We look at how to save a failing business before the roof falls in with real examples that you can use to increase sales and profit.
Is your business failing?
First of all, understand that some 30% of businesses fail within the first 2 years and over 50% within 5 years so if things are not going so hot you are not on your own.
A quick search on Google to find the reasons why the high failure rate and I came up with a dozen answers.
However, the ideas did not really gel as the basics I was after.
I have been in small business for 30 years and in that time have marketed business to business so I have seen my share of failures and of course the successes as well.
I regularly see businesses that are not doing well and at times try and offer some guidance and support, but most often it is too late, the doors have closed.
What are the signs of a failing business?
- Cash flow problems
- Trouble paying bills
- Expenses too high
- Pulling out cash
- Location
- Product
- Management
- Marketing
- Differentiation
- Communication with customers
- Blowing the budget
- Spending unwisely
- Planning
- Capital for expansion
- Leadership
We all have cash flow problems at some stage but when it gets too bad it gets too hard.
The three things that I rate the highest in damage are a bit different from many others and maybe different in your case. Saying that there are a few that will stick out.
Product and location just mean moving the business, it was a poor choice first of all so fix it. Or is it?
Failing to act in business
Near to where I live is a street shopping center, about 10 different businesses that were all struggling because of perceived location.
The Chinese restaurant closed for lack of business, the Fish shop, once the best in the area was on its knees, the Newsagent is failing and a Pool shop has no customers.
A little 24-7 Deli just keeps the doors open and the lunch bar is closed. What an awful location to be in. Or is it the location?
A new coffee shop opened in place of the failed restaurant providing good food and high prices and should not succeed. Physiotherapy and sports medicine centers start-ups catering to the young and trendy, and then a pizza restaurant and bar take a corner spot.
The street is now abuzz with clients in new places whilst the old plod in their own old ways hoping for some overflow.
We have many more coffee shops and pizza outlets in the area to choose from so what made this location become successful when it was so drab?
Location was not the problem
The location theory went out the door, they are competing businesses so the product is not an issue, cash flow is fixed by busy trading so what makes them successful?
The answer is in what they offer and how they present it to the public. Then word of mouth takes over to deliver customers that will only come back if the result is better than expected.
Management, marketing, planning and appeal.
All existing businesses unchanged will get some overflow but need to do a radical appearance upgrade and customer communication lift to build their profile.
Unfortunately, I don't think they will make it and the principal reason is personalities.
You all understand the rules of know, like and trust in business, unless you have all these ducks lined up you will fail. You can flog a business like mad but if there is no street appeal you are lost in the wilderness.
In the other shops, the Newsagent is rude, the fish shop family has cut back on the serve sizes to save money, the Hamburger bar is dirty and the Chinese deli without character.
They could all change, but can you and will they?
What is your problem that keeps people from buying from you? Is it Know like or trust?
Know like and Trust
In the above example, what would I do to improve my business if I was one of them on the slippery slide out the back door?
The Hamburger bar is stuck in the 60s make it a casual dining and great take-out food experience. The new pizza bar is overbooked every night so just the overflow would be enough.
The newsagent needs to bring the store with a new floor plan in a modern setting and have the lotto sales on the street, get in the customer's face and treat them well.
The fish shop needs to market the local area with regular specials and provide better value in the delivery.
The Chinese Deli, well everyone needs one so just de-clutter the stock and come out and don't hide behind the counter.
It is all basic stuff, not expensive and could double the sales overnight fixing all the little problems. They don't know-how.
Slow sales breaking the business
So what is stopping the sales?
Marketing. This is the “know” in the equation.
Your web page and SEO, current working and performing.
Is your social media all in place and active? LinkedIn. Facebook and one other selected module to showcase your business.
Are you using emails, newsletters and messaging to contact customers?
The Rule is 7. That's seven touches before they will buy.
Like. Are you delivering a customer experience visually and orally everyday?
