Your Business's Magic Pill, Ask Me Anything, Part 2: Small & Medium Sized Businesses

Often, a business can get overwhelmed by the dynamic nature of delivering a product or service while also performing all requisite tasks for its delivery - i.e. the business part of your business. 

I was recently joined by over 250 entrepreneurs and executives from all over the world interested in uncovering the Magic Pill in their businesses- that perfect formula that could take their organization to new heights.

Participants fell evenly into three categories: those at the helms of startups, those running small and mid-sized established companies, and those looking to innovate large existing businesses.

To begin each was asked if there was a difference between what they're good at, what they like to do (or believe that they're doing), and what makes them money.

They wondered how can they align corporate performance with consumer expectations all while growing profits?

Come along while we work to deconstruct their businesses and distill the few items that matter most and those that can make all the difference this year and for years to come. You may recognize some tactics that could impact your business…

First, The Small & Medium Sized Businesses.

What are the most common mistakes made by small to medium business owners? @Caroline

The biggest concern that I’ve come across working with small and medium size businesses is that they are simply not capitalized well enough to invest in growth. R&D and marketing end up being addressed in a reactive mindset. “We’re getting our butts kicked. We need a new product,’ or “We need to move some units to drive revenue, let’s do some advertising.”

However, investments ought to be allocated to build a sustainable customer funnel that satisfies down cycles as well as accentuating the good times. R&D and marketing are really two sides of the same coin. What is your story if it isn’t constantly learning based on market performance in order to deliver an optimal solution to your deserving customers? Both your R&D and messaging strategies could (should?) start with that type of mission statement.

Many small and medium sized companies are essentially laying the proverbial tracks in front of the train. For them, proactive budgeting for growth, and even patience for the process, seem unrealistic or at least a luxury they cannot afford.

The other common mistake (if we can call it that) is that those who work for startups or small businesses must wear many hats. This dynamic can lead to two possible outcomes and neither is productive for growth.

First, the need for a general approach from a leader or team member means that neither is allowed to specialize, forfeiting better outcomes through focus.

Second, leaders and teams can become overburdened and burn out. Culture can falter. Employee churn is costly. And so is leadership turnover.

Note both instances may appear easier to diagnose and more complicated to remedy.

Why do some small businesses stay small? @Patrick

Great question @Patrick. Commonly, it has less to do with the lack of a blockbuster product or larger market dynamics. A small company must objectively look at their growth goals and be willing to change in order to reach them. It’s not always a lack of resources or viable market that keeps a small company from growing.

In my experience, the majority of small business that claim a desire to grow but fail to take that next step never advance their mindset and/or approach to allow their business to scale. They get stuck in the habits and systems that work for a small business and fail to consider how to transform those processes.

I’ve heard it said that a company needs one type of CEO as a startup and a second type once they mature. The first CEO (or mindset) is imaginative, disruptive, almost frenetic, with an ironclad belief in the company’s concept or solution. This mindset helps to build and maintain momentum when facing the barrage of challenges while getting established. The second CEO, however, is more methodical, looks for ways to simplify and automate systems, questions early assumptions and applications, and perhaps most importantly, they look to surround themselves with capable and talented people and they delegate important decisions.

A small company faced with stagnant growth should ask itself if they are ready, willing, or able to make the necessary changes in direction and mindset to spark expansive growth. If the answer is yes, a strategy and estimated outlay of resources can be generated and then you’re off, raising or reallocating capital. If the answer, honestly, is no, then they should get cozy with the status quo and be the best small company that they can be. And for some, that’s the perfect fit.

In what ways can small businesses successfully fight the battle against better-established, stronger competitors, while fending off the e-commerce upstarts? @Krista

Great question @Krista. First, there’s no need to fend off an eCommerce upstart if you already own the category in the digital space. We are well past the age where one could do business without a digital footprint. You’re going to need to invest in putting your best foot forward. After all, your website and social platforms are a digital representation of your business and a gateway that many of your potential clients will enter through or look to to verify what they’ve encounter in real life (IRL).

Don’t skip it. Don’t short change it. Don’t rest on what you’ve got even if it’s working.

Now, let’s get a better understanding of what you mean by stronger competitors.

