Small Business Center

If you’re like a lot of small business owners I’ve talked to since we rang in 2010, you probably sympathize with this statement: “Enough with the doom and gloom already. I don’t want to know how awful the economy is, I want to know how to make a profit anyway!”

A couple of weeks ago, our very own Anita Campbell tackled that issue with an Intuit Community webinar titled, “Make 2010 Your Most Profitable Year Ever.” Joining her for the webinar was expert Andy Birol of Birol Growth Consulting.

In spite of a few technical difficulties early on, it was another of Anita’s information-packed sessions with a mountain of actionable take-aways for small business owners, sponsored by Intuit.

Anita started the webinar with a couple of poll questions, which elicited the information that a surprisingly high 71% of participants didn’t know what their customer acquisition costs are. From the second question, we learned that most business owners either know who their most profitable customers are (50%) or they have a general sense but aren’t 100% sure (43%).

Birol used the poll results to launch into a discussion of how to analyze your customers in order to maximize profits.

TIP: If your most profitable customers are increasing their purchases, keep them happy and find more like them by asking for referrals. If their sales are low/flat, enhance your products and services to generate more sales from them.

TIP: If your low profit customers are increasing their purchases from you, reprice your products or services to more accurately reflect the costs of serving them or selling to them. If sales to these customers are low or flat, reduce or rethink your costs for serving or selling to them and how those costs can be reduced so that these folks become more profitable.

TIP: Fire customers that earn no profit (break even) or cost you money.

Profitable growth does not necessarily come from expanding your customer base. Instead, growing profitably — that is, making a profit while your business grows — comes from selling more to the customers you already have.

The underlying theme in all this, which might better have been introduced first, is that it costs less to sell more to existing customers than it does to sell more by acquiring new customers.

Your current customers already know and trust you. That gives you the chance to establish your expertise and experience, which will differentiate you from your competitors.

TIP: Differentiation gives you a stronger brand and more pricing power, so work to establish that expertise and experience in the minds of the marketplace.

On the subject of pricing, which often gives small business owners the willies, here is a terrifically quotable quote from Andy:

“Price, for me, is the single most important demonstration of self-confidence that a business owner can have.”

And finally, profitable growth comes from being willing to take what you make or do and re-package it for new sales or distribution channels.

In short, the general way to grow your business profitably (even during this recession) is to focus on your existing customers, sell your expertise and the wonderful experience of working with you, beyond just your product or service; and packaging your offerings for sale in multiple channels.

And, just for fun, there was a list of 45 ways you can improve your profitability in 2010:

Increase Prices

1. Raise prices
2. Eliminate discounts (or lower discount %)
3. Services: define scope and fight scope creep*
4. Push higher priced products, weed out low profit products
5. Use marketing to convey your differentiation and value

Increase sales and customer retention

6. Improve customer retention through better customer services, better communications, increased value-add
7. Cross-sell additional products or services
8. Upsell to higher priced, higher value products
9. Serve your most profitable customers well
10. leverage additional sales and distribution channels
11. Add self-paying sales like commissioned sales reps, PPC ads, affiliate program

Invoice!

12. Invoice promptly
13. Make sure invoices are complete and accurate
14. Use technology and automation to tighten invoicing and collection processes

Improve productivity

15. Reduce waste through controls
16. Train employees
17. Automate routine tasks
18. Upgrade inefficient equipment and software
19. Supplement tracking systems and analytics (a.la. Google) and “manage to your metrics”
20. Ask employees for cost-saving suggestions.

