The 5 Most Dangerous Trends Facing Small Business

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This is a powerful briefing on issues affecting all business. Special thanks to the Empire Research Team and Chet Holmes.

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The 5 Most Dangerous Trends Facing Small Business

  1. 1. The 5 Most Dangerous Trends Facing Small Business
  2. 2. Snapshot of the Current Business Climate <ul><li>A corporation closes or files for bankruptcy every 53 seconds </li></ul><ul><li>A company changes control every 15 minutes </li></ul><ul><li>92% of all companies fail within 10 years with 67% failing within the first 2 years </li></ul>2007 SBA advocate
  3. 3. Snapshot of the Current Business Climate <ul><li>26,000 new products and brands are introduced each year </li></ul><ul><li>16-30% of consumers change brand loyalty in one evening of watching commercials </li></ul><ul><li>74% of consumers buy outside of their “favorite” brand </li></ul>
  4. 4. Dangerous Trend #1 Fighting the Clutter Factor
  5. 5. Dangerous Trend #1 – Fighting the Clutter Factor <ul><li>In 1992 the average consumer was presented with 3,000 messages per day. </li></ul><ul><li>In 2006—that number has reached 30,000! </li></ul><ul><li>That number is even HIGHER for business owners . </li></ul>Pacific Bell study
  6. 6. Dangerous Trend #1 – Fighting the Clutter Factor <ul><li>Even though we’re already overwhelmed, buried in information and deafened by constant voices pleading for our attention – and already unable to discern what’s valuable and what’s waste – more and more information is being presented to you daily. – Rich Schefren </li></ul>The advertising and information clutter only worsens when it comes to your Inbox. According to Ferris Research, in 2009 we’ll waste 21 hours per year deleting spam e-mail , compared to 2.2 hours in the year 2000.
  7. 7. Dangerous Trend #1 – Fighting the Clutter Factor
  8. 8. Dangerous Trend #1 – Fighting the Clutter Factor <ul><li>What to do NOW . . .? </li></ul><ul><li>Consistently Communicate through your network, what makes you UNIQUE and how it BENEFITS THEM . </li></ul><ul><li>Select a narrow IDEAL target market and market continually. </li></ul><ul><li>Market through your partner relationships to benefit THEIR network </li></ul>
  9. 9. Dangerous Trend #2 Increasing Marketing Costs with Decreasing Effectiveness
  10. 10. Dangerous Trend #2 – Increased Costs & Decreased Effectiveness <ul><li>It now costs 3X more in 2008 than it did in 1992 to reach your perspective buyers. </li></ul><ul><li>In 1992 it took an average of 4 attempts to reach your buyer. In 2008, it now takes 8.4 attempts . </li></ul><ul><li>Therefore ½ the results from the previous same efforts are common. </li></ul>Pacific Bell study
  11. 11. Dangerous Trend #2 – Increased Costs & Decreased Effectiveness <ul><li>As the popularity of search engine marketing has increased, so have the costs. Pay-per-click advertisements are being driven up in costs as the demand for online advertising space increases. Organic search engine marketing is a long-term, uncertain and often costly endeavor. –Implied By Design LLC </li></ul><ul><li>The recent postal rate increase on May 11 th is inflicting HIGHER COSTS on small publishers and no business that uses the mail to reach it’s customers is escaping. –LA Business Journal </li></ul>
  12. 12. Dangerous Trend #2 – Increased Costs & Decreased Effectiveness <ul><li>Newspaper advertising rates GREW an average of 18% between 2005 and 2007. </li></ul><ul><li>Nonprofits were hit with increases in expenses last year that were 2 and 3 times the rate of inflation, driven by the hike in minimum wage and the always increasing cost to raise funding. </li></ul>
  13. 13. Dangerous Trend #2 – Increased Costs & Decreased Effectiveness <ul><li>Brand loyalty is continually decreasing </li></ul><ul><li>Surveys in 2002—56% of consumers demonstrated brand loyalty </li></ul><ul><li>By 2003—53% </li></ul><ul><li>May of 2005—46% </li></ul><ul><li>As of 2007—approximately 39% of surveyed consumers felt loyal to their current product or service provider. </li></ul>
  14. 14. Dangerous Trend #2 – Increased Costs & Decreased Effectiveness <ul><li>What to do NOW . . .? </li></ul><ul><li>Implement marketing strategies that begin with the lowest cost for the highest reward. </li></ul><ul><li>Implement 3 to 4 ways you’ll systematically seek referrals. </li></ul><ul><li>Continually test your advertising, sales and marketing campaigns for their effectiveness. </li></ul>
  15. 15. Dangerous Trend #3 The Pareto Principle & Removable Waste
  16. 16. Dangerous Trend #3 – The Pareto Principle & Removable Waste <ul><li>80% of your recurring problems come from 20% of the root causes. </li></ul>
  17. 17. Dangerous Trend #3 – The Pareto Principle & Removable Waste <ul><li>Why does the same problem continue to occur daily, weekly, monthly and yearly? </li></ul><ul><li>The 80/20 rule applies to more than errors made, including problem customers and suppliers or employees. </li></ul>
  18. 18. Dangerous Trend #3 – The Pareto Principle & Removable Waste <ul><li>Waste in a business sense is any activity which absorbs resources but creates no value. </li></ul><ul><li>There are 3 basic types of actions: </li></ul><ul><ul><li>Those that creates value as perceived by the customer. </li></ul></ul><ul><ul><li>Those that don’t create value, but are needed by the process—not immediately removable. (Type 1 Waste) </li></ul></ul><ul><ul><li>Those that don’t create value and are not needed—can eliminate. (Type 2 Waste) </li></ul></ul>
