Less is More
Position yourself for growth in 2017—join us live at the Entrepreneur 360™ Conference in Long Beach, Calif. on Nov. 16. Secure Your Seat »
When harsh economic winds blow, there's a natural impulse to hunker down. Entrepreneurs often react to recessionary times by freezing spending and dramatically cutting expenses in an effort to boost their business's bottom line. But that strategy can backfire when the cuts go so deep that they end up stifling growth. So in addition to paring down unnecessary expenses and getting your organization lean and mean, focus on increasing top-line growth by finding new sources of revenue. The trick is to do this without increasing your cost infrastructure--in other words, it's time to squeeze the most value you can out of the operations you already have in place.
First, take a look at the products and services you provide and see whether you're giving away any freebies that you should be charging for. "Very often you'll see businesses trying to out-service their competitors, but meanwhile the other companies are charging a little more a la carte and being much more successful at that," says Jason P. Zickerman, president and COO of The Alternative Board, which provides peer advisory boards and consulting for privately held businesses.
Next, take a moment to re-evaluate your pricing structure, says Zickerman. "You may find many things in your product line that may have been priced correctly at one point," he says. "But [maybe] you never raised your prices when you should have." Your clients may balk at first, but when they look at the market and see similar prices all over, they'll likely accept the increase.
Consider how to sell more to existing customers without staffing up. "We all know it's more difficult to get new clients than to sell additional things to the clients you have now," says Barry Moltz, an entrepreneur and the author of Bounce! Failure, Resiliency and the Confidence to Achieve Your Next Great Success. Look for potential strategic alliances that would allow you to sell products from other manufacturers that complement your product line. You can strengthen relationships with existing customers while earning a referral fee. For example, says Moltz, "If you bring me a customer, I'll be willing to pay you 10 percent or 20 percent because that's my sales cost normally." These relationships can often be reciprocal, adds Moltz, meaning you can sell your product into your partner's market without having to hire additional salespeople. But before entering any partnerships, do plenty of research to ensure that you won't be compromising quality and that you can trust your new partners.
Finally, decide whether you might be able to make the most of your core competency by selling into a new market altogether. Chip Self, the 39-year-old founder of Logic Systems Sound & Lighting Inc., saw just such an opportunity during a troubled economic period in 2002. As a provider of sound and lighting systems for concerts and big stadium events, St. Louis-based Logic Systems often did permanent sound and lighting installations for churches, schools and theaters as side work when things were slow. Self realized he already had the in-house talent and experience to begin offering permanent installations on a regular basis, and his second company, Cignal, was born. "We took what we were doing as a side business and turned it into a stand-alone business that is now actually bigger than the first business," says Self. He brought in several partners to help shoulder the financial risk of the new venture and says they were careful to staff up slowly, sharing office space, staff, equipment and vehicles with Logic Systems in the beginning.
Entrepreneurs shouldn't let Wall Street predictions of doom and gloom kill good business ideas, says Self. "I'm not an economist, but it seems like a cop-out to think that enterprise stops just because a number went down on a piece of paper somewhere," he says. "Good businesses can be profitable in bad times." Self has certainly proven that--both Logic Systems and Cignal are expecting sales of more than $3 million this year.
C.J. Prince is a writer specializing in business and finance. Reach her at firstname.lastname@example.org.