Posts Tagged ‘Financial Crises’

What Are The Best Pricing Practices For Small Business During An Economic Slowdown?

February 21st, 2012 admin

In an economic slowdown your pricing is determined by factors like input cost of production or distribution channel cost etc. ….. which are primarily working on market factors. Generally one should be working on a reactive strategy of open price …. which allows for revision in product pricing over a shorter time period instead of quarterly or yearly market driven slashes or increases.

The important consideration is to try to maintain sales, even if some of them yield marginal or no profit (i,e, break even). In other words, so long as you are covering your costs, particularly fixed costs, then there is value in doing so.

However, unless you wish to become the low-cost leader going forward, then this low pricing may create a precedent which customers expect to continue, and it also may devalue the brand.

So pricing strategy must be decided carefully, with all things considered, including unintended consequences. And it may be better to have various incentives rather than simple price cuts in order to sustain sales.

In the article “Pricing in an Inflationary_Downturn”, McKinsey recommends the following actions:

-Watch for sudden shifts in price structure
-Adjust to changing customer needs
-Monitor customer-level profitability
-Update price sensitivity research

Many companies across the nation are on the verge of closing their doors and some have already started liquidating their inventory.

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Small Business: How Do You Adapt In Times Of Financial Crises?

December 23rd, 2011 admin

It’s not news that things are tough today. For small businesss and sole proprieters especially.

For example it has become very difficult to spend money on non-critical activities. It also means having to let go people (if you have employees). But it seems also that by doing so, we loose on competitiveness. It is a real catch 22. How do you adapt? What should small business owners do to keep their head above the water?

I think the details of how you adapt will vary by company and industry, but the fact is that small companies actually can adapt more quickly than big ones. One or two people can make a decision, and with electronic communications (email, website, twitter, or whatever) that change can be cheaply and quickly communicated.

The problem for many small companies is that they don’t have any emergency cash reserves (sometimes because the owner has just taken everything out over the years things went well) …. so they *THINK* they can’t adapt. But the problem is not size, the problem is available reserves.

I know of businesses who have started to bid on what was in the past not lucrative enough projects, just to keep their work force employed.

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