Ray Silverstein's Blog

HOW CREATIVE ENTREPRENEURS CAN BEAT THE RECESSION

 

 

Necessity really is the mother of invention. While the recession continues to batter small businesses, some wily entrepreneurs are using unconventional strategies to hold their own.

 

They’re finding creative ways to tighten their belts, do more with less, and drum up unexpected sales. And because I facilitate peer advisory groups—where small business owners meet to share ideas and experiences—I’m lucky enough to learn what some of them are up to.

 

I’m also happy to share the buzz with you. Perhaps you can use some of these ideas in your business, or let them inspire you to brainstorm some new moves of your own.

 

 

Let’s Make a (New) Deal

One of the upsides of a soft economy is that everyone is hungry for business. That makes it the perfect time to renegotiate terms with vendors. For example, one entrepreneur I know crafted this unusual announcement, which he mailed to all his suppliers:

 

“We value your services and want to continue our relationship. However, due to the current economic environment, we must adjust the amount we can pay you to [fill in the blank]. In the interest of our relationship, are you willing to work with us during these difficult times?”

 

Was he rebuffed? Actually, no. In fact, he got some surprisingly good results. After all, who wants to lose good business right now?

 

More food for thought: if you’re willing to enter into longer-term supply contracts, now’s the time to lock in more favorable terms with your vendors, including discounts, promotion allowances, restocking charges, you name it.

 

 

Collections: Don’t Strong Arm, Charm

For many, growing collections are becoming an ever-bigger headache. Instead of turning to collection agencies (often an expensive, ineffective strategy), I know a business owner who is turning on the charm. Now he’s writing “love poems” to his delinquent customers, like this:

 

“Roses are red, Violets are blue,

When will I receive payment from you?”

 

He’s also been known to send flowers and candy to the people approving his invoices for payment. Guess what? His silly, simple strategy is working. Apparently, it’s more difficult to ignore someone who’s funny and friendly than someone who’s unpleasant and demanding.

 

 

Go Back to Basics with Barter

Barter is one of the oldest forms of commerce. It is also a good way to stretch your dollars, or in this case, “trade credits.”

 

When you join a barter association—most states have at least one—you trade excess inventory or capacity for goods and services provided by other members. Transactions and trade credits are managed by the association.

 

If your business earns a reasonable gross profit or offers a disappearing asset, it may lend itself to bartering. Before you start, determine how much of your business you can afford to barter. Then, encourage your association to actively promote your offerings.

 

For example, one bed-and-breakfast owner I know is doing very well with barter. He’s filling empty rooms by promoting weekend getaways, something everyone could use right now. Then, he’s using his barter dollars to purchase ad space and hospitality supplies, reducing his out-of-pocket expenses.

 

 

Do the Unexpected: Ramp up Marketing

When money gets tight, what’s the first expense that many firms cut? The very thing they shouldn’t: their marketing activities. Studies confirm that companies that maintain or increase marketing efforts during a downturn rebound higher and faster once the climate improves. 

 

I know several entrepreneurs who’ve taken advantage of current conditions to upgrade their marketing programs, cutting sharp deals with ad agencies, PR firms, and the publications that run their ads. After all, this sector is especially eager for new business. To make it work, set a goal, develop a plan, and then drive a hard bargain.

 

In other words, there are many ways to outsmart the economy—it just requires a little creativity.  

TARGETING CUSTOMERS MAKES MORE SENSE THAN EVER

We’re all committed to working smarter these days. We’re busy cutting expenses, trimming the fat, and streamlining processes whenever possible. But there’s one wasteful habit we’re loathe to give up. Many of us still want to sell to “everyone.”

 

These days, most entrepreneurs are thrilled to sell their wares to anyone who wants to buy them…and that’s fine. However, when you try to include “everyone” in your marketing message, you may actually end up reaching no one. 

 

When you broaden your message too much, you risk watering it down to the point where it no longer resonates with your best prospects. That’s symptomatic of a lack of focus, a dangerous flaw to have, especially now.

 

Furthermore, small businesses simple don’t have the time, resources, or staff to chase every demographic. The reality is, you can’t sell to everyone. Nor should you want to.

 

Yet many companies continue to take a scattershot approach to marketing and sales, thinking they’re more likely to score a hit. The truth is, if you want to hit the bulls eye, aim with a rifle, never a shotgun.

