His tone was desperate: “How can we increase sales? We’re losing money and are almost out of cash. If something doesn’t change, we’ll be forced to close.”
How would you respond? I could offer heartfelt sympathy, but what good was that? The owners seemed to expect me to hand them a miraculous formula to bail them out of their dilemma.
But here we were. What, if anything, could be done to save the business?
Guiding principles in a business emergency
We have a way of getting ourselves into tough situations. While this could mean we are daring, courageous entrepreneurs, it could also mean we simply haven’t managed our businesses well.
These situations are tough for several reasons:
Their business did not reach this low point overnight. The problem had been months, maybe years, in the making. It usually is. Why hadn’t they reached out for help six months or a year ago? Didn’t they see it coming?
- There is little or no cash to invest.
- Risk tolerance is low to none.
- Stakes are high.
- People are stressed out and fearful.
- Options are limited.
- Time is limited.
If you find yourself in this situation, maybe you can benefit from this advice I found helpful:
- Be creative. Look for possibilities.
- Consider spending your time instead of paying someone else.
- Stay calm. Get others’ input to keep your perspective.
- Maintain a positive attitude.
- Consider issues carefully, but act quickly when you get clarity.
- Look for low-hanging fruit.
- Find at least one experienced business person you can lean on for support.
Hopefully your business is not in a dire situation like the opening story. For you, maybe it’s a matter of hovering around break-even year after year. This can be frustrating. I remember saying, “Either we are going to change this and get profitable, or we are going to close the business.” How can you go from losses or break-even to consistently generating a profit? Whatever your situation, let’s start with two questions that require soul-searching and honesty.
Questions to identify root causes
How did we get here?
Be honest with yourself and own the problem. Why did I let the situation deteriorate to this point? Did I ignore the warning signs? Was I afraid or ashamed to ask for help? Have I worked to correct the problem? What, if anything, has worked so far?
Be humble and seek to understand how your decisions have impacted you. How can you make decisions differently going forward? Even though we don’t like difficult times, they are opportunities to grow our character. When we are not willing to learn from our mistakes, we stand in the way of our own progress.
What are the core issues?
Struggling businesses sometimes expect marketers or other types of business coaches to have a silver bullet to magically solve their problems. The core issues in a struggling company are not always rooted in marketing even though they affect it.
Owner or management disagreements, low morale or a dysfunctional culture, inefficient processes, or poor financial management can be the real culprits. If core issues aren’t resolved, changes in marketing still won’t make the business sustainable. For example, increased revenue won’t solve undisciplined spending.
Once you understand the root causes, it’s time to make the big decision. You have three options:
- Do nothing and let the situation ratchet you down tighter and tighter.
- Cut your losses and create an exit plan.
- Make necessary changes to reverse the trend.
Number one is not just irresponsible, it is the most painful and damaging route in the long run. Sometimes number two is the best choice. Hopefully for you, number three is possible.
Bootstrapping Your Marketing
“You have to spend money to make money,” the old adage says, but not all spending is created equal. How can you invest your limited resources for the best return?
1. Invest in low-cost research and development (R&D).
“R&D” sounds expensive and sophisticated, something a multi-million dollar corporation would do. But any business can do R&D. Discover how you can serve a niche market better than anyone else, and how you can communicate that advantage to more people.
- Involve prospects or customers in brainstorming, creating and testing solutions. Ask prospects, “What would need to be true for you to purchase from us?”
- Network with others in the industry. What works for them? What problems do they have? What problems do their customers have?
- Determine how you can use what you have to meet a particular need or solve a frustration, even if it only affects a small portion of the market.
- Look for additional products and services to sell.
- Create deliverables and pricing that make the decision a no-brainer for people in your target market niche.
- Research the price you should charge. Be ready to adjust up or down to reflect market value. Always be sure to maintain a healthy profit margin.
- Evaluate ways to make it easier for people to do business with you, such as simplifying your processes or paperwork and offering additional methods of payment.
- If your current marketing isn’t working, adjust your strategy. The problem could be one of several: your messaging, your channel (a mismatched audience), or your brand positioning.
2. Know your numbers.
It’s the beginning of the month. Where should you focus your attention as the month progresses?
- Set a sales goal for each month.
