Monday, April 4, 2011
In business, nothing happens unless there is a sale. With the advent of the internet, websites have reduced the need of a sales force. However, for the foreseeable future, you are still going to need an individual go to your customers and ask for the sale.
Finding individuals that know your products and has the ability to get the customer to agree to purchase your product is absolutely critical to the success of your business.
How do you find these individuals? Unfortunately, there is a large subset of folks that try working in sales when they cannot figure out what they want to do for a living. They will go on until they are fired or decide it is not for them and move on to their next profession. They are a waste of your most valuable resource, your time. As a business owner, how do you find the 'good ones'? The answer is you look for them wherever you can find them.
A business owner I know goes into restaurants, bars and other service related business to find his sales force. If he finds a server giving excellent customer service, he watches them for a while seeing how they handle all types of customers. If the server is very good at what they do, he approaches them and offers them an extremely good dales position. He knows he can teach an individual his product line and techniques on how to sell. However, he has found out the hard way that he can't teach the desire to see to the customers needs and the ability to be 'nice'.
How do you motivate these individuals? First off you need someone that is motivated by both money and customer service. It is very possible for the right individual wit the right product to become wealth. You want to encourage this because if they are making money, so are you. A 'commission only' salesperson are only paid on performance. If they do well, they do very well. If they don't they starve. So they will be more aggressive in making the sale.
A salaried or hourly employees with no commission arrangement are generally the least motivated and effective. They are going to be paid on Friday, no matter how much they sell.
The following links contain more information on finding and managing sales personnel:
Friday, March 4, 2011
These days getting a bank loan is very difficult. What is a business to do? There are other alternatives than the standard model of going to the bank for a loan.
Some financing alternatives are difficult but possible, others are extremely expensive but possible and some are not suggested but possible. With the current economic situation, a business must look at all of its possibilities.
Don't Borrow Any Money, Ever! - This is extremely difficult but possible. You plow earnings back into your business. It is slower, but gives you a solid foundation for true growth of your business. Too may people equate wealth with profit, it is not. Wealth is equity. It is what you actually own after everything else is paid.
"Love Money"- The people that love you (friends and family) lend you the money. there are pitfalls to this however. To quote Dave Ramsey, "whenever you borrow money from your family, somehow the Thanksgiving turkey tastes different". This is generally not a business transaction, it is a relationship transaction. Therefore, unexpected business problems could damage you relationship with the people who love you. Is it worth it?
Home Equity Funding - This involves taking a second mortgage on your home to raise money for your business. This method was very common in the past but with the real estate crisis this method has virtually dried up as a method of raising funds. It may still be an option in the future but less so now.
Trade Credit - To keep your business, some suppliers will give you terms for the things you buy from them. To example, you buy a piece of inventory from a supplier and they will give you terms of 30 days. This is a way of stretching your dollars buy by buying on things on credit. the downside to this is if you don't pay on time, a valuable supplier can cut you off or insist on COD.
Credit Cards - This is a highly dangerous way of financing because of the very high interest rates. I know of very successful multi-million businesses that have started with credit cards, however due to the risks it is not suggested.
Factoring Your Invoices - A factoring company buys your accounts receivable. They will give you a discounted amount immediately and they will do the collections. There are two general types of factoring: with recourse and without recourse. With recourse means that if you accounts receivable is not paid by a certain time they will give it back to you and they will want their money back. without recourse means that you just sell it to them. The downside is that they will discount (pay less than the face value) of the accounts receivable. You will be receiving immediate cash but the cost is very high.
Sell a Percentage of Your Business - Another money of raising money is to sell a percentage of the business for cash. In doing so, you are taking on partner. This is a viable way of raising cash but you are slicing up the pie.
Have Your Customers Pre-Pay - Let's say for example, you are a manufacturing company and an order comes in to build one of your products. You can ask for a percentage up-front before starting the manufacturing process. This is a way of bringing in some cash and assuring payment.
Private Placement Loan - This is becoming more common, especially with the advent of the Internet and very low interest rates available for savings. this entails borrowing money from an individual (non-family) at set terms. At this time, this is a small niche of the lending market but growing.
Non-Bank Lenders-Some non-profit economic development organization will lend money much in the same way a bank will. there may be special lending criteria and limits depending on the non-profit group, but funding is available.
Wednesday, January 5, 2011
As you load up your sparkling new shelves with brand new inventory you wonder, now what? You finish up that last piece of code to open your software business, now what? You have been dreaming about starting a business for years and you have finally done it, now what?
From the moment you open and every moment from that point forward, understand who your customers are, set price points to attract your targeted customers into your business, know the tricks that will keep them interested in your business and coming back.
Friday, December 3, 2010
As a cautionary tale, allow me to present the main causes of the vast majority of all business failures. Unfortunately, these causes are alarmingly common and are arranged in descending order of occurrence.
- Insufficient Money to Start- This means a business has started out under capitalized and since it generally takes a while to get to the breakeven point, you run out of cash. When you are out of cash, you are out of business!
- Uncontrolled or Unexpected Growth- A mentor told me a number of years ago that there are two sure ways of killing a business. One is to do something stupid and the other is growing too fast. Unplanned growth can quickly outstrip the cash you have available to operate your business. When you are out of cash, you are out of business!
