Some business owners tend to base decisions about their business on the state of the economy and what economists and industry analysts predict for future economic outlooks. While this is a sound decision, it could hinder business owners from taking advantage of key opportunities. This inadvertently helps speed up the onset of an economic slowdown and the uncertainty becomes a self-fulfilling prophecy.
While economic recessions that follow a prolonged period of expansion are cyclical and often inevitable, there are many ways a business can prepare itself to deal with it and turn what seems to be a problem into an opportunity.
As we cannot make the world around us change in our favor, the best way to deal with the changes is to have a positive attitude. The changes are numerous and complex and decision making is not easy. Certainly, everyone has some concerns: How do I keep abreast of the latest technology? How will the regulations change? Can I compete?
Businesses that are dynamic, resilient, adaptable and innovative can find a space in today’s economy. However, to improve their competitive position, small businesses will have to explore new technologies, find ways to implement them, evaluate how to overcome the disadvantages of being small, learn to increase quality and consistency, and find creative ways to organize and finance a system of consistently delivering comprehensive solutions to complex problems.
How to get there is a challenge. The key is planning and management. Planning is an orderly process to try to achieve a specific purpose. Management is the ability to organize ourselves towards the achievement of goals with limited resources. Both are processes directed towards a goal. In other words, business owners must know what they want to achieve and chart the path to reach that point.
Despite changes in the economy, there are currently four major consumer trends that businesses can take advantage of.
There are current demographic trends that businesses can take advantage of. The Baby Boomer generation, who are currently retiring in large numbers, is creating a large demand for products and services attuned to their specific needs. Their higher purchasing power implies that they would be willing to buy premium and differentiated products that carry higher margins. So, why not develop a particular offering geared towards this specific age group? For example, a beauty salon would offer specialty beauty treatments for this segment a particular day of the week or a contractor would build retirement-friendly homes.
Health and Wellness
There is currently a big trend in companies creating healthy and authentic products that are locally produced and are associated with a healthier lifestyle. The “wellness” trend is something we cannot overlook. For example, consider healthier choices in restaurants, vegetarian options, organic products and farm-to-table ingredients sourced from local growers.
Now more than ever, customers are interested in buying products that are sustainable, eco-friendly and recyclable. Business owners should have some type of “green initiative” such as recycling or using alternative energy sources and let clients know they are actively contributing toward an environmental cause. Some questions to ask are: What is your environmental footprint? What is your green message? Clients care about the impact you are having on the environment. Contributing to local organizations and getting involved with some type of community initiative helps with establishing leadership and visibility.
If you have a product that can be sold online, then you have the potential of selling your product to a much wider audience, and not be limited by a geographic area. Many consumers make their purchases online through a mobile device and their decisions are heavily based on the reviews and recommendations from friends and family. Price is not necessarily the only determining factor, especially when considering purchases of products and services related to education and health care. These are often largely dependent on referrals.
The era of high growth and minimal competition with business operations that are managed traditionally is over. Also, economic recessions are a factor out of our control. However, what we can do is prepare our businesses to deal effectively when one happens, the same way we prepare for a major event, like a weather emergency. We must have our contingencies and a well thought out plan of action.
During periods of economic expansion, business managers should take appropriate measures to allocate a budget and resources to be used during challenging times. Businesses should strive to remain relevant and gain a competitive edge that will sustain them during periods of slow growth. Those that develop a sound differentiation strategy, will remain in the game, continuing to generating sales and profits while others fall by the wayside.
Pablo Arroyo is a business consultant for the Florida SBDC at University of South Florida.