To Everything, There is a Season…Especially in Business

Growth is natural and generally considered positive; almost everything, in its own time, grows and develops. So it’s expected that your small business will reach a point at which you can make the decision to grow (i.e., expand). But how do you know that you and/or your business is ready and what will it look like?

Obviously you can persevere or you wouldn’t have started your business and seen it to a point where you are now considering expanding, but as you stand at the precipice of a new challenge are you ready for the new obstacles that may come your way? Before you embark on a new course, take a moment to look at you. After all, you are the Commander and Chief of your enterprise and if you’re not ready to sail your ship into uncharted waters, no amount of advice, effort and luck will help you. Be honest about where you’re at as a person and ask yourself the following questions.

Have you found the balance between life and career? If not, you’ll want to address this before you take on more of one or the other. It’s not easy but then again nothing worthwhile ever is.

How do you handle it when the you-know-what when it hits the fan in your business or personal life? Do you asses the situation or stress out? Blame others or accept what is, problem solve and act, then learn from the mistakes.

What kind of leader are you? Is this the kind of leader do you want to be? If not, find a leader you truly admire and let him/her be your mentor. Learn about that person and maybe print a quote by him/her to rem yourself the path you want to be on. For example, “The true measure of a man is not how he behaves in moments of comfort and convenience but how he stands at times of controversy and challenges.” – Martin Luther King Jr.

Now it’s time to get to the brass tacks of your business. So how do you know if this is the time and what do you do to make it happen? Excellent questions…and the answer is more – questions, that is.

What’s the black and white of it?

You need to be in a place where your profits are holding steady, or steadily increasing, over the last few years. You’ll also need cash flow that you can earmark into investing back into the business. What about your target market and customers? If you’ve found your niche and have reached your goal for repeat customers this is the time to consider growing your business. Especially if your industry is holding or gaining consumer interest.

Who makes it happen?

Now that you’re done with the number crunching, the next step is to take stock on a more physical level. On the human level, look at your team of employees. They need to possess the skills, reliability and drive to take it to the next level. You will likely need to recruit to expand. Don’t forget to bring in new leadership (carefully) and not rely solely on the employees who have been with the company as this may create burn out. It would be a good idea to dedicate a senior employee or two to your existing customers who need someone they already know and rely to make the transition. You want more customers, not to lose the ones you have.

Am I really ready?

Next is perhaps the hardest part; take a look at yourself. Are you just as excited now as you were when you opened the business? Because you will need that energy. If you haven’t up until now, are you ready to play a more strategic role? If the answer is yes, then you need to be the (wo)man with the plan – the business extension plan, that is, rife with everything you need including best and worst case scenarios.

What’s the plan?

Jim Alles, the New York City chapter chairman of SCORE, a resource partner of the Small Business Administration (SBA), says, “All good plans will contain separate marketing and sales plans that deal with competitors and customers, as well as a product plan and an operation plan.” So while you’re not creating a new business plan, you definitely need to map out what you want to do and how you’re going to get there. There are a lot of ways to grow your business. These include:

  • Opening another location – such as a second office or store.
  • Franchising – someone else buys into your business and runs their location.
  • License your product – other companies that would use your product or service can buy a license to do so.
  • Merge or Acquire – buy a similar business or merge a struggling business into yours.
  • Diversify – sell similar products or services, etc.
  • Globalization & the Internet – import/export your products or services; if you’re not selling on the internet, start.

Your Competitor Lowered His Prices: Don’t Panic, Follow These Strategic Steps

As the economy continues to struggle, many small business owners are finding that they have to compete more and more for consumers’ attention and wallets. It’s no secret that price can be a huge motivator in people’s minds today as they go about making their purchase decisions. In an attempt to keep their sales levels up, many business owners have slashed prices. But are these deep discounts helping or hurting their businesses?

Should You Lower Prices?

Let’s say that your big box competitor down the street decides to offer their products at fire sales prices. Should you do the same? Before you run to lower your prices in order to match your competitor’s offer, you shoudl first consider if it’s really going to help.

1. Take Stock of Your Business

The key is to understand your place in the market before you decide to change you current pricing.  You should ask yourself the following questions:

  • Will a Price Cut Really be Effective in Bringing in More Revenue? Most businesses can categorize their clientele into segments, and each of those segments has different needs. For example, if you own a curtain company, you may have clients who want inexpensive, functional curtains or blinds, as well as those who are willing to pay for more expensive, specialty items. If you have big competitors that can afford to slash their prices, you may be tempted to do the same. But the truth is that you will only be able to lower prices in the category of less expensive products in order to attract price-conscious consumers.
  • How Are Your Profit Margins? It doesn’t do any good to sell your products at a loss, no matter what your competitors are doing. Have an in-depth understanding of your cash flow and profit margins, and if a competing business lowers prices below that, then you just have to be real with the fact that you won’t be able to compete on price. In the case of the curtain store mentioned above, your efforts could be focused on either cutting costs, or even better, finding ways to add value to your products. Which brings me to the next point…
  • Where are the places where you can add value? Not all consumers care about price alone;  many will buy according to the great customer service and value they get with their purchase. With this in mind, before you lower prices check to see how you can add value while keeping the price the same. With the curtain store, for example, you could hire customer service representatives who can help consumers match colors and plan the decor of a particular space. You could also offer to measure the windows for free, guarantee a quick delivery, or install inexpensive child-proof cord-holders. Just keep in mind, however, that you should do some research before making any offers to be sure that your customers will indeed see it as a value-added feature or service.

