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5 Ways to Become Profitable

August 23rd, 2013

5 Ways to Become Profitable

All businesses want to make money. And of course if they don’t, then even those with great products or services will fail. Making more money and becoming a profitable business is what it’s all about. Here are five strategies that can help.

1. Change the Way you Operate
Analyze your existing business models and try to establish ongoing revenue streams. If your customers are buying infrequently then you might, for example, sell an ongoing re-supply program or a maintenance plan instead of just a one-time or stand-alone sale. Establish a relationship with new customers and change the relationships with established customers to tie the profitability of their business to your products or services.

Look around, analyze and learn from what your competitors are doing. Think about what you can innovatively apply from those lessons to your business.

2. Become Visible and Connected
If you have a long established company with a great reputation, loyal customers and respected industry experience, then you are probably running a successful business. But along comes the new guy who puts his business on the Internet and posts his credentials all over the place. Everyone, including your customers, can find him. You can’t sit there and assume that just because people know who you are you will remain dominant.

You have to have a marketing plan that addresses the current methods used by potential customers to find the products or services that you offer. When they search the Internet, and you’re not there, or they can’t find you, then in 100% of those cases you will not get their business. A lot of older small businesses don’t have a web-presence. If that’s you, or you don’t have a strategic marketing plan in effect, then you need to take your reputation online through social media, a website and a blog to connect with customers, including the ones you already have, or you won’t have them much longer.

3. Raise the Bar on Marketing
A lot of small businesses think about sales but not marketing. You can’t just go out and try to make sales; you have to have a plan with a strategy coherent to your industry, your company and the prospects you want to target.

In order to track the leads your marketing program generates, you will need customer relationship management (CRM) software, although a well-designed Excel application may be OK as you get started.

Consider using search engine ads, email marketing and other such online advertising.

Give your business an immediate web presence through social media networks including LinkedIn, Facebook, Twitter and YouTube.

Offer tutorials, demos, or new certification sessions as webcasts or podcasts for immediate download.

All these types of promotional vehicles need to be on the table because that’s what your competitors are doing.

4. Make Every Person a Salesperson
Some employees don’t think they’re there to promote sales or the business and are just there to collect a paycheck. But those days are gone and those people are the first to be laid off. Everyone should be an income-producing part of the business no matter what their main function might be. Everyone needs to pitch in to help cut costs, sell, and network on the web. Motivate employees to spread the message and reward those who make the extra effort or are producing new business.

5. Streamline Your Costs
If a business is having profit problems, the options are pretty straight forward. You can increase sales, decrease expenses, or do both. Due to the sluggishness of the current economic recovery, sales may not be where you would like them to be, and increasing sales may be a slow road. Decreasing expenses may be a faster way to turn things around. Try fitting expenses into three categories: fixed costs, such as rent and other overhead, sales-related costs that are tied to producing revenue, and discretionary expenses, such as new equipment and bonuses. Examine every single line item looking for ways to save, even with the fixed costs. Telephone and insurance costs may be fixed, but they are also competitive, and therefore negotiable.

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Posted in , action plans, best practices, bookkeeping, business goals, cost, customer service, entrepreneur, management, profit, small business, strategic planning, Uncategorized

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A Successful Business is a Well-Oiled Machine

January 21st, 2013

 

Since you want more clients or customers, more income, and more time off, you’ll need to make your business run like a well-oiled machine. If you are like most entrepreneurs you’re handling almost everything yourself, and so your business is probably running YOU, instead of you running your business. That means a lot of things are being left undone, opportunities are being lost, and consequently fewer clients and are coming in.

Consistency is crucial and chaos is costly, both financially and time-wise. When things run like a well-oiled machine, when everything’s organized, chaos is reduced. Ideally, you want things run on their own, or by the efforts of someone else, so you can focus on growing your business, while having more time off to enjoy yourself. For this to happen, you’ll need to systemize the processes involved in operating your business.

If you haven’t identified the one best way to perform each repeatable task or process (such as answering the phone in a consistent manner, managing your sales process, etc.) then you’re in big trouble. You need to create some systems and procedures.

