Grow Your Creative Business in Any Market

Feature business leader – Anne Ramstetter Wenzel, founder and owner of Econosystems (econosystems.com), a business specializing in market research, business plans, independent business consulting and business management.

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WMI: Microsoft, IBM, Disney, Apple and CNN are a few successful companies that launched during bad economies. Why do some businesses thrive, including new businesses, during tough times while others struggle? 

Anne: In a nutshell, firms thrive when they provide their customers with products or services that they value at a price they can afford.  Even during tough economic times, the vast majority of people of working age have a job and steady income.  While the economy is down, it’s not down for the count.  There is still a lot of spending that goes on, and the trick is to provide value.  Firms can provide consumers or businesses ways to cut costs or be more productive, healthier, or have more fun and enjoyment in life. 

Firms started during tough times are most often very aware that companies and consumers have limited budgets, and so the founders are very aware that they need to keep production costs low to keep prices as low as possible.  Costs structures tend to be leaner and meaner than companies launched during booms, and so the firm has staying power through good times and bad.  But even a firm with low costs can’t survive without providing customers what they want at a price they can afford.  And the quality has to be consistent, so building a good team of employees is essential, too.  These companies have had teams of some of the best employees in their industries. 

WMI: Which have you found to be most influential to the success of a firm, market climate or leadership abilities?  Why do you think this is? 

Anne:  The average firm needs a combination of both a good market climate and good leadership.  We’ve discussed how some firms can survive in even tough times, but it really is easier to grow sales and profits when markets are growing.  But leadership is essential, too.  I’ve seen so many start-ups flounder because the founders were not committed to staying the course.  The owner/entrepreneur pursues too many market and product ideas, never seeing a product idea through from idea to launch to business growth.  Other business owners let their personal lives consume so much of their time and energy that the business never takes off, or existing businesses never grow to their potential. 

A successful firm needs an entrepreneur leader who is willing to put aside distractions during the start-up phase.  Of course the product and service mix pursued should be the one with the best market potential, but the hottest market out there cannot make up for poor business management. 

WMI: What was it like for you operating Econosystems during those early days in 1999?  

Anne:  Ah, those were such exciting days, the happiest days of my life, really.  I came out of a job I’d had for 14 years that was so stifling, so boring.  Suddenly I loved my work, and I worked 7 days a week, very long days, but it really didn’t seem like work at all.  I was networking online with other Entrepreneurial Parents (an online discussion group started by Lisa M. Roberts) and Mompreneurs (another online discussion group originally at iVillage, led by Patricia Cobe and Ellen Parlapiano).   The online support I was getting from other entrepreneurs was essential to my business planning and start-up.  When a difficulty arose (contract negotiations, vendor problems, requests for referral discounts), my entrepreneurial colleagues would weigh in with their advice on the discussion boards.  I’d come to a decision based on their input, document my new policy in my business plan, and then move on to another business challenge.  The personal and professional growth I experienced was phenomenal.  Also, I co-authored an article with another entrepreneur, Jeralynn Burke, without ever meeting or speaking to her.  It was so cool to be doing this new kind of “virtual” work.

WMI: You actually started Econosystems at the height of the dot.com bubble.  Compare that downturn to what we’re seeing in global economies today, and tell creative business leaders what they can do to effectively manage their way through this shift?

Anne:  The Dot Com bust was tough, especially for my community, since I’m located in Silicon Valley.  My software engineer husband was laid off and had to start new jobs several times.  Many people I know still aren’t earning as much as they were during the dot com boom.  Market research work dried up, and my revenue plummeted. 

Still, back then, everyone believed the downturn was temporary.  Most people I know kept spending despite their job losses, putting much of their spending on credit cards.  Retail vacancy was extremely low and rents were high in most places because everyone believed a recovery was right around the corner.  But not this time around.  Consumers and businesses are pretty pessimistic.  So many families have lost their homes, or equity in their homes.  The drop in consumer spending that has resulted is apparent in many retail shop vacancies.   

Here is Silicon Valley, demand for commercial space is roaring back as these and other software companies expand.  We have many very successful local companies – Google, Facebook, Twitter, LinkedIn, and the gaming companies Electronic Arts (now called EA) and Zynga (makers of Farmville), but consumer spending in the community is not bouncing back as quickly.  The retail sector is still somewhat depressed.  

