STRATEGY
Seven Questions for the Struggling Business
Can you survive the recession, or is it time to make some
strategic changes to your business?
ARE YOU ONE of the many small businesses whose market has dried up?
Some industries that I’ve seen hit particularly hard are financial
advisors, consultants, graphic designers, event planners,
photographers, catering companies, esoteric retailers and many
others that depend on discretionary expenditures. For some
entrepreneurs it may mean cutting both their business and personal
expenditures to the bare bone.
Continuing to pursue a declining or oversaturated market is only
going to put you closer to the edge. When there are a lot more
suppliers than there are customers, something has to give. It’s time
for some strategic decisions and action.
Many are taking creative, and sometimes drastic, actions to stay
alive. They have recognized it’s time to save their business.
If it’s time to save your business, ask yourself the following
questions:
1. Where else can I cut short-term expenses now to conserve cash?
Make a projection of your cash needs on a monthly basis over the
next six months. Use historical financial information to help you
decide about the future. Keep in mind, however, that if revenue is
down, variable expenses may be down also.
Then make a projection of revenues for the same period. If you have
gaps, now is the time to take action to cover those gaps. If a
credit line or a loan is not an option, you’ll run out of any cash
reserve quickly if you’re not covering your expenses.
It may mean things as drastic as giving up your office and working
from home or a borrowed or bartered space. You may have to terminate
all support. If you want your business to survive, do whatever it
takes. A great deal of work can be accomplished virtually now. That
can be a cash saver also. Question all subscriptions, travel,
subcontractors, etc. If the need to cut is deep, keep only what you
need to stay in business.
2. Are my customers just not spending now or has there been a big
shift in the market? If a turn in the economy would likely bring
back former sales levels, you may just want to cut back but keep the
same business model and target market. If sales were slipping before
the economy tanked, it’s a clue to look more closely at the
long-term trends in your industry.
3. Is it time to revise my business model? If you’re in a
fading or oversaturated industry, rethink how you can restructure
your assets to meet a current and future need. I have a financial
advisor client who is starting a financial management and
bill-paying service for the dysfunctional elderly. She is targeting
a brand new market, assisted living facilities.
4. Is there a related need in the market that is currently
underserved? If you see that your current market may be slow to
recover or is oversaturated, prudence says it’s time to broaden your
horizons. As in the example above, the Baby Boomers are getting
older; many will need help managing their finances at some point.
5. What assets can I take in a new direction? An assessment
of your personal and business assets will help you identify what you
have to work with in building a revised business model. Match assets
to market need. The client mentioned above had been asked in the
past if she provided bookkeeping and bill-paying services. She
recognized that she had the credentials, the experience and the
growing market for active financial management for individuals.
6. Will I need to restructure the business to leverage my new
direction? You may be able to set up a division of your existing
business or it may need to be a whole new business entity. An
executive recruiter decided to offer creation of a 3-minute video to
attach to a job seeker’s virtual resume. Her new market is now the
job seeker; before it was the employer with the job opening. Because
it’s being offered to a brand new market, she chose to create a new
entity for the video resume business.
7. How soon do I need to make these decisions? Do not wait to
see what happens. Be proactive with a strategic plan. Take action
now.
The waters are rough, the sea is stormy. You may need to find any
port in the storm, or you may want to change course and head for a
new destination. As captain of your ship, you need to make these
strategic decisions and put them into action right away.
Marian Banker, MBA and Business Leadership Coach, publishes the
monthly e-newsletter, Small Business Leader. Her focus is on
bringing to the busy entrepreneur a quick look into the current
world of small business from the perspective she’s gained through
coaching, consulting and training entrepreneurs in both service and
product-based businesses. To subscribe, go to www.primestratgies.com/newsletter.
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T R E N D S
Lowered risk trumps logic for b2b buyers
Have you ever been absolutely sure that your product or service was
the best solution for a particular prospect, only to find out that
they chose a competitor? It may be because the long-accepted,
rational, step-by-step model for the business-to-business (b2b)
buying process is less effective with today’s buyers, according to a
new study by Enquiro Research.
The traditional purchasing model, which includes identifying a need,
building awareness, consideration and purchase, does not consider
the emotional, non-linear aspects of purchasing. “99% of b2b buying
is about covering your butt,” according to the authors of the study
of over 3,000 business buyers. In other words, b2b buying has become
about minimizing personal and organizational risks. And today’s
economy has magnified this risk avoiding behavior.
How can companies create a lower-risk environment for prospects?
