It is a tough time for businesses around the world, as we really start feeling the pinch of his global recession. We’re all looking to cut costs or make core changes to our business strategy to survive. Making the wrong decision can be extremely detrimental, and can often lead to a complete failure of the business.
If times are getting tough, what should you do? Well certainly the answer isn’t to just give up and go home. It’s all about making careful and informed decisions based on sound knowledge and research. There is plenty out there in terms of advice, but a lot of it is crazy and unjustified. You need to look at the evidence to make a careful decision and this will dramatically reduce the risk in any decisions you make. Here are 3 tried and tested ways to help your business through 2012:
Invest in marketing
It is an often thought that when times are tough you should cut your marketing. This is an easy cost to slash and a great way to save money on the short run. This, however, is a really bad move. If you cut your marketing you are reducing your promotion and brand awareness meaning you’ll experience even fewer sales.
Marketing is an investment in your brand and key to long term success. When a recession comes, lots of companies reduce their marketing spend and if you actually increase it, you’ll be the brand that people remember. When it comes to a growing economy, your brand will be at people’s forefront and you’ll see a big uptake in brand loyalty as a result of this. This work was empirically carried out by Ehrenberg who is one of the greatest living marketers. The evidence he presented over a number of companies over several decades all supports the theory, but you need guts to put it into practice.
Take out insurance
Insurance will minimise your risk as the last thing you want is to pick up the pieces from an unfortunate event. Whether this is injury caused to the public, a break-in or theft from a store, it could easily bankrupt you if you’re not protected.
You can get Business Insurance to cover almost anything these days, from a takeaway or restaurant to a shop or hairdresser. There is also standalone cover for public liability available too if you don’t have this. Avoid any hefty outgoings by getting covered. Shop around online for the best quote and think about the risk minimising involved that could do wonders on the long term.
Take advice from Michael Porter
Porter is one of the leading business strategy minds of our time and resides at Harvard Business School. He is the godfather of theoretical business strategy models and has two claims to fame. Students around the world are taught about Porter’s Five Forces which demonstrates the push pull effect of competition, suppliers and buyers on a market place.
One you should really look at though in terms of your business plan, is Porter’s 3 Generic Strategies. He says you must fall into one of 3 distinct groups if you are to succeed. If you fall between groups or not in one, then you will struggle to turn a profit and survive in hard financial times.
The first place to be is cost leading. This means you must offer extreme value at a great price. This will help you sell in higher volumes at lower profit margins and during a recession where money is scarce, these businesses tend to thrive and gain a lot of new customers. The second approach is differentiation which involves taking a premium stance in the market, offering a better product that you can charge more for. This means focusing on things you are good at going the extra mile. The last approach is a focus niche approach meaning you must specifically cater to a niche market and provide high quality bespoke products to their exacting needs. This ability to be flexible is key here.
If you read up on Porter then you will understand his background and theories to a better level and your business will flourish. If you apply what he says to your business, you will be able to see things you are doing wrong based on research and theory from over the last 20 or 30 years. A sound strategy will help you through the tough times ahead. It is worth having a contingency plan and budget too in case things do go awry.
Steve works in a high pressure company who are using these tips to battle the recession. Public liability insurance was on the top of the list of priorities for the year ahead.
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