If they’re better capitalized, can you somehow raise more capital? Can you leverage your business or create resources through investors, VCs, or traditional lenders? Perhaps non-traditional lenders with whom you can enter into product supply agreements for added value or resources? Can you gain commitments from your existing clients to liquidate slow moving inventory or for future product delivery? If the answer is yes to the first question and to any one after that, you may be able to even the playing field in the short term to reinvest in developing a new market or innovating a more relevant product.

If the stronger competitor is more well-established and has a significant market share, know that right now is the best time for market disruption. Whether you’re selling to an end-user consumer (B2C) or to a retailer or distributor (B2B) buyers have never been more primed to scrutinize the current status quo and make unscripted decisions. Through the reach and convenience of the internet, buyers are stress testing their existing relationships for more value, higher quality, improved turnaround time, better pricing, and in many cases social currency through new and exciting brands or those with shared values or responsible business principles.

To beat to a stronger competitor, you must make a better case for yourself as a valued partner. Have a better product, if you can. Create more value. Deliver on time or ahead of deadline. Be easier to do business with. Have a corporate narrative that tells a more compelling story. And if efficiency is your game, offer a better price but be aware of the slippery slope of price wars and the race to the bottom.

That being said, know that you will lose some customers as they stress test their relationship with you and seek better value elsewhere. Be gracious when they leave. After all, if may not be long before they decide to come back.

Do you think businesses would do much better if they specialized in, say manufacturing, and they left marketing to companies that specialize on that? @Celine

The simple answer is no. In a world without choice, perhaps, but even in a somewhat free market, businesses need to compete for consumer attention and utilization through effective messaging.

Now, a company should understand what their core competencies are and invest in enhancing their main value drivers. However, they must also become proficient in telling their story from the CEO, to the key relationship managers, to the recruiting and training teams. Once you fail to tell your own story, you allow someone else to tell it. And that could be anyone: former employees, dissatisfied clients (we all have some), competitors, anyone with an outdated mindset, etc. Not only that, your business is much more likely to be observed in relation to an existing business or solution. This is known as anchoring bias. 

For this reason, even the most utilitarian business must at least understand that sophisticated branding techniques are important and be a part of creating the narrative that will be put into the marketplace on their behalf.

Of course, outsourced and contracted work is commonplace and it’s no coincidence that marketing firms and ad agencies exist and do very well. Those types of partnerships can be very beneficial for a business that would rather focus on delivering their products or solutions. In my experience the most expensive option is not always the most effective but opting for the least expensive is rarely a wise choice.

When selecting a messaging partner, find one that seems to align with your corporate ideals and values, understands who your key audiences are, can produce evidence of some out of the box ideas, and those who recommend messaging platform diversity.

Good luck! 

How can a business handle cash flow problems and still bring in clients? @Jovana

Great question! Cashflow is the lifeblood of a business, and not just to fund day to day activities and growth, but to react to market conditions or profitable opportunities as they arise.

Balancing aggressive investment in customer acquisition and growth vs. a more conservative approach which allows for cash reserves is of vital importance for a business. Often, a business has more ability to drive revenue organically, or through previously acquired customers. After all, it is much less expensive to activate a current customer than it is to acquire and activate a new one.

So, if cashflow is a concern, I’d suggest exploring methods to engage your current customer base to fund new customer engagement activities.

This could look like an incentive campaign based on previous purchase patterns and perceived stock levels. Messages like these can work: “we can see that it’s been 3 months since you last purchased, and you normally stock up every 4 months. Buy today to get ahead of the need to save time and money.” or “you’ve ordered these products in the past and we’ve found that many clients pair them with these other options. Order today and find out what the buzz is about.” or lastly, “you’ve been a trusted client and we have a new lineup of products that we’d love to get your take on. Buy today and get an incentive when you give us your opinion.”

Depending on the relationships and your staff, a phone call may be warranted. Email communication is usually lower cost for the reach but can appear spammy or cold if not done well. Either way, you should be able to activate some of your current customers and at the same time prevent them from considering buying somewhere else. The more authentic the message and, of course, the more valuable the incentive, the better the return.

Be careful not to go back to the well too many times and not to cut your margins too thin.

Do you think most businesses waste money doing a little bit of everything that ends up affecting their cash flow, yet the investments yield no results? @Theo

Yes @Theo, some investments are more prudent than others, and certainly some are more impactful.

Businesses need a leadership team who operates with a plan of how and when to invest their free capital. Their decision making paradigm can guide them through differences of opinion or through times when there are many outlets in need of resources.