Even if you don’t have help from staff, you can still make your business run smoothly.

Begin by documenting everything you do:
Start by tracking your time. Take a note pad and document the time it takes you to do the tasks you do every day. In a week you will have a good picture of where you are spending your time. It also allows you to see what can be removed from your day, and what can be delegated to your team. By keeping an awareness of your time and where you spend it, you will be much more productive. You’ll see a pattern of where you are spending too much or too little time, and which things you are doing that aren’t essential to your business. By keeping track of this, it will help you realize how you can use your time better.

Next, you want to document the process associated with each task:
Write clear instructions on how to complete each task. This will eliminate, or at least improve, chaotic situations. Increased levels of organization will enable a better work ethic and will help keep you on task generating better production throughout the day. It can be eye opening to see what you need to put into place. Once you realize what needs to be done, and fix it, your business will run more smoothly. You may also detect areas of your business that are under, or over staffed. By recognizing this you are attacking an issue before it becomes a bigger problem. You are now also able to better delegate what you need to, so that you can focus on what is the most important use of your own time. Make certain that all task instructions include the locations of all support material so that if you are unavailable your staff can easily find what they need to keep things going smoothly.

The end result should be an instruction manual for your business:
An instruction manual, or operations manual, for your business is a huge asset. It will help you and your staff to keep on track and know where to go to find the information need. It will clearly define the rules and regulations, work ethics and processes clearly. This will help you keep your employees in line, and help employees know their proper role, and what they need to do to fulfill that role. Everyone’s job is easier when the processes and procedures are clearly stated. There won’t be any gray areas when everything is right there in black and white. As you add to your team over time, having your systems documented will allow new people to integrate better, faster and more efficiently with your current team.

Ideally you will want to define your systems and document your processes and procedures before your company grows to full capacity. Then, as you approach full capacity status, you will avoid the breakdowns that cause so many businesses to fail. At the same time, you’ll make more time for marketing and for the ability to service the resulting larger client list.

A prime reason that franchises are so successful is that the operations manual eliminates all the guesswork on how to do things. It tells you “one best way”, and documents everything in a step-by-step manner.

But remember, just because the process is documented, it does not necessarily mean it’s always going to be the “one best way” to perform that task. You should challenge your employees to improve on how things are done to increase productivity and the quality of the results. That said, your operations manual should be a living document.

There are many things in any business that can be systematized. For example, each of your different marketing methods that you use to attract new clients should be well defined and documented, as should your client management, your schedule, your calendar, your email, etc. While you’re at it, your personal life could also benefit from establishing specific procedures. You can systematize your food shopping, your doctor appointments, your personal email, your dry-cleaning, your errands, your banking. You name it, and it can probably be systematized to your benefit.

You’ll be amazed to see how much of a problem-free zone your business becomes. You will have a lot more time to focus on building the business, a lot more room for new clients, and more time to simply enjoy yourself. You’ll have more time for vacations, for self-care, and for spending quality time with friends and family. And that’s what being self-employed is really about.

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Posted in , action plans, best practices, business goals, entrepreneur, management, profit, small business

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6 Mistakes to Avoid as You Build a Profitable Business

September 18th, 2012

Where do small business owners go wrong when trying to build a profitable business? Many mistakes can be traced back to such things as not being consistent in preforming some of the most crucial tasks required for a business to function. But there are also mistakes made by not taking a task to completion, trying to take too many tasks to completion, spending time on the wrong tasks, not having procedures in place for the most crucial tasks, and hiring the wrong people for the tasks you expect them to accomplish.

Avoiding these 6 mistakes can save you time, money and a lot of frustration. So as you move your business toward your goals of profit and growth, here are some mistakes you may want to avoid or fix.

1. An Inconsistent Marketing Effort
Marketing may well be the most important task a business must perform. For many, marketing efforts are like a roller coaster ride, up and down based on how busy you are or how sales are doing. If your marketing is sporadic, it’s likely your results will be the same. The key to attracting and retaining customers is consistency. It is better to do 3 or 4 lead generation strategies well and consistently than doing a dozen of them periodically.

