Happy Thanksgiving

To all of you in the United States, I want to wish a happy thanksgiving.

We are living through some very tough times – financially probably the worst in most of our life times. It is easy to get discouraged, especially for a small business owner who is trying to cling to a faltering business. Customer orders are slowing down, payments are late, and the bank seems indifferent to your problems.

Yet there is so much to be thankful for. This is still the land of plenty. We live in a country and time where opportunity abounds. As business owners and entrepreneurs we have set before us all of the opportunities we could want – we just have to adjust our thinking to new ways of leveraging the opportunities.

I am thankful for new government leadership that will be working so hard to lead us into a better financial and social climate.

I am thankful for a loving family, and for all my social and business friends who so enrich my life.

I am thankful for my health and a rewarding life.

I wish for all of you blessings, success, and health.

Happy Thanksgiving.

Who are your best customers?

There is a maxim that 80% of sales come from 20% of customers. Most companies go out of their way to coddle the top few customers. But do you judge your best customers by sales or profitability?

Clients I work with are often amazed at the results when I ask them to do profitability studies on their top tier customers. Often price breaks and other concessions are made to encourage more sales and to keep competitors at bay. The shock then comes when reality sets in and a client discovers that little or no profit is generated by these customers.

Keep track not only of sales by customer, but also profitability by customer. You should look at direct cost of servicing a customer as well as the indirect costs of supporting, responding to, and calling on the customers. If a customer is not profitable, re-negotiate with it, or fire it. Before taking on a new job or a new customer, do an analysis to make sure it will generate the income you need.

A Surprise

I opened the mail Saturday and found a wonderful surprise. In an envelope from a firm called DesignTech there was a twenty-five dollar VISA gift debit card, along with a note of appreciation. It seems that the firm landed a new client as a result of a posting I made on October 28 in which I wrote some complementary things about how well the firm has been building an addition to my daughter’s house.

Wow, what a pleasant surprise! And I’m not just talking about my getting a gift card.

No, the real surprise is how this firm stands out from so many others in their marketing and follow-up. Not only did they send a card with a lovely hand-written note, but the card was beautifully branded with their logo and photo of a kitchen they have installed. This indicated they have purchased a supply of these cards and use them regularly as thank-yous. Very creative. This small gesture and low cost made a large impact. I suspect this is but a piece of a much broader and creative marketing strategy in use by the firm.

What kinds of marketing innovation does your firm employ?

Multi-generational businesses

I was talking recently with a principal of a business that is now in the hands of the third and fourth generations. I asked her what some of the success factors were in keeping the business thriving while maintaining harmony in the families. Here are some of her responses.

1. Sometimes one family faction needs to buy out another family faction that disagrees with the direction of the business.

2. Family members should work extensively outside the family business before taking a job in the business. This gives them a better perspective and helps them bring fresh ideas to the business.

3. Shares should be held only by blood relatives. This prevents issues that would result from divorce.

4. Boards should be comprised of family members and outside directors.

5. Family members should be vetted for top executive positions with the same due diligence as if hiring from outside. This may mean hiring a consultant for unbiased opinions. It also means batteries of personality and aptitude testing to assure maximum competence for the job.

These are sound ideas that has helped this company grow and thrive for about 100 years.

Do you need to diversify?

I know few owners who are not worried about how the current economic trends are going to affect their businesses. Many already are feeling the pinch – especially those in the home construction industries. The big three auto crisis has many machine shops around the country concerned about future business.

One of my clients traditionally has designed and built high-end new homes. He has seamlessly moved away from new homes to remodelling. While other similar businesses are suffering or going out of business, his business is thriving.

How dependent is your business on a particular market or market segment? What contingency plans have you made in case that market dries up? How much of your business is dependent on one customer or even one product? You should be diversifying even when in a good market. How could your skills, equipment, or technology be used to create other products or serve other markets? You simply can’t wait for sales to dry up or the market to fall out from under you – by then it may be too late to recover.

The Good and the Bad

Yesterday a good friend shared with me an idea she uses for time and energy management. She has a chart. On the left side she list those things that she is good at and loves to do. On the right she lists those things that she either is not good at or hates to do. Keeping the chart in front of her, she can concentrate on her strengths, and find a way to offload the things she does not like to do.

This can be very effective. We are energized when we accomplish things we love to do and are good at. Brian Tracy says that each of us has a skill that we are absolutely excellent at and we should hone and polish that skill to be the best that we can be.