Reduce fixed costs

21. Find smaller offices; sublet; move
22. Employ part-time staff in place of full-time
23. Subcontract to independent contractors
24. Do preventative maintenance
25. Reduce staff if necessary
26. Change sales compensation to more commission, less guaranteed base

Reduce variable costs

27. Negotiate better deals with suppliers
28. Find less expensive suppliers
29. Take advantage of advance purchase discounts
30. Find cheaper materials and supplies (assuming quality is still there)
31. Hold online meetings instead of traveling
32. Create self-serve resources for customer service
33. If it’s not essential, eliminate

Manage capital wisely

34. Keep your books up to date, and review P&L versus budget forecasts regularly
35. Know your key indicators: DSO; customer acquisition cost; gross profit margin
36. Offer advance payment discounts
37. Put slow payers on “watch list”
38. Collect past due invoices quickly and personally
39. Don’t overinvest in inventory
40. Insist on shopping for alternatives
41. Negotiate for as much time as possible to pay your creditors (e.g., 30 – 45 day terms)
42. Make loan and credit card payments on time, to avoid extra interest and penalties

Be tax smart

43. Keep good up-to-date records to take advantage of all deductions
44. Actively engage in tax planning
45. Follow your tax calendar scrupulously to avoid unnecessary penalties, interest, and attorney and tax advisor fees

If you’d like to watch the webinar event you can check it out at, “Make 2010 Your Most Profitable Year Ever.”

Policy makers, the media, and many other people care about small business owners’ perceptions, making the monthly optimism figures put out by the National Federation of Independent Businesses (NFIB) and Discover Small Business Watch (DSBW) noticed statistics. The goal of these measures is to tell us if small business owners are becoming more or less optimistic about prospects for their businesses and the overall economy.

Because these indices get reported and discussed in the media, it’s important to recognize their strengths and weaknesses. First, the overall numbers sometimes mask big differences between groups of entrepreneurs because the surveys are given to very different business owners. Some are male, and some female; some sell products and others provide services; and some serve consumers and others serve businesses. The respondents vary in age, income, number of employees, and years in business.

If the optimism and pessimism of all of these business owners moved in lock step over time, the tendency to focus on the average of all of them wouldn’t be a big deal. Whether optimism was high or low would pretty much be the same for everyone. But when the levels of optimism of different groups don’t all move in the same way over time (they aren’t that highly correlated), then knowing the average but not what’s happening with the different groups hides important information.

I don’t have data on the Optimism Index for different groups of respondents to the NFIB survey, but I do have it for the DSBW from December 2006 through January 2010. So I can talk about those correlations.

While the optimism levels of all of groups are positively correlated, the correlations aren’t super high. For instance, the correlation between the optimism levels of the owners businesses that are one to two years old and those that are six to ten years old is only 0.44 over this time period.

Similarly, the optimism levels of business owners 18 to 29 only correlate 0.64 with those of business owners 65 and older, and optimism levels of owners making under $20,000 per year only correlate 0.66 with those making between $75,000 and $100,000. Thus something common affects the optimism of owners of different ages, those running different aged businesses, and those making different amounts of money, but different factors also drive their levels of optimism.

Second, the responses of the business owners to different questions on the surveys don’t all correlate highly. For instance, there is essentially no relationship (correlation of -0.02) between the share of business owners who say the economy is getting better and the percentage that say they have experienced temporary cash flow problems that caused them to hold off on paying some bills over the past 90 days. And the percentage of small business owners who say that the economy is getting better and the percentage that plan to increase spending on business development correlate only 0.36, while the percentage of owners who say the economy is getting better and the percentage that plan to hire correlates only 0.30 over the August 2006 through January 2010 time period.

What about the question everyone wants to know about right now: are businesses going to hire? Over the August 2006 through January 2010 time period, the share of owners planning to increase spending on business development is a better predictor than the percentage who say that overall economic conditions are improving (a correlation of 0.73 versus 0.36).

But here’s a piece of evidence that shows what a lot of people in Washington are worried about. If the data are split into two time periods – from August 2006 to June 2008 and from July 2008 through January 2010 – the correlation between the share of small business owners planning to spend more on business development and the percentage planning to hire is greater for the first period than for the second. That pattern suggests that the factors driving the spending and hiring plans are more different now than they were in the pre-financial crisis period.

What about the two optimism indices themselves? They’re pretty highly correlated. From December 2006 through January 2010, the NFIB and DSBW optimism indices correlate 0.85. Because the NFIB surveys its members (who tend to run larger businesses than the respondents to the DSBW), that level of correlation suggests that both indices are picking up general trends rather than factors affecting larger versus smaller small businesses or NFIB members versus nonmembers.

