Posts Tagged ‘Growth’


Where Small Businesses Are Stuck in 2014

During the course of their career, every small business owner gets stuck. The key is to know where and how to get unstuck.

My annual survey of 5,000 small business owners identifies the problem areas. Here are a few excerpts:

  1. Treating their company like a job. The Survey: Over 40% of owners do whatever customers need in order to earn money for their business. This does not allow them to strategically ramp up a profitable business. The Solution: Don’t take every piece of work offered by a customer. Focus on what the company is good at and get more of that profitable business.
  2. The daily plan gets interrupted when entering the office. The Survey: 53% don’t have a plan for their day or it gets destroyed when the start work. The Solution: Before opening email, voice mail or social media, do two important tasks that will make the day productive.
  3. Stocksy_txpe7f75a0ezH4000_Small_41935They never take a break. The Survey: Over 50% said they are too busy to take a break and always have their phone near them. This is because they have a fear of getting left behind. The Solution: Find a daily place without a smartphone where personal batteries can be recharged and let creativity flow.
  4. They fear failure. The Survey: Over 40% said that failure is not an option. They fear it so much that they stop taking risks in their business. The Solution: Accept failure. Learn something. Let go of that failure and take another action to get to another success.
  5. They are afraid of selling. The Survey: 41% are either afraid of rejection or not sure how to build a relationship with a prospect. 59% said that they are too busy servicing existing customer to find new ones. The Solution: A company can’t really sell anything to anyone. They need to be there when customers are ready to buy by executing a daily systematic marketing plan.
  6. They stop marketing as soon as they have sales. The Survey: 58% only market their products when they do not have sales. They also believe their products are so superior that they do not need to market them at all! The Solution: Execute a systematic marketing plan through content marketing on a weekly basis.
  7. They don’t know how to use or have stopped with social media. The Survey: 54% either do not have a social media strategy or have stopped using it. The Solution: Social media is part of promotion. Use it to form relationships by providing help to customers, prospects and connectors.
  8. They let poor performing employees stay. The Survey: 53% never fire employees since it is too uncomfortable or they are too loyal. The Solution: Be slow to hire and quick to fire. Find the team that makes the company profitable. Fire anyone that does not add productively to the company.
  9. They don’t ask for help. The Survey: 44% never ask for help because they believe they have to figure it out on their own. Many others are unsure of who to ask for help. The Solution: Find a formal or informal group of advisors and mentors to answer pressing questions. Do not go it alone!
  10. They allow personal smartphone usage at work. The Survey: 74% do not monitor personal use of smartphones which can destroy company productivity. The Solution: Have a written policy that personal smartphones are not to be used during work except in emergencies.

Bonus: They rarely review their financial statements. The Survey: Over 20% never look at their financial statements because they are hard to understand. The Solution: Get trained to understand every line of the company’s financial statement. Review them monthly.

Tell me where you are stuck!


How to Keep the Rule of 3 from Ruling your Business

Even with the best laid plans, it has become clear to me that every business project follows the “Rule of 3”: it takes three times longer, costs three times as much and is three times as difficult as it should be.  This is a universal truth, so if you can accept it and even embrace it, you can put yourself on a path toward a more successful future for your business.

Here are some ways to battle some of the Rule of 3 issues that have been frustrating business owners since the beginning of time.

Everything Takes Longer, but You Can Get There

Setting your expectations too high is often the cause of this phenomenon.  Once you align yourself with realistic goals, you can head for longer term success.  Consider the following situations:

  • Getting the big order from a new client:  New customers may want to test the waters by initially offering smaller jobs.  When you impress them by providing high-quality work on time or before deadlines, the large order will come.
  • Getting a new product to market:  Even with extensive planning, Murphy’s Law accurately predicts that something will inevitably go wrong.  Perhaps a vital part is not delivered, manufacturing becomes halted, or your entire software development team gets the flu a week prior to scheduled delivery.  One way to deal with this issue is to develop an accurate delivery date up front — and then, multiply it by three or at least add some padding to the date. The worst case scenario is that you end up delivering early.
  • Providing on-site support for clients:  The moment you lose control over the place where your work is performed or your product is installed, any number of things can go wrong.  If you need to rely on a client’s computer, you might get a defective one.  Or you may set out to install 220 volt equipment in a building with only 120 volt outlets. Make sure that your contract provides detailed requirement specs and estimates the resulting time delays if those requirements are not met.

Of course, time delays can also amount to income delays.  So, make sure that you have enough capital to ride out the extra time.

