When you're hungry, E.A.T.
Every small business has, or should have a marketing strategy. If, like us, you sell to other businesses instead of directly to consumers, referrals are likely a huge part of that strategy.
I have seen small business owners put a lot of effort into obtaining referrals: they join networking groups, visit socials, and schedule 1-on-1s with various referral partners (or potential referral partners).
However, many business owners neglect to put any thought into their best potential referral source: current clients.
Now, asking a client for referrals is a delicate science. (After all, you've already asked for and obtained their business; it can feel presumptuous to ask for even more on top of that.) But if you are strategic, while continuing to put the client first, current clients can be an incredible pipeline for new business.
If you are hungry for new business, remember the acronym "EAT".
"E"arn
This shouldn't need to be clarified but, in order to get referrals, you need to earn referrals. If someone is giving you a referral, they are sticking their neck out for you because, if you do a bad job, it reflects poorly on them.
This is especially true for clients, who should know better than anyone what level of quality service you provide. And if they are not completely happy with your service, pushing for a referral they don't feel you've earned may actually cause them to reevaluate their relationship with you.
"A"sk
Asking for referrals can be awkward, but if you have a client who is thrilled with your services and is already telling you they're happy, it is reasonable to transition to a request for referrals at that time. It also never hurts to have a bonus for referrals, whether that's a discount, cash bonus, or a discounted rate for the client they're recommending. (Note: Some businesses can't receive cash gifts, but might still appreciate a gift basket or being taken out for a meal.)
Beyond asking the right way, you need to be thoughtful in your timing of asking clients for referrals. Don't ask for referrals right at the beginning of an engagement, as they have not yet had accurate time to reflect on your service. Also don't ask for referrals if the client is in the middle of a crisis you're helping to solve; their minds are not in the place to think of anyone who could use your business, and it is a bit manipulative to put that pressure on them when they are already stressed out.
"T"each
If your clients are very happy with you, they might want to send you referrals, but just don't know how. This can especially be true if your business is one that many people don't understand, or if you work with a wide variety of clients.
For instance, many of our clients and referral partners don't initially realize that, though we mostly work with established companies, we also work with very small and new start-ups. Once they found that out, several of my business friends told me, "I have someone who needs your help." The issue wasn't with a lack of referrals, but with a lack of education coming from me.
Keep your clients up-to-date on what you're working on, without being intrusive, and they will likely think differently about how they can refer business to you.
Living a Lie: The mistakes that make entrepreneurs go broke
"You have to spend money to make money."
"Maintain the image of success."
"Fake it 'til you make it."
There is an ideal of the successful entrepreneur as a jet-setting globetrotter, someone living high on their quickly-amassed profits earned through their brilliant business insight. We want the overnight success and rock star-status of Richard Branson. (Comparatively, Larry Ellison, who has over eight times the net worth of Branson, took a less meteoric path to wealth, and is relatively unheard of.)
The unfortunate side effect of our idolization of instant-millionaire entrepreneurs is that many have come to associate that glamorized lifestyle with proof of product value. In other words, "If I look and act successful, people will assume I know what I'm doing and hire me for my services!"
Here are the four most common ways entrepreneurs blow money on an image.
"I've gotta get my name out there."
Advertising is great. Advertising is essential. By all means, advertise! However...
Don't blow your budget on advertising. While seeing your company on a billboard or hearing your name on the radio is a great feeling, don't throw your money away on that illusion of the "big-time" without knowing for sure that you are going to get a good return on your investment. This is a mistake we have seen time and time again.
I once personally witnessed a (now closed) local small business flush away thousands of dollars on a radio ad which they were convinced would result in a flood of customers to their large weekend sale. They scheduled additional staff, opened early, and...no one showed. The ad was ineffective. In their frustration and desire to not have their money wasted, they played the ad on loop inside the store (i.e., the place where customers weren't), succeeding only in driving their employees crazy.
For the majority of small businesses, big-budget ad campaigns are not worth it in the early days. A local tv spot might make you feel like a celebrity (for better or for worse, given the quality of most local tv ads), but it cannot match the per-dollar effectiveness of a decent website, solid social media engagement, and positive word-of-mouth.
"I have to have a nice place to meet clients/customers."
The information age has transformed the world, and the way we do business in it. Meeting clients over coffee or lunch is a perfectly valid option, as is selling products online without a physical storefront. However, many entrepreneurs still seem to feel as if their business is less legitimate without a physical location.
Rent on offices and storefronts is a significant monthly expense, and that does not include furnishings, utilities, etc. Having a separate workplace to travel to on a daily basis has mental benefits in improving productivity, but it is not a cost to be considered lightly, nor is it a business essential nowadays. A gorgeous office with a big mahogany desk is a nice long-term goal, but it is not worth putting your company in the red.