The overall measures correlate more highly than specific items. For instance, the NFIB’s measure of the percentage of small business owners who answer “better” minus the percentage that answer “worse” to the question: “About the economy in general, do you think that six months from now general business conditions will be better than they are now, about the same, or worse?” correlates only 0.40 with the percentage of respondents to the DSBW survey who answer “better” minus the percentage who answer “worse” to the question: “Generally speaking, are the economic conditions for your business getting better or worse in the next 6 months?” Unfortunately, we can’t tell whether this low correlation results from the types of businesses surveyed by the two groups or the difference between the NFIB’s focus on general conditions and the DSBW’s focus on the respondent’s business.

None of this says that there is anything wrong with these surveys. They provide us with useful information about what’s going with small business owners’ thinking on an up-to-date basis. We just need to be cautious about how we use them. We can’t assume that the patterns over time are going to be the same for both surveys, between questions on each survey, or between different groups of respondents to the surveys.

“It is time to rework work. Let’s get started,” declares the authors of the new business book Rework by 37signals founders Jason Fried and David Heinemeier Hansson.

They want to change how businesses are run, and to borrow a segment title, “Make a dent in the universe.” They are definitely knocking on the universe’s door.

I read a review copy, and was inspired to rework my own thoughts on entrepreneurship and business strategy.

What Worked Well in Rework

This is a book you don’t want to judge too quickly. On first blush the short content seems gimmicky for a book claiming to have a revolutionary outlook.  The chapters cover an arc of business growth with intriguing names:  Takedowns (addressing the barriers to starting a business), Go (Getting started in business), Progress, Productivity, Competitors, Evolution, Promotion, Hiring, Damage Control, and Culture. Within each chapter is a bold statement, a short page or two of explanation, and a memorable image, all with a ready-for-e-book feel.

Ah, but what seems lacking on the surface can be fulfilling when examined.  Rework will pleasantly surprise you once you delve in.  This book offers simple been-there-done-that advice  — and it is anything but shallow.

It distills the typical business subjects to essentials, then offers inspired suggestions with a sharp imaginative eye. Here’s one piece of realistic advice that rings true:   entrepreneurs should seek alternative means to get their business  exposure besides major media publications.  In the “Forget about the Wall Street Journal” segment they write:

“Pitching a reporter at one of these place is practically impossible… you’re better off focusing on getting your story in a trade publication or picked up in a niche blog.”

The Takedown segments get the ball rolling, with sharp headlines throughout the other chapters.  Hansson and Fried explain why Meetings are Toxic and Press Releases are Spam.  Especially powerful was the segment on the “Myth of the Overnight Sensation”:

“It’s not the whole story.  Dig deeper and you’ll usually find people who busted their asses for years to get into a position where things take off…. Trade the dream for overnight success for slow, measured growth…. You have to do it for a long time before the right people notice.”

I loved the musings on “Learning from Mistakes is Overrated”:

“You might learn what not to do again, but how valuable is that?  You still don’t know what you should do next…. Evolution doesn’t linger on past failures, it’s always building upon what worked.  So should you.”

Every idea proposed shows imaginative ways to spur you to intriguing decisions.  Example:  letting your customers outgrow you:

“When you let customers outgrow you, you’ll most likely wind out up with a product that’s basic….  Small simple needs are constant. There’s an endless supply of customers who need exactly that.”

Steps in the growth process are turned on their head without being dumbed down.  Tips such as “Hire managers of one” will re-imagine the hiring process for leaders.  “Resumes are ridiculous” says resumes are “filled with action verbs that don’t mean anything.”

Rework relies on the authors’ perspective, who deliberately set about creating a small business and avoided being bogged down by external factors such as venture capital or extensive research.  That’s the perspective of this book.

References to outside sources to support their views do appear, like in the overrated mistake learning example (it mentions a Harvard study on entrepreneurship and failure).

Readers are cautioned to de-emphasize traditional tools for early efforts — “Your Estimates Suck” dovetails into the concept that not having a plan is okay. It is based on the authors’ experience.  These ideas are valuable for startups or small businesses with a few employees.

