White-in-article-portrait.jpgBy Sherron Lumley.

 

“In my mind, it seems like I’ve been through this cycle three or four times,” says Rick Reed, founder of R.A. Reed Productions in Portland, Oregon, a company that creates scenery for theaters, opera houses, and performance venues around the world. “Persistence comes from doing something you like and believe in,” he says, with the wisdom of 33 years at the helm of his company behind him.

 

“Starting your own shop is a passion; you want to create something special,” says Sander Flaum, CEO of Flaum Idea Group in Manhattan, a consulting firm he launched in 2004 after retiring from decades in the top ranks of global advertising. “I decided I didn’t want to work for anyone anymore,” he says. 

 

Sidebar.pngCall it having a growth strategy coupled with calculated risk-taking or more simply optimism and guts, being able to roll with the punches means adjusting to difficult circumstances as they happen. This idea has a literal meaning, from boxing, where staying in constant motion lessens the impact of your opponent’s blows, an apt metaphor for the small business owner—finding opportunity in the face of adversity, surviving, and winning. 

 

Finding opportunity certainly isn’t easy nowadays, however, as a recent National Small Business Administration study confirmed. Among the NSBA’s members, who represent every state and industry in the nation, the survey found that 72 percent had serious concerns about the economy. Perhaps not surprisingly, business optimism has likewise eroded in the face of stagnant economic growth. In fact, optimism is lower than it was a year ago, lower than in the Reagan-era recession, and it’s now even lower than during the Great Depression, a phenomenon the Pew Research Center calls the Optimism Gap.

 

Nevertheless, the hardscrabble years of the 1930s provide an important lesson for the small businesses of today. Despite the economic catastrophes, financial fragility, and a longer-lasting period of high unemployment, Pew found that Depression-era Americans still remained hopeful for the future. And today’s entrepreneurs should understand that adopting a head-in-the-sand, do-nothing strategy is not the way to get through tough situations. So, here are three business strategies that have stood the test of time in the worst of times.

 

Market Development – Finding new customers for current products

Perhaps the easiest of the three strategies, at least on paper, involves finding new target markets for a business’s current products. In addition to stage scenery, Reed has a large supply of barricades for outdoor concerts and festivals. The cache of crowd-control equipment he has in stock is something that sits idle in a warehouse most of the time, waiting for that next festival to come along. It is not something he would want to sell, though, as the need comes up again and again. So, by being willing to rent the product to others, Reed was able to tap a new target market. In fact, the barricades have been rented to new customers—some as far away as Japan—that were never going to be in the market for his scenery.

 

Product Development – Making new products for current customers

Despite the additional revenue from this clever rental strategy, Reed’s business has significantly declined, forcing him to lay off 85 of his 100 employees. “We’ll do almost anything for money,” Reed says with a little laugh. But he has seen this happen before.

 

With a smaller crew, Reed now focuses on industry innovation, creating automation software for what he sees as the future of the business. “Our customers are moving away from stage hands pushing stuff around,” he says. Similarly, a product development strategy means finding new products and services to sell to your current customers. It can involve creating an altogether new product or it could mean extending the product line—for example, by offering less expensive products that meet the needs of customers’ smaller budgets.

 

Diversification – New products and new customers 

Call this strategy the haymaker—a hard swing with all of one’s might. Diversification means providing new products and services to new markets, and it has a long history of success. A famous example comes from the Prohibition era, when alcohol became illegal in the United States. Beer brewers sitting atop vast acres of farmland and thousands of square feet of warehouse space decided to redirect their resources toward dairy farming, providing a new product (milk) to new customers.

 

Although going after new markets with new products sounds highly risky, it doesn’t have to be. “Everyone is kind of wringing their hands about the economy,” says Flaum, “but we are doing better than ever.” During its seven years of existence, the company has grown from two initial employees to a staff of 29 today by doing something entirely new, what Flaum calls focusing on the big idea—providing breakthrough strategy for new customers in the healthcare and biotech industries. “We do whatever service in whatever area that the clients need,” he says. “We give the customers hope and they put their trust in us.” 

 

All this will happen again, so just be ready to deal with it

Although Reed is retrenching and Flaum is in expansion, both have decades of experience in weathering business cycles and don’t worry too much about them.

 

“You only have 24 hours in a day. How much time do you want to spend angry, depressed, rejected, and thinking ‘Why me?’” Flaum says. A struggling national economy, an industry lifecycle in decline, a seasonal dip in the market—whatever the scenario, a small business will experience some hits. It’s part of the territory. But it’s what you do afterwards that makes all the difference.

 

 

Additional Resources

 

Books

Breakthrough, by Paul Kurnit and Steve Lance (2011)

Make Your Own Luck, Success Tactics You Won’t Learn in Business School, by Peter Morgan Kash with Tom Monte (2002)

Selling When No One Is Buying, by Stephan Schiffman (2009)

 

 

Web

“Learning from the Great Depression,” Bloomberg.com, Businessweek, by Stacy Perman, October 17, 2008:

http://www.businessweek.com/smallbiz/content/oct2008/sb20081016_825689.htm

National Small Business Administration, 2011 Mid-Year Economic Report:

http://www.nsba.biz/docs/2011_nsba_my_survey.pdf

The Pew Research Center

http://pewresearch.org/databank/dailynumber/?NumberID=1149

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