Match prospects with happy customers that had similar “risk
factors.” Rather than provide a reference from a long-time customer,
have prospects talk to customers who made their purchase within the
past year. Go a step further by getting references from all the
people that were involved in the referring customer’s decision to
buy and give them to those in the same role at the prospect’s
company.
Become an “approved vendor” in the mind of your prospect. Create a
relationship with a teaser offer (e.g., a free trial, money-back
guarantee, etc.). It lowers the risk of getting started. Small
interactions like this build trust.
And, finally, direct buyers to positive word-of-mouth. If prospects
have any doubts about buying, consider linking them to content
(industry/customer reviews, blogs, etc.) that speaks well of your
products or services.
Source: The Marketing Report, June 2, 2009
Mobile couponing goes mainstream
The mobile phone is quickly becoming a replacement for the 300
billion paper coupons issued every year in the United States.
Industry forces are converging in today’s market to create the
perfect storm for mobile coupons to take off: Consumers are
increasingly price-sensitive, revenue is harder to come by and
mobile phones are nearly ubiquitous.
Big retailers have recently gotten on board with mobile coupons in
various forms, and according to Juniper Research analyst Howard
Wilcox, where the big brands go, the rest of the industry will soon
follow. Juniper expects coupons issued via mobile phones to increase
by 30% during the next two years alone.
Mobile couponing is emerging in three ways: Most common is through
text messages as an affinity program in which consumers text in a
short code and receive a coupon in return. Second is through a less
widely supported method in which a message is sent with a bar code
to be redeemed when scanned in-store. The third and least widespread
example is Web-based fulfillment where the coupons appear on mobile
websites.
Coupons on the mobile phone typically offer a much better redemption
rate and are more cost-effective. One coupon vendor claims they
consistently get redemption rates in the teens compared to paper
coupons’ return average of less than 1%.
Source: Telephonyonline.com, June 23, 2009
Finding new employees via social media
Employers already know that one of the best sources of high quality
hires is friends of existing employees. Now, new services are making
it easier for your employees to match jobs to the hundreds of
friends in their online social networks.
Companies that use services like Appirio and Jobvite ask their
employees to add an application to their Facebook pages (Jobvite
also works with LinkedIn and Twitter). The tool notifies the
employees when new jobs open and which of their friends might be a
good fit.
Both services use a matching engine that searches for keywords in
their friends’ profile information. To address privacy concerns, the
list of possible candidates is only available to the employee and
not the hiring company or software provider. If a friend is hired,
the services can tell the hiring company which employee found the
match in order to offer a referral bonus.
Source: The New York Times, May 31, 2009
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N E W S
Small biz left out of credit card reform
When the Senate passed its credit-card reform bill, it was called “a
great day for consumers.” But what will it mean for small business
owners? That depends on how your small business is incorporated and
what kind of card you have.
The Credit Card Accountability Responsibility and Disclosure Act
outlaws several card policies that have provoked public outrage in
recent months, including retroactive rate increases on existing
balances for cardholders in good standing; hiking rates for new
charges without at least 45 days’ notice; “double-cycle billing,”
which allows fees to be charged for balances that were already paid
off; and “universal default,” which applies rate hikes if a customer
is late with payments on unrelated bills.
For small businesses, however, there’s a catch. Because the new law
amends the Truth in Lending Act, which only governs consumer loans,
it doesn’t apply to corporate cards. What this means is if you use
your personal card to make business purchases, you’ll be covered by
the new protections. Likewise, business cards based on your personal
credit — as is often the case for sole proprietors — should be
covered as well.
But for limited liability corporations and other companies that use
traditional corporate cards, the same old rules will continue to
apply. No one is sure exactly how many small business owners will be
affected by the new legislation. The final bill directs the Federal
Reserve to conduct a study of credit-card use by small businesses.
Source: CNNMoney.com, May 22, 2009
Web ads more memorable in context
Ads that run on websites with related content are 61% more likely to
be recalled than ads running on sites with unrelated content,
according to research by Condé Nast and McPheters & Co.
This information is the result of analysis that examined the
effectiveness of Internet banner ads aligned with the content of the
websites they appeared on vs. those that were not. Examples of ads
in context are food ads running on food sites, entertainment ads on
entertainment sites, etc.
The study also revealed that social network, shopping and food sites
generate the highest recall levels (29% to 39%). However, despite a
high ad recall level on social networks, previous research by
Insight Express revealed that social networkers remain lukewarm to
ads on their networks.