 

How do you do this? Start by determining who your best customer is, by reviewing your current customer base. Identify your “A” list customers, along with what makes them valuable. Describe them in as much detail as possible. What common attributes do they share…is it age, gender, or annual income?

 

If you’re a B-to-B operation, you can use the same kind of process. Do you value large firms or small ones? Companies in certain industries or areas? Keep thinking until you arrive with a detailed description of your target B-to-B prospect.

 

Next question: what draws them to your products or services? What needs do you fill? How do you fill them better than your competition, and how can you improve on it?

 

By the time you complete this exercise, you should not only know who your target market is, but what message you should be marketing to it.

  

Targeting customers is yet one more way you can cut, trim, and streamline your business. It will save you money, time, and aggravation. Best of all, it will also position you for future growth.

 

P.S. Need help defining your customer? Email me at [email protected] for a free copy of my “Target Your Market” brainstorming worksheet.

 

Woodstock Entrepreneurs

August 18, 1969 is a date that was the apex of a social revolution.  That was the date of Woodstock, a weekend music festival whose impact was felt around the world.  The music festival occurred forty years ago but is still remembered not only by the sixties generation, but by those who followed.  Many who attended said it was a “life changing event.”

 

Woodstock is remembered as a time of hippies, drugs, love, peace, freedom of ideas and revolution of accepted mores.  In short, youthful hedonism and 60’s excess.  But, I want to examine Woodstock from an entrepreneurial point of view.

 

 I recently went to visit friends who live in Livingston Manor, New York.  Little did I realize that they live not far from Bethel, the site of Woodstock.  My friend spent his summers in a home adjacent to Max Yasgur’s pasture, where Woodstock was held. 

 

The setting today is a pastoral hillside with a small marker indicating where Woodstock took place.  On the hillside is the Woodstock Museum and a small outdoor concert area, mostly for classical music.  What a change but still worth seeing.

 

Woodstock was pure entrepreneurship--people with an idea and a passion!  For sure, this was not a MBA mentality.  They were, as Tom Peters states “Ready, Fire, Aim.”  The concept came together very quickly.  Although they had some business experience, it was not great experience.  The original goal was to raise enough money from the festival to fund a music recording studio in upstate New York, where some of the artists lived.

 

The original site was an industrial park in Wallkill, New York.   Contracts were already signed, but town people became nervous about the potential crowd.  An audience of 50,000 was the initial target.  But these young entrepreneurs were adaptable.  In June, Wallkill town people were still raising issues and Woodstock Ventures quickly found another location that was willing to accept them.  Imagine, changing locations with less than 75 days to concert time! 

 

The major marketing activity would be word of mouth.  And, there was no internet to spread the word.  They thought they would need three major acts to get the buzz going.  Jefferson Airplane was the first to sign at the incredible amount of $12,000.  At that time, they usually received $5,000 to $6,000.  The next to sign was Creedence Clearwater for $11,500 and then, The Who, for $12,500.  In total they spent $180,000 on talent.  These promoters were risk takers.  Just think…a concert in a pasture, over 100 miles from New York and without any major population nearby.

 

The concept slogan of “Three Days of Peace and Music” was cultivated very carefully in the underground press.  Publications like the Village Voice and Rolling Stone were used along with some ads in the New York Times.    Artie Kornfeld, one of the original Woodstock producers said, “The cool PR image was intentional,” using counterculture symbols and phrases.  This is another entrepreneurial cornerstone; you must identify your market.  The advertising and public relations was targeted for a specific group—young, peace loving and hip.  This audience spread the word from the east to west coast.

 

Woodstock was over the top successful.   It is estimated 400,000 to 500,000 people attended on a rain soaked, muddy field.  The New York Thruway was clogged and created one of the worst traffic jams experienced.

 

 Woodstock is now a brand.  These promoters had an idea and were passionate, adaptive risk takers who identified an audience.  They had a message targeted to that audience and were proactive in creating word of mouth marketing that was “cool” and easy to spread. 

 

To be successful in tough times, you need similar traits.  You need ideas and a passion to execute them.  You need to be adaptive when necessary and make investments (risk taking) to promote the concept.  Lastly, you need to identify your audience and choose the best vehicle to get attention.

