Over the years, I’ve helped many business owners solve their biggest challenges. The most difficult calls or emails I receive are from accountants, insolvency practitioners or bankers asking for help because a business client is in trouble, with a risk of failure. Having saved a high percentage of these companies from the brink, I thought I’d share some of the most common ways I helped these clients, with the view that this will help you understand your current position and give you ideas to solve your problems before they reach a critical stage.
In situations like this, there are generally a few reasons why the business is facing closure. The main causes are:
1) Insufficient customers
2) Insufficient sales transactions
3) Excessive overheads
4) Insufficient cash to fund orders
5) Unable to manufacture due to machine breakdown
6) Insufficient skilled labour
7) Poor decision-making
Some of the above could be considered a sub-section on another but, for the purpose of this article, let’s leave the list intact.
Additionally, let’s assume that you, the business owner, has acted with integrity and there are no illegal incidents to give cause for concern. It’s very rare I am faced with such situations. Of course, every situation is different as the dynamics of the business and personalities are contributory factors.
In Part 1 I’ll cover the first couple of the reasons in the list….
It’s important to solve the cause and build robust systems (a key phrase) to ensure this isn’t repeated in the future.
Insufficient Customers
It’s easy to understand that this is a marketing issue. However, there can be numerous causes…
Initially I would look at your entire marketing systems. How are you advertising, where are you advertising and what are you advertising? Additionally, it’s important to understand the reputation of your business. What is your business known for?
Hopefully, your reputation is good. If not, then it’s important to address the issues and ensure customers are made aware of the changes that have been made.
When we understand the way you market your business, the next step is to look at the numbers. What does each leg of the marketing system produce in respect of the number of new customers and profit from the first transaction.
It’s also important to ascertain whether your business needs to make a profit from the first transaction. This may appear an unusual statement, however, the important numbers in any business, is identifying the lifetime value of a customer.
OK, you may think this is all of the data I need to help a business owner turn the business around. But there is one other critical element to consider. What is the customer experience of your business? It’s widely accepted that first impressions count. If so, then what impressions is your business creating. Does this bring prospects closer to being a customer or do they disappear and potentially purchase from a competitor?
You can create…
– An excellent customer experience whereby the likelihood of a prospect/customer returning to buy again is high.
– An indifferent customer experience where there isn’t a definite outcome. This is dangerous assuming there is competition and a prospect/customer can shop around. If your competitors offer a better experience then it is likely you won’t see them again.
– A poor customer experience is the most dangerous. Poor experiences can lead to complaints which take time and resources to resolve. Ultimately, this costs in time, reputation, staff morale, loss of future business. A poor experience leads to a prospect telling everybody about your business. This in turn reduces the size of your target market as your reputation is a turn off.
With the introduction of social media, this provides people with a platform to complain in public, showing the complaint to a considerably bigger audience. You cannot professionally resolve this online and need to move it away from the media.
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Insufficient Transactions / Orders
In this case, there are customers but your business hasn’t created a systemized process to entice/program customers to buy more often. Again, I would initially look at your entire marketing process and then add other elements.
A huge aspect of any marketing system is the marketing to existing customers. You heard me, but sadly this is often forgotten. Without constant reminders of how good your products and/or services are, your customers may forget your business and buy elsewhere, especially if your competitor’s marketing is superior and more attractive. Generally, I find that the business has no marketing whatsoever to existing customers and considers their entire marketing effort should be focused on gaining new customers. This is wrong and if your business has this attitude then please change it now.
Part of any marketing to existing customers should be to help them get the greatest benefits, results, advantage from their purchase. You must ALWAYS communicate with them with THEIR interests in mind and not your own (a VERY IMPORTANT distinction).
Creating an ongoing program of marketing where the customer is continually updated and educated is vital. Within the mix, we can add offers. These are all tests, however, in time, we will find ways to generate additional orders.
In a previous article on marketing I explained there were three ways to grow a business. They are:
1) Increase the number of customers
2) Increase the frequency of purchases
3) Increase the average order value
The next part of this article, the focus changes from one of marketing to finance. I’ll see you in part 2…
