How to Grow a Company in a Down Economy
By Elizabeth Meeks
Sounds like planting seeds doesn’t it? Well, in a way it actually is for many small businesses. You don’t just throw the seeds in the ground and expect the seeds to do all the work on their own do you? No, as a matter of fact, you have to really study the facts and learn what you can. Like finding out what makes your plants grow, how much will it cost to maintain them and keep them healthy? You have to have a plan, along with good fertile ground and hard work.
I presented some tough questions to small business owner Chance Knapp with VIVO Technology (service parts supplier) to find out how he managed to keep his company not only afloat, but growing during a down economy.
How did VIVO handle the recession?
“We were very blessed in that not only did we weather the storm, but we were able to maintain double digit growth over the last four years as well. It’s hard to know exactly if that was because of the industry we were in or because of the actions we took. I would venture to guess it was a combination of both along with a blessing from above.”
What specific actions did you take?
“We definitely took a hard look at our costs, as everyone else did, and found ways to save money. However, I would argue that through good times or bad a company should be doing this regularly, regardless. We have a motto here that if you’re not growing you’re dying. Companies are scared to try and get into new product lines, and push for growth especially during a recession, but you can’t be scared to take some risks. We pushed into some different areas that we in all honesty had to start off at breakeven to get a foothold in that industry/product line. There is nothing wrong with not making money when it means getting your foot in the door, or keeping your employees on the payroll. Once our foot was in the door we dug deep looking for ways to improve efficiency, reduce cost, and then make a profit. I would say this is what really set us apart and allowed us to grow while others were cutting back. It can be risky, but it almost always pays off. It can be very hard to find good solid employees, so keeping the ones you have is crucial.”
If a company needs to cut costs what should be the first place to review?
“That is a tough question as it can depend on your size as well as your industry. I would have to say though that you have to review your payroll. Now that might sound hypocritical after my comments to your last question, but let me be clear, I’m not talking about across the board layoffs, or pay cuts/freezes. I am talking about finding those employees who are slowing down production, pulling down morale, basically the ones you should have let go along time ago. I believe nearly every company, if they are honest have such employees and during busy times its easy to over look them. When companies decide that they need to lay off 10% of their work force and start with the newly hired I think that can be a big mistake. Layoffs should be avoided, and I think they can be a lot of times if you get the right people in the right seats and the wrong people off the bus (From the book Good to Great by Jim Collins) and the company then utilizes the knowledge and skills of their dedicated employees to build a stronger company.”
When times are tough, and people are being laid off how do you keep moral up?
“Being open and honest with your employees as well as keeping them in the loop I think can make a huge difference. If they are unsure whether or not they will have a job tomorrow, this can add unnecessary stress which in turn brings down performance. However if they are informed that the company needs to cut costs, improve efficiency, or work to grow sales you’ll find that people have great ideas and will work hard to help. There are also inexpensive and easy team building activities that can really bring a company together which helps performance greatly. For example; we took everyone indoor rock climbing which really was good for our company, well worth the small fee. It really taught them how important it is for us to work as a team, and brought everyone closer.”
Did you have an actual plan?
“I would say we had plans; however I’m not sure a single plan would have worked in the ups and downs everyone experienced in the last four years. We had ideas and we had goals, and along the way we adjusted the map that took us from our ideas to our goals. During good times or bad there has to be goals and there has to be ideas on how to reach your goals in different scenarios, but to come up with one plan and stick to that plan no matter what can be dangerous, you have to learn to be flexible as well.”
What impacted your company most?
“We at times found it difficult to find the products we needed/wanted to provide to our customers. Between that and customers having difficulty financially we definitely had some stressful days. The recession really messed up the supply chain, as demand drives supply and no one could figure out how great or small demand really was at the moment, and they especially couldn’t figure out what it was going to be three months down the road. This really caused an oversupply of product in some areas and an under supply in other areas.”
Did you downsize your inventory or increase it?
“Since we were growing our sales we were also growing our inventory. There were a lot of great buying opportunities especially in 2009 that we were well positioned to take advantage of. I believe another key to growth is putting profits aside during good times so that you’re able to not just weather but take advantage of the bad times. I’m very thankful that we were in such a position that we could capitalize on the moment.”
Can you tell us a little bit about VIVO Technology?
“VIVO was started as a division of a liquidation company in 2007 to focus strictly on computer parts, most specifically mobile computer parts (laptops). We have grown leaps and bounds ever since, both in the B2C supply chain as well as B2B for service parts. We sell any and all parts from screws to LCD screens with our main focus on motherboards and screens. We are located in central Illinois so we are able to provide very quick transit times to either the west coast or the east coast which makes it very nice for our customers. We originated as a liquidation company, so we still have that “foundation” you could say which typically gives us a pricing advantage over just a typical retail or even wholesale company. We are very excited going into 2012 and hope to continue our growth and keep the ball rolling.”
Looking back is there anything that you would have done differently?
“Some of the things we have already talked about I learned later rather than sooner. So first I wish I would have implemented some of those things quicker and more aggressively. A great quote from Warren Buffett “Be fearful when others are greedy and greedy when others are fearful” definitely turned out to be true in 2007-2008, and although investing in stocks isn’t exactly like investing in your business or your employees there are a lot of similarities. This quote really turned out to be true during this recession as those who were greedy and over extended themselves in 2007 found their selves in a lot of trouble during this recession. However those who were more conservative and fearful probably found themselves in a good position to grab market share and become stronger.”
Well there you have it, everyone has their own strategies, different situations, and there is no “magic answer”, but I believe we can learn from Chance’s findings as he not only has a passion for his business but also his employees. If you want reliable employees you have to be sure they are in the know, keep that morale up and stay optimistic. You can have a plan but be prepared to be flexible as well. As we started off this article you have to have good fertile ground and be prepared to work hard. It sounds like VIVO Technology is on the right track. Maybe it’s because they are located right next to a corn field; perhaps Chance already has some prior experience planting seeds and taking care of his crops before he started his business.