Small-business owners often spend a good deal of time strategizing how to stay ahead of the competition and grow their market share.
Reducing the cost of products and services is the most common strategy business owners implement. This works until their competitors initiate a similar strategy, but this kind of short-term strategy often distracts from developing a long-term focus.
I often meet with business owners who say that they need more money to keep operating. Unfortunately, I see that many who suffer losses never had or maintained a written business plan, which only decreases their chances of survival during rough times.
Worse is that those who have been reporting losses are unlikely to get approved for a business loan because lenders foresee more risk in lending money to businesses that show recent losses. Sometimes some small-business owners borrow from their personal accounts, which at times leads to higher risks if they do not recover the losses in a timely manner.
Small-business owners should maintain or update a business plan, including financial projections at least once every year. Consistently maintaining a business plan helps identify the roadblocks and warn of potential hazards. A well-written business plan with good market planning helps increase the possibilities of long-term business sustainability. And that is often the best business medicine.
There is no 100 percent guarantee of recovery, but it can prolong the life of a business during rough times or at least give the business owners a more realistic view into the future of the business and help them plan.
When a business goes through its ups and downs — whether it’s because of the market conditions or the economy — small businesses often ride the unpleasant roller coaster. The only way to hang on is by adapting. Update a business plan and be prepared to make crucial organizational decisions. As part of the re-planning and restructuring process, business owners should consider the following:
▶ Reassess every function of the operation, management and overall administration;
▶ Reassess the target market based on the current demographics, competition and market conditions;
▶ Redo the expense budget months ahead based on the most recent financial data and seasonal earnings;
▶ Modify service and product line based on the products and services that show more demand, including seasonal sales;
▶ Revisit lease, insurance, vendor, distribution, supplier, sales and service agreements;
▶ Enhance outreach strategies and track customer-returning strategies based upon the service, products and more important through strategic marketing;
▶ Initiate CRM: Customer Relationship Management, or implement customer contact database through smart marketing tools;
▶ Maintain targeted customer engagement through various marketing, and target special and seasonal offers based on the demographics.
Every business is different, but the goal is leaner overhead, operational enhancements and consistent and measured marketing strategies based on the current market, demographics and economic conditions.
Mike Bindrup of the University of Nevada, Las Vegas and Small-Business Development Center, said that often when you are in a service-based business, you will have a larger percentage of clients that will take most of your time over small-ticket items. A smaller percentage of the clients who are your bigger customers often take less of your time and are usually the best customers, the ones you want to keep long term. “They pay the best, too” Bindrup said.
“When I operated my own graphic design business, I experienced this sort of customer diversity on a day-to-day basis and couldn’t understand why during some of my busiest times, there was only minimal revenue increase. My mentor helped me understand this concept by breaking down my work routine into specific sequential tasks, which started making sense to me,” Bindrup said.
A business that can make it through the rough times has only one way to go when the times get better, and that is to grow.
Raj Tumber specializes in strategic business development. Originally from Silicon Valley, he has worked with Fortune 500 companies and attained strategic business and management skills. He is also a certified business mentor with SCORE, an organization that helps small business formation and growth. Reach him at firstname.lastname@example.org.