Creativity and Planning Helps Handle Extra Expense

Stocksy_txp31123075Gu3000_Small_81280Even the big business players want to bring projects in on budget, but additional expenses do not generally bring their operations to a screeching halt.  As a small business owner, you do not have the luxury of overspending, but there are some ways to help avoid — or at least deal with — financial surprises.

Just as you need to add a buffer when planning the timing for an undertaking, you have to do the same when it comes to budgeting.  After a careful analysis tells you that your new widget will cost $5,000 from design to final production, you need to plan for what you will do if the actual expenses turn out to be $15,000.  Even if you don’t have the cash on-hand to deal with the additional costs, create a Plan B so that you have a pre-approved bank loan in place or someone waiting in the wings to help.

You may also be able to manage the additional costs with some creative strategies.  For example, a vendor might be willing to barter its product in exchange for one of your products or services.  If you think bartering is not a viable way to conduct business, I recently heard of a web designer who conducts all business within a “gift economy.”  He designs and builds websites as gifts for his customers, trusting them to gift back based on what they believe is fair value for his work.  While he reports this business model has worked well for him, I’m not recommending — or even suggesting — that you take such an extreme approach to your cash flow.  But entering into a barter agreement can be valuable in a pinch.

It May be Difficult, but You Don’t Have to Go it Alone

There is nothing better than the power of people.  Every small business owner should find a support group of other business owners that they can use as sounding boards for business challenges.  The Web offers many ready-made groups that you can turn to, or you can form your own group.  Often, the experience of expressing your concerns out loud is enough to help you find solutions.  And the chances are that others in your group have worked through the same issues and have found successful solutions.   At a minimum, they can provide you with some comfort when things are inevitably more difficult than you expect them to be.

Dealing with the Rule of 3 can be one of the most frustrating aspects of running any business, but you can lessen its effects with creative thinking and a few good friends. And for those times when you feel overwhelmed by these issues, remember — there’s always ice cream.


Mondays with Mike: Fast Flow Prospecting

Stocksy_txpaa3f874fBY3000_Small_164426The business world moves too fast for any of us to rest on our laurels.  While Monday might be great, smart entrepreneurs worry about Tuesday, knowing that ensuring a steady stream of new clients is essential for a healthy business.  It’s a struggle we all face – finding high quality prospects to convert and keep our companies growing. 

Client referrals have always been a traditional source for new prospects, but there are some problems with getting good quality referrals.  If we assume that you’re providing outstanding service to your existing customers, they’ll have two primary concerns about sharing your services with their competitors.  First, they’ll want you to continue to be available to serve their needs.  They don’t want your success to get in the way of their demands.  Second, if you’re providing a service that gives them a competitive edge – whether it’s personal or professional – they’ll be reluctant to share their brilliant discovery – you – with their competition.  They may want to keep you all to themselves.

The gold ring is the organic referral – when a friend of your client is desperate for a plumber, asks for a recommendation, and the client shares your name.  An associate asks who designed your client’s logo, and they give you a rave review and pass on your contact info.  The problem is that these high quality referrals are few and far between, and they’re also – by their vary nature – inconsistent.

So what do you do?  You require new clients, but cold-calling is expensive and yields poor-quality results.

The answer is fast flow prospecting, and here’s how it works:  You approach your clients and ask them for a referral to their other vendors.  They may look at you like you’re crazy.  The angle, though, is that you’re going to reach out to their other vendors and work with them to provide even better service for your mutual clients.  Whether you can consolidate shipments to save your clients money, or whether you can bundle services and offer predictable monthly payments, working with other vendors can help you create efficiencies and provide better service at a reduced cost for the client who referred you.

Here’s the key, though – once you’ve established a relationship with your vendor partners, then you ask for referrals to their other clients.  You’ll be presented with a pool of new clients – clients to whom you’ll be recommended by your partners, and clients for whom you can provide outstanding, streamlined and efficient service.  You’re expanding your network via new partnerships.

So let’s say that you’re a small, independent internet access provider.  You get some vendor referrals from your satisfied clients and you connect with a company that installs and monitors security systems.  The two of you offer bundled services to your existing shared clients, providing them with better, more affordable internet services that improve the reliability of the security system.  Win-win.

The security company shares its client list with you, and you can now pitch your combined services to a whole new group of prospective customers – customers who can get reliable references from the provider of their security services.

Working together with your clients and their other vendors gives you a much wider field of clients, and provides ample opportunity to improve efficiency and profitability for everyone.

