Double-Dip-Proof Your Business

With fears swirling about a double-dip recession because of disappointing employment news, dropping housing sales and other indicators, many
September 07, 2010

With fears swirling about a double-dip recession because of disappointing employment news, dropping housing sales and other indicators, many entrepreneurs are worried that we're in for another round of tough times. 


While it may be next to impossible to insulate your small business completely if it does, you can protect your sales by borrowing some smart strategies from other ventures that have done well in the past couple of years.


For ideas on how to "double-dip-proof" a small business, I talked recently with Clifford Lerner, CEO of fast-growing Snap Interactive, a New York City provider of applications for dating websites such as Are You Interested, which he co-founded with brother, Darrell Lerner. Their young business, which went public in 2006, has built an enviable track record of growth in the past few years. 


For the six months that ended June 30, revenues were nearly $2.2 million, compared to $1.6 million in the same period in 2009. "Our revenue keeps growing, and it's larger than it's ever been," says Darrell. Here are some ideas you can use in your own business, no matter what field you are in.


Face reality

This isn't a great time to launch a business that takes tens of millions to start, but it can be an ideal time to pursue other, lower-cost opportunities. "Find something that's not capital intensive at a time when it's difficult to raise capital," advises Darrell. Snap Interactive raised $750,000 in financing from friends and family in 2006 and 2007. That's not pocket change, but it pales in comparison to the amount that tech startups raised in the dotcom era.


Stay lean

Snap Interactive never raised venture capital, so it stretched its startup money to make it last. For instance, the founders never went on a hiring spree. Today, the company has only 16 full-time employees. "Pretty much every hire is because of an urgent need that is going to have significant impact to our bottom line pretty quickly," says Clifford.


Pay close attention to customer feedback

When Snap Interactive adds a new element to its site, its team devotes constant attention to the tracking system it uses to measure visitors' responses. That way, employees can focus on doing what works and get rid of additions that aren't profitable quickly. This may sound obvious, but given the time constraints many small businesses face, it isn't done as often or thoroughly as it should be, say the site's founders. "The companies that disappear are the ones that don't realize the importance of this and don't come up with creative ways to test ideas," says Clifford.


Maximize social media

No matter what your industry is, Facebook and Twitter offer easy ways to create a community where you can engage with current and potential customers. Snap Interactive, for instance, uses its Facebook fan page to post photos of couples who met on the site and got married. Fans will often direct their friends to the site, exposing more people to the company. "If you don't have a presence on Facebook, you're missing out," says Darrell.


Create recurring revenue

Snap Interactive used to focus on generating revenues through advertising, which is tied closely to the state of the economy. It switched in December to a subscription-based model — a move that is working out exceedingly well, accounting for much of the increase in revenues. If you spend some time brainstorming, there's probably a way to offer your customers a subscription or other type of ongoing purchasing option that's easy to renew. If the new option appeals to customers, it'll put you on strong footing no matter what the economy does.


Elaine Pofeldt is an independent journalist specializing in entrepreneurship whose work has appeared in, BNET, Crain's New York Business, CBS Moneywatch, Good Housekeeping, Inc., Working Mother and many other publications. A former senior editor of Fortune Small Business magazine and editor of its website, she does editorial consulting for online and print publications.