How to Survive As a Small Business in the Current Economy

These are trying times for all businesses. The current state of the economy has impacted one and all, but it is the small, local businesses that are most prone to the vagaries of the economic instability. Local businesses, therefore, must innovate and work even harder if they are to stay afloat through this recession.

For a small business to survive in this environment, it needs to focus on two things: cutting costs as much as possible, and gaining new customers. This, of course, sounds very contradictory. After all, the best way to get new customers is by increasing the marketing efforts, which, in turn, will increase your expenses. But there are ways to gain more customers without shooting your marketing budget through the roof, and I will identify some of these opportunities in this article.

As a small business owner, you must try to keep abreast of the latest developments in your business and new marketing techniques that can impact it. The latest way to market your business is through the internet and social media sites such as Twitter, Facebook, etc. Unfortunately, even today, a lot of local businesses do not have an internet presence. So the first thing you should do is to build a presence online. You don’t have to go over the top, though. You can get a website made through a template for a couple of hundred dollars (outsource it if you have to. Use services like Freelancer.com for outsourcing). Hosting the site shouldn’t cost you more than $50-60 per year. Membership on sites like Twitter and Facebook is free, while you can easily learn some SEO (Search Engine Optimization) techniques within a couple of weeks of research.

List yourself on all the major local directories such as Yelp, Google Maps, Yellow Pages, etc. The buzzword these days is viral marketing, which is essentially another term for word-of-mouth publicity. To derive benefit from this, give your customers an experience and service they won’t forget. An impressed customer is much more likely to tweet or tell his friends about your business, introducing you to a broad customer base.

Carefully analyze your current marketing efforts. Are you really getting your money’s worth by spending a couple of hundred dollars every week on an advertisement in the local newspaper? Can you get better returns by taking out that money and investing it in some more lucrative marketing venture? A detailed sales and expenses record can be very useful here as you can compare the performance of your current marketing efforts to your past efforts.

Your marketing budget must be allocated very carefully. If most of your target audience is internet savvy, then increase your spending online. If it is full of people who access the internet once in a blue moon but read the newspaper everyday, then increase your spending on print advertisements. If your target audience still uses the Yellow Pages to find businesses, advertise more prominently in this medium. In other words, craft your marketing campaign according to your target audience. If one campaign isn’t showing good results, don’t be afraid to scrap it. The key to survival in this economy is adaptability. Keep on moving and transforming yourself, and you will find just rewards for your efforts.

How to Protect Your Small Business Ideas With Business Structures

If you have the ingenuity to come up with a stellar idea, develop it into a business, and generate profits with it, you will likely have the foresight to protect that valuable entity. Here, we talk about how you can protect your small business ideas by keeping them behind the business castle wall: your business structure.

Business structures, or entities, are generally classified into one of these categories:

  1. sole proprietorship
  2. partnership
  3. limited liability company
  4. corporation

Each type has pros and cons. Here, we will consider some of those.

The sole proprietorship is an unincorporated business run by one person, and is by far the simplest form of business to operate. The reasons are straightforward:

  • It doesn’t require much, if any, registering or paperwork
  • It is very easy to start, change, or close down
  • The value of the business (viewed by both buyers and the IRS) is based upon the skills and assets of the owner, not stock

The sole proprietorship may be a simple form, and is often best when there is limited capital and personnel, but there are distinct disadvantages:

  • The capital is limited to the owner’s capital or what he/she can generate
  • The owner cannot be an employee of the business for tax purposes
  • There is unlimited liability for the actions and debts of the business

Liability is an issue in running any business, and increasingly so with the litigious society in which we operate. Liability is the ever-present dinosaur in the cave, ready to break out at anytime. You can’t know when or why or how it may burst upon the scene of your business, but history has proven (as recent as yesterday, or any day) that IT DOES HAPPEN.

Simple can be good, but it can also be dangerous. When a sole proprietor operates, his capital, assets, and skills are what make up the business, and these assets become his payment in the event of a lawsuit. A court can freeze assets, force the sale of a residence, attach bank accounts and many other financial nightmares that you can imagine.

Fortunately, there are other business entity structures more geared to protecting your small business ideas and your thriving business.

Another of business is the partnership. It is a relationship between 2 or more persons who join together to carry on a trade or business. There are some advantages:

  • It involves more than one member, so it has greater potential for capital than a sole proprietorship
  • It combines the management skills of multiple people
  • It has pass through taxation

The partnership also has some disadvantages:

  • The authority for decision making is divided
  • Partners cannot be employees for tax purposes
  • Unlimited, joint and several liability among members

Like the sole proprietor, the partnership members can be held liable for all actions and debts of the business. In addition, there is joint and several liability, which means each partner is responsible for the actions and debts of each other partner.

It doesn’t take much thought to see how this can (and frequently does) create issues. Different people have different ideals, different risk tolerances, and different methods. If one partner decides to act in a way in which another partner believes is risky, the other partners often times have no recourse but to dissolve the partnership. Because of this, many partnerships do not stay intact for long.