 


How to Get In Bed with Your Banker

Stocksy_txpf799c772Ea3000_Small_104560Most small businesses still need banks. They provide valuable financial services daily for companies. Banks can still be a major source of capital for the promising business. How do you make sure that they are there when you need them? Get your business in bed with your banker! While this many not conjure up a pleasant image, it must be part of the strategy. Getting the banker to know your company’s capital requirements must be established far in advance of when you may need them. Here is what to do and why it works:

Establish yourself as a customer. Open checking and money market accounts at the bank. Use their merchant, ACH and wire services. Pay fees to use their services. Why it works: Bank employees are trained to help customers and you want to part of that group as soon as possible.

Go into the bank weekly. Be seen at the bank and get to know the branch manager and key staff. Visit at least a few times a month. Talk to them about the bank, their family and your business. Why it works: People do business with other people they know, like, and trust.

Participate in common community events. Go to the events that the banks sponsors locally. Show support for their causes. Get on joint committees. Why it works: You can demonstrate what it is like to work with you and share a common goal.

Share the progress of your company. Sit down with loan officers before capital is needed. Show them your sales and profit projections. Impress them with your knowledge of the financial statements. Revisit them when you make progress toward your goals. Why it works: Numbers are power. They are easy to take to a loan committee. Bankers trust business people that understand them.

Get a small loan. This may be a home equity loan (or similar secured asset) to be used by your company. Pay the loan back on time and then try to increase it. Why it works: This builds a reputable track record the bank can reference.

Keep your personal credit score high (as well and Dunn and Bradstreet number). Bankers like numbers that increase. Why it works: A high credit score will show that you can be trusted to borrow money. They believe that past performance predicts the future.

Bring more customers to the bank. Everyone loves referrals. Be responsible in helping the bank grow their business. Why it works: If you help them, they are more likely to help you.

Go for the big ask: It’s time to apply for the bigger loan for your company. This can be a term note or line of credit. Why it works: Because the bank now trusts you and your company.

How have you got a banker in bed with you to get a loan?


Work Your Biz Wednesday: Resources for Women

Whether you're a woman just starting out in a new business or you're established and looking to grow, it's important to educate yourself about any resources that can help your small business.


3 Ways to Sink the Sale of Your Company

??????????????????????????????????????Many small business owners dream of selling their company for a huge profit. After many years of hard work, they finally found the right buyer to acquire their company. After negotiating business terms, they signed the letter of intent (LOI). Now comes the tough part: collecting all the due diligence information and having the lawyers on both sides negotiate a final purchase agreement.

Here are the three ways that sink the sale of any company:

1. Pressure from external parties. This can be from overly aggressive lawyers arguing over largely irrelevant legal terms on the purchase agreement. One lawyer in a deal I was involved wanted to know what the seller’s responsibility would be if “the sun exploded”. Remember, in the sale of most small businesses, the only terms that really matter are the upfront sale price, sale payment schedule, representations and warranties. Many times, the seller’s accountant insists on charging added fees to give financial statements to the perspective buyer. One accountant even wanted a lump sum “research fee” for the client to collect all their historical records. It is common for the landlord to approve the transfer of any leases. They sometimes charge a steep “transfer fee” for their approval. Regulatory agencies with licensing requirements can also mean a delay of months. The remedy: Make sure that to have a lawyer that is familiar with small sale transactions. Collect all the information from the accountant up front for due diligence. Seek outside regulatory agency approval far in advance of the completion of any transaction.

2. Inconsistent financial numbers or other changing “facts”. All financial statements tell the company’s story. If during due diligence, this story changes, and then it will raise questions from the buyer.  Weaker numbers (specifically profitability) that differ from those provided in the LOI will always result in a price reduction. Additionally, changing “facts” may get the buyer nervous. This can be in the form of profiles of customer concentrations, revenue trends or employee status. The remedy: The small business owner always needs to know what story they are telling with every fact disclosed and explain any difference in the narrative.

3. Sellers or Buyers changing their mind. This happens very often. The seller decides that they don’t want to sell their company. The reason they give now is the sale is not enough money. More than likely, they are afraid what they will do with their time a day after the sale. The buyer sometimes has a change of heart on how the new business will fit into their company or “what they thought was true now isn’t”. The remedy: As a seller, the small business owner must determine what they will do the day after the sale of the company before they decide to sell it.

Barry Moltz helps small businesses get unstuck. His new book, “How to Get Unstuck: 25 Ways to Get Your Business Growing Again” is available in March. Barry can be found at www.barrymoltz.com


Why to Question Assumptions When You Are Successful

It’s easy for small business owners to question themselves and their assumptions when they are failing. But at that point, it may be too late to fundamentally make changes that can turn their company around. The success rates goes up if the owner questions assumptions when things are going well. However, most entrepreneurs will have a hard time doing this because they will not want to “mess with success” or “if it’s not broken, don’t try to fix it”. Many times, they do not even know what the success formula really is. They make cause-and-effect connections where it truly does not exist.