A chart of strengths and weaknesses can be the start of the search of the one thing you are truly great at doing.

Networking

I had breakfast with a dear friend and colleague this morning. We get together every couple of months just to reconnect and provide mutual support. We share frustrations, learn about latest joys and concerns, and give each other advice. The meeting reminded me of how important networking is to small business owners.

Networking is an over-used terms that instills in many people (including me) the fear of being thrown into a group of strangers, giving elevator pitches, and collecting business cards. Such group networking does have a place for expanding a range of contacts getting potential referrals.

But the more important network is the relatively small group of people you know and like, and whose counsel you savor and judgment you trust. Including the friend that I met with today, there are fewer than a dozen people that I  meet with frequently. We all have connections that are helpful to one another. When we meet we part company re-energized. We are able to share common concerns and walk away with fresh perspectives.

Underused source for new business

It’s commonly understood that it costs much more money to acquire a new customer than to retain an existing customer. Yet marketing and sales efforts so often are geared to getting new customers.

To increase sales, start with your current customer list. Are there additional products or services you could be selling to existing customers? Perhaps you can devise creative solutions to helping existing customers reach their goals.

Due to improved processes or products can you offer existing customers better service or quality than in the past?

Ask existing customers for referrals.

When was the last time you checked in and chatted with existing customer? Take some time each day to do so.

Customer Service (or not)

In mid summer I contracted with a tree service company to trim  branches on one of my oak trees that is brushing against a neighbor’s home, and to fertilize another large oak tree on my property. This was a company I had used before with excellent service and follow-through. They have changed.

For weeks I heard nothing from the company. Then I got a call from their office telling me the crew would be out the next day to do the trimming. Great! They never showed. I never got a call. A week later I called to inquire what happened. After some run-around I was informed that the oak trees would not be trimmed until the temperature cooled down to prevent oak wilt. No apology for not showing up when promised. I accepted the explanation and anxiously awaited the chill of fall. Fall has arrived and still no crew.

On October 30 I received an invoice dated October 29 for fertilizing performed October 28 (which had not happened). On November 3 a man with a truck showed up to fertilize the big oak. I asked about the trimming. The response? “I do what I am told to do and don’t know nothing about the trimming”. He made no attempt to get any further answer or even to take my question back to the shop.

Yesterday morning I called the company to ask about the trimming schedule. The response? “I don’t know. I’ll have to call you back this afternoon”. The afternoon came and went – no response.

Lessons businesses should learn from this experience:

1. Don’t make promises you can’t or won’t keep.
2. Follow up and keep customers informed.
3. Don’t ever send an invoice before service is performed – even if you are at the end of a month!
4. Don’t ever send an invoice with wrong information. By the way, I didn’t tell you that the invoice had a computer generated invoice number that had been scratched out and replaced with a hand-written one.
5. Train your employees that they always are representatives of your business and need to be ever helpful to customers. If they are asked a question they can’t answer, they should promise to have someone in the company provide the answer – and then follow up to make sure it happens.
6. Maintain a master schedule of work to be performed so scheduling questions can be answered.

I’m still waiting!

Will Limkemann
440-871-0976

Selling Your Business

With a tough economy, many business owners are thinking that they might be better off to sell their businesses. At the same time baby-boomer-business-owners are arriving at the stage in their lives that they would like to retire from their enterprises.

Of course, the credit crisis is making it almost impossible for buyers to get financing. What to do? One option is financing by the seller. While the seller might like to get a lump-sum payment, financing may provide a steady income stream. But there are risks. If the buyer drives the business into the ground either through mis-management or inability to cope with economic conditions, the seller may be left with an empty bag.

My friend and colleague Ted Hill has developed an innovative succession plan that reduces the risks. His plan requires implementation at least three to five years prior to selling (but maximizing the sales value of any business requires that amount of time.) Under Ted’s plan, a business owner will recruit a bright young person in her or his 30s. The recruiting process will include a battery of tests to assure the right temperament for owning a business, and the aptitude to do so. The protege will work hand in hand with the business owner learning all aspects of the business, and the owner will be able to observe whether the individual really has the right stuff to take over the company. The owner will then retire from the business and will finance the transfer of the business, giving the retiring owner a steady income stream with minimal risk.

I have somewhat simplified Ted’s innovative approach. But it is a fine alternative.

Will Limkemann
440-871-0976
www.neobizadvisor.com