Small Business Development Center
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Category Archives: Best Practices

Keeping Your Customer Pipeline Full

By Chemeketa SBDC

The economic recovery seems to be in full swing and the customers are coming back. This is good news! You may have just about as much work as you can handle these days. Or perhaps you do some of the time, and then make a marketing surge to fill the pipeline when things are slack.

But that’s the problem, right? When you’re really busy you don’t have time to market. And when you’re not busy enough it’s because you weren’t marketing during the boom weeks. The fact is that you need to market continually (boom times and lean times) in order to keep your sales pipeline full.

So how do you do that?

Always be thinking about marketing your business and attracting new customers. It should be top of mind all the time. Don’t skip networking events. Don’t slack off on continually getting your name in front of current and potential customers. You can’t afford it!

Reach out to former customers and try to get them to come back. Use social media, email newsletters and other forms of communication to keep in touch with them and invite them to reconnect with you.

Create a system to put customers on a waiting list if they come to you when you’re too busy to handle them. Don’t let them slip away because they won’t come back.

Consider getting additional help to handle overflow times. That way you can meet a customer’s need when the need is there. If you put a customer off because you’re too busy, they’ll just go somewhere else instead.

Think about creating tiered pricing so that you can adjust your prices up or down depending on what your demand is at the moment. This is a strategy to adjust as you go so that you always have customers coming in.

Ask yourself if you can turn some of your customers into a recurring and predictable income stream, and away from a one-off occasional buyer. The more “bread and butter” customers you have, the easier it will be to smooth out your pipeline and forecast workflow and resource needs.


Hiring Strategies

By Chemeketa SBDC

Knowing whom to hire is a critical factor for every expanding business. As you already know, the image and reputation of your company depends on how your customers view your employees. Your job begins long before the new employee is greeting your public.

The hiring process is not (or shouldn’t be) haphazard. Before you begin, decide why you are bringing on a new employee — define the job. Determine the experience or education level truly required. And know the appropriate salary and benefits for the job. (Appropriate is not only the market rate but your ability to pay and equity within your company.)

If you have not formulated a personnel policy, now is the time. What are the hours to be worked each week, the number of days per week, holiday work and the time and method for overtime pay, fringe benefits, vacation and sick leave, time off for personal needs, training, retirement, a grievance procedure, performance review and promotion, and termination. This may seem overwhelming but it is better to “put up the stop sign before there is a fatal accident,” so to speak.

Often in a small business you will hire a person for a certain job (or tasks) but you should also expect, articulate and cross-train for the most efficient utilization of that employee. Can they pinch-hit for other staff? Is there room to “grow your own” managers? Think not only about the training they will need to get them up to speed on their assigned responsibilities, but also the next steps — what else do they need to learn do within the company?

Rather than deciding who to hire based on intuition, establish an entire hiring process that enables you to determine their worthiness for the position. Review their resume, application and work samples; test the applicant if appropriate for the position; interview the candidate; and check his or her work references. Do not focus on what the candidate has done; rather, find out how they did it.

Interview the candidate, not their resume. Observe and deliberately consider interpersonal skills and motivation level. When it comes time for the hiring decision, your instincts of people will come into play, your ability to separate “good” employees from “bad” ones. However, a word of warning: do not hire someone you believe will turn around. Time is too precious and too expensive to waste on anyone who cannot contribute 100 percent.

There is always concern about what questions are legal in an interview. While is it important to know the laws related to job discrimination, you may be overwhelmed by the “what if” scenarios. According to one expert, there are two simple rules to test whether or not to ask a question. First, is it job related? If it is not, do not ask. Second, is the question presented only to a specific type of candidate? If it is, do not ask.

Make your employee expansion a process. Formalize the entire procedure — you can tweak it over time but establish a system for hiring before you begin.


The Trouble with the Low-Cost Game

By Chemeketa SBDC

Don’t have enough customers so it’s time to lower prices, right? Well, maybe. You may be tempted to do this in your business, especially if a competitor has lowered prices. But you run the risk of lowering yourself right out of business.

Carefully consider other options; perhaps there are better ways to remain competitive. And if you need to lower prices, do so with a clear idea of where that might take your business.