Stocksy_txp5226ac4eb53000_Small_135613For example, the phenomenon of success actually not bringing more success has been statistically documented in basketball. A  study called “The Hot Hand in Basketball: On the Misperception of Random Sequences” states, “ The chances of success on the next shot are not correlated with the success of the last shot. In other words, the ‘hot hand’ idea is a fallacy.”

To increase success in the future, look to see what conditions exist in the market that will make the company profitable now. Evaluate past results, but do not base future actions solely on them. Don’t say, “Well, it worked in the past, so it should work in the future!” Keep thinking like a start-up entrepreneur as long as possible. This worked for IBM in the early ‘80s when the company moved the work on their new personal computer to a separate business unit so the effort would not be “weighed down” by IBM’s past success in unrelated areas.

A $75M company I know had been in business for 50 years. Historically, they were only able to deliver five percent net profit to the bottom line. Sales had grown slowly over the years, so there was never a need to make any changes since they could predict what they could contribute to the parent company. A new CEO got worried about what would happened to the company’s profits if sales dipped during a recession.  She realized that even a small drop in sales was going to mean disaster for their overall profit contribution. The CEO needed to find ways to cut their expenses or increase their gross profit while not cutting revenue. She was able to do this by throwing out established distribution channel assumptions, cutting discounts for many vendors and raising prices for newer products to their customers. When sales eventually shrank during the Great Recession, the company was able to deliver the same dollar profit to the parent corporation. Now that times are better, and sales have grown again, they have become even more profitable.

What assumptions are you not questioning?


Work Your Biz Wednesday: 6 Reasons Why You Should Contact Your Customers

The most valuable thing in any business is your existing customers. Here are 6 reasons why you should contact them from Melinda Emerson, the Small Biz Lady.


Mondays with Mike: Boost Your Revenue with Recurring Fees

While some of us derive great satisfaction from the role our business plays in the community, the services we offer our clients, and the rewards of having built a successful business from scratch, we’re all – at the end of the day – concerned about growing our company’s revenue.   In order to keep the lights on and pay the staff, we have to bring in money, and it seems like we need a little more if it each year.   One of the most effective methods I’ve found for managing and increasing revenue is by converting customers to a recurring fee plan. 

Here’s how it works:

Say you’re in the office equipment repair business.  Your average visit costs $200, and you visit each of your customers an average of twice per year, for a total of about $400 annual revenue per client per year.  If you were to offer an annual service plan, billed at $40 per month, you would be providing a solution that benefits both your company and your clients.  You give your clients predictable expenses, alleviating the stress of funding the entire cost of a repair all at once.  You get the benefit of predictable revenue.  You can count on the monthly payment and bridge the gap that slow months can create, and at the end of the year, you’ve brought in $480 per client, increasing your overall revenue. 

Makes sense, right?  Now here’s why it works:

In addition to establishing consistent expenses and income, there’s another key benefit.  Once you’re no longer billing for the service itself, you have new motivation to operate as efficiently as possible.  Your new goal won’t be increasing billable hours, but will be doing every job quickly and properly.  You know that poor quality work will end up costing you more in the long run, so you provide the best service possible the first time.

Stocksy_txpd093e56ePf2000_Small_27507Skeptical about your customers’ willingness to commit to a contract?  Think about gym memberships.  Millions of people pay $29 monthly for a gym membership they seldom use.  They sign up (usually in January,) go regularly for a little while, and by the time they stop using the gym, they’re so used to the monthly debit that they don’t even notice it.  Sure, some members will cancel, but others will not.  Once your clients are used to the monthly premium, they will cease to think about it.  You’ve gotten them accustomed to a steady-as-she-goes expense that lands in your bank account each month.

Think that your business won’t support a recurring fee structure?   Think again!  Nearly every business has an aspect that can be transformed into a regular fee cycle.  If you own a candy shop, you can sell monthly subscriptions with seasonal offerings available exclusively to your subscribers.  They get special treats, and you get regular revenue.  Own a bookstore?  Offer an annual reader rewards card with a modest fee that entitles customers to exclusive events and special discounts.  Challenging yourself to find ways to reward customers for committing to you in the form of a recurring fee can – if managed properly – yield both steady income and consumer loyalty: a magical combination.




 
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