Posts Tagged ‘Growth’


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.


Why Your Business Is Asking All The Wrong Questions

Stocksy_txp6e171103c53000_Small_17064Many entrepreneurs start a business because they have an overwhelming passion around a certain interest. They want to help people accomplish a stated goal. A problem develops in growing their business because they continually ask the wrong question:

“I wonder if my exciting idea can help other people?”

This question is entrepreneur-centric and does not revolve around what the customer wants. Just because a person is passionate about an idea and its solution does not mean that people will pay for it. This is the biggest mistake entrepreneurs make when they try to convert a hobby to a business. They have a dream that they want to earn a living doing what they love. This is a result of a misinterpretation about the feel-good directive that an entrepreneur needs to be passionate about their work. While this is true, a better view is that an entrepreneur needs to be passionate about what the customer wants them to do. Therefore, the better question to ask is:

“I wonder if the customer has the money to solve a pain which I am excited about?”

This question focuses on what the customer wants, not what the entrepreneur needs. The customer cares only about solving their problem, not the passion of the entrepreneur. The answer to this question is the core of what any business needs to focus on. Customers always buy painkillers before they buy vitamins.

Other wrong questions to ask:

  1. Would this product help your company? Again, most prospect will say yes as not to confront or embarrass anyone. Unfortunately, this may not reflect the action they would truly take. Instead ask: What would it be worth to your company if I could fill this need (resolve this pain)? With this question, the entrepreneur establishes what the customer wants and the monetary value of solving their need.
  2. Are you interested in buying the product? Most prospects will simply say yes because they want to be agreeable and not seem negative. What prospects say and what they do are two different things. Instead ask: Where can I send your order? This is an assumptive close and pushes the action to now. It will also immediately raise any hidden objections.
  3. When should I contact you again? Most prospects will give a date in the future and then never respond again. Instead ask: Should I contact you in the future? If so, what will different then as opposed to now? This gives the prospect an ability to say no so time is not wasted in the future. This also self qualifies them for another call and gives insight into what is holding their purchase back now.

What questions are you asking? Are you really listening to the answers?


Why It Was Good That Shaun White Lost

Shaun+White+Portrait+Session+ElxITyhEXx9lLike small business, the Olympics don’t always work out the way they are planned. One of the poster athlete’s for Sochi Games is Shaun White who basically put half-pipe snowboarding on the map. He won the gold medal at the last two Olympics. He was supposed to be a repeat winner this year. After he arrived in Sochi, he pulled out of the slope style event because he thought the course was too dangerous. With all the pressure now on winning the half-pipe event, he lost and came in fourth.

While I cheer Shaun White’s decade of success, it’s good that he lost in front of millions of people. Here is why and what you can learn from it:

Things don’t always go as planned. Even with endless hard work and preparation, sometimes you just lose. Similar to White, the course may be rough (the market) or the other athletes (competitors) may be better that day. No athlete or company can control all the conditions. Every small business owner needs to get used to not knowing what will happen. There are no sure things in sports or business and this pushes everyone to work harder.

Even the favorites lose. No matter how dominant your business may be in the market place, you won’t always win. You have to earn a victory each time you compete and not mail it in. While White’s competitors were well qualified, no one would have predicted 15 year old, Ayumu Hirano from Japan would win the silver. The favorite has to work just as hard and the rivals always have an opportunity to win.

How you lose counts. White did not let this one loss define him. He said, "I don't think it makes or breaks my career, one night;" he never blamed the course or the other competitors. After his failed run, he agreed to celebrate with Swiss Gold Medalist Iouri Podladtchikov (IPOD).

The best push the rest. The top dog gets everyone to improve until they get beat. This is good for any competitive market because in the end, the customer (or viewer) gets a better product or service. The best business always gets pushed by other companies that want to be them.

What will White do next? Looks like he is going to dust himself off and compete in 2018.


Mondays with Mike: The Tier Method for Increasing Revenue

A disclaimer of sorts:  This method of boosting revenue is intended for entrepreneurs who own businesses that are already making a little money.  This strategy can help you look down the road if you’re just getting your business up and running, but the method I describe in this article is intended for established businesses, rather than those just starting out.

More money.  It’s an appealing prospect, but it’s not always easy to achieve.  One of the most versatile solutions I’ve ever found is the tier method, and it’s successful because it’s such an elegant and simple strategy. 

Here’s how it works:

Your business is established, and you have a good product, but you’re looking to increase sales.  The answer is simply to create additional, higher quality (and higher priced) offerings. 

Let’s look at some examples:

  1. ????????????????????????????????????????You own a restaurant, and you’ve found success with your weekday, prix-fixe menu.  Folks love coming in and selecting three courses for a set price.  How do you step it up?   Add on the option for wine pairings for each course (with an additional fee, of course.)  You’re adding an additional tier of services that will entice your existing customers.
  2. If you own a cleaning service and have regular customers, but need a way to get more from them, create tiers of service.  Your existing contracts – let’s call that your Silver Service – is offered at the current price.  You add Gold Service with additional services – periodic window cleaning or carpet shampooing, as well as Platinum Service – where you clean everything that doesn’t move.   You’ll inevitably find some clients who want to step up to a better plan, and your new clients are likely to settle for the option in the middle, so you’ll be starting them at the Gold Service – it’s your new default setting, complete with higher price tag.
  3. You sell original artwork, either online or in a brick and mortar store.  Your customers love your work, and you decide to offer additional options.  Your first tier is the watercolor painting – the work your clients know and love.  You offer one option of adding a frame, and a second option of high quality mats and a custom frame.  You’re adding tiers of service that save your clients the time they’d have to invest in selecting the perfect frame that shows off your valuable artwork.  

Why is the tier method so successful?  You’re starting with an established brand – a product or a service that your customers already trust and enjoy – and you’re offering a better version of that product.  We all want the best, and we’re conditioned to think of selecting the least expensive option as settling for less than the best.   Airlines make bank on pricier seats in first class.  People pay extra to buy iPhones with more memory than they’ll ever use.  If you offer your customers pricier options, it is inevitable that some of them will take you up on it.

The key here is to offer authentically better options.  We’re not talking about smoke and mirrors  — playing games with your clients is a tactic that can alienate loyal customers.  Rather, you want to develop tiers that are meaningful and offer additional value that’s appealing to your customers.  You’re finding a way to enhance your existing high quality offerings by creating options with added benefits to your clients and added revenue for your business. 




 
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