1. Cash Flow Is King
A business fails when it can’t afford to pay its expenses—you may have all this money coming in next month, but if you can’t make payroll at the end of this week, then it’s basically all over.
2. Build a Stockpile
Careful cash flow management and projections aren’t immune to sudden emergencies. Always make sure that you have enough liquidity for emergency bank loans or credit lines.
3. Stop buying crap
Spending money can make you feel really productive: you get to make a decision, enter a credit card number, and hit send. It feels like you’ve achieved something, your brain gets a nice dopamine hit, and it’s taken just a few minutes. Don’t confuse making purchases with being productive. If you’re not quite sure about a purchase that’s not business-critical, wait one day before you make a final decision. Putting it off will give you more perspective on its actual importance, helping you resist the urge to impulse buy and giving you more control over your expenses.
4. Selectively pay invoices
Pay invoices from critical suppliers that are also small businesses before the due date. This banks you an incredible amount of loyalty, which may come in handy down the track. For example, we always pay our recruitment firm within 24 hours of an invoice and we make sure that they know this. Why? Because since they know we’ll pay them immediately, they’re going to offer a great candidate to us first, before their other clients. Delay paying invoices from large, multinational suppliers as long as you can, however, as unlike a small business there’s no personal relationship there. You most likely have nothing to gain from paying today instead of in 60 days’ time.
5. Hire slow, fire fast
Hire the resources you need at the very last minute to maximize your cash. Eliminate underperforming people as soon as possible to improve productivity and, again, to maintain your cash flow.
6. Don’t hire average people
If you have 10 people in your business and one of them is average—or worse, an under-performer—then literally 10 percent of your workforce sucks. That’s a scary number. Here’s the strategy we use when hiring top talent for WORK[etc].
7. Don’t hesitate to outsource
You can cut down on overhead by moving some of the work overseas. Of course, you have to make sure that whoever you hire is passionate about the work and doesn’t treat it as “just another job.” Check out WORK[etc]’s outsourcing strategy here.
8. Upskill your team
Even when you switch your company’s engine to overdrive, an economic downturn will likely lead to fewer sales calls. Use the downtime to enroll your team members in crash courses, seminars, and online academies like Udemy. Let them broaden their skills and make them even more competent at their positions.
9. Look after yourself first
A lot of modern business advice tells us to always put our team first. The problem here is that it fails to recognize the importance of management and the entrepreneur. If you’re not paying yourself properly, if you’re stressed out of your mind working 70-hour weeks for months on end, then it doesn’t matter how your staff is feeling. If you’re not at your best, you can’t expect to stay in business for long.
10. Own your advertising spend
It’s easy to waste money on advertising. Don’t fall for the “mutually beneficial partnership” routine—more often than not, this just means the ad sales people will try to milk as much of your money as they can without any hard guarantees on returns. Also use the “wait another day” method above; you’ll probably find that the longer you wait, the more discounts you’re offered.
11. Always be marketing
Treat every piece of communication that you send out as another chance to market your product. Add detailed information about your product, special discounts, and new service announcements in your quotes, invoices, and even follow-up emails.
12. Hitch your wagon
Partner with a large organization for distribution. Aside from additional sales, you expose your brand to a larger audience without having to spend millions on advertising.
13. Business isn’t a democracy
A lot of modern management advice talks about getting input on key decisions as a team. Do it, but remember that you’re not required to take this input on board and give it an equal vote. Manage your business less like a democracy and more like a finely-tuned operating room, where information from only the most knowledgeable people is fed up the line, while clear, decisive decisions are sent back down.
14. Make strong, fast decisions
Numerous studies, including one published in The Academy of Management Journaland another from the Strategic Management Journal, show that strong and fast strategic decision-making is linked to company growth and profit. Of course, that doesn’t mean you just make decisions off the cuff. The Academy of Management Journal found that fast decision makers actually used more information and developed more alternatives compared to slow decision makers.
15. Don’t hesitate to delegate
Let’s say you’ve decided to handle all social media work in-house. It might be faster to just, for example, do the social media post scheduling yourself right now instead of teaching someone else how to do it. That one thing, however, will soon turn into a hundred other things that are added to your plate. You’re here to grow your business, not get buried under a mountain of things that you couldn’t bear to delegate.
16. Tune out the noise
Cut pointless meetings and stop handing out your cell number and personal email address. Before you agree to a meeting or a “quick 5-minute phone call” (that never seems to last just 5 minutes), ask yourself if it’s something that you really need to do. If it isn’t, then it’s OK to just say ”no.”
