may make sense. It also makes sense to get back to experimenting with your messages and placement of those messages, as client needs during tough times may be different enough from what they were during good times that the previous message(s) aren’t close enough to what the prospect is looking for.
Interesting points but I guess it depends what type of business you are in.
ultimately, if you selling non essential, expensive or luxury items then surely it would be best to lie low and ride out the downturn and plough all money back into it once things pick up.
On the other hand for things thatpeople will still buy and use even when times are tighter, you still want to hold a prominent presence?
This is right up my alley! As a marketing consultant, I tell people the worst thing they can do is STOP marketing. That being said, yes, you can stand to trim some things like print ads (which I rarely find effective). But you can trade them for more affordable things like email marketing, networking and press releases.
Check out my ebook that covers exactly this: how to get the most out of your marketing during poor economic times:
http://www.eatingcerealwithafork.com
We have been doing fairly well in this down time. We find that its harder to up sell clients (for extra features on there websites) but we are still making due. In our down time we are also working more and more on our own brand and internal projects. I think that is a big part of why we are doing well. A lot of companies are rethinking there image (since they have free time) and thats why the are purchasing Business to Business offerings.
I work a lot with small businesses and have seen more downturn in the past few months in their business. Many are doing exactly what you just warned about and are now suffering from their 2nd or 3rd cycle before going out of business. The successful ones are changing the way they advertise for their product or even changing their product to fit these times better.
rummuser,
Love your strategy. So how do you implement it in the face of fear?
John,
Without a doubt. Marketing is about your message and how that message is responded too by a specific audience.
Olly`,
I think it’s a catch-22, really. You never want to be stagnant in your business in the first place. Yet most small business owners seem to pull back when things get difficult. But what happens if you refocus your business and work toward growth rather than pull back?
Julian,
It’s interesting, my business is still thriving and yet I’ve taken this downturn in the economy to (almost) launch a new start-up. Should be ready in the next 10 days. Go forward, I say.
Susan,
Nice plug! So answer me this…what’s your own personal strategy for continued business growth in difficult times?
Tim,
I think what happens in a downturn is that there is fewer low-lying fruit to pick. So business that have relied on it will find themselves going hungry unless then revamp how they go after customers.
Thoughts?
Thanx Dawud for sharing such a important issue. I was desperately waiting for this kind of article because i’m starting a business..
It is so true that we often don’t start planning until hard times have hit us. If during affluent times we build a business nest egg instead of funding that company cruise we may find later it keeps your business a float.
When times are tough it is important to pull together as business and make sure everyone is working for the same goal and understands which projects are most important. even if that means others get put on hold.
I agree with what Rachel said. “We often don’t start planning until hard times hit us.” I have been in the business world for 37 years – which means I have experienced many cycles. There always have been and always will be good times and bad times. The ecomony goes through cycles. Those who prepare, survive and sometimes even proper in the bad times. The key is being prepared.
A downturn in the economy can be great for catching up with your competition. The hope is you as the business push forward with growth, while your competitors get hit by fear and trim in the wrong areas, spiraling them into further problems.
Credit,
So how will you use this information to aid your business?
Rachel,
A nest egg – so true – especially for the soloprenuer.
I think a downturn gives business owners a change to reevaluate how they do their business, how the market and to whom. Yet as business owners, shouldn’t we be doing that anyway?
Ron,
What’s one key point to being prepared?
matt,
I think that’s true. Yet how much time do we spend watching the competition? And how much of that time could be used to revamp our own business?
Fear is a constant. Whether you are in a boom or a bust, a business man lives with fear of something or the other. Success in business, or for that matter, all aspects of life, is doing things despite fear.
If one did not have that characteristic, one would not have gone into business in the first place.
Good info. Growing while the economy is in a slump is a tough thing to do, but if one can do it then they are set for when the economy is booming.
Absolutely fabulous post and great comments. My business is doing well even in these troubled times, in spite of the fact that I am tied heavily to the auto industry. I agree with rummuser regarding being aggressive in sales efforts. Cutting back on marketing is the WORST thing one could do as the article points out. The key to do is to cut down your margins and sell more to maintain your profits. It works like a charm every single time. The key I have also found is that you should be operating in a lean fashion at ALL times not just the tough times. Dont spend unless needed no matter whether times are good or not. Great topic, great post, great comments. Enjoyed it. Thank you, Sir.