- Poor Credit Arrangements - When you get terms of 'net 30' from your suppliers, they aren't really looking for the money until the 30th day. After the 30th day they will get rather cranky, but they are not expecting your money until then. If you pay your invoices as soon as it arrives, you could run out of cash. This is especially so if your customers are late in paying you the money they owe to you. Additionally, giving credit to your customers is always a challenge. Your customer could go to a competitor if you don't give terms. However, will they pay you in a timely manner or at all? When you are out of cash, you are out of business!
- Poor Inventory Management- Sometimes inexperienced or overly enthusiastic business owners will buy an overabundance of inventory that is way beyond the short term needs of the business. Thus eating up the cash needed to run the day-to-day operations of the business. When you are out of cash, you are out of business!
- Over investment in Fixed Assets- An example of this is a construction company that buys a backhoe which may cost $50,000-$80,000 and only uses it a few weeks out of the year. However, they will have to make payments for a $80,000 piece of equipment to just let it sit and rust the rest of the time. When you run out of cash, you are out of business!
- Low or Unprofitable Sales- This is obvious. No sales, no cash, big problem. When you are out of cash, you are out of business!
You should be seeing a common theme by now. Good and timely cash flow planning is the main solution to the above business killing problems.
For assistance in determining your businesses cash requirements and developing the necessary strategy to manage your cash flow, contact your University of Georgia's Small Business Development Center. For an appointment please contact: Rand Riedrich at email@example.com.
Friday, November 5, 2010
With the economy in an uproar, customer service should be one of the top priorities a business has today. Sadly, a lot of businesses ignore good customer service at their peril. Your customer has almost unlimited options for the products or services that you sell. If they have a bad experience with your company, in any way, they will go away forever. There is no excuse for bad service.
Studies have indicated that it is ten times harder to get new customers than to retain old ones. Therefore, once your customer has a relationship with you, it is imperative that you treat them like the buds of spring because they are the ones that are actually paying your bills. What will turn your business around could be as easy as just acknowledgment of your customer and their needs. A simple 'hello, how are you' and really meaning it goes a long way in this day and age.
In my readings, I came across a story about how a young man with Down Syndrome working as a grocery bagger turned around a local supermarket's business. This is not rocket science, it doesn't require an expensive advertising campaign, all it takes is the genuine concern for the customer. See the 'Johnny the Bagger' story on the following link. http://www.youtube.com/watch?v=qOZPlt3Ha0Y
If you are running a business, you are going to need to do the following three things, and do them well if you want your customers to keep coming back. First, the business needs to obsess about customer's needs and not just product features. Always think of it from the customer's point of view. It is not about the fancy bells and whistles your product has, but what problems they solve for the customer.
Second, you need to reinforce the brand of your business with every interaction with your customer, not just in advertising and communications. A single good or bad experience could influence a customer a lot more than a lifetime of traditional advertising and marketing.
Third, treat your customer's experience with you company as a core competence, as well as a passion and not just a function of your business. Give them more than they anticipate.
For more tips on customer service, please review the following links:
Friday, October 29, 2010
Some people call it the 'Great Recession', while others call it a 'Mini-Depression'. Either way, running a business right now isn't as fun as it used to be. If you are going to stay open until better economic times arrive, you must 'Recession Proof' your business.
If you are going to survive, you are going to have to go back to basics. The biggest basic pointers are: Keeping track of every penny and spending them very wisely; becoming a crazy person about excellent customer service; don't stop marketing; now is a great time to find and employ superior employees.
Please see the links below for a number of ways that you can keep your business afloat by using strategies that you may have not thought about.
Wednesday, August 4, 2010
In this economic downturn, one of the biggest problems that we face is lack of liquidity or the availability of cash to deal with survival, growth and other operating expense issues of running a business. Deserved or not, lately banks have gotten a bad reputation. Some banks, because of their poor lending habits in the past, are simply not able to lend. However, there are many banks that are still lending.
In this new environment, banks that are able to lend have increased the loan requirements to such an extent that many businesses are unable to borrow money like they have in the past. This is generally due to the banking regulators requiring more stringent lending requirements. This manifests itself in higher credit score requirements, different collateralization requirements and higher down payments in order to get a loan, resulting in fewer loans.
The banks, these days, are cash flow lenders. This means that one of the biggest criteria in their decision is if they think the business can pay back the loan with ongoing cash generated by the business. Additionally, they are going to check the business owner's and business' credit history, they are going to want collateralization in case payments cannot be made. They are also going to want an equity injection (down payment). Any problems with the above and the bank cannot and will not loan a business money.
Banks are not investors. Banks are in the business to buy and sell money profitably. They have a responsibility to preserve the capital of the depositors and do not want to take excessive risks with potentially bad loans. It is in their interest to say no to loans that have a chance of going bad.
What does a business owner do if these increased lending requirements have made it difficult to find money? There are other alternatives. These alternatives require a change in attitude and thinking. In this changing economy if you are to survive, you have to 'think outside of the box'.
For a free, confidential analysis of your situation and a discussion of your alternatives, contact Rand Riedrich at the University of Georgia's Northwest Area Small Business Development Center at firstname.lastname@example.org or (706-272-2700)