Issue 5 2009
Small Business Spending Strategies For Tough Times | How PR Keeps Business Growing When Cash Isn't Flowing | Is There A Role For Performance Appraisal In SMEs? | HR Tips - Motivation
Small Business Spending Strategies For Tough Times
Like most business operators, you’ve probably been doing a lot recent pondering over where to cut spending. Whether you’re just being cautious, or outside forces have inflicted a need to slash budgets, consider a redirection or re-think of spending habits first – it can really help support your bottom line while the economy recovers.
Switch your pitch for a recession-time loan
After years of flowing loan funds and easy credit, your routine plans for business borrowing might face new obstacles today. Economic pressures have shifted lending attitudes. If your business was banking on a loan, there’s better chance of success if the recession scenario is set into your pitch. Present a realistic business plan to lenders that confronts the hard times relevant to your company, and show what you will be doing to meet the challenges ahead. Demonstrate an understanding of the economic environment, rather than a “business as usual” approach.
It’s tempting to keep everything in-house when your finances are falling, but the strategy could produce expensive traps. Not only do you displace team time that may be better spent on other strengths, but the risk of errors and a less than professional image could prove costly later on. Examine where you can spend money to save money. Outsource tasks like bookkeeping, IT support, direct marketing, public relations, writing or web design. Even loyal customers will scrutinize your professional image closely now. One advantage of a downturn is that there are many more specialist freelance skills on the market offering competitive rates.
Cut business cycles
In tightening economies, it’s wise to review business activity more frequently than usual so that you can take swift action on cash flow if required. Quarterly financial revision could revert to bi-monthly or monthly; monthly to weekly if you’re already in that cycle. Your customers will be spending less, but that won’t last forever. With shortened business cycle planning, you’ll see the upward trends sooner too, and can respond accordingly.
Plan for even worse conditions
Keep in mind that serious unexpected changes could upend even the best-designed business plans for a downturn. Include an analysis or two for serious scenarios that could test your revenue, expenses and cash flows. For example, extreme inflation or deflation, a change of government policy or oil price hike; a supplier’s demise, move offshore or takeover.
Check for technology lag
It’s tough to even consider borrowing or leasing new equipment when cash flow is tight, but there might be situations where your technology is being outpaced. Should you invest in the latest gear to stay in the game? Beware that if your competitors have upgraded their machinery or equipment, they will be achieving better time - and cost-savings, passing the benefits on to their customers and worse – pitching to yours.
Bring your website out of hiding
Your website may already be doing a lot of sales legwork for you, but could it do better? More people will find you online if you invest in search engine optimization (SEO). By moving higher up the search results page, potential customers see your site sooner when shopping around.
Searches can be promoted by key word, by your location or even by an image, using html programming. “Vertical searches” are emerging as an even better way for niche professionals to find refined information and reach highly specialized audiences. Diverting marketing funds to SEO is a good alternative – or addition – to traditional promotions, with the important bonus that you can see precisely how many people searched, looked and booked.
Use a business mentor
An empathetic, experienced business mentor is useful in times of boom and bust. As a general sounding board during expansion in tough times they help keep you focused on your greatest business challenges. Committing time and money to a mentor will energize your business.
The benefits include finding opportunities or threats you have missed; an experienced and professional sounding board; clearer guidance during growth (or decline); improved networking and; a sense of accountability through refined milestones that are more formal than if left to yourself.
Keep up the marketing
Ongoing marketing lets your customers, and prospective customers, know that you’re still around and operating as usual, in any economy. Promotions are easy to cut when income slows down, but consider the risk of ‘disappearing’ from the industry or public radar when the media and others are constantly talking about business foreclosures. You might be able to negotiate better advertising or printing deals now, so don’t be afraid to ask.
How PR Keeps Business Growing When Cash Isn’t Flowing
When business is slow, more than ever, you need to stay visible. Public relations can come to your rescue inexpensively - and often for free. Every organization uses PR, from the logo on your van or color of team uniforms, to sponsoring the local football team. Even your email sign-off is working for you if it gives the right impression.
Here are seven ways to grow your business using ‘easy PR’:
1. Make great service a top priority
In these days of price-sensitivity, review your service levels for a competitive edge, even to loyal customers. Look for opportunities to take service up a notch, on the phone and in person. Ask customers for their feedback and opinions and act on what they say. Answering phones promptly and professionally is a good signal that you’re serious about hearing from clients, no matter the reason for the call. Make a new policy for timely turnaround of enquiries and complaint-handling, such as “within 24 hours” – and promote it in your marketing and correspondence too.
2. Reward word of mouth referrals
When new customers come through referrals – and you must always ask where they heard about you – reward the person who passed the good word along. A free product sample, discount or even movie tickets are all good gestures, but a simple thank you letter will have them just as delighted in these times of hurried emails and impersonal communications.
3. Review your messages, not your rates
Are you sure your market shares the eco-gloom? Check on perceptions and competitor activity before discounting prices as an automatic reaction to the slow-down. Could you better focus of your company’s messages on value, benefits, your reputation or reliability? If so, you might avoid an unnecessary cash flow cut in the process. Perhaps your “25 years as a trusted family business” or your “no-fuss returns policy” messages need to be brought to the top of current promotion.
4. Get quoted in the media
Third party credibility in the right media outlets – traditional and online - increases your business opportunities. Look at your company’s activities through a media prism. Somewhere, there’s an editor or blogger writing about your field who is looking for news items, commentary for a feature story or expert advice. Media visibility is the perfect way to stay in the minds of past clients - who may wonder if you’re still around - and reach new ones.