What creative business leaders need to keep in mind is that despite falling markets, there are always growing markets, too.  In downturns you have to create and market necessities.  Now maybe Farmville doesn’t seem like a necessity, but many, many consumers have found great entertainment value playing the game, for a zero price.  And the players spend more time on Facebook, which can sell more advertisements as a result – something that seems like an incredible win-win to me.  LinkedIn and Facebook provide people with a low cost way to keep in touch with each other.  They also offer firms a way to pay for advertising only to those consumers and businesses who will be interested in what they are selling, another win-win. 

Business leaders need to figure out where they fit in the new landscape.  Is their business riding the wave of one of the hot markets, or are customers hunkering down, trying to spend less?  Does the business need to downsize, or can the products and services be repackaged to become a more affordable necessity?  Or even a hot commodity? 

In the dot com bust, businesses didn’t have the budget to spend on market analysis services, which would likely reveal their markets were shrinking anyway.  I launched a series of business planning workshops and a business plan writing coaching service to be able to provide my expertise to business owners at a lower cost.  Many struggling entrepreneurs found the new services affordable necessities as they needed insights into how their companies could survive the dot com bust. 

WMI: Is market research for start-ups or do you advise established firms to periodically conduct market research as well?  Why? 

Anne:  Market research is definitely both for start-ups and existing firms.  Change is just the way things are.  Firms that are successful over the long run know they have to stay informed about changing customer needs and trends, emerging competition, emerging technology and changing government regulations.  Firms especially need to watch out for competition if the company is successful.  Once other entrepreneurs get wind of success, they will try to tap into the market, and so a business owner must constantly work to keep the company’s competitive edge.

WMI: How successful has market research been at foreseeing business successes/failures?  For example, can the work determine whether or not a business is going to be successful 50%, 75% of the time, etc.? 

Anne:  While a growing market can make business success easier, it in no way guarantees success.  Strong market growth cannot make up for a lack of management skills, partner disagreements, no marketing plan (or poor follow through of an existing market plan) or lack of customer service.  Identifying a market need and meeting that market need in an affordable way is essential for business success, but the company striving to meet that need must be well managed.  

WMI: Content, working social networks (e.g. Twitter, Facebook, Linkedin) and advertising are expanding rapidly on the Internet.  Companies are using both to drive traffic and sales.  Are these three alone enough for a company to stay in the black?  If not, what else would you suggest companies incorporate into their growth strategies? 

Anne:  Oh, gosh, no, social networking is not enough for a company to grow and stay profitable.   

First, you need to have a great product or service.  Then, you need to be able to produce that product or service and deliver it to your customers’ satisfaction consistently.  Social networking can actually be a distraction, especially if you are working solo.  Marketing is only one aspect of running a business.  You and your employees have to deliver.  Your employees have to be talented and productive, or, if you’re working solo, you have to set aside time to engage in production yourself.  Utilize technology to help whenever possible.  Many Small Business Development Centers around the country have Technology Assistance Programs that can guide business owners in adopting technology to streamline operations and lower costs. 

To grow you need to plan additional products or services you can sell to your existing customers, or to new markets.  They should complement your current products and production processes, not complicate it. 

When businesses first start out they have few customers and a lot of time to market.  But systems need to be put in place that will allow the owners time for both marketing and production.  The time will come when the company’s capacity will be reached, and it’s best not to drop marketing completely because suddenly the company has so many customers they don’t have time for marketing.

WMI: When do you see the economy shifting out of this slow to stalled growth period?  What makes you think this? 

Anne:  Unfortunately, times are going to be tough in most markets for a couple more years.  There are always pockets of growth, but overall the economy is being weighed down by the mortgage crisis.  Millions of families have lost their homes to foreclosures, and home equity is the main source of wealth for the average American family.  The loss of the family home means the loss of this wealth and no ability to buy a new home.  Many Americans are living in homes where the mortgages are higher than the value of the home, so they can’t sell and move to where the new jobs are.

A lot of economic activity is generated by people buying and selling homes (think not only construction jobs, but also sales of carpeting, appliances, home furnishings, and home and garden supplies), and also by workers relocating to where the new jobs are located.  Until mortgages adjust to reflect the lower home values, either through a government consumer bailout program or more foreclosures, economic vibrancy will not return.  2012 will be an okay year as we muddle through, but I don’t see strong economic growth occurring until 2013.