As a collection agency working with small business owners, we hear stories all the time of businesses at the brink of failure. For whatever reason, the business just couldn’t get past any number of roadblocks in their way and the business ultimately had no choice but to close. Most of the time the reason is pretty clear. It’s cash flow. It crushes us to hear these stories because we know there was a good chance that we could have helped had we been contacted earlier.
Yes, there are many other reasons a business might close such as an owner retiring, moving on to something else, crippling regulations or a bout of bad publicity that causes the business to shut down. And of course there are others but almost always, it’s about the cash when a business is forced to close against an owner’s wishes.
Why do businesses fail? For the most part it’s cash flow. You might have enough customers and have a steady flow of business coming your way but you are not getting paid for what you do. Customers pay late, don’t pay at all and the cycle spins out of control. All the while your own bills continue to come in. Payroll. Rent, insurance, inventory and the list goes on. You pay your bills which means you are laying out cash, but cash is not coming in like it should. And that creates negative cash flow. If you don’t step up your accounts receivable program and engage a collection agency to help with stubborn late accounts, you run the high risk of shutting your doors for good.
Solution? Create a solid accounts receivable program that has all the systems in place to get your business paid on time. Invoice on time, follow up promptly by mail and phone and engage assistance such as a reputable collection agency for hard to collect accounts.
Taking your foot off the gas:
There comes a point when a business is doing well and cash is flowing freely. Maybe you have a few late payers but no complaints about being busy. But, you make the mistake of not looking to the future. And what we mean is getting too comfortable with your current situation. Many businesses get really busy, service their clients well but when something happens to those clients, they have no pipeline. They think these clients will last forever and that is never the case. Clients and large accounts can vanish in a moment’s notice for a whole host of reasons. Mergers, buyouts, new staff that brings in their own people and other reasons.
Solution? Always be marketing. Your business must have some kind of external communication program. The phrase, out of sight, out of mind is so true in the world of business. You never want to drop by a networking event at your local Chamber of Commerce and hear. “I didn’t know your company did that…” That tells us that you have been hiding in your office for far too long. If you are busy, great! That’s why you are in business. But have something ongoing that keeps your business in front of your potential customers for when you are not busy. If you get crushed with new business, first of all congratulations! But there is always a way make it work. Hire more staff, outsource what you can’t handle such as regular tasks in your business and delegate more.
It can take months if not longer for someone to decide to do business with you. For example, if you stop marketing your lawn care company and someone needs your services, they may have been looking over the winter. If you were not out there, you lost that business. Scrambling for business and thinking that when you do turn on your marking will just miraculously fill your pipeline, is at the very least shortsighted.
Keeping up with the times:
If your company is still doing things the way it did 10 years ago, you won’t be around much longer. Technology has changed just about every business on the planet with lightning speed over the past decade and things you did 10 years ago, may not keep you in business today. Let’s take our own business here, American Profit Recovery. There was a time, and not too long ago when collection agencies would accept accounts from clients through the fax machine. And that had to be done during business hours. We knew that if we were going to serve our clients the best we could, we needed to offer something much more that allowed our clients much more accessibility and ease of use. Enter APRweb. Any client can submit accounts to us 24/7. And, they can monitor the progress of each account.
The fact is whether you are a collection agency or a machine shop, you had better be current with the times because most likely, your competition is.
Solution? Stay on top of current trends in your industry. Join associations and subscribe to publications that talk about your industry. Meet with vendors and new potential vendors to gain as much knowledge about what is trending. And listen to your customers. They just might be telling you what you need to do to stay in business. I want to access my account at 2:00am. We got you covered!
The term Value Proposition has been used over the years to an annoying level. But here’s the thing. You have to tell your customers why you are different. Why should they value your business over your competition? Walk downtown and count how many insurance agencies there are on your Main Street. There are probably no less than six right there in your downtown. And many of them get their products (insurance policies) from the same large companies. So why would you choose one over the other? They are different in some way.
Being different was at the heart of founding American Profit Recovery. All of the owners have spent decades in the collation industry. And from all that experience, we knew what customers wanted. They wanted their customers treated fairly. They didn’t want aggressive debt collections. In fact, despite their customers not paying, they still wanted to keep them. They also didn’t want to fork over 50-60 percent of what was owed to them immediately just to recover it. We listened and made these two parts of our company what made us different than others in the industry.
Solution? Find what is lacking in your industry and capitalize on being different. Listen to your customers and your industry and break out of the habits of 20 years ago. If you understand this and do it right, you just might be in a position to not even worry about competition.
There has never been a time like now. Technology has changed just about every aspect of how we do business. And it’s moving fast. Business practices have fundamentally changed and information has never been more prevalent. Staying on top of these will go a long way in preventing your business from shutting its doors.