Diversifying Your Small Business – Part 2

In part one of Diversifying Your Small Business I addressed the factors that impact your business’s need for change. The “Why” and “How to” factors driving this need for change were covered in detail. Finally, it was made clear that because of the ever evolving trends in business, business owners must get on board or fail in their endeavors.

In the second part to this diversification concept, I will address in more detail some of the areas business owners need to work on in order to meet these growing demands. Without addressing these key areas of business development, the cost to your business includes losses in both your customer base and income level.

Your Small Business as It Is Today

You might currently be operating your small business with negative cash flow or you might only be breaking even. If so, you might not notice the new demands on your business because you are not following the changing trends or regulatory enactments. You might be too busy just trying to stay afloat and think you cannot come up for air. Being the head cook and bottle washer of your company does not leave you with enough time to keep up with much else. Effectively accomplishing the necessary changes as listed below will allow you to develop and grow your business.

1. Business Plan – Operating your business on the basis of a business plan that was written 5 or even 10 years ago is not acceptable. If you have not looked at the plan in a long time, then now is the time to go back to the drawing board. If you do not have a business plan, I would recommend you consider getting one done now. Writing a new business plan or revising an old one will get you to think about the areas in your business that are coming up short. Remember, the business plan is your road map to business success.

2. Cash Flow Management – Managing your business’s cash flow is the life force of your business. You might think you have great products or services, but if your customers are not buying, then how great are they? Without paying customers, you are maintaining an expensive hobby. Addressing your operating expenses can also improve the net cash flow. Review your monthly Cash Flow Projections and determine what you would like to be making over a given period of time. Then compare the projected figures to what is actually happening on a weekly or monthly basis. If the numbers are far off, then this exercise should give you some ideas as to where your business model needs adjusting.

3. Payments – Understanding the term “Time Value of Money” is vital. This concept affects your bottomline. When cash is not flowing into your bank account, you cannot cover your operating expenses or increase that rainy day fund. Implementing strategies such as early pay discounts can help. With more businesses taking longer to pay their outstanding invoices, using financing options such as Factoring (the sale of your outstanding accounts receivables-invoices) can alleviate disaster and save your business. We can agree that it is better to have your money today than having to wait 30, 60, or even 90 days to get paid. Think of the ramifications of not acting quickly and no money coming in.

4. Pricing – This is an area where many small business owners fail. The price points of 10 years ago are not applicable today. There is an art to pricing your products and services. You must flow with the changes affecting your business. Wanting to get customers in the door by being the cheapest on the block is not necessarily the most successful way to go. Being the most expensive can also deter your growth. If your products and services cost of goods figures are too high, this will negatively impact your cash flow balance. So be sure you are pricing your products and services to meet your needs.

5. Customer Retention – Knowing the heart of your customers might not always be easy to figure out. Identifying ways to keep your customers coming back is important to the longevity of your business. Use creative strategies to thank your customers, remembering important dates such as when they first became customer, their wedding anniversaries, or birthdays. If they took a long vacation consider sending them a welcome back card. Send them a handwritten “Thank You” note directly from you stating how much you appreciate them. Doing this will make your customers feel valued and it will make you feel good in the process.

6. Products or Services – This is probably the most important section of all 6 topics. Why? Do you currently offer only services or just products? If you are a business owner providing only services, you had better seriously start thinking of ways to implement a product division to your business. On the other hand, the same goes for those businesses only providing products. You are losing out on sales/income by only targeting one aspect and not both. When you have multiple ways of getting paid, this just makes sense.

Remember the term, “Multiple Streams of Income”? This is how you implement and start building on your income streams. Figure out how you can improve your business cash flow and start taking the necessary actions that can make the difference between success and failure.

When considering the diversification of your business, be sure to look at your strengths, weakness, opportunities, and threats, (S.W.O.T.) and address them head on. Do not allow the fear of change to paralyze you from taking your small business to the next level.