2. No Follow Up
Investing resources to generate leads for your company without a proven method to convert them to paying customers is costly. No matter how potential customers come to you, a system for consistent and timely follow up is a key to sales growth. Take the time to develop a procedure for turning prospects into customers. Take advantage of technology, templates and scripts for efficiency and effectiveness. If you are not consistently following up on your marketing, you are not completing the marketing task. Be consistent and watch your sales soar.

3. Doing it all Yourself
Most small business owners became entrepreneurs because they are experts or skilled at something and believed they could do it better than others. But building a successful business requires more than technical know-how. No one is an expert at every task, so supplement yourself with other experts to fill in the gaps. Whether you hire employees, sub-contract work, create joint ventures, work with coaches, consultants or develop strategic alliances, the support you need is available. Don’t try to do it all yourself.

4. Not Identifying Your Customer Profile
The best products or services will go unsold if you are talking to the wrong people, those who will likely never buy. If you invest your time and money promoting your products or services to people who don’t have the resources, authority or need, today or in the near future, you will have spent your time on costly frustration. Who are the ideal customers for YOUR products and services? Do your research, find out who and where they are, how to reach them, and then apply your resources to pull them in.

5. No Procedures
Documented procedures for all your company’s critical tasks and operations is a key to efficiency, consistency, continuous improvement and profitability. Defining the important tasks crucial to a business is often ignored. This mistake becomes obvious when you hire and train new people, only to start losing customers due to poor service or missed deadlines. Don’t expect your employees to have your clarity of vision. They will need to know exactly how to do their work if they are to do that work successfully. Take it one at a time, but make written procedures a priority in your business. The results will surprise you

6. Hiring on the Fly
Are you quick to hire and slow to fire? That phrase describes many small businesses. A strong team of people to support your operations is certainly important, but only if they are the right people. There are proven hiring systems and tools, including a job description and clear goals, to help small businesses attract and retain quality people. Always hire with a purpose, invest in training, commit to developing your team and be willing to let go of those who don’t fit.

Which of these mistakes are impacting your profit and growth? Make it a priority to fix them, one at a time if necessary. The sooner you do, the sooner your sales and profit will grow.

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Posted in , action plans, best practices, business goals, customer service, entrepreneur, management, profit, small business

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Retaining Your Current Customers

April 26th, 2012

When focusing on growing your small business, acquiring new customers should probably be at the top of your list. And that would be the best possible approach for a startup company. But I would suggest that the most important thing for any established business is to keep their existing customers.

You have probably heard this before; it is far less expensive to retain old customers than to acquire new ones, but you should also ask yourself what is the point of acquiring more customers if you can’t hold onto your existing ones? Also, what is the cost to your brand of all of those defecting customers? Are you just replacing angry customers with ignorant ones?

In a world of increasing competition and ease of defection to other products and services, building and focusing on keeping your customers longer can be a significant way to grow your business. Realize that:

  • Businesses in many industries may lose up to 50% of their customers over a five year period.
  • Studies have shown it is 5 to 7 times more expensive to acquire a new customer than it is to retain a current customer.
  • As little as a 5% increase in customer retention can increase profits by 25 to 95%.

Unaware of these figures, many businesses still focus on acquiring new customers as their primary growth strategy rather than protecting and nurturing those they already have.

Why do customers leave?

 Before we can start keeping customers, we first have to try and understand why customers leave. Studies tell us that the main reasons customers leave, or stop doing business with a specific company are:

  • 1% die
  • 3% move to another area
  • 5% are influenced by friends or contacts to go elsewhere
  • 9% are lured away by your competition
  • 14% don’t stay because they are disappointed with your product or service
  • 68% leave because they perceive an indifferent attitude toward them

Furthermore, research also shows that there is a significant difference between the reasons that companies think customers leave and what their customers actually think. If these findings are true then they have huge implications for business. They suggest that loss of customers is not so much about how good your product or service is, or how competitive your industry is, but rather it’s more about how you are with your customers, and how much they believe you care about them.

