Business Owners Toolbox Blog Discussions and articles to help the small business owner solve the challenges they face as they grow their business.

August 14, 2008

My Top 10 Rules for Small Business Marketing

Filed under: Marketing — Tags: , , , , — Mike Van Horn @ 4:15 pm

Q: What are the marketing needs for the average small business? Do you consider working with marketing consultants and, if so, what would you go to one for? 

I’m looking to get thoughts from those who are in/ run a small business (i.e., sole-proprietorship to a place with fewer than 20 employees)

 (Linked In posting, Aug 14, 08)

A: My Top 10 rules for Small Business Marketing? At least some good guidelines:

First, you asked about the marketing needs of the “average small business.” There’s no “average business.” Very different marketing/selling needs for a retailer, personal services, business services, and manufacturer/distributor.

• Marketing is essential, and it is expensive. You know what they say about owning a yacht? “It’s a hole in the water you throw money into.” Marketing can be the same way.

For a small company on a shoestring budget, the question is, how can you get the most from every marketing dollar you spend? And for every hour you spend on marketing and selling?

• Separate marketing and selling in your thinking. People who lump selling in with marketing often have lousy sales.

• Do you have more time, or more money? For the shoestringers, it’s time. So you need a time-centered marketing strategy.

• But then you must balance bringing in the work with doing the work. This leads to the eternal entrepreneur’s dilemma: You get a project; you stop marketing. The project ends; you have no work because you stopped marketing.

• Look at your marketing/selling at 3 different levels, and have a plan and budget for each:

1. Shortest route to cash flow. What sales can you bring in within 30 days?

2. Business development. How can you cultivate relationships that turn into sales within, say, 6 months?

3. Strategic development. How can you take advantage of big opportunities over the next 2 years or so?

• The “Goldilocks principle.” What size jobs/customers are just right for you?

1. Boulders. Big, lots of competition (thus lower margin), dominates your time if you get it, devastating if you lose it. They may view you as a contract employee.

2. Rocks. Solid, profitable, appreciative, no single job is more than 20% of your revenue

3. Pebbles. Tiny. Takes as much time to get as a larger job, low margin, demanding, slow pay

Aim your marketing at your “rocks.” If other good ones fall into your lap, take them.

• What works for you? Do more of what works, and stop doing the rest. To find out: List everything you already do (or might do) for marketing. For each one, estimate

…How much time you spend on it (per month, say)

…How much money you spend on it, per month

…What results you’ve produced so far: number of customers, size of jobs, type of work, desirability of prospects, etc.

…Lead time, sales cycle. How long does it take to pay off?

Ideally, you’d like to compare this ratio for each:

         Gross profit from the sales produced, divided by . . .

         Marketing/selling cost (including time)

When I do this for myself (I sell small business services) here’s what I learn:

…DOESN’T PAY OFF. Networking groups (wrong kind of prospects), display ads, yellow pages, PR campaigns, direct mailings or cold call campaigns

…PAYS OFF. Referrals from clients (remember to ask for them!), mutual referral sources, public speaking, writing books, writing articles (like this one), getting interviewed, professional organizations

…SHOULD PAY OFF BETTER. Website (search engine optimization)

Your list may be exactly the opposite of this.

• Get your face out there. Esp. for service businesses, people buy you. “80% of selling is just showing up!”

• Stick to it. The other 80% of selling is consistency and follow up. Have a regimen for marketing and selling, and get a coach to help you stay on it. Your coach is your de facto sales manager.

• Get needed help. Are you a great marketer/seller? Then hire someone to do the work for you. Are you best at doing the work? Then hire a marketer AND a sales person. (Rarely are these two skills combined in one head.)

Should you hire a consultant? For a shoestringer, be wary! Remember the yacht!

…Hire specific expertise: web designer, graphic designer, copywriter.

…Hiring someone to do a marketing plan for you is a waste of money. Find a FREE marketing advisor, e.g., through SCORE or your local Small Business Development Center. I could email you a page of questions, and if you answer them, you have a marketing plan.

