In order to survive and thrive in tough times, avoid the four biggest mistakes businesses make.

Some businesses have it and others don't: the ability to overcome economic downturns, recessions or just plain, old tough times. Certain businesses seem to thrive during tough times while others slowly wilt away.

Those that have what it takes enjoy a growing clientele and are poised for even more growth when the tough times end.

"For some, this is the winter of despair," said Tom Reilly, professional speaker and author of How to Sell and Manage in Tough Times and Tough Markets. "Others look at this and see huge opportunities."

In order to survive and thrive in tough times, avoid the four biggest mistakes business owners and managers make. Recognising and understanding these mistakes can help you avoid some of the pitfalls many businesses face.

Believing everything salespeople say: "When managers believe everything salespeople tell them, it biases their decisions," Reilly said. "Owners and managers need to base forecasts on solid market information, not just sales force input. Their input is important, but not absolute. It will always contain a sales bias. Balance this with other departments' feedback."

Reilly believes this is one reason to spend more time listening to what your customers are saying about their needs, the marketplace, the competition and their customers.

Radical cost-slashing: "Across-the-board budget cuts are like blanket bombing; you get the job done, but leave too much collateral damage in your wake," Reilly said.

The first reaction for many firms is cost-slashing. The problem is they sometimes slash departments or areas that are profitable. "Do you really want to slash marketing budgets when you need more business? Do you want to lose top employees because your slashing may deplete their department of the valuable resources they need to perform their jobs successfully?" Reilly said.

Instead of across-the-board cuts, businesses should first look to eliminate waste and nonprofitable areas.

Reducing promotional efforts: It's common business practice that the advertising budget is the first budget to go in tough times. Reilly believes cutting advertising "is shooting yourself in the foot."

A Cahners Publishing Company study estimates that those who increase their marketing activity in tough times outperform the industry average for market gain by two and one-half times the rate other companies grow. "When everyone else cuts back and you maintain your investments in advertising and promotion, you may effectively double your exposure for the same amount of money," he said. "Increasing investments in this area gives your company even greater exposure."

Cutting your prices: The temptation to cut your price in tough times is great. "If you cut your price, how will you get your prices up when the tough times are over?" Reilly said. "Stay on the message. Your value doesn't diminish in tough times. Why should your price go down?"

Reilly said businesses should focus more on customer satisfaction. "By focusing on delivering more than you promise, you are putting the customer first," he said. "It reinforces their decision to buy."

Authored by: Ron Ameln. Published by the St. Louis Small Business Monthly October 2001