How Small Businesses Win Big in Tough Economies

Blinded by mass layoffs and the financial follies of Fortune 500 companies, we have overlooked a smaller but more important transformation: the increasing importance of small businesses in our economic recovery. After all, small businesses employ more than half of our private sector workforce. And history, as well as the Small Business Administration, readily reminds us that the ability of small businesses to create jobs is a key factor in any resurgent prosperity.
That's all well and good, you might say, but what difference does any of this make when the media keeps bombarding us with reports that many small businesses are going bankrupt? Well, you can choose to wring your hands in frustration or you can look to the facts. For every small business failure, dozens more are actually thriving despite the economic panic.
What are these small businesses doing to outperform the economy? Consider the following strategic approaches:

Action. This is an entrepreneur's best weapon. Things happen fast these days and fluidity favors small businesses — you don't need to sort through the layers of bureaucracy that can slow down, or even cripple, larger companies. Small businesses can adapt to any circumstance quickly. As every thriving entrepreneur knows, speed breeds success.
Planning is important. Plans aren't. It's good to have a strategy in place, but don't succumb to analysis paralysis. With things changing almost hourly, can you afford to spend time following a bloated plan that was outdated almost as soon as it was completed? Spend your time with your ear to the ground and respond accordingly.
Innovative financing. There are a number of resources available to small businesses and innovative approaches that can have a positive impact on your bottom line. Diana Ransom touched on some of these tactics in a WSJ Smart Money column. She recommends offering upfront pricing, using seller financing, and switching from fixed to variable costs. She also recommends selectively discounting items. Although, I've gone on the record as saying discounting can damage your brand, the key word here is selective. Circumstances also come into play. If your business is based in a community that is particularly vulnerable economically (such as Detroit, let's say) or your target audience is responsive to discounts, then by all means try this approach.
Give the people what they want. People are staying home more and they're looking for value. Smart companies are tapping into that. For instance, Skinner Baking is giving people what they want: comfort food during hard times. And I'm willing to bet that the sales of that much maligned blanket with sleeves, the Snuggie, aren't going to do too badly this winter either, what with people staying home and turning down their thermostat.
Test, measure, refine, repeat. Small businesses have another added advantage these days that they didn't have in past recessions — social media and sophisticated online marketing tools. You can measure the success of your marketing and advertising and conduct all the market research you need in real-time with a click of the mouse. You can engage your customers online in a number of low-cost ways. And you can optimize your website so your customers can find you quickly and easily. Likewise, effective use of eCommerce capabilities can help keep you in the black with minimal overhead.
What tactics are you using to keep company performance up while the economy is down?


Jeffrey M. Stibel is an entrepreneur and brain scientist. He studied business and brain science at MIT Sloan and Brown University, where he was a brain and behavior fellow. Stibel has authored numerous academic and business articles on a variety of subjects and is the named inventor on the US patent for search engine interfaces. He is currently President of Web.com (NASDAQ: WWWW) and serves on academic Boards for Tufts and Brown University, as well as the Board of Directors for a number of public and private companies.