Spring forward or fall back: How mid-sized and small businesses are reacting to the slowdown

By Andrew J. Birol, President, Birol Growth Consulting, Inc.

Whether or not a small to mid-sized business is actually feeling a slowdown in sales, every firm knows customers or colleagues who are singing the blues.

And this is all it takes to begin their own slowdown. Because small to mid-sized businesses often operate more by feelings and intuition than on facts.

For example, a manufacturing client recently informed me he heard that his automotive customer would be increasing the price rollbacks they demand from other vendors. He was expecting his rollback to hit any minute. I told him not to overreact and to wait and see what really happens. He responded by saying, "OK, but just in case, I am going to cut back on expenses now."

Later that day, he called me back and told me his customer’s inventory was shrinking and soon he might have to hire more workers to fill expected new orders.

This is typical of what most small businesses face and how they react. They hear snippets of information from people they know, read the national news and project this into their own business environment. When they hear rumors, they allow themselves to become victims of influence. Usually, their immediate response is pessimism, followed by a realization that the situation is not that bad. When they hear that their customers, competitors or colleagues have a cold, they begin to imagine themselves catching pneumonia.

What are successful medium to small-sized businesses doing? If they can catch their breath between the rumors, the smart ones begin to recognize and exploit their circumstances to the positive. Here are four lessons my clients have learned to succeed in todays climate.

1. Know When To Hold Em, Know When To Fold Em. When it comes to changing business plans or cutting costs, timing is everything. Recently, a technology reseller shut down one of his three product groups, cut staff in the second and restructured the third one. He now follows the mantra of serving only real customers with real money who have real problems real soon.

2. Remember You Are A David, So Dont Fight Like A Goliath. Small to mid-sized companies can stop and turn on a dime. For example, a distributor of manufacturing equipment quickly decided that while some of their customers would cancel their orders, they still needed the output of the machines. As a result, they now also offer their customers the end product they need instead of asking them to invest in production.

3. Choose the Needs of the Few Over the Needs of the Many. During the 90’s, many firms over-invested in future projects. For example, a metal shop recently decided that all new outlays had to payback in a year or less to be considered for approval. While the requests for funding shrank, there were still too many needs. Now they only fund projects in the order of those that increase profits, grow sales or cut production costs.

4. Stand By Your Man or Woman. Entrepreneurs pride themselves on providing the personal service that big companies either cant or wont. An auto repair shop used to remind all customers of free car valet service for all repairs and oil changes. But in these tough times this service means extra cost. Now they focus their extra services mostly on their better, loyal customers.

As the real and imagined shockwave of the slowdown hits the middle and small business market, businesses can choose to spring forward or fall back. One last note. Those firms who have been through a previous downturn are often the first ones to move forward in these treacherous times. They understand the cost of overreacting.

 

Articles by Birol Growth Consulting are © copyrighted and all rights are reserved. However, articles may be reprinted with prior written consent if attribution is included as follows:

© Copyrighted by Andrew J. Birol, President of Birol Growth Consulting, who helps owners grow their businesses by growing their Best and Highest Use ®. Andy can be reached at  (412) 973-2080, by email at abirol@andybirol.com, or on the web at www.andybirol.com.


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