• Review each step of your supply chain, from your vendors on through to your customers. Why are there not enough customers? Are you losing current customers because they’re dissatisfied? Chances are there’s more to it than your prices. Find the areas of weakness and shore them up.

• Find ways to cut costs where your competition can’t. This increases your margins and consequently your cash. If you need to cut prices as a last resort, you’ll be sitting in a better position. You may think you’ve cut costs to the bone, but take another look.

• Examine your business model. Are there strategic changes you can make instead of tinkering with pricing? Are your current offerings what the market really wants? You may have a problem with what you’re selling instead of how much you’re charging for it.

• See if you can raise prices in a complementary service or good if you need to lower them on a core good or service. A coffee shop might leave the coffee pricing alone, but slightly increase prices for pastries. This results in the same revenue per customer. On the surface it appears as if you are competitively priced, but you’re not paying the penalty for those low prices.

• Selectively lower prices for only some of your customer base, or for only a limited time as an incentive. Make sure that what you gain (in customer loyalty or in increased purchases of ancillary goods) makes up for the loss from the price reductions. Be strategic about this.

• Have a clear idea of just how low you can go, if you choose to engage in a price war. Know your limits. Remember that smaller businesses will lose this arms race much faster than larger and better capitalized businesses.

 


Make a New Year’s Resolution for Your Business

By Chemeketa SBDC

It’s that time of year again, when the old year is wrapping up and the new is just around the corner. The time of year when those resolutions about losing weight and spending less money are top of mind.

Business owners make resolutions at this time of year too. Smart ones will be setting goals and lining out action steps to go with their choices of course. But let’s start with a list of questions that every entrepreneur should take a look at right now. Some may or may not apply to your particular situation. Just pick a few for serious consideration. And then resolve to do something about them.

  • How can I be more proactive and less reactive?
  • What tough decision do I need to make (in January!) that will have an effect on the rest of the year?
  • Am I operating my business more like a hobby than a business?
  • Will I do a major campaign or major push of some kind this year?
  • Is my staffing at the right levels?
  • Is it time to shake up my marketing, perhaps add a big dose of social media?
  • Are my employees and I wearing appropriate clothing every single day, clothing that carries a clear message about my business values?
  • Am I measuring the right things?
  • Do I have sloppy work habits that are impeding my ability to run my business in an efficient and effective manner?
  • Am I thinking big enough?
  • What is the one thing that I can do this coming year that will make the biggest impact on my business?
  • Why don’t I have systems in place that make operations more efficient?
  • Do I run my business with a heavy dose of wishful thinking instead of running it on actual facts?
  • Do I have the right customers?
  • Will I be in business a year from now if I keep doing what I am doing, and doing it in the way I’m currently doing it?
  • How committed am I to making this business a success?
  • What help do I need and where will I get it?
  • Does my business need to be scaled up, or scaled down in the next year?
  • What got me into this business in the first place, and is it still relevant today?

 


Six Key Ideas to Grow Your Business

By Chemeketa SBDC

Your ability to think, analyze and decide is the key determining factor of your profitability.

To help you sharpen this ability, here are some key principles for business success that are relevant and important at every stage of your business life. If ever you aren’t happy with the business results you’re getting, revisit these key points.

1. The Product Must Satisfy A Current Need — The first principle to consider in selecting any new product or service is to determine if it fills a genuine, existing need customers have right now. A new product or service must solve a problem of some kind for the customer or make his/her life or work better in a cost‐effective way. You must be very clear, from the beginning, about exactly what your product or service does to improve the quality of the life or work of your customer.

2. Offer Good Quality At A Fair Price — The second principle for business success with any product or service is that it must be of good quality at a fair price. If it’s in competition with other similar products or services, it must have what’s called a Unique Selling Proposition ‐ some feature or benefit that makes it different from and superior to others out there.

3. 3. Be Careful With Your Money — Tight financial controls and good budgeting are essential. Successful companies use accurate bookkeeping and accounting systems. They put these systems in place at the very beginning and carefully record every penny they spend. Cash flow is a critical measure and determining factor of business success. Always carefully consider every expenditure. The basic rule for entrepreneurial success is this: Only spend money to earn money.

