I have 10 plus years of experience working with small businesses during my stints with various multinational corporations. During this time, I have met more than 800 small business owners and have developed lasting relationships with them. These relationships have helped me on multiple occasions when I wanted to learn about a specific challenge that small businesses face.
To get the information quickly, there is a video i made about this that you can watch below.
While catching up with one business owner who runs an Indian restaurant, we discussed various ways one can keep the business growing. The restaurant and cafe business usually see a lot more business failures than other services businesses.
This discussion left a lingering question in my mind and I decided to reach out to a few more business owners who have been able to grow their business over time and have established themselves over time.
I got the chance to connect with 4 small business owners and asked them all some fundamental questions on growth and things that other business owners can learn and do to help them succeed and minimize the risk of failure.
These 4 business owners run vastly different businesses, one of them runs an event management company specializing in corporate events, one of them has a software development company that specializes in creating APIs, custom apps and provides systems integration services.
Of the other two, one of them has a boutique wedding dress studio and the fourth one has an Energy efficiency consultancy services company that focuses on a specific niche on electricity distribution.
I learnt that there are 11 key things that small business owners should do to ensure their business continues to grow.
Track your revenues every month
As simple as this sounds, most small business owners do not track their revenues rigorously enough every month and as management guru famously said, “What gets measured, Gets improved”.
Many small business owners usually know how much revenue they earned, but not how much they grew revenues in percentage terms over the previous month. Business owners are aware of large receipts and the usual payments they make, but they mostly do not have an understanding of the monthly trend, exact seasonality and quarterly trends to make data backed decisions.
This is where setting a 10% increase in revenue month over month as a target comes in handy and once you start measuring the actual performance against the target, you will always have this number nagging at you at the back of your mind.
All 4 of the business owners emphasized on having a mechanism in place to track revenues every month and by having a monthly review of trends, things that went well and those that didn’t and by putting in actions to solve for in the immediate next month.
One of the business owners highlighted that tracking of revenue trends in itself won’t be able to ensure growth, but it builds the behavior and mindset in the business owner like a clock that’s always ticking and keeps the owner conscious of how his business is doing at all times.
One does not have to invest in a fancy SaaS software to track this, business owners just need a simple whiteboard where they write down the revenues for every month at the closing date and keep it there. After a few months, they can see the trends for themselves and it will nudge them to take action.
Review your sales pipeline every week
This was another factor that all 4 of the business owners spoke about with the same enthusiasm. They keep a constant watch on their sales pipeline. They did not want to lose out customers where they had already invested their time and resources.
A sales pipeline is a visual representation of a prioritized list of potential customers who are adequately warmed up through multiple interactions and have a higher likelihood of converting into paid customers over the short term.
Business owners are usually capable of identifying customers who are really interested after a couple of conversations. Where many business owners give up is in following-up and they allow these customers to go cold by not being in touch with them. This is a definite loss of revenue.
Business owners should focus on creating a weekly routine where they go through the list in the sales pipeline, the follow-up activities done for each customer, customers’ responses and update the likelihood of closure. Just setting this process in place will ensure a growth in revenue over time.
Deep dive into most prospective customers who did not convert and get to the root cause
This builds on the previous point of creating a routine to track the sales pipeline. There will be many cases where customers decide to not go ahead with the business. Small business owners need to proactively take feedback from customers on why they took the decision and use it as a learning opportunity to correct mistakes if any in future.
One of the 4 business owners I spoke with runs a Software Development business and he highlighted a situation where a client wanted a software integration done with the client’s own database with a new analytics platform they were onboarding.
After multiple rounds of discussion and favorable negotiation on commercials, the client decided to not go ahead with the deal with this particular business. The business owner was disappointed over the loss of the deal but did not lose the opportunity to understand from the client the reasons for loss of business.
He understood that the client had customers who were only permitted to source services from partners who had PMP and few other certifications which this business owner lacked, though his team was technically capable of delivering on the project. This was a non-issue when you really look at it, but his client had some check-boxes to tick which ended up affecting the business.
Armed with this feedback, he got two key employees in his business certified for PMP and the other requirements, though it increased his overheads as these employees now commanded a higher salary in the market given their additional qualification.
However, he was rewarded for this investment after a few months as similar proposals came in from larger clients that he could execute on and it helped him grow his IT solutions business significantly.
He turned this loss in business to an opportunity where he came out stronger and expanded on his business even more.
