Video: How Can I Make a Comeback?
Mike Michalowicz, author of The Toilet Paper Entrepreneur, shares tips on how struggling businesses can turn it all around.
Mike Michalowicz, author of The Toilet Paper Entrepreneur, shares tips on how struggling businesses can turn it all around.
As a business debt solutions provider, I'm finding that there are many entrepreneurs whose companies survived the recession, but are still struggling to make the bottom line.
They never turned to the real solution, which is management by the numbers — not by the heart or gut.
Maybe you used to give your customers 60 days to pay you, or paid a noisy creditor right away because you felt bad you couldn't pay. But you don't have that luxury any more.
You can no longer afford to be sentimental. Revenues are down, competition is fierce and thus profit is reduced. The business has been in a car wreck and needs some serious triage. It's time to get smart.
Here are some steps you can take to retool your business post-recession:
Also, don't be afraid to also cut your losses if debt is too high. Do the workout and save the business. Get rid of debt and negotiate a sharp reduction of the personal guarantee with your lenders. Managing impossible debt service is a slow boat to self-destruction.
Related: 10 Rules for Surviving the Recession
When there was still a frontier, Americans were pioneers. In the 21st century, they need to be “visioneers” — especially when it comes to growing and maintaining successful businesses.
What do I mean by “visioneering?” It is nothing less than the embrace of constant change.
The change needs to be accepted and capitalized on because it is happening.
The recession made it painfully apparent that the Internet, smartphones and other new technologies are causing huge disruptions. The economy has changed, the world has changed and with these changes business has also changed dramatically.
The only question is whether you are going to change too in order to capitalize on it, or be left behind.
You may be a natural when it comes to adapting to chaos and change. But even those who are not can still thrive by consciously changing their daily thinking and planning to stay one step ahead.
Here are some strategies to get you started:
It can be a game-changer. To be sure, defaulting and the likely ensuing foreclosure, concluding in total loss, is a recipe for chaos. But chaos is the name of the game. Sometimes you need to clear out the old vegetation before you can grow anew. Removing the debt from the business and reducing the personal guaranties to affordable losses can allow you to operate the business at given revenue, giving you the freedom to make necessary changes to succeed.
How can you change if you don’t know what’s going on with your business? You must diligently track, monitor and control how your business performs and with this information make rapid and appropriate adjustments to enhance profitability. Key indicators to follow include profitability by the job or product, costs, overhead ratio and payroll ratios. Follow these measurements and then manage by the numbers.
Constant reinvention is the way to win, because stability and predictability are no longer a reality. You should honor your core mission and be who you are. But you also have to adjust with the times. This comes from frequently reconsidering and questioning your business strategy, experimenting and stepping outside what you “normally” do. Specialize, find your niche, provide amazing service, be the best, the most, the go-to business. It is no longer gross revenue; it is net profit that we pursue.
There are all kinds of routes to consider: importing instead of manufacturing, adding services, focusing on a niche, emphasizing a competitive advantage, expanding horizontally or vertically, allowing employees to telecommute from home. The possibilities are infinite. The idea is to determine what works and does not on a daily basis and then make the adjustments required to stay profitable. Lead or get out of the way.
If you haven’t done it already, Internet marketing is a big change to consider as you reinvent your business. The Internet has already changed the world, so it’s time for it to change your business too. Options to consider include: a beefed-up website and online sales operation, search-engine optimization, blogging, deal-of-the-day services such as Groupon and LivingSocial, Facebook and Twitter. The Internet can help a small micro-business compete with the largest international business. Budget no longer controls the outcome, but neither does price alone. But perceived value and niche marketing will win, developed and enhanced with the community support that social networking provides. This can best be accomplished via the Internet.
Adapting to change is not a new challenge. American entrepreneurs in the past found ways to reinvent their businesses amid mind-boggling changes: the settling of the frontier, railroads, steel, antibiotics, electricity, automobiles, telephones and airplanes.
We must learn to do so again. Embrace change. Do not avoid it. It is happening anyway. So make it part of your business plan.
