There are ways of ensuring your business survives the worst hits of the recession. You can go on the offensive, squeeze your margins and undercut your rivals – a successful strategy, but not without its dangers. You can bring up your defences and focus on delivering higher quality to your existing clients – good if you are prepared to forfeit growth. But there is a third way.
A kind of recession protection is open to all businesses that, if done well, can enable you to grow in size and profit even through the bad times.
If you’re a larger company, recession protection can come in the form of buy outs: you spread risk through diversification – by acquiring other firms. Merging your company and managing the two together generally means increased profits and reduced costs. As a smaller business, you may think this trick is beyond your reach, but there is a similar technique available to start-ups: you can establish a related network.
Working together with a network of businesses – even competitors – in the same or a related sector, can enable you to grow your customer base. Small hotels can club together with local tourist attractions to maximise visiting custom, for instance; plumbers can work with plasterers and pitch to the same clients; small food producers can broaden their reach by forming regional gastronomy groups. While drumming up custom and even building brand, related networks can reduce fixed costs at the same time, which means more competitive quotes for your clients. And you don’t even need to change the way you do business.
This kind of partnership approach works best in the service industry, as it is possible for similar companies to happily share the same client base. Industries such as retail may be less suited, as customers tend to be more jealously guarded.
Claire Eason-Bassett of specialist event management agency, Event Cornwall, has set up a successful related network for event managers in her region, and believes business networks are primed for popularity in the downturn. The idea behind her network is that events companies that work together can grow opportunities and, as an added bonus, maybe give their industry a stronger voice.
There are around twenty events companies within the network, which has been going strong for about six months. Claire says the political environment in the service industry is moving towards partnerships: “People want to work together more because we can be more ambitious. I saw I’d really benefit if myself and my competitors were in the same room.” As well as sharing contacts and cutting costs on marketing and supplies, businesses working together can keep up to date with legislation and work on areas of mutual interest like health and safety.
Companies in related networks can’t really see each other as competitors: it’s a partnership. The advantages of working together should outweigh any competitive wrangling, and foster a mutual respect. Claire says working in a network can make great business sense: “We can meet more of the cultural and tourism strategies by working together rather than competing. Together, we’re lobbying town halls, and the multi agency style of what we do means we can work with the police on a county-wide basis. And we can join up several separate events that are being led by different events managers.”
Business is business though, and you must remain vigilant. Companies in your network can always diversify and grow into your specialist area. Your close ties may leave you open to customers being poached, suppliers being stolen, or sensitive information breached: the security, integrity and success of your own firm must always remain top priority. In terms of customer sharing, things have worked out well for Event Cornwall, as Claire reports: “We share customers to a certain extent, but what we have noticed is that rather than sharing the customers, we’re actually sharing projects.”
It takes a lot of confidence -- in your own service or product, and in your own skills – to involve others in your projects and work in partnership. But if you are willing to share and share alike, the benefits of working in a network may just be enough to take you through this recession.