Wednesday, March 25, 2009

Recession Strategies: Cut costs or increase sales?

A recent article published by Scott Latham in the Journal of Small Business Management examined how firms react to a recession. Their study of 137 software firms during the previous economic downturn in 2001-2003 suggests that start-up firms are more apt to focus on increasing sales and other revenue-generating strategies to make it through the touch times. However, larger firms tend to instead focus on cost reductions.

I find this pretty interesting as when I look around at what is happening right now – I am continuously hearing about all the layoffs at the large corporations and yet, many of the smaller businesses are frantically trying to get a bigger piece of the pie in order to make it through.

So, it seems to be an accurate depiction of what is happening in the real world. However, the real question, though, is ‘should it be happening?’ For instance, should small businesses be focusing solely on revenue-generating strategies? Should large businesses solely be cutting costs?

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