The makeover business is booming–and not just on TV. In today's image-conscious society, everything is judged first by how it looks. Rebranding has become the "cure du jour" for everything from sluggish sales to increased competition and outdated products. So how well do these makeovers work?
It depends. There are times when rebranding is crucial, and times when it's nothing short of perilous. Remember, branding should be a reflection of your company, not just a projection of what you want it to be. You must ensure that the customer experience equals the expectation, or no amount of image revamping will work–at least in the long run. Before you rebrand, there really does need to be something different about your business, product or service–unless, of course, your image never accurately reflected your company to begin with.
You should also keep in mind that the more dramatically you change your brand, the more likely you'll lose your current customers. This may be an unpleasant fact, but it's an unavoidable one. For example, if you attract price-sensitive consumers and you change your brand to appeal to upscale trendsetters, your price-sensitive customers are going to run for the hills. Do you care? No, you don't care if you can keep your brand promise to your new, more upscale customers. But if you can't keep this promise, you shouldn't have tried to cast a wider customer net by rebranding. You simply can't be all things to all people.
That's why established companies with market share should always consider adapting their brand before starting from scratch. There's value in your name and image, even if you're tired of it personally. Is your look out of date? Consider updating it by keeping key design elements that still work, while shedding those that don't. Keep your name or alter it only slightly. The key is to bring your look current without losing its original appeal, and thus customers.
Perhaps a more common problem is the small business whose image never truly reflected its brand in the first place. A poor-quality logo or clunky website does damage to any company, regardless of size. Does your image as projected by your sales materials reflect your product, your mission, and your values? They should. Branding is about using "mind share" to influence "market share"–but if your promise doesn't match your product, it'll be all for naught.
Another valid time to consider a brand makeover is if your company is headed in a new direction–either due to new technology, new industry trends, new markets, or a new product launch. If you decide on a ground-floor makeover, work from a sound strategy based on facts related to sales and profits, not fatigue related to marketing consistency.
Rebranding must be conducted carefully and comprehensively. Ideally, you should change everything at once. Redo your logo (and name if necessary) and brand standards, then apply them to all sales tools–from your business cards and website to your signage and brochures. Of course, this can be expensive, and requires some cost-risk analysis. If you can only afford to change one thing at a time, focus on your customer's typical first point of contact. For example, a retail business might consider its signage and/or ad in the phone book, while a B2B firm might concentrate on its website.
If you change the name of your business, know that it's rarely a good idea to substitute the name of one of your products for your company, even when your product is well known within your industry. Doing so can be self-limiting, making it difficult for you to keep pace with future industry changes.
Branding isn't an option today–your business will be perceived in a certain matter either by default or design. You choose. Reinventing your business time and time again isn't a good idea, but adapting to changing consumer needs and industry direction is crucial. Take control with strategic, relevant branding that differentiates you from the competition.
From gallery owners who want to turn the masses into art collectors to DIYers who blend art and science, creative arts entrepreneurs are building new businesses while–purposely or not–reinvigorating cities and towns across the country. We checked around to see who's creating what–and what this growing creative class contributes to economies small and large.
A few months ago, Steve Strauss noticed a fairly popular Italian restaurant in his Portland, Ore., neighborhood had gone out of business. He didn't think anything of it until a week later, when it reopened as a burger joint with a new look, a new name and the same guy behind the counter. "I talked to the owner and said, 'You risk losing your brand. Why would you make such a huge change?'" says Strauss, a business speaker and author as well as a columnist for USA Today. "He said the economy had shifted. That upscale Italian brand wasn't letting him grow the way he wanted. He felt the need to reinvent."
To most business owners who have spent years or decades and hundreds of thousands of dollars building their brand and developing a client base, chucking it all away to reinvent your business probably seems like the height of insanity. And if you do it on the fly or haphazardly, it probably is. But there are many reasons to tweak your business model–or to try out a whole new one–that make perfect sense. If you do it thoughtfully, it could be the best business decision you ever make. Here's our guide to reinventing your business, one smart step at a time.