 

 

Cutting Payroll? Think Beyond the Pink Slip

 

Difficult times present especially difficult challenges for small business owners. Perhaps the most painful of all: terminating employees because earnings are down.

 

When business is bad, you have no choice but to reduce expenses. However, cutting payroll doesn’t automatically mean resorting to layoffs. Before you get to the point where you’re drawing up pink slips, create a payroll reduction plan. Your plan should address three points: where you’ll cut, when you’ll cut, and how to minimize the damage moving forward.

 

 Layoffs are a surefire way to cut operating costs, but it’s also the most traumatic. That’s why is wise to plan this in advance, as opposed to reacting in panic because you’ve waited to long. 
 
If you do have to implement layoffs, base your decisions on employee capability and contribution, not seniority or personal need. Create a list, starting with your most productive personnel and working down to the most marginal. That way, if you have to start cutting, you’ll know where to start. 

Once you determine what emergency actions you’ll take, identify your tipping point for setting that plan in motion. This is your point of no return: if business falls to X, then you’ll enact Y.
 
It’s up to you to determine what your threshold is. Every business has its own tipping point. For example, you might tie yours to cash levels such as receivables, inventory levels, aging of outstanding bids, number of bids, backlog in hours or dollar.

 

The point is, when you set an objective, measurable point of action, you remove some of emotional upheaval from the process.
 
Whatever form of payroll reductions you make, recognize that your employees will be traumatized. It’s up to you to set the tone. The best approach is to be positive and upbeat, but truthful about the challenges facing your company.   
 
When announcing cutbacks, look your employees in the eye. Be frank, be real, appeal to their sense of reason. Remind them of the greater economic picture: “I know you’re disappointed…I’m disappointed, too. But people in the unemployment line have even greater hardship then we do.”
 
Leadership starts at the top. When asking employees to make financial sacrifices, you must make those sacrifices, too. Your people must see that you share their pain.
 

To Blog or Not to Blog?

So maybe you’re wondering…why in the world am I writing a blog?  I am not a young man. But to retain your MPB (Master of Practical Business) at any age, you’ve got to think young. You must be willing to experiment. You must to be poised to learn new concepts in business, communication, and strategy. Who wants to be "Master of the Buggy Whip"? Not me!

Recently in Arizona, I met two small business owners who are expanding to new territories and markets segments through the use of blogs. Neither is looking for exposure to end consumers, but rather new business-to-business customers. One manufactures sprayers for pest exterminators; the other makes embossing dies and machines to decorate cards and gifts. Both report that they’ve received new business as a result of their blogging ventures. How very interesting…

Today, every marketing plan should include word-of-mouth marketing. Are you familiar with Seth Godin (one of my favorite marketing experts)? According to Godin, you need “Sneezers” to spread an “Ideavirus”—the ideal word-of-mouth marketing technique. But this is more difficult than ever these days, thanks to the excessive clutter of myriad products and marketing outlets (ads, the Internet, pay-per-click, search engines, direct mail, email blasts, ezines…does it ever end?).

With so much static in the air, it’s tougher to bring your message to market and impress a buyer. It’s even hard to get someone on the phone (when it comes to getting your message across, can you rely on voicemail or receptionists? No!). So, what has the power to cut through the cacophony? A person—a real, person with an individual voice—who can blog about the value of a particular product or service!

The concept of viral marketing certainly isn't new, but it’s coming into its own. Creating and writing a blog is part of the growing/thinking/learning process. Here I am, a business veteran of 40 years, planning to get a professional blogging coach. To be an MPB, you must keep abreast of what’s going on. You must stay young in thought and action—not just in business, but in life.

I want to learn from your blogging experiences (and I bet others do, too). Please write and share your thoughts on blogging…good, bad, and ugly. Go ahead—toot your own horn. Blog, blog away!

Tweet, Whistle & Shout

The big buzz word today is social media.  At PRO, President's peer advisory board meetings, the questions comes up, how do I use social media to get business?  Twitter is the fastest growing of all social media. We have found an expert, David Barnhart of Business Blogging Pros, to teach the Twitter "in and outs."  David has tremendous experience teaching, coaching and mentoring this business building activity. This Twitter webinar will be presented Thursday, July 9th at Noon EST, 11:00, Am, CST, 10:00, AM, Mountain Time, and 9:00, PST.  The PRO, President's webinar enables you to learn without having to leave your office.  After this webinar you will be able to Tweet, whistle, and shout for more business.

