As I’m reflecting about how to run my business in 2009, I need to be creative on how to grow my business. I don’t believe “flat is the new up.” I’ve got to grow. It does, however, require creativity and a shift in strategy to grow in this environment. I need to find ways to reduce expenses to increase runway (trying to maintain significant cash reserves), but at the same time grow the business. Basically, I’ve got to get more from less. It can be done. Here are some of my thoughts on how to go about doing this:
- Lower your costs today. I’m looking at our budget and finding costs that can be cut or lowered. Can you re-negotiate your lease? Can you sub-lease to another tenant? How about your fancy Internet connection, can you share the costs with your neighbor? Are you managing your legal firm well? With all due respect to my legal firm, they do great work, but they are very expensive, everything should be fixed cost for a project. Do you really need that fancy new chair or can you get by with a used one from Craigslist? How about professional services like accounting, graphic design, consultants? Can you renegotiate with them? Can you get by with Voice-over-IP instead of landlines? Are you using Skype for all your international calls? Did you get your insurance repriced? I had no idea that I could save money by asking for a reprice. Do you qualify for Microsoft BizSpark, a program for early stage entrepreneurs to get free software? If not, are you using OpenOffice or Google Docs to lower your software licensing costs? Are you paying any bank fees? You shouldn’t. Lower your costs now, every dollar adds up.
- Variabilize your payroll. I admit this is tough to do, but is it possible to share some risk with your employees, less salary and more bonus based on metrics? They have the opportunity drive more take-home pay if the company reaches its targets. You should definitely consider this with your salesforce. Due to the tough environment, more people are willing to sacrifice in order to maintain their positions. But, be sure to be very transaparent about why you are doing this. You can’t afford to hurt morale. Perhaps make it an option for your employees (maybe some stock options for those who choose it), but reducing your fixed payroll will extend your runway and that is critical. It’s all about surviving and creatively growing in these tough quarters.
- Hire revenue generators. Huh, hiring??? Yes, you need more feet on the street and you need to work harder for sales, hire people who can generate revenue. They are out there, but don’t fall into the trap of paying a high base, I’m convinced the great ones will always ask for higher commissions because they are hungry and know that they are good. I’m very, very, hesitant to pay top dollar base to salespeople. I’m sure there are plenty of people who disagree with me, but that’s my experience. Don’t be afraid to pay top commissions, make sure your salespeople can taste real success with each win, it becomes addictive! I’d make sure to help them close their first deal as quickly as possible, nothing motivates salespeople more than a quick win:)
- You need to sell. If you’re the CEO and you aren’t selling in this environment, you should fire yourself. Maybe, it’s just 20% of your time, but now more than ever you need to sell. Why? Because you’ll find out quickly how to pivot your products so that it is sellable in this environment. Your messaging will need to change so you can communicate to your salesforce, your team, your client, and your potential clients on why your product is a must have product. Trust me, people now are buying because they either think you are going to save them money or you are going to make them money. Fluffy stuff just isn’t going to cut it and you as the CEO need to step it up and get on the phone making the calls and meeting with clients. Demonstrate your commitment to selling to your team and do what it takes to bring revenue in the door!
- Reduce credit. I learned a tough lesson just last month, a check bounced when the company that advertised with us went belly-up. It sucks and I wouldn’t wish it on anyone. In this environment, I value upfront payment significantly more than a promise to pay. Even if you are working with a very upstanding company, you don’t know what’s under the covers, remember even Lehman Brothers went bankrupt, what’s to say your client won’t do the same? Negotiate hard and give a nice discount, if necessary, for upfront payment. Make it easy for them, take credit cards, paypal, etc. Get that cash in today! If you have a client now that is having a hard time paying, you really need to “slow” down and ask for payment before continuing more work. Make sure your check is the first one they write, if they are having a tough cash crunch, they will pay who they think is either giving them the most trouble or they absolutely need the service.
- Stop Pet Projects. In the good times, we all have pet projects that we want to work on and cash was flowing pretty good. It was probably not a bad idea to do pet projects and to see what happens. Stop it! I’m not advocating you to stop innovating, but be much more critical about your prioritization of projects. It kills me when I meet entrepreneurs who are struggling and they have this “big idea” that is tangential to their business that they are working on and isn’t generating revenues. They bet the farm on it and then realize it’s too late and they run out of cash. Stick on projects/products that are revenue generating now and make sure you’re healthy and growing before taking crazy bets in this market. If you’re just starting a company, stick with 1 idea with limited features and launch it. Don’t go crazy!
- Advertise. If people are cutting their advertising budgets, then ad prices are dropping, should you start advertising now? The answer is yes, if it’s profitable for you. I think it’s a marvelous time to be advertising right now - everyone is hurting - magazines, billboards, radio, TV, and some Internet properties:) Look for great opportunities to buy, I think prices have dropped more than they should because too many companies are cutting back on advertising when they should be cutting elsewhere.