  19. 19. Dangerous Trend #3 – The Pareto Principle & Removable Waste <ul><li>The 2 types of waste can be </li></ul><ul><li>broken down into 6 categories: </li></ul><ul><li>Mistakes </li></ul><ul><li>Producing items no one wants </li></ul><ul><li>Processes that are not needed </li></ul><ul><li>Movement without a purpose </li></ul><ul><li>People waiting for an upstream activity to complete it’s task </li></ul><ul><li>Products that do not meet the needs of the customer </li></ul>
  20. 20. Dangerous Trend #3 – The Pareto Principle & Removable Waste <ul><li>50-65% of the average worker’s movement is for no reason. </li></ul><ul><li>– Quality Press 2007 </li></ul><ul><li>The Dollar Store idea has created a whole new market from overproduced and “non-saleable” products grossing more than $33 billion yearly. </li></ul>
  21. 21. Dangerous Trend #3 – The Pareto Principle & Removable Waste <ul><li>What to do NOW . . .? </li></ul><ul><li>Create a board that tracks the errors and chart them. </li></ul><ul><li>Spend one hour per week eliminating the 20% of your error root causes. </li></ul><ul><li>Create processes so you can see if something is broke and causing waste. </li></ul>
  22. 22. Dangerous Trend #4 Increased Competition & Increasing Business Failures
  23. 23. Dangerous Trend #4 – Increased Competition & Increased Failures <ul><li>Did you know? </li></ul><ul><li>There are over 60,000 new businesses started every year. </li></ul><ul><li>In 2003 there were 742,600 small businesses in Michigan </li></ul><ul><li>In 2007 there were 814,657 small businesses in Michigan </li></ul><ul><li>By 2015 there will be over 1 million businesses competing in Michigan </li></ul>SBA Advocate
  24. 24. Dangerous Trend #4 – Increased Competition & Increased Failures <ul><li>We are in the midst of the largest entrepreneurial surge this country has ever seen. -Fortune March 2007 </li></ul><ul><li>Nearly 672,000 new companies were created in 2005. </li></ul><ul><li>— That is the biggest business birthrate in U.S. history! </li></ul><ul><li>— 30,000 more startups than in 2004, and 12% more than at the height of the dot-com hysteria in 1996. </li></ul>
  25. 25. Dangerous Trend #4 – Increased Competition & Increased Failures <ul><li>92% fail within the first 10 years… </li></ul><ul><li>67% of those fail in the first 2 years. </li></ul>
  26. 26. Dangerous Trend #4 – Increased Competition & Increased Failures <ul><li>Many reasons include </li></ul><ul><li>Lack of sufficient capital funding </li></ul><ul><li>Poor management skills </li></ul><ul><li>Lack of sales </li></ul><ul><li>Over the lifetime of a business: </li></ul><ul><li>Only 39% are profitable </li></ul><ul><li>30% break even </li></ul><ul><li>31% lose money </li></ul>
  27. 27. Dangerous Trend #4 – Increased Competition & Increased Failures <ul><li>What to do NOW . . .? </li></ul><ul><li>Spend an hour a day working on your business (not just in). </li></ul><ul><li>Build a sound and tested process for the way you sell to your prospects and add value for your clients. </li></ul><ul><li>Create a workable plan for strategically marketing your business. </li></ul>
  28. 28. Dangerous Trend #5 Lack of Cash Flow
  29. 29. Dangerous Trend #5 – Lack of Cash Flow <ul><li>The number 1 reason businesses fail is a lack of money. </li></ul><ul><li>Accounts Payables and Accounts Receivables are at record highs. </li></ul><ul><li>The average collection time for Accounts Receivables have increased 40%. </li></ul>Sageworks 2008
  30. 30. Dangerous Trend #5 – Lack of Cash Flow <ul><li>Small businesses are hugely dependent on their cash flow, so they must either cut costs or scramble to find alternative funding if they are not being paid on time. With money tight and bank loans hard to get, a cash-strapped company can easily be pushed to the brink. </li></ul><ul><li> – Wall Street Journal 10/08 </li></ul><ul><li>“ Its very difficult for us, we have bills to pay, and now we fall into the cycle of paying our bills late.” –Steve Goldberg TLS International </li></ul>
  31. 31. Dangerous Trend #5 – Lack of Cash Flow <ul><li>How much money do you have outstanding? </li></ul><ul><li>Collection Agency </li></ul><ul><li>Lawyers </li></ul><ul><li>Yourself </li></ul>
  32. 32. Dangerous Trend #5 – Lack of Cash Flow <ul><li>Collection agencies charge between 30% and 50% of the collected amount. </li></ul><ul><li>Lawyers charge $100-$500 per hour. Even if you get a judgment, you still need to collect it. </li></ul><ul><li>It only takes a few minutes of your time if you have a plan. </li></ul>
  33. 33. Dangerous Trend #5 – Lack of Cash Flow <ul><li>What to do NOW . . .? </li></ul><ul><li>Protect yourself with the proper language on your invoices. </li></ul><ul><li>Build a sound and tested process for the way you collect on current and past due invoices. </li></ul><ul><li>Follow through with your process, it is your money! </li></ul>
  34. 34. The Next Step for the Astute Business Owner <ul><li>Calculate your Days Sales Outstanding (DSO) </li></ul><ul><li>Break out of the clutter </li></ul><ul><li>Reduce Waste </li></ul><ul><li>Have a system in place to collect and protect your Accounts Receivables </li></ul>
  35. 35. <ul><li>The information </li></ul><ul><li>Contained in this executive briefing </li></ul><ul><li>Is brought to you by: </li></ul><ul><li>Daniel M. Cushard </li></ul><ul><li>Phone: 810.459.1173 Email:dcushard@hotmail.com </li></ul>

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