Use your own customer information intelligently, find out the type of customers who are best suited for you
This is related to getting your target customer right. Most small business owners who run services businesses or who sell products will have information about their customers. Take a look at the last one year of the data on customers who ended up buying your product or service.
Look at information and anecdotes you collect from customers during your interactions such as where they work, the kind of educational background they have, their preferences and how frequently they purchase. Put them into buckets and you will see a specific set of characteristics that bring your customers together. Double down on any customer with those characteristics and you will have a higher likelihood of success.
Another one of the 4 business owners I reached out to, runs an event management company and his focus is to only serve companies in the pharmaceuticals industry who have between 1000 to 5000 employees. He says that this set of clients can be serviced very easily with his set of event execution partners and at pre-decided costs. Since he caters to a geographical cluster where many pharma companies are located, he has a curated list of hotels that he has agreements with for renting out their grounds or other properties for the events.
He is also very particular about the size of the company since that determines the frequency and the average number of people attending each event. Larger companies need a much larger venue where the economics and scale does not work in favor of this business.
His negotiation rounds are reduced to a simple checklist that even the team can do in his absence. This has helped him double down on such customers and grow his business only with this niche clientele.
Double down on your successful product or service
Every small business will have one offering – a product or a service that can be called as its hero offering. This offering is what is tried and tested with many customers and has the lowest risk. This particularly works for businesses such as restaurants and bakeries where customers have multiple options to choose from.
Many restaurants add a “Chef recommends” or “Most ordered in 2022” to the menu to indicate to the guests that these are the choices they should make if they are new to the place. This would do two things:
- Eliminate or minimize the risk of making the customer unhappy or dissatisfied
- Building on the expertise on the team that has executed this multiple times before
The same concept can be applied to services, consulting, manufacturing where the business owner is specifically skilled in a particular niche product or service. The business owner should focus on the type of customer he/she can serve and then focus on building a reputation for superior quality of service.
By doubling down on the area of expertise, the business owner will build on the expertise with each new customer and this will end up becoming the moat for the business over time which a new entrant cannot easily replicate.
Don’t compete on price, rather; focus on the customer problem that you are solving
Whenever a small business owner relies on discounting to increase sales, it’s a sure shot way of telling that this business will not survive the long haul.
If you think about it, put yourself in the shoes of your customer. The customer is not coming to you for the cheapest price – They would probably find that in Costco. The customer is coming to you because you solve a specific problem for the customer.
The most successful small business owners have been the ones who have identified a very small opening in their business to solve a problem for customers that others haven’t seen yet.
Let’s take the example of a trucking business owner where prices, trucks, drivers are almost standard across the country. One example of a business owner in the trucking business who found a gap is with respect to being always available with a reefer truck when the local supermarket distributor wanted during the fall and in the run-up to christmas.
This truck owner ensured that this supermarket distributor always had a reefer truck allocated to service his shipments, more so specifically during the run-up to the holidays where demand for trucks skyrocket.
The business owner identified this gap where in the past, the supermarket distributor usually had a number of fleet owners who would provide service, but most of them lacked capacity to serve him during the peak season as they had multiple bookings, which shot up the price on the trucking market and the supermarket had to rely on sub-par providers with not that great reliability at the last moment.
The business owner in this case, maintained a steady pricing, although it was marked up by 10-15% versus competition on regular, non-peak seasons. What he did solve for was the availability issue of the distributor during the time period when it mattered most.
This led to the cementing of a long term relationship with the distributor and opened new avenues for business through partners and associates of the same distributor as and when the business owner expanded his fleet.
Look for adjacencies to build a second growth engine – Can you develop a recurring revenue engine that can scale in addition to your core product?
Of the 4 business owners I spoke to, one of them who runs and energy efficiency consultancy company spoke about building competency that is closely related to the core business but is capable of producing an additional revenue stream.
The business owner here is a postgraduate in power systems and power electronics with an undergraduate degree in electrical engineering with over 27 years of professional experience in the field. His core line of business is in providing technical consulting with various power distribution companies and companies that manufacture equipment related to power distribution.
Over the past four years, he and his team has been building expertise through certifications and training on the rising share of renewable power in the country and its implications for managing peak demand and non-peak power demand.
This is a field that is very closely related to his core expertise and one that needs more people in the industry. His venture into renewable power distribution and load balancing has helped him upsell additional consultancy services along with his usual projects which has increased the revenue from his regular clients.