2. Consider the Competition

It’s also important to understand why your competitor has lowered prices in order to determine your reaction. The three most common reasons are:

  • To Take Over the Market. Many times, fledgling companies think that if they can quickly gain a large percentage of the market share, they’ll set themselves up for future growth. However, many business owners fail to plan for what will happen when they are the biggest company around, but aren’t earning an acceptable profit. A price increase at that point won’t likely go over well with consumers, and they may end up shutting their doors. Those companies that stood firm during the price wars and continued to offer great service and a valuable product reap the benefits.
  • To Create Better Purchasing Power. Manufacturers offer better prices to companies that buy more, and a business owner may decide to lower prices in an attempt to have the ability to order more product and get those prices. This can be a dangerous game, because once an owner achieves better wholesale discounts, he or she will have to maintain the volume in order to keep the discount. And to do that, sales may need to continue at an unacceptable profit margin.
  • To Grow a Market. Sometimes business owners in a new market will offer low prices in order to make that market grow more quickly. For instance, some businesses offer discounts to new customers, or on new products to introduce them to their customers. This is typically short-lived, and once consumers have been made aware of the new product, prices are adjusted upwards.

Final Thoughts

It’s important to know what your business’s price points are, how your business is perceived by the public, and what your competitor’s motives are before you decide what your response to price discounts will be. Once you take all of these factors into account, you’ll be in a better position to make your pricing decisions. Remember, your goal is to ultimately increase revenue, and if you make a poor choice, you could damage your cash flow in the long run.

Author Bio: Suzanne Kearns is a small business contributor for Money Crashers Personal Finance where she writes about business finances, marketing, entrepreneurship, and more.

Small Business Growth Stunted Amid Economic Uncertainty

For the majority of U.S small businesses – the backbone of the nation’s economy – growth and expansion have remained on the back burner as of late. In fact, many smaller companies are struggling just to stay afloat even as reports stream in that the economy seems to be on the mend. Why? Here are a few reasons:



1. US Consumer Sentiment has plummeted once again. Consumers remain cautious about spending money. According to Thomson Reuters/University of Michigan’s Surveys of Consumers, U.S. consumer sentiment fell in early July to its lowest level in 11 months. This dramatic reversal comes after consumer sentiment climbed to its strongest level in nearly 2-1/2 years in June. All of this spells uncertainty for the majority of small businesses, and uncertainty breeds caution.

2. Banks have clamped down on small business loans. Banks are making risk reduction a priority at a time when a significant population of small businesses are struggling to be credit worthy. In a recent speech, Federal Reserve chairman Ben Bernanke called on community banks to lend more to small businesses because they are “crucial to America’s recovery.”In response, various banks noted that most small business owners are applying for funding just to remain afloat, never mind expansion. Moreover, even those who do seek to expand are struggling to come up with the collateral necessary to back up a loan due to the freefall in real estate prices.

3. Many small business owners are still trying to reduce debt levels. Many small business owners have accumulated bad mortgage or credit card debts and are still working at reducing their debt levels. The result: plans for expansion are put on the shelf.

4. Uncertainty regarding policies and legislation. Although during the past year, the Obama administration has pushed through a package of financial incentives to small business owners looking to expand or grow, these have since expired, and no decision has been reached regarding their renewal. There is talk in Washington about an overall incentive package for small businesses, but so far that is all it is – talk. And as we all know, you can’t take talk to the bank.

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Tips on How to Grow Your Small Business in a Recession

Yes, there are small businesses out there that are considering growth opportunities even as our current recession keeps a tight hold on our economy. But for those small businesses that are in this situation, any steps that they take to expand operations should be carefully implemented.

Here are a few tips on how to responsibly grow a small business in a recession:

Now is the time to re-examine, re-define, and streamline company objectives.

A recession often changes consumer demand, spending habits, and attitudes. It is thus extremely important that small business owners take the time to ensure that their businesses are operating in line with this a shifting environment.

Keep up the trust of your employees.

Even if you cannot offer a big benefits package, make sure there are methods in place for employee recognition and that the lines of communication are open.

Focus on customer service.

Catering to your customers is after all the focus of your business, and having good customer service does not have to get expensive. Like your employees, you want to build the trust, loyalty, and regard of your customers.

Develop creative, low-cost ways to advertise your business.

Getting your name out there effectively does not have to break the bank.

One of the biggest obstacles to small business growth is lack of funding or inadequate cash flow.

Make sure that you are doing all you can to maximize cash flow, such as implementing effective debt collection strategies, good price management, inventory management, and the coordination of equipment purchases. You should also be aware of all your financing options.

Stay on top of current trends in technology.

There are many software programs, services and devices on the market that will greatly improve efficiency and give your business a competitive advantage even over your bigger competitors. Many of these essential business tools are also relatively inexpensive.

Keep your eyes open for opportunities.

A recession may provide many opportunities to expand business operations. Real estate, for example, is much cheaper now and so is many raw materials. Consumers also have different needs, and your business may be able to capitalize on them.

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