Making it to a Merry Christmas

The fiscal cliff in the USA, financial crises in Europe and the political reconstruction of the Arab Spring provide the bulk of business concerns for small businesses. This leads to sluggish demand, late payment and restricted access to credit with adverse consequences for sales, investment, financial well-being and business confidence.

Smart companies have weathered the storm by cutting costs to maintain survival in the short-run at the risk of reducing capacity to maintain momentum into the Christmas holiday recovery or maintaining core quality business and expanding their marketing efforts to realise opportunities for what looks to be a more profitable new year.

Small businesses are now in a better position to take on full-time staff during the holiday season and build their longer-term growth, owing to their flexibility in adjusting resource inputs, processes, prices and products.

The key lies in changes in the firm’s resource base and/or relations with stakeholders. Investments in new product/service development, for example, generate sales and reduce old inventory. That, in turn, makes possible future investment in resources (staff, equipment, premises, and advertising) that enable repositioning into new territories and product innovation.

Around the world we find government’s focus is on deficit reduction and stimulus of small and medium business enterprise as a source of job creation. At the same time, we see a resurgence of small business co-operatives and shared marketing using social media networks and share-ware business consultancies that are creating new customers for each other from traditional loyal consumers.

Business confidence is steadily rising where SME agents (owners, managers, employees) and other stakeholders (actual and prospective customers, suppliers, competitors) are getting together to cross-promote local initiatives and service delivery.

Research into small business recovery suggests that now is the time to shift from cost-cutting to revenue generation. According to a study by Kitching et al: “Revenue-generators are more likely to operate in expanding sectors, or to have already exploited market opportunities during the recession and, therefore, be encouraged to continue their approach, particularly now the recovery appears to be underway.”

Cost-cutters, in contrast, are more likely to be active in industries where competition remains fierce and possibilities to win new business are limited, encouraging continuation of the retrenchment approach.

Strategic reorientation towards revenue generation is likely to involve more far-reaching decisions about resources and their mobilisation than cost-cutting approaches, which very often entail only one-off decisions or minor readjustments in business practices.

Business confidence in America is steadily on the rise despite conservative reactions to the trumping win of Obama over Romney. In Asia, there is a steady rise in middle-class demand and business confidence is leading to a recovery in forward investment offshore to make the most of productivity improvements. In Australia, consumer confidence is back in the positive sector and people are increasingly saying that now is a good time to buy.

The next six weeks present opportunities to reconfigure and modernise sectors that have struggled to stay optimistic over the long post-GFC recovery. Pre-season trading plans offer the prospect of substantial customer development for smart companies that are at last winning the attention of both lenders and business angels.

Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.