Workplace

Although the world economy is in another recession, the good news is recessions are a logical phase in every business cycle. Rather than fear a recession, you should actively position your company to leverage the next logical steps in the economic flow: innovation and corporate growth. Following are four ways to proactively move your company into a position to achieve higher levels of corporate value.

Ensure relevance

Many business owners cling far too long to their service offerings hoping new customers will be found to revive ailing revenues. But with revenues slowing, business owners are in an ideal position to invest in simple forms of market research and predictive environmental analysis.

Your customer marketplace is always evolving—usually in response to economic factors. Where will your new customers come from? What services will be needed to satisfy the evolving marketplace? How can you prepare your offerings portfolio for the next business cycle?

Asset usability

When a recession hits, business owners often make the mistake of jettisoning assets.

The biggest mistake you can make during a recession is to fire trained service employees based on how recently they were hired. Take a critical look at your work force. Do you have long-term employees who are, at best, marginal workers? Likewise, do you have some newer employees who show a great deal of promise?

Pursue growth options

Recessions are opportunities to buy undervalued businesses. Low-cost growth—the result of buying undervalued assets—is a legitimate and attractive business growth strategy.

But what type of business should you look to buy? The answer revolves around the principle of horizontal and vertical market expansion.

Horizontal expansion is defined as moving into markets that are logical extensions of your current business model, and vertical expansion relies on maintaining a subset of your existing customer base and adding niche offerings that satisfy a smaller percentage of that base.

If you are interested in horizontal expansion, the acquisition of a firm specializing in the rehabilitation of foreclosed properties may be a logical extension of your company's current offerings. Conversely, if you are considering vertical expansion options, focusing on "green" offerings may be a good move.

Refine core functions

During periods of economic slowdown, business owners spend an inordinate amount of time trying to optimize sales, marketing, finance and administrative activities. These functions are nonproductive activities having little, if any, effect on overall corporate value. Instead, resources should be expended on refining a business's core functions, operations and delivery because these will set the business apart from competitors.

This is not to say there are not opportunities to reduce costs and increase productivity in non-core functions. But the basis for savings is less about refining your current practices and more about completely changing the way you do business.

If you venture down this path, let me offer one word of advice: outsourcing. Online accounting systems can be leased for as little as $20 per month, allowing you to pass off all the responsibilities of technology ownership. Other applications associated with customer relationship databases, inventory and dispatching can be found in software solution packages that eliminate your need to maintain any software at your site.

Corporate rebirth

Prudent business owners realize recessions are an opportunity to re-establish a business in a new competitive light. Focus on predicting your next market demand, and position your company to reap the benefits of the next upward economic swing.

Brad Dawson is managing director of LTV Dynamics, Catharpin, Va.