4. Get Efficient Through Technology — Working hard is important, but there’s one thing even more important — working smart. That’s what technology helps you do. You get more done, you get it done easier and you get it done better. By using technology you’re able to do some things that would simply be impossible without it. There is an array of technology tools that allow you to build your business in extremely smart ways. Be sure to take full advantage of them.

5. Maximize Your Marketing — Perhaps one of the most important principles for business success is strong momentum in the sales department. This requires an emphasis on marketing that permeates the entire organization. Everybody must think about selling and satisfying customers all day long. Create a daily sales checklist, set performance goals, and unify everyone’s effort by sharing goals team‐wide.

6. Create A Culture — This is about cultivating passion in both your team and customer base. Your culture clarifies your identity, your values and your beliefs, in addition to more basic things like the products or services you offer and how you price them. Some growth strategies are obvious and have immediate results. Others, like creating a culture, have more indirect results, but are still extremely important.

 


Simple Steps to Quell the Office Critic

By Chemeketa SBDC

A wealth of current research tells us that the most critical factor in controlling undesirable turnover and increasing retention of talented people are the skills of managers. People join companies but they leave managers. Satisfied employees are critical to the success of your business. If they’re not happy on the job, customers are not happy being with them.

So what do you do when you have an employee who is just not happy? Every business can have “the glass is half empty” person on the lookout for something to go wrong. You can recognize them — they spend the majority of the day in a negative slump and critical of everything from projects to people.

The “it will never work” attitude also can devastate your company morale. You may start to notice that other employees — once happy, motivated people — are starting to gossip and criticize. When it comes down to it, negativity is like the flu: It’s contagious. It’s also expensive. Negativity costs companies millions in terms of productivity and profitability.

So how do you deal with an employee whose negativity is starting to rub off on other people? Our first instinct may be that the person’s behavior is just about their “bad attitude” and ignore it. Not a great idea. This can actually fuel the fire by setting a culture of negativity. In fact, if we do nothing about the negativity — we are condoning the behavior and subsequently, endorsing it. You do need to take some action.

Often at the heart of a “negaholic” attitude are fear and uncertainty. Change is the biggest single cause of workplace negativity. Even if that new billing system is for the better, people will automatically ask themselves: What am I losing? For employees, change automatically equals the loss of something comfortable — and they will resist it.

Here are some simple steps for quelling the office critic, paraphrased from some great work by Chris Penttila, a freelance journalist.

1. Understand change from the employee’s perspective. Employees can put up with change as long as they can talk openly about it. Remember most negative people don’t know that they’re negative because no one ever tells them.

2. Find the fear, then focus on solutions. Teach negative employees to focus on offering solutions, not just criticism. Turning the griper into a solution provider gives them a genuine avenue to contribute.

3. Do some coaching. Work with the negative person on improving their attitude. Chances are, these people are complaining because they think they have good ideas that haven’t been heard.

Ultimately, employers can work too long and hard with some negative people when it’s better just to cut your losses, recognizing a bad fit. If there’s no improvement after three to six months, maybe it’s time to let them go (legally, documented, etc., of course).

After you let a negative person go, talk with employees about the future of their workplace. It can be the perfect opportunity to take the pulse of your company culture.

 


The 5 C’s of Credit

By Chemeketa SBDC

Businesses require capital to start, run and grow. Where does it come from? Isn’t that a large piece of the successful business puzzle? Many small businesses must save for years or invest inheritance or retirement funds, while others borrow from friends and family.

While these are successful venues to pursue in raising funds for business, they are not always available. Who is always available? The bank.

Visiting a bank is not a guarantee that you will receive needed funds; typically, about one in four businesses will be successful in getting a loan. Why is that number so low? Banks want to lend in a manner that brings the greatest return for the least risk. In other words, they want to know they’ll get their money back.

So your job as a potential borrower is to demonstrate that you are capable of repaying what was borrowed and that you are a minimal risk to the bank. Banks look at potential borrowers and assess their 5 C’s: character, credit score, capacity, capital and collateral. Bankers often use this term to describe the considerations given to the borrowing ability of a small business.

