Editor’s note: This article was first published in November 2010, during the economic crisis in Spain.
When the market turns ugly, there are only three possible strategies for keeping our business profitable or making it more profitable. More than strategies, let’s call them the only paths we can follow, all aiming at the same final goal: profitability in spite of adversity.
Strategy number one is the least viable, because in many cases it means selling the business to an entrepreneur with fresh ideas and making some money that way before closing it down. You should know that a closed business isn’t a business: in the buyer’s eyes, it’s a business project starting from scratch. So we’ll set that strategy aside and focus on the two most viable, logical and profitable strategies.
Strategy number one for making our business profitable
Expansion: There’s no doubt about it. Even if fear gets the better of us, we should know that times of crisis are ideal for expanding with less investment. Our suppliers will appreciate the initiative, and in many cases we’ll get more discounts and even some form of financing.
In many cases, expansion is the only way out. If your province is hit hard by the crisis or no longer wants your product, you’ll have to take it to other provinces or other countries. If you used to have 300 customers nearby, maybe it’s time to look for 3,000 new customers everywhere.
It’s true that expansion carries risk and that investing in that idea for your business is a gamble, but it’s also true that it can be very, very profitable.
Strategy number two for making our business more profitable
Reduction: Less is more, in business too. The more fixed and variable costs you remove, the more profitable your business will be on the same sales.
Look at which products require you to have more staff or the most expensive staff. If you run several work shifts, analyze each shift separately, because sometimes the second shift eats up part of the profits of the first. In that case it may be more profitable to drop a shift and close earlier than to stay open longer.
Look at your production. Depending on your costs, and if your net profit figures aren’t clear, it may be more profitable to outsource manufacturing to a company that specializes in it.
Unfortunately, this second measure or strategy means cutting staff, although sometimes we have to look after our business.
Personally, I’m more in favor of expanding our business in times like these, but I also understand that this second measure is the more comfortable one and the one that best builds a cushion for a possible fall.
There are no other secrets: these are the only two things you can do with your business, and both are valid for business owners, who are of course looking for their business to be profitable. Here are a few good related articles:
Further reading
