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

March 14, 2017

How to Prepare for the Next Downturn

Times are good, aren’t they? Will they stay good forever? Of course not.

Back in the last downturn, what do you wish you had done to prepare for future tough years? The time to prepare for hard times is during good times. That’s now.

You don’t want to hunker down and miss out on opportunities now for fear of what may lie ahead. So how can you take advantage of profit and growth opportunities now while taking prudent steps for later safety?

  • Control your costs. This is not sexy, but it’s the single most important step. And it’s the opposite of what many business owners do. When cash is rolling in, they go on a spending spree.
  • Run a lean operation. Don’t get lax with routine expenditures. Weed out people who aren’t doing the job you need done. Stay on top of scheduling, and don’t have more on hand than you need for each part of the day or week.
  • Hire top quality people; train them well. Build a growth team, and nurture their loyalty. A strong, loyal growth team will also be a “get through tough times” team.
  • Build habits of productivity and profitability during good times, so they will carry over into tough times. Make sure your incentives require and reward productive, profitable operation.
  • Raise your prices. Don’t lag behind your competition.
  • Keep your customers happy and loyal by performing impeccably, and handling mistakes completely and openly.
  • Make sure everything you sell is profitable. Make sure your systems can tell you what is most and least profitable. Weed out unprofitable products or services that drag down your margin.
  • Build up business savings, made possible by raising prices, controlling costs and boosting profits.
  • Stay on top of opportunities. Innovate in your products, services, marketing, and operations. Don’t get trapped behind the innovation curve by sticking with lower margin offerings.
  • Seek counter-cyclical business niches. What do you sell that will stay strong through a downturn?
  • Grow into profitable niches, so that you have a stronger basis for profitable operation during a downturn. Don’t be caught trying to sustain an unprofitable operation when a downturn hits.

Surprise!  Your preparation for a down cycle looks very similar to growing during good times.

Want a set of questions to help you discover how to make these things happen in your business? Just ask me and I’ll email it to you.

April 10, 2012

To Thrive, Banish Doom and Gloom

“I let myself get discouraged by telling and retelling the same old story of woe about how bad things were. This was killing the business. During the plan workshop, I wrote it all out in excruciating detail, took one last look and then tore it up in little pieces. Now the slate is clean for the coming year. From now on, I’m talking about how we’re laying the groundwork for recovery.”

You do the same. And don’t hang with doom and gloomers; stick with the problem solvers.

“The last two years have been humbling. I saw how arrogant I’d been. We assumed that growth would just keep going. But when the phone stopped ringing, we had to relearn Marketing 101. For example, setting targets for number of new clients, and tactics how to bring them in. We should have been doing this all along.”

This is one of the lessons in How to Thrive in Tough Times—Lessons From Small Business Owners–my newest ebook, just posted on Amazon for Kindle, iPad, etc. for $2.99.

When All Else Fails, Try Marketing

Marketing in 2008. *Ring! Ring!* “Hello! Joe’s Plumbing, this is Joe. How may we help you?…Sure! I think we could handle that. What about next Tuesday?…Thank you!” Joe scribbles on calendar. *Ring! Ring!* “Hello, Joe’s Plumbing.”

Marketing starting in 2009. . . . . . Joe sitting at desk twiddling his fingers. “Hum dee dum”…….. The phone is not ringing.

Marketing now. (Joe picks up phone and dials.) “Hi, Pat, this is Joe of Joe’s Plumbing. Haven’t talked with you in awhile. I just wanted to call and tell you how much we appreciate your business. We’re having a special! For the next 30 days, you can get ….”

Joe was really good at plumbing but he didn’t like marketing. But, at long last, he turned to his partner and said, “Everything else has failed. I guess we’ll have to try some marketing.”

Now, you may think this is an exaggeration, but I can’t tell you how many business owners I work with treat regular outreach to their best customers and prospects as a last option.

How about you?

Make some calls. Pick up the phone. Call some of your best customers and those you’d like to be working with.

Show your face. 80% of selling is just showing up. This is more important than all the rest of the high falutin’ stuff people tell you.

Ask, “Who’s buying?” Too often, we focus on who’s NOT buying.

Ask, “Where do we get the biggest bang for our marketing buck?”

Set a reachable target, and track your progress. Be accountable to someone else, so you don’t let it slip out of your consciousness.

If what you used to do doesn’t work, do something else. What will work best in this business climate to reach those you want to work with, and entice them to do business with you?

Want to see some more of this? How to Thrive in Tough Times—Lessons From Small Business Owners is my newest ebook, just posted on Amazon for Kindle, iPad, etc. for $2.99. Worth every cent!

January 21, 2010

Lessons From a Gawdawful Year

Some people have told me that ’09 was not their best ever year! But what doesn’t kill you makes you stronger. What lessons have you learned from this tough year? Here’s what people in my Success in 2010 plan workshop sessions have been saying:

“We’ve had to cut costs to the bone. We’ve managed to save 10%. It struck me, what if I had been that ruthless in good times and not just bad? I’d have 10% more bottom line. Money to put in my pocket, to create a cushion for future tough time or to create a growth fund.”

“2009 was humbling. I saw how arrogant I’d been. We assumed that growth would just keep going. But when the phone stopped ringing, we had to relearn Marketing 101. For example, setting targets for number of new clients, and tactics how to bring them in. We should have been doing this all along.”

“I let myself get discouraged by telling and retelling the same old story of woe about how bad 2009 was. This was killing the business. During the plan workshop, I wrote it all out in excruciating detail, took one last look and then tore it up in little pieces. Now the slate is clean for 2010.”

“We kept people on way too long. We should have laid people off sooner. I was afraid that we’d never get the good people back. I’ve learned we cannot guarantee jobs. We must retain labor flexibility. From now on, our scheduling must go along with revenue—not just shop people but admin as well.”

“We saw our employees perform better in tough times. They’re more friendly, supportive and team-oriented. Is this fear of unemployment? I think they just saw the trouble the company was in and it focused their thinking. As a result, people are doing better client work than ever.”

“I watch the books like a hawk now. During good times, I only kept half an eye on the books. I’ve got to track how we’re doing—even day-to-day. I can’t wait till the end of the month to see what we did a month ago.”

“We hunkered down and lost sight of our goals. We’ve had to get in touch all over again with our long-term vision. It’s the source of our direction and inspiration. Without this we’re just wandering around.”

“Tough times force us to make better decisions. In fat times, we get lazy; let bad decisions slip in; spend too much on marketing and keeping poor employees, etc.”

“We laid off 40% of our people and kept the best 60%. Now that business is picking up, I’m giving more hours to our remaining people—even overtime—rather than rehiring. I see that paying overtime for existing people is cheaper than paying health insurance, workers comp, etc for extra people we hire.”

“We got a lot less picky about our customers. We’re going after smaller clients we would have said no to before. And without these, we’d be dead now.”

“A key employee left unexpectedly. This threw us for a loop. The lesson? Cross-train. Don’t be put into a position so that the company is held hostage to whether one employee stays or leaves”

What lessons have you learned? Add ‘em below.

June 29, 2009

Most bang for your marketing buck — right now!

“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?”

May 6, 2009

Pay yourself first, even in tough times

Filed under: Thrive in tough times — Tags: , , — Mike Van Horn @ 3:42 pm

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

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