How Can a Recession Be Good for Your Business?

Recently, my strategic planning firm guided some market research for a distribution company. One finding was that contractors within their geographic area were spending $1 billion/year on their type of product(s). That’s $1 billion of market potential without expansion into new products or investment in new branches.  At $50 Mil/yr the distribution company has 5% market share.  Statistics about housing starts would suggest that the market expanded beyond $1 billion the following year, but with the slowing of the economy, the market would probably recede back to $1 billion.

So how should the distributor respond?  How would you respond to the same situation?

The standard approach is to view the economy as an excuse.  Sales people start whining.  Managers who never read the newspaper while the economy was stronger start sharing daily examples of downsizing from the front pages.  Executives adjust their projections. Down, of course.

The alternative approach is to focus on the $1 billion of available business.  They could choose to remember that economic downturns are measured in single digits.  How different is their potential really if the available market is “only” $950 Mil?

Instead of pouting, they could do an account-by-account review to learn which products key customers are buying and how much of the key customers’ business is really coming their way.  It pays to have face-to-face discussions about what it will take to have more of the customer’s business.

They could choose to notice that some baby-boomers haven’t addressed succession and are getting tired. Those baby boomers may now be more interested in selling their businesses.  A slower economy leads to increased receptivity to reasonably priced acquisitions plus interest rates are coming down.  Now is the time to buy other peoples’ equipment or inventory at a good price. It’s even possible to acquire a larger business by financing the transaction with the accounts receivable of the combined businesses.

They could reach out to the owners of competitive and complementary businesses who are now more likely to see the need to cooperate.  A recession leads to stronger strategic alliances and joint ventures in which multiple companies share the risk.  Sometimes, groups of complementary companies go far enough to “roll their businesses up” into an initial public offering that wasn’t possible for the individual companies on their own.

They could recognize that recruitment is becoming easier and less expensive. Low unemployment rates have been a real headache for companies over the past few years. Even mediocre performers have been able to demand higher and higher salaries.  Maybe some of the competitor’s “A players” the distributor has been coveting can now be attracted to work with them?

History teaches us that the greatest fortunes have been won during economic downturns.  While everyone else is whining, cutting back, using the economy as an excuse, and not taking chances, industry leaders charge forward and claim more and more market share.

How do you choose to view slowed economic growth?

 

Known as The Growth Strategist®, Aldonna R. Ambler, CMC, CSP helps businesses achieve accelerated growth with sustained profitability® through a combination of speaking, consulting, executive coaching, authorship, and growth financing.  Aldonna can be reached at www.Aldonna.com or 1-888-253-6662.

 

 

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