I can remember it like it was yesterday. I was on the sales force of a struggling company hit hard by new government regulations. This was my first taste of adversity in the corporate world. There were rumors of layoffs, spending cuts, and buy outs. As I sat in the gigantic conference room waiting for our monthly team meeting to begin, I noticed all the frustration and anxiety on the faces of my co-workers and leadership teams. Everyone was worried about the state of the company and whether or not they could depend on having a job tomorrow. The president and CEO of the company walked through the door. I noticed a simultaneous terror that filled everyone in the room. He did not attend these monthly meetings, so we all were speculating in our own minds about the reason for his unexpected visit. We did not know if he was there to tell us we have all been relieved of our duties or the company had been bought out by a bigger competitor. He did neither of the two. Here’s what he said…
“Ladies and gentlemen, we have a crisis on our hands. Our sales are down almost 50%. Industry insiders say that we will not last. Our competitors are lowering the boom on us. Th situation looks bleak.”
We all were waiting for our pink slips when he began talking about the history of the company…
“This company started in the basement of the owner’s house. He built it up in his basement by putting in extra work after working a ten hour day at a steel mill. We came from nothing to be a great business, filled with great people, and we are a family. When families are backed up against a wall, and there’s no way out, they fight. They fight not only for survival, they fight for each other. Everybody in this room has a family to feed, a career to continue, and a legacy to build. I am not giving up without a fight. Now who’s with me?”
Every hand in the room went up! We were all amazed by what he said. He provided us with the right perspective while we were in a tough situation.
Today, you may find yourself in a tough situation regarding your small business. The economy has not been very strong, and consumer confidence is down, but you can’t go down without a fight. You worked hard to build your business. Even if your business is running smoothly, you must always be on the lookout for ways to improve. The best way to improve any business is to identify the challenges you face. If you are blind to the challenges you face, you will never overcome them. Let’s take a look at the top three challenges small business owners face today.
Challenge #1 – Technology Gaps
Many small businesses have severe gaps between the technology they use and the standard business technology that is used in Corporate America. According to the Smarter Small Business report released by the New York City Center for Urban Future, small businesses in New York City are tremendously hurt by this technology gap. The report cites the fact that small businesses with 20 or less employees, also known as micro businesses, make up over 90% of the city’s businesses, yet less than 20% of these micro businesses are leveraging technology.
Many of my clients make the following excuses for not bridging the technology gap…
- “It’s too expensive”
- “It’s too time consuming”
- “It’s too difficult to learn how to use technology”
- “It will slow down my business”
- “We already have a system that works”
I have found that in most cases, a lack of the right technology can cost a business a tremendous amount more than investing in the right technology. Technology today is not expensive at all, especially with the evolution of basic business applications on apple and android devices. I have also found that not having the right technology can cost a business a tremendous amount of time. I have recently witnessed a store clerk crossing off sold inventory in a notebook. I want to time how long it takes the store to get an accurate count on inventory and how much extra time a day it takes the employee to find the item in this notebook and cross it off. The lack of the right technology is costing small businesses valuable money and time.
Recently, I’ve noticed an interesting phenomenon. Toddlers find it very easy to operate an kind of touch screen mobile device. My three year old nephew can take my cell phone, input my pass code, and find the game he wants to play with any help from an adult. Technology has become very easy to use and it does not take long to use it. All it takes is effort and courage. Many businesses think they have technology that suits the needs of their business until they are introduced to upgraded technology that works much faster, saves them time, and is inexpensive in terms of return on investment.
Challenge #2 – Inadequate Staffing
It’s very difficult for small business owners to land talented employees because talented employees are expensive and they usually opt for working in a large corporation that can provide extensive benefits and opportunity for growth. Small businesses that do not have the right employees will be slow to grow and difficult to keep afloat in this competitive environment. Here are four options the Small Business Administration (SBA) recommends for staffing a growing small business:
- Hiring Friends and Family - The SBA says “Operating a family business has a nice ring to it, and of course if the talent and willingness is there, why not use it? Friends and family can often step in and help you out on flexible schedules and terms.” They also provide the following warning, “However, if this is an option you can take advantage of, don’t abuse it. Give your nearest and dearest clear goals and objectives, and compensate them fairly and within the law”
- Consider Independent Contractors – I have seen many small business owners have great success with independent contractors. The SBA says “Hiring an independent contractor or freelancer is another flexible approach to staffing your business. It’s also a great way of finding specialists to help on an hourly or project basis (independent contractors specialize in many areas of business from HR and accounting, to marketing and web design). The best way to find independent contractors is word of mouth and referrals. Ask around. Use LinkedIn or Facebook to solicit recommendations from friends and acquaintances.”
- Turn to a Temporary Staffing Company – This is interesting as it can become expensive in a hurry. The SBA says “Temp agencies can help you quickly staff a position with qualified and screened candidates, which can reduce the recruitment burden. However, remember that temp agencies take a cut of the hourly rate that you pay the ‘temp’ (up to 30%) and often charge temp-to-permanent fees if you decide to hire that person full-time.” Be sure to have clear cut long term goals and make all necessary budgetary considerations before starting with a Temporary Staffing Company.