The first step is deciding if it's the right time for a change. Karyn Greenstreet, a Philadelphia-area small-business coach specializing in self-employment and business reinvention, says she sees a pattern with small-business owners. "Most people who come to me have been running their businesses for about seven years," she says. "They spend the first three years absorbed in getting things started. Then they're in a growth phase for three or four years. Then they hit a glass ceiling, or don't find the work challenging anymore and want to try something different."
Many factors can push a small-business owner toward reinvention–it may be a need to spend more time with family. The market may have changed. The economy may have reshuffled your customer base. You may be bored. All are legitimate reasons for change.
But you need to be practical, too. Any change involves risk. If you're paying for kids in college and have a steady cashflow, you may have to suck it up a few more years.
After the decision is made to change, you need to decide what type of change is necessary to meet your goals. "Once you decide there's something you can do better, you need to decide whether to make a little tweak or a major overhaul," Strauss says. "You have to decide what's best for your brand.
It's a matter of looking at your core competencies and sticking with what you're best at."
Greenstreet agrees. "Entrepreneurs have more ideas than they have time for. The absolute first stage is deciding to cut off all those other ideas and focus on one. Making a decision to make a decision is the hardest thing for entrepreneurs to do."
The easiest way to figure out what to change–and at what magnitude–is to work backward. Are you chiefly interested in reducing the hours you spend in the office? Are you sick of selling office supplies and think running a dog bakery is your destiny? "Once you have clarity on your goals and values," Greenstreet says, "you have a compass to guide you and help you decide which ideas are good and which are brilliant."
The next step is something every business owner should be experienced at–making and following a business plan. "You need to act as if you're starting from scratch," Strauss says. "You need to think it through thoroughly, figure out who the competition is, how you are going to beat them and what the costs are."
Strauss and Greenstreet suggest sharing your plans with other business owners or a mastermind group. "Entrepreneurs tend to rely on intuition a lot, but you need to make sure other people think your plan is a good idea," Strauss says.
During the transition, you'll likely be running two businesses at once as you phase out the old business model and ramp up the new one. "Sometimes reinvention means running two businesses simultaneously for almost a year," Greenstreet warns. "It's overwhelming, and business owners are often so excited about the new model, they want to let go of the old model. It's like going through a long divorce before committing to a new relationship. It's not fun."
The solution is to create a detailed exit strategy. Allow time to negotiate new leases, bring on new employees or train current employees. Be transparent through the whole process with vendors, customers, employees and, most important, your family. Give everyone notice that changes are coming, when they will happen and what it means for them.
Pamela Wilson, a marketing consultant in Lehigh Valley, Pa., is in the midst of the process. After running a marketing and design firm for 20 years, she decided to scale back her one-on-one clients and reach a broader audience. In 2010 she created a do-it-yourself marketing course for small businesses called Big Brand System. "It's been difficult juggling two businesses," she says. "But I'm at 50/50 right now. By the end of next year I plan for the new business to generate 75 percent of my income."
Even those committed to sticking to their business plans can start to deviate. Greenstreet suggests bringing in outside help. "Business owners sometimes need people to bounce things off of to keep them from going off in crazy directions," she says. "Some people go through a grieving process. They're letting go of a piece of something they've built and need to process that. There's a lot of stuff to deal with, but if you don't, it will come back and bite you hard."
Although the process can be rough, reinventing your business can be a rush. "It's an exciting place to be," Greenstreet says. "A business owner gets to reinvent themselves with capital and 10 or 20 years of experience–without making mistakes. They have an ace in the hole.
You’ve grown a successful business and now you want to expand. There are a number of potential paths you can choose to do that, and each has different advantages and disadvantages for you. Your choices can include:
For this article, we’ll focus on the option of offering a business opportunity. And in this context, we’re not talking about a multilevel marketing business but rather a more traditional approach to the business opportunity option.
