In the almost 30 years that I've worked as a CPA, I've had the opportunity to see businesses go on to achieve amazing results in the marketplace and for their community and for the owners. And I've seen many more businesses founder and fail.
One of the biggest challenges for small business is figuring out how to grow your business, especially in the beginning. The problem is that the desire to grow your business can turn into "grow at any cost" and that's a dangerous position. Growth can be deadly to your business if you don't first weigh the cost of that growth.
That cost can come in two forms:
The expense of the development strategy itself, and
The cost of ramping up your business with inventory and/or personnel to meet the demands of increased business.
In this article, we're going to look at the expense of the development strategy itself. It really is the second thing you should consider, though. Fast growth can cripple a small business if there isn't enough cash flow to fulfill on the sales. First determine how much growth your business really can stand.
Assuming that your business is able to handle new clients and/or sales, now let's take a look at the business development strategy itself. A good rule of thumb is that you should expect to receive 5 times gross income (in other words, sales) for the amount you spend for promotion, marketing and advertising. In other words, if you spend $10,000 in total to put a new business development strategy in place, you should expect to receive $50,000 in new sales.
If you're the typical small business starting, growing or even just surviving in a tough economic market with little or no credit, you also need business development strategies that don't eat up your cash flow. There are plenty of people happy to sell you tens of thousands of advertising space, but can your business afford that? And what if the campaign doesn't work? You've just used up some hard-won cash from your small business.
The best business development strategies are ones that take little or no cash flow.
Here are nine high impact, low-costs for your business:
Get noticed. Small business often start with an entrepreneurial urge to do something better than anyone else has done it before. That's working in the business. And to a certain extent, you need that. But, in today's world, it's highly unlikely that the world will beat a pathway to your door based on something great you've done that no one else knows about. Some ideas to get you started: Write articles, post a blog, build a social media platform or press releases. It's possible to get noticed in today's world for little money. The trick is to stand out above all the other noise. The best way to do that is to provide solid content. Each product and product line must stand on its own merit. There is no room for dogs in a bootstrapping company. Unless, of course, you have a pet grooming business.
Have a good accounting system in place so you can quickly make business management decisions. If something is working, then put more money into promoting that item. If something isn't, cut it quick.
Create a sales funnel. The sales process resembles a funnel. At the top end, the widest part, are the people who are just finding you, checking out their options, considering using your services or buying your product. If you can adapt your product or service to match the funnel, you can often pick up sales. For example, at the top, where the funnel is widest, you may want to offer an entry-level product or a special report at a reduced price. This may help you to capture some of those people who otherwise may not have gone past the looking point.
Can you create some kind of recurring business model, where you receive automatic monthly payments? This is a great way to generate steady cash for your business and is often easier to sell then one big product. For example, our tax firm has a monthly billing service. Clients get unlimited consulting during the year and the cost covers the preparation of their business and personal returns. The benefit to them is that they have a budget and know exactly what it's going to cost. The benefit for our firm is that we have steady cash flow. One of our clients sells equipment. They offer a monthly fee to provide ongoing maintenance. The benefit to the customer is that they have someone checking on the equipment. All costs of repair are covered as part of the ongoing monthly fee. So there are no big cost surprises down the road. Our client picked up extra revenue, a steady stream of cash flow and a happy client. Is there a way to create something like that for your business?
Create different service levels. Not all clients want the same thing. Can you create a premium service level that allows you to charge a higher rate for some of your current clients? What are the things that would make your service more valuable? Increased access to you personally? Front of the line option? Our firm has 3 levels of service available. Ironically, it's the most expensive option, with 'front of the line' service and unlimited consulting with partners in the firm that sells the most. Because of the nature, though, it's limited and so there is a waiting list. That helps sell the other levels of service.
As you create a product or a service, think about what other products or services could be offered to complement and augment it. What else do your clients or customers need? What other services can you give them to create additional streams of income for your business? For example, a chiropractic office may offer therapeutic massages, yoga classes or nutritional supplements. These services and products aren't chiropractic services but they are related to health and something that chiropractic patients might be interested in.
Form strategic relationships. When you focus on a niche, you often find that there are things you can't do, but are things that augment your service perfectly. By affiliating with other service providers, you can create a bigger, higher-value product that benefits everyone. A website designer/programmer builds websites for business owners. He finds that his clients also often need quality writers. If he refers services, he may make a referral fee. To be honest and ethical, that relationship and possible payment should be disclosed to the client as well.
Create a high-end and low-end solution. One of our new passions is talking about the bi-modal graph. Imagine a two-hump camel. One hump represents the people who want hands-on, concierge service. The other hump represents people who want the lowest-cost solution. The depression in the middle is what used to be our target market: people who wanted a little of both. Today, that market is largely gone.
Bill and collect in advance. It's much easier to collect money up front then it is afterwards. It might be a little harder with the first sale, because your customer doesn't have any experience with you, but after that, you've actually got to question why they don't pay you in advance. If you are willing to extend credit, make sure you bill at a premium. There is a cost to carrying debt, especially in a tight credit market like now.
Business development strategies that double as cash flow development strategies are vital for every business, but especially if you're going through your own business recession.