The limited liability company is a more flexible, and in many ways, more desirable business structure. An LLC may be treated as a sole proprietorship, partnership, or a corporation. A single member defaults to sole-proprietorship, 2 or more members defaults to partnership, and either can elect to be taxed as a corporation or a subchapter S-corporation.

Advantages are:

  • Flexibility: members can be individuals, other partnerships, other corporations or even other LLC’s.
  • Management flexibility and pass through taxation
  • Members have limited liability for the actions and debts of the LLC

Disadvantages:

  • It is governed by the laws of the state
  • It is subject to a base annual tax (in some states) which is increased after profits rise to a specified ceiling
  • All members must also pay individual earning taxes

Over all, the LLC is a very clever and flexible way to set up a business, but the main advantage is the limited liability to the partners. This is an increasingly valuable quality as revenues and profits increase, because more money means higher chances of being sued. Following the old “risk and reward” equation, as the reward goes up, so does the risk.

Corporations are an advantageous way of establishing a business, but especially so when the profits and scope of operations increase. The law treats a corporation as a legal entity, similar to a person. It has perpetual life, meaning it does not pass away when the originator passes – the corporation remains a legal entity until such time it is formally dissolved.

Advantages:

  • The transfer of ownership is relatively simple
  • It is easy to raise capital and expand the business
  • All shareholders can be employees of the corporation, and have limited liability

Disadvantages:

  • Double taxation (C Corp), meaning the corporations profits are taxed and shareholders’ earnings are taxed
  • It can be difficult and expensive to organize
  • The corporate officers must follow procedures, such as board meetings, corporate minutes, and others

Again, corporations are ideal for any business that has expanding operations, substantial earnings, or defined liability. Some businesses, by their very nature, encompass more risk, and some businesses are quite complex and require a more centralized structure. For these reasons and more, the corporation can be the best form of business to operate in.

Corporations were designed to encourage business. The corporate veil is a strong one and protects people from losing their personal assets in a business catastrophe such as a lawsuit, and empowers them to grow and expand without fear. However, the veil can be pierced, but essentially only one way: fraud. Fraudulent activity among officers of a corporation can pull back the protection and expose them.

Seven Common Mistakes Made By Small Business Owners

Most new small businesses won’t be in business this time next year. That’s the cold hard facts. Though it is easy to start your own business, it takes a lot more to succeed in business. There are seven common mistakes made by small business owners. Let’s explore them so you can avoid them.

Mistake #1: Neglecting Your Continuing Education

You are the only renewable resource, besides your employees, your business has. You may be a master at getting the most out of your other resources, but how are you doing with you?

Today’s world is characterized by rapid change. Keeping up on innovations in your business and new business strategies is crucial for long-term success. However, most small business owners do not invest any time or money into developing themselves. The less you know, the more time, money and energy you will waste in the future.

Do not be satisfied to be “functional” in the software programs you use to run your business. There may be many time saving options in those programs if you take time to find them. Here’s an easy strategy that will take about fifteen minutes a day. Take your favorite software program (accounting, planning, contact manager, or marketing) and access the “help” menu. Now learn one new function of that software program per day. Fifteen minutes of your time may yield big returns in the future!

Mistake #2: Failing To Plan Is Planning To Fail

Many small business owners avoid planning at all costs. The old adage, “Failing to plan is planning to fail”, is true. Without a well-thought out plan for establishing your business, running your business, and marketing your business, you will waste a lot of time. Time you don’t have.

So, how do we find time to plan while we’re trying to run a business? Do the work in small increments. Keep a notebook handy throughout your day. Have sections designated for “Operations”, “Finance”, and “Marketing”. Make notes as random thoughts appear to you during a day. At the end of each week, take an hour or so and summarize the ideas into a plan. Place the actions that will yield the highest potential return at the top of the list. Start Monday of the next week by tackling the items at the top of your list.

Mistake #3: All Work and No Play

Running your own business is hard work. There is no doubt about that. However, without proper relaxation, you will become increasingly less productive. It isn’t the hours you spend at work but the productivity of the hours you spend there. Become a student of your own business. When do most customers access your business? When is the slow time of the day or week? If you are available for an entire hour that may only yield one small sale, you would be better off out of the office.

Take a walk. Talk to people along the way. They could be future customers. Join a gym and work out during a half of that slow hour. This kills two birds with one stone. You get healthier with better endurance and again, you can network with people who might be future customers. Join that Chamber of Commerce and attend those meetings! Join the Rotary or Lion’s Club! Not everything you do to successfully advance your business will occur at your business.

Mistake #4: Take Your Existing Customers For Granted

Remember the first customer you ever had? Remember the appreciation you had for them? Remember the little things you did for them? When did you stop and WHY?

Avoid looking after your existing customers and they will go elsewhere. Customers have more options today then they ever had before. If they don’t find your competitor locally, they will find him/her on the Internet. Ignore customers at your own peril.

The fact is without them you wouldn’t be in business. It’s time to make certain they understand how much you really appreciate them. How about having a special reception or buffet on site for your customers? What about a special appreciation day? When was the last time you contacted customers just to tell them how much you appreciate their business? A happy customer is a valuable business asset, now and in the future.

