5 Big Mistakes Business Owners Make in a Slow Economy
Lethal Mistake #1 - Business is down... Let's cut the Marketing & Advertising Budget.
Few companies had larger cash flow issues during the 4th Quarter of 2008, than GM, Ford, and Chrysler. However, if you watched any TV, especially NFL broadcasts in November and December, there was certainly no lack of commercials from the Big 3 Automakers.
Super Bowl or not, these are extremely expensive ad slots, but all of America got to learn about the Ford F-150's new little fold out step and the Dodge Ram's built in tool boxes running along the sides of the cargo bed.
So why is it, do you think, as these companies were flying their CEO's to Washington to beg for bail out money, they were ramping up their marketing and advertising?
Because... they've been around for about a hundred years now and they know what the heck they are doing! They know the companies who made it through the great depression of the nineteen thirties, were the companies who kept marketing and advertising.
We are not suggesting that you be irresponsible with your budgeting and increase your marketing just because other companies do, on the contrary, now is the time to evaluate every dollar you are spending, in all areas of your business, especially marketing and advertising.
What we are saying is, if you have marketing that is working for you, whatever you do, don't stop using it now. There's are ways to trim your expenses way back without making Lethal Mistake #2...
Lethal Mistake #2 - Using the Slash & Burn Method of Expense Reduction
Yes, this is a time for looking carefully at all your expenses. The trick is to know more than just what to cut and what not to cut. You should consider in what order should you cut. We are all optimistic that things will "get back to normal"... hopeful sooner than later. Try to think long term about your budget reductions. You don't want to through the baby out with the bathwater by cutting people or services that will take too much time or money to replace when the time is right.
Obviously, one of your biggest expenses is payroll. Unfortunately, we are talking about people here; and I know the last thing you want to do is let someone go. Especially when they are doing all you have asked of them. In addition, when business picks up again, the costs for rehiring and retraining for those positions will be among the highest in your re-growing processes. Perhaps adjusting hours or shifts for your staff will work. Did you see where the State of California is closing some services, like the Dept. of Motor Vehicles for one day each week. The state employees don't like it, but it's much, much better than getting laid-off, right? But, let's look at some other area's that you may want to trim first.
1) Expenses for such things as staff meetings, travel, employee incentives, customer appreciation programs etc. We believe these things are important, but not critical. This is a time when everyone, including your employees, sales reps, vendors and customers all understand cutting these non essentials.
2) Economy of scale is usually a great strategy. These days however, a bird in the hand is worth two in the bush... big time. And the bird I'm referring to is CASH. Yes, most supplies can be purchase at a lower price when bought in bulk, but excess inventory is not something most business should be carrying right now. Remember the old "just in time" system? Now is a good time to revisit that strategy if you can.
3) Conveniences: Are you paying for an expensive copier or other office equipment that can be eliminated by a few trips to the local FedEx Kinko's or some other copy center. Perhaps your small office printers can handle your day to day hard copy needs and you only need the "big copy machine" for special projects. While I'm on the subject of office expenses, do you know about Office Depot's Small Business Advantage Program"? They offer big, really big discounts on hundreds of items to small business owners. This benefit can be accessed through your local chamber of commerce. Call June Nisbet at (561) 901-1341 for details.
Have you developed the habit of using expensive delivery or courier services that can be adjusted with a little explaining to your customers? Are you using hotels or conference centers for meetings that can be handled in house or with tele-conferencing? The technology is simple to use and really inexpensive these days. I know of several businesses that are saving thousands of dollars with something as simple as skype which is a free service. ( www.skype.com )
Is it possible to outsource some of your needs such as bookkeeping, accounting, or other non-direct to profit expenses?
Take some time to think about all of your expenses and ask your accountant or business coach for help. I'll bet you can find many areas to trim without detracting from your core product/service quality or letting go your valuable employees.
4) As previously stated, marketing/advertising that is working should not be eliminated. But with some marketing, it's not always clear how much response you are getting. If you have direct marketing campaigns such as direct mail or print advertising, it's should be easy enough to measure their effectiveness. But if you have non accountable marketing strategies such as radio, billboard or TV ads which cannot always be measured,... CUT! Brand awareness is one of the most important things we teach, but right now, we are a bit more concerned with your SURVIVAL!
If you have marketing or advertising strategies and you are not sure if they are producing revenues or not, that is symptomatic of Lethal Mistake #3
Lethal Mistake #3 - We're too busy just trying to survive to keep track of "paperwork".
You're busy. Way too busy to take time out of your day to keep track of every little detail about your business. I mean c'mon this is a crisis, right?
Well, this is the toughest economy most of us care to remember. But it's times like these when the only thing that will bring a company through is calm, thoughtful execution. And when we say execution, we mean the basics. It's time to stop. Just stop and think for a minute. What was is that made you successful in the very beginnings of your company?
Usually, you will find that as time went by, you strayed from the processes that worked so well when you got started. Oh sure, most of what you do every day is stuff you have been doing for years. It's second nature. You don't even have to think about it anymore. But if you take the time to analyze EXACTLY what you are doing every day, I'll bet you will see significant variances from how you did things in the beginning.
For example, when you got started, did you keep track of:
 |
How many leads you received or created? |
|
Which Ads, Meetings, Groups, Activities are producing the most leads? |
|
How many calls/contacts you made? |
|
How many contacts became appointments? |
|
How many appointments became customers? |
|
How many customers remained customers? |
So... why did you stop keeping track of that stuff? Because you don't have to anymore? Well, if you don't have to anymore, then why is it, you were doing better before than you are now? Oh yea, I forgot... the economy. We'll, are you sure? or is it possible, just possible, that you are not doing things as well as you are capable of... or even as well as you use to?