"Yeah, I think I've got a place in the business for you."
We have written before on the dangers of expanding too early. However, this becomes doubly dangerous when owners begin creating positions for the sake of hiring friends and family. Middle management, and other positions which are not directly involved in revenue generation, are rarely necessary in a young company. It is good to be surrounded by people you like and trust, but, until your business has enough sustained profitability, employing people for positions you really can't support is like inviting people onto a raft with a hole in it. Everyone just starts sinking more quickly.
"The company's buying dinner tonight."
This is the big one and, really, the issue from which all the others stem. It appears that, since the invention of commerce, owners have fallen prey to the temptation to treat the company as a personal piggy bank, not realizing that they are essentially robbing themselves. Personal expenses being run through the company tanks profits, and can become risky from a tax perspective. (Inaccurately deducting too many things as "business expenses" sends up a red flag to the IRS.)
In some cases, a failed understanding of accounting reports results in owners bankrupting their own companies. For example, Owner's Draw does not show up on a Profit & Loss report. So, when an owner views the Profit & Loss report, they might see that the company is very profitable, and think everything is fine. Meanwhile, their overspending is bleeding the business's Retained Earnings dry. When an unexpected setback occurs, they suddenly realize they're out of money and the company goes belly up.
So what should you do?
Though stories of those who got rich quick are fun, it has to be accepted that, for the majority of us, success will be a longer journey. Just as we individuals must live within our means, so much our businesses function within their budgets. Slow and steady wins the race, a penny saved is a penny earned, etc.
"He worked hard and was patient, and eventually earned wealth and a comfortable lifestyle," might not be the most exciting story, but it beats that tired tale of the guy who tried to have it all right away and lost everything.
Success Stories: The client who got a financial makeover
A good deal of the time, business owners don't recognize potential issues within their company until they become real problems. By the time those issues are discovered, drastic actions are required to remedy them.
That was the case when Craig was approached by a friend who, bluntly and truthfully told him, "I have no idea how my business is doing."
A surface look at his financials didn't present a clear answer. He was billing plenty, but there just wasn't much money left in the account at the end of each month. He couldn't see where the money was going.
So, Craig dug deeper.
He went through all of their financials for the past two years and found a few areas of concern. The biggest problems were:
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All personal expenses were being run through the company.
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Net wages were being recorded as gross salary (causing a greater tax expense).
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The company was significantly overstaffed.
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There were no legal documents.
Complicating the issue was that the client actually had an in-house accountant, and The Bookkeeper was only working on this issue in a consulting role.
A change was clearly necessary but, like many changes, that didn't mean it would be easy.
At the next meeting, Craig brought all of these issues to the client's attention. From there, they devised a multi-step plan to get the company in shape.
First, they took all personal expenses out of the company, so they could get a more accurate picture of its financial status.
Second, Craig went back and corrected the two years' worth of payroll entries in the in-house accountant had entered incorrectly.
Third, the client reduced surplus staff (including the accountant).
In the end, the client ended up hiring us for his bookkeeping and CFO work (for a fraction of what the in-house accountant was being paid). There was a great deal of work up-front in cleaning up his financials, but ever since the "makeover", records have been kept accurate and up-to-date, with no issues or surprises.
Here have been the effects of this change:
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All payroll expenses are now accurate.
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The company is staffed at an appropriate level.
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Monthly expenses have been reduced by $4,000.
Most importantly, the client has peace of mind that he knows exactly how well his business is doing, and no new problems are sneaking up on him.
The Financial Reasons Small Businesses Fail
Almost every entrepreneur has heard the statistic: 80% of small businesses fail. There are many reasons this happens, and can include everything from market slumps to lazy owners. To enumerate every way a business can go under would be an endless, impossible task.
However, there are a few financial characteristics frequently found in struggling businesses. Here are the most common financial reasons small businesses fail.
There's no plan. It's not uncommon to meet new small business owners who have a brilliant product idea, a well-developed marketing plan, a slick website, and not one thought given to their budget. We've already written on the tough financial questions to answer before starting your own business, but the importance of a solid financial bedrock cannot be overemphasized. A well-researched budget and fixed goals is the key to surviving that crucial first year in which most businesses go under. Great customer service and spot-on marketing are not enough to balance out shaky financials.
Speaking of customer service...
Poor credit management and pricing strategies are bad for everyone. No one craves popularity like an entrepreneur and, when your business's success is entwined with how well-liked you are, the urge to avoid offending anyone becomes even stronger. In the early days of a business, when there are only a few customers, there is a common impulse to let clients slide on late payments, or to offer frequent "friends and family" discounts. It's easy to justify this with the logic with the idea that you need to establish customer loyalty, and you can tighten the reins a bit when you have a solid customer base. There are a few reasons this doesn't work:
- Clients who don't pay on time aren't going to appreciate the slack you've given them in the past; they are going to resent the restrictions you enforce in the future.
