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How to Find Opportunity in a Down Economy

Share current LOB: SmallBusiness

Many business owners are used to right sizing their operations during difficult economic times. To help your business thrive in a challenging economy, consider the following strategies:

1. Market more for less. Develop tactics to focus your marketing efforts. For example, try new and less expensive solutions for reaching target audiences, such as satisfaction surveys to collect feedback and engagement, search engines, blogs, public relations and partner marketing. Consider the following marketing tactics:

  • Reallocate more of your time to business development
  • Use word-of-mouth marketing to your advantage
  • Maintain price levels by bundling value and service
  • Use free satisfaction surveys to reach customers and encourage referrals
  • Leverage the Web with search engine optimization and e-mail newsletters
  • Use public relations to get inexpensive media, leads and exposure
  • Seek marketing partnerships to help share marketing expenses and build strong communication with the customer

2. Protect and grow high-value market niches. All markets and customers are unique in terms of profitability, health and potential. These three actions can help you grow high-value markets:

  • Segment your market to define your most profitable customer niches
  • Target growth in profitable niches, and pare back costs in unprofitable markets
  • Research economically resilient market segments to foster growth

3. Cut non-strategic expenses, not value-added expenses. Spending is one area you can control. It’s important to know the difference between strategic and non-strategic costs. Strategic costs are directly linked to product quality, excellent service, new sales or a feature or service that gives your business a defined competitive edge. Tips related to expenses are as follows:

  • Define and maintain strategic expenses
  • Question every cost, and ask, “What’s the good business reason to do this?”
  • Establish a budget and track it monthly

4. Invest in productivity and systems. Productivity initiatives maximize resources such as people, technology and business “know how” and the savings continue annually. To improve productivity:

  • Document business processes to identify easy improvement opportunities
  • Investigate systems that automate, eliminate, structure, reduce or simplify work

5. Strengthen cash flow to protect your assets. A challenging economy often poses real risks to your cash flow. Tighter cash management helps you improve cash flow and business value. A cash management expert can help you identify ways to speed receipts and slow payments, better match expenses to income, smooth out the swings of cash flow and identify options for investing spare cash when available. Cash flow tips include:

  • Consult a cash management expert to find ways to protect your cash flow
  • Increase working capital from cash

6. Develop strategies to take advantage of economic conditions. Economic uncertainty often creates a “buyer’s market” for labor, goods and credit. Two-thirds of business owners view an economic downturn as an opportunity to get customers, employees and supplies at value prices. If you have the financial strength to invest with an eye on longterm return, you position yourself to benefit “from the silver lining” of economic challenges. Tactics to take advantage of a down economy include:

  • Capitalize on the weak labor market to gain attractive talent
  • Bargain shop for deals on goods and services
  • Refinance to capitalize on lower interest rates

7. Communicate more with customers, employees and partners. Talk to everyone involved in your supply chain—suppliers, advisors, partners, customers, employees and bankers—about the realities of a challenging economy. It is more important than ever to communicate and maintain trust among suppliers, customers, lenders and employees.  Benefits and strategies for improved communication include:

  • Open communication helps your business better anticipate changes in customer spending patterns
  • Encourage and reward employee productivity improvements
  • Manage and protect your supply chain with open, honest communication
  • Work with banks with resources, capacity and willingness to work flexibly

About SunTrust Business Owner Research: SunTrust surveys small business owners and advisors as part of its ongoing business seminars and symposiums. The small business owners attending these events include both SunTrust client and non-client business owners and are representative of the broad spectrum of businesses located in the SunTrust markets. The research cited in this report is extracted from these 5,425 small business owner surveys collected between 2007 and 2011.

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.