What Might Have Worked Better

In a few instances subjects contradict or need more explanation than a page or two.  A tip to “Pick A Fight” – calling out your competitors – seems to contradict a later query “Who cares what they’re doing?”  which is about ignoring your competitors.  Moreover, the Audi example in the “Pick A Fight” segment breaks a marketing rule to never mention your competition (doing so can remind your customers of the competition’s advantage over your product).

Miscues are rare, though.  In a brisk and comfortable pace Rework experiments well in reframing business.  It offers  practical steps for establishing culture, strategy, and productivity.

Who Should Read Rework

The advice in Rework fits small service firms with simplicity at their operational core.  Refreshingly the authors own up to their perspective, offering no apologies for its honest language, or for the fact that it is written mostly from the 10-year experience of running a 16-employee software firm.

Rework may not fully appeal to firms with engineered products or joint ad-hoc projects that want more detail regarding processes.  Managing a joint project between businesses can require coordination to make a profit.   Such joint collaboration is not deeply covered, a particular point given the increased tendency to coordinate small businesses remotely together.

Rework is right for entrepreneurs and small businesses that offer services and are intent on steady solid growth and profitability.   If you have a services type of business, this book will be ideal for you. The flexibility to scale advice, coupled with clear explanations, is what makes Rework a rousing success in its mission.  In its originality Rework has found a clever way to stir the entrepreneur in everybody.

How’s the first quarter of 2010 — and the rest of the year — looking for you and your business?

Are you primed and ready to make money this year?

Have you put a plan in place to promote your business and maximize your success?

Here are ten quick, easy-to-implement things you can do that will guarantee your online business will be making you money this year:

Write down your personal affirmation for the month and the year.

The goal here is to help you step back from the hustle and bustle and stay focused on what’s important to you.

Get your story, idea, product, or service announcement out into the marketplace seven different ways, all at once.

Choose from these options to make a powerful impact:

1. Press release
2. Blog post
3. Facebook
4. E-zine blast
5. Email announcement
6. Videocast
7. Downloadable audio snatch
8. Free e-book
9. Podcast
10. Teleseminar

Use free classified ads to promote your business.

If you have a knack for writing short ads, you will be able to increase your site traffic by using free (or pretty darn cheap) classified ads. Place ads where you know your target audience will see them.

Introduce yourself to three potential referral sources.

A nurturing referral relationship can be quite profitable. So think of professionals who would be good referral sources for you. Then make contact with them today.

Add three success stories to your website.

You already may have testimonials from your clients on your website. Now create a space for their before-and-after success stories. Remember to include a link back to their sites so everyone gets some love.

Add a tantalizing promotional “special” to your email signature space.

Put a brief promotional line about the special product or service that you are giving away (or offering at a reduced rate) this month.

Write each of your clients and customers a personal, hand-written “thank you” card.

Thank them for sticking with you through the 2009 recession. Be sure to include a coupon they can use for a special product or service.

Offer a deal, such as “buy-one-get-one-free.” This will increase your sales!

Follow up with all your 2009 leads that showed an interest in your product or service but didn’t buy.

Call (don’t email) them and see if they now have a need for anything you offer. 

Let your clients know about something big you’ll either be doing or offering in 2010.

Here are some big ways to make an impact and get their attention:

• Book launch
• DVD training program
• Keynote speaking engagement
• Public seminar
• Corporate training program
• Boot camp
• Mentoring and apprenticeship program
• Weekend retreat
• Television show
• Membership website program
• Special teleseminar series

As a business owner with an online presence, you need to offer special buying opportunities throughout the year. This list will help you do just that.

Implement one idea each day. You’ll not only be promoting your online business, you’ll also be making certain it will be a success this year.

Editor’s Note: this article was previously published at OPENForum.com under the title: “10 Things You Can Do to Make Your Online Business Money” It is reprinted here with permission.

We hope you’re enjoying your daily small business news roundup here at Small Business Trends. Here is the latest from news sources and blogs we are following regularly.

