The Things That Get Forgotten By Small Businesses #2

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Prepared for: Simply Better Performance Website – Article Series

19 October 2011

The Things That Get Forgotten By Small Businesses, aka What Big Businesses Don’t Want To Talk about

Introduction

SMEs are under the hammer.

Last week’s MYOB Business Monitor, which showed 40% of SMEs lost revenue over the past year, with average falls a massive 27%, (http://www.smartcompany.com.au/sales/20111031-ten-quick-sales-and-marketing-wins-for-smes.html?utm_source=SmartCompany&utm_campaign=e3e3932c10-Monday_31_October_2011&utm_medium=email). In the lead-up to Christmas, there are fears the records monthly insolvency figures we’ve seen throughout 2011 will persist throughout next year.

It looks like where some businesses are prospering and making the most of it, others will go out of business because they don’t adapt quickly enough.

Process Underpins Marketing

Too often businesses can start forgetting about the people who keep them in business – the core customer base. They start focusing on more of a general approach and forget those dedicated few who have kept them in business.

Once an understanding of who is the customer is and what they want, then process becomes the key driver to deliver what they want.

SMEs need to focus on customers who are more likely to spend than anyone else – the ones that pay a good price, are cheap to acquire, and create the least amount of hassle.

It is at this point that Marketing as a discipline comes into its own with questions such as: “Are your efforts focusing on your core customer? If you are losing difficult unprofitable clients your business will be better without them? If you are losing core customers you should be worried”.

Believe it or not, process plays a role here as well in understanding who those profitable customers are and how to keep them. All the steps required to deliver what they want is process. Simply put all work (including Marketing) is a process and all processes can be “studied” and made better.

The end result is Simply Better Performance.

 

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The Things That Get Forgotten By Small Businesses #1

Prepared for: Simply Better Performance Website – Article Series

19 October 2011

The Things That Get Forgotten By Small Businesses, aka What Big Businesses Don’t Want To Talk about

Introduction

A quick look at all the articles and books written about small businesses and for small businesses paints a very interesting picture. You will find lots written about how to finance the business, you will find lots written about “strategy”, you will find lots written about how to better the business and in this day and age, you will find lots written about the value of social media such as Twitter, Facebook and so on.

Theses are all very important considerations to the running of a business, but its not the only set of considerations. Rarely will you find anything written about “process” or “process re-engineering” and yet this consideration is key to the success and or failure of the business

Why is “Process” such a key consideration?

Process in simple language is the set of steps required to achieve an outcome such as manufacturing a product, paying bills on time, understanding how to get raw materials from suppliers in on time, keeping customers satisfied and so on.

It is these “steps” in the process and how they are put together that can make (or break) a business. Too many unnecessary steps with lots of wasted time and effort and well, you are probably going to have an unhappy customer at the end of the line.

What big business does but tends to keep it quiet

You may not read too much about it in the press, but big business is well and truly focused on understanding what the customer wants and how they can deliver it in the simplest, most cost effective way.

That means, the fewer the steps the better. It also means the least amount of wasted time, effort and resources expended, then the better for the business because not only will the customer get what they want quicker it also means that the cost to deliver to the customer is reduced. That ultimately means a better bottom line

“Improved customer satisfaction and reduced cost to deliver can simultaneously co-exist”

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How do I Value my Small Business?

The problem with marketing any small business ($500,000 and below) is how can a practical value be put on the business. In case a business is valued too high no one is going to be interested or even worse value it too low prospective buyers may feel there is something abnormal. Also where it is listed for sale is essential, EBay is really a incredible medium for several things however scams is normal.

 

Sadly there is absolutely no fixed method with regards to valuing any personal business, the irs, Courts of Law as well as the Inland Revenue all use there own methods. In addition there are a lot of wonderful mathematical formulas which you can use; however there is no fixed method. To tell you the truth the entire system is difficult without any fixed guideline aside from one. What price is an individual is pleased to sell a business for and what is the purchaser happy to pay?

 

In case you are either buying or selling a small business don’t let yourself be afraid of negotiation, it is a natural process within businesses. There are lots of good negotiation strategies; Maitland Kalton of Kaltons Solicitors London is considered an expert in this field.

 

The following list is a simple assistance to help people who are interested in finding a value of a business, either for the sale or purchase.

 

1.            Is the business solely a web based business? Be warned it is extremely easy for an online business to appear to be doing very well, when the fact is entirely the contrary. This kind of practice sadly is leading to the devaluation of genuine online businesses.

2.            Does the business have fixed assets or stock? It is much easier to value a car port where real estate and equipment may be easily valued, where as it is more difficult to value a small business without any fixed assets I.e. Legal specialists, Solicitors, Health workers etc.

3.            Does the business possess a full audit trail; it can be surprising how many small businesses listed for sale don’t.

4.            What area is the business in; it goes without saying that businesses found closer to major cities tend to be valued more than those thar are in a rural district.

5.            What are the upcoming growth prospects for the business?

6.            Will the business require insurance/liability policies?

 

These are just a couple of elements that have to be considered, as you can see there is much more to take into consideration than simply how much revenue is generated by the business. I hope this short article has been of some assistance to any kind of possible buyer or seller of any small business.

 

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