Is there a recession coming? Oh, well let's ask our economists!
Such a question!! And the answer changes about every 15 minutes. Some economists say yes, some are not so sure. Isn’t it strange that we keep listening to disciplines that never have to be right? Economists and weathermen! People we love to hate!!
So what should we do about this?
Here are two steps you can take NOW to minimize the impact of a recession on your business.
Interested? Yea, I thought you might be…
Step 1: Get out a 4 burner stove and put a pot on each burner. Yes, I’m being serious!! Each pot represents a market segment in your business. You should have at least 4 specific market segments defined for your business.
What is a market segment? A market segment is a cleanly defined set of customer parameters representing a significantly sized market you have access to (or can easily get access to).
Step 2: Market demand oscillates depending on the economy, customer behaviors, etc. The power of having 4 market segments allows you to turn up the heat on some pots (market segments) while keeping others on simmer.
Then when some start to cool off, you adjust the heat and bring others to a boil. This helps keep your overall revenue from roller coastering and smooths your entire business activity.
And that’s it. Two simple steps to help insulate your business from recession.
Yes, it’s really that simple. But did you note that I did not say it was easy? Yes, I figured you were on to me…
The reason it’s not easy is because you have to do the research and homework to define those market segments, and you must regularly check them to make sure they are still valid.
Want some market segment parameters?
- Start with developing a product/service offering that will give your company a decisive competitive edge, concentrating on small changes that eliminate major negative effects in your competitors
- Define the market segment, then validate the market size by getting a list of known prospective customers
- Insure that the several segments developed can be serviced with existing products/services
- Each segment should be diverse enough such that they will not all drop at the same time, no matter what the economic situation is.
- Make sure you are serving each existing market segment to a certain extent so you have a footprint in each one.
- As one segment begins to cool off, shift emphasis to another segment.
Illustration: Let’s say you’re in the construction business. There are many different potential market segments that can be concentrated on in this industry. From new construction in different sized homes, commercial work, to home or commercial remodeling, specialty contracting, etc.
With one of my clients, we’ve defined several segments: Design/build custom homes, remodeling, small commercial projects, and public sector work. We move the emphasis on the segments based on market conditions in order to maintain the revenue and growth goals of the client.