Small firms are becoming leaner and meaner, research has found, and that means taking advantage when competitors are struggling.

Being able to leapfrog struggling competitors is a key opportunity during the recession, according to a survey of business owners.

Over half of the businesses polled — 54 per cent —said the challenges faced by rivals was the biggest advantage to make use of in the downturn.

The research, conducted by Barclays, also suggested that most business owners are using the downturn to improve their businesses from within. Sixty per cent of respondents said their firm had been transformed for the better, while a quarter said their operations remained unchanged.

Small firms have to seize any advantages they can in a downturn, says Amanda Walker, managing director of Amanda Walker Marketing Consultancy and expert contributor to the Marketing Donut, the essential website for small businesses.

“No matter how the economy is performing, the key to seizing advantage over your competitors is to understand your customers better than your rivals do,” says Walker. “The more knowledge that you have about what is important to your customers in your market and what drives their purchase decisions, the better placed you are to optimise your current offer to sell more and to take cost out of your current offer without selling less. Talk to your customers as often as you can so that you truly understand what is important to them.”

David Marks, managing director of Barclays Commercial in England and Wales says: “These results show that far from being focused solely on survival, many companies are using this period to make a renewed push for growth and market share.

“We are also seeing a grass roots economic transformation in the UK as businesses change what they produce and how they produce it en masse. This transformation is one that businesses and banks alike are working hard to understand and plan for.”

It seems this process is leaving many businesses in better shape so they can emerge from the recession stronger.

“Small firms should spend this time gaining a better understanding about the key cost drivers in their business and how they can reduce these costs without impacting on their sales,” says Amanda Walker. “Businesses should optimise the model of their core business so that they emerge from the recession with the highest possible margins in their business.”

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