Small business at times exceed all expectations and survive difficult financial times and according to research the best approach to survive is to differentiate and customize accordingly.
During periods of financial turmoil, small and medium-sized firms face a unique set of challenges. By employing certain strategies, not only can smaller companies survive slumping demand and low consumer confidence—they can thrive.
A new study finds that a crumbling economy doesn’t necessarily mean smaller firms have to get buried in the rubble. In fact, even the smallest companies can grow irrespective of a financial downturn, if they employ a multipronged approach that places a heavy emphasis on standing out from the floundering competition by:
- Keeping costs down: All the high-performing companies strove to keep their production budgets low and their prices competitive. However, even when confronted with a sagging economy, they refused to shirk on quality; as a result, most had slightly higher prices than their slumping counterparts, and they attributed their success, in part, to delivering superior goods and services while avoiding price wars.
- Differentiation: Thirteen of the 20 firms studied simultaneously employed innovation strategies designed to regularly introduce new products, services, or processes. Five of the firms, all in manufacturing sectors, steered a substantial percentage of their annual revenue to new product development initiatives. Thus, the high-growth companies showed a consistent affinity for using aggressive strategies instead of taking a more conservative tack. Differentiation through marketing, however, was nowhere near as widespread. In fact, 15 of the 20 companies reported pursuing few to no traditional marketing activities, reasoning that the required investment wouldn’t be worth a limited short-term spike in sales. Instead, they relied on their sales team or Internet outreach to keep their existing customer base up to date about new products or services.
- Customization: Eight of the 20 companies emphasized working closely with their customers to identify and produce tailored solutions, altering their product lines to meet their customers’ ever-changing criteria. An additional five firms, although producing more standardized items, also invited their customers to make small alterations or take advantage of complementary services. Interestingly, the successful firms largely eschewed market customization, that is, focusing on a niche sector. Despite the conventional wisdom that smaller firms can improve their performance by zeroing in a specific market segment, only five of the high-growth companies followed this advice. The rest assertively targeted the whole market, taking advantage of volatility to increase their market share. As one CEO told the authors, “Clearly, we targeted the competition: we tried to understand what they were good at and what they were bad at, and we just tried to be better than them.”
Every businessman works so hard to ensure that the business remains a going concern for a very long time, that means forever if possible. But different factors hinder the survival of businesses and thus businesses should always adjust with changing times.
Family businesses are often best suited to longevity. But product development, investing in staff and attention to detail help in a recession.
Founded in 1860, awnings and blinds manufacturer James Robertshaw has seen its fair share of internal change and economic upheaval. The company also survived a major fire, in 1933. A feat managing director Nigel Sharrock, who took on the role in 1979, brushes off. “Fires were a common occurrence in those days,” he says.
Sharrock says its 157-year survival lies in constant innovation, new machinery, family values and business sense.
“Even if you’re doing really well today – don’t stop there,” warns Sharrock. “Always look at new ways to innovate. You can’t afford to stand still – the market and your customers’ needs will change, and you need to be able adapt and evolve with them.”
Making the production process more efficient is part of how his business innovates. Investing in what Sharrock says is the UK’s only integrated heat welding and hot-melt fabric-gluing machine is one example. Another is staff training: in the 2008 recession, the company made sure production staff were trained in all processes, rather than specialising in one as they had previously. More recently, the business has set up an apprenticeship scheme.
Sharrock says it is important to attract and train new recruits as the company has an ageing workforce. “Without introducing such a scheme we would soon struggle to have the right people in place to maintain our business growth.”