Operating a business entails maintaining control over your operation in every step of the way – particularly in tough times. Here are seven strategies to help your business survive the tough times.
Operating a business is both a challenge and a struggle. To ensure that your business will prevail after the crucial first year, it is important that you maintain control over your operation in every step of the way. Whether your business is online or traditional, you must be able to assess your personnel needs, manage costs, and attract and hire good people. To do otherwise spells doom for your business.
Look at the crunch in the dot-com world in the late 90s. From high-flyers wallowing in abundant venture capital, many dot-coms (including prominent ones) failed. Dot-coms were then challenged to show results: higher revenues, more customers, and profits! Companies can no longer ignore profits and continue spending lavishly on excessive marketing and branding goals. Survival strategies take many forms. However, for any business to survive, whether a dot-com or a traditional brick-and-mortar, entrepreneurs must focus on their most important resource: customers.
Here are some smart strategies to help you ride out the difficult times.
Your Customers Shape Your Business
The rationale for every business is to attract customers for its products and services. Without customers, there is simply no reason for a business to continue operating. To attract more customers, your mission should be to go beyond merely satisfying your customer – but delighting them – with your products or services. When you’re selling, your focus should be on your customer and your customer’s needs. Think of the selling process in terms of helping customers find solutions that will help them achieve their objectives. But first, you need to find out what the customer wants, what the customer cares about, and what objectives the customer is trying to achieve. A happy customer assures a steady stream of revenues for you, plus that powerful marketing strategy: positive word-of-mouth.
Take Advantage of Tough Times
Tough times are good times to get noticed. At the first hint of a bad economy, many small businesses panic and run for cover. They slash their advertising and sales budgets and try to sit out the downturn. At times like these, you can practically have the field to yourself as your competitors make themselves invisible. Grab the chance to stand out and be noticed. Businesses that advertise during tough times usually take market share away from businesses that don’t. Tough times may be the best time to launch an advertising blitz to gain market share. Advertising agencies are eager to get whatever business they can, so you may be able to negotiate better rates and terms. At the same time, explore less expensive and perhaps more cost-effective advertising alternatives.
Introduce New Offerings
As such, always look for opportunities to expand your area of operation. Even without the benefit of expensive market surveys, regular communication with customers and the use of feedback mechanisms will provide you with valuable information about what they need and what remains unfulfilled in the market. You need to have a deep understanding of your market and their needs. Proceed with caution and obtain some marketing intelligence before you proceed. Check out the most likely prospects in the expansion areas that interest you, and find out if you can compete with existing suppliers.
A smart marketer knows that a product or service has greater consumer appeal if it is perceived as new. You can add newness to already existing products and services by adding such features as extended warranties, free installation, and consultations. Always be thinking of ways to differentiate your products and services from those of your competitors. Start by experimenting with several variations on a small scale until you hit upon the right combination. Test the new derivative on a sample set of your customers to see if they like it. If they do, introduce the new product or service to increase your sales. Increasing productivity does not mean working harder. Chances are you’re already doing that. Increasing productivity means working smarter. Analyze your business on a product and service basis to see which elements contribute most to your costs. Identify and eliminate excess costs. For example, you might sell idle equipment, inventory, or property or sublease empty warehouse space. Follow the time-honored strategy of taking a sharp red pencil to all your costs, including entertainment and travel costs.
If you are extending credit to your customers, you must be prepared to take on a different role: that of a bill collector. While everyone knows that bad debts cost money, some small business entrepreneurs are reluctant to go after their slow paying and deadbeat customers. While large corporations can afford the luxury of having collection departments, small businesses often have to few resources that can be dedicated to running after collectibles. To minimize receivables, the first step is to streamline your billing process. The ideal billing approach is to collect payments when goods and services are delivered. If you have to bill your customers, send invoices out the day the product or service is delivered. Follow up with a reminder bill two weeks later. If you don’t receive payment in thirty days, get on the phone and make a collection call. Talking to customers may be far more effective than sending letters.
To encourage early payments, offer customers a discount (1 to 3 percent) for payments made within fifteen days. The key to collecting money from customers is to do it without damaging the business relationship. In order to know the best course of action to take, you need to know the reason why the customer is late with the payment: is the person or company falling on hard times temporarily, or is it is going under, or do they have no intention to pay up? If the customer is feeling a temporary financial pinch, talk to your customer (if a company, talk to the president or owner). While indicating that you are willing to be patient, inform the customer that you expect to get paid as soon as possible. Ask for partial payment as proof of good faith. If your customer plans to file for personal bankruptcy or if the business is folding up, move swiftly to try to collect something before all assets vanish.
If you do not have the time or patience to deal with deadbeat customers, assign someone to do the job for you. If do not have any staff, it might be better to turn matters to a commercial collection company to manage your past due accounts. Collection agencies usually work on a contingency basis, usually keeping about 35 percent of what they collect. Then again, 65 percent of the receivable is better than nothing!
Spread the Word About Your Business
The best way to expand your marketing opportunities is through advertising. One of the biggest mistakes small businesses make is not aggressively pursuing new markets. You can have the best product or service in your industry and still go out of business if people don’t know you’re there. Keep your company in the public eye by developing an effective advertising campaign. Talk to other business owners to find out what works for them. Talk to your customers to learn what types of advertising appeal to them. Evaluate the features of your company and its products and services to determine which offer advantages over your competition. Implement a coordinated advertising program that exploits the best features of your business. The cost will vary widely depending on the market you’re in, the medium you choose, and how often your ads run. Consider advertising jointly with other businesses to reduce cost.
Get Back to the Early Times: Barter and Swap
Bartering, or trading goods and services directly with other businesses for something those companies have that you need rather than for money, is a bane for businesses with tight marketing budgets. Barters can be a valuable way to pay cash for advertising, printing materials, client and customer leads, media exposure, and advice. This process can preserve precious cash. Most barter deals are worked out informally between businesses. For example, if you own a clothes shop and need to advertise your business, you can offer to supply a local theater group with costumes in exchange for full-page, back cover ads.
Don’t Waste Time
Time is money. Study after study shows that most businesses waste 25 to 50 percent of the time it takes to produce a product or a unit of service. Even the best companies spend a significant amount of time performing tasks that add no value to their end products or services. Lost and wasted time can prevent your company from becoming a major competitor. Time management is a relatively easy concept to grasp and exploit. Start by separating all your activities into two categories: Those that add value to your business and those that don’t. Tasks like assembling product parts or shopping for a more competitive insurance policy clearly add value. Tasks like writing a sales report or carrying a part from one end of the factory to another may not add any value. These tasks should become the target of your efficiency analysis. If you don’t need them, get rid of them.
Another timesaving technique is called process flow mapping. To map your business processes, start with a big sheet of paper and some Post-it notes. Tape the paper to the wall. Write every step involved in your business, from making a sales call to filling orders, on a Post-it note (one step per note). Stick the notes on the paper and draw lines connecting the steps in the order you perform them. Find wasted time by looking for steps that add no value, that are duplicated, or that can be combined. Can you speed up the process by having two activities go on concurrently rather than sequentially?
Opportunities to save time are painfully obvious once you start looking for them. Many operations are in such deplorable condition that there’s plenty of low-hanging fruit to pick. No matter how many hours your business may have wasted today, the most critical time wasted is the time between now and when you start looking for ways to save time. A time management strategy will enable you to fuel new product development and new technology. I have helped many business owners with all these strategies for success.