Why do some small businesses fail, others barely survive, and yet others thrive through recessions? Here are a few insights:
Take Calculated Risks — There is a common myth that entrepreneurs are big risk takers. But most studies show the exact opposite: successful entrepreneurs avoid risk wherever possible. But they do take calculated risks all the time. They develop new products, enter new markets, pull out of existing markets, change their product packaging, form new strategic alliances, etc. But they never jump in without looking to see if there is any water in the pool.
Invest in Sales & Marketing — When business slows down, the first thing most businesses cut is marketing and sales. They view marketing and sales as overhead, not as an investment. This is the exact opposite of what most successful entrepreneurs and business owners do: they increase sales and marketing efforts when business slows down. In some cases, that means a move away from “traditional” marketing (print, yellow pages, etc.) toward Internet marketing and social media (LinkedIn, Facebook, etc.). In other cases, it can mean cutting ties with unprofitable customers and strengthening ties with the most profitable ones. The result is usually an increase in market share and improved customer loyalty, at competitors’ expense.
Embrace Change — It seems pretty obvious that the world is changing faster than ever before. Successful companies don’t just react to change, they anticipate it. Then they either flow with it or they drive it. Companies that resist change are more likely to fail, or at best, barely survive. The entire U.S. auto industry is an example: GM, Ford and Chrysler all spent decades lobbying against improved CAFE standards and emission controls. If they had instead embraced the fact that most Americans want clean air, improved gas mileage and safer cars they could have out-maneuvered Toyota, Honda, and others.
Act Fast — Successful companies make decisions carefully, but once they make a decision, they act quickly. GM is, unfortunately, another example of what not to do. Until they restructured, GM was so slow and unmanageable that a typical initiative was reviewed by at least 60 managers before it went anywhere. The usual result was that most initiatives were either killed outright or took so long to get through the system that they were effectively dead anyway by the time they emerged. Since coming out of bankruptcy, GM is now moving much faster. They have dramatically streamlined management and internal decision-making, and even brought in some outsiders. Small companies have the ability to act swiftly. If your company is small but major ideas and projects take years to bubble up to the surface, you have a problem.
Listen and Learn — Successful companies listen to their employees, their customers, their partners, and even their competitors. They are good at “thinking big”, but they also pay attention to details such as employee morale, paying invoices on time, customer service, marketing consistency, sales training, etc. No matter how large or small your company is, make sure you are not just gathering data, you also need to analyze and act on it. This should happen at all levels of your company, not just in management meetings and strategic retreats.