Smart Answers October 23, 2009, 2:00PM EST

To Beat the Recession, Reinvent Your Business

In many industries, entrepreneurs are rethinking their business models. We check in with five companies that are making big changes

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RocketLawyer launched its online legal site in 2007, targeting entrepreneurs with a pay-per-document-download model. Things went well until the economy began falling dramatically a year ago, says CEO Charley Moore.

That's when transactions began dropping off the firm's Web site whenever customers were asked to make a credit-card payment. "We were asking them to pay for every legal document they wanted to download, and charging them a couple hundred dollars less than other sites or [the cost of] hiring a lawyer. That's a big savings, but it was still a lot of money for most folks, especially once the economy started to tank," Moore says.

Recognizing that interest in starting a business was hotter than ever, but that fewer would-be entrepreneurs had startup funding, RocketLawyer changed its business model. "We decided to go with a 'first one free' model to accommodate customers who wanted to try the service," Moore says. In addition to the free one-time download, the company established a $40 monthly membership that gives customers access to unlimited document downloads and online document storage for their company.

Growth Spurt

Revenues at the 30-employee San Francisco firm went from $1 million in 2008 to an estimated $5 million this year, Moore says, and monthly visitors at his site have increased from 150,000 to 900,000. He credits the change in his business model for converting many "accidental entrepreneurs" into long-term customers and attracting an outside investment from LexisNexis, the legal database.

Whether it's offering a free trial, partnering with a competitor, or moving business online, the Great Recession has spurred small companies to become more innovative than ever. They may be working harder for less money, but many small firms are finding ways to survive—and even thrive—by reinventing themselves.

The ThomasNet Industrial Market Barometer, a survey of 829 manufacturing and distribution firms released this month, showed 80% of respondents were coping with the downturn by diversifying into new industries, widening sales channels, expanding overseas, and increasing online marketing. A majority of the firms surveyed are small businesses, says Linda Rigano, executive director of strategic services at ThomasNet. "Business leaders are not sitting back. They're changing how they sell their products or changing their sales strategies and product lines," she says.

"Smaller and more lean companies have an ability to adjust much faster than large ones and that has served them well this year," says Thomas Harpointer, CEO of Atlanta's AIS Media, an interactive marketing and Web services firm. For instance, retailers that once "had great difficulty determining whether the Internet was friend or foe" have begun embracing their online customers, he says. Many have found ways to overcome customer's objections to online shopping, including beefing up their return policies and instituting free shipping.

Greater Share of Stomach

Specialty's Bakery & Café, a regional company that owns and operates sandwich shops along the West Coast, revamped its Web site this year and now finds 40% of its revenue coming from online orders. "People can order their sandwiches or salads online, customize them, save them as favorites, and pick up without waiting in line," says Angela Pace, vice-president for marketing.

Online ordering "helps us in fighting for share of stomach," Pace says.