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Pittsburgh companies thrive in recession

Pittsburgh Companies Thrive in Recession with Creative Growth Strategies Growing a business in a down economy may be difficult, but it’s not impossible.

A diverse client base, a solid product, a clear vision and sometimes a little luck can all add up to growth in a recession year.

Add to that some key economic indicators that are now more promising: The latest Gross Domestic Product numbers show 2.2 percent growth in the third quarter. That compares with a real GDP decrease of 0.7 percent in the second quarter.

Some Pittsburgh-area companies of varying size are closing their 2009 books on an up note with growth, thanks in part to their ability to quickly move with the market, focus on their core strengths and listen to their customers. These are all aspects of business that experts say are the key to success in tough times.

“These are all good business skills for everyone to learn,” said Audrey Russo, president and CEO of the Pittsburgh Technology Council, a trade group with more than 1,400 members.

She noted that, in boom times, some fundamentals can fall by the wayside when “anyone that had an idea could get cash. Now anyone can have an idea, but not everyone can get cash.”

LEADERSHIP EFFICIENCY AND LUCK

In addition to being a savvy leader, business owners who want to grow in this economy must “be prepared to bootstrap” by working with less and putting in sweat equity.

KIT Solutions, a software company that works in the health and human services sector, is finishing this year 23 percent over last year to close out at $6.5 million, said Xiaoyan Zhang, president and CEO. His strategy from the beginning has been to fill a technology gap to make client data more useful, and he credits that with some of the company’s success. Additionally, there was internal reorganization for efficiency to ensure that everyone was contributing, he said.

The final piece may be attributed to a bit of luck. The company’s main clients are state or federal agencies — which have continued to spend — and the product helps those entities show required performance outcomes.

“The state market is tricky,” he said, in light of state money troubles. “We did get IOUs from California.”

GO OUTSIDE TO GROW

Extending a customer base beyond the immediate area is a common thread that DeWitt Peart, president of the Pittsburgh Regional Alliance, has seen in successful companies.

“Look at Pittsburgh and analyze why we are weathering the economic storm better than others. It’s because those companies are providing their products and services globally,” he said.

H.J. Heinz Co. finished fiscal year 2009 with record sales of $10.1 billion and a record profit of $923 million, 9.2 percent over last year. At an annual meeting of shareholders held in August, William R. Johnson, chairman, president and CEO, attributed much of the strength to the company’s growth in emerging markets such as India, Indonesia, Latin America and Poland.

“We expect emerging markets to contribute disproportionately to our long-term growth and anticipate that they could generate as much as 20 percent of our total sales by fiscal 2013, compared with 14 percent in fiscal 2009 and just 11 percent three years ago,” he said in a written statement.

Government data shows that corporate profits nationwide were on the upswing in the third quarter. Profits from current production, which include inventory valuation and capital consumption adjustments, increased $132.4 billion in the third quarter, compared with an increase of $43.8 billion in the second quarter, according to the Bureau of Economic Analysis.

STAY FLEXIBLE

Rich Lunak, CEO of Innovation Works, a nonprofit that invests in start-up companies, offers advice to business owners looking to grow in a tough economy, based on his own experience of starting and growing a company in the recession of the early 1990s. He noted that successful companies have a product that creates real value for customers.

In fact many of the most successful companies have grown out of hard economic times. According to research by the Ewing Marion Kauffman Foundation, more than half of the companies on the 2009 Fortune 500 list began during a bear market or a recession. Furthermore, Lunak said nimble companies can fare the best in an economic storm.

“I think company strategy is a dynamic thing,” he said. “When market dynamics change, you have to be quick to respond.”

STEADY GROWTH

Tips for exceeding expectations when the going gets tough:

• Be prepared for hard work and sweat equity.
• Seek out savvy leadership, since investors not only look at a product to invest in but also the team behind it.
• Be flexible to move with the market.
• Listen to customers and address their needs.
• Ensure your product solves a real problem so that it has real value to a customer.

Sources: Audrey Russo, Rich Lunak, DeWitt Peart

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Pittsburgh Business Times full article