Economists say the Great Recession–the longest and deepest since World War II–ended 18 months ago and that the U.S. economy is, in fact, growing again. But growth is relative. Even the rosiest economic forecasts for 2011 come in well under 3 per cent growth. Unemployment is still high, and consumer spending is still sluggish.
“However optimistic you may be about your business, you need to let the overall economy temper your expectations,” says Scott Shane, an economics professor at Case Western Reserve University and author of The Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors and Policy Makers Live By. “You need to assume that the recovery is going to be tepid and plan accordingly.”
That doesn’t mean sit and wait for things to improve. Rather, retool for the economy that exists today, and will be lingering for many tomorrows. Here are 10 places to start.
In a climate as unforgiving as this, stasis is death. So dust off your business plan and scrub it of any assumptions you may have made three years ago. Roll up your sleeves, do the maths and zero in on the best strategy to grab market share and win new business. Then start treating your business plan as if it's a work in progress. Create hard benchmarks and measure results often. That's how you improve performance, says Tim Berry, president and founder of Palo Alto Software Inc., developer of Business Plan Pro, a small-business software tool that creates plans and financial projections.
'Planning means tracking how assumptions change and reviewing progress and plan versus actual results,' he says. Rethinking your business plan also can help you spot new opportunities and point your company in the right direction. For step-by-step advice, check out the U.S. Small Business Administration's guide.
Whatever paid off in 2010 is worth investing more time, money and resources next year. Ask yourself: What was your top-selling product or service, and how can you get your customers to buy more? What money-saving strategies went straight to the bottom line? What incentives or promotions got your customers' attention?
Elyissia Wassung, CEO of 2 Chicks With Chocolate, a South River, N.J., chocolate maker, is doubling down on in-store demos, which have boosted sales. When she learned a chain retailer was planning to order exclusively from 2 Chicks for Christmas, she says, 'We decided to double our demos with them this holiday season and blitz all of their stores on the same day. We are also giving away prizes to the top performing stores.'
The best time to try something new? When the old isn't working. It may feel safer to stay in your comfort zone, but sticking with the same old product, service or marketing strategy might actually be riskier.
The best new ideas often come from conversations with your customers, suppliers and, most of all, employees. 'The unexpected can often be the obvious,' says New York business and personal coach Carol Vinelli. Talk less, listen more and really tune in to ideas that could lead to breakthrough products and services.
Need some inspiration? Check out Seth Godin's bestselling book Purple Cow about how to make your company remarkable.
'High-maintenance, low-margin customers are an impediment to deploying time and resources more profitably,' says Joseph Fulvio, a consultant in Doylestown, Penn., who specialises in growing small businesses. 'Get rid of them.'
Make a list of your customers and give each of them a grade. Then dump everyone below a C--or a B, if you can afford it. Once you've separated the winners from the losers, put a plan in place to turn those laggards into A-listers. Going forward, use those criteria to size up new business.
Though most businesses worry whether they'll meet clients' expectations, 'it's actually a two-way street,' Fulvio says. A better vendor-customer fit should produce a healthier bottom line.
When prices are low, as they are now, it's generally a good time to lock in long-term contracts with your regular vendors, contractors and suppliers. Indeed, you might be able to negotiate a lower price in return for the promise of your business. Small-business management expert Tim Sciarrillo of The New England Group in Milford, Conn., suggests asking your supplier for a volume discount and to hold the goods until you need them.
Instead of ordering 10,000 custom labels five times a year, for example, order 50,000 at once but have them delivered in batches. This lowers the supplier's manufacturing costs, reduces your unit price and speeds delivery on future orders because the labels are already printed.
Exclusivity is the key to a sweetheart deal like this. 'At one client company, we reduced corrugated suppliers from five to one,' Sciarrillo says. 'The client received better service, reduced pricing and every time there was a price increase, the salesman usually kept our increase a per cent or two below the standard.'
Make sure your contract covers all the details, such as delivery cost, timing and quality guarantees.
Facebook and LinkedIn have their uses, but they'll never replace face-to-face meetings, especially to win new business and get referrals.
'Some folks aren't ready to go out there and mingle, but in today's economy, it is imperative,' says Bryan R. Adams, owner of FAB Communications in Teaneck, N.J.
Think about it: A single coffee, meeting or lunch with a lawyer, financial planner or supplier could bring in dozens of new customers next year. If you're afraid to jump in right away, Adams suggests starting by searching Meetup.com for a group that matches your interests and attending local chamber of commerce events.
Once you find your groove (and refine your elevator pitch), consider joining a dedicated networking group such as BNI International, LeTip International or National Association of Women Business Owners. 'Getting out there keeps you sane and you get to hear what's working and not working for other businesses,' Adams says.
In this economy, it's more important than ever to avoid becoming a 'me, too' brand. Low prices and quality service are no longer enough. Whether it's a YouTube video, an iPad app or a free tasting event, offer something to make customers take notice.
'What do you bring to the table that no one else is serving up to clients and potential clients?' asks Debra Condren, a New York business psychologist. 'You must first understand what sets you apart and then become completely fluent in communicating to your target audience what separates you from the herd.'
For more tips and tools on leveraging your brand, check out Entrepreneur's free online marketing guides at entrepreneur.com/marketing.
The mortgage market is starting to thaw, and that's good news for small-business owners who can tap their home equity for working capital. If you have good credit and some equity in your house, now may be the time to refinance before interest rates rise.
Be sure your credit score is solid and that your business shows positive cash flow before you start shopping for deals. You won't get the loan unless your bank is convinced you can cover the monthly payments.
'Banks are willing to provide credit but are still very selective,' says Case Western's Shane. 'Financials help a lot right now.'
Think about creating a bonus plan to motivate employees to hit your 2011 goals. Bonuses, while not always successful, says Rich Armstrong, president of The Great Game of Business Inc., can help focus your staff's attention on key metrics such as sales, profits, productivity and customer satisfaction.
Armstrong's Springfield, Mo., firm provides training in the open-book management philosophy, which advocates sharing financial and operational information with employees so that they can make better decisions, and it gives them a stake in the company's success.
'Your people must clearly understand the goal, the improvements that are needed, how they can make a difference and what they stand to gain,' he says. 'Bonus-plan success will have everything to do with how well you communicate, educate and encourage your people to stay in the game and reach for the goal.'
A bonus plan can work in all types of businesses, including manufacturing, sales, even restaurants. Goals can be tied to easy-to-measure numbers such as revenues, new business volume or gross margin. There's more about open-book management practices on The Great Game of Business website, greatgame.com.
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