- Outsourcing – I have helped many small business owners start and save their businesses by developing a plan for outsourcing certain tasks. The goal of outsourcing is to delegate all the tasks that take you away from the most important tasks that you are good at. Recently, I helped a music producer outsource all his business and marketing needs so that he could focus on making music. The SBA says “When you don’t have enough hours in the day to operate your business and take care of your clients at the same time, outsourcing core business functions can be a cost-effective and headache-free way to go.”
Before hiring anyone, be sure they understand your company mission, receive the proper training, and have the right skills to get the job done. There is nothing worse than hiring the wrong person. You can prevent bad hires by having a through interview process. Heather Brighton and Geri Stengel, leaders in the business management and strategy consulting field provide the following tips for hiring the right people:
- Recruit Continuously - Aggressive companies are always on the prowl for talent. They have a sense of what skills they need now and in the future, and what type of person will be a good fit. They look even when there are no current openings, because one can never predict when an employee might leave.
- Know What You Need - Know the skills and personality traits that will make a person successful in a given job, so you can develop job descriptions when you’re hiring. This helps in framing interviews with potential applicants, who in turn learn in advance more about the skills needed for the position.
- Interview Many Candidates - Don’t hire the first person you like. Commit to meeting a number of people - even though you won’t be interested in most of them. If you don’t think a person is a good fit for your company, use the interview to dig up information on your competitors or create a business-development opportunity. (Who knows where your company’s next alliance partner will come from?)
- Ask Probing Questions - The only way to find out if candidates will be a good fit for your company is to ask a lot of questions.
- Check References - Today’s employment laws are extremely strict on how much information can be obtained regarding past employment; previous employers are not supposed to give out any information other than the length of employment. They cannot give out any information with regard to skills, attitude, attendance or anything else in the applicant’s job history while employed there.
- Clarify Expectations - New employees seldom know exactly what is expected of them, how they will be measured, or with whom they will work the most. It’s important to communicate expectations and metrics clearly and succinctly from Day One.
- Offer Attractive Compensation - Money buys the house and the bacon, but it also represents recognition and fairness. Talented people expect their contributions to be acknowledged and their compensation to reflect their impact. If necessary, do a competitive compensation survey.
- Establish a Buddy System - Often overlooked yet consistently successful, mentoring systems give employees a sense of history and community when they enter a new company environment. By introducing recruits to the office culture immediately, mentors make them feel important and necessary to the company’s success.
- Develop People to their Full Potential - Every company leaves a tremendous amount of human potential untapped because its people are inadequately developed.
- Conduct Exit Interviews - Retention of talent often begins at the end of the process. Chances are, an employee who is walking out the door will be more honest and forthcoming than a person who still depends on your company for a paycheck. But in order to ensure truly effective exit interviews, a leader must establish a climate of trust long before he receives the letter of resignation.
All of the tips may not be useful to you, but I am sure a few of them are very applicable to your business. I can’t emphasize the importance of getting the right help. I her insightful article on Small Business Trends, the former editor of Entrepreneur magazine Rieva Lesonsky says:
“How many times have you found yourself struggling to complete some task that’s not really in your wheelhouse (wrangling a printer, trying to do your own SEO, calculating your taxes…I could go on) because ‘it’s easier to do it myself?’ But is it really? How much would it cost you to hire someone to handle what you hate? How much time would you gain—and what could you spend it on? With 79 percent of us saying we’d willingly pay to gain some time for our business, are we putting our money where our mouths are? What would you do with an extra hour in the day?”
Challenge #3 – Ineffective Marketing Strategy
I have found that many of my clients do not have a structured marketing plan. As you can imagine, this causes many problems for a business. Jay Ehret, owner of The Marketing Spot, a blog designed to provide entrepreneurs with cutting edge marketing tips, says “The great thing about a marketing plan is that eliminates much of the guesswork associated with marketing. If you do the hard work of building a marketing plan, you no longer have to market by trial and error.” I have noticed that many of my clients market by trial and error, but they have no way of assessing the errors, so they lose thousands of dollars on poor marketing campaigns with no return on investment. Here are three of the biggest mistakes small business owners make in terms of marketing:
Mistake #1: Relying on one marketing source
Dan Kennedy, well recognized as one of the best small business marketing experts in the world says “One is a very bad number, anywhere you find it…If one media produces a disproportionate percentage of your customers, you are subject to being summarily put out of business.” I am very passionate about this because I lost a very lucrative business because I only had one main source of clients. Here’s some things that I’ve seen happen to small business owners who have only one marketing source:
- The price of the marketing media skyrockets, so the campaign becomes ineffective from a cost effectiveness standpoint.
