At the end of the day, all businesses have the same goal: to make money. But most of those ventures, even those with great products or services, will fail because they simply run out of cash. In her book, Six Steps to Creating Profit: A Guide for Small and Mid-Sized Service-Based Businesses, business advisor and entrepreneur Patricia Sigmon looks at the issues that prevent many entrepreneurial ventures from achieving and sustaining profitability.
Change the rules of operation. According to Sigmon, this means generating more sales while reducing expenses and tweaking costly administrative processes. Find out what business models are working and try to identify ongoing revenue streams. “Whatever you’re doing, look around and start analyzing what your competitors are doing – how you can do it differently,” she says “If you provide a service, you don’t sell the person the one-day effort, you sell them an ongoing maintenance plan. Getting the new client is the difficult part; you want to establish a relationship.”
Stay visible and connected. “Say you’ve been in business 20-30 years, have great experience and all the credentials and certifications. The new guy comes and puts himself on the Internet and blasts his credentials all over the place and people can find him,” says Sigmon. “You can’t sit there and assume people know who you are. You have to do marketing, put up a website and you have to show your wares. And a lot of older businesses don’t have a presence there.” She advises taking your reputation online through social media, a website, and a blog to connect with clients.
Maximize your cash flow. Sigmon says it’s better to sell a plan of 10 hours at a lower price than to sell one-shot deals at a higher price. “It establishes a relationship and keeps the door open for additional work,” she contends. “Anything that will change your business into an ongoing relationship business is the way to get cash flowing into the door.” Among the management moves entrepreneurs can make are making purchases to the exact date the goods are needed, managing the workload so many customers get ongoing service, rather than just one large client holding up service for everyone else. She also recommends managing credit payments to avoid fees or to take advantage of discounts and better terms.
Streamline management costs. If a venture is having profit problems, there are three choices – increase sales, decrease expenses, or both. “We like to think we can increase sales, but we’re going through a terrible economy and sometimes the sales aren’t where we’d like them to be,” Sigmon points out. She recommends fitting expenses into three categories: fixed costs, such as rent and other overhead; sales-related costs that are tied to revenues; and discretionary expenses, such as new equipment and bonuses. “I take every single line item in the fixed category and go through it looking for ways to save, even with the fixed costs. Telephone and insurance costs are fixed, but competitive and therefore negotiable.”
Raise the marketing bar. “A lot of small businesses think of sales and not marketing,” says the author. “You have to create a marketing plan, get customer relationship management (CRM) software to keep track of leads, use Google Ads–all those kind of things need to be on the drawing board because that’s what your competitors are doing.” She also recommends giving your business an instant presence through online networks including Facebook, Twitter, YouTube, and LinkedIn and offer tutorials, demos, or new certification sessions as webcasts or podcasts for immediate download.
Make everyone a salesperson. “There’s the kind of people who don’t think they’re there to promote sales or the business and are just there to collect a paycheck,” says Sigmon. “But those days are gone and those people are laid off. You have to be an income-producing part of the business no matter what your function might be.” She also says everyone needs to pitch in to help cut costs, sell and network on the web. The author recommends motivating the employees to spread the message and reward those who make the extra effort or are seeking continuing education.