- Calculate how many dollars you need to sell each day, on average, to meet your goal.
- Determine how many sales calls and how many closes you need per day to meet your sales goal.
- Know your break-even point.
In the book Street Smarts, entrepreneur Norm Brodsky lists “Ten Commandments of Business.” Number 1 on the list? “Numbers run a business. If you don’t know how to read them, you’re flying blind.” Number 2 is, “Cash is hard to get and easy to spend. Make it before you spend it.” Number 4: “A sale isn’t a sale until you collect.”
In your pursuit of increasing sales, focus on making high-margin sales. Brodsky warns against what he calls “the sales mentality.” He writes, “It’s the idea that you should focus all your attention on making sales, and it’s very dangerous, especially when you are operating out of your basement on a shoestring.
“Why? Because sales do not equal cash, and cash is what you need to survive. You run out of cash, you go out of business. End of story.” He advises, “Maintain the highest monthly gross-profit margins you are capable of achieving. Do not go after any low-margin sales.”
3. Sell the solution.
Communication is key. Are you communicating the true value of your product or service? Put yourself in your customer’s shoes so you can pinpoint how your product changes their lives. Communicate this transformation in emotional terms in your customer’s everyday language (as opposed to simply citing information and data).
- Clarify your solution into a competitive advantage that prospects can easily understand and believe. Sometimes this is called a unique selling proposition (USP).
- Personally get in front of your customers. Focus on serving, not selling.
- Remember your numbers, and figure out how to meet them.
- Use testimonials to show your customer’s success.
- Ask your customers for referrals.
- Hand your business cards out everywhere—three at a time.
- Make sure every customer is truly satisfied. Give them 5 business cards and ask them to share their story with others.
- If you have one category of product that is doing well and one that is lagging, focus first on increasing sales of the product that is doing well. This may seem counterintuitive, but it allows you to quickly leverage what has already proven successful.
4. Gain wider exposure.
The ways you can increase revenue fall into four categories:
- Increase the number of customers.
- Increase the frequency of a customer’s purchases.
- Increase the size of each sale.
- Raise your prices.
Here are ideas related to the first two of these ways to increase revenue:
- Set up referral alliances. This could be anything from putting a stack of your business cards at your local barbershop to a signed agreement with another company to pay a finder’s fee for referring customers.
- Get the media involved. News writers are always looking for good stories, so give them the opportunity to tell yours. Write a press release. Hold an event and ask a reporter to cover it.
- Send email blasts and/or post on social media. Instead of desperate pleas to purchase, send helpful information or educational content related to your products or services. Then provide links to your products.
- Remember. It is easier and cheaper to sell to an existing customer than to find a new one.
- Hold an open house or a customer appreciation day, possibly teaming up with neighboring businesses that would benefit from sponsoring the event with you.
5. Invest in low-cost brand-building.
Donald Miller, CEO of StoryBrand, said, “Multi-billion-dollar companies can afford to do branding, but what most small businesses need is marketing.” Branding efforts are a long-term investment, and spending too much on branding when you need short-term results is a mistake.
Marketing includes branding, but your marketing at this point should focus on promoting your product or service more than refining and promoting your image.
However, following some branding best practices now will pay off later. You didn’t get into this situation overnight, and it won’t be corrected overnight. Getting some basic low-cost branding in place early on can help in the medium-term recovery stage.
- Use the same logo icon, typestyle, and colors consistently. Change them if they do not complement your business or if they don’t accurately convey the type of business you are.
- Letter your vehicles and make your phone number or website prominent.
- Use job signs. Again, make sure your contact information is easily readable.
- Hand out pens and other branded swag. Calendars are a proven brand builder.
- Find places to display banners.
Bill Sahlman, a business school professor, said, “The job of the entrepreneur is to make sure the business does not run out of cash.” Hopefully this article has opened your eyes to potential ways to strengthen your business, whether you need to bring in more customers, increase efficiencies, or rein in costs.
Understanding the numbers behind your business is crucial. If they start to slip, sit up and pay attention. Don’t let a business slow-down slip into a full-blown crisis.
Effective marketing is a little like this Chinese proverb: “The best time to plant a tree was 20 years ago. The second best time is now.”