Marketing

What can Lego teach us about guerrilla marketing? Shane Gibson talks about giving away real value and offering a variety of options in the digital world. Closing Bigger.net

Does your business really need customers? Here’s a completely different way to look at and treat the people you serve each day. Walt Goshert

Self-Development

How to create your own online business training. Whether you attend an accredited business school or design your own “personal MBA” with online and other resources, the key to a good education is the information you take away. Copyblogger

Learn better speaking skills with seven simple steps. When it’s time to do a presentation for your small business, some simple advice will help you shine. MarketingProfs Daily Fix

Tech

Google Translate breaks the online language barrier. Think Skype is something? Joel Libava will tell you about one more tool that will increase your small business’s global reach. The Franchise King

New mobile devices may challenge Apple products. What will a Sony line of products offer by way of small business tech tools? WSJ

Operations

Want to make more money from your small business while putting less time in? Who doesn’t? But the key to success may be much more than simply increasing your efficiency. Bloggertone.com

Embarrassed by your profit margin? Remember, profitability is a sign of a healthy business and of good value delivered to your clients and customers. MyProjectTracker

Does your small business need a lawyer? Better read this first. Open Forum

Do you take notes while meeting with clients? Or when having any kind of important business meeting where issues are being discussed and hashed out? You should and here are some more tips on how to do it right. Sales Tip A Day

Startup

A great business is about more than a great idea. When it comes to launching your next venture, you’ll need plenty of hard work and the right skills. 37 Signals

Actions speak louder than words. What’s the difference between talking about that startup idea and making it happen? The answer is simpler than you think. Chris Brogan

Ever dream of launching an online retail store? Entrepreneur Cristian Dorobantescu talks with one small business owner about his experiences in the competitive world of e-commerce. Entrepreneurship Interviews

Policy

Are more loans really the key to recovery? Or is easy credit what got us into this mess in the first place? Cato Institute

More sales not government incentives are the key to economic growth. Businesses are happy about any tax breaks, but a $15 billion jobs bill won’t create new hires on its own. WSJ

When you’re a small business, positive word-of-mouth is critical to growth. One of the best ways to get that buzz going is through publicity.  But how do you compete with the big guys, and get publicity?  Here are the only three steps you need to get great publicity FREE:

Step 1:  Have A Great Product, Service or Business

Most small businesses think that what they sell is great. 

The Key:  To get publicity, you need to provide what the media thinks is great.

Here are some examples of what makes products interesting to the media:

• A truly new product (just launched in the last few months or about to be launched)
• Unique, breakthrough product
• Works well, tastes great, etc. (In most cases the media will test out your product if they are interested in featuring it in a story)
• Colorful packaging / visually appealing – especially important for visual media
• Product ties into trends – organic/green, political, etc.
• Priced right – less than key price points ($100, $50, $25, $10) or priced high if truly a luxury item

Here are some examples of what makes services and businesses interesting to the media:

• New service, company or book (just launched in the last few months or about to be launched)
• Unique, breakthrough service, concept or business
• Provides ways to save money
• Offers something for free
• High rate of revenue and employee growth
• Ties into trends

Step 2:  Approach The Right Media Contact With A Great Pitch

You should only approach media that cover your type of product or business.  This means that you’ll need to read, listen to or view these media outlets prior to pitching them.

Once you determine that your business or product is a good fit for their editorial coverage, you need to find the right contact.  You can do this in several ways:

• Call up the media outlet and ask who the person is who covers your area
• Look at the print masthead or producer credits
• Search online 
• Buy a list – you can find these online

Then you need to pitch the contact. Include why your product or service is a great fit for that media outlet, as well as a product or service description.  Don’t forget to include your contact information.

You can pitch via phone or email.  Here, you can see a sample pitch for a product or service business.

Step 3: Follow Up

This is the part that trips up most do-it-yourself publicists and even P.R. folks.  Once the media has expressed interest in your product or service, you must be persistent in contacting them. 

Often you’ll need to follow-up with them several times, via the phone or email, until you have gotten media coverage.

