Planning for growth in the post meltdown economic climate:
Growth should generally be a key focus for business but the current strained economic conditions mean that for many businesses simply keeping above water is a major challenge. Also, some recent examples of irresponsible behavior by corporate leaders have led to great concern among customers and a desire for signs that businesses are practicing responsible growth and long term, sustainable, corporate architectures.
Responsible practices and long term growth have been great basic business principles for some time, but have become especially valued by your clients, customers, or prospective business associates given the current economic climate. Luckily for the small and medium sized business, responsible rather than reckless spending and adopting a long term rather than short term focus are likely to prove even more valuable now than before.
What kinds of expansion are justifiable?
Flexibility is extremely important when times are tough. It is justifiable to expand your business to be more flexible as you face uncertain challenges. Also, expanding for flexibility may allow you to capture or create new markets for your goods or services, or even develop new goods and services. Even as business in general has stopped the dramatic expansion of the last 10 years, the pace of technological innovations remains very fast. This creates both challenge and opportunity for you and your business.
Generally expenses related to significant quality enhancements and product improvements should prove justifiable even during challenging revenue times because they help protect both short and long term business prospects and help to build the long term reputation that is important to your success.
Another expansion focus can be real estate. In many areas of the USA as well as cities around the world real estate values for some types of properties have fallen dramatically and there may be opportunities to reduce lease costs or buy properties to enhance your businesses viability. A caveat here is that prices of commercial real estate in many areas have not fallen nearly as dramatically as home values, so all other factors equal this is probably not a great time to be buying commercial real estate unless the price is very right for you. It is a great time to renegotiate your leases and other real estate service arrangements. Rent costs in many cases do not reflect current reduced values and you should be asking your landlord to price according to those reduced values and the fact that vacancy rates are higher and rising, making you and other reliable renters even more important to your landlord.
Recalculate Risk and Reward:
In my view the best course of action has changed with respect to taking on risks. During the early 1990s many companies took on high levels of risk with large expenditures in an effort to maintain and increase market share - effectively to avoid being “left in the dust” by competitors who were also expanding business rapidly. Our own travel publishing business took this approach as we increased our staff many fold, from about 10 full time writers to nearly 100 at two additional office locations. Although this expansion followed a year of huge revenue growth, we also felt the pain of many when falling revenues could no longer support our large staff and infrastructure. Despite the current negative economic climate we are expanding again, but this time much more conservatively and with an eye to optimizing our time and resources rather than just using them.
Many new resources are already available or will become available to small businesses during these challenging economic times. As during the best of times using your resources wisely and with an eye to optimizing your return on investment are always important guidelines.