Has Your Company Stopped Being Creative?

I see small companies launch in a burst of creativity, then slowly lose their creative edge over time. Why?

This post was catalyzed by “At what size do companies stop being creative?” on www.joyofhumancapital.com

I see small companies launch in a burst of creativity, then slowly lose their creative edge over time. How about you? Tell me about you and your company’s creativity.

My clients are small business owners – from a handful to a hundred employees. Run by the owner, who is often the founder as well. As I look around at the people I’ve worked with (including myself) here’s what I see.

First, two observations:

1. Creativity comes in many flavors. Not just the “creative industry” like ad agencies. Also creative business concepts, product dev, designs; creative marketing campaigns, merchandizing, or product selection; creative distribution or service packaging or customer service; creative team building or organization structure; creative pricing or financing.

2. Creativity comes in all sizes, and so does failure of creativity.

CREATIVITY KILLERS FOR SMALL BUSINESS OWNERS

• Lack of support. Nobody is pushing her/him to take the creative leap, or problem solving how to overcome the hurdles . . . No-one following behind, handling the details, executing the vision.

• They get dragged out of creativity by the demands of running the business day to day. This has a lot to do with their own management style. “ I can’t find good people that I can trust.” “I got into this business to do what I love; now I spend all my time as a damn manager.”

• Lack of help. Owner continually pulled back down into lower-level tasks, can’t focus on creativity, vision, strategy.

• Lack of systems, relying on seat-of-pants management. Thus their franticness quotient increases exponentially with growth.

• Ill-fitting systems. E.g., accounting systems that don’t give needed performance information to the owner.

• Constraining systems. Too much “by the book” or “bean counter mentality.” Of course the owner has put these into place, but then starts believing in them.

• Failure of vision. Creative owner gets beaten down, burned out . . .  Has one good idea, and sticks with it long after the window of opportunity has slammed shut . . .  Fear of taking the needed next step. “Tried that, got beaten down, it didn’t work, now I’m gun shy.”

• Gets out of touch. Drifts into an eddy out of the current of new ideas and technologies. This can be related to age, but there are many creative codgers out there.

• Gets too comfortable. The balance between work and life tips toward Maui.

• Physical/mental impairment. Alas, this eventually catches up with us. If you’re smart, you’ll go out at the top, handing the creative reins over to the young whippersnapper you’ve groomed.

Can you add to this list? And how did you overcome this hurdle?

Most bang for your marketing buck — right now!

Hopefully nobody says, “Business is down, money is tight, so let’s cut advertising.” But you SHOULD ask, “Where do we get the most bang for our scarce marketing buck?” Then examine advertising along with your other options.

“As a small business in the current economy, how have you modified the advertising portion of your marketing budget this year? How has it been working for your company so far this year?” (Question on LinkedIn)

Melissa,

Hopefully, nobody says, “Business is down, money is tight, so let’s cut advertising.” But you SHOULD ask, “Where do we get the most bang for our scarce marketing buck?” Then examine advertising along with your other options.

Ads or promo? Direct mail or email? Internet outreach?  Networking or public speaking? Asking for referrals? Cross-selling current customers?

And not just about advertising in general, but for each type of ad placement.

To figure this out, I would create a grid: Down the left column, write every every type of advertising, and every other marketing activity that attracts business for you. Then across the top, head columns by the most important criteria for you, such as:
– How much you’ve spent on this, in both dollars and time (Put a dollar value on an hour of your time.)
– Size of customers or sales this brings you
– Number of customers per time period
– Desirability of the customers
– Lead time till you get the customers
– Its potential to bring you more in the long run
– (add your own)

Then rate each marketing activity by each criterion. Add up the totals and see what gets high and low scores. This is an eye-opening exercise.

This approach is over-simplified. It ignores interactions among types of marketing, and ignores strategic marketing with a long lead time. But it gives enlightening answers to the question, “What marketing gives me the shortest route to cash flow now?”

Why Businesses are Going Under

People say, “A rising tide lifts all ships.” Except, of course, for the ones that have sunk! As the recovery kicks in the companies that have gone under will not be coming back.

Many recent business failures I’ve seen are due to other issues that are exacerbated by a downturn in sales, even though the sales decline was not enough to knock them out.

• They expanded too much in recent years, then with business downturn they could not sustain their high overhead, even though sales still seemed pretty good.

• The owner/founder is nearing retirement and decides it’s just not worth the hassle to continue, and closes the doors.

• Poor management and administrative practices that worked okay during good times became much more apparent during bad times.

• Partners have a falling out, partly over needed tough money decisions.