- Likewise, your patrons who are just coming to you for the lowest price will quickly go elsewhere when your rates rise.
Lenient accounts receivable and cheap pricing might gain you a quick boost in early sales, but they are not a sustainable model. Delivering a product you can be proud of, at a price that is worth your hard work and can keep your business afloat (and actually requiring customers pay you that fair price) ensures that your customers the pleasure of patronizing your business for years to come. Because you have to remember...
Cash is king. Yes, it's a cliche, but that doesn't make it any less true. A great business model matters little if you run out of money before you can implement it. Managing cash flow is key to not just the health but the continued existence of your business. Here are a few of the most common cash pitfalls small businesses face:
1.) Insufficient capital. In all likelihood, your business will not be immediately profitable. So not only do you need enough cash to get your business started, but you need enough to allow yourself to operate at a loss for a while.
2.) Not having a large enough cash cushion. Think "Princess & the Pea" levels of padding. Regardless of how well you plan, the economy is unpredictable. Look to history for examples. No one expected the Boston Molasses flood which, in addition to the damage caused and lives lost, resulted in a nearly $11M settlement (in today's money) for the responsible company.
3.) Over-investing in fixed assets. It's great to plan for the long-term but, if you don't plan for the short-term as well, your business will not get a long-term. Sacrificing too much of your cash for something like manufacturing equipment (even if you're getting a great deal) can hurt you, as that is not a liquid asset and will be of no help to you in the event of an emergency (i.e. your factory flooding a major metropolis with 2.3M gallons of molasses). Think of it like a game of Monopoly; if you start building hotels too soon and suddenly need cash, you're stuck selling all your buildings back to the bank for half-price, and you know bankruptcy is right around the corner. Only, in real business, instead of losing yet another game to your annoying brother-in-law, you've lost your entire livelihood.
Expanding your business is the ultimate goal, but maintaining cash flow gives you the solid foundation you need to build upon.
80% of new businesses fail, but that means 20% succeed. To be that 1 out of 5, have a plan, know your value, and remain patient. Better to start small and grow something big than to start too big and dwindle away.
Marketing to Customers (Who Aren't You)
Growing your business is an exciting challenge. It's a time when you're ready to take on new customers, and you feel like you're ready for that "next step".
Of course, if you've been only working with a few close clients or through word-of-mouth, you may find it difficult marketing and networking with people outside your social circle. That's understandable; it's easier and more comfortable working with people with whom you have a lot in common.
However, diversity amongst customers is necessary to really expand your business, and is a great way to avoid having all your "eggs in one basket". But even mega corporations fall victim to major mistakes when it comes to marketing to a diverse audience. Here are some "do"s and "don't"s for reaching customers who are nothing like you.
Do your research.
There is an enduring (if slightly ridiculous) urban legend about General Motors expanding into international sales. The legend goes that attempts to market the Chevy Nova in South American countries met with failure because no va in Spanish means "doesn't go".
According to popular web aggregator of urban legends Snopes.com, this tale is a myth. And, upon further inspection, that makes sense. After all, even in the '70s, surely GM would have had someone fluent enough in Spanish to alert higher-ups about the possible translation issue? Besides, even if the Nova legend were true, we savvy businesspeople of the 21st century surely know better now.
Enter, Twitter. Though most Americans have a passing colloquial knowledge of Spanish now, in the digital era, technology has created a communications gap that spans generations instead of nationalities.
Now, there have too been too many Twitter scandals to ennumerate, but a recent marketing disaster illustrates just how bad it can be when a company tries to hitch onto a trend they haven't fully researched. When the #whyIstayed hashtag began trending, with former victims of domestic violence listing the reasons why they didn't immediately leave abusive partners, pizza company Digiorno tweeted, "#whyIstayed You had pizza."
Of course, Digiorno did not mean to make light of domestic abuse, and immediately issued an apology with the explanation that they hadn't read what the hashtag was about before posting. So failure to perform roughly 30 seconds of research resulted in a marketing disaster.
Don't be needlessly specific in your marketing.
Companies often seem to think they need to change their message in order to reach a new audience. Here they enter a minefield of marketing hazards, frequently falling prey to tropes and stereotypes, alienating the people whom they'd wished to include.
We have Bic to thank for the most hilarious trainwreck in unnecessarily-pointed marketing. When Bic came out with a line of "For Her" pens, they were flooded with sarcastic Amazon reviews. Customers rightly (and very snarkily) questioned why men and women would require distinct writing utensils. Bic's attempt at marketing toward a specific audience had unintentionally come across as condescending and ridiculous.
