Due to the prevalence of online wholesale operations, such as Amazon, acting as retail, small businesses are handcuffed into not raising their prices to cover costs. In conjunction with the cost of supplies, the introduction of the new EHT, minimum wage and CPP increases, and escalating Property taxes creates a perfect storm for hard times for small business.
While CFIB always recommends a discussion with a financial expert, like an accountant, there are a few strategies you might consider first:
Identify and specify the problem areas
What exactly is costing the business the most money? Sitting down and doing a cost-benefit analysis is critical to working your way out of financial issues. Unless you know and account for every red cent, you cannot get an accurate picture of what needs to change. If you do your books, it may be worthwhile to sit down with a family member or trusted friend to review them:
a) Because a fresh pair of eyes might catch something you haven’t, and
b) Because they can often bring forward and open dialogue on some hard truths.
Address overhead costs
Cutting costs can be difficult, especially if restructuring the business involves redundancies. Work out the areas of the company where you can trim the fat, starting with the most bloated overheads but later looking at the minutiae. If something does not add value to the business, then it’s time to ditch it.
For instance, if your greatest cost is your commercial lease or property taxes, consider moving to a smaller location, or maybe even take the bigger step of moving to be an online store only, to cut the cost of facilities altogether. You might also consider your customer occupancy flow and reduce the number of hours your store is open during the day.
Payroll is another way to reduce costs: If you have employees, taking the difficult step of downsizing may be necessary; if you are a one-person army, taking the step of paying yourself in dividends, rather than a wage, can eliminate the needs to assess yourself payroll taxes. Talk to your accountant about how to make this shift. Additionally, if you are paying WCB premiums on optional personal coverage, you may consider canceling this for now.
Define and focus on your niche
Establish what the most profitable areas of the business are and dedicate your attention to building up those high-value activities. Chances are, those less popular areas of your offerings cost you money rather than adding value. A common issue when businesses start to grow is that they try to become all things to all people, and may carry a product just based on one or two insistent customers, where it doesn’t make fiscal sense to do so.
Re-evaluate your business goals
Remember when you drafted your business plan? No? That’s ok! There is no bad time to create one, and the benefits can be plentiful. If you do have one, refer back to it to re-establish or vision or if you want to draft a new one, craft a long-term vision that is not entirely product-centric. While demands for goods tends to ebb and flow with current economic conditions, services are not usually under that same scrutiny. We have seen that, during times of economic downturns, people tend to spend more money on services that invest in themselves.
How your target customers perceive your brand determines whether or not they wish to associate with it. The brand name, colors, logo, ambiance (in case of a physical location), and customer service can all play a part in building a brand identity.
If your existing brand has a neutral or negative reputation attached to it, consider going back to the drawing board and reworking your brand experience. By rebranding, you provide your business with a new, distinct identity, and it changes the way customers look at your business. Over time, this new identity helps you create a loyal following that can help turn your business around.
If you already have a loyal customer-base and do not want to alienate them, it will be a matter of maintaining their identification with your brand, but also attracting new customers. Consider chatting directly with current customers to ask about what they like and consider surveying prospects about their thoughts and feelings towards your brand. Sometimes we tend to forget to ask what the customer wants and instead assume what we think they need.
Grow through organic traffic
Yes, paid advertising helps bring new customers to your business. However, this can be an expensive way to build a customer base. It is a lot more sustainable to acquire customers through organic (and free) marketing tactics, like social media.
The best way to gain ‘word of mouth’ growth is to ask your customers to refer their friends and family. It may seem overly simple, but it is effective. Most importantly, organic traffic acquisition methods do not cost a lot of money.
Putting out a monthly e-Newsletter can be a great way for your customers and prospects to personally identify with your product, without directly advertising to them.
Automate your processes
Automating your business processes can help you in two ways;
1) It enables you to scale your operations up without a significant and ongoing increase in operational expenses.
2) It helps you raise your revenues without having to increase your prices.
One quick way to automate the sales process is to add an online checkout option, where customers can make a purchase themselves quickly, without ever having to speak with a sales representative. Some customers enjoy and seek out that human interaction, while others shirk away from it and will do whatever they can not to engage.
Co-marketing via a Referral Circle is a win-win
Many businesses look at other businesses as competitors; however, they can be your greatest ally. Establishing a ‘referral circle,’ as we call it, can bring hot and unsolicited leads to new clients for your business, and you don't even have to lift a finger to seek them. Your clients also win in this scenario, because now they have a referral they can trust, rather than just guessing and going on online reviews.
Here’s an example of an effective referral circle: a personal training company forms a referral system with a doctor’s office and another with a nutrition clinic. Why? Because the personal trainer’s scope is strength, flexibility, and endurance, the doctor’s scope is physical health maintenance and treatment, and the nutritionist’s scope is diet. All of these services are symbiotic in the contribution to a clients’ optimal health.