• During boom times, companies took any project that came along, and never developed a strategic focus. In down times, lacking this clear image in customers’ minds makes their marketing task much more difficult.

I Survived the Crash of ’09!

Here’s how some of the small business owners I work with have managed to pull through the last few months:

Savings. “Over the years, every time we got a big job, I put some money away. That savings saw me through. During the first quarter, sales were terrible–and we can only cut back staff and overhead so much. Without that savings to dip into, I might not have made it.” Custom interiors

Hire sales rep. “Our new sales person has been with us a couple of months now, and she’s beginning to bring in the business. Before, selling all fell on me. She’s best at bringing new people in, then I can concentrate on doing the proposals and closing the deals.” Business insurance

Pay cuts. “At the beginning of the year, we cut everybody’s pay 20%, including mine. Everybody was okay with it. Then, a couple of months later, we cut it another 20%. We were down to 60% pay—working 3 days per week. But my best people stayed with me. And now, orders are trickling in again. With every big deposit check, I’m increasing hours.” Contract design firm

Develop new products. “Business has been very slow this spring. But ’08 was strong, so we had a cushion. My partner and I decided to take a couple of ‘retreats’ from the business and develop new materials. We never had time to get this done before.” Consulting firm

Focus on healthy part. “Our wholesale business has been way down. So we put the focus on our retail shop. We created promotions such as special products and live music on Saturdays. Retail is more profitable than wholesale (even though it has less growth potential). So, it has carried us throughout this down time. We’re actually more profitable now than we were a year ago. The rule for us is ‘go with what works.’” Specialty foods manufacturer

Diversify. “Smartest move we made was to hire a guy in 2007 to focus on commercial moves so we weren’t totally dependent on residential. Beyond that, we had steady military business, plus storage. So, diversification has saved us.” Moving and storage

Cut to the bone. “I kept cutting back on our crews until we were down to just one—but it was composed of all our best people. Even so, I was only about one payroll cycle from being broke. Now, some of those jobs that have been orbiting around for months are beginning to land. As I build up our crews again, there are certain people I’m just not bringing back.” Contractor

Reduce prices. “We cut prices 40%. This attracted a lot of people who were otherwise just not signing up. It wasn’t very profitable, but it allowed us to keep the doors open. I’ll continue this through June.” Training company

Does this list stimulate any ideas? It’s not too late for you to put some of these in place in your own business.

How to Thrive in Tough Times

Lessons from Successful Business Owners

To Survive Now
Keep your customers
Protect your cash
Sustain your team
Focus your head

To Thrive Later
Seek new opportunities
Ready your recovery fund
Inspire your team
Envision your recovery
Snap up resources

In the business media, it’s all doom and gloom and hunker down. Yet many small businesses are doing well. They are taking measures to protect themselves, yet making money and preparing for recovery.

Here are a few things owners I work with are doing right now–in marketing, customer service, finances, staffing, and operations. You can apply many of these ideas to your business tomorrow.

A year from now, the people thriving will be those who plan for recovery now.

Lesson #1. Banish “doom and gloom” mentality. At each Business Group meeting, members say, “Things aren’t going too badly. But we constantly hear all these horror stories on TV. We’re running scared. When will it hit us?” If you’re on your own, it can defeat you. Don’t hang with doom and gloomers; stick with the problem solvers.

Lesson #2. Keep you current customers. Meet with them individually. “How can we save you money? Here’s a suggestion how we can keep giving you what’s most important to you now, and cut back on these other items for now.” “So that your expenses are predictable, we’d like to shift from time and materials to set a monthly fee.”

Lesson #3. Ask, “Who’s buying?” Too often, we focus on who’s NOT buying. Sure, your big customers from 2006 are long gone. So raise your antennas and see who IS buying what you offer, and how you can refine what you offer to meet their needs and desires.

Lesson #4. Go for cash flow. Ask yourself, “What’s the shortest route to cash-generating sales?” Create a table with two columns. In the left column, write down all the marketing actions you do—or could do. In the next column, write how long it takes for each of these to pay off: “One week,” “a month,” “3 months,” “a year” and so on. Go after fast payoffs to generate cash flow now. This can give you financial breathing space to focus on long lead-time strategic initiatives. I call this “marketing triage.”

Lesson #5. Don’t take on unprofitable work. During the last downturn, a BG member watched with dismay as he lost job after job to desperate competitors. As recovery gained momentum, he was swamped with business from people who had previously gone elsewhere. Why? “You are the only one left!” they told him. Lesson: lowballers go belly up.