Whoever the customers you're trying to reach are, your company hasn't changed. So instead of changing the message about the benefits and values of your brand, change your marketing channels. Advertise in different channels, or across different platforms. If you use physical signage or flyers, try different locations. Just whatever you do...
Do be genuine.
Think back to your favorite high school teacher. You're probably thinking of someone who inspired you; someone who took an honest interest in your goals and success.
Now think back to that high school teacher who wanted desperately to be liked by their students. Who tried too hard to be cool by talking and acting like a teenage and, as a result, was respected by no one.
So frequently when companies try to market outside of their comfort zone, they follow the cringe-inducing pattern of the second example, awkwardly squeezing into ill-fitting jargon and trends. I will never forget a local tv ad, infamous in our area, for its inclusion of a senior citizen quoting, "Whoop, there it is!"
The ad was for a furniture retailer, and I doubt they attracted any new young customers through that awkward reference to an outdated rap song. They would have been better served by providing something relevant and of value, for instance, payment plans for customers without established credit.
When you look at it closely, marketing to a diverse set of customers really isn't that different from how you market to anyone. By keeping the focus on your brand and the value you provide, you can maintain integrity and avoid any awkward pitfalls.
The "First-Date Effect": Are you treating new clients like a long-term relationship, or a one-night stand?
Business partnerships, like any other relationship, can be very exciting in the beginning. You meet someone new, and the two of you click. You're on the same page, you have the same vision...You just get one another. Contracts are signed, meetings are arranged and, for a while, the two of you work happily in sync.
Then, something happens. Maybe they're your financial planner, and they stop answering your emails in a timely manner. Or your IT services provider shows up to your office dressed a bit more casually than you're comfortable with. You ask your marketing representative whether you should re-design your logo or leave it as is and they respond with, "Oh, whatever you think is probably fine."
When you first met, you fell in love with their customer service. But now? The thrill is gone, baby.
You don't like being treated like a sure thing, so you know your customers don't either. Here are some ways you can keep the spark alive with your clients so you know they'll stay loyal to your business.
Stay in communication.
Let's say you go out to dinner on a romantic date. You have a nice time, and think the other person did, too. You call them the next day and leave a voicemail thanking them and asking if they'd like to go out again sometime.
Then you wait. And wait. Three days later, you just get a text reading, "sure sounds good".
You probably wouldn't be too impressed. You definitely would feel like they were not as invested in the relationship as you. It's the same way customers feel if you don't respond to communications from them in a timely and appropriate manner. Some general rules:
1.) Respond via an appropriate medium. In other words, unless specifically indicated in the voicemail, don't respond to a phone call with a text or email. If they consider an issue important enough to warrant a phone call, and you shoot back with a casual text or email, it implies that the problem isn't as important to you as it is to them.
2.) Be timely. Don't leave someone hanging, waiting for your response. Many business etiquette guides advise responding within 24 hours to all communications. Faster is even better. If you are trading emails with a client as the two of you collaborate on a project, don't just log off at 5:00 and drop them until the next afternoon. If you have to attend to other business (even if that "business" is really just "having a personal life"), let them know that you have to run for a bit, and then resume communication with them as soon as you can the next morning.
3.) Be professional. This shouldn't have to be said but, sadly, it still does. No matter how friendly your client is, no matter how much you like each other, your communication still has to be professional. Every email doesn't have to include an attached notarized PDF copy in triplicate, but it does need to be free of spelling and grammatical errors. Taking the time to make sure your communications are professional is a sign of respect for your client.
While we are on the subject of professionalism...
Stay attractive.
One of the cliches of romantic comedies is a couple experiencing tension because of complacency in the relationship. At the beginning of the movie, when they fall in love, they go out to five-star restaurants in formal wear. The second act features them eating take-out on the couch in sweats.
When your customer service starts slipping, it is the metaphorical equivalent of you showing up to the client site, wearing sweat pants and eating pizza. (Also, please don't literally show up wearing sweat pants and eating pizza, either.) If you don't provide the same quality of service you did at the beginning, it makes your customer feel taken-for-granted, and like you misled them with false advertising.
Your business should always strive to grow and improve, and your customer service along with that. If you want to really shock your customers, surprise them by providing exceptional service, even above-and-beyond the high level they've come to expect from you.
Stay 
interested.
Nothing makes people like you more than when you make them feel attractive. Just like you try to remember your significant other's birthday or favorite dessert, your clients will be flattered if you can remember the intimate details of their business. You do not want your client to have to remind you of items discussed at prior meetings, or current issues being faced. No matter the size of the company or how much income they bring you, you want each client to feel like they are at the forefront of your mind.
There are small things you can do to make your client feel significant. This could be something as small as tweeting them a relevant news article, or as large as arranging a referral meeting to help them earn new business. By going above-and-beyond the minimum which is required of you, you can help ensure a lasting client relationship to profit you both for the long-term.