Speak to your customers, visit them to understand how they use your product or service, put yourself in their shoes
This aspect of truly understanding your customer is something I learned hands on while I worked at Amazon while handling customer calls as a part of my onboarding journey and at Intuit during the numerous “follow me homes” that we did with small business owners.
The business owner who runs the event management company told me how much time he invests personally to make sure that he visits the offices of his clients to spend a day with the engagement managers and with some of the employees during their lunch time.
He does this to have a pulse on the culture at the companies who are his clients, to know the priorities of the employees and that of the management first hand. He uses these insights to curate special experiences for the teams during their offsites and events the companies ask him to organize.
He says that the employees are usually surprised at the contextual nature of the events and activities his team does. This helps the employees participate more enthusiastically during offsites and the managers in the company are able to achieve better outcomes from the offsites and events they conduct.
This goes to show how building a relationship with the real customers who use the service goes a long way in achieving some of the best results over the long term. This business owner says that companies that sign up with him for business rarely leave him for another event management agency due to the level of personalisation this guy is able to bring to the table.
The result of this is an enviable stickiness of customers who keep giving this business owner repeat revenues with larger teams every year that helps the business grow in revenues.
Thank your customers regularly on special occasions
This one struck a chord with me.
My business owner friend who runs a boutique wedding dress studio mentioned how even though her primary line of business is in making bespoke wedding dresses, she also has a business of taking orders for just about any boutique occasional wear which has bloomed into a successful adjacent business.
The key to success has to get repeat customers has been a ‘Thank you’ gift that she sends out 20 random customers every year.
She has made it a practice to send out gift boxes with goodies and a handwritten thank you card to 20 random customers every year around the holidays. She has been doing this for the past five years.
She picks 20 random customers who made a purchase from her during the year and sends them a personalized thank you note along with some goodies. It does not cost her much to do it, it’s about $50 in total for a goodie bag including shipping.
This investment of $1000 every year is like building a goodwill that carries on for a long time. The customer who receives this goodie bag, will automatically register a “She is so nice!” emotion and a subconscious “I owe her something in return” feeling.
This resulted in many of her customers just dropping in to say “hi” when they were nearby and ended up placing orders for other bespoke dresses. This activity of just thanking customers enabled her to build an adjacency to her wedding dress business and offer bespoke tailoring services which enabled an upsell or repeat business in a business that sees a single order typically.
Small business owners would do well to have a program that thanks their customers with thoughtful small presents given during happy occasions. This will create a snowball effect of goodwill that the business owner will enjoy over long periods of time.
Reinvest your profits back into the business
This is the most crucial strategic action a small business owner needs to make on a consistent basis.
The great businesses of today were built organically by putting whatever cash the business makes back into the business to grow further. This is the secret sauce that all successful companies employ to grow over time.
When a small business owner makes a profit, sure his family can enjoy a small portion of the success through a better standard of living. However, the business owner should be prudent enough to put most of the excess profits back into the business.
The example below shows a business that is in the machinery servicing industry which starts off with an annual revenue of $500,000 but grows at 25% per annum initially and the growth takes off exponentially as the business owner re-invests back most of the profits back into the business while contributing steadily to the family savings.
This reinvestment allows the business owner to almost triple the revenues from the business over 4 years at which point in time, there is sufficient cash available to buy out a competing business.
The ability of the small business owner to discern between various options available to put money to work will decide the outcome and fortunes of the business and that of the business owner’s family.
Use low cost marketing to get to your customers effectively, don’t spray and pray
Marketing is often mis-understood by many business owners. I have seen a lot of businesses spend a ton of money to promote their business over facebook, youtube and via google through paid ads. It does not work. Period.
All of the four business owners I spoke to agreed that social media and digital presence is required, but needs to be managed in a low cost and efficient way. The best way to make use of the internet is to make content, either written content like this article or creative content depending on your business and let customers come in organically.
This is the “slow and steady” process but will help the business in the long run.
All the small business owners also agreed to the fact that they had to be present where their customers are present, be it in fashion events, in seminars or at industry gatherings to show what they have to offer.
Being present in person at such venues allows the business owner to get contacts of potential customers first hand, to make a good impression about their business and to understand the pulse of customers in an ever evolving landscape.
The common theme here is simple, go where your customer is, but don’t spend too much money!