Click on this link for more information and to register online http://www.1shoppingcart.com/app/?af=995349.

Horsing Around: Is Your Business an Old Gray Mare?

I recently had the opportunity to have dinner at an old, very well known restaurant in Chicago, the Cape Cod Room in the Drake Hotel.

The Cape Cod was known as the apex of seafood restaurants in the United States.  It had classic decor, responsive service and outstanding food.  This time around, the experience was different.  Thank goodness I had a lively dining companion or the evening would have been a total disaster.  Nowadays, the  dining room decor is dated, the service extremely slow and non-responsive and the food okay at best.

What does this have to do with small business in general and your business specifically?  It is an example of what not to do.  Do not take your customer and your market position for granted.  Do not let your brand deteriorate.  Do not let your service capability and responsiveness "go south." 

The Cape Cod Room was a premium restaurant with premium prices.  It is now an average restaurant with above average prices.  At one time, it was perceived to be a value.  The experience then was extremely satisfying and customers flocked there.  Now, the experience creates a reluctance to ever return.

In your business, what are you doing, every day, to enhance the customer experience?  Due to the Internet, it is much harder to create a WOW with your customer.  You should be thinking about your key customers and how to create the WOW.  You must have a strategy to make your company “top of mind” and build the personal relationship with your customer--even in a digital world.

A branding expert I know states that your brand is only as good as your last "touch" with your customer.  Small business does not have the marketing dollars to create a major brand, but does have the ability to create a brand within its target market (niche).  Small business does have the ability to be top of mind to its customers or get a last look if you’re a contractor.

Today, competent service is expected and is not a differentiator… unless the service is poor.  The result: you get left out!   Is service and responsiveness a keystone of your business?  You have the opportunity to make sure your organization has the right people to accomplish this.  There are lots of very good people available.  So, it is your responsibility to have the right people in place who are trained with good procedures.

The business environment is difficult, but now is the time to enhance your relationship with customers.  When business improves, companies with strong relationships with customers will reap the harvest.  Sow your seeds now.  Customer service is not expensive.  It is actually less expensive than poor service.  You don't have the rework, corrections, credits, customer hand holding and most important, lost customers.

In the small business owners’ peer advisory boards I facilitate, we discuss the attitude that management must have as well as the employees they need to maximize their business in a soft economy and to soar when the market improves. 

We are always concerned about getting new customers, but now is the time to make sure you retain your existing business.  Don't give your customers the experience I recently had at the Cape Cod Room.  Don't become the Old Gray Mare, or you may get a kick in the ass.

 

 

 

Are You Ready to Take It From Your Peers?

What’s one of the biggest challenges of entrepreneurship? Isolation! Cliché or not, it’s lonely at the top.

As a small business owner, you don’t have access to a board of directors. Chances are, you have no one to brainstorm with or challenge your theories. Sure, you can bounce ideas off your employees, but don’t expect an objective response.

The problem is, operating in a vacuum can skew your decision making and limit your growth. If your goal is to take your business to the next level, you need a springboard. For many entrepreneurs, that springboard is a peer group.

Small business peer groups, or peer advisory boards, have been around for several decades, and their popularity keeps growing.

A peer group consists of about a dozen small business owners/executives in non-competing industries who meet regularly to pool information and lend support.

Led by a professional facilitator, the group addresses a new topic each month, such as ways to cut expenses or attract new customers. The facilitator’s job: tap into the group’s collective wisdom, so members leave armed with new strategies and solutions.

Many small business owners get so caught up in day-to-day activities, they forget their most important job: company visionary. Peer group discussions force them to step back and take the long view.  

In addition, members can pose business problems to the group and solicit solutions. Usually, someone else has already dealt with a similar challenge, so they benefit from each others’ experiences.

Peer groups also enforce accountability, which is especially important during tough times like now, when entrepreneurs often have to take unpleasant actions. 

If you fit the following description, then chances are you’ll find benefit in joining a peer group: 

·        The ability to give and receive constructive criticism.

·        The honestly required to admit mistakes and share successes.

