Offensive Maneuvers
Recently, we’ve been asked by our friends and customers if we are suffering from a lack of business due to the time of year, and the economy. They are usually surprised to learn that we are doing better than ever. Conventional wisdom states that a company that works with investment-backed startups during the holidays should not be prospering. We’ve discussed this with a few other colleagues that are suffering. So, what is the trick to economy-proof your business? I wish I had a clear answer, but all that I can do is explain some of the initatives we undertook to compensate for the impending slow down.
Lower your barriers
I have previously mentioned this, but now is the time to consider doing it. We only require a $4,200 refundable deposit to get started, rather than 50% upfront. The amount is credited to the customer’s account, usually covering the first few weeks worth of work. This makes it much easier for customers to say “yes”, and say it more often.
Flexible and accurate
Since we work hourly, customers can buy as much or as little of our time as they need. Since we don’t charge for the time it takes to make decisions, customers tend to take the time to make the right decision more often. This helps to save both money and time. By being accurate with our time, customers only pay for completed work – not high margins or a perceived value, which so many other firms exploit. We charge for every hour worked so we don’t lose money, as can happen with fixed-price projects.
Sell less more often
Many businesses assume that you only should chase the big fish to make your bones. If you limit yourself to large compaines with huge budgets to stay in business, it is going to be a very cold winter. At New Leaders, we prefer small projects to big ones. It is harder to get a small project wrong and not complete it quickly. Since the price point is lower, there are many more companies that can afford to hire you, increasing your opportunities to make money. We also insist on Net 15, rather than billing out and receiving payments once a month. We typically receive a payment almost everyday in this fashion. Cash flow is the life blood of your business; if you can smooth out the peaks and valleys of your cash flow statement by billing more frequently, you should do it.
Move money faster
Using the benefits of custom applications provided by Thincloud, we create estimates, invoices, and payments. We now accept credit card payments from customers through our website. By giving all of your patrons the ability to make an immediate payment, you can minimize any monies in transit. 90% of our customers make payments online. 50% pay on the day they approve an estimate or an invoice. The value of money is higher the sooner you receive it. If you have to chase paper checks to deposit them manually, business is going to be slower and more expensive.
Pursue opportunity
Not only should you attempt to provide an estimate for every opportunity that finds you, you should aggressively compete for the business. Something is always better than nothing. Out of all the opportunities presented to you, only a certain percentage will commit. Each person’s conversion rate is different. Most of the time hesitation stems from customers who aren’t ready to start, versus being related to cost or timeline. If it takes several weeks for customers to decide or pay a deposit, each estimate can be a costly endeavor. Creating an optimized workflow for converting customers will allow you to always have a new opportunity to sell your services.
Diversify your offering
Did you know that New Leaders sells online advertising, hosting, SSL certificates, and domain names? Well, we do. These tiny revenue streams add up, providing additional income for the business. While they aren’t lucrative enough to pay our team members currently, they do offset the costs of our rent and web hosting. If you have more to sell, make sure your customers know it.
Guerilla marketing
Historically, our local business has always been the strongest, and facilitated by word of mouth. If your local market slows down, you need to compensate. We recently updated our website to help tell a complete story of what we can do. We’ve minimized promotions of our free products and placed the focus on our core business. By adding a level clarity to our offer it has attracted new customers that prefer a less risky, more affordable approach. In a sense, we did for ourselves what we’ve done for customers for years; we crafted a more complete and compelling offer.
Mobilize Advocates
We are in the process of setting up our new Customer Advocacy program. We share 10% of the initial project deposit with the person who recommended us to a friend or colleague. While most companies that rely on word-of-mouth recommendations would never provide an incentive, we do. This means that people can actually make money doing what they normally do. Now they’ll be sure to recommend us more frequently.
Leverage connections
While we always used social networking, we have only recently leveraged our connections to find new opportunities. We started an initiative to integrate our website with a number of social networks. It has proven easier to find new opportunites when you bring your site to the people, rather than the people to your site. But there is more to it than just friending people. This is a form of permission, and these people have accepted the connection because they want to hear about what you are doing. Be respectful, authentic, and use the tools wisely. Friending anyone and then spamming them is intolerable.
Performance based
At New Leaders, we don’t believe in salaries. Unfair? Maybe. Practical? Absoutely. I have owned several businesses and know that fixed salaries reward the lazy and punish those that work hard. The person who does the work at New Leaders receives the lion’s share of the hourly wage. We do not cap how much a leader can make, so long as they record their hours accurately and the customer is satisfied. This allows the cream to rise to the top of the business. The more income they help produce, the more their power rises within the organization. No longer do those that do the least, earn the most. This is considered a “gladiator school”. We call it New Leaders for this reason; the weak need not apply.
Capitalism rocks
Thinking about taking Friday off? This isn’t a socialist country. We work everyday, all the time; if not on client work, then on our own sites. You can’t get ahead by doing it 9 to 5. In America, we work hard, save money, and prosper. Anyone that promotes using your surplus of time to find a hobby, is crazy. Sell your surplus to customers willing to pay for it. New Leaders recycles the profit we make from projects as investment into our business. Since it costs us money, we have to be very careful what we invest in. This is why everything is created one piece at a time, slowly but surely. Hard work pays off, procrastination doesn’t.
The combination of these initiatives have added up to our best holiday season, during the worst economy in recent history. We managed to create a sustainable business that appears to transcend the economic issues plaguing many small businesses. We hope that you can utilize some of our techniques within your own business, so you can succeed no matter what the weather is like outside.
This work is licensed through Creative Commons.
Posted on Dec 11, 2008 by Kevin Milden
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