17. Streamline your sales cycle
When you send out a proposal, include a contract that is ready for signing. Send out the first invoice on the same day that contract is signed to further reduce the time on your sales cycle. Cutting just one day from your sales cycle means you collect money on a sale one day sooner. Multiply this by hundreds of sales in a year and it can add up to whole weeks of extra productivity and thousands in additional revenue.
18. Don’t reinvent the wheel
Identify the common activities your team does every day. Turn these into simple checklists and look for opportunities to make them more efficient. You increase productivity while building an internal library of business know-how at the same time. These documented processes will come in handy if you should ever let someone go.
19. Avoid long-term contracts
The business environment and your business requirements change quickly. New and improved products are launched every day and better offers come and go. Avoid signing contracts with terms of longer than 12 months. You have to be a cutthroat negotiator here, but most vendors will agree with you rather than risk losing a sale. Besides, you’ll have a new opportunity to renegotiate for a better deal in 12 months’ time.
20. Rebrand services as “products”
Products feel more tangible than services; a product can be boxed up, branded, optioned-up, supported, and renewed. Services can appear too vague and lead to questions like “What am I actually getting?” and “How much is this going to end up costing me?”. When your service becomes a product, your customers feel more confident about their purchase decision.
21. Tighten your focus
The 80/20 Rule, also known as the Pareto Principle, states that 80 percent of your revenue comes from only 20 percent of your clients. Identify the ones in this 20 percent and bring all your guns to bear on them. You can never please all of your customers at the same time, so focus instead on giving maximum value to your most lucrative clients.
22. Learn to say “no”
Learn to spot pain-in-the-ass customers and don’t be afraid to show them the door. Think about opportunity cost, the time and resources you waste dealing with difficult customers instead of looking for and signing new paying customers. If the opportunity cost is significant—for example, attending to your difficult customer actually costs you more money than he makes you—just drop him and focus on building relationships with new, hassle-free customers.
23. Don’t skip low-hanging fruit
Low-hanging fruit are goals and targets that are easy to achieve. It’s easier to get an existing customer—the “low-hanging fruit” in this context—to buy more (you have a 60 to 70 percent chance, according to CMO) than it is to find a new one and convince them to buy for the first time (5 to 20 percent probability). Low-hanging fruit are already making you money, so concentrate on getting more out of them. After all, customer acquisition costs up to seven times more than retention.
24. Gain customer loyalty
It’s hard to get new customers in an economic downturn, so make sure you do whatever you can to keep the customers you have. Give your best customers small “wows”—a small discount on their next invoice, free training sessions, or just a free shirt, for example—and turn them into true believers, advocates that champion your product simply because they like it and your company. Your competition is just as desperate as you are and may be looking to poach your customers; don’t give them the chance.
#12 should also come with the caveat that you should make sure the wagon you’re hitching to is worth the hitch. There are always risks when connecting yourself with someone else. The company I work for tried to start a people sharing deal with a similar company in the area. The plan was that we’d give employees at cost when the other company needed extra help for a contract and they’d do the same for us. When it came for them to honour their end of the deal, they tried to charge us full rates for their people AND tried to insert themselves in with our client in the hopes of taking the contract away from us. Needless to say, we told them that we didn’t need their help for anything in the future.
Great article and I love the info graphic. Point 4 is something I had not considered but I bet it’s some really good old-school common sense.
I have a few quick tips of my own for small businesses.
-Hire people that add immediate value and can take ownership versus just direction.
-Fail fast so you dont spend tons of time going down a road to nowhere
-When possible pick well known technologies so you can quickly add temporary help when needed
-Avoid obscure technologies which require you to maintain highly specialized staff
-Dont always buy into the phrase “We can built it ourselves” which almost always comes with higher total cost of ownership and distracts from core objectives.
-Know the revenue value of each customer account and which customers are actually costing you money.
-Dont give anything away. Most customers expect to have to pay for extra services but at a fair price.
Really useful article, thanks – we will definitely mull over some of these issues to attempt to boost our business.
I would say of all the strategies, that POINT #22 is the most salient to us at present.
We have a few problem clients that we were suspect about to begin with and those suspicions proved to be correct. It has not been worth taking these clients on, they change their minds constantly, do not seem to read our correspondence and then ask the same questions we have already responded to.
It’s these quirky clients we need to avoid in the future as their projects always take so much development and project management time – not to mention support.
I don’t like to be negative about clients – where would we be without them, but we need to be more selective in future as one of our weaknesses is not being able to say no!
#3 Really applies to business & personal life. It’s amazing how much “stuff” I’ve accumulated over the years.
