Some clients at Treasure Valley SCORE are small-business owners who face imminent threats to the survival of their businesses. Far and away the No. 1 issue is: “How do I find customers?”
The next most frequently raised questions usually involve financing. Financing questions typically involve collecting delinquent payments for services rendered, arranging a line of credit to smooth out cash-flow problems, setting prices for goods and services, closing sales and handling problem partnerships.
Here are some of our answers.
How do I find customers?
Start with a marketing plan. A critical element of the plan is market focus — establishing target customers. To attract customers you need a value proposition. Customers need a reason to be interested in you as a supplier. To have a value proposition, you need to know what your competitors are providing to the market. Does your value proposition meet the needs of your prospective customers?
While the use of social media and the Internet may help communicate your products and services, personal contact will enable you to identify customer needs and present your value proposition. Establishing new customers takes patience and persistence. Don’t take a prospect’s lack of response personally — it’s all part of the sales game. Your existing customers’ competitors can be a source of new business.
How can I collect past-due invoices?
Have you established payment terms for your sales? Terms must be an element of the sales contract. Collection starts with an accounts receivable status report. Customer contact must be made when the payment is due, not a week or two later. It may be difficult to institute COD terms, but slow-pay customers need to get the message that the survival of your business depends on prompt payment.
How can I arrange a line of credit?
Many businesses need periodic short-term infusions of funds to cover inventory, work in progress and operating expenses while awaiting payment. A review of your cash flow financial statement with your CPA and your banker should help. Arrange for a line of credit before you need it. As in your personal life, be realistic and don’t overspend. The new machine or new desk may have to take a back seat to meeting payroll or your accounts payable.
How should I set prices?
My initial approach starts with a cost analysis. While knowing market prices offered by your competition is critical, there’s no sense selling your products and services below your cost. Many new business owners believe there’s a need to sell for less than the competition. Dismiss the thought. Promote your value-add as the rationale for a competitive price. Your best customers and prospects are willing to pay a reasonable price for quality goods and services. Low prices will not necessarily be their sole objective. Quality and service almost always rank above price.
How can I close sales?
Many small-business owners are able to reach prospective customers but unable to close a sale. Closing starts with having customers describe their needs and relate any issues they may have with their current suppliers, and with you offering your value proposition and asking for the order. It goes something like this: “If I can offer this benefit and do so at this price, I’m ready to write up the order.”
My partnership isn’t working. What should I do?
There are many reasons for partnerships to have problems. With a well-crafted partnership agreement, a solution exists for terminating the partnership. Without an agreement, a meeting of the partners is in order. The distressed partner must prepare a draft of the solution he desires and discuss the draft with the partner. If a solution cannot be resolved, we suggest a mediator be engaged. Mediation is preferable to court.