Companies like Google, Apple, and Amazon were started in garages as the investment in overhead was considered a luxury they couldn’t yet afford. Indeed, there have been growing companies who’ve had to ask employees and leadership to take pay cuts or even go without pay in order to invest in product development, raw materials, or inventory.

Those are tough and unsustainable choices, but clearly sometimes these tactics pay off.

The point is, belt-tightening and hard choices are inherent to finding the magic formula for success.

Find out the one thing that you need to deliver. If your company is bakery, you need product every day. If you have a budget shortfall, you need to seriously consider the peripheral expenses that don’t put product in front of your customers. If your company relies on new tactics and innovation, then you must have ready access to fresh ideas and methods at all costs.

You may cut expenses entirely (travel, meals, etc.) or pay for them from personal funds early on. However, at some point, you will need to budget for, and invest in, peripheral expenses in order to scale. The trick for any business is knowing how and when to cut and how and when to invest.

Good luck!

If you have a high market demand how can you answer the challenge posed by established niche players and major consolidators? @John

Thank you for the question @John. Luckily, when market demand is high you are not faced with the challenge of informing your target customer about the value of the solution itself. Instead, you need to effectively differentiate your brand within the space.

If you are challenged by established niche players, should we assume that you are a more general product platform? Consider specializing more or positioning yourself as a convenience platform from which to fulfill many needs.

However, If you are specialized but new to the market, breathe a little easier as there has never been a better time for emerging brands to disrupt existing industries. In fact, more frequently consumers are making unscripted decisions, selecting an unknown, or rarely engaged brand over ones they had been loyal to. You just need to capture their attention in the medium where they spend the most time or make the most consumer decisions and then tell them an amazing story of value (not lowest price) and add a wrinkle that differentiates your product or brand.

As far as competing with major consolidators, remember that while you may be less well capitalized, you have the advantage of agility and of creating more authentic ‘touches’ than a company with larger scale. Try to remain focused on the consumer experience and exceed their expectations. Be easy to do business with. Show that there is value in working with a company that can take the time to get it right. After a time, if you’ve done it right, you may end up, yourself, an acquisition target of one of those major consolidators.

What is the best way to gather insight about your clients’ needs in order to generate better leads? @Tucker

Good question @Tucker. We should be attempting to work smarter not harder, right? Your question suggests that you’re already aware of, and perhaps already leveraging, social profiling to target certain buyer types, demographics, and other behavioral tendencies. Now, you’re looking for new information with which to develop new markets or client relationships.

I would suggest a couple different methodologies to learn about your client’s needs.

First, I’d develop a comprehensive survey that will give you the types of insights that you’re looking for. You may want to better understand where your current clients are spending their attention, both online and off. You may be looking to find where your clients are employed or what products they buy most in addition to yours. Of course, you should also look to understand why they continue to do business with you and whether they’ve considered any alternatives. If so, what was the message that grabbed their attention? What do they think you could do better or do more often? Is there anything that they’d expect from your brand or anything that they were surprised by once they got to know you better.

All of this information should create a data set that can help you refine your message, target where to place your message, and which strategic partnerships or collaborations, if any, would make sense to drive consumer excitement or engagement.

Now, you can simply send the survey via email, but you may be hard pressed to drive participation and may want to consider customer incentives. However, even if you do drive compliance with an email campaign, you miss out on the highly nuanced answers and the opportunity for follow questions that only a real one on one conversation can afford.

With that in mind, you could have an objective third party execute the survey calls to drive (hopefully) the most honest results. However, I’d suggest that you designate someone within your company with some sales experience and status to make the calls. Someone with pre-existing relationships and savvy enough to navigate the landmines inherent to this type of dialogue; who can hear the constructive feedback without getting defensive and is persistent enough to ask probing follow ups and dig deeper when questions are side-stepped.

Armed with this information you should be able to understand which leads to target, where to find them, and how best to engage. The data set should be further analyzed and mined for product improvements and enhancements to customer service. Which should in turn help drive satisfaction and customer referrals.

Now you’re cooking!

If all leads are not created equal, how should you qualify and score them? @Glenda

Lead generation and capture is important to many business types and is, in most cases, the underlying motivation and justification for sales and marketing divisions.