·        A desire to step back from everyday activity.

·        A willingness to invest one morning a month in meetings.

·        An open mind and desire to learn. 

If this interests you, investigate local peer groups. Most will let you “sample” a meeting for free. Sometimes, you need to try a few to find the right fit.

If you are in Chicago or Phoenix, contact me at [email protected]to attend a free meeting.

The Survey Results are In!

 

We’re all intently focused on the economy these days. Many of us are curious to know how other entrepreneurs are handling the recession. For this reason, I recently conducted a “How Are We Doing?” survey among my associates and PRO peer group members. The results are in, and they’re pretty interesting. Here are the highlights.

 

Finding #1: Our outlook is generally positive! 

When asked what their experience has been during the last six months, 67% of respondents report that their experience was “not as bad as it could have been” or “we did surprisingly well.” While this question measures outlook rather than actual results, it’s good to know so many are in an optimistic frame of mind.

 

Finding #2: We wisely reduced expenses.

Many entrepreneurs took steps to reduce expenses. 25% laid-off employees; 20% cut staff through attrition and/or reduced work hours. Some respondents report that they also reduced fixed expenses such as rent and phone service.

Finding #3: We’re becoming more Internet-savvy. 

76% of respondents report they’re relying more on web-related activities, especially in marketing and sales. 42% reported that they either revamped their website or increased SEO activity. Others are using more email marketing and utilizing social networking media. Bottom line: the low cost of Internet activity is moving many companies to market more aggressively online.

 

Finding #4: We’re split on how we think our year will play out.

Asked to rate their business outlook for the remainder of 2009, the responses formed a near-perfect bell curve, with a slightly optimistic tilt. (36% of respondents weighed in at the middle, 37% say business will improve, and 26% were pessimistic.)

Finding #5: Entrepreneurs are most worried about cash, credit, and costs.

When asked to list the top three issues facing their business, respondents repeatedly identified three things: cash flow, credit availability, and health care costs. And when subsequently asked to state the three top issues facing the small business community, they identified these same issues. This is clearly what’s on most people’s minds.

 

In summary, we can learn a great deal from what our peers have to say, which is why I facilitate peer advisory boards in the first place. If you’re interested in receiving a detailed survey results summary, or in learning more about peer groups, email me at [email protected].  

Vision: The World is Changing … What About Your Business?

It’s a new world out there, and if we want to stay competitive, small businesses can’t afford to do “business as usual.” 

For example, I know an entrepreneur who owns a karate studio. Despite the recession, he still requires that students sign-up for at least six months of classes. That worked just fine in the good old days, but it isn’t working now. Enrollments are plummeting, and so are his revenues. But he insists that “I have to pay my rent!” and refuses to change his terms.

But alas, something bigger already has changed: namely, his customers’ spending priorities. Parents aren’t willing to make long-term financial commitments when they’re worried about losing their jobs.

If Mr. Karate wants to stay in business, he’s going to have to acknowledge this reality and update his terms. For example, he could offer month-to-month memberships, or guarantee refunds if parents lose their jobs. Yes, he has to pay his rent. But isn’t it better to collect the rent money one month at a time than to blindly forfeit it altogether?

Now, what about you? Are you operating by obsolete “rules” that are holding you back? Perhaps it’s time to reevaluate your business, to approach it from an entirely fresh perspective. Here’s a few of the questions every entrepreneur should be asking:

• Who is my customer? Has my customer changed in the last two years, and how?   
• What are my customers buying, and why? What aren’t they buying like they used to?
• What are all the things I said I’d “never, ever” do or sell? Is it time to reconsider?

If you don’t know what questions you should be asking, email me at [email protected] for a free copy of my “Expand Your Vision” worksheet. The world is changing, and if you want to survive, you need to change, too.

Biography Ray Silverstein is a small business expert who specializes in helping entrepreneurs grow. He is president of PRO: President’s Resource Organization , a network of entrepreneurial peer advisory groups in Phoenix and Chicago. He recently took his own advice and expanded his business to include The PRO Alliance  —it’s the peer group experience, minus the peer group. He is also the author of “The Best Secrets of Great Small Businesses” and a columnist for Entrepreneur.com. You can reach Ray at 1-800-818-0150 or [email protected].