June 12, 2012
Financial Strategy, Increase Profit, Leadership
You may or may not have noticed recently that almost every day we are hearing stories of corporate collapses, bankruptcies and businesses closing down. I’m not here to talk about what they did wrong, but I’m very interested in what it means for small businesses.
There is no doubt that, at the moment, the consumer is becoming more and more careful about where and how they spend their money. This is true whether your business sells to individuals or other businesses. So, what does this mean for your business?
Your business will generally fit into one of three different categories; it’s affected by the economic downturn, econonic downturn has no effect, or (if you are one of the minority) your business thrives in an economic downturn.
Regardless of your business ‘type’, and even regardless of whether we’re in econonic downturn or not, there is a constant in business that remains the same – We need high sales, healthy margins and minimum payroll expenses and overheads to have a thriving and successful business.
When things get tough, I believe we have three choices.
For choice number one, we can take a real cost-cutting approach, bunker down and hope things turn around quickly.
Choice number two is to do exactly the opposite. When businesses are confronted with a downturn or become conservative, the two areas they normally pull back on are marketing and employee related expenses, including training. What doesn’t make sense to me is that we agree that consumers are thinking twice about spending, so doesn’t common sense say we need to increase our marketing and increase our sales and service training??? If your competitors have gone into survival mode, they are giving you a great opportunity… to take their customers!
And lastly, choice number three is to evaluate whether your industry is going to be viable in the long term. There is no doubt that we are living in times where amazing advances in technology are seriously affecting some industries. All of us need to be continually evaluating what impact the technology is going to have long term. In particular, we simply must be making the technology work for us, not against us.
The May Partners coaching team has worked very closely with many businesses in Country Victoria over the past three years. Without exception, we have found the businesses that have succeeded, regardless of what their industry is doing, did the following:
- They knew their numbers – and not just their profit and loss or balance sheet, but their input numbers such as number of customers, average dollar spend, number of leads, cost per lead, gross profit etc etc
- They have improved their sales process/sales team - so that they could maximise any and all opportunities in their business
- They have recorded the results from their marketing very closely – and consequently have reduced their cost per lead
- They tried new things - and then they tested and measured the results. That is, they understood that business is changing, so to do the same things year after year and expect the business to improve simply wont work.
- Most importantly, they have seriously monitored the new marketing and sales activities they have implemented - and by doing so, they knew whether to continue with them or not.
What we also know is that any business decision needs to be made with adequate information. Otherwise we really are just acting on a hunch. We consistently hear from under-performing businesses things such as “advertising doesn’t work”, or “my sales team is good, but i’m not getting the financial results I want”. When asked for the figures to substantiate this, typically the business owner doesn’t have any. They are acting on a hunch, often a costly one.
Make sure your strategic decisions based on the answers to the following questions, not on a hunch.
- Analyse your industry; is it impacted?
- What are your competitors doing?
- Is your target market being adequately served?
- How can i get a bigger slice of the market?
Be sure to think outside the square when answering these questions. “It can be difficult to see the picture when you are stuck inside the frame”. Ask for outside help – now!