By following these steps, your chances of getting publicity are greatly increased.  And once you get publicity, you’ll see more buzz, more sales and more credibility for your business.

Movies have a big impact on our everyday life. There is no denying that even with DVRs where we can record everything on cable television, we still take a lot of time to watch movies. The 2009 movie “Avatar” now has become the highest grossing film in history — by a wide margin.

In fact, technology has increased our appetite to watch to entertain ourselves since we can now watch not only on television, but computers and smartphones.

There’s no reason to feel guilty about watching a movie, thinking you should be working instead.

Relax! You can actually learn about business by watching movies!

I asked a few small business leaders what were their favorite movie quotes of all time and then I thought about what I learned from that movie. Grab your popcorn and take a look at what they shared:

NO EXCUSES!

Movie:  Goodfellas. “Business is bad? F-you, pay me.  Oh, you had a fire? F-you, pay me.  Place got hit by lightning, huh?  F-you, pay me.” (From Bob London)

• Lesson: If you are part of the organization, there are no excuses for results. It is also an incentive to keep your company overhead low so you have cash to pay for what you really need.

FOCUS FIRST, GROW LATER!

Movie: Jerry Maguire: Remember the Mission Statement? “We are losing our battle with all that is personal and real about our business. Every day I can look at a list of phone calls only partially returned. Driving home, I think of what was not accomplished, instead of what was accomplished.”

• Lesson: Fewer clients, more personal attention makes for a better business. Growth for growth’s sake is a bad business strategy.

STAND UP FOR YOUR BUSINESS!

Movie: Road House: “Be nice.  Be nice until it is time to not be nice.”  (From Prasann Thakrar)

• Lesson: Being nice in business does not always get the results you want. Many times, we need to press our point.

RISE TO THE OCCASION

Movie: Mr. Magorium’s Wonder Emporium: “Your life is an occasion. Rise to it.” (From by Phillip Zannini – @PhillyMac)

• Lesson: We need to remember that we are responsible for our own success. Never look for that one magic bullet in business or for someone to save you because no one is coming. The magic comes from the hard work you give to your business.

EVERYONE NEEDS TO BE ABLE TO SELL

Movie: Glengarry Glen Ross “Good leads are for closers”.  (From Vicki Donlan)

• Lesson: You need to know what to do with a lead if you are going to close a sale. There is no substitution for being able to sell. We all need to learn and have skilled sales people on our team.

GET TOUGH — DON’T COMPLAIN!

Movie: A League of Their Own: “There is no crying in Baseball”.  (From Scratch at Boston Baby Dolls).

• Lesson: No matter how bad it gets, long term, crying does not help us in business.

From the same movie “Of course this is ‘hard’:

• Lesson: People always tell me that their business is especially hard. Guess what, every business is hard.

RELATIONSHIPS ARE POWERFUL

Movie: Hustle & Flow – You’re in charge of your business and the power of marketing relationships.  (From Elizabeth W. Wilson)

• Lesson: No matter where you come from, you can become successful.

DON’T LET ANYONE TELL YOU WHAT YOU CAN’T DO

Movie: Legally Blonde: Elle uses what she has to achieve her goals. (Submitted by Phillip Zannini)

• Lesson: We all need to make it work from where we are right now

LEAD BY EXAMPLE

Movie: It’s a Wonderful Life:  The movie shows the principles of leadership. George Bailey puts his customers, employee and family interests first by taking responsibility.  (From Stephen Antisdel of Precept Partners)

• Lesson: If more financial institutions has operated this way maybe the “Great Recession” would have been avoided.

LOVE YOUR LIFE

My favorite movie quotes are from the movie, Jerry Maguire, as said by Jerry’s mentor, Dickie Fox:

”Hey, I don’t have all the answers. In life, to be honest, I failed as much as I have succeeded. But I love my wife. I love my life. And I wish you my kind of success.”

Want more? Check out Kevin Coupe and Michael Sansolo, the co-author of The Big Picture: Essential Business Lessons from the Movies interview on my radio show.

What are your favorite quotes or business lessons from movies?  Share them below.