Survive or Thrive

Why do some small businesses fail, others barely survive, and yet others thrive through recessions? Here are a few insights:

Take Calculated Risks

There is a common myth that entrepreneurs are big risk takers. However, most studies actually show the exact opposite, indeed successful entrepreneurs generally avoid risk wherever possible. But they do take calculated risks all the time. They develop new products, enter new markets, pull out of existing markets, change their product packaging, form new strategic coalitions, etc. It’s therefore important to note that open risk-taking generally isn’t productive. Instead, successful entrepreneurs tend to take risks in ways that limit their potential loses. They always look before they leap.

Invest in Sales & Marketing

When business slows down, the first thing most businesses cut is marketing and sales. They view marketing and sales as an overhead, not as an investment. This is the exact opposite of what most successful entrepreneurs and business owners do: they increase sales and marketing efforts when business slows down. In some cases, that means a move away from “traditional” marketing (print, billboards, etc.) toward Internet marketing and social media (LinkedIn, Facebook, etc.). Outsourcing your marketing is another option, rather than doing it in-house. Whist this may save you the overhead of a marketing department you will still need to know what things to look for to find the right marketing agency or consultant for you, or risk being financially burned. In other cases, it can mean cutting ties with unprofitable customers and strengthening ties with the more profitable ones. The result is usually an increase in market share and improved customer loyalty, at competitors’ expense.

Embrace Change

It seems pretty obvious that the world is changing faster than ever before, recent events regarding COVID-19 tells us this. Successful companies don’t just react to change, they anticipate it. Then they either flow with it or they drive it. Companies that resist change are more likely to fail, or at best, barely survive. COVID-19 is forcing companies to adapt quickly to change and in many cases redesign their products or services, or even create new ones to respond to the demands of millions of people adjusting their habits around the world. COVID-19 aside, the list of bricks and mortar companies struggling to compete against more agile online competition continues to grow. Nevertheless, whilst the likes of Toys R Us, HMV and Austin Reed have not managed to adapt, there are those that have managed to stay relevant, anticipate trends and embrace innovation such as Netflix, Yellow Pages and Lego.

Act Fast

Successful companies make decisions carefully, but once they make a decision, they act quickly. Companies that are slow and unmanageable due to the sheer number of managers required to review initiatives will stifle them, risk them become killed outright or take so long to go through the system they will be effectively dead by the time they emerge. In 2003 Lego almost hit bankruptcy as a result of over innovating. They quickly recalibrated, streamlined its business model by changing the way they managed innovation and discovered it could revitalise and reignite its original products through collaboration with the likes of Harry Potter and Star Wars. They took the time to see where and why it was going wrong, created a measured strategy to fix its problems and then acted fast. Small companies have the ability to act swiftly, if your company is small but major ideas and projects take years to bubble up to the surface, you have a problem.

Listen and Learn

Successful companies listen to their employees, their customers, their partners, and even their competitors. They are good at “thinking big”, but they also pay attention to details such as employee morale, paying invoices on time, customer service, marketing consistency, sales training, etc all of which builds trust in their business and their brand. No matter how large or small your company is, make sure you are not just gathering data, you also need to analyse and act on it. This should happen at all levels of your company, not just in management meetings and strategic retreats.
So, bottom line here, even the best and bravest entrepreneurs need to find ways to mitigate the damage from the risks they take. However, knowing these insights, you may find it possible to turn risks you take into advantages, instead of liabilities.