A bank is going to assess your character. This is often picked up during the interview process and throughout your work with the loan officers. Do you have a history of paying on time? How do you treat your managers, employees, vendors and customers? This is a subjective judgment but is one of the 5 C’s, a piece of the decision-making process.

On the flip side, the next test is not so subjective. Credit score is often a make-or-break consideration. A credit score demonstrates your commitment to meeting your financial obligations. There is not a concrete minimum score; each institution sets its own policy regarding credit scores. Having a high score increases your chances of borrowing money.

Free reports are available, and you should review your score at least annually. This will help you identify ways to clean up your credit. It also provides a basis for comparing yourself to other borrowers, as most reports tell you where you rank nationwide. You can work on your credit score for months and even years in advance of applying for a loan to position yourself to be lendable.

Capacity is where your projections are used. What is your ability to repay the loan? A banker will look for sufficient cash flows to cover your debt repayments, not just to this bank but to all the sources from which you have borrowed funds.

Debt-to-income ratios are used in making these determinations. Most homebuyers are familiar with this computation. When looking at your total debt payments as a percentage of your total income, it must be below certain thresholds determined by the bank to keep its risks at moderate levels.

Next comes the skin-in-the-game test. A lender wants you to invest, not just your time and efforts, but your money into the business as well. Capital. This is often a deal breaker as many people expect to be 100 percent financed. Typically you will need to contribute 20 to 30 percent of the capital. These funds are often raised from friends, family or retirement withdrawals.

The last of the 5 C’s is collateral. Your lender wants to know how it can get its money back if you default and don’t repay. If you pledge real estate or capital equipment as collateral, then you can be forced to sell the assets and the proceeds used to repay your creditor. Remember, banks are risk averse, and having sufficient collateral allows them the best opportunity to recover their funds, but such a drastic measure is typically a worst-case scenario.

Banks are great to work with. They want to lend money. But will they lend to you? Are you bankable? That is for the bank to determine, but if you strive to improve your 5 C’s, you are giving yourself the best chance at raising the funds necessary to start, run and grow your small business.

 


Make a Plan When Spending Advertising Dollars

By Chemeketa SBDC

It’s a question as old as business itself: How can a company be sure it’s spending the right amount of money on the right kind of marketing so that it can sell more products or services to increase profitability and, ultimately, enhance shareholder value?

Advertising dollars without an evaluation plan are dollars wasted. You must know BEFORE you spend one dime what you expect to get as a return on your investment, or ROI, and you must have a plan for knowing whether or not the expenditure was worthwhile.

ROI is a measure of the effectiveness of your advertising. How much you made compared to how much you spent or invested.

First you must be specific. Set your goal. To start down the path of marketing/advertising without knowing what you want to achieve is easy. Most everybody starts that way. The problem, you will never know if you got where you wanted to go. More specifically, you will never know if the marketing strategy worked!

If you spend $1000; attract 10 new customers who each spend an average of $50 dollars — this is not good: $50 x 10 customers yield $500. You just spent $1000 to earn $500.

Measure your investment. Your ROI is calculated by dividing your sales by your advertising costs. Example above $500 / $1000 = 50 percent. Not good. Bad investment. You must have a minimum of 100 percent simply to break even.

“Oh”, you say, “they will come back”. Okay, then your strategy simply for breakeven must be 10 new customers spending $50 each and returning a second time to spend $50. ROI: $1000/$1000 = 100 percent. Okay, but still not good enough. Why all the effort and energy just to break even?

The most effective advertising gives you a high ROI. You get a high ROI if you spend very little to advertise and still get sales.

The second critical step in ROI is how do you measure the effectiveness of the ad? Be sure to collect data so that you can calculate your actual ROI. If you are using multiple advertising methods, you will need to track sales or income as a result of each type of advertising.

• Ask prospects that contact you how they heard about your business. (Write it down, keep a tally – you cannot remember in your head and measure effectively).

• Include a code with your advertising and ask prospects to include the code with their order or inquiry. (Codes work well to track results from multiple advertising campaigns that are occurring concurrently.)

