Why do some small companies weather adversity when others go under? They share survival traits that keep them away from the edge of the cliff when others crash to the bottom. Here are 10 habits of SMB survivors.
1. They build a strong foundation
Survivor companies have been built to withstand bad economic weather. A good foundation includes access to money—something you should line up before you need it.
"It's tough right now for many small businesses to get loans," says Lawrence G. Hrebiniak, a professor in the management department at the Wharton School of Business. "Often, those who survive are smart with money or have access to money."
You should make friends with a banker or two before you need a loan, according to Bruce Huang, of Walden University’s School of Management.
"A lot of the banks have a small-business department and they do have a lot of good resources. Build a relationship with them, even if you are not borrowing money," Huang says.
2. They call on friends
In tough times, the tough keep going because of their relationships.
"All things being equal, people tend to do business with people they know. You always go with the familiar," says Lynda Ireland, president and CEO of the New York and New Jersey Minority Supplier Development Council.
But it takes time to build those relationships. Ireland advises SMBs to join the Chamber of Commerce, do community service and participate in fundraising to make a name for yourself.
"Become known not just for who you are but for what your company does," she recommends.
3. They think differently
There are two paths most companies follow, according to Hrebiniak. They compete on cost or differentiate themselves from the competition by offering added value or something unique.
Price-cutting can lead to a spiral of squeezing. A business that offers customers something different has a better chance of holding onto them. Differentiators still have to worry about cost, but they focus on perpetuating and communicating what makes them different.
To do that, survivor companies invest in marketing, advertising, customer surveys and competitive intelligence, Hrebiniak says. "If you differentiate, others will either imitate you or attack you. So you need to have intelligence to know what your competitors are thinking and doing."
4. They reinvent the wheel
Sometimes, survival is a matter of jettisoning practices that don't work anymore. In 2000, Huang was head of an InfoG2, an IT-services company. After 9/11, customers canceled contracts in droves—without advance notice, creating a cash crunch.
Who says everyone has to get paid on the first and the 15th of the month? The solution was to change the payroll process, forming three groups of employees and staggering payroll to spread it out over the month.
5. They change gears
When a sector dries up, endurance can mean a drastic shift in the business model or offering. IT, for example, used to be a red-hot field, Ireland says. "Now, there's a glut."
But there is still opportunity in the health care IT industry. "You have to be a visionary in order to stay in the game and survive through difficult times," he says.
6. They ask questions
When things go downhill, companies need to figure out what's wrong, fast. Hrebiniak calls this conducting an autopsy before you're dead.
"For every strategy, as you try to make it work, you have to have feedback not only about sales but about customer and competitor reactions. What specifically is causing the problem?" To find out, talk to customers and partners, go to conferences and do market research.
This step often means the difference between life and death for a company, Hrebiniak says.
"Sometimes, a business gives up too soon without taking that step. If they spent more time on cause-and-effect analysis, they might discover ways to revamp their approach."
7. They go back to kindergarten
"A lot of us who have been in business, think of ourselves as experts," Huang says. "We think we know what the customer wants."
This problem is worse in small businesses, where the owner may have started the company because he was good at a certain aspect of it. Survivors, on the other hand, are willing to admit they might not know everything—and to learn what they need to know or get help.
8. They go back to college
"Some small-business owners are smarter than others in pursuing knowledge," Hrebiniak says. He points out that more colleges and universities are developing courses with content targeted toward SMBs.
There's a plethora of continuing-education offerings and certification programs that can provide you with skills and information to stay in the game.
9. They have a mentor
"At a time like this—and all the time—you need someone to act as a springboard, a coach or mentor, someone you can interact with and exchange ideas," Huang says.
Your mentor doesn't need to be an expert, he adds. The very act of talking to someone else can help find creative solutions to your business problems.
A good place to look for a mentor is the Service Corps of Retired Executives, according to Huang—and don't worry that someone who's out of the game can't be a good coach.
"The key is not whether they are current on business trends, but whether you can bounce ideas off them," he says. "Most of the time, the answers will come from yourself, anyway."
Small-business development centers at colleges and universities including Wharton are funded in part by the SBA. They provide free help with financial, marketing, production, organization, engineering and technical problems, as well as feasibility studies.
The National Minority Supplier Development Council and the Women's Business Enterprise National Council match members with corporations that want to purchase goods and services. They offer free assessment tools and other resources.
10. They persist
How do you know whether to hang on or throw in the towel?
"Do research to counteract your fear and find out where you have opportunity," Ireland says. "Sometimes success comes down to being willing to wait long enough for it."
Image credit: yeowatzup