By Staff
We're indeed facing a tough economy, there's no way to dance around that fact.
A severe credit crunch is hurting home and auto sales, and uncertainty about future revenues is putting the damper on consumer spending, which in turn is putting a squeeze on many business sectors.
As a nation, we've been here before, many times.
Recessions come and go, though this one seems to have deep uncertainty and a politicized nature that makes its looming presence even more ominous.
Perhaps it's the never-ending doom and gloom of the mass media; perhaps it's the timing of a major administrative shift at the top of our federal government; perhaps it's just time for the stinging slap of reality.
But regardless of what's behind our current recession or what's in store, I remain optimistic.
I remain optimistic not because I know something no one else does, or because I have faith in the government to turn things around (I don't).
No, I remain optimistic because I know that innovation, private-sector change and the human spirit will carry us through.
The businesses that will survive this – just like any other "economic downturn" – are those who go forward with a proactive and positive approach to tackling the challenge.
Now is not the time to pull back, to run a business at a limited capacity. Scaling back a business based only on what your core market can provide is planning for failure.
Indeed, if we as business owners and managers learned anything from the Great Depression, it's that the companies who thrived – not just survived – during that time were the ones who diversified their business plans and refocused their efforts on Business 101.
A few of my favorite examples:
Howard Johnson, namesake of the famous Howard Johnson's line of restaurants and motor lodges (most of the restaurants are now gone, but numbered more than 1,000 at their peak)), couldn't get credit to open another restaurant during the Great Depression, so instead sold the rights to his business model and name – pioneering the concept of restaurant franchises and, in turn, growing the company's revenue by leaps and bounds during the worst economic situation in American history.
Procter and Gamble, makers of countless household cleaner and soap brands, used the shrinking advertising budgets of its competitors to its advantage, investing in radio and print advertising at a feverish pace, even inventing a sponsored radio segment forever after known as the "soap opera."
Knowing that many people wouldn't spend money on a luxury like movie tickets, theater owners in the early 1930s slashed ticket prices in half and offered two-for-one deals known as "double features."
This not only led to an increase in movie-ticket sales during the Great Depression, but fueled the need for a higher volume of movie titles to fill the double feature time slots, more or less inventing the "B-movies" that we know today.
There are countless other examples, but all of those businesses thrived because, while their competitors thought that a difficult economy required new knowledge and skills, they rightly knew that what a difficult economy really requires is old skills executed better.
The first two steps to a successful enterprise in Business 101 are: 1.) Make a good product; 2.) Make your product's features, benefits and simply its presence known to consumers.
Consumers will buy products if they warrant a value exchange – and if they know that a product exists.
Let's say your business sells ice cream cones for $3. On a cold day, I don't really need an ice cream cone, so I value my $3 more than I value your ice cream cone. Crank the temperature up to 105 degrees, and suddenly your ice cream cone is worth more to me than my $3, and a value exchange takes place.
In other words, the recession is a cold day, and businesses that will continue to struggle are the ones who are still trying to sell only ice cream cones.
Why not diversify and sell soup until it warms up?
During a recession, business owners should be asking what their ice cream cones are and, more importantly, what can be their soup.
If you sell cars for a living right now, the car is your ice cream cone, so what can your soup be? If I owned a car dealership, I might turn half of my lot into a greenhouse, since the National Gardening Association predicts that homes growing vegetables will increase more than 40 percent this year over two years ago.
If you sell houses for a living right now, home listings are your ice cream cone, so what can your soup be?
If I were a real estate agent, I might partner with local landlords to find people for empty apartments – for a fee, of course. Or I might get in the business of pairing hair stylists with empty chair rentals at local salons. Heck, I might even get into the business of running estate sales, since people still die during recessions.
A recession doesn't need to mean the end of a business if owners and managers diversify – if you're lucky, it might even mean the start of a new, more lucrative business.
E-mail him at bryan.clapper@leaderpub.com.