By William Lynott
The upheaval in today’s economy has given a rebirth to the basic dynamics of successful business management. Easy to ignore in good times, the time-honored rules of profitable business management are a critical component in the recipe for building sales and profits when the going gets tough.
Here are 10 commandments of successful business operations that can help you and your groundwater business survive and prosper in this and in any economy.
1. Never allow any of your money to lie idle
Making the sale and collecting your invoice is only half the job of professional money management. Once you’ve collected your money, it’s important to manage it skillfully.
If you don’t already have a money market account at your bank, open one and have it linked to your business checking account for phone or online transfers.
Deposit all daily receipts into the money market account where they will immediately start drawing interest. Never deposit receipts directly into your checking account. Keep a minimum balance in the checking account and transfer cash by phone or online only as needed to cover checks to be written.The banks have made this procedure so easy to use there is no longer any reasonable excuse for not taking advantage of it.
Keeping all your money working for you all the time is an important part of professional business management.
2. Be aggressive collecting accounts receivable
Never allow your accounts receivable to go untended. You’ve earned that money. You have a right to it. You need it.
Badgering late-paying customers may not be your favorite pastime, but close monitoring of your accounts receivable and following through on late payments is as important to your financial success as the quality of the services you offer. If your customers learn you are indifferent about money owed to you, you can be certain they will stretch your patience—and your cash flow—to the limit.
3. Don’t be in a big hurry to pay your bills
There’s good reason why checks are slow to come in from people who owe you money. It’s because hanging on to cash as long as possible keeps that money available to draw interest on or put to work in the business.
That’s why it’s important to set up a system to pay your bills the smart way. It’s easy to do and it moves you up another rung on the ladder of professional cash management.
Never jeopardize your credit standing by paying bills late. Pay your bills just before they are due—not long before, not after. It’s especially important to avoid late payments on credit card bills because of the oppressive penalties most banks are now putting into place.
4. Adopt a marketing mentality
If customer satisfaction is the mashed potatoes, marketing is the gravy.
But keep in mind marketing involves far more than an ad in the phonebook and a fancy website. Marketing is a complex challenge, all the more so in a business operating in a specialized niche such as groundwater systems. If you are to achieve optimum success in marketing your business, you must be willing to spend time studying, reading, and analyzing your market and your competition.
Keeping your business healthy and profitable requires an ongoing marketing program. There is no other way. Competitive prices alone will not do it; technical know-how alone will not do it.
Marketing embraces all facets of your operation. To be an effective marketer, you must nurture and promote your business image, sell yourself as well as your business, and concentrate on making your business the best choice for knowledgeable customers and prospects.
5. Determine you will never lose a client to a competitor
Numerous studies over the years have shown that on average it costs five times as much for a business to find a new customer than to keep an old one. Focus on the significance of that statement—it is one of the most powerful concepts in the world of business.
With competitors standing ready and anxious to snatch away your customers and prospective customers, and your awareness how much it costs to replace a lost customer with a new one, it should be easy for you to understand the importance of never giving one customer a reason to leave you.
Once a customer does business with you for the first time, you’ve done the hard part. Now, your job is to instill the notion that doing business with you will always be a rewarding experience.
You and your employees must never lose sight of the fact developing a new customer is a costly and difficult job. Once a stranger becomes your customer, a major part of your overall marketing program must center on ways to make sure he or she never has reason to leave you for a competitor.
6. Keep leasing in mind
Most financial advisors agree leasing products like cars or vans for personal use is usually not financially advantageous. But business is a different animal entirely.
The nature of business accounting is such that leasing can be the most sensible approach to many types of capital investment. It usually makes sense to lease if you will be able to use the cash in your business or in your investments to earn a better return than the cost of leasing.
Talk to your tax advisor about this the next time you’re considering a large capital purchase.
7. Go the extra mile
Never forget a complaint from a customer can easily be converted into a valuable asset. Some years ago, a major retail marketing study revealed customers whose complaints were satisfactorily resolved became better customers of the company than they were before the incident that triggered the complaint.
Some of the most successful companies in the world have been built on a foundation revolving around the principle that customer complaints provide a valuable opportunity to build the business.
When L.L. Bean, founder of one of the world’s most successful catalog order firms, was starting out, he suffered what could have been a disastrous setback. Shortly after he began shipping his first waterproof hand-made boots, complaints that the boots leaked started coming in from customers.
Determined to fulfill his promise of customer satisfaction, Bean returned the full purchase price to every customer. Then, he set out to correct the flaw in the boot’s design. That was the beginning of the customer loyalty that helped to make L.L. Bean what it is today.
Sometimes, satisfying a customer complaint calls for measures you may feel unreasonable. When that happens, think of the cost in time and money as an investment in your future.
Once you’ve sold yourself and your employees on why you are the best choice for customers who require the utmost in dependability and quality, you must focus your marketing efforts on ways to promote this image to both customers and prospects.
8. Set your business apart
America’s most successful entrepreneurs—gigantic or tiny—are those who have carefully developed an identity all their own. Your job is to evaluate your strengths and then combine them to form a unique identity—an identifiable image for you and your business.
Perhaps you’ve been in business longer than your nearest competitors, maybe you have a reputation for wide-ranging and dependable skills, or maybe you’re the only certified professional in your area. Whatever your marketable strengths, you should write them all down, study them, and then determine how to separate yourself from your competitors—how to motivate potential customers to seek you out, and existing customers to feel fortunate to have discovered you.
9. Guard your most precious business asset
Whether you have a few employees or a few dozen, they form the bedrock of your business. While adequate wages are a fundamental requirement for employee satisfaction, money isn’t the only motivation for most workers. Recognition for a job well done and respect for individual effort are important contributors to low employee turnover and high productivity.
Non-financial rewards such as company picnics, employee-of-the-month programs, suggestion boxes with rewards for usable suggestions, and other incentives are valuable at any time, but they take on special importance when circumstances limit your ability to increase wages.
10. Develop a personal relationship with your banker
Handling money is a banker’s job, and most of them are good at it. Even if your operation is relatively small, it’s a good idea to develop a personal relationship with the manager at the bank where you do business. Discuss your financial picture honestly with the manager of your local branch. You’ll get some good ideas and a favorable ear should you ever need a little financial help.
To some contractors, a tight economy means going into hibernation. To others, it’s a time to increase customer loyalty, solidify market position, and attract new customers. Following these 10 commandments of successful business operations will help you turn any time into good times.
Bill Lynott is a management consultant, author, and lecturer who writes on business and financial topics for a number of publications. His book, Money: How to Make the Most of What You’ve Got, is available through any bookstore. You can reach him at firstname.lastname@example.org or through his website: www.blynott.com.