…Hire someone to sell for you, and pay them mainly on results ($$$$) produced. Good sales people are rare and expensive. Ask one: “I’d like to pay you obscene amounts of money. How much is that for you? Now give me a plan of how you’re going to produce it.”

August 12, 2008

Sample short business plans

Filed under: Planning — Tags: , , , — Mike Van Horn @ 1:00 pm

Q: I’d like to see some sample short business plans to use as models

A: Shorter is better. My rule: “If you can’t write your plan on a page, you can’t get it done in a year anyway.”

We conduct plan workshops every year, to help business owners complete their Action Plan for the coming year. They devote a day to review their past year’s performance, clarify their long-term business trajectory and how business fits into their life goals, what they must accomplish in the coming year. We use a 70-page workbook with questions about every aspect of running a small business, but by the end of the workshop people reduce it to one sheet.

Note that this is an “action plan” that guides your action. It’s not intended to convince someone else they should put money in your business. Once you have this brief, basic plan, however, it’s much easier to convert it to a strategic plan needed to attract financing. My rule: Plan of action comes first.

If you ask me, I’ll email you several pieces:

– Template showing how it looks

– A handful of questions you can answer to get your plan started

– A Project Tracker that helps you add detail to central goals of your plan

While this plan is aimed at guiding your actions for the coming year, it can also serve to show a potential financier.

When to grow out of a home based business

Filed under: Entrepreneurship — Tags: , , — Mike Van Horn @ 12:50 pm

Q: “When is it time to grow out of my home-based business?”

 A: When I ran my business out of the house, my wife would say, “Mike, every flat surface in the house is your desk.” Clients would come in and plop down on the sofa. Our part time office assistant worked in the room next to the kitchen. I was always on; things always had to be cleaned up, ready for business. There was a big temptation to blur the time between work and home life. Did I work at home, or just sleep at the office?

It’s true that some good-sized businesses are run from homes. These are usually virtual business, where numerouis people work for the business, but remotely. Support people: bookkeepers, web designers, marketing strategists, virtual assistants. But also line people: field reps or technicians, contractor’s crews, and others who are paid per result not per hour.

This depends on the kind of business. A business that you essentially run out of your head (or from your computer) can be run from your home for a long time.

Many people run businesses from their homes that do not fit zoning requirements. But aside from the legalities, just how many people can you fit in your house? So the real crunch comes when you need to have a team of people work together in an office.

You must balance your desire to minimize overhead and avoid paying extra rent with several factors:

– The number of people that need to work together regularly

– Greater productivity and efficiency due to better workspace. Houses are often poorly laid out for office space.

– Image. How you come across to your desired customers and even your employees

– Revenue potential. By moving into an office or commercial space, how much could you boost your revenue and profitability? Is it enough to cover the increased overhead and then some?

– Readiness to grow further. 

August 7, 2008

How do I grow beyond a one-person business?

Filed under: Not yet categorized — Mike Van Horn @ 2:22 pm

JD, Consulting engineer (from LinkedIn Q&A)

I’ll answer your question with some questions. Use these to help you assess your growth options:

– How easy is it for you to bring in more business? Is there business out there for you to get, assuming you have the time and resources to service it?

– How competitive is your market? If companies don’t work with you, who do they go to instead?

If your answers to these two are positive, then growth is worth pursuing.

– What about your pricing? I often find that sole professionals like you underprice – esp. those who charge by the hour.

– How do you feel about managing others? Some professionals love the work, hate to manage others. Some are control freaks: can’t let go. Others get a charge out of coordinating a team. The latter find it easier to grow.

– How do your customers view you? Are they hiring just you, or are they hiring your company? For you to grow by delegating work to other techs, you must train your customers to do the latter.

– What is your best role in the business? Tech? Business development? President? Set it up so you do what you love doing, and what you do best, and hire people (even part time) to do the other parts. I work with professionals who hire a general manager to run their company, so they can keep doing the tech work they love.