Mistake #5: Never Ask For Referrals

As stated above, your existing, happy customers are a major business asset. That asset can yield benefits in many ways. But you have to ask. Instead of spending a lot of money on your advertising, why not ask customers for referrals? Referral sales are the cheapest and easiest way to grow your business. “Two Men and a Truck”, a moving business, generated $150 million dollars in revenue from 95% referrals sales. That is a target we should all shoot to match!

Mistake #6: One-Stop Shop Mentality

Many business owners fail to achieve their true potential because they try to be all things to all people. You need to target your ideal customers. Look at your product. Ask yourself who would benefit most from your product. Once you have selected a targeted group, learn everything you can about them.

Change your store or website to reflect that targeted customer’s needs or desires. Speak their language. Find out where they hang out and what they read or listen to. Understand their concerns. Sell them solutions, not products, and you will excel!

Mistake #7: Neglecting Marketing

It is so easy for a business owner to get caught up in the daily operations of a business. The inventory ordering, order processing, data input, and more, can become all consuming. Then one day you look up and wonder what happened to the business.

Marketing is all about future sales. You plant the seed today to reap the benefits tomorrow. If you want a long-term successful business you can hand off to the children, don’t neglect marketing. Every month, set aside at least 20% of your time dedicated to marketing activities.

Marketing activities include deciding to expand an existing product line, dumping unprofitable products or adding new products, determining where your advertising can generate the biggest return for the investment, and planning your marketing materials. These are crucial functions for your success. Neglect them at your own peril!

In summary, staying focused upon these seven common business mistakes can save you a lot of time and money. They are also crucial to the ongoing success of your business. Stay focused on the future while you work in the present. Don’t develop work habits counterproductive to a successful outcome.

The Little Thing That Can Make You Big Money – Small Business Marketing

For the last week I’ve been listening to a 27 hour-long marketing seminar that was recorded back in 2000 and it is very interesting how the little things just pop out at you when you spend so much time immersed in a topic.

Now I don’t expect all of you to spend your time immersed in marketing the way Travis and I do on a daily basis, day-after-day.

BUT I do expect you to take the advice we give you because we’re boiling it down for you and hopefully making you think about things you wouldn’t have thought about otherwise, challenging you to do things you wouldn’t normally do and making your brain work in ways it doesn’t naturally.

But while listening I was reminded of something so simple and so critical to your marketing and business success that I don’t know if we’ve mentioned here before. I at least know I haven’t made a BIG enough deal about here.

At this seminar they were only scratching the surface of this concept…but today it is essential and if you aren’t doing it you need to start immediately and if you are doing it congratulations.

If you are or aren’t doing it you need to start utilizing it to it’s fullest potential.

So I’m sure you’re asking yourself…”Jimmy, what are you talking about??”

I’m talking about effectively and systematically collecting your prospects and customers contact information – Including email address.

Many people who market online understand this concept. But many small businesses we encounter do not get the power of this.

It’s just as important if you are a bricks-and-mortar business to do this as it is if you only operate an e-business. You need to be actively creating a database.

You’re database is GOLD JERRY!

Many businesses collect their customer’s contact info when they buy something and so do a good job at keeping it current and in a usable state and most don’t even do that. But just as important as keeping your customer’s data you also need to keep you prospect’s information.

If a lead calls up on the phone you have to have a system that collects their information. Ever notice how when ever you buy anything at RadioShack they always ask for your full address? They collect the information vigorously.

In the very least you want a prospect’s email address and their permission to send them stuff in the future. It is imperative and can quadruple the effectiveness of your marketing and significantly impact your bottom-line.

So here’s the big question…

How do you get it the info? You need to have a system that allows you to get at least the email of every prospect that calls, comes into your location or you run into in public. You need something to exchange for their permission to market to them in the future. No one is really going to give you their most valuable possession (their attention and time) for nothing.

So if you are going to have a snowballs chance in hell on getting them to give you their contact info and in turn their attention and permission to create an open dialogue and relationship you better have something they want.

In steps information and the concept of giving value first.

We’ve all heard of added value after the sale right?

Travis and I think that is BULL… You are rewarded for the value you deliver to the market place in conjunction with what you do potentially better than anyone else. And you have to deliver that value FIRST – Before a sale is ever made.

That’s how you get people attention and permission and create relationships and customers for life. That’s how you create raving fans that recommend you and talk about you to others. That’s how you get more referrals then you can handle and that’s how you can harness the power of that all elusive, best-marketing-on-the-planet-because-it’s-free Word Of Mouth Advertising.

But it all starts with rabidly pursuing and making it TOP priority to collect the contact info (especially email) of all the prospects you ever come in contact with. With email you can market to them for free in the future.

But the second part is that you list has to be kept up-to-date and organized (that’s another post in and of itself).

We discuss this concept in more detail in our “Small Business Owners Guide To The Galaxy: Jim and Travis’ Super Stellar, Out of this World, Step by Step Guide To Generating Leads, Attracting Customers, and Making Sales.”