Managing growth during a recession can be challenging. Strategies to direct growth during recessionary times typically fall into two categories: controlling costs or increasing revenue.

Companies have taken different approaches to managing recession-era growth. One distributor, after analyzing its inventory SKUs on a particular part, realized that three of its custom parts were extremely similar. To control costs, the company worked with purchasing and engineering to create a modified standard product that would meet their needs. In the process, the company lowered the product’s cost and reduced overall inventory costs because it no longer had to manage minimum order quantities on three different SKUs.

Despite a rough economy, many companies are also able to increase revenue by diversifying their client base. Take, for example, the $100 million distributor who had for years considered expanding into other market segments.

Previously, 80 percent of the company’s business came from one large auto manufacturer. When the recession hit, the company used it as an opportunity to expand its product mix to work within a new industry segment. As a result, the company experienced renewed growth and lowered its risk of allowing one large client—and a declining industry—to determine its fate.

Working with complementary service businesses that aren’t quite as cyclical as manufacturing may also encourage growth. For instance, because one Illinois manufacturer of construction equipment has the resources to quickly provide replacement parts for machines, it currently distributes parts for more companies around the world than it does for itself.

Strengthening your relationship with current customers and markets is another potential growth strategy for periods of economic decline. A global plumbing product supplier’s most significant recent growth opportunity came from increasing business with existing customers and markets. As competitors faltered, the supplier had the opportunity to generate more demand for its products with users, such as plumbers and wholesalers.

Companies can also take the following steps while waiting for the recovery:

• Manage product mix. Revisit product size, quality and pricing.
• Focus advertising. Examine whether you are advertising for products that consumers buy during recessions.
• Cultivate your promotions policy. Implement promotions and discounts, which typically prompt a greater consumer response during difficult economic times.
• Target young, stably employed consumers. Concentrate on this audience, which is less affected by home price and stock market declines.
• Build brand loyalty and social capital. Find opportunities to use goodwill and incentives to establish loyalty with existing and new customers. iBi

Excerpts taken from the 2009 Manufacturing and Wholesale Distribution Summits Executive Summary, “Strategies for Success in the Recovery.” For more information, contact Dave Seiler, managing director in RSM McGladrey’s Champaign, IL office, at dave.seiler@rsmi.com.