Lesson #6. Don’t keep unnecessary labor. 1st, let go of people who aren’t cutting it. 2nd, be frank with your good people. “Times are tough, but we can pull through it if we share the pain. We need to cut hours by 20%. If possible, I’ll make it up to you when the market recovers.” We’re afraid they’ll quit but where will they go?

Lesson #7. Envision your recovery. How do you want it to be in a year? Let your imagination run free and visualize without blinders. Don’t make decisions with long-term implications based on near-term negative outlook.

Lesson #8. Focus on running your business. Get yourself out of the minutiae. Do the things that are the most important to preserve health and stay forward-focused. Hand off the other stuff, or let it go for now.

Lesson #9. Watch your money like a hawk. Where can you save money without sacrifice? Look at each line item on your Profit & Loss statement. What outside services do you pay for that you use infrequently or not at all? Call your vendors and ask how they could save you some money. This includes your insurance carriers. The phone company. Yellow pages. Landlord.

Lesson #10. Collect money faster. Stay on top of your accounts receivable. Give an extra collection effort. Encourage payment by credit card to your merchant account.

Lesson #11. Don’t stop paying yourself. Pay yourself first! You are the most important person working for your company.

Lesson #12. Lay groundwork for recovery. At the end of a downturn is the best time to add needed people and resources that can help take you to the next peak. Locations, people, customers.

Pay yourself first, even in tough times

Re: “Entrepreneurs Cut Own Pay to Stay Alive” by Simona Covel, 5.6.9 http://online.wsj.com/article/SB124053156953150693.html

“A number of small-business owners have stopped paying themselves as they struggle to keep their companies afloat,” the article starts. She quotes a business owner: “All those small-business books say, ‘Pay yourself first.’ [But] not paying myself enabled me to keep a couple of other people around.”

I am author of one of the “Pay Yourself First” books referred to above (How to Grow Your Business without Driving Yourself Crazy), and I’m sticking by it.

Owners, if you stop paying yourself, it can have a devastating impact on your morale, drive, and productivity. Same as if you stop paying one of your other people, but the company absolutely depends on you.

Here’s what I’m advising my small business clients:

— Cut unneeded labor. If you don’t have the work, what are the people on your payroll doing? Find the level of operations that allows you to sustain your company.

— Don’t use your credit lines to meet payroll (except to cover a short-term receivables gap). And NEVER use your credit card balance for this.

— If you borrow money now to cover payroll or other expenses, then when business picks back up, you’ve depleted your credit, and you’re dead in the water.

— Cut everybody’s pay (after you’ve laid off the expendable ones). Either work 4-day weeks, or just reduce pay by 10 or 20%. Your good people know what’s up, and they know 80% is better than 0%.

— Then perhaps reduce your own pay by the same percentage.

— When all else fails, try some marketing! It amazes me how many owners are still marketing like it’s 2006, when we were all so busy we’d just wait for the phone to ring. But now, how many of us are still spending too much time in our office and not enough out schmoozing with customers, prospects, and referral sources?

— Don’t stop marketing. I read a quote this morning attributed to Henry Ford: “Cutting your marketing to save money is like stopping your clock to save time.”

— What are your customers buying these days? There’s a lot of business being done right now. See how to refine what you sell so that it meets the needs of those ready to buy this month.

— You might have to cut prices, but don’t take on unprofitable work. Don’t compete with the lowballers. If you can resist this temptation, when the recovery comes, they’ll be gone, you’ll have less competition, and you’ll have the finances to take advantage of it.

mvh

Economic stimulus for small business?

Three rules for Washington economy rescuers to live by:

“First, do no harm.”   (Hippocratic oath for fiscal policy makers)
“It’s got to work, stupid.” (From Clinton’s “keep it simple, stupid”)
“Targeted, timely, and temporary.” (From Obama’s economic policy advisors)

I want to hear from you.

What specific items in the economic stimulus package wending its way through Washington would benefit small businesses and independent professionals? Why? How?

What elements of the package would not be helpful–or could hurt you?

No conservative or liberal rants, please. Be specific. Relate it to your situation.

Below are ideas and responses on this topic–starting with my answers to my own question.

Kill the golden goose with taxes?

Convincing blog post on the “Doing Business” blog on the importance of entrepreneurship for innovation and economic well-being. We all knew that!

Business Owners Toolbox
Business Owners Toolbox

Read the full post at http://www.typepad.com/t/trackback/462659/35963502

But small businesses also bear the brunt of taxes! And the more we pay in taxes, the less we can afford to invest in our businesses. So our government is damaging our ability to create jobs and innovation, the very things they say are essential to boost the economic well-being of all of us.