Five Business Strategies to Overcome Economic Uncertainty
Share current LOB: small-business-banking
Phil Minnes knew that starting an insurance agency in 2008—soon after the Great Recession commenced—would be tough. However, instead of allowing the negative headlines to hamper business growth and development, he had a plan to overcome the down economy and pervasive uncertainty.
Minnes chose to focus on his business plan—to nurture strategic partnerships and referrals—as he worked to grow his American Family Insurance agency in Johns Creek, Ga. Today, with six employees, Minnes has surpassed $2 million in premium sales by aligning himself with key players in industries that have rebounded from the recession, including attorneys, realtors and bankers who serve the Atlanta real estate market.
Minnes’ situation is evidence that economic uncertainty does not have to result in small businesses sitting on the sidelines, passively awaiting another Recession-sized shoe to drop. Instead, experts suggest owners focus less on the news and more on how to better serve clients and enhance bottom-line results. Here are five tips to get started:
1. Focus on micro, not macro
Small business owners should separate the macro-economy from the micro-economy, looking inward at your operations and customers, says Joellyn “Joey” Sargent, principal of Claravon Consulting Group, an Atlanta-based consulting firm that helps small businesses develop growth strategies. She recommends engaging in real, candid discussions with customers, prospects and even competitors to monitor the unique circumstances affecting their businesses and the local market.
She also suggests keeping tabs on interest rate trends so you know how readily available money may be in your marketplace, as well as paying attention to announcements and projections made by public companies in your industry. As industry leaders, decisions these larger companies make can affect the types of products and services your customers will expect you to provide.
“Having your ear to the ground to understand what’s going on in your market is critical,” she says. “Customers will tell you if they’re considering pulling back or shifting the money they do have to invest. When you hear that feedback, you can adapt accordingly.”
2. Know your cash flow
Accurate cash flow projections and analysis are critical to overcome uncertainty, says Gary W. Patterson, owner of FiscalDoctor, Inc., an Atlanta consulting firm that helps companies improve their finances and operations. Regularly creating and analyzing 13- and 26-week cash flow projections have helped some of his clients avoid potential cash flow crunches by spotting trends, such as key customers beginning to lengthen their payment cycles.
“If you thought you’d have $91,000 in the bank today but it’s only $50,000, how did you guess wrong on the remaining $41,000?” he says. “If a good customer has gone from paying in 30 days to 75, you could get some market intelligence that they may be having a problem before they actually go bad.”
3. Consult your bank
Patterson says that owners can also position themselves to take advantage of opportunities by delving into the key financial issues facing their businesses.
“Ask your banker what questions they would ask you if you wanted to secure a substantial increase in credit,” he says. “By clearly and succinctly answering those questions and continually updating that information, you’re going to know your strengths and weaknesses and what it’s going to take to leap on an opportunity.”
4. Recognize existing opportunities
Sargent believes economic uncertainty can create growth opportunities if owners are willing to take calculated risks.
“There certainly can be acquisition opportunities, and you can pick up customers that are no longer being served, or served well, by struggling companies,” she says.
She also has seen companies focus on talent during tough economic times as a way to gain competitive advantage.
“Strategic hiring also could be a good calculated risk,” she says. “It can be a good time to prune your own tree of underperformers and upgrade your talent pool by recruiting top talent from struggling competitors.”
5. Invest in strategic partnerships
Beyond focusing internally, Sargent suggests looking to outside partnerships as another way to overcome uncertainty.
“Invest in strategic relationships, whether it’s partners, professional associations, referrals or your banker,” she says. “If you stay visible, you can build awareness and traction for the business so you’ll be in an advantageous position when things start to pick up.”
This approach worked for Minnes, who has attended Chamber of Commerce and industry association events to build stronger client relationships.
“If you’ve got clients that are clustered within a certain industry, you also might consider joining their professional association just so you can spend more time with them and maybe meet their peers,” Sargent says.
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