The flipside of “success” is “failure” and it’s the latter that every business owner and manager strive hard to avoid. By definition, the term “business failure” refers to the cessation of a company’s operations following its inability to generate enough revenue to cover expenses without adequate reserves.
In the recent times, there are many examples of strong businesses that have failed to adjust to the changing markets and economic times or to take advantage of opportunities – and this has ultimately led to their downfall.
Based on my 26 years experience working closely with business owners, here are my 9 key tips to avoiding business failure:
1. always ensure that you target your marketing.
Too many businesses have an undifferentiated product/service offering and fail to understand who their target customer is and what they require. Don’t be undifferentiated, make sure you’re speaking the right language and using the right channels and/or media in targeting your main group of consumers. Focus on delivering exceptional value. ACTION:Develop a structured Marketing Plan for your business and revise it regularly.
2. always plan ahead.
Talk about what you want to do next and where you’d want your business to go by preparing strategies that will help you focus on your business goals and objectives and to make sure that appropriate and sufficient resources are in place. Be rigorous in your planning and hold yourself and your Team accountable. ACTION:Develop a 5-year Strategic Plan supported by Annual Plans. Have 90 Days Actions. Cascade your plans so that everyone in your business is part of a plan.
3. have great business models.
It is a fact that most businesses fail because of poor business models – a business model describes you will engage your target market to profitably generate revenue. To avoid this, make sure that you have great and well-thought pricing models and economic cost models that will help your business focus more on creating, delivering and capturing value needed by your customers. ACTION:Understand your Business Model – there are some great tools to do this.
4. have effective processes.
All businesses are driven by processes. However, few businesses have well documented processes. Many businesses fail to have any continuous improvement processes and have a well entrenched view that they are already efficient. The reality is far from this and many businesses can improve productivity by up to 30%. The challenge is to avoid waste in: time, resources, opportunities, materials, etc. caused by inefficiency – this results in higher than necessary costs and lower margins. ACTION:Apply simple Process Improvement Tools, like 7 Wastes to your business on a regular basis. Never stop searching for improvement.
5. engage your team.
As a leader, you should be a good example to your team. Teach them how to own issues, take responsibility, be accountable and model proper engagement, not only with their customers and clients, but also with each other. An effective team will overcome most business obstacles and enable your business to seize opportunity, when required. ACTION:Engage your Team by improving communication and feedback.
6. have great sales processes.
Sales is the engine that drives your business. Most businesses that fail do not have effective sales processes in place. So with that said, make sure you have great processes that your salespeople can follow. ACTION:Clearly define your Sales Pipeline and develop a Sales Model that delivers.
7. ensure you have adequate cash buffers.
“Cash is fact – Profit is opinion!” This great quote from Andrew Russo (Master Accountant) gets straight to the heart of the matter. Ensure you build adequate cash reserves in your business to ride out changing markets and economic conditions. Cash reserves also allow you fantastic flexibility when looking at opportunities. ACTION:Develop a plan for how you can build cash reserves in your business. Engage your Coach or Accountant in this process.
8. avoide uncontrolled growth.
Uncontrolled growth is often a pre-cursor to business failure. When business growth is “out of control” often cash flow is uncontrolled. Rising sales are barely enough to cover rising costs and cash is at a premium. Cash flow, staff, customers and production are all stretched often to breaking point. Avoid this by “taking your foot off the accelerator” – be more discerning in taking on clients – engage strategies that will slow demand (like lift your prices) – say “No” to opportunities that aren’t in your sweetspot – and introduce tighter financial controls and KPI’s. ACTION:Monitor key drivers in your business and ensure that you have the capability to meet demand. Develop strategies to maintain control.
9. take early action.
Too many businesses fail to “take effective action” until it is too late. Act early and avoid the Receivers! Set up effective monitoring systems. Plan for different scenarios (revenue, cost. Market conditions, competition, etc) and define “trigger points” – bank balance, sales$, profit %, market KPIs, etc – that will cause you to evaluate your options well in advance. These options should include plans for how you will address the challenge – reduce staff numbers, cut costs, close non-performing divisions/products, etc. Make these decisions now rather than trying to make them when under pressure. aCTION:Develop plans to address particular scenarios with effective trigger points.
Focus on ensuring that you have all 9 elements covered and you will do more than stave off failure you will be on the road to success.
What is the element that has the highest priority for you? Pick one and start working on it now.
I recently posted about an interesting ad campaign from Canada using Porsches in a wealthy suburb in Toronto. Let’s expand on this concept of really understanding your target market and personalising your approach to them.
In the video, the advertising agency Lowe Roche in Toronto Canada thought of a way to make advertising more direct and more personal for client – Pfaff Porsche. They drove the Porsche to a neighborhood of affluent families in Toronto (which was their target market), parked the Porsche in driveways and took photos.
After the pictures were taken, the team from the advertising agency produced tailored marketing pieces for each address using mobile printers. They then distributed the print outs and the residents of the neighborhood received a personalized direct mail piece.
From this creative and very unique campaign, 32% of people responded to a website where they booked a test drive. For Pfaff Porsche, this ad campaign was very successful.