The implications of this falls into a few areas that businesses need to focus on:

  • It’s not about you (the business), it’s about them (the customer)
  • Customer service/care involves everyone in your business not just your customer-service people
  • Your relationship with your customers. This may take some time, effort and a lot of trust in your front-line staff because everyone is different and technology and systems are not always the best way to solve a problem. Sometimes it’s about just being a bit more human, taking a bit more time and a longer view of the relationship you have with the customer.

Want to improve your retention of customers? Here are a few steps to help you get started:

Get to know your customers

This is not just about how long they have been a customer or how much money they spend. Get to know them, find out what they like, what they don’t like, ask for their opinion on how you could better serve them.

Segment your customer-base according to their similarities

Segmenting your customers into different groups will make this project easier and allow you to track retention progress in each group. Create a strategy to get to know each group of customers that focuses on their expectations. Since each group is different, it is reasonable to expect they will have different preferences.

Decide which customers are going to work for your business

This is where reality and tough choices kick in. Not all customers are going to be a good fit for your business so choose which customers will work and be very clear about which ones will not. If you can identify the customer that will be disappointed with your customer experience as it does not fit with their needs and you choose not to do business with them (in the nicest possible way), then you will have saved yourself a lot of time and energy and brand equity in the process. They’ll appreciate the honesty. Refer them onto someone who will be able to fill their needs and you’ll create an advocate for your business.

Use Customer Relationship Management software

You’re going to need to have a way of gathering and storing the information about your relationships with your customers. This is where Customer Relationship Management (CRM) technology can lend a hand. Talk to an expert about this but don’t be led by the technology. Let your customers lead.

Measuring your progress and success

Set targets, monitor and measure your progress. It’s the only way that you will know if you are improving. However, realize that this can take time and will depend on the nature of your business and current relationships with your customers.

The results of improving your retention

The process of creating a focus on customer retention is not easy, and it takes time. But when you put it all into place you will be pleased with the results. Listening, learning and paying attention will get a positive response from your customers, and that means more business for you. Once you establish a learning relationship with your customers, you can develop a partner-like relationship. And at that stage, you’ll be able to meet and exceed their expectations by anticipating their needs. The deeper the relationship and more complex their needs, the more they will appreciate your relationship with them and the less likely they will be to move their business elsewhere.

Customer loyalty has a direct impact on the market value of your business

It’s been said that the most valuable asset a company possesses is not its buildings, employees or intellectual property, but its customer list. And that’s certainly a defensible position to take. A true entrepreneur, stripped of his or her entire infrastructure, could conceivably rebuild from scratch with only a list of proven buyers.

Interestingly, anyone who may wish to acquire your business will assess your company’s market value by taking your customer list into account. Should you ever choose to sell your business, it will be easy to point to a well-maintained customer list and express customer loyalty as a considerable value.

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Posted in action plans, best practices, branding, business goals, contact management, CRM, customer relationship management, customer retention, customer service, entrepreneur, small business

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9 Strategies for Thriving in a Tough Economy

March 13th, 2012

Whether or not you believe we’re in a recession, or slowly moving out of one, or even if you have come to believe that what we have now is pretty much as good as it’s going to get, there’s no getting around the fact that we’re experiencing poor economic times. An enduring lack of consumer confidence and decreased sales threaten all businesses, but small businesses are particularly vulnerable as they often don’t have the reserves to help them survive difficult times.

Entrepreneurs who are survivors will look at this as an opportunity to improve their business practices so they can not only weather the tough times, but thrive during them. How, then, can you recession-proof your business? Thinking through the following practices and how you can make them your strategies will help ensure your small business’s success in a tough economy.

1. Protect your cash flow

To keep your small business healthy, cash needs to continue flowing through it. As long as your business exists, you will have expenses. But the harder times get, the harder it can be to keep the cash flowing into your business. Be more diligent in how you are spending money. It’s important to be frugal and aware of your income and expenses. By doing a line item cost for each expense, you will be able to identify areas that need greater attention. Efficient cash flow management is crucial. The sections below are all, for the most part, areas that will have impact on your cash flow, but take special note of the ones regarding evaluating your vendors, reviewing your inventory management, and keeping your personal credit in good shape.

