Any small business owner will tell you that, even in good economic times, it is challenging to operate a profitable business. According to 99Firms.com, one in 12 businesses closes every year and only 50% survive for 5 years or longer. Why is this the case? A study by US Bank reported that 82% of small businesses fail because of cash flow problems. Small businesses typically operate on a very thin margin and often rely on financing, not only for startup but to carry them through difficult periods. This, combined with the fact that many of these businesses cater to niche segments of the market that are highly dependent on a dedicated group of customers, can set any business up for failure.
Our current pandemic and economic downturn have created even greater difficulties for small business owners. Some will be forced to close, others will not. What will set the survivors apart? There are common themes and strategies that small businesses can employ to succeed during crisis and even come out on the other side better than before. Here are four keys to small business survival and growth during crisis.
Leverage small business agility
One advantage small businesses have over larger ones is the ability to pivot to a changing market. The pandemic is driving spending and demand in ways that no one could have foreseen. This is a time when small business owners must be honest about their business model, products, and the direction crisis will push their customers and decide how the business needs to change to stay relevant and responsive to customers' needs. This not only includes brick and mortar shops but online stores as well. An excellent example is a small, online dress rental business owned by two sisters in New York. Before the pandemic, the online shop had a solid customer base who rented dresses for galas and events. After the pandemic, as we are all well aware, these events ended, along with their business idea. The sisters assessed the new environment and saw a new way to deliver needed clothing to their customers in the form of customizable accessory boxes. People were no longer going to the office but still needed to dress for zoom business meetings, online hangouts, and stay at home date nights. They were able to quickly turn their products to ones that met an emerging need and ensured they stayed relevant and responsive to their customers during the changing times.
Many other types of businesses have made similar rapid adjustments to meet customers' needs such as real estate agents using 3-D home tours for their showings, restaurants moving to all online ordering with curbside pickup, or distilleries dedicating one of their stills to full-time hand sanitizer production. Small businesses can find success if owners quickly assess and respond to market drivers and customers’ needs.
Focus on the positive
There is a famous quote by John F. Kennedy, “The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger: the other for opportunity. In a crisis, be aware of the danger--but recognize the opportunity.” For small business owners, crisis certainly can be seen as a danger, but it can also represent an opportunity. The key to success is focusing on what you can do and not what you can’t do. For example, if you own a shop that exclusively sells a product from a storefront it may be tempting to think your business will not survive. On the other hand, if you decide to focus on how you can get a product into your customers’ hands without them having to come to the store, you will begin to see there is an opportunity to reach a larger number of customers than just selling via foot traffic. No matter your product or service, there are inventive ways to get your product to the customer. Today’s advanced technologies provide endless ways to connect with customers, sell products through larger vendors like Amazon or eBay, set up remote work environments for your entire team, or move a business to an all-online model. In a recent blog, we published a “how-to” primer for current business owners or new entrepreneurs seeking to start an e-commerce business. Change can be difficult but concentrating on the positive and potential will help you focus on solutions rather than problems and keep your business moving forward.
Customer relationships are key
An important aspect of changing your business model or product is to understand what your customer wants and how you can serve them. The best way to accomplish this is to hear from them directly. There are many methods a business can use to get feedback. Use your customer mailing list or website to send a survey, conduct a poll on your social media, or contact dedicated customers directly to get their input. This will give you a clear idea of what your target audience wants to see in affordability, convenience, product changes, and delivery and help you make the right changes, quickly.
The pandemic has driven everyone to virtual communication. Utilize social media to stay connected and have meaningful interactions with your customers. Share changes, new products, success stories, loyalty benefits, and ask for their input as the economy and markets continue to change. These micro-interactions will build relationships with your customers and build loyalty at the same time. The adage that it’s easier to keep an existing customer than get a new one is very true. It took time to build your current clientele base, and if you lose it, you may not get it back. Customers tend to stay with businesses that listen, meet their needs, communicate, and show ingenuity, compassion, and a belief in the greater good. Use all tools in your toolbox and be that company.
Network
Many business owners may feel they are going through this crisis alone. This is definitely not the case. Other businesses and entrepreneurs are experiencing stress, uncertainty, and seeking best practices along with you. Again, the internet and online tools mean no one has to go it alone. Networking with other small business owners is a great way to share ideas, discuss things that worked and those that didn’t, get advice from more seasoned owners that may have experience with downturns, and be sure to seek and give support. Some online sites that lend themselves well to connecting are LinkedIn and Instagram. For example, LinkedIn has interest groups that connect people in similar occupations or lines of work, or you can build personnel connections to create a like-minded group of business owners looking to have an exchange of ideas. Also, there are Small Business Association forums that can connect you to business owners and mentors with the appropriate level of experience. Networking can help business owners find outside the box solutions to overcome roadblocks and help business owners survive the current crisis and create a new, relevant business in the process.
Small business owners have the opportunity to leverage this crisis and create a new direction, products, and new client base for their business. Be sure you listen to customers, conduct a diligent assessment of the market, and then don’t be afraid to think outside-the-box and change with the times. If you need more information or help on how to navigate a crisis, send us an email or give us a call and we will be happy to discuss.
Rita Simmons, Ph.D., is the founder and lead consultant of Novelle, where she provides business and research consulting to companies across a variety of industries. Dr. Simmons leverages her drive for innovation and excellence along with her extensive executive and military experience to help companies grow their business, drive revenue, and achieve strategic goals. When you’re ready to take your business to the next level, contact Dr. Simmons at info@novelleonline.com or connect with her on LinkedIn.