• Keep advertising campaigns separate from each other to test new markets.

• Feature a new product / service and market it exclusively in multiple media.

To know if a marketing strategy is effective you must a) know your costs (easy enough) and b) know how many customers responded to the advertising strategy ( more complex but critical). Be creative.

 


Running a Family Business Can Have Unique Challenges

By Chemeketa SBDC

Family businesses can be wonderful. And challenging. Or maybe difficult and challenging. Or maybe all of it all at once. If siblings are involved there are issues to be worked through on the way towards a smoothly running business, especially if the business was started by the older generation and then handed over. Here are a few key points to consider:

  • Clear away any unfinished business or lingering emotional issues first. Unresolved issues will clutter any discussions going forward. Rivalries, old wounds, and tendencies towards competition can derail a business. Invest in a weekend retreat or series of sessions with a trained facilitator. Decide up front if this is even a course worth pursuing. If it isn’t then involve legal counsel to draw up a buy-sell agreement and documents that consolidate ownership into fewer hands.
  • Determine up front what the vision for the company is, and agree on it. If one sibling wants to grow an empire while another is happy to keep the business the same size it is now, there will be big problems. Come to agreement on size, direction, and other matters so that everyone knows right off the bat where this is headed.
  • Your business needs an organizational chart and clear job descriptions for everyone. Who will fill which niche, how much responsibility will each person have and for what areas, what are the regular duties to perform. How will performance be measured? These are key questions for any person in a business, but especially key when emotional and family factors are at play. Take subjective judgment and the potential for favoritism out of the equation by using well-written documentation.
  • Write clear compensation policies and stick to them. What people are paid should be based on job performance and in accordance with industry standards. Take the emotion out of this completely if you can. Hire an HR consultant if you need to.
  • Decide how communication will occur (in writing? During regular meetings?) and be sure to include a policy on conflict resolution. How will things be brought out into the open and dealt with (in a timely manner)? Ignoring conflicts will just lead to greater ones down the road, and that can spell disaster.
  • Develop a board of advisors and pay serious attention to their advice. Members of this group should include your attorney, your CPA, and people outside your business who have expertise in marketing, personnel, your industry, and other related matters that impact your business.
  • Create a set of policies (in writing!) that govern perks, privileges and conduct. Who will get the sports tickets? How often may company equipment be used at home? Where will charity dollars be allocated to, and who will decide? How much financial information will be shared (things like extra gifts from mom and dad, personal tax information, prenuptial or divorce documents)?
  • Figure out ways to enjoy each other’s company on your off hours. You’re still brothers and sisters, so enjoy family holidays and find ways to strengthen your family bonds.

 


Planning a Company Retreat

By Chemeketa SBDC

Do you and your staff need a retreat day? You know, a day away from work where you can focus on strategic planning, or resolving something that’s just too big to fit into an extended staff meeting. If you do, here are some planning tips to make the most of your time.

First, you need to know what your goal is for your time away. The retreat should have a clear business purpose, like creating a strategic plan, or developing the year’s marketing calendar. Make sure you can accomplish this goal within the time you’ve dedicated.

Once you know what you want to accomplish you can decide who to invite. Just issuing a blanket invitation to all staff might not be the best use of staff resources. And consider that some retreat goals might be served by inviting some of your best customers or other stakeholders. Also, you’ll want to include anyone who needs to have buy-in on whatever decisions you are making.

From here you’ll need to decide on a few logistics. Where will you hold the retreat? Do you want to build social time around the business activities? If so, then consider a place with good restaurants or recreational facilities around it. Will you be having the event catered? Is it a brown-bag affair? This will make a difference in your locale.

Next, think about who will help you get through the agenda. A facilitator can play a helpful role here. They’re neutral, understand group processes and dynamics, and can help you get through an agenda efficiently. You may want to include one.

Prior to the retreat, work up an agenda that is specific as to time frames, activities, purpose and desired results. Distribute the agenda beforehand so attendees can bring whatever materials they might need to present. Participants should know up front if they are there to just discuss issues or if they’ll be asked to make decisions on issues. The more preparation everyone puts in ahead of time the better your retreat will go.