Successful businesses are very dynamic in nature. In order to survive, they need to be able to adapt to changing conditions in the market. Those who rely on a single source or market to feed them are making a big mistake by being held captive to the ebb & flows of others. So, to be successful in the long term, a company must be able to utilize its basic resources to introduce itself into a number of new vertical markets. When one market is declining, others will prop up your business. As a rule of thumb, I have always looked for markets where there is very little room for competition. At least 50% of the cost of sales is finding the opportunity. So, it makes sense to maximize the opportunity of closure by having little to no completion. That is how market icons are created. The old adage that “Necessity is the mother of invention” is so true today. But this time, it’s not a physical need that spawns invention; it’s changing factors that necessitate thinking outside the box.
Companies that are not forward thinking can easily fall prey to changes in technology. As more and more of the manufacturing jobs go overseas, companies that can’t adapt go by the wayside. America has gone from investing in capital equipment to design, invention and ultimately subcontracting. This leaves tremendous opportunities for small businesses to take over niches that have been vacated. It goes without saying that major manufacturers will stay away from products with limited markets in favor of high volume production runs. So, there is room for small adaptable companies to reap the benefits available in these small niche markets.
Another method is to invent new products for a market that you are already in. A good example is the common articulating keyboard and mouse platform that can be acquired at any stationary store, Office Depot or online store. It is important to figure out why people buy these items and what they must eliminate to put one of them to use. In the case of the common keyboard platform, usually you would need to get rid of the pencil drawer in your desk to install it. So, where do you put those pencils, paper clips, rubber bands, etc. At Americon, we saw the need and invented a solution that separated us from our competitors in the keyboard aftermarket. This is just one example but there are many more opportunities that are based on technology that you already possess.
Improving Production Methods
In a declining market, there are only two options. You either lower the cost of manufacturing to offset smaller volume or you close the doors. The latter is not an option so let’s take a good look at what can be done to lower the cost of manufacturing. It’s obvious that you can’t reduce the cost of materials if you are buying less. So, labor is the single most important factor that we can affect. Not only do you have a base payroll, you also have matching funding for Social Security and Medicare, unemployment insurance, workerscomp and liability insurance. Reducing your labor force by investing in automation, though a considerable burden in the short term, will pay dividends in the long run. Less people equates to fewer headaches. I say that assuming that you understand that you should never reduce your sales force during hard times. That would equate to cutting off your phone to save money. Another option is to re-evaluate what you do well and what you can sub out to other local businesses. Many times you will find that subcontracting materials and services is actually more cost effective than doing it yourself. Of course, you will probably have to live with less control of timing.
Let’s review the things you can do to reinvent yourself:
- Find or create vertical markets that have minimal competition.
- Invent new products in existing markets you are already in that distinguish you from the competition.
- Reduce the cost of labor through automation and subcontracting goods that others are more efficient at producing.
- Save money when times are good and spend money when times are bad.