In my last blog I discussed ten growth factors for small and medium businesses (SMBs) during the recession, and as promised, this blog discusses money allocation tips during the recession, i.e., where to cut back and where to allocate funds for best results. It will probably help if you read the last blog before you read this one.
Get the best finance VP (CFO) your money can buy. Many finance VPs are glorified accountants, but you can’t afford this when times are hard. Your finance VP is a key executive and a huge factor in the health of your business, and needs to be strategic, creative, and an expert in cash flow management. Penny pinching isn’t necessarily a success factor during tough times. Your finance VP needs to know when to strategically invest in your business, when to shut the purse, and how to allocate your funds for best results.
Shed low performing business & product lines. Perform detailed analysis on your business lines and product lines, and either sell or shut down the ones with low ROI. You have better things to do with your money. This doesn’t apply to new operations that require more time to show returns.
Evaluate marketing and advertising costs. Marketing and advertising are major cost centers, so take a step back and reconsider the ROI on each aspect of your marketing efforts including print, email campaigns, trade shows, online programs, advertising (both online and traditional). Move funds into higher ROI activities and eliminate or reduce your lower ROI activities. Definitely look into social media. It’s here to stay, and as I mentioned in my last blog, it will turn your marketing department upside down.
Evaluate your customer service processes. Customer service is one of the main cost centers in service oriented companies. Take a serious look at your customer service processes and see how you can reduce the need for “contact”. Can you improve your product documentation? Better yet, can you move all your documentation and “help line” online (including videos, flash presentations, photos, diagrams, etc.)? The cost of developing online help is minimal compared to the cost and headache of maintaining a customer service department, but you have to do it right otherwise it will backfire on you.
Consider outsourcing. If you can let go of the control a little, you can save a lot of money by outsourcing, as long as you don’t outsource your core competencies. It’s a fine line and it’s easy to lose track of your core competencies in your quest to cut costs.
Boost R&D. I mentioned this before, but it bears mentioning again. Times will improve at some point, and you need your competitive edge when that happens. See my last blog for more details.
Re-negotiate your building’s lease. Yes you can. At least you can ask.
Evaluate the cost of ownership of all office equipment. Unearth the hidden costs of maintenance and lease agreements for: PCs, laptops, hardcopy products (printers, copiers, etc), network equipment, and other hard assets. Get rid of the unused equipment especially those with maintenance agreements. Re-negotiate the lease and maintenance agreements for the equipment you plan to keep. For new purchases, consolidate your hardware vendors and negotiate a hard deal with one of the top three in the field. Businesses spend up to 3% of revenues annually on hardcopy costs, most of which is unnecessary. Simply replacing copiers with networked scanners will save a lot of money in equipment and consumables costs (paper, toner, etc), save space, and make your data more accessible. (I know far too much about the hardcopy industry – ask me and I’ll tell you more.)
Remove the bottom 10% of your workforce. All companies carry dead weight in good times, but if you haven’t already cleaned up, this is a good time to do so. Getting rid of low performing employees doesn’t necessarily erode morale (counterintuitive, but true).
Pay cuts, forced vacations, bonus cuts. If you haven’t already done this, this is a better alternative to layoffs. Make sure everyone understands this is temporary and stand by your word, otherwise, the minute the market turns around, your best performers will take off. One day every two weeks forced day off, and/or 5-10% pay cuts seems to be the norm these days. Pay cuts for higher paid personnel and executives should be more than others. In tough times, bonuses only go to those who directly increase the top-line or bottom-line. You’re not Goldman Sachs, and you don’t have to act like them.
Travel costs. Another one that you’ve probably already considered. Make sure to invest in technologies such as web conferencing to simulate face to face meetings with clients and partners. Consolidate all your travel bookings with one agent to get better deals. Mileage points stay with the company not the employees.
I hope you find these tips helpful. Feel free to let me know if you have other helpful fund allocation tips.
