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STREET SMARTS

How To Grow In a Soft Economy

Worried that the economy is tanking? Don't fret. Even when times are bad, your company can still find ways to thrive.

Norm Brodsky is a veteran entrepreneur.

Don't let the prospect of a recession scare you. There are opportunities for growth even when times are bad

Psychology plays a big role in business, and right now most businesspeople are pretty nervous. Given the state of the economy, they feel they have no choice but to batten down the hatches and prepare for a bad year.

Not me. Yes, the economy has slowed significantly and will probably get worse, but I'm expecting to have a decent year anyway -- and you can have one, too. I've lived through several downturns and recessions, and they always offer great opportunities for growth.

Why? For two basic reasons. First, people are looking for ways to save money. They're open to change. Consequently, you can get through to a lot of prospective customers who wouldn't listen to you when times were good.

What's more, you'll have less competition for their business, because some of your competitors are bound to make the most common mistake of companies heading into a downturn. In an effort to conserve cash, they cut back in the one area they should be expanding -- namely, sales and marketing. They advertise less, or they take salespeople off the street. If you do the opposite, there's a good chance you'll be able to pick up market share.

It's important to move forward in the right frame of mind, however. You need to set a goal and go after it aggressively, while remaining flexible enough to adapt to the changing conditions in the marketplace. I recently got a textbook lesson in how to do all that and grow in a soft economy. The lesson came, oddly enough, from a group of high school students that included my 17-year-old daughter, Beth.

Through a club in their school called Focus on Helping America, Beth and her friends have staged annual fashion shows for the past three years to raise money for breast-cancer research. The proceeds come partly from sales of tickets to the event, which includes a sit-down dinner. In addition, the girls sell books of raffle tickets for gift baskets that they put together with items donated by businesses. The girls also solicit contributions from people in the community and sell advertising in the journal they produce in connection with the event.

By such means, the girls netted about $35,000 from their first fashion show, which was held in March 1999. Building on what they'd learned, they managed to raise more than twice that amount -- almost $75,000, after expenses -- at the second event, in March 2000.

Shortly thereafter, they sat down to plan the third one and decided to shoot for $100,000. It was an ambitious goal, but it seemed achievable, considering the state of the economy at the time. Then came the stock-market decline and the general economic downturn, and the girls found themselves trying to grow 33% during a period when most people were cutting back on discretionary spending, including their contributions to charity.

Various grown-ups tried to warn the girls that the bad economy would make it extremely difficult for them to reach their goal, but they wouldn't listen. They weren't interested in the economy, and they dismissed any suggestion that the overall business climate would affect them. Sometimes it helps to be nave.

In fact, people in our community are heavily involved in the stock market, and many of them own businesses, so it was inevitable that the economic environment would have an impact on this year's fashion show. Nevertheless, the girls were able to buck the trend by employing some of the same tactics that businesses can use when they're attempting to sell in a tough market. Those tactics include the following:

Expand your focus. By that, I mean you should try to think of new ways to generate sales. Beth and her friends realized that to reach their goal, they would need an additional source of revenues. They decided to go after corporate sponsors and ultimately succeeded in signing up five of them -- at $5,000 apiece.

The same principle applies in business. In my archive-retrieval company, for example, we're experimenting with telemarketing for the first time, hoping to tap into markets we haven't been able to reach in the past.

Don't take no for an answer. The girls had assumed they could get last year's donors to give the same amount this year, but it turned out that a lot of those donors were feeling the economic pinch and said they couldn't afford to contribute. Instead of giving up on them, the girls said, "We understand that times are tough, but maybe you can give a smaller amount this year." In most cases, the donors said they would. They felt good about making a contribution, even if it was smaller than last year's, and the girls walked away with something, which is always better than nothing.

That's worth remembering when you're selling in times like these. Even if customers won't buy the whole loaf, you can often sell them a few slices.

Raise prices selectively. Beth and her friends thought they could generate more revenues from the fashion show by raising the ticket price for an adult from $50 to $60. Their adviser thought a price increase was risky in the current environment, but the girls figured that the adults wouldn't even notice the $10 difference. Aside from supporting a charity, after all, they'd be getting dinner and a show. Students, on the other hand, would resist a price increase, so the girls decided to leave the student-ticket price at $25.


In the coming year, many companies will have to work hard just to maintain their sales level, let alone grow. So it may be a tough year. But opportunities are out there, and you can find them if you look hard enough.


As it turned out, attendance at the show dropped by about 100 -- from 750 people last year to 650 people this year. Was the price increase a factor? Maybe, but I strongly doubt it. Without the increase, moreover, ticket revenues would have fallen by more than $6,000. Instead they went down about $2,000.

The lesson: You may not be able to have an across-the-board price increase during an economic slump, but you can still raise prices selectively, and the additional revenues can prove more important than you expect them to be.

Go for the cash. In the past, local merchants had contributed gift certificates and other items for the baskets that were then raffled off to the event's supporters. This year, however, the girls decided they needed cash more than raffle items, so they asked some merchants to buy ads in the journal instead. "We'd rather have a $50 ad than a $100 gift certificate," the girls said. "It's better for everybody. More people will know about your contribution, and we'll be able to raise more money for charity." In fact, they wound up raising $5,000 more from advertising this year than they'd raised last year.

Of course, cash is just as important to a business as it is to a charity, especially during a downturn. Now may be a good time to emphasize discounts for early payment.

Be creative. In choosing cash over raffle items, the girls weren't abandoning the raffle as a source of revenues. On the contrary, they figured they could do just as well in the raffle as long as they replaced the items they lost with new items that would be equally attractive to raffle-ticket buyers.

But where would the new items come from? In a brainstorming session, one of the girls pointed to the magazines they all liked to read. Maybe some of the magazine advertisers would be willing to contribute. The girls wrote to several companies and found that, sure enough, many were happy to donate raffle items. As a result, this year's raffle baskets were as attractive as ever and raised a significant amount of money.

So remember, additional sources of revenues may be closer than you think. If you and your people put your heads together, you may be able to identify what they are.

In the end the girls succeeded in hitting their goal, raising just over $100,000 after expenses. To call that a 33% increase, however, is to understate their accomplishment. In retrospect, it's clear that they started out at a disadvantage. Not only was attendance down significantly, but so were contributions from last year's donors. So the girls weren't working from a base of $75,000, the previous year's net revenues. My guess is that the base was about 20% lower. In effect, the net proceeds went from a total of $60,000 to $100,000, an increase of 67% rather than 33%.

In the coming year, many companies will also be playing catch-up. They'll have to work hard just to maintain their sales level, let alone grow. So it may be a tough year, but it doesn't have to be a bad one. The opportunities are out there, and you can find them if you look hard enough.

Beth and her friends did. Of course, they still don't believe the economy had any effect on them, despite what I say. But since when do teenage daughters listen to their fathers anyway?

Norm Brodsky is a veteran entrepreneur whose six businesses include an Inc. 100 company and a three-time Inc. 500 company. This column was coauthored by Bo Burlingham. Previous Street Smarts columns are available online at www.inc.com/incmagazine/columns/streetsmarts.


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Last updated: Jun 1, 2001

NORM BRODSKY | Columnist

Street Smarts columnist and senior contributing editor Norm Brodsky is a veteran entrepreneur who has founded and expanded six businesses.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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