Category Archives: Optech

Restoring Small Business Competitiveness (Part 1)

I co-host a weekly radio program on charlieprofit.com.  It is an economic impact segment where we have been talking at length about the economy and the impact that politics, the investment and credit markets, and the overall attitude of the American people have on the short-term recovery from the slump were are in.  Recently, we turned our focus to the question of what small businesses can do to survive the current economic crisis and simultaneously prepare themselves for explosive growth when the economy finally does start to turn in a positive direction.  In Part 1 of this multi-part blog, I want to talk about INCREASING REVENUES.

Benjamin Franklin, one of the great leaders in the early years of our country, once made a comment that, in order to become wealthy, one can either supplement one’s income or reduce one’s expenses — but that the quickest way to wealth is to do both at the same time.  In the business world, this is sage advice.  Reducing costs will be dealt with in my next blog, but today I want to focus on INCREASING REVENUES.

How does a business increase revenues?  Anyone who has taken a marketing 101 class will recognize the 4-quadrant model that says that we increase revenues by (1) increasing sales of existing products to existing customers; (2) selling existing products to new customers; (3) selling new products to existing customers; or (4) selling new products to new customers.  As true as these statements may be, they are, in my opinion, inadequate for dealing with today’s economy because they do not put sufficient focus on just how dramatically we must change in order to survive.

Businesses today must re-invent themselves, which means that they must, at a very fundamental level, rethink their business models.  What has made businesses successful and profitable in the past may not work moving into the future.  One company I have worked with created a compelling business model, in the early 1990’s, around having a dual profit center business.  One business unit was created to provide customers with quick turn-around tooling, and the other was a production unit to run those tools to create product for their customers.  This model worked well until the middle of last year, when, due to the economic slowdown, customers began canceling or delaying expenditures for tooling.  The company had a great deal of money invested in the tooling business and, with management believing that their business model was still viable, they hunkered down to try to weather the storm.  Now, a year later, the company is hemorrhaging money every month because they have not taken the time to rethink the underlying fundamentals of their business model.

Re-inventing a business is not as easy as it sounds, or even as simple as it may look on paper.  Why?  Because re-inventing a business requires that mangement do two critical things.  First, they must be honest with themselves and truly understand what is not working with the business.  What is preventing the company from surviving and moving forward?  Second, they must be committed to making whatever changes are required for the business to survive.

I was interviewing a potential client a couple of months ago.  The organization provides manufacturing services in the area of metal finishing.  Revenues are $10M per year, with about 50% of sales dollars coming from the automotive market.  With such a high level of automotive sales, it became readily apparent that the business was tanking.  When I asked what the company was doing to change, I understood that the management team realized the NEED for change.  However, when I probed further and asked if they were COMMITTED to making the change, the answer I received was uncertain.  My point?  Management must be committed to making change — or the change will never happen.

So what can companies do to increase revenues in these challenging times?

  1. Do go back through the basic marketing model and see if there is any low hanging fruit that has been missed.
  2. Visit your top customers (the 20% that represent 80% or your revenues) and take the time to tour their operationS.  You may well find opportunities for a greater value-add to their business that can give you the opportunity to get paid more and, perhaps, even reduce your costs.  At the very least, you will understand your customers better and you will have the opportunity to strengthen your relationship with them.
  3. Learn to think outside the box.  Examine the core competencies of your business.  What made you successful in the first place?  What other products or services can you offer that are closely aligned with what you currently do?  What other markets can you serve?  Get creative and look for new opportunities!
  4. Get away from the traditional sales and marketing methods.  A sales person making cold calls is wasting his time and not being productive.  Learn to creating a marketing strategy that (a) multiplies the effectiveness of your employees and (b) draws qualified customers to you instead of you having to search for them.

At Optimum Performance Technologies, we stand ready to help you in your journey to improve your business.  Please visit us at www.optechs.tel, to get all of our contact information.  Also, tune in every Tuesday, from 2:30 — 3:00 p.m. Eastern Time, for our Economic Impact segment on www.charlieprofit.com.

Regards,

Gary Smith