Good times, bad times
Most businesses lose money during recessions or periods of great volatility and many go bankrupt. Then there are the select few that manage to simply stay afloat or even prosper. So what's their secret to success? Well, it's actually not much of a secret according to Peter Navarro author of Always a winner: Finding your competitive advantage in an Up and Down Economy. He suggests developing and deploying strong market literacy, building brand awareness and increasing market share during the good times. Above all he encourages entrepreneurs to recognize that recessions produce not only risks but also opportunities. I think the following quote from Steve Jobs, Apple CEO, in 2008 sums it up quite nicely:
"We've had one of these [economic crashes] before, when the dot-com bubble burst. What I told our company was that we were just going to invest our way through the downturn, that we weren't going to lay off people, that we'd taken a tremendous amount of effort to get them into Apple in the first place–the last thing we were going to do is lay them off. And we were going to keep funding. In fact we were going to up our R&D budget so that we would be ahead of our competitors when the downturn was over. And that's exactly what we did. And it worked. And that's exactly what we'll do this time." In short, while most companies laid off workers, cut advertising and reduced R&D during the 2007-2009 recession, Apple did the opposite.
Andrew Razeghi, adjunct associate professor at the Kellogg School of Management at Northwestern University, offers similar advice. In Innovating through Recession he cites examples of companies that have used innovation to succeed during periods of economic uncertainty. Take, for example, Henry R. Luce, who, in 1930 during the worst of the Great Depression decided to launch a magazine called Fortune that covered human interest stories not found in the Wall Street Journal or any other magazine or newspaper. And when Kraft's mayonnaise sales dropped because of the Depression, the company developed a new, exciting and cheaper product called Miracle Whip, launched at the 1933 Chicago World's Fair.
If you're a new entrepreneur or a seasoned business-owner and want to find out more about how to be successful during a recession, check out these books:
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