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A recent Wall Street Journal article highlighted what many small businesses are starting to realize: cutting costs, protecting their employees, and not affecting the service their customers receive is key to improving margins in good times, and staying alive in lean times.
This creates as overarching question: if we’re all doing the same thing, then how are you preventing your customers from seeing you as just an expense line that can be trimmed?
It goes without saying that, if you are a producer of a tangible product, skimping on quality is an absolute non-starter — the moment your customers start seeing defects, you become expendable.
But what about service companies?
Most companies have cash reserves of varying amounts (most experts seem to recommend at least 3 months) but what if a recession is longer or more deep than you expect? Reserves are designed to keep you afloat while you adjust your revenue streams to keep cash flowing. For most business owners and sales managers, it’s finding new customers, showering existing ones with ‘keep me’ gifts and meals, or entering entirely new markets or spaces. They’re nice in the ‘dating’ phase, but how about after?
Business courtship is very similar to dating: you want your prospective partner to know that you are the best choice for them and they will be happier with you than anyone else, but you also can’t seem desperate or that message will get lost.
The easiest approach is to call all of your suppliers and demand that they provide incentives because, after all, if you go down, they hurt, too. The problem is: every one of their other customers is likely doing the same thing. If you carry debt, refinancing or restructuring might be an option but, again, all the other bank customers are likely doing the same.
So you have to do a lot of little things that will compound into the ‘magic’ solution. The catch: you have to repeat the process constantly to compensate for new challenges and solutions whose cost savings will inevitably plateau.
The easiest is the ‘low hanging fruit’ stuff: turn off lights, cut back facility services (like cleaning) from 5 days to 2 or 3, look at your inventory levels, review your receivables’ aging, and start simple. From there you expand outward: payables aging (you should be ensuring that you are maximizing your payment discounts when it makes sense — even 1% prompt pay can be real savings, but you’re likely getting a better interest rate on your savings depending on who you bank with).
All of this allows you to court new customers and not let them down or your sales team become complacent. I’m short: it proves to your customers that you aren’t taking their business for granted.
The other half is what you should be doing already: ensure that your customer can’t get your product or service — or anything even approximating it — from anywhere else. That doesn’t mean you have to trash your competitors, just make sure that when your customer decides to poll the market that, if they find an alternative, they know instantly that it’s not even in the same league as your in performance and value. That takes time, which is why we emphasize that you should be doing this long before a recession is a word people are even thinking about saying.