How to Stage a Small-Business Comeback
Enter the Project Grow Challenge presented by Entrepreneur and Canon USA for a chance to win up to $25,000 in funding for your business. Deadline is Sept. 15 2015. Click here to enter.
When sales are down and cash-flow problems are up, small-business owners can become desperate for a turnaround. But rather than shooting from the hip, experts say it's crucial to strategically plan your way back to the top.
"Entrepreneurs sometimes lose that innovation interest that initially got them into the business," says Mark Faust, author of Growth or Bust: Proven Turnaround Strategies to Grow Your Business (Career Press, 2011).
But how can small-business owners get back in the game to stage a comeback? Here, three experts share their turnaround tips.
1. Look outside your company for help.
Frequently, small business owners don't look outside their office walls enough for guidance. Faust suggests making a list of your top 20 existing customers and reaching out to them for feedback. "Too often in business we become too insular," says Faust, also a growth consultant and coach based in Cincinnati. "Innovation is listening to your customer so intently you create solutions to improve their situation."
When Faust began working with Hagie Manufacturing Co., an Iowa-based agricultural equipment company, 18 months ago, he assigned each of the top eight executives a task: Visit eight different customers in a year. The visits were not meant to sell their product but rather to listen to what was lacking in the company and find out what clients thought of the competition. Those meetings resulted not only in a sales spike, but also ideas for new products, better financing and more effective selling, according to Faust.
While listening to customers is critical in making a business comeback, other outsiders can help, too. Faust says "connectors" -- such as lawyers, accountants, or association members -- can provide referrals and shed light on how to improve your business. Making a list of the top 20 connectors who help your business will also allow you to expand your customer base and get a better handle on the market. "They know your customers," Faust says. "They can give you insights on your customers and friends of your customers."
Faust also suggests making a list of prospective clients to show to your network of contacts for insights on how to best approach those companies. "Set the goal of showing that to five people a week," he says. "Before you know it, every person you hand that to is going to have two or three connections for you."
2. Consider cutting costs while raising some prices.
Too often, when business slows, entrepreneurs have the knee-jerk reaction of laying people off, says Denise O'Berry, a Tampa, Fla.-based small business consultant and author of Small Business Cash Flow: Strategies for Making Your Business a Financial Success (Wiley, 2006). But layoffs can actually end up stifling growth, she says. Ask yourself: "Have you really cut everything else that you can cut before you let people go?" she advises.
Instead of cutting staff, O'Berry suggests taking a closer look at lowering expenses elsewhere within the company. For example, when a small deli she worked with wanted to turn the business around, O'Berry had the owner review the menu offerings more carefully. It turned out that while the deli offered 50 items, customers were buying only 20% of them. By streamlining the menu, the business significantly cut expenses related to ingredients.
As for what you charge for your product or service, O'Berry suggests avoiding discounts and instead possibly raising prices on some products to boost cash flow. "If you have a high-selling product and you raise the price of that product by 50 cents, you can dramatically increase what you bring in the door," she says. "Most customers aren't going to notice it if you've targeted your market well."
3. Find a better way to stand out in a crowd.
Differentiating yourself from other businesses is critical, says Victor Cheng, a Bainbridge Island, Washington-based business coach and author of The Recession-Proof Business (Innovation Press, 2009). Cheng advises small-business owners to carve a niche for their company by developing products and services that are tailored to specific markets rather than trying to make everyone a customer.
Take the Healthy Back Institute, for example. Two years ago, when the recession first hit, the Maryland-based back-care company decided to hone its marketing focus. Instead of trying to reach the whole spectrum of customers with back problems -- from sports injuries to chronic pain -- with Cheng’s help, the company narrowed its focus to work-related back issues. It began selling chairs and other office-related products and marketing with material on work-related back care, a focus that has helped create a niche in the market. The shift in focus to sell higher-priced items, such as chairs, resulted in a sales increase of more than 17% in 2010.
"It's very hard to beat everybody," Cheng says. "It's much easier to pick a small slice of the market."