Every business must qualify a lead differently and categorize or score them specifically to their profit model. In most cases, a lead is more valuable based on the place that that lead enters the conversion funnel, and as it moves through the funnel. The closer to converting, the more valuable they are. However, the potential total buying power and the ratio of a lead’s buying capacity available are two more sophisticated elements of lead scoring.

For instance, a lead that purchases a monthly total $100,000.00 of your type of product appears more valuable than one that buys only $10,000.00. But, if that first lead is contracted to buy $95,000.00 of their product elsewhere, the $5,000.00 -or 5%- of available business is less valuable than 100% of the $10,000.00 from the second lead.

Of course, earning the 5% share of wallet (SOW) -also known as shop share- now could afford your company an opportunity to earn the remaining 95% when the existing contract comes up for renegotiation. Therefore, potential SOW should be a long-term consideration.

In this hypothetical, a matrix of total buying power and available SOW could be used. Rank your leads based on total buying power and place them in buckets. Now, rank each based on percentage of buying available.

Each business will evaluate their leads differently. Right out of the gate, you may want to discount certain buckets. Low potential accounts may be too small for larger firms. Perhaps your company may not be ready to service or compete for high potential accounts with larger needs. 

Likewise, you may decide that you can onboard, service, or meet the inventory needs of only so many accounts with 100% opportunity. Or maybe those with sub-25% opportunity, don’t generate enough volume to make it a profitable relationship.

You may find that mid-level accounts with 25%-75% opportunity are the most favorable. You may specialize in high-volume/high-upside and only take so many clients at a premium price point. And for some, their business model may be to serve a higher volume of the lower level accounts.

Whichever method serves your model best, this is a widely used matrix in market strategies by many sales organizations.

One final note: there are other, more intrinsic value triggers that will come into play. Relationships with high profile clients, legacy accounts, and strategic partnerships who deliver access or resources may help to increase a lead’s value beyond their immediate impact on the bottom line.

What strategies should be used to drive quality traffic to your e-commerce operation? @Marcy

Content, valuable content is the key. Any worthwhile strategy should employ content development and leverage the engagement to feed your consumer funnel.

eCommerce will continue to be the platform for most consumer transactions as we further integrate the human experience with technology. The ubiquity of smart screens and spoken word search through digital assistants is only the current state and we will move far beyond in a not too distant future.

In order to engage a consumer in the digital space you must understand user intent and the consumer experience online. If a consumer is already aware of -and you provide- the product or solution that they seek, you must, of course, be easily found. Thus making the case for SEO rich content and a well-designed, mobile friendly eCommerce site.

However, you must also present a case for your product that stands up to the comparison that will inevitably follow. Therefore, you must have a strategy to promote and collect user reviews/testimonials and satisfaction ratings, as well as a well-crafted corporate storytelling strategy. Your origin story, the why and passion behind what you do, and how you give back to the community you serve. Combined these with product performance, customer service, and price point and you have a dynamic value proposition for your target consumer to consider. It may seem like a lot of work, but it is the cost of doing business in the 21st century.

Now, if you have a product where consumer demand is driven more by impulse or context, then you must place your messaging and content in the places where your target customer is spending their time. Collaborate with brands whose products are important or influential to your customer and build blog and video content that is interesting, relevant, only slightly related to your own product. These tactics will build product recognition and trust. At the same time pay for targeted impressions and reach along social platforms. Invest time in forums and subreddits to better understand your consumers’ needs and preferences.

Once you’ve developed trust and some customer relationships, target your audiences with value added content to keep them engaged. Make them feel special with exclusive incentives. Remember that it costs a lot more to acquire a new customer than it does to keep a current engaged.

Most likely, you will need to pay for reach using a blend of digital marketing tactics -search engine marketing, product listing ads (PLAs), social media marketing, and direct message ads, etc.- along with some targeted traditional ones in real life (IRL). Do the work on content and you should be able to spend less.

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I hope that you've enjoyed reading along and that you'll allow me to bend your ear again in the chapters where we discuss small, medium, and large established businesses. 

I want to hear your feedback and I am eager to learn from each of you. Please don't hesitate to reach out.

The views expressed in replies are my own but have been influenced by years of collaboration with amazing people along with a willingness to fail and to learn.

Best,

Cliff Carey

Founder, American Reserve Clothing Co.

[email protected] | americanreserveshop.com

Follow our story @americanreserve