Which begs another question; If this economy makes it harder to succeed in your business, isn't this the time to be doing things as excellently as you possibly can?
Now is the time to go back and start keeping track again. And here's why... You're busy remember. And in tough times like these, there's no time to waste being inefficient. It's only by keeping track of the important numbers in your operation will you be able to accurately identify what's not working properly. Then, you can direct your precious time and energy and money directly to those things that need fixing.... That's how you get through times like these.
And that's how you get you live to fight another day... so you can correct Lethal Mistake #4...
Lethal Mistake #4 - Working without a Strategic Plan for Each Area of Your Business
In the mega NY Times Best Seller, 7 Habits of Highly Successful People by Stephen R. Covey, habit #2 is... "Begin With The End In Mind".
That's obviously a great idea when you are setting goals, but it's so much more than that. How many times have you set goals in the past, just to find out, whether you are reaching them or not, they are not helpful for "pulling you along" towards their attainment. A goal is a target; and it's critical to have them written down as you already know. A strategic plan has a goal at the end of it but it also includes the action steps necessary to achieve the goal. So instead of being just a target, a Strategic Plan is a road map, directions if you will, that will take you to where you want to go.
It's great to know your goal for profits, but it's impossible to get there without doing the things you need to do to get there. And you can't do the right things unless you are crystal clear about where you should be investing your time, effort, and money.
Knowing what's important to work on: We are all guilty of majoring on the minors from time to time. But is this economy, there simply isn't enough time in the day not to be working on mission critical activities. Mission Critical meaning Survival and the key to survival being profits. Here are the 5 Area's of your business that create profits. The good news is that you can control all of these.
|
Leads/Traffic |
|
Conversion Rate (How many leads/prospects actually buy from you) |
|
Average Dollar Sale |
|
Profit Margin(s) |
|
Fixed Expenses |
To Create or increase: You Develop, Implement, and Monitor your:
Leads/Traffic Marketing Plan
Conversion Rate Sales Training & Systems
Average Dollar Sale Sales Systems & Compensation Plan
Profit Margin Management, Accounting & Bookkeeping Practices
To Decrease: You Develop, Implement, and Monitoyour:
Fixed Expenses Management, Accounting & Bookkeeping Practices
I know this seems a bit trivial as you look at it in this form, but don't be fooled. What you are gazing at is the way, probably the only way to significantly grow & multiply your profits for a sustained period of time. If you start to break down and look at your business (even if your business is only you) this way, then you can start to set ACTIVITY goals for each area. Such as...
We will develop systems to contact X Prospects to get Y responses to get Z Sales of at least XX dollars. We call that Strategic Planning... See, you're already doing it.
Seriously, If you do this, you will find out something exponential happens in your bottom line. If your took the time to understand where you are now in terms of numbers for each of the areas, you will find that with an increase of just 10% in each one, you will increase your PROFITS in the neighborhood of 70% to 90% depending on the size of your business!
Do you think if you focused your attention on your marketing (or got some outside help with it), you could increase your lead generation by just 10%?
The question is, how would you even know if you accomplished the 10% increase (in any of the areas) unless you kept track of all the numbers? Remember Lethal Mistake #3?
If you take the time to do this stuff, and (sorry about this) act like a business owner, not just someone working hard for a business that he/she just happens to own, you can control your profits and in turn control your business... and your destiny. It's there for you... and you can do it.
Unless you make Lethal Mistake #5...
Lethal Mistake #5 - Letting the Current Economic Situation Get Inside Your Head
We are all human and subject to good days and not so good days. But as business owners, it is up to us to decide, in advance whether or not we are going to keep going or not. If the answer is, I am not stopping and this situation will not kill my business, then you need to start acting like it around everyone you come in contact with... especially yourself. I can't believe how much negative talk I'm hearing from business "leaders". I put leaders in quotes because "leaders" don't talk like that. We're part of the solution, not the problem, remember?
And, while I'm at it (I just can't help myself)... TURN OFF THE %$@*x!* NEWS! - It's not news. It's negative marketing designed for a purpose; and that purpose is not to help you. I'm serious... read the Wall Street Journal or watch Neil Cavuto or Lou Dobbs if you must, but WE cannot afford to allow Constant Negative News into our minds...
I'm not going to get into some type of motivational diatribe here. You can go to Tony Robbins or your Priest, Pastor or Rabbi for that. What I will say is, you are an entrepreneur. You are a different breed. There are a whole lot of people who have nice big jobs with big secure companies (if there is such a thing... notice I did not say secure jobs) who get an envelope put in their hands on Friday afternoon with thousands of dollars in it.
Sounds like a good deal, doesn't it? Nah, Not only do they have just as much stress as you do, different stress yes, but just as much. They don't have the opportunity to control their situation. They're stuck and they know it. Having to do things that they know are inefficient, or unproductive, or wrong, or just plain stupid, just because someone said to. Not you. You have the one thing that they will never have... the one thing that all men were born to have... The freedom to do what YOU think is the best thing to do for you and your family.
Hey, I know being an entrepreneur can be terrifying sometimes... But, that's what separates you from them. Your smart, they're smart. You're motivated, they're motivated. But you've got the one thing they don't have (or don't have enough of)... Guts.
It's you that gives me courage and makes me proud to be what I am... part of the backbone of America... A Small Business Owner.
For more information or assistance with the strategies or concepts in this report, contact:
Victory Business Coaching Corp.
Info@VictoryBusinessCoaching.com
www.VictoryBusinessCoaching.com
Phone: (561) 807-7245