Small Business Tuning
How Do You Save a Business?
I was asked to do business development for a failing business unit. I quickly learnt that we couldn’t handle more business because we weren’t allowed to hire more people because we were losing money! You see the problem?
What I wanted was to turn the loss into a modest 12% net profit. Truly I had no idea how to do it now that business development was out. I needed to find some other levers to pull on.
I also realized that as the “business development man” I didn’t have the authority to fix anything other than sales. So I had to take charge and run it like it was my own.
I dreaded failure because at least 15 people would have been fired, and well, because all my life I have dreaded failing.
I grew up in a family of small business owners and from them I got the idea that making your own way in life is just the way life is.
From my corporate exec and largely absent father, I got fierce ambition and no bullshit.
I think I have to claim my deep-seated fear of failure and caution for myself.
On balance, though it doesn’t sound it, it’s good. Fear tempers my ambition and forces me to provide for my family, now and in the future.
And my father – though he died before I found out what he thought of me as adult – I’m quite sure he would have approved of the ambition that propels me.
Marketing Wouldn’t Save Us
So I was there to bring in new business that we couldn’t deliver on.
With no way to market our way out of trouble, I had to look inside the business.
I researched everything I could find on rescuing businesses in trouble and apart from increasing sales, there are only three other levers: increasing revenue, reducing cost of good, and reducing overheads.
I looked into each in turn in our business, and found horrors!
We’d set our prices years before and never raised them – even as wages, health insurance, cars, gas, hotels all went up in price.
Worse still, those prices had been set by looking at other companies’ prices – the wrong companies – and not on the value we delivered.
The we’d got into the habit of doing free work – because we’d got into the habit of agreeing to crazy terms and conditions.
And all of this was allowed to happen by the guy at the top and he’d spent years ‘training’ his people to work the same way.
My plan had four simple parts: get the authority to act, change the culture of the team, raise our prices, and stop doing work for nothing.
Simple But Not Easy
Well, I say that they’re simple… but not that easy.
The easiest was to get the authority – my plan took care of that.
Second was to change the approach of my team. That wasn’t so difficult because on one side was no job, and on the other I aligned pay to the way I wanted the team to act.
Pricing wasn’t too hard – though we needed to change what we were selling from ‘programming’ to ‘profit’.
Hardest of all was to negotiate out of the crazy contracts – which required a certain firmness to make our interests the customers’ interests.
Within 3 quarters I’d got the profits up to 12% net and the next full year to 22% – that’s from a loss to $2.86M profit.
For me it was the realization that sales and marketing is not the only way to boost profits. If you want a fast change, then look inside. Pricing you can change in a day, costs in a week and at expense and no risk.
Best of all, this also propelled me into the next jump – fixing small businesses.
I’m confident my father would approve, and it’s taken me back to my family’s small business roots.