August 2009 Archives

August 21, 2009

Don't Waste Your Money on Ineffective Marketing

Here's the seventh big-picture strategy from my save your business list:

7. Don't waste your money on ineffective marketing.

Spending money on conventional advertising, including radio, TV, and newspaper ads, usually isn't worth the money because these ads are broadcast to a general audience, most of whom probably won't be interested in your product or service. It makes more sense to use your marketing dollars to pay for selective listings, like a yellow pages ad or an ad in a trade journal, which are more narrowcast to an audience you know is already interested in your products or services. If you have a good-sized website, you might also investigate search engine marketing, which is paying to have people click to your site when they enter certain keywords into a search engine. But search engine marketing can be expensive if you don't spend time on it, says today's blog entry by Doug Williams at Web Design, SEO, Blog Marketing and Social Media Marketing for your Business.

August 15, 2009

Identity Your Customers to Focus Your Marketing Efforts

Here's the sixth big-picture strategy from my save your business list:

6. Identify your customers to focus your marketing efforts on them.

Your customer list is one of your most valuable assets. After all, your existing customers have already told you they are interested in your product and they are the easiest to reach Yet many small businesses concentrate their marketing efforts on the more difficult task of finding new customers.When dollars are tight, why not spend your marketing money developing offers to existing customers and developing additional products and services they'll appreciate? What's the best way to determine whether your current customers are interested in additional products or services? Simple: Ask. One way to do it is to email customers asking for suggestions about new and improved services. If you don't have their email addresses yet, now is the time to get them. Hand customers a postcard or short form asking for suggestions and their email address (ensuring them that you won't sell their email address to third parties). Here are some ideas from Laura Wheeler at Good Marketing Ideas for how to market to existing customers.

August 10, 2009

Innovate on a Shoestring

Here's the fifth big-picture strategy from my save your business list:

5. Innovate on a shoestring.

In a recession some small business owners cut back to the core, slashing new development and going back to the tried and true. That's not necessarily going to help you in the long run. Consumer buying habits aren't necessarily going to go back to the way things were before the downturn, so you probably need to make some permanent changes in your product or service offerings. To come up with ideas for new directions, services, or products, try brainstorming with your advisory board, employees, and family members, and solicit suggestions from your customers. You never know where you'll stumble across good ideas. In this month's Costco Connection magazine, there was a collection of reader ideas on how small business owners were adjusting their business strategy to the recession. One of readers had a great example of how adding profitable services to a retail store can bring revenues back up. Suffering from poor sales, a Texas bird shop added a "jungle room" for children's birthday parties, complete with a parrot show. The jungle room has created more revenue for the shop as well as free exposure to a new audience and more customer traffic (plus a bunch of kids who are begging their parents for a pet bird!)
In the same article, a business owner wrote in that he had had a lot of success by asking some business acquaintances in his area to get together and help each other brainstorm some innovative and creative strategies to survive the recession. It provided a great sounding board, new ideas, and even business leads. See if you can pull together a small group to come up with new ideas, and choose the most promising ones to implement.
August 6, 2009

Concentrate on What's Profitable

Here's the fourth big-picture strategy from my save your business list:

4. Concentrate your sales efforts on what's profitable.

There are two ways to make sure your marketing dollars and sales efforts are put to the best use: focus on selling (1) more of your bestsellers and (2) products or services with the highest profit margin.
Too many business owners ignore their bestsellers because they're selling well, and instead pour energy into marketing products or services that don't sell well, hoping to raise sales on these items too. It makes much more sense to concentrate your efforts on what your customers and the market have already told you--they want your bestsellers.

ist1_9372306-measure-your-profit.jpgAs to margins, in case you're not familiar with the concept, profit margin measures the difference between the costs of producing a product or providing a service and what you're selling it for. In other words, it lets you know what your return is on the money you pay out to buy or produce goods or to provide services.
To determine your profit margin, you divide your profit on an item by its sale price. For example, say an extermination service costs the customer $100, but the exterminator spends only $45 to provide it. The exterminator's profit is $55, so the profit margin is 55% ($55 divided by $100). If you have a margin of 55%, you know you will get to keep 55 cents of every sales dollar you take in (before paying for overhead).
If you regularly calculate your profit margins, you can monitor the profitability of your products or services. A decrease in profit margin often means that your costs have gone up--costs for inventory, supplies, or labor. This should nudge you to look for new suppliers, lower your labor costs, or raise your prices. If you're discounting products and services, it's especially important to keep track of your margin. You need to make sure that your costs for inventory and supplies, or your time or labor costs, aren't eating up your profit margin or even putting you into the negative on a sale.
Another way to use profit margins is in screening new products and services to sell. For instance, if you run a retail gift shop, you might decide to sell products only that can be bought and sold at a price that yields a profit margin of 50%. This will prevent you from taking on inventory that you'll eventually lose money on.
Once you figure out your profit margin on each product or service you offer, you can concentrate your sales efforts on those with the highest margin, which will let you keep more money from each dollar of goods or services that you sell.
And if you haven't already, pump your revenue and expense numbers into a profit/loss forecast to help you see the big picture: how many products or services do you need to sell each month, and for how many dollars, to cover your expenses and earn some kind of profit as well?
August 3, 2009

Minimize Your Personal Liability for Your Debts

Here's the third big-picture strategy from my save your business list:

3. Minimize your personal liability for your business debts.

If you're business is struggling, you should know what's at stake. If you're a sole proprietor or a general partner in a partnership, it's simple: you are personally liable for all debts of your business. That means a creditor can sue you and come after your personal bank account, your house, and your personal property.

If you are a shareholder of a corporation or member of an LLC, theoretically your personal property is protected from business creditors, but there are a number of ways that you can give up this liability protection--mainly by not keeping adequate separation between you and your business. For instance, if you signed a business contract in your name rather than as a representative of the business, or if you signed a personal guarantee, you're personally liable for paying back that debt if the business doesn't. I recently posted an article on Nolo's website that gives further details on when you're personally liable for your business's debts.

If you are currently running a sole proprietorship or partnership and you believe your business is viable in the long term, quickly forming an LLC or corporation will protect your personal assets, such as your house or your car, from being taken to pay off new business debts. If you are able to pay off to pay off your old debts--the ones that you incurred while you were a sole proprietor or partner--and you convert to an LLC or corporation, you'll be protected from personal liability for most new debts. Just keep in mind that forming an LLC or corporation won't allow you to escape your personal liability for current business debts.