We all shop at places where we get respect and identify as a valued customer. Think about the Apple store, Nespresso outlets, Porche car sales. Places where the customer experience comes first, often when they don't have to with locked-in customers.
The above 3 examples all have a captive audience and still understand the value of choice and give the shoppers an experience they will remember. (plus grab the dollars)
Trust. It is in the delivery
McDonald's delivers a burger you can trust to be the same all the time and you know you will get value for money.
A bottle of wine from a trusted winery will always be the same, the quality is in what you pay.
Coca Cola markets the experience more than the product because there is some doubt about the benefits of drinking sugary drinks. We still drink coke more than any other soft drink because it is always the same.
What is your business problem?
This is often a hard question for business people to answer as we take a myopic view of the situation and become defensive of our position. It is only natural that we are like this but we do need to look outside the square and take advice from others.
Is it the leads we want?
More sales per customer
Greater margin
Fewer expenses and overheads
Each of these is very easy to fix so let's have a look at our fix list.
Seven touches: how many are you using? Shopfront, Street flags, Social media, Emails, SMS messaging, Frequent buyers club.Local directories.
Do you want fries with that? Cake with Coffee, Squid with Fish, a gift with your lotto ticket. Remember it does not hurt to ask and to upmarket, people appreciate it.
Put your prices up and provide extra value. Throw in a freeby, everyone loves that.
Work an extra hour, cut staff an hour, use other ways to do your work, negotiate a rent review. Seek supplier specials and buy in bulk.
If your product is substandard, your delivery is below what should be expected, your staff are lazy and uncaring nothing will work unless you fix the problem.
Dominoes experience
Companies in Australia and the USA called Dominoes Pizza ( a bit like Pizza Hut but mostly take-away) with a modest 16,000 outlets had an image problem.
The problem was that the actual delivered product did not look anything like the marketing material. In fact usually nothing like it.
We had a family gathering recently and the kids wanted Pizza so Dominos was ordered. It was so bad my wife registered a complaint that it looked, and tasted nothing like the promise.
However, since that time Dominos reacted to the public that all voiced this concern that the media is better than the food.
They have taken this on board and installed cameras above all ovens to ensure the delivered product matches the promise.
This is a big call from someone at the top of the market who changed to meet the buyer's expectations or lose traction.
Know your customers and have their details
Collecting customer details is paramount to marketing.
My customer had a live Fish and aquarium business that she had to close because of slow sales. She sold what she could and binned the rest. Her competitor approached me and asked for her marketing list and was prepared to pay by name, an amount that would have cleared her debt.
The sad ending was that she had no such list, never bothered to record the buyers.
The Pet industry
The pet industry is a huge business. We have one small cat that requires feeding and locally there are no less than four major supply shops. All with similar products and pricing.
I buy every couple of months Food and Litter plus a few treats with an amount of around $60. No big deal, a Dog would consume three times that.
I am a Member of the club for each site so come my time to buy my rations their offers start coming in, 25% off, 30% off, buy now and save. They know my trading history, my name, what I buy and they email and SMS me and entice me to the store. They know my value as a lifetime customer and are prepared to market it.
Do you know your customer details
When you have this information in a place you can work to do things with it. Marketing is just one example. You can increase the average sale to customers by introducing new products or benefits or reduce the cost of sales by purchasing power.
Billing a customer for a 1kg bag of food can be upgraded to a 2.5 kg bag.
We all know they will use it quicker in bulk. We can add specials and offers to increase sales value.
The 1% rule in marketing
If you made 10 small changes and each delivered a minimal 1% increase you have now a 10% change in your business. These figures can change but the message is that you are responsible for growing your business and every small increase grows the total in bigger sums.
Summary
Business in most areas is tight in today's economy. People are going broke everyday and walking away from a product that just needed some management. The big companies can do it and so can the Mum and Pop stores that rely on someone taking the initiative and doing something
How to write a blog for money
How to save a failing business by Peter Hanley
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