– How much is your time worth? List in a column the things you do in your business, then in the next column how much it would cost you (per hour) to hire someone else to do each task. For example, strategic business development, $250/hr. Tech work, $150. Bookkeeping, $35. Office tasks, $15. If you spend time on the office tasks, then you are overpaying your office assistant by at least $150/hr!

– Can you price high enough to generate the surplus you need to grow your business? Here’s how you can justify hiring employees:

— Tech person. You must be able to bill them out for at least three times what you pay them. (For a subcontractor: two times their pay)

— Admin person. They must free up enough of your time so that you can bill additional work that is AT LEAST three times what you pay them. That’s break even: actually they should free you up to bill many more times what they cost you.

— They free you up to take more time off.

– How much are you willing to invest in your company’s growth? Some are willing to grow only what cash flow will allow. This is slower. Are you confident enough in your prospects to invest, say, $50k in hiring and learning curve time for people who will then make you a lot of money?

– How good are you at hiring excellent people? If you don’t give yourself an A, get some help with this from an HR professional. The biggest barrier to growth for professionals like you is not bringing in good enough people.

Your answers to these questions will point to the best growth strategy for you.

My book, How to Grow Your Business without Driving Yourself Crazy, is about this very question. You can get it from my website http://www.businessownerstoolbox.com

Mike Van Horn

How do I grow beyond a one-person business?

Filed under: Entrepreneurship — Tags: , — Mike Van Horn @ 1:40 pm

Q: from JD, Consulting engineer (from LinkedIn Q&A)

 

A: I’ll answer your question with some questions. Use these to help you assess your growth options:

 

– How easy is it for you to bring in more business? Is there business out there for you to get, assuming you have the time and resources to service it?

 

– How competitive is your market? If companies don’t work with you, who do they go to instead?

 

If your answers to these two are positive, then growth is worth pursuing.

 

– What about your pricing? I often find that sole professionals like you underprice – esp. those who charge by the hour.

 

– How do you feel about managing others? Some professionals love the work, hate to manage others. Some are control freaks: can’t let go. Others get a charge out of coordinating a team. The latter find it easier to grow.

 

– How do your customers view you? Are they hiring just you, or are they hiring your company? For you to grow by delegating work to other techs, you must train your customers to do the latter.

 

– What is your best role in the business? Tech? Business development? President? Set it up so you do what you love doing, and what you do best, and hire people (even part time) to do the other parts. I work with professionals who hire a general manager to run their company, so they can keep doing the tech work they love.

 

– How much is your time worth? List in a column the things you do in your business, then in the next column how much it would cost you (per hour) to hire someone else to do each task. For example, strategic business development, $250/hr. Tech work, $150. Bookkeeping, $35. Office tasks, $15. If you spend time on the office tasks, then you are overpaying your office assistant by at least $150/hr!

 

– Can you price high enough to generate the surplus you need to grow your business? Here’s how you can justify hiring employees:

— Tech person. You must be able to bill them out for at least three times what you pay them. (For a subcontractor: two times their pay)

— Admin person. They must free up enough of your time so that you can bill additional work that is AT LEAST three times what you pay them. That’s break even: actually they should free you up to bill many more times what they cost you.

— They free you up to take more time off.

 

– How much are you willing to invest in your company’s growth? Some are willing to grow only what cash flow will allow. This is slower. Are you confident enough in your prospects to invest, say, $50k in hiring and learning curve time for people who will then make you a lot of money?

 

– How good are you at hiring excellent people? If you don’t give yourself an A, get some help with this from an HR professional. The biggest barrier to growth for professionals like you is not bringing in good enough people.

 

Your answers to these questions will point to the best growth strategy for you.

 

My book, How to Grow Your Business without Driving Yourself Crazy, is about this very question. You can get it from my website http://www.businessownerstoolbox.com

 

Mike Van Horn

 

 

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