- Don’t buy, Lease. Probably doesn’t make sense in your personal life. But, cash is king in business and paying small monthly payments on equipment that can grow your company is much better than upfront cash. For computers, some may want to give you the deal of the century for leasing, interest rates are so low. For early stage entrepreneurs this may require a guarantee so make sure it makes sense for you personally before doing it. Remember, you want income that is upfront now, and you want to pay slow. Manage your receivables and payables accordingly.
- Find an experienced mentor. Especially someone who has gone through the bad times and made it through. They will help you keep your chin up as undoubtedly you will encounter rough patches. I love down times because I’ve been through it and I can see opportunities. Find those mentors and meet with them at least once or twice a quarter in 2009. Make it a priority.
- Stop Reading. The newspaper that is. But, do keep reading this blog:) I struggle with this a lot, the media definitely takes a toll on people’s pyche. If all you’re consuming is gloomy economic reports, stock market crap, layoffs, bankruptcies, you will not have the positive mindset it takes to make it through. Enough already, it’s the same recycled stories. Opportunities will be harder to see and your mental and emotional state will be in the gutter. Stay positive, surround yourself with optimistic and happy people. Now, really, stop reading, and work on your 2009 plan - stay focused and don’t let the media distract you.
I’m probably missing a lot of other ideas, so it’s your turn to tell me what you are thinking about in your 2009 plan and how you are approaching this year.
I hate to let pet projects drop as I always hope that one will turn into a good revenue stream but this year I have taken time to make a sheet of all my dormant websites and domains and flagged which ones can be sold off or even just cancelled.
It is a useful process as it focuses the mind on making decisions based on the harsh reality of now rather than the hopes of someday.
I have already saved money by consolidating my hosting. It is an ongoing process and hopefully one that produce some cash and reduce some fog.
Smart move… It is really hard, but I think the entrepreneurs who are capable of reducing projects on their plates will be more successful than those tackle more.
As usual, great advice from you Andy. I am seeing your mentioned business strategies being implemented in my own corporation, and we are doing well despite the current economic condition. The CEO is making calls and visits to large clients, our salesforce is larger than ever, credit lines have been reduced while many clients have NO credit limit established (have a pre-paid balance set up), advertising efforts have been increased, etc.
You are right on the gun with this entry, and I think every CEO & manager of a corporation should take heed to your words.
Jacob - thanks for visiting and your kind comments.
Hi. I am a long time reader. I wanted to say that I like your blog and the layout.
Peter Quinn
Great advice Andy. I can’t emphasize the ‘Find an experienced mentor’ comment enough. Especially if you’re a first time entrepreneur, mentors and advisors will play a critical role in ensuring that you’re making the best possible decisions. Had Kyle and I secured a mentor during the early phases of the MouseDriver days, we would have avoided a number of boneheaded mistakes and would have saved roughly $120K…of which all of it was credit card debt at the time.
I’ve found that most experienced entrepreneurs are more than happy to mentor others…should be a great time to find some!
Good Stuff.
john
John - thanks for visiting! i still refer back to my bookcase for mousedriver chronicles:) thanks for inspiring entrepreneurs. now more than ever, mentors are sorely needed.
Great words Andy. I’d add one more… People management.
You have to convince your people that today’s purpose is the same as it was in yesterday’s market and will be the same in tomorrow’s market… so we must accomplish that purpose. They are a big part of that purpose. You cannot do it alone, and they certainly already know don’t want to do it alone out there.
Don’t make false promises. If your business will likely have to make cuts. Then certainly don’t overpromise. But you should be able to communicate to your key people that your primary concern is making money and that they are a key part of that. (If there are people not involved in making money they should be evaluated right now anyway…)
In uncertain times, people are afraid of tomorrow. If you can convince your people to work here today and not worry about positioning for tomorrow, you will have a more productive workforce.
great comment, wes. people are living in a ton of uncertainty, more communication rather than less is necessary.
Great article. I am currently working on the Lower Your Costs and You Need to Sell initiatives.
One idea I’ve found effective is to challenge employees with a budget area that they are responsible for lowering so I get buy-in. I have done this with recurring purchases such office supplies, warehouse supplies, etc. We make it a challenge and fun, and people instantly become very defensive of any spending in their budget area.
Colin - now, that’s being creative. Getting people to buy-in and making it a fun challenge is fantastic. Thanks for sharing.
2009 -
Learn more to grow more to earn more to help more.
May be will meet mentor someday while learning…
Goodluck HOBO
Great tips. We are doing some of those tips, others we are looking into. Glad to see you blogging!
Thanks for sharing your tips Andy! - I’ll be recommending it to some of my business partners and close frneds in the business world.
Thanks Ruben!
I queued up your post for my flight to ASW09, and it was a great read. I learned in a very interesting way about leveraging credit / leasing to get an increased rate of return during business school. If you can get something for $100 and get a 10% return annually, you’ll have $110 at the end of the year. If you take that same $100 and use it to get a loan for $1000 that will return you the same 10%, but cost 6% annually, you still end up with $1040, a 400% increase on your gain. The only other thing that factors into the equation is risk.
there will be even more opportunities like this in the upcoming months:)
great stuff andy, i think you have it in the opposite order! it should be “stop reading” first. the negativity is creating a vicious cycle in and of itself, break free.
chase norlin
ceo
pixsy
chase - thanks for visiting. yup, agreed - mindset is huge piece of it and the media can definitely play too strong of a role.