But this type of campaign isn’t completely new. In fact, an advertising agency for an auto company in the Netherlands has also utilised this type of campaign and has successfully tailored their marketing strategy to their customers.
They started using street view images about a year ago in their direct mails and the response has averaged about 63% leading to a 13% increase in sales from a single direct mail. They sent 1000 direct mails and sold 130 brand new cars in one dealership. This is a sensational response!
Now, with this type of personal and direct campaign so successful, how can we expand this beyond cars? How can we apply the same principles to other products and services? Some concepts are:
For fashion, the tailored marketing strategy would be to Photoshop different clothes onto client photos. Companies could make this work by allowing people subscribe to a service where they view themselves in different clothes and accessories. The business can also send them “an outfit” once per month. You could also do something similar for sporting apparel, ski wear, sunglasses, etc?
For Real Estate, the personal approach would be presenting views of the customer and his family in their new home. Or even having a “Sold” sign superimposed over the street view of their house.
For Roofing businesses, the direct strategy would be showing customers what their house would look like with a different colour and style of roof.
But if you can’t use this type of marketing strategy in promotion, maybe you can use it to personalise a product.
Bundaberg Brewed Drinks has done this with their “personalised label” offer where you can create your own product labels using your own photos. It is also available through their iPhone apps.
What can you do to tailor your marketing to a clearly defined target market?
We are in a highly competitive world where consumers are constantly bombarded with information and advertising. You need to make your promotions cut through the clutter.
Maybe using a highly tailored approach to directly target or link your brand to the consumer is an option you should be considering?
Social networking has indeed changed the world. Since its introduction, this modern phenomenon, which is also referred to as social media, has provided a new and faster way for people to connect, interact and go about with their daily lives.
Social networking may have started out as a fad, but its massive appeal has transformed it to something even bigger. And today, almost 50% of the world’s IT literate population, under 30 years old, is on social networking sites such as Facebook, Twitter, Linkedin and more.
Social networking has affected almost every person in the world in one way or another—good or bad. In fact, many people’s personal lives have changed because of it. Research shows that 1 out of 8 US couples have met through social networking sites. With things like this happening because of social media, the question is, is it only good for personal life? Or are there opportunities that businesses can take advantage of?
Social Media and Business
One of social networking’s strong points is that it gets news across—whatever it is—to millions of people—wherever they are—in real time. Gone are the days when people had to take time to find out about what’s going on in the world. These days, news is fed to people via social networking in minutes! This feature is one of the best opportunities businesses can and should definitely explore and take advantage of.
Another opportunity that social networking presents to businesses is its attractiveness or appeal to people. Aside from having a large proportion of the world’s population on it, studies reveal that social networking sites, especially Facebook, have topped other forms of media such as TV, radio and other popular internet sites like Google. This percentage ensures that business people who invest time and money to market their products and companies in social networking sites are sure to get the exposure and quotas they’re aiming for.
But with so much hype on social networking, many consider that the social media bubble is about to burst. The notion has been formulated by economists who think that all things that reach a peak will soon fall. And with this speculation, business owners ask whether investing in social media is still worth it or not?
Social Media is here to Stay
People might say that the reign of social media will soon end, and although it may be true, businesses should still take the opportunity to use it for marketing purposes because the social networking technology will be here to stay.
Yes, it is possible that Facebook and other popular social networking sites may become obsolete in a few years but it will only be replaced by something much more advanced.
Social networking sites, as the term implies, thrive on people’s natural instinct to socialize, to communicate and to interact with each other. So long as there are people in the world, social media, in whatever form will stay as a powerful tool to reach out, sell and convey a message.
Social Media is Relatively Inexpensive
With the global financial crisis, finding alternative solutions to high costs is essential for businesses to survive. And with that said, another reason why businesses should consider utilizing social networking is because it is inexpensive.
Most social networking sites are free to access by anyone, anywhere in the world. With no financial cost, businesses are able to build a profile in whatever way they want their brand to be introduced and made known to the market. But don’t be fooled. Social networking may be absolutely free, but in order for businesses to excel in this new media, hard work and patience is required.
Social networking makes businesses more vulnerable to the public eye. Just as in the “physical world”, establishing solid customer relationships and providing sincere customer service are important for business growth – they are just as important online. If businesses fail to invest the necessary time and effort in reaching out to their customers – they’re bound to fail in social media, as well.
Anecdotal evidence suggests that businesses that treat their social networking like any other physical networking opportunity are winning work from it. This requires a consistent focus and attention to the network. It will involve participation in the network, communication with other members, responding to posts, joining special interest groups and discussion forums. All things you would do in a physical networking group like a Chamber of Commerce.
Selecting the Right Network for your Business
Obviously, selecting the right social media platform for your business is important. Facebook, although the dominant player in the market, anecdotally appears to be more for Business to Consumer relationships than some other options.
LinkedIn on the other hand is one the larger Professional/Business networking sites and is much more suited to building Business to Business relationships.
