Don't Get Boxed In
While others worry about cost-cutting measures, think about income generation instead.
By: Chia-Li Chien | Published 09/08/2009
It's Cloudy Out There
It was a wet summer day in late July 2009. We went to Acadia National Park in Bar Harbor, Maine, on our annual national park hiking trip, expecting a sunny day on top of Cadillac Mountain. At 1,532 feet, Cadillac Mountain in Acadia National Park is the highest point along the North Atlantic seaboard. We were paying our second visit in 10 years largely because of the breathtaking view from the mountaintop.
When we got up to the observation point, we saw heavy clouds. Visibility was only 10 feet, and we were hiking against a strong wind. We weren't sure we could find our way out.
You may be feeling the same way about the economy--cloudy, with very little visibility. Since the last quarter of 2008, competition has tightened for many businesses. Even healthy companies may feel boxed in, without room to breathe.
Matthew Martin, Ph.D., the economist from the Charlotte branch of the Federal Reserve Bank of Richmond, was the speaker at our last semiannual economic update in May 2009. Comparing the economy since the last quarter of 2008 to a flood, he characterized it as the greatest economic flood in centuries. And while the weather report shows signs of the water receding, it left tons of mud that have to be cleaned up. No one knows how long that will take.
The recovery has been accelerated to a degree by many so-called government stimulus activities. So far, however, I haven't heard of any privately held businesses benefiting from those activities. And as tension increases in the economy, privately held businesses find it harder to gain revenue and access to capital.
Many of my clients tell me their competitors are being forced into low bids to keep one step ahead of their creditors. Those businesses get boxed in by bills they cannot pay, and many fail. You may be feeling good that your company is still able to find its space in this tough environment. On the other hand, your revenue likely is down and you're faced with some hard decisions. Now's the time to determine whether your company has created a space with enough room to maneuver and breathe in this tight economy.
Focus on Income-Generating Activities
Early this year, there were a lot of conferences showcasing "sustainability." Many of them focused on cost-cutting exercises. Many of my clients and fellow business owners have done the cost-cutting. And, admittedly, many uncovered waste in their business practices by going through those exercises.
But let me say this straight out: Sustainability isn't only a matter of cost-cutting. If you're only focusing on cutting your operating expenses, think again. Put your focus and priorities on income-generating activities.
Remember, small to mid-size privately held businesses operate very differently compared with Fortune 1000 companies. We are small, flexible and able to move quickly; you can focus on income-generating activities beyond survival mode.
Reconceptualize Your Business
This is a great time to reconceptualize your business model. Revitalize the architectural map of your business. Identify, prioritize and implement strategic projects that help you stay ahead of the economic curve. Your company needs to continue to create value for all stakeholders: clients/customers, suppliers/vendors, employees and--most important--you. If you're not creating value for your company, you're just taking up space in your marketplace.
Redefine your market space
Take a leaf from professor Lynda Applegate from Harvard Business School, who spoke at a WPO conference. She talked about how to find "green" space in your playing field, which is your current market space. Take time to innovate your products or services so you can position your company ahead of the economic curve. Consider the following:
- Enhance your product or service if your product or service and your market are in the same marketplace. An example would be Microsoft Word. Microsoft upgraded from the 2003 version to the 2007 version, but the market and the product are both the same.
- Expand your product or service if you have the same product or service and a different market. An example would be Lowes, which expanded to the West Coast--a new market--a number of years ago, but the products remained the same. Another kind of expansion is adding a different product or service for the same market. Examples include Victoria's Secret, which years ago added perfume and cosmetics to its offerings, but sold it to the same market.
- Explore your product/service if you've got a new product in a new place. For example, when eBay bought PayPal, it added a new product and service centered in a new marketplace. My own company is expanding to the West Coast--a new marketplace--with a new product, providing temporary CXOs to clients.
Can you see how to find your potential market space? You can look inside your playing field or outside it. Or, best of all, create a new space for your company. Don't get boxed in; redefine your market space. Shift your driving gear from boxed-in mode to value-creation mode. It will take your company to a whole new level.
At Cadillac Mountain, we followed the clear marker along the trail that helped us find our way into the parking lot at the observation point on the top of the mountain. We found ourselves soaked, not only because of the rain but also because the strong wind forced the clouds upon us.
If you don't already have some clear marker for your business to maneuver through this cloudy economy, take the time to strategize your business model, find space in the tight market and, most important, focus on income-generating activities. You too can find your way out; it may not be easy, but all will be well.
Chia-Li Chien, CFP®, CRPC, PMP; helps women entrepreneurs to convert their business into meaningful personal wealth. She is the author of Show Me The Money and columnist for WomenEntrepreneur.com & Fox Business online. She is available for consulting, speaking engagements and workshops. She can be reached at www.chialichien.com or email@example.com.
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