Growth and decline: Which side are you on?

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tca lunch
The annual Toronto Construction Association (TCA)s Christmas Lunch attracts hundreds each year, and seems to be growing -- at a per person cost of more than $200. Is this a wise use of company resources? The answer may be observed in the event's success, but each business needs to make a decision about the value of this sort of discretionary cost.

There are many interesting arguments about business growth, sustainability and evolution, and these are clearest in industries experiencing either technological or cyclical changes (or both).

The cliché “a rising tide lifts all boats” certainly has relevance in the marketing world. If you happen to have the good fortune of being in or associated with a growing industry, your job should be a lot easier — at least until the growth ends or the masses crowd to join the bandwagon.

When the world around you is shrinking, however, you have a different problem. The combination of lack of clients and downward pressure on prices pushes your margins and marketing effectiveness to dangerously unprofitable levels.  These problems become most apparent when you don’t have a systemized marketing plan and rely on referrals and previous clients; when they go, you don’t have a practical way to drum up new business.  (The conditions are slightly better if you had an organized business development strategy before the downturn, especially if you planned for it, but client acquisition and retention costs will still increase even as you face declining revenues.)

What can you do in these circumstances?

  • The obvious statement applies: You are better off in a downturn if you prepare in good times. This means watching your debt levels and fixed expenses, and knowing what measures you may need to take if your revenue and margins decline abruptly.
  • Build some reserves, both personally and in business: It is good to not have to panic when things start declining, BUT be careful in spending these reserves, because they will be hard to replace;
  • The other cliché: Crisis creates opportunity, applies. dYour elevated “survival sense” will often help you discover ways to work around the difficulties and begin the rebuilding process.
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