Twitter, is a “micro blogging” network that seems to have appeal across both business and social networks. Some of the networks, like LinkedIn, allow you to interact with other social media like blogs, Twitter, etc such that a posting on your blog can automatically feed to LinkedIn which can then on feed a comment to your Twitter account. In this way, one activity can service multiple contact points and networks.
Choose the network that suits your business and concentrate your effort on this. This should give you a greater return for effort than spreading yourself too thin.
Countering the dangers of Social Media for Business
Like all things, social networking also has its disadvantages. One of the dangers of social media for businesses is also one of its strongest points—social networking delivers news, good or bad, in an instant. For this reason, businesses should be wary of what they say about their products and be very careful of their actions.
According to some studies, people are prone to believing what they’re friends say more than what they see on advertisements or press releases. A bad company or product reputation will easily spread via social media.
Another thing that business owners should keep an eye out for when investing in social networking sites is the possibility of having copycats. Competition can encourage anyone to do just about anything, and because social media sites are mostly free, it’s easy to copy and create false and rep-destroying profiles against a competitor. Because of this, social networking as a marketing tool is dangerous by itself.
Integration is the Key
Social Media is not the only platform for your marketing – it is one of many. And it should be integrated into traditional media and other marketing strategies such as word of mouth, relationship building and contact programs.
It is crucial for businesses to integrate social media activities with their existing marketing programs because the objective of using social media is to build relationships via an online community, just as much of your other marketing is about interacting with the physical community.
Overall, the advantages of social networking as a business tool outweigh its disadvantages. With larger proportion s of the business community involved in social media in one way or another, it is a strategy that business owners should definitely take advantage of.
For many businesses, the period of strong growth that has preceded the downturn, meant that sales skills and management did not get the attention that they deserved. As the economy slows, competition for scarce resources increases and sales are no back on the agenda – the shoe is now firmly on the other foot!
Selling in difficult times It is worth noting some key points raised by Neil Rackham (of SPIN Selling fame) in his article: “Selling tactics for difficult times”
There are several other reasons why business managers don’t plan:
Only 50% of sales people have sold in difficult times – if you have a young sales force then this proportion will be much higher;
In an economic downturn, sales cycles (from start to close) are typically 40% longer;
Many people believe that in tough times, customers buy on price – this is a fallacy as most customers will buy on value, not price;
Research has shown that during difficult times, customers will buy safety i.e.. the offering with the lowest risk. Often the perception is that the lowest risk option is to stay with the “status quo” i.e.. the current product, service and/or provider;
Committees are often involved in making economic decisions in difficult times and group decision making usually favours lower risk;
Buyers also realise that their decisions will come under more scrutiny in tougher economic times.
This means that businesses and sales people will need to adjust their strategies in order to compete effectively and to survive in a depressed economy.
Sales Survivors
Rackham’s research indicated that many sales people struggle to adjust to the “new rules” of the downturn (just as many business owners and managers struggle). There is also a group that will adapt and survive (even thrive) in an economic downturn.
In his article, Rackham outlined the key characteristics of “the Strugglers” and “the Survivors” based on research undertaken in previous downturns. This is summarised in the table below.
Strugglers
Survivors
More calls, more demos
Focused on best opportunities
Poor planning
Good preparation and planning
Just a “talking brochure”
Asks good questions
Shorter calls
Longer/deeper calls
Nervous/ rushed
Confident / In control
Low sales conversions
High sales conversions
Interestingly, research has shown that a key factor in the buying decision for customers was the “confidence” of the sales person.
Mike Boyle (sales guru from www.banjargroup.com.au) calls this “Sales Swagger” and it is an essential ingredient for good sales performance. Are your sales people confident when they sell? How can you help them to build confidence in themselves, your pricing and your products and services?
Improving your Sales Force
In a second article, Rackham expouses 5 top tips for building a world class sales force:
There are several other reasons why business managers don’t plan:
Sales Supervisors are the key to success – lift the level of supervision not the level of sales person. You don’t need better sales people -you need better sales supervision;
Fewer accounts = more sales – Research has shown that dramatic improvements in sales can come from reducing the number of opportunities that a salesperson will focus on by up to 30%. It’s the quality not quantity approach!
Create Value – Your sales people must become “value creators” or “problem solvers” rather than “talking brochures”.
Coaching brings results – ensure that your team has support at all levels from manager to supervisor to sales person. Effective coaching can often provide that external sounding board and third party accountability that can help to improve results.
Integrate marketing and sales – There are usually 2 camps in most businesses: Marketing and Sales – and they are often at war! As they are both involved in revenue generation (at least that’s the plan!) to have them working independently is a great loss. Spend the time to set common targets, integrate teams and improve communication.
However, in my experience, in many businesses there is only one camp because “marketing” is usually missing – not because they are integrated. Often businesses have a “marketing department” but it doesn’t do any marketing (apart from a Yellow Pages ad and new business cards) because their primary role is sales, not marketing. By not calling “a spade, a spade”, there is no focus on sales and performance usually suffers.
In conclusion, now is the time to look hard at your Sales Team. Are they “Sales People” or “Order Takers” ?
Make the changes necessary in sales management and systems and especially make sure that you and your team become “Problem Solvers” and sell the value behind what you do.