First off, it’s important to understand the legal differences between a franchise and a business opportunity–there are laws and regulations that govern the activities of someone using either strategy to grow a business. It’s important to know–at least in general terms–what these laws are so you don’t inadvertently cross a line and become subject to costs and regulations you don’t want to have to pay or adhere to. As a general rule, a franchise structure is more highly regulated than a business opportunity, but most states have business opportunity statutes as well.
A franchise requires that a new franchisee pay an initial cost or fee to get involved; it has some form of obligated ongoing payment required (usually in exchange for a commitment to provide ongoing services), and has a common brand or brands used in the operation of the business. If you eliminate one or more of these characteristics, you’re generally considered to be operating a traditional business opportunity rather than a franchise.
The most typical method of setting up a business opportunity involves the owner of the successful business taking the time to document all the key operational characteristics and procedures involved in both starting up and successfully running the business. This is usually done by creating one or more manuals that explain everything a new person would need to know about the business based on the owner’s experience. The manuals need to explain the following areas in detail:
All this documentation, contained in a set of manuals, becomes the “business plan” for successfully operating this concept. The owner then offers this business plan for sale to interested parties who would like to start this type of a business.
In addition to the manuals, the seller of a business opportunity usually provides an initial training program, which is normally conducted at the owner’s existing business location. The buyer comes to the location for a week or two to get hands-on training experience in an actual operating unit.
You typically charge a one-time fee for the business opportunity, and then after the training’s finished, the person who bought the business opportunity will be on their own. The contract for such a sale is usually pretty simple, and its main features are the price a person has to pay for the opportunity and a confidentiality agreement requiring the investor not to share the business plan information with anyone else.
The initial fee charged for a traditional business opportunity fluctuates widely, but for a reasonably thorough preparation for a reasonably complex business, it’s not uncommon for the one-time fee to range from about $10,000 to $25,000. Frankly, if you can’t generate a fee in this range, it’s probably not worth the effort to go through the process of preparing and then attempting to sell your business plan.
A business opportunity typically doesn’t require (and may even forbid) the new investor from using the same brand name as the existing business. A common brand is one of the characteristics that makes a business a franchise, and you want to make sure you’re not treading in franchise water if you mean to be a business opportunity. A business opportunity may also grant some form of exclusive territory as part of the sale, though many do not.
There’s typically no assumption that there will be any ongoing fees of any kind paid to the owner under the terms of the business opportunity contract. There’s also normally no assumption that there’ll be any ongoing service or support responsibility after the initial training in this type of relationship. As the creator of a business opportunity, you’re simply agreeing to give someone the initial advantage of your experience in exchange for a one-time fee payment.
Though there are usually no requirements to do so, most business opportunity owners do provide some ongoing communication facilitation to the people who bought their business plan. These buyers generally form a network of business owners with the common denominator of having all started from basically the same place. This communication can be as simple as a newsletter or, even more common today, an intranet with forums to share best practices and other helpful information.
The path to setting up a business opportunity is fairly clear and involves the following main steps:
The types of businesses that work well under a business opportunity structure tend to have two common characteristics. First of all, they’re concepts that don’t require a common brand in order to convey quality or value to potential customers. Second, they’re concepts that are easy enough to learn that someone without experience in the concept’s operation can be taught whatever they’ll need to know to be successful in a relatively short period of time (say, two weeks of training or less).
Most business opportunities that are successful in selling a significant number of business plans also feature a fairly low total investment (including working capital and a grand opening advertising budget) to get started in the business. They’re almost always less than $150,000 in total investment, and many are under $50,000.
The types of businesses that don’t tend to work well under a business opportunity structure are usually ones with more complicated operations and/or ones that require special licenses to conduct business, especially if the licenses take months or years to acquire. It’s also much harder to sell a business opportunity if the total investment to start the business is greater than $200,000 or so.
Deciding to expand your business by preparing and offering a business opportunity can be very rewarding financially. And if you’re the kind of person who gets satisfaction from helping others achieve success, you’ll probably find that many nonfinancial rewards come to you after you start offering a business opportunity based on your already successful venture.