Great thoughts Andy. I think another one would be to leverage your partnerships and your network. Everybody is in the same boat regardless of what industry you’re in. Everybody is trying to do more for less and working together with partners can create great results for everyone and a better product for the consumer.
While traveling, we negotiated for everything. It was exhausting after awhile especially when you were fighting over less than a dollar, but it’s the principal right? I think Americans have gotten used to not negotiating but everyone should take a lesson from my mom. The biggest place to get discounts is to negotiate on things that are already discounted. Clearly they want to get rid of it and are probably willing to get rid of it at any price. It’s costing retailers more to keep it than not.
PS. Always try to go used when it comes to furniture. It gets your creatives juices working on how to make it work in your office, puts your own signature touch on things, and it’s just cheaper and better for the environment.
susan - thanks for visiting! i think your mom is absolutely right, there are good deals to be had on things that are discounted. put it another way, if you are selling, be ahead of the curve and sell sooner with larger discounts now because the market for what you are selling may continue to heading lower. having that cash available will allow you to take advantage of future opportunities.
Well fool that I may be, have started one from scratch with tweetersbay.com which is based on the premise that tweeters (twitter users) can sell second hand stuff to each other in a safe environment. Given the need for people to raise extra money by selling stuff, and also the need to re-connect in a friendly selling environment as ebay used to be, I’m hoping it’s going to work out. So far costs have been minimal and within my budget so see how it goes. All profits go to charity, which will be needed in these times, so I”m hoping it’s a win win win for everybody. It’s in beta mode until end of January if you want to check it out and list something for free.
Kathy - congrats on getting started! i hope you post often here about how things are going. i love how you are creating a much needed business to assist charities - best of luck!
You are advocating to stop reading newspaper. Newspapers are still important. It is a pity that it is slowly dying. I like newspapers because they provide to you the chronicle of an event. Blogs would like you to navigate through it. Also, newspapers are easier to read, Blogs needs you to sit in front of your pc to read it. If a blog post is long, I just skim through it .
thanks for your comment. i am a news junkie and don’t get me wrong, i don’t think newspapers and the press are not important. they play a huge role in society and they keep government and people in check, if anything we need more of them. however, i am advocating that reading stories about the economy, bankruptcies, day in and day out would be better spent focused on your business - plus, you’ll be able to stay more positive. perhaps, consider reading just the sunday paper to get your fix, i’m trying to at least…
Finding an experienced mentor is imperative. Find out who does what you do, but better, and learn from them. Buy them lunch, make that connection and simply pick their brain.
AJ Kumar
I particularly like the tip to SELL. That’s a good one indeed. I mean - why reduce your marketing because times are hard? That’s the right time to INCREASE and do everything within your power to sell more. The more you sell, the more you can keep your business open and make more money, despite the economic problems. Thanks for sharing these incredibly important tips, Andy.
great post,
though can’ you increase the font size of your blog comments
A common mistake is to implement a new software project without a known quantifiable ROI. ” Is will make us more efficient” doesn’t count. Get numbers before you spend money. don’t waste money on a ‘Solution looking for a problem”.
Totally agree on the reading newspaper part. I started getting depressed a few weeks ago and couldn’t figure out how to get out of the funk until I realized that everything I was reading on WSJ, NYTimes etc. was really depressing. Gaza. Madoff. Economic crisis. Big 3 Auto. It just goes on and on and on. It’s almost like the only thing newsworthy these days are things that go wrong.
Andy,
Am new here. Came through Shoemoney.
Thanks for the blog and ideas shared here. Am sure will be a regular reader here.
One question, you have advised in stopping pet projects. How do we decide whether a project we do should be stopped? As we will know the result of the project only after traveling at-least half the way on it. So any tips on deciding on projects before starting itself would really help.
I like the idea of consulting a mentor. At Local Price we’ve made sure to listen to everyone and anyone we can get to talk. Advice, both good and bad, has value that we turn into action. By listening to as many people as possible - in and out of the industry - you’ll get ideas. You might be surprised what your non-techie grandmother can tell you about your site. She doesn’t know much about the Internet but knows what looks good and what works.
Excellent advice. I’m particularly fond of the last one. It’s very easy to get derailed and accept all the negativity in the traditional media. There’s plenty of succes to be found in bad times, you just have to focus on your core strengths and take advantage of the opportunities that are there.
Wow, that was a lot of information! I have to think about this and come back and read it again. These are excellent suggestions and im going to see where else I may be able to cut costs! Thanks Andy!!
So i took your advice about negotiating and have found it to be very enjoyable! I tried to do it with my hosting company and even though they rejected my offer, i felt like i was totally in control!
I think the key to negotiating is willing to walk away.. Still struggling a bit with that, but definitely learning through experience. Thanks for the great post.
Love this advice. Will you be my mentor Andy ;-)?
”Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law.”- Romans 13:8
Ok.