Small Business Development Center
At Chemeketa Center for Business & Industry
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Monthly Archives: June 2010

Expanding Your Business

By Chemeketa SBDC

Marcia Bagnall, SBDC Director

Are you looking for ways to reach new customers and new markets? A thriving business needs new directions, is it time for you to find your next move? What you need to keep in mind is that expanding involves choosing methods that capitalize on your company’s strengths, fit your company’s product or service, and address the concerns of limited resources, cash and credit.

Before you put together expansion plans, ask yourself what additional resources you may have to lay in first. Do your employees have the necessary skills to support a growth strategy, and will you need to hire additional staff? When you get additional business will your operations be able to handle it, and will you be able to maintain service levels? Does everything already run smoothly (management, customer service, inventory controls, bookkeeping) and will those systems be prepared to cope with increased load? What will this do to your cash flow?

If you’ve got the home bases covered then here are some classic ways to expand your business:

  • Take an existing product or service to a new market. Test out this market first in a small way, and then if results are positive, go for it. You are probably already overlooking market segments that are right in your backyard. 
  • Expand your line of existing products or services to include new ones. The smart solution is finding new ones that complement and support the older ones. You know that your existing customers like your current offerings, so give them something new to work with.
  • License your product or intellectual property to another business. This strategy involves expanding your reach while allowing someone else to take on the production, distribution and marketing. You give up a lot of the work and risk and in exchange for giving up some of the profits. It can be a good trade. You will need to make sure your intellectual property is protected first. And check to be sure your licensing partner has a positive reputation with potential customer bases and glowing references in your industry.
  • Expand to a second location (or third, etc.). This is the chain strategy and it works for a business that is easily reproduced. But be careful to analyze whether your success is tied to your location or your staff at your current location. Could you create your success again somewhere new?
  • Consider franchising your business. This takes the chain idea to a whole new level. If you can replicate your business multiple times and turn it over to others to run, this may work for you. You’ll need to make sure there’s a strong market for your product or service first and that you have sufficient capital to make this work. And of course you’ll need to have systems in place (in writing) that can be taught to others and implemented consistently.
  • Merge with another company or buy another company. This can expand your customer base, give you access to intellectual property, trained employees and capital, and create operating efficiencies. Clearly you will need to make sure the two companies are a good fit first.
  • Consider taking your product or service to a global market. There is a world of potential customers out there. But again, start small and move slowly. You’ll need to factor in cultural and language considerations in your decisions too, so make sure you have adequate assistance before proceeding.

Firing a Client

By Chemeketa SBDC

Marcia Bagnall, SBDC Director

While it’s uncommon for a business owner to fire a client, sometimes it’s the best long-term solution for the business.

There are good reasons why some clients just aren’t worth your time and energy. Deadbeats who won’t pay up and have continually revolving balances (and excuses to go with them) may cost you more than they’re worth. Ditto for someone who eats away at your time, frequently changes meetings, stands you up, and needs endless attention (and still can’t make a decision). Some clients are overly demanding, belittling or abusive to you and your staff. And then there are the clients who ask you to behave in unethical ways (lie, forge documents, cheat vendors, etc.). Good riddance to these folks, they’re not supporting your business.

Here are some steps you can take to distance yourself from a client you no longer want to do business with.

  • While a phone call is more personal, a letter is a better option. It gives you a chance to carefully choose your words and have your say without being argued with, yelled at, threatened, cajoled into changing your mind, etc. You can respectfully lay out your rationale for the decision and give the client next steps. 
  • Carefully write a business letter (standard business letter format) that is polite and firm. Resist the temptation to make accusations. Don’t use sarcasm or profanity. Take an apologetic tact that expresses regret that you will no longer be able to do business with this client. 
  • Clearly list the top reasons for your decision but phrase them in a way that is tactful. If a client takes way too much time you could suggest that this client “…needs a higher level of service than we can provide…” You don’t need to create a long list of reasons, just pick the most important ones. And if possible, suggest alternative providers to give the client a next step.
  • Remember to clearly list any issues that the client caused, breach of contract, problems with vendors (after they cancelled orders at the last minute), missed meetings that cost you travel time, etc. These details will help you substantiate the client’s wrongdoings in the case that they try to take you to court. 
  • Don’t claim things that simply aren’t true. If you’re not going out of business or moving to another state then don’t claim that you are. They’ll figure it out soon enough and you’ll both be embarrassed. Same goes for fake terminal illnesses, made up family issues, etc. 
  • End the letter with a polite wish for luck in their future endeavors. Then go back and make sure that the letter is perfect in its spelling and grammar. Have someone else look it over as well, it’s too important to just dash off and hope for the best.
  • You may get an apologetic response from the client asking you to reconsider, but don’t give in! There are good reasons for terminating this relationship, stick to them. You may also get an angry response. Be calm but firm in your resolve.
  • Be sure to keep all records of this client along with this letter in a secure place. You may need to refer to them again. Then resolve to remain silent about the issue, no badmouthing this client to colleagues or family. You don’t want to set yourself up for slander or libel claims.