I have one main business and three other smaller streams of revenue to help from putting “all my eggs in one basket.” You also have to be looking toward the future and not the past. I was lucky enough to act on a good idea BEFORE most of my competitors did.
I was given a great opportunity when the market was bad and i had just had a baby. I was laid off my job at a time when i thought i had job security and if forced me to become my own boss. I feel that threw faith in god i was able to over come and make it happen. I haven’t looked back since. Feel free to check out my website http://www.aeasyplan.com
Taking the risk when market slows down shouldn’t feared about. You need to take chances. Failure is the key to success. Your experiences will help you climb to the top. In any business, you will face many downturn. It is part of every business. Just go with the flow, do the right strategies and marketing and everything will fall into place.
as in every business small or large there are always good and bad points. One needs to keep eyes wideopen and picture big
Very interesting article. Hope it will help me to grow real big business but I want more articles like this one ) Thanks
little business should be very sharpened to meet needs of local / niche marketing. thanks for your thoughts!
think of some unique way to catch the attention of others..like this try to visit it…http://www.winningponies.com/
There’s no doubt that tougher times will seperate the sheep from the goats, so to speak. Businesses that have been getting by in spite of process flaws and inefficiencies will be in great danger, whilst those on a more stable footing will have a better chance of survival. The current shake-up of financial institutions around the world is sure to have a ripple effect through the entire world economy – who’s going to be ready?
It’s harsh, but many will go under, creating new opportunities for those that survive. Kind of like when the autumn wind blows all the leaves off the trees – the hedgehogs love it.
Very apt article for today. I am have been making 50% less than last year.
I am not planning on cutting back any of my marketing expenses as I believe that is what is most important right now.
But I may soon be forced to lower my price.
This is great info. Thanks for sharing
Lets just say that now with an economy the way it is, we will be having a hard time (small business) to make money.. without A LOT of money.
Very helpful post. In putting a business it is natural to experience the high and low on return of investment. Developing the ways and means to stay your business just flowing like the water is nearly enough, But if you want to have higher returns. Focus on the clients needs. Sometimes you have to feel and act like your client, from then you can come up to a better idea on how to improve your business gains. Thank you for posting this article.
Put value added and service into your buisness. Dawud, I’m surprised that your client came to you so long after having the problems.
Its not about trying to take from the competition either.
Innovation loves a crisis and in these times, brands have a big opportunity to stand apart from their competitors, to be better connected to the market, even if it’s in turmoil. Yes, consumers are going to be under stress, but that’s simply another way of saying “open to change”. But what does the financial crisis mean for innovation? Well, this is the time for innovation and the economic crisis provides the platform.
Restructure & reinvent
A crisis has multiple impacts. Loss of revenue and profit will at first instill a cost-cutting mentality, which is not good for innovation. But if the patient is bleeding you need to stop that first. Then, however, a phase starts where leaders ask which parts of their business model are weak (and perhaps unsustainable) and that, in turn, can lead to restructuring and reinvention.” But let’s be cautious about over caution, over reliance on incremental innovation juxtaposed to transformative or disruptive innovation. The largest gains in business come from more daring innovations that challenge the paradigm and the organisation. So just how does an entrepreneur, business or brand go about being disruptive? How does one convince investors or top brass of a radical idea’s value? Get innovative with your marketing dollars and stop following what the competition is doing.
Other than that Dawud, how the hell are you?
Good to read your posts. Take care my friend and get as much joy as you can everyday.
Being pro-active to the customer wants and digging-up emotional triggers is a great strategy which you can have a laser beam focus on the customers avatar which work on any economic downtime. One way also for them to put more value to them is for you to facilitate a “Group” or “Clan” in which they could make feel they belong to a “Elite”.Promise Big and Over Deliver.
Good article again. Very helpful when finances are tight, it seems as if even survival is so tough in this tough time. I’m sure your strategies will help me.
Thanks, Aditya
I think Kim should have gone on the offensive and try new tactics and change her sales agenda a bit. You have to adapt to the changes. Of course the economy chilled out, yes it is tougher to sell in a lot of genres. But don;t just sit there passively, try anything new to get more leads and set a few hours every week toward new ideas.
