As I have met and counseled small business owners over the past few months, it is clear that most have experienced a drop in revenue, although some more than others. When queried about the actions they are taking to compensate for this the majority answer “cutting expenses.” Although that is certainly a logical answer and if done correctly, a good thing, focusing on cutting expenses can be a fatal distraction from the very first issue upon which you should focus, “increasing revenue.”
The first and most important step is to crank up your marketing machine. Every employee, regardless of their department, can have a positive impact on your marketing if you clearly communicate the problem and make them part of the solution. If you invite employees to help you solve business problems you might be surprised at the great ideas they can generate. To motivate employees to come up with their best ideas you might consider offering a small portion of the increased revenue as a reward for results. It can be something as simple as a catered lunch, an extra day of paid time off (PTO) or more elaborate prizes if revenue reaches a certain level.
When brainstorming about how to increase revenue the first area to consider is your existing customers. What can you and your employees do to ensure a competitor can’t steal them away? What can you do to increase the amount of revenue from each? Your finance department might consider adding marketing messages on all invoices. Can you justify offering a discount for a timely payment or increased order size? What is the message that your collections person communicates to your slow pays? Can your shipping department or delivery person include a marketing message that will increase customer loyalty? How is the receptionist answering your phone? What message are customers given about your company when they call? Can payroll include a message with paychecks that will motivate employees to provide better service to your customers? If you are in manufacturing, is there a way that your product(s) can be personalized by the person making it (i.e. “made with care by…”)? Every employee can contribute to your marketing strategy in some way and it can be a costly mistake not to use them to your fullest advantage.
Now, let’s consider new business. Generally new business is secured by the small business owner and/or the sales department. However, before we discuss your sales department, let me ask you something. Who are really your very best sales people? Would it not be your satisfied customers? What have you done to make their lives easier or improve their business? Do you refer them to other customers and prospects to help their business? Have you secured testimonials from customers that you can use on your website and in your marketing materials? Are you leveraging your existing customers to help you secure new customers? If not, you are missing one of the best opportunities to increase your revenue without increasing your costs.
Now, let’s discuss your sales department. First of all, are you letting them moan, complain and blame the economy for their lackluster results? It is critical that they focus on what they can control rather than worrying about what they can’t control. It is also critical that you remove all excuses. How much of their compensation is based on results? Are you inspecting what you expect from them and holding them accountable for their daily activities? Are you doing anything to motivate them or generate excitement with performance based contests? Do you need to replace any of them? Right now there is a huge pool of talent available due to the downsizing of larger companies. Sometimes a change in personnel can motive the rest of the team.
Finally, who cares more about the well being and success of a small business than the owner(s)? Who knows more about what it takes to secure new customers and keep current customers happy than the small business owner(s)? Yet, they are usually the ones with the most on their plate. These distractions pile up throughout the owner(s) days, weeks, months, and years, keeping them from focusing on strategic business issues such as increasing revenue. I call these activities “fatal distractions.” I recommend to small business owners that in these economic times they delegate or subcontract as many non-revenue generating activities as possible. The increase in sales from focusing on revenue generating activities will far outweigh any extra expense from delegating or subcontracting non-revenue generating activities. It is not unreasonable to expect an increase in revenue by as much as 40% by leveraging all of your employees and customers in the manner I mentioned above and in all the other ideas you come up with. If you were able to increase revenue by that amount, how different would your small business be?
As mentioned at the start of this post, there is nothing wrong with cutting expenses if they are cut in the right places. Let me just mention two of the wrong places. The first is marketing expenses. Now is not the time to reduce your marketing efforts. However, it is a great time to reevaluate how you are investing your marketing dollars to ensure you are getting the absolute biggest bang for the buck. The second place to avoid is those expenses that will have no material impact on your bottom line. Saving $20/month by removing the water cooler won’t have a meaningful impact on the bottom line but can demoralize your employees at a time when you want to motivate them to help you increase revenue. So, unless it is a totally wasted expense (which should always be eliminated regardless of the economic climate), look for expense reductions that will make a major difference.
If you would like to contact me, you can do so by emailing me at mike.clough@bestbizpractices.org or visiting my LinkedIn page.
Posted by: Mike Clough
