How to grow tech businesses during a recession

Recessions don't need to be a time of doom and gloom. Entrepreneur and Dragons' Den judge James Caan explains how to shape up your business through the downturn.

IT is more fundamental to businesses today than in any previous recession. As a result, the IT industry has more opportunities for business growth than most other sectors. But these opportunities are not without their challenges.

Even in difficult economic times, technology develops rapidly and IT businesses cannot just sit back and ride out the recession. Those wanting to grow need more than just innovative products - they need to combine them with an exceptional business plan.

It is more important than ever for IT to have a strategy that focuses on clearly communicating the business benefits. IT companies can be very technically oriented and efforts to deliver outstanding products are often at the expense of developing a clear business strategy. The result is that the best products aren't always the most successful. Sixty-five per cent of Fortune 500 companies, including Microsoft, started in a recession, and they were successful because they supported their technical expertise with the right business approach.

A big challenge for selling technology during a recession is that the ultimate customer spending decisions rarely lie with technically-literate individuals. In large organisations spending requires multiple approvals at several different levels of authority. While you may be selling to IT managers, there is no guarantee they will be able to sell your offering internally to senior decision makers. In the case of small firms, you may find yourself in front of a director with a good grasp of business but limited technical knowledge.

Either way, sharp technology businesses will recognise that undue technical detail is not going to speed those decisions. There is a huge opportunity for vendors to gain the edge over competitors by offering a clear and uncomplicated business case for their technology that will appeal to the non-specialist buyer. Focus on what the product can do for the specific customer, not simply what it does.

Once you have made the sale, look at offering value beyond your product. Businesses put a huge amount of faith in technology they don't always understand. When they sign a contract they don't just want a product, they want a partner they can trust to give them sound advice that helps them make tough technological decisions.

Experience has shown that the IT sector stands to benefit extensively from offering consultancy and advice to complement products. It is well known that it's easier to sell to an existing customer than a new one but post-sales service is not just a marketing tool, it is also a way to actively drive profits.

Customers expect a high-level of post-sales service, particularly when dealing with IT problems they cannot resolve themselves, and there is money to be made providing it - in addition to the more obvious benefits of customer retention.

Finally, make the most of your employees. IT staff can understandably be very focused on specific technical tasks and this can mean big opportunities are missed. Delivering better services requires people with a wide range of skills and capabilities.

Invest in training that can broaden the scope of what your employees can do, focusing on areas that can increase profitability. This could be a new service such as post-sales support, or development of areas where you are currently doing well - it will vary between companies. The important point is that the directors carry out a thorough audit of where the business stands to make profit, then target training and development in those areas.

You need to be as productive as you can in a recession, so set goals, measure performance and reward achievement across the whole company. Business isn't just for the management - ensure every member of your team knows what the goals are and knows what they personally can do to help; after all it's in everyone's interest that the company is successful. There is no reason why design and technical staff shouldn't be keeping an eye out for potential new business leads, or thinking about the best way to market the product they are working on.

If you've got a good product or service supported by a solid business strategy, now is a great time for IT companies to grow. Office rent is good value, suppliers are offering great deals, and there is an abundance of talent clamouring for jobs. It's a great time to get some cost-effective contracts and excellent staff in place, so you are ready to take full advantage once things pick up and potential customers start looking to gain competitive advantage by having the best IT systems in place.

Entrepreneur James Caan will speak about growing technology business during the recession at the global IT association CompTIA's Member Conference on 22 October. James is CEO of private equity firm Hamilton Bradshaw and has been building and selling businesses since 1985. In October 2007, Caan joined the panel of the fifth series of BBC Two's Dragons' Den programme.