You describe this post in lovely writing style. I enjoy reading your article. Hope I can visit your blog again. Thanks for sharing
I am finding that aligning our business with smaller investments to match the demand has been ideal. We have shifted our investment into already profitable areas and needed to realign resources. The challenge has been identifying those areas. Any tips on that Dawud?
You can perk up even your small business with Online Call Management Service.Call management is one of the most challenging activities for any firm, be it small or large. Attending all customers call, converting calls to sales and providing service through telephones is one area where every business thrives. It is always the first point of contact and a way of communication between the customer and company. Hence every organization is working towards improving their call management efficiency and quality.
There are many features of call management services that help companies to analyze performance of staff. Call recording and online call statistics are the most important online call management tools available. These features are available on all 0800 Numbers series and 03 numbers.
Every call is recorded and a statistics of calls is stored in the service provider’s database. This information can be downloaded anytime for analysis purpose. For any customer complaint or critical cases between customer and company, the company can refer to the copy of the conversation to resolve issues. It also helps in tracing performance of staff for training purpose. A call statistics would show how soon the calls are attended, how many calls are taken up by each staff, what are the call duration and also the number of calls that were missed in any particular day.
A periodic use of this feature will immensely help company review performance and thereby improve quality of service as well as efficiency.
“My advertising and marketing is my biggest expense” – she forget about the biggest income, that advertising gives to any business!
Slow economies present many challenges small businesses have a hard time preparing for. Selling is definitely the key to a successful business, but to accomplish that they probably need to test the climate and find out what works and is most effective.
I do believe that these are hard times. There is less money in circulation. Selling is definitely crucial today because most of the potential clients are looking for the best bargain they can have with whatever money they have left. I say adjust your products to be more affordable, adjust your target market and be more flexible with your niche market.
If there is a slow economy, there is a guarantee that businesses will also decrease its function. It is important o have an alternative way to solve this kind of problem.
Being as we are STILL in a slow economy I believe this article is still valid, however I believe you need to spend to encourage growth, but in the rights areas. If you can get your priority advertisement out the door and people in and calling then no matter the climate you will succeed.
“I should probably look at how much I?m spending on Google Adwords” – This would be a great start. Refining your keyword searches can bring down your daily cost per click dramatically.
Informative post. Economy plays an important role in business growth. Slow economy is really very painful. There should some alternative way to overcome from the slow economy effects.
Very interesting post tips helps new business owners and those who are struggling with growing or maintaing their business not only in a struggling economy but for the future as well.
I am definitely feeling the crunch. This is the kick to the butt I have needed to get out and sell. It has been a while but that’s what I built my business on in the first place. Thanks!
Marketing is an essential tool for any business that wants to cope with the changes in the business environment. During the last 20 years marketing plays a significant role in how businesses operate they daily tasks and it has also changed the way consumers perceive the market. I believe marketing plays a VERY important role all year round in any market condition but maybe even more when the market is in a downturn.
We can exactly say when its better to do more marketing. It has its place and time and has to suit the current conditions we are in.
Tim
I don’t think the economy is bad. GDP is up 10% in 2 years despite high unemployment (less money for the middle class). Also, revenue and profits from US companies are at all time highs. I think they also have more cash on hand than ever before. It is the conservative stance of companies that is holding back unemployment, but overall people are spending money and companies are making money. There is a ton money to be made in this economy and no one should be making excuses.
Interesting points for growing business. However I believe most of your ideas are for companies that already have substantial revenue and are in a position to invest more money to either open new business units in newer markets, or acquire businesses, etc. What about startups and small businesses? What’s the best way for them to grow? Perhaps use some sort of advertising by partnering up with various media publishers? or may be twitter and facebook marketing? Is there any other approach?
I think that advertising is play a vital role to increase any business. A fixed amount of capital must be spend on the advertising.
I agree that marketing is an essential part of any business. Although expenses may seem high, cutting out your marketing budget could actually be worse for the business because it makes it harder to reach new customers.
People like Kim are in a “catch 22” type of situation. You need money to make money. So, it can be a real struggle trying to make cuts in your budget
Interesting observation on how a small business can shape ones perspective. I have nothing else to add to this topic other the need to further understand it. Very valuable information Dawud.