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Business Cycles - You May Need A Whole New Direction

by Dave Driscoll

You own a business that has thrived, survived, and prospered for years. Then something happens; consumer taste changes, innovative technologies disrupt the markets, demand shifts away from your product or service in favor of chasing what’s new and hot. Remember Krispy Kreme Donuts and the Adkins Diet, IBM Selectric Typewriters and the Apple Commodore, receiving bills through the mail and then the internet?

When you see this potential disruption coming straight at you, what do you do? Work harder? Take on more risk? Improve productivity and efficiency? Chant the phrase; “hard work and risk-taking pays off… it’s the core of the American Dream?”

Yes, you do all of those things, yet at the end of the day you may feel better because you are engaged and busy, but are you really going to return to the days of prosperity without changing your model? Probably not.

What are your options?
1. Merge with your competitors and ride the wave of declining demand to the beach.
2. Recognize your strategic assets, people, in-place technology and systems, building and fixtures, and knowledge of a tangential market to construct a new path while your current business declines.
3. Liquidate; you don’t want to be left holding the bag when the music stops.

 Recognizing your strategic assets should be your first choice.

Think how hard it was to assemble those strategic assets…

The people. How many folks did you go through before you created your current team? Hundreds? Thousands? Your team was the result of hard work and is your strongest strategic asset. Inviting those trusted employees into your vision and seeking their knowledge and assistance multiplies your brain power, and may reveal an exciting new direction.

In-place technology and systems. Do you remember how difficult it was to acquire the technology? All that doubt and anxiety as to whether it was the right direction, and the cost! And systems are predominantly an operational result of trial and error with a little education and tribal knowledge thrown in.

Buildings & Fixtures. There are probably only a few of those assets that perform a very specific task, yet I would bet the majority are used by almost every business. Offices, warehouses, pallet jacks, compressed air, tools, desks and chairs, etc. - the cost to duplicate what the business already owns would be enormous and time consuming. Leveraging in-place assets is strategic thinking.

Tangent markets. Definition: Making contact at a single point or along a line; touching but not intersecting. A tangent market opportunity is the point where your market touches that of another. Tangent markets may be hard to discover and need to be analyzed carefully. You don’t want to begin moving into a market that may be heading in the same direction as your current business. A good place to begin your search for a tangent market is to analyze your customers and your suppliers. Opportunity to slowly diverge away from your current trajectory into a tangent market can be challenging and exciting, pumping fresh energy into your enthusiasm. One word of caution: don’t bet the farm. Move slowly, quietly and deliberately after exhaustive investigation.

Understand your market, follow your unique view of the future, and take the risk of being proactive in your decision making.

Dave Driscoll is president of Metro Business Advisors, a business brokerage, valuation and exit planning firm helping owners of companies with revenue from $2 million to $15 million sell their most valuable asset. Reach him at DDriscoll@MetroBusinessAdvisors.com or 314-303-5600. For more information, visit www.MetroBusinessAdvisors.com.
Submitted 8 years 199 days ago
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