123rf42438497 largeHighs and lows are common in business, but that doesn’t mean they come without significant risk. Canadian companies are currently experiencing this first-hand, with a drop in small business investment that has continued for the past seven consecutive months. This decline isn’t caused by financial factors, according to PayNet Small Business Lending Index, so it isn’t leading to defaults and bankruptcies. [quotes]So what’s causing the slowdown, and how is it likely to affect your business? [/quotes]

Reduced Demand a Cause

The slowdown is caused primarily by companies borrowing less due to reduced demand for their goods and services across at least three of Canada’s most industrial provinces. The long-term effect of this will be slower overall economic growth, something Canada can ill-afford at a time when the United States is seeing excellent growth.

What this means, essentially, is if we stop delivering products at a time when the U.S. is stepping up its buying, someone else is going to be supplying the demand. In the long term, that could mean losing valuable export opportunities and leave Canadian small businesses floundering without nearby (and easy-to-ship-to) customers who pay in hard currency.

Maintaining Your Position

We’re creatures of habit, accustomed to “battening down the hatches” and riding out the storm, and small business owners are often particularly risk-averse. In this instance, however, [quotes]cutting costs and slowing production to adjust to the economic shift isn’t necessarily the only (or best!) option,[/quotes] because that could leave you wondering how to get back into a future market whose needs have changed as it moved away to find other suppliers.

Differentiating Your Business

When your product or service is the same123rf53239343 large as everyone else’s, then price becomes the only thing separating you from your competitors. That forces you into discount situations, and you end up delivering what are often superior goods at the same price, because that’s “what the market will bear.” [quotesright]An alternative strategy could be[/quotesright] to diversify your offering, create value-added products and services, and make your company stand out from others – both here and overseas.

There are lots of ways to differentiate yourself from your competitors, such as:

  • Identifying your unique value proposition. What makes your company different from others, how do you explain to potential customers why they should use you?
  • Who do you serve specifically? We all want to supply as wide a target market as possible, but what does your ideal customer look like?
  • How do you reach the people you want as clients? There’s little value in advertising on TV during evening prime time slots (even if you can afford it) when your target niche is chief information officers of restaurant chains. You might capture one or two of the right people, but you’ll also end up trying to adapt your offering to commercial property managers, for example. And that could take more time and money than it’s worth.

Above, we said that diversification is an option, and doesn’t the third item above qualify as diversification?

Not really. [quotes]There’s a world of difference between strategic diversification and distraction,[/quotes] and it’s essential to avoid the second in a tight economy. This is where company owners and CEOs can benefit from the services of an experienced business coach, who can help you find ways to differentiate and diversify, without fragmenting your focus.

123rf17958413 largeDiversification

Real diversification is most often achieved through mergers and acquisitions, when you buy or partner with a company that already has an established market and operations. Statistics from McKinsey based on more than 4,500 companies around the globe, show that diversification produces excellent returns, both in developed and emerging economies. The secret to doing this successfully, however, is to ensure that there’s synchronicity between your original offering and the new products.

[quotes]If you’re feeling the pinch, it doesn’t necessarily mean it’s time to run for cover![/quotes] Business rewards are directly related to the risks you’re prepared to take, and a well-informed, carefully calculated risk is a far more productive strategy than trying to stay on a path headed for a dead end.

Get Expert Help

Looking for more ideas and strategies to turn slowdown to breakout growth? Call me today, we specialize in helping companies grow and take market share in slow times.

Resources you can use:

http://www.reuters.com/article/canada-economy-paynet-idUSL1N1AW1QF

https://www.linkedin.com/pulse/20140903140440-35586565-9-ways-to-differentiate-your-business

https://www.fastcompany.com/3038845/how-to-differentiate-your-brand-even-when-its-not-that-unique

http://www.inc.com/shazi-visram/3-ways-to-differentiate-your-business-from-competitors.html

http://www.forbes.com/sites/williamcraig/2015/04/24/business-diversification-the-risk-and-the-reward

http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/mapping-the-value-of-diversification

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