When the economy began to plummet, Heartwood Custom Homes, Inc. president and owner Jeff Langston went into survival mode. The 10-person staff was trimmed by half and he broadened his customer base to include homes at a lower price point. "If you don't survive, you can't take advantage of when the market turns," he says.
For Langston, continuing to invest in marketing is a way to stay afloat during the recession and prepare for an economic turnaround. But with fewer financial resources, Langston has modified his approach to marketing. He now participates in social networking sites and blogging on the company's web site. After cutting one of two marketing employees, the remaining staff now shares marketing responsibilities. Every employee can be counted on to hand out direct mail, enter properties into home shows and staff model homes. "We enrolled the whole company in marketing," he says.
"A lot of your less capable competitors are going out of business now, and this is a great chance to establish your brand and build market share," says Akira Hirai, founder and managing director of Cayenne Consulting, LLC, a consultancy for entrepreneurs focusing on strategy, planning, financial forecasts and budgeting. "If you lay the groundwork now, you'll be on top of your game when the economy recovers," he says. Laying the groundwork means cultivating your customer base by focusing on service, quality and value, he says.
"Customers are much more picky, much more finicky. If your service is not up to par or exceeding the competition they will leave," says Charles Goetz, professor of entrepreneurship at the Goizueta Business School at Emory University. Right now you have an opportunity to serve your customers' needs like no one else. It's not about slashing prices; it's a matter of tailoring your offerings in a way that people can afford. "If all you do is lower your prices during bad times when good times come there is no rational reason to raise them," Goetz says. But offering a less expensive alternative can help to retain customers, attract new clients, lower your costs and build loyalty, he says.
Goetz explains this strategy using the example of a landscaping business that tends clients' yards every seven days. During a recession, the business could offer clients the option to have their lawns tended every 10 days, for a savings up to 25 percent. This more affordable option helps customers save money without seriously impacting service, and it's a good hook for attracting competitors' customers. As the recession subsides, the landscaping business can then ask new and old customers if they want to switch to a seven-day rotation.
As the economy improves and earning a profit becomes easier, business owners may become lulled into a false sense of security about their businesses' financial health. Some business owners make the mistake of looking at only their profit and loss. But robust profits can mask underlying issues such as poor cash flow management. Ensure you have a well-rounded view of your business's finances by looking at your balance sheets and cash flow on a monthly basis in addition to P and L, says Ray Vargo, director, Small Business Development Center at a university.
Another strategy for staying lean is setting goals for specific expenditures and then sticking to those limits, Vargo says. If, for example, it looks like your company is going to exceed its target labor costs, you would focus all of your energy on driving those costs down.
When your business is in the midst of dealing with a recession, it can be challenging to think past the next month, let alone plan for the next year. But it's important to stay prepared when economic troubles give way to new opportunities.