2. Streamline your business practices

This is an opportune time to review your business procedures for effectiveness. Consider areas that can be combined into one. Consider areas that can be structured differently to reduce costs. Think about sharing resources, like administrative or payroll work, with other entrepreneurs to reduce overhead. The goal is to streamline operations so you can still provide a quality product or service, yet realize a greater profit by reducing the expenses to produce it.

3. Evaluate your vendors

If you use vendors for packaging, labeling, distribution, or in other areas of your business, this is a good time to do some price comparisons. There is a lot of competition among vendors to attract new business, so you could realize some serious savings in this area. Since no one wants to lose business during a bad economy, chances are good that your current vendors will meet the competitor’s price. If not, it’s time to move your business to the lowest bidder, just as long as you’re not sacrificing quality.

4. Review your inventory management practices

See what can be done to reduce inventory costs without sacrificing the quality of goods or inconveniencing customers. Are you ordering too many of particular items? Can an item be sourced somewhere else at a better price? Is there a drop-shipping alternative that will work for you, eliminating shipping and warehousing costs?

Just because you’ve always ordered something from a particular supplier or done things in a particular way doesn’t mean you have to keep doing them that way, especially when those other ways may save you money.

5. Focus on your core competencies

A diversification strategy is often recommended for small business success. But too often small business owners simplify the concept of “diversification” to “different”. Just adding other products or services to your offerings is not diversification. It’s potentially just a waste of time and money. Worse, it can damage your core business by taking your time and money away from what you do best. It may even damage your brand and reputation. If you have diversified out into different areas over the years to improve market reach, it might be time to regroup and focus on the core of your business and outsource the rest. Evaluate what is and isn’t working and put more effort into what started you out as a successful entrepreneur in the first place. It’s important to get in touch with your core business and make sure it continues to meet the changing needs of customers. So consider dropping the extras and focus on what you do best and which is most profitable to recession-proof your business.

6. Develop and implement strategies to get your competition’s customers

If your small business is going to prosper in tough times, you need to continue to expand your customer/client base. If you have competitors, then they have customers. So, there are already people out there buying what you sell, just not from you. What will it take to attract those customers? You’ll need to offer something more or something different. Research your competition and see what you can offer to entice their customers into becoming your customers. It’s not only lower prices or a better price/quality trade-off that gets the business. Providing better customer service is often identified as one of the easiest ways to outdistance the competition. But you need to do the research in your own market to find out what it takes to be the customer’s first choice.

7. Make the most of the customers/clients you have

They say that a bird in the hand is worth two in the bush. The bird in the hand is the customer or client you already have. These customers are an opportunity to make more sales without incurring the costs of finding a new customer.

Even better, he or she might be a loyal customer, giving you many more sales opportunities. If you want to recession-proof your business, you can’t afford to ignore the potential profits to be had from established customers. But remember that your customers are going through tough times too. In order to retain their business, implement measures to express your appreciation. This could be a one-time price reduction, a customer loyalty card, or a referral incentive. Whatever the strategy may be, it should be something of value to the customer and within your marketing budget.

8. Continue to market your business

In lean times, many small businesses make the mistake of cutting their marketing budget to the bone or even eliminating it entirely. But lean times are exactly the times your small business most needs marketing. Consumers are restless and looking to make changes in their buying decisions. You need to help them find your products and services and choose them rather than others by getting your name out there. So don’t stop marketing. In fact, if possible, step up your marketing efforts.

9. Keep your personal credit in good shape

Hard times make it harder to borrow and small business loans are often among the first to disappear. With good personal credit, you’ll stand a much better chance of being able to borrow the money needed to keep your business afloat if you need to. To recession-proof your business, keep tabs on your personal credit rating as well as your business one and do what’s necessary to keep your credit ratings in good shape.

There’s absolutely nothing that will make your small business one hundred percent recession-proof. But implementing the practices above will help ensure your small business survives tough times and might even be able to profit from them.

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Posted in , action plans, best practices, budget, cash flow, cost, customer service, entrepreneur, management, profit, small business

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