Showing posts with label medium business. Show all posts
Showing posts with label medium business. Show all posts
August 20, 2009
August 17, 2009
Ten growth factors for small and medium business (SMB) during the recession
Times continue to be difficult for businesses about a year into this recession. So many small and medium businesses I’ve recently spoken with are either going under or selling out, I’m beginning to take it personally (yeah, it’s all about me!). During good times, anyone can drift along, and during tough times, the weaklings fall off the grid, but during particularly hard times like right now, only the best survive. Being average no longer cuts it.
Reality check: by definition, half of all companies are below average. Where does your company fall on the spectrum?
Best business practices that make stellar companies need to be front and center in hard times as there’s no time to snooze. You and your employees have to work harder and much smarter in order to succeed. Here’s a list of factors that will propel growth during the good times, but must be seriously considered during tough times.
Embrace change. I know it’s cliché, but you don’t have a choice. The road ahead of you has turned and you’ve either come to a screeching halt or headed for the cliff. The only way to survive is to turn with the road. Change can be scary and unsettling for some, but get used to it. A windy road awaits all of us.
Define your target market with laser accuracy. Many of you have drifted along and survived on low hanging fruit, but this is no time to be fuzzy about your target market. Take a giant step back and define your market strategy. Where is your best bang for the buck? Are you headed for where the market is going? Without this, you’re shooting blind hoping to hit the target.
Develop complementary corporate partnerships. I’m a big advocate of corporate partnerships and when times get tough, joining forces with others becomes essential. Some of the best partnerships are with companies that provide solutions complementary to yours into the same target market. A combined sales force selling combined solutions can generate strong revenues.
License your intellectual properties (IP) to non-compete entities. This doesn’t apply to everyone, but to those who develop IP… In a perfect example of working smarter rather than working harder, licensing can increase your revenues solidly over time with high margins. Some companies develop IP and patents without doing much with them. Put your hard earned IP to work and watch your revenues grow.
Boost R&D. Times are not going to remain down indefinitely. When the next “up” wave comes around, you want to be ready with new solutions for the market. This is when weaker companies scale back on R&D and smarter companies invest in their future.
Evaluate all aspects of your marketing operations. The marketing function has transformed exponentially in a very short time. You can’t expect to print some brochures, design a cool website (even with SEO), announce some new releases, and expect the market to come after you. Explore new ways in which you can continue to engage the market (sometimes at a lower cost than traditional marketing methods). Social media is not a fad. It’s here to stay, and it will turn your marketing department upside down.
Evaluate and optimize your sales operations. Make sure you have the best Sales VP your money can buy as (s)he is the one in charge of generating your revenues. Being aggressive is no longer the main success factor in sales. Your sales VP should be strategic and creative, and embody excellent leadership skills to keep your sales staff highly motivated during tough times. Evaluate all aspects of your sales operations including direct sales, telemarketing, channels, ecommerce, etc., and focus your resources on the highest ROI methods. Spend time evaluating new sales and lead generation tools and pick one that best fits your business. If you decide to hire commission-only sales people, make sure they are deeply knowledgeable about your products and your vertical, otherwise they’ll fail and leave within weeks.
Engage your employees and listen. Your employee base is a goldmine of ideas and information about your business. They know your customers, your market, and your operations. Actively encourage them to come up with ideas to improve revenue generating operations, product innovation, cost cutting measures, etc., and listen to them. You’d be surprised at the level of ideas you’ll generate simply by asking. This also gives your employees a great sense of inclusion.
Evaluate your board. The purpose of your board of directors is to help the company’s health and growth. If every single one of your board members isn’t actively involved in the growth of your company, what are they doing there? Pick individuals for your board who can specifically help the growth of your company through their expertise in your vertical, connections to potential clients or partners, or extensive experience running businesses similar to yours. And ask them to get active about your company.
Stay physically healthy. (This is your mother talking!) You need to keep healthy to handle the pressures of working harder while managing change. Stress compromises your immune system and induces depression and anxiety. Regular exercise has the exact opposite effect, and has myriad of other benefits. It’s a slam dunk.
I’d love to hear about other creative improvements you have implemented for growth in hard times, and I invite you to share your ideas here.
