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10 Danger Signs for Business – Part 1

Written on March 11, 2009 by George Krueger & Mary-Lynn Foster in Business, Management

danger We’ve heard that diagnosing a medical condition early greatly increases the chances of successful treatment. The same is true for our businesses – we want to spot the minor issues so they don’t become major problems.

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Cash to a business is like blood to our bodies. It has to continue flowing or we won’t survive. As a small business owner, the bottom line is that you can’t run out of cash. So you have to know how to diagnose and treat the source of the ailment before it spreads. With that in mind, here are ten signs that your business may be heading for trouble:

#1 – Lost market share

Your sales may be growing, but your share of the market may be falling. Are they up because you’ve increased prices? Is the growth of your sales keeping pace with the growth of the markets you serve?

Market share is precious – among other things, it provides leverage to raise prices as your costs increase. As competitors enter your market, you have to work even harder to maintain (and hopefully increase) your share.

#2 – Declining customer counts

Your sales may be holding steady, but fewer and fewer people are making purchases. Your remaining customers are spending more, possibly because of price increases. There’s nothing wrong with that, but you have to find a way to attract new customers because a certain amount of customer attrition is natural.

We don’t want our customers to leave because they’re unhappy. But you can’t make everyone happy all the time so even that will happen. We’ll also have customers move away, pass away, grow out of our product or service, and the like.

#3 – Low repeat and referral business

Many businesses actually lose money to get a customer for the first-time. If they break-even, they’re very happy. It’s the follow-up purchases that make a difference to our bottom line.

A healthy percentage of repeat and referral business also shows that your product or service is still meeting the needs of a core base of people. And these people are the ones who will refer other people to you, which is much less expensive than depending totally on advertising to grow your business.

#4 – Declining sales

Right now, a lot of businesses are experiencing this. It may have nothing to do with you – it may be your industry that is experiencing trouble. So you have to ask yourself … is this a long-term trend or is it cyclical? That’s the first thing you have to determine.

Next, ask yourself, will my industry recover? Some industries were facing challenges even before this recession. It’s only accelerating the long-term trend. Other industries will do just fine coming out of it. You have to know which one applies to you.

Once you’re satisfied that your industry will survive, you have to look at your own business. A lot of shake-out is happening even in healthy industries. Isolate whether it’s a problem with your business or the industry as a whole to know your best strategy.

#5 – Disproportionate sales to a small group of customers

Picture this extreme situation – all of your sales come from one customer. You’re totally at the mercy of that customer. It’s like being an employee without the safeguards that go with employment!

Generally speaking, if more than ten percent of your sales are to one customer, you may face trouble at some point. Five percent is even better. Bigg customers are great. But serving a bigg number of customers leads to bigg success.

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Thank you for reading our post today. Join us next time when we talk about five more early warning signs of trouble ahead in your business. Until then, here’s to your bigg success!

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Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00348-031109.mp3

The Secret to Survive and Thrive in Your Own Business

Growth: The Good, the Bad, and the Ugly

There’s Gold In Them There … Customers!

(Image in today's post by asifthebes)

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Am I Paying My Salesperson Too Much?

Written on June 26, 2008 by George Krueger & Mary-Lynn Foster in Bigg Solutions, Business, Business Ownership, Challenge, Money

Bigg Challenge
Max is a business owner. He hired a salesman about a year ago. Max put him on the same compensation plan that his other sales people were on (a small base salary with an incentive).

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The guy has done a phenomenal job. Max’s company is showing record sales and profits, largely due to this sales person. But here’s the problem: this salesman is now making more money than Max.

Max wants to know if he should adjust his salesperson’s compensation.

Bigg Advice
What should you do about this, Max? Here’s what we think …

Nothing!

Here’s why …

Is it costing too much?
It is possible to over-compensate your people. You can’t design a system where a small number of top performers win bigg while the company loses money.

But that’s not the case here. You’re also making more money, Max. So if it ain’t broke, don’t fix it!

Handle with care
We’ve heard of great sales people who were let go when a situation like this occurred. It does happen. But remember the nursery rhyme about the goose that laid the golden egg?

This sales person is the goose. Handle him with care. Like the old Proverb says,

“Kill not the goose that lays the golden eggs.”

Your bigg payoff
Don’t miss the bigg picture. The bigg payoff for owning a business often isn’t what you make each year. It’s what you make when you sell it.

You’re building an asset whose value is based on the income of the business, sometimes called owner’s cash flow. As your bottom line increases, so does the value of your asset. That’s your bigg payoff.

How you can get paid more
You’re making record sales and profits so you can probably afford to add another salesperson. Before you do, look at your infrastructure and capacity to make sure you can support an additional salesperson.

If you can, then go for it!

There’s a good chance, if you do that, you’ll be the highest paid employee of the company again!

Model this employee
We would suggest cloning, but okay … we won’t go there!

So try to find someone with traits and characteristics similar to this salesperson. To do that, think about what you know about him.

What industry did he come from, if he came from outside your industry?

What experience did he have?

What education?

Are there any other clues you can get from his background?

If you did a personality assessment as part of your hiring process, what did his look like?

And ask your sales person if he knows anybody who might work out well. Bigg goal-getters know bigg goal-getters.

Thanks Max for sending us your bigg challenge. We wish you bigg success!

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