#8 I’m with you 100% on this point. I think it is important to grow your staff / employees skill set. I like Udemy, but there are so many things available for free on the internet! Take advantage of free classes from universities like Stanford, MIT, etc..
#13 Is something that I & others need to work on. Regardless what you think is right or best, the final decision is always made by the boss. All you can do is present your point of view.
#20 Not involved in sales, but we do offer a lot of services to our customers. I think we could convey more value if these were marketed as products.
In order to be a step above the rest, this article brings back to mind:
A great owner manager hires the best, delegates to his/her team, thus creating a strong circle around them. Under promise and over deliver keeps your customers coming back and creates as states above “true advocates that champion you and your product”.
Another great article that really makes you think. It can be difficult to say no, we are led to believe that the customer is always right but that is not always the case. We have in the past needed to close the door on a customer and we have not regretted that decision. In fact it was a relief!
I think #3 is one of the most important for us a s a small business, I would also add to that check all the monthly and yearly subscriptions/services, you are paying for it is amazing how much you can save by getting rid of the excess and sometimes you can get more for less (phone companies are classic for this you can be on a grandfathered more expensive plan with less benefits)
As we are looking at hiring at the moment I am also interested in the hiring advice above as its always good to be reminded of #5, #6, #7, #8 and #15.
Especially with #15 as a business owner it easy to fall into the trap that you can do it best, or quickest, however as we would all like more time, someone else doing it (even if they are a little slower) means you don’t need to.
Excellent advice. Even if you practice these things it is important to be reminded why you should continue. My immediate take aways for me to evaluate deeper are 4,9,17 & 20. Thanks again for the succinct, valuable advice.
Some really good pointers here. I particularly like Point 3 and I don’t recall seeing it before in lists like this.
Too many business owners spend their hard-earned money on stuff they don’t really need (or buy new when they could buy second-hand).
If, each time they were tempted to buy the next gadget or the next shiny thing they stopped and pondered, ‘Is this worth thing all the effort we’ve put in to earn this money, in terms of marketing, sales and customer acquisition?’ then they might think twice. (There speaks the voice of bitter past experience 😉
I love this image and will use it for business clients I work with…Work etc is an instrumental part to my business
success. Not only does worketc produce a phenomenal product, the leadership team gets it and helps you work with business challenges with articles like this. Great work, worketc…thanks!!!
I liked this article so much that I shared it and its linked articles (especially hiring) with my team and close clients. It is full of great tips from someone who clearly knows and lives small business.
Some tips we live by are:
– If you’re not unique, you better be cheap. Unless you continuously innovate to differentiate in products, processes, services, markets, messaging…you will become an antiquated commodity.
– What’s in it for me? (from the customer perspective) – Why would I buy this product/service from you?
– Focus on product benefits instead of features so you can answer the above question.
This is a great info graphic and points out some things that entrepreneurs forget in the daily grind.
I have seen companies waste quite a bit of money on solutions that are not right for them. This leads to even more wasted money down the line. As a consultant I regularly am responsible for cautioning clients against such moves and have to encourage them to follow the advice of someone who knows better. I can’t stress enough that clients should focus on what they do best, their business, and let someone else handle the finances and technology.
I LOVED this infographic. Really sharp. All important stuff. I love stop buying crap and also the items around hiring. You do not have time to bring on anyone but the A team. Passion is most important, and while skills can usually be taught it’s important to hire people who “get it” you can be really passionate about the business but if you can’t figure out the tools used with a bit of direction then probably not a great fit.
This is a great infographic! I liked #20 “rebrand services as products”. The simple change up of wording can mean a big difference when copy can determine sales. On #17 “streamline your sales cycle”, I too believe that sales cycles should follow a process that makes the closing faster. I think all of these on the infographic really brings up great points for any business owner to go over.
I’m weary about #6 when I’m hiring new people. I don’t want to hire someone who is over qualified who may either expect more pay for talent that we wouldn’t even use or just be plain bored with their work and not put in the effort I seek from an employee. I try to look for those who have skills necessary to do the job but also have the potential and eagerness to grow their talent without hindering our work.
I think persistence and smart planning are the biggest tips and if something isn’t working get to the why of it and own it. there are some great tips in this article that i hadn’t thought of or perhaps need to practice more such as saying no. I said no today with a client and found it quite empowering.
I especially love the “Stop buying crap” comment … so often in the competition with the Joneses – we are tempted to buy new technology and equipment, to only find out that they barely make any difference to our business performance.
Great work on the infographic – I’ve shared it around the net.