Next time, I’ll talk about fund allocation tips for small and medium businesses during the recession. Feel free to subscribe to this blog to get the follow up blog by email (I don’t blog that often so you won’t be spammed).
Reality check: by definition, half of all companies are below average. Where does your company fall on the spectrum?
Best business practices that make stellar companies need to be front and center in hard times as there’s no time to snooze. You and your employees have to work harder and much smarter in order to succeed. Here’s a list of factors that will propel growth during the good times, but must be seriously considered during tough times.
Embrace change. I know it’s cliché, but you don’t have a choice. The road ahead of you has turned and you’ve either come to a screeching halt or headed for the cliff. The only way to survive is to turn with the road. Change can be scary and unsettling for some, but get used to it. A windy road awaits all of us.
Define your target market with laser accuracy. Many of you have drifted along and survived on low hanging fruit, but this is no time to be fuzzy about your target market. Take a giant step back and define your market strategy. Where is your best bang for the buck? Are you headed for where the market is going? Without this, you’re shooting blind hoping to hit the target.
Develop complementary corporate partnerships. I’m a big advocate of corporate partnerships and when times get tough, joining forces with others becomes essential. Some of the best partnerships are with companies that provide solutions complementary to yours into the same target market. A combined sales force selling combined solutions can generate strong revenues.
License your intellectual properties (IP) to non-compete entities. This doesn’t apply to everyone, but to those who develop IP… In a perfect example of working smarter rather than working harder, licensing can increase your revenues solidly over time with high margins. Some companies develop IP and patents without doing much with them. Put your hard earned IP to work and watch your revenues grow.
Boost R&D. Times are not going to remain down indefinitely. When the next “up” wave comes around, you want to be ready with new solutions for the market. This is when weaker companies scale back on R&D and smarter companies invest in their future.
Evaluate all aspects of your marketing operations. The marketing function has transformed exponentially in a very short time. You can’t expect to print some brochures, design a cool website (even with SEO), announce some new releases, and expect the market to come after you. Explore new ways in which you can continue to engage the market (sometimes at a lower cost than traditional marketing methods). Social media is not a fad. It’s here to stay, and it will turn your marketing department upside down.
Evaluate and optimize your sales operations. Make sure you have the best Sales VP your money can buy as (s)he is the one in charge of generating your revenues. Being aggressive is no longer the main success factor in sales. Your sales VP should be strategic and creative, and embody excellent leadership skills to keep your sales staff highly motivated during tough times. Evaluate all aspects of your sales operations including direct sales, telemarketing, channels, ecommerce, etc., and focus your resources on the highest ROI methods. Spend time evaluating new sales and lead generation tools and pick one that best fits your business. If you decide to hire commission-only sales people, make sure they are deeply knowledgeable about your products and your vertical, otherwise they’ll fail and leave within weeks.
Engage your employees and listen. Your employee base is a goldmine of ideas and information about your business. They know your customers, your market, and your operations. Actively encourage them to come up with ideas to improve revenue generating operations, product innovation, cost cutting measures, etc., and listen to them. You’d be surprised at the level of ideas you’ll generate simply by asking. This also gives your employees a great sense of inclusion.
Evaluate your board. The purpose of your board of directors is to help the company’s health and growth. If every single one of your board members isn’t actively involved in the growth of your company, what are they doing there? Pick individuals for your board who can specifically help the growth of your company through their expertise in your vertical, connections to potential clients or partners, or extensive experience running businesses similar to yours. And ask them to get active about your company.
Stay physically healthy. (This is your mother talking!) You need to keep healthy to handle the pressures of working harder while managing change. Stress compromises your immune system and induces depression and anxiety. Regular exercise has the exact opposite effect, and has myriad of other benefits. It’s a slam dunk.
I’d love to hear about other creative improvements you have implemented for growth in hard times, and I invite you to share your ideas here.
Next time, I’ll talk about fund allocation tips for small and medium businesses during the recession. Feel free to subscribe to this blog to get the follow up blog by email (I don’t blog that often so you won’t be spammed).
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