When talking to people about how things are going in their business, I have discovered some common tasks. People who have successful businesses are doing certain things on a regular basis that appear to be similar. Also, it seems those who are struggling are not doing these things. In addition, I have noticed that sometimes small businesses believe that the normal business principles that work for larger companies do not apply to them because they are a small company. At times, small business operators are not necessarily formally trained in business, rather, just nice people with a great idea trying to figure out how to make it work. That got me thinking about what key elements that I feel make businesses successful to avoid potential pitfalls. Below are the three things that I feel are critical for every small business to ensure success.
1) Know your target market – If you have read some of my other blog posts you know I am a huge supporter of making sure one has a marketing plan, no matter how formal or informal. (See the blog here.) A big part of that plan is knowing who you are selling to, noting this can change. Yes, as a small business you want to take all the work you can to make money, but that does not change the fact that you need to know who your target customer is though. In today’s highly saturated information world, reaching your potential customers is very difficult and can be impossible if you do not know who they are. Let’s say you are selling T-Shirts, but standing next to the nudist colony people and the people that really want your shirts are clear on the other side of the room. If you don’t know your target market you are going to be trying to sell shirts to nudists and then when that fails you will be just screaming at the top of your lungs to anyone who will listen. Now you’re the crazy person in the room! But let’s say you walk into that same room, and you know your target market is people that are trying to promote a band and need T-shirts to do that. Now you can ask around and find out where the band people are standing, then you can walk over to their area and start a normal conversation with them about their needs. The best part is now that you found the right people it is so much easier to win the business. Then it also allows your business to grow organically. Let’s say you make some t-shirts for a band you meet at the 10,000 people convention and your service was excellent. Then let’s say that the band’s lead singer has an uncle who is a triathlete. Uncle runner happens to need shirts and sees the new shirt band singer guy is wearing. BAM! You have a new lead and potentially a new market to target.
This is something that needs to be looked at, studied and updated at least quarterly. When you pick your target market you must “know” your target market. Find out where they hangout (online, at the supply store, etc.) and also make sure your sales pitch and collateral material talk to your target market. Maybe band guy only is interested in black shirts, but runner guy only is interested in white shirt or poly performance wear. Make sure you have the right samples, prices and pitch. Then get into their groups, follow them on twitter, like their Facebook pages, attend their trade events and start winning the business.
2) Know your true costs – This part is the most important piece that many times is completely overlooked. If your business is not making money you have a hobby and maybe your energy should be put towards something else. The biggest factor here is making sure this is something you are working at and tracking. Let’s now say you are selling t-shirts and each shirt costs you $2.00 to buy and you sell it for $5.00. Cool, you just made 60% profit on that, right? I’m in business, right? But wait, how much did it cost you to have that shirt shipped to you, and what about the cost of the transfer paper and ink? Also, how about the cost of the printer and heat press? What about the cost of your cell phone, basement space and fancy website? What about the most important cost of all YOUR TIME? Maybe you should have sold the shirt for $15 to make 30 to 40% profit and been really in business?
A friend of mine, Jimmy Lamb, has a very good spreadsheet, and blog post that will really help you figure out your true costs. I will not expand too much into this since he does a great job of it with those available resources mentioned. What I can say is that I believe you will be surprised at what factors move the needle between profit and struggle. Again this is an area of focus that must be worked on regularly. Definitely update your numbers and review your pricing on a monthly or at least on a quarterly basis. This will help avoid any big surprises that could take away from your success in business.
3) Work at selling/marketing – Many times when people get into business for themselves they spend a great deal of time dealing with the everyday production to create the best product possible with the most efficiency. Unfortunately, the fine art of marketing, selling and keeping the pipeline full of business can be forgotten. For many small businesses the hardest part is going to be getting customers in the door. Being a salesperson does not come naturally for most of us, in the old school sense of going out and pounding the pavement. I have been in sales and marketing since 1998 and still to this day I would not consider myself to be a natural sales person. If you are a natural at selling/marketing, then you are probably going to need to focus your efforts on the above #2, but don’t lose sight of the selling and marketing.
With sales and especially marketing, it is not going to happen for you overnight. It is something that must be worked on daily and it needs to grow organically. In today’s market place you cannot force your products on potential customers; you must build/create your customers via all sorts of different channels. To do this you need to put aside 30 to 60 minutes a day. During this time, make sales calls, work on your social media presence, build your email list, create new marketing material, and send out press releases and other sales/marketing items that fit into your target market.
You must keep that pipeline full of potential customers who you are interacting with or developing more business in your current customer base, otherwise, one day you may wake up and not have any work to be done. There is no magic bullet to attract orders, just hard work and organic growth.
Overall, small businesses cannot get wrapped up in the day to day operations of producing the product or the above tasks can be neglected, creating even more difficulties keeping the business successful. I have watched it happen to a company that was on the Inc. 5000 list, noting it was out of business two years later! Please remember that you must perform all three actions, not just one or two, to help ensure success on a regular basis.
What other suggestions do you have for keeping your business healthy? Agree or disagree with me? I would love your comments.