Finding Your Ideal Clients

By Chemeketa SBDC

Marcia Bagnall, SBDC Director

You probably already know that every customer out there isn’t necessarily your customer. Just because they have a pulse and a wallet doesn’t mean they’ll come running to you when you open your doors, let alone buy from you. But there is a segment of your customer base that is a sweet spot for you. By targeting these folks you will see better results at a lower cost.

These customers are your ideal customers. It’s well worth your time to be specific about who they are and how they can most benefit from your expertise and experience. Here are some steps to making this work for you:

  • Identify the qualities of your ideal client. You can start with a list of your very favorite clients and ask yourself what makes them so special to you.
    • Are they appreciative of your efforts and insights?
    • Do they have the resources to afford you and the willingness to refer others?
    • Are they easy to reach and connect with, do they respond to your marketing?
    • Who are these folks, what are their particular needs, why do they need your services, and how can you solve their problems?

Consider their gender, age, location, industry, challenges, etc. You want more customers just like them, so keep a tight picture of them in your mind.

  • Identify the commonalities among your ideal customers. What is unique about them in terms of the problems that you can help them solve? Think about issues they’re faced with, goals they want to achieve and the biggest challenges they face. Then identify the insights you are able to provide them with and the results they will achieve from working with you.
  • Find and reach your ideal client. Once you know who these folks are, find out which groups and associations they participate in. Do they read certain newsletters or periodicals? Do they patronize certain websites? Consider who can introduce you to your ideal client and then pursue those avenues.
  • Use your list of ideal customers, they’re a gold mine. If they already love you they’ll be willing to share information about what groups they belong to, what they read, where they go on the net. Just ask! And if they already patronize you they’ll be willing to refer friends and family members to you. Ask them to, and give them incentives to do so.  Remember that the people your ideal customers associate with are probably a lot like them, meaning they’re the exact people you want to reach.
  • Identify what makes you better prepared to serve these clients than your competition. Do some research on your competitors. Visit their websites, read their press releases, sign up for their newsletters, do a web search, review their marketing materials, and attend industry events. Think about a handful of key attributes that are selling points for using you versus someone else.

Budgets in Tight Times

By Chemeketa SBDC

Marcia Bagnall, SBDC Director

Times are still tight, so are a business owner’s finances. You need to survive this downturn, but how? Now, even more than ever, you need to know your business.  And you need to determine what level of cash cushion you feel you need to maintain your solvency over a period of time.  As part of your analysis you should know the areas that are viable for cost containment and that could be targeted for streamlining.  Most likely you will cut expenses to increase profits allowing you to build the cushion you need for the long term.

You will need to develop an operating strategy for effecting changes.  One of the first things you need to do is to set a basic budget floor for the area(s) you will be cutting.  When you establish the basic budget, it is critical that you include an amount sufficient to meet all the needs of the department or operations covered.

If you operate machinery or equipment, be certain to budget adequate maintenance and accrue an amount to set aside in case new equipment is required.  Cutting too close to the edge could leave you out of production as a result of one major malfunction.

Travel and entertainment are an easy target for tough budget cuts.  But, for many companies, these costs are an absolute sales necessity  – your customers expect it and your competitors will be hot on your heels if you do not maintain these contacts. In many cases, the loss of business won’t be felt initially and you might feel that you saved money without any effect.  Take the time to create a budget that allows your company, through all its sales efforts, to keep up a high profile with your customers.

If you know that your administrative cost is way out of line, don’t just storm through and fire every third person to save money.  First, determine what work is essential and how many people it takes to accomplish those tasks.  What support do they need in terms of equipment and outside services?  Put a number to that to find your minimum floor.  But, that is not the level that your have to reach.  Always leave room above minimum service.  You will do your cutting on the margins above this operational level.  If you get down to the bare minimum, you leave very little in the way of real service and have no margin for error.  While you don’t need ten people doing the work of five, cutting back too far will mean if someone is out sick or resigns, important work may not get done.  Your intention is to be efficient, not at a critical edge with no margin for error.

When you begin a program of serious cost reductions, you should develop a target percentage for the costs and where you are going to focus for the reduction.  Spreading the cost cuts fairly across departments won’t ease the difficulty that managers have when budgets are cut, but it will make others feel that this is a group effort and not a punitive attack.