5. Get noticed in the community
Local sporting clubs and schools need financial help in small and large doses. Sponsorship brings you great grassroots credibility and much more than bottom line rewards. Rather than ongoing cash, an ‘in-kind’ donation such as uniforms featuring your logo and web address, or supplying the food at catered functions might be just the boost they need. An accounting firm sponsoring a soccer team has the parents, grandparents and other spectators as perfect targets for financial services. Imagine an 80-minute “advertisement” every week in winter for the cost of jerseys and trophies?
6. Make necessary occasions “special”
Opening or relocating a shop or office shouldn’t just be hard work and sweat. It should be an opportunity to celebrate. With balloons outside on opening day, sample giveaways and company literature for passers-by, your first day (or week) at a new address becomes a simple and colorful “event” - and a memorable entry to the neighborhood or central business district.
Or, are you appointing a new manager with unique experience in a certain field? He or she might be welcome to share their story at a business breakfast or local chamber of commerce event. Promote your new team member and business to a keen audience with a public introduction that gets the right people talking.
7. P.S. Email sign-off messages get attention
Before email (if you can remember back that far), successful direct marketers swore by the “P.S.” as a crucial way to emphasize a marketing message. Your email sign-off is the new “P.S.” and it can work just as well. At minimum, it should show your website address, slogan and all contact details. But also think of it as energetic advertising space to broadcast your news.
Change the copy regularly. Add messages like “Winners of Best Widget 2009” or “Visit us at The Widget Show at Stand 10” with trade show dates and a hyperlink to the show’s website. But be careful when sending people to places other than your own website, as they might browse elsewhere and forget about you or worse – stumble on a competitor.
Is There A Role For Performance Appraisal In SMEs?
Every manager is aware of differences in performance among their employees. Most would see it as only fair that the top performers should get a reward of some kind for their effort, dedication, productivity and overall contribution to the success of the enterprise. Likewise, managers would like to be able to point out to underperforming employees just what behaviors they need to alter or what skills they need to improve on and give them the opportunity to do so before having to go to the ultimate step of firing them. Performance appraisal has become the tool for achieving these objectives.
Performance appraisal may be defined as a structured formal dialogue between an employee and their supervisor, that usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the employee is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development.
Note an important point about this definition - it omits reference to monetary reward. Appraisal is primarily about identifying and correcting substandard performance or encouraging good people to perform even better. Tying performance appraisal to monetary rewards and penalties is a very uncertain and contentious matter. Such schemes, known as ‘pay for performance’ schemes, do exist and can work successfully in some circumstances but that doesn’t alter the fact that appraisal itself is focused on performance improvement through the use of setting future objectives or goals.
Many reputable researchers, management theorists and managers have expressed doubts about the validity, reliability and return on investment of the performance appraisal process.
At the same time, every manager would argue that there is value in being able to assess their employee’s performance so as to predict the level and type of work an employee will be capable of doing in the future and how they can be best developed for the sake of their own career and to maximize their contribution to the organization. Indeed, every manager has a responsibility to provide their employees with feedback regarding their work performance on an ongoing basis as a matter of fairness.
Negative press on performance appraisal probably derives from looking at poorly structured schemes.
In the conventional performance appraisal process a supervisor annually writes his opinions of the performance of the employee. Most of the time the appraisal reflects what the manager and employee can recall from events taking place over the previous 12 months - so it is usually only the most recent events. Almost always, the appraisal is based on opinion as real performance measurement takes time and follow-up to do well. The rating scale often consists of undefined and unquantifiable qualities such as ‘excellent’ performance, ‘enthusiasm’, and ‘achievement oriented’. Supervisors are uncomfortable with handing out subjective judgments and often hold back on doing performance appraisals. Subjective judgments are likely to breed questioning and conflict.
Smaller companies need to work out a system that excludes the major causes of failure. This means developing:
· A rating scale that addresses the key skill areas necessary to perform the essential functions of the job and a ranking scale that accurately reflects performance in them
· A system to gather information on employees’ performance ongoing through the year in order that they are able to view the appraisal process as fair and objective
· Regular provision of feedback to employees throughout the year so criticism is not dumped on them all at once at the interview
Is A Formal Appraisal System Suitable For Smaller Businesses?
SMEs are capable of developing effective performance appraisal systems that are not overly elaborate and don’t generate a lot of paper but do pay off in terms of improving employee performance. It will involve the investment of time and money to develop the system along with some training of the person/people who will carry out the appraisal interviews if they are to do them successfully. Creating a workable performance appraisal system may actually be easier in a small business where managers are more likely to know each employee well than in a larger one.
HR Tips - Motivation
· The quality and style of your leadership will be key to the motivation levels of your team members and to the success of any action you take to enhance their motivation.
· Some factors are likely to have a positive affect on motivation, whilst others tend only to have a negative impact. For example, being paid a 'fair' wage is not likely to highly motivate a team member, but the perception of being paid unfairly can be very demotivating.
· Motivating your team members is not always the answer to improving your business performance. Their motivation is only one factor affecting performance, so be realistic about your aims.
· Your arrival in the office and the first moments you spend with team members each day have an immeasurable impact on their motivation and morale, so start the day right. Share the goals and expectations for the day. Let your team know that today is going to be a great day - you can make their day.
Get The Edge
Create reasons to contact your clients and others on your marketing lists. Modifying prices, for example creating discounts for bulk purchases or making early purchases, can give you a good reason to get in touch with your customers and others on your marketing list.
An Important Message
While every effort has been made to provide valuable, useful information in this publication, Lewis Barlett Klees accepts no responsibility or any form of liability from reliance upon or use of its contents. Consider any suggestions within your own particular circumstances and contact us if you want more help.