Source: MarketingVox.com, June 22, 2009
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T I P S
- Appeal to frugal customers by unbundling your products and
services. When customers are tight with their dollars, consider
letting them select and pay for a sliver of what normally sells together
as a pie. For example, in real estate, unbundling means a homeowner
could pay an agent only for a comparative appraisal or per-house showing
or for creating an alluring ad, instead of the full-service commission.
For sellers, unbundling can mean revenues from impulse buyers and
penny-pinchers who would otherwise look elsewhere or remain unsatisfied.
Source: www.yudkin.com
- Energize headlines by simply adding an extra letter.
Which headline will pull more response? “Put extra money in your
pocket” or “Puts extra money in your pocket”? The word “put” implies
that some effort will have to be made; however, tests show that
“puts” will generate a higher response because it implies
“effortless” and “done for you.” Add the letter “s” to all action
words, such as get, drive, start, add, generate, etc., and watch
your response soar.
Source: www.kcsmallbiz.com
- A gift certificate giveaway is an easy way to get more
referrals, according to veteran marketing coach John Jantsch of
DuctTapeMarketing.com. Send a quarterly mailing to your customers
and referral sources, offering a gift certificate of real value for
your products or services. Tell the recipient that it’s okay to
forward this to anyone they choose. Many customers want to refer you
— this gives them something tangible to use in the process.
Source: www.entrepreneur.com
- Tired of employees missing important deadlines? The way
you set deadlines can often affect the degree to which workers
procrastinate and even on the ultimate quality of the work. In a
study, participants that were given a single deadline for completing
work turned in assignments much later than groups that were given
interim deadlines leading up to the final deadline. Not only was the
“single deadline” group late, they also turned in the poorest
quality work (evidence of a last-minute rush job). The lesson is
clear: If you want a job done right and on time, set a series of
deadlines, not just one.
Source: Harvard Business Review, 60 Harvard Way, Boston, MA 02163
- Keep new customers coming back by offering a “growing
coupon.” Studies show that once a client visits you three times,
they are more likely to become a regular customer. Encourage repeat
visits by offering a coupon that grows in value with each visit. For
example, 10% off for the first visit, 15% for the second and 20% off
for the third.
Source: www.marketingprofs.com
- When a prospect asks “Can you do better on your price?”
don’t automatically start discounting. Instead, continue the
conversation. First, validate your prospect. This puts the prospect
at ease. Example: “I really appreciate that you’re sharing exactly
what’s on your mind.” Then ask if the prospect is ready to commit to
a purchase today if you can agree on the price. If no, negotiating a
price would be a waste of time — determine the other objection. If
yes, ask “Where would our pricing need to be in order for you to
move ahead with this purchase today?” If you can meet that price, it
will be very difficult for them to back out of the purchase.
Otherwise, say that you can’t sell your product to them at their
dream price. Then ask if they’d be willing to come up from that
price so that you can continue negotiating. If they won’t budge, you
have to either meet their demand or lose the sale, but most
prospects won’t take this hard-line approach so early in the
negotiation process.
Source: blog.sellingtoconsumers.com
- Get displayed on page one of Google’s search results by
posting to Google Base. This Google service allows users to submit
pretty much anything, ranging from products to services to events
(you don’t even need a website). These listings are then displayed
in Google OneBox results as well as Froogle results. OneBox results
are typically displayed near the top of Google’s organic search
results. Google will show the top three OneBox results for any given
keyword you type in, so expect some competition for popular
keywords. Go to base.google.com for more information.
Source: www.bestrank.com
- Worried about getting stiffed by a big customer? Consider
trade credit insurance. This little-known risk management tool
protects companies in the event their customers can’t pay. A
business can purchase trade credit insurance for individual
customers or as a blanket policy, covering a percentage of its
receivables. Some industries are too risky to insure, including
automobiles, housing, furniture and jewelry. And, you can’t wait too
long to start coverage — insurers are unlikely to offer policies
against customers that are already giving telltale signs of failure.
For some companies, the cost of holding a policy may surpass their
actual bad debt expense.
Source: BusinessWeek SmallBiz, P.O. Box 8418, Red Oak, IA 51591
- Increase traffic at your trade show booth by changing the
placement of your exhibit table. Avoid placing the table across the
front of your booth space — visitors will unconsciously perceive
this as a barricade. This is how most exhibit halls arrange your
space before you arrive to set up, but do some rearranging and move
the table to the back or side. Leaving the center of an exhibit open
can increase traffic by 25% or more.
Source: www.tradeshowresearch.com
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