5 Winning Tactics to grow your Small Business in Tough Times
When times get tough, the tough get innovative in the business world.
While current economic conditions do not make life easy, the entrepreneurial minded find opportunity where others find gloom. And the ingredients to succeeding are not secrets known only to a few, says entrepreneur Steven Uster, co-founder and CEO of FundThrough. Successful businesses generally follow a few tried-and-true formulas that fall into five fundamental concepts, says the CEO of the fast-growing, invoice-funding platform for small businesses.
1. Keep them Happy
It seems obvious that having excellent customer service is crucial to success, but in a downturn it is absolutely essential to retaining and even gaining customers. After all, customers are the life blood of any enterprise. “My general experience is that during downturns you really can show how valuable you are to your customers,” Uster says. “Any way you can maintain or enhance that value — from service levels to responsiveness to just listening to what they need and offering it — will ultimately prove beneficial for your business in the current economic conditions experienced in Alberta.”
2. Go on the hunt for Opportunities
Call it creative destruction, but downturns often result in more business opportunities than people realize. Many business leaders may view it as a time to be defensive. But the innovative remain vigilant, seeking to make the most of market openings. In other words, they go on the offensive, Uster says. “This is an opportunity for you as a small business to keep an eye on what your competitors are doing — or not doing — and look for ways to take advantage of that.” Uster speaks from personal experience. “FundThrough was created coming out of a downturn when banks were more conservative with lending and small businesses had difficulty accessing capital,” he says. “We saw the opportunity to fill that void by creating an invoice-funding platform that allows businesses to upload their outstanding invoices, click a button and get that invoice paid the next day.
By giving business owners control over when their invoices get paid we created a new self-funding opportunity. Not only did they get the funds they needed, they didn’t need to go outside to get it – they funded themselves.” When the economy is slow, a vacuum often gets created and ideas turn into businesses. By understanding your industry, the competitive landscape and your customer needs, you can often create opportunities while your competitors buckle down to ride out the storm.
3. Know your Numbers
It’s no secret good accounting, bookkeeping and financial reporting are essential to success. But it’s especially important to have a firm, ongoing grasp of sales and the bottom line in the midst of a downturn to ensure there are no nasty surprises lurking around the corner. Yet for many small businesses, professional advice can come with a hefty cost at a time when keeping costs down is essential. Thanks to a growing number of do-it-yourself services, however, small business owners can now leverage the power of cloud-based technology and stay up-to-date on the financial health of their enterprise.
“You absolutely need to understand your business numbers — in real-time as much as possible — because you can’t make management decisions without knowing them,” Uster says, adding tools like FreshBooks, Xero and QuickBooks (to name a few) make this easier than ever before. “These online programs allow you to see month-over-month, year-over-year differences for your business’s sales and expenditures, for example, so you can quickly and strategically adjust to the challenges presented by a struggling economy.”
4. Sell into your Customer's pain Points
Downturns are hard for almost every business so the cash flow pain you’re feeling is almost certainly being felt by your potential customers. So why not use that knowledge to land more business? One way to do that is by offering friendlier payment terms. Extended payment terms can be a real deal maker and competitive advantage, especially when your potential customers are putting cash flow at a premium. “The idea here is that your customer is in the same situation you’re in, and that in a downturn cash is king and holding onto it is really important to be able to survive and thrive in this environment,” Uster says. It’s an old-school idea: allowing customers more time to pay. But now you can put a new twist on it using platforms like that allow you to offer cash flow relief as part of your proposal but keep your cash flow protected.
“The same principle can apply to help out your current most valuable customers. If you can give long-time customers a little leeway on payment terms as part of overall great service that will go a long way to solidifying the relationship,” adds Uster. In a tough and competitive environment being able to “sweeten the deal” with something that addresses a sharp pain point like payment terms can be the difference maker in closing more business.
5. Seek vs offer early Payment Discounts
While giving customers a break on payment terms is a good idea, that doesn’t mean cutting them a deal on pricing. Discounts are tempting, Uster says. But during tough times, let’s face it: revenue is harder to come by, and profit even more so. Good businesses find ways to cut costs without cutting deals to customers that reduce cash coming into the business. Find efficiencies, Uster says. “Collect on accounts receivable or use a funding platform to provide cash flow while waiting.” It never makes sense to offer discounts to customers for early payment.
Offering two per cent net ten terms, for example, mean that you are financing your receivables at 36 per cent per year. It will always be cheaper to use an invoice-funding platform like FundThrough than to offer discounts. And just because you should shy away from offering discounts to customers, that doesn’t mean you shouldn’t seek them yourself from whom you do business with. “You are in the middle of a value chain so on the one side you may have your secret weapon in the form of FundThrough and on the other side if your supplier doesn’t have that secret weapon, you’re able to take advantage of that by taking advantage of the supplier discounts.”
Originally published in the Financial Post on May 16, 2016