While this may seem counterintuitive, many entrepreneurs and companies have successfully turned a bleak economic situation to their advantage.
Take advantage of changing customer preferencesDenver-based Smashburger was launched in 2007 when the great financial recession was just beginning. Its CEO, Scott Crane, was asked why he chose to start the company at a time when prospects for new businesses were poor.
He replied, "It was a time when guests were buckling their belts, paying closer attention to their budgets and seeking more value from restaurant options. This was how the fast casual movement was born."
Fast casual dining had a start in 2007 and today includes companies like Qdoba and Jason's Deli in addition to Smashburger. Industry sales stand at $23 billion and it is the fastest growing segment of the restaurant business.
Buy at lower valuationsIn addition to changing consumer preferences, a decline in the economic environment presents other opportunities. Real estate values drop, making it easier for businesses to purchase or rent additional space. Firms that want to expand by buying out other companies are able to make acquisitions at relatively lower prices.
Zeta Interactive, formerly known as XL Marketing, a big data and analytics company, used precisely this route to grow. John Scully, formerly CEO of Apple and Pepsi, is one of the founders.
Explaining the strategy that Zeta Interactive adopted, its CEO, David A. Steinberg, said that it was possible to buy out smaller companies at favorable multiples because of depressed market conditions. There was a lower level of competition as other potential suitors found it difficult to raise the required capital.
Adopt unconventional strategiesAnother useful approach in a downturn is to sign on a few large customers at a discount. Even if these clients do not yield a substantial margin, they will at least take care of fixed costs. If this strategy is adopted, it will be possible to keep workers occupied and to continue paying the bills.
In the meantime, the hunt for new business from customers who will pay better rates can continue. If the company does not succeed in getting new clients who offer higher margins, it may still be possible to ride out the downturn using the profits generated from the existing customers.
When the general level of economic activity is low, sales will be down and it will be necessary to keep a tight control on expenses. But if the business is to survive, it is essential to market the firm's products or services in an aggressive manner.
At times like this, quick-witted companies use low-budget but high-impact marketing strategies. Expensive advertisements do not necessarily translate into higher sales. With some effort and innovative thinking, businesses can get free publicity by getting mentioned by the local media. Another strategy is to target past customers for referrals.
Remain customer-centricWhen economic activity slows down, company management needs to work smarter. A well-run firm can hold its own in difficult times by changing its approach to business and providing greater value to its customers for the same amount of money.
Senior management's responsibility is not only to ensure that their company survives the slowdown. They should also remain prepared to rapidly scale up operations when conditions improve.