- The quality of the marketing media decreases because of new ownership or a new target audience. This leads to the small business owner getting the wrong clients, a smaller amount of clients, or too many clients to handle.
- The media may go out of business or be effected by industry regulations that maker it ineffective.
Shannon Cherry, a Creative Relationship Marketing Expert says “If you rely on only one marketing source, like word of mouth, we can nearly guarantee what your business looks like. Feast or famine. Either you’re buried in work, stressed to the max as you spend all of your time and energy frantically fulfilling the work pouring in, or you’re starving. Nothing is coming in and you spend your days worrying about how you’re going to pay next month’s bills. So how do you avoid that situation? By not relying on one lead source but instead diversifying and having leads come in from multiple sources.”
If you are in a situation where you only have one marketing source, here’s an easy way to get out of it. Try other media, but try it with only a small portion of your marketing budget. I highly recommend using at least 10% of your marketing spend on new efforts every month or quarter.
Mistake #2: Lack of Campaign Performance Tracking
In many cases, small business owners do not track the performance of their advertising campaigns. Laura Lake, Vice President of Interactive and Client Services for Entrepreneur Advertising Group a Kansas City advertising agency that specializes in marketing solutions for entrepreneurs and small businesses says “Tracking is crucial to any marketing campaign; if you aren’t tracking you are not marketing.” This is a great quote that is very true! All advertising must be tracked effectively and consistently. Here are some ways you can best way track the effectiveness of your advertising campaigns:
- Find a way to identify how many new customers each individual advertising campaign brings into your business
- Determine the lifetime value of a new customer
- If the advertising is costing more than the lifetime value of the customers it generates, it is not profitable
Here’s an example:
You advertise in the local newspaper. It costs $500 for a four week ad. The lifetime value of a new customer is $1000. You generate 2 customers from the ad. This ad is successful.
Costs = $500. Revenue Generated = $2000. Net Revenue = $1500.
Calculating the lifetime value of a customer may not be idea for you if you own a restaurant or some other high transaction type of business. If you fall in this category, you may want to calculate the effectiveness of an ad by calculating how many customers it brought in multiplied by the average sale volume per visit. I know it’s lots of math, but it’s important to do this. If you don’t, you will never know if you have some ad campaigns that are costing you more than they are making you.
Mistake #3: Lack of Internet Presence
Internet marketing has changed the face of marketing. Customers can now find most things online, and they can go through the entire buying process from research to delivery using robust e-commerce websites. Many small business owners are falling behind the times in terms of their marketing strategy. Internet marketing, if done skillfully, can save lots of time and even increase the value of each customer. I have seen small business owners take three types of approaches to internet marketing:
Approach #1 – No online presence “We don’t need it”
Many small business owners are totally ignoring the internet. They may not see the effects of this now, but e-retail spending is going to increase by 64% by 2016 according to Internet Retailer, a internet retail research firm. Many customers start the buying cycle by researching products and services online. I have found that the only way to have a client understand the power of the internet is to show them how it’s helping their competitors. The sad thing is that many small business owners never wake up and smell the digital airwaves. They only want to utilize the internet when it’s too late to save their business.
Approach #2 – Incorrect presence “We have a website, but we don’t get any customers from it”
I have a client who spent $20,000 on a state of the art website five years ago. He has not made a dime on the website to this day. The bad news is that many small business owners have experienced this scenario. They pay a web designer thousands to build them a great looking site that does not generate any business and then charge a monthly retainer fee to make any updates to the site. The website becomes a liability instead of a powerful strategic asset. Small business owners must develop direct response websites that call the visitors to action.
Approach #3 – Strong Presence “The internet is a huge part of our marketing strategy”
These small business owners usually can tell you exactly how many customers they get from the internet per month and how some of their internet marketing campaigns are going. They also have a strong social media presence and employ the help of brand ambassadors within their customer base. The small business owners that embrace the internet are the business owners who will benefit from the increasing usage of the internet and smart phones.
Tiffany Monhollon, who is an award-winning content, community, and social media marketing strategist, wrote a great article called The Seven Deadly Sins of Online Marketing. I recommend going through these with you leadership team, advisor group, or marketing manager. As you read, remember that all of the solutions mentioned are not for every business structure and industry.
- Not tracking your online advertising
- Not locally targeting your online advertising locally
- Not claiming your Google Place Page
- Failing to optimize your website landing pages for conversions
- Not training staff on how to handle internet leads
- Poor online customer service
- Letting your online reputation go unchecked
All CEO’s and small business owners dread having a conversation with their team about how to save their business. I have learned one thing in my time served as a Business Productivity Coach. Small business take years to build, and they take years to fail as well. Many small businesses fail because they neglect to address challenges. The small business owners who address technology gaps, staff adequately, and have a solid marketing strategy will win in the coming years. The small business owners who neglect these areas will fail.
I challenge you to look at your business and see if you are addressing these potential areas of opportunity in order to prepare for the future and continue your small business success legacy.