News Archive

This is the best explanation of the scale of our national debt problems I have seen. This movie, IOUSA, is a must see.

I.O.U.S.A. – the 30-Minute Version from IOUSA the Movie on Vimeo.

News IOUSA, national debt

By: George Walden

During a period of economic downturn, joining forces with another firm to create stability, strength and opportunity for growth is a solution that is viable for some companies.

Horizontal Integration or Horizontal Merger: “The union of two or more entities with similar products or services into one usually for the purpose of creating synergies.”

CFA Houston is now advising two contract-manufacturing firms in the same industry. On the surface, both companies are equals. Both companies have sales over $10mm. While competing in the same industry both companies serve different niches.  Company A has equipment to perform larger and longer runs. Company B is configured to produce smaller and shorter runs. Company A has a strong group of account service personnel. Company B has a large and strong sales force. One company is further advanced than the other in modernization of equipment. Each company has excess debt capacity. Both companies have a great reputation.

Both owners are tired of slugging it out alone. During the current economic downturn, both companies are expecting sales this year to be less than last year. They can see the synergies that would be created by joining forces. A merger could eliminate numerous duplications of expense. The equipment can be better utilized to produce more work with less effort and cost. The sales and account service personnel should improve client relationships for both owners. Marginal personnel carried by all companies during a period of strong economic growth could be released to reduce overhead or moved into other areas of need. In a merger after integration, the combined entity should be more valuable than the individual components.

Here are some things you should consider about a horizontal merger:

• A horizontal merger should provide Economy of Scale.

  Economies of scale refer to the reductions in unit cost as the size of a facility, or scale, increases. It is the cost advantages that occur when there is expansion. In our example, there should be numerous opportunities to reduce costs. One plant could move equipment into the other with minimal disruption eliminating a rent burden. Instead of forcing work on a machine that is not as effective in its use, for example, using short run equipment to provide long run services which raises unit cost and makes the short run company less competitive, merged the combined companies are now better positioned to use the equipment more effectively.

• A horizontal merger should provide Economy of Scope.

  Economies of scope refer to the reduction in average total cost of production as a result of increasing the number of different goods produced. Sales and marketing should benefit the combined entity because a more complete product offering is now available. As the number of products promoted is increased, more people can be reached with each dollar spent. In our example, following the job to completion can now be more effectively handled by account service personnel freeing sales people to spend more time selling. The expansion of products to promote to customers should provide greater sales opportunities.

• A merger may not require cash.

  Remember a merger is about combining interests. Protecting cash can be important for the future. In our example, the combined borrowing base and the reduction of fixed costs should allow for better financing terms and a significant improvement in cash flow for the combined entity.

• A merger lets both businesses realize the appreciation potential of the merged entity.

  This can be a way for an owner to take chips off the table and continue to reduce risk by creating a stronger company. Additionally, a merger allows the shareholders of smaller entities to own a smaller piece of a larger pie, usually increasing their overall net worth.

• A merger can be adjusted to create equality in equity.

  All things considered, it is rare that two entities are perfect equals.
  Therefore, a direct exchange of stock is not always the best solution. If the goal of the combination is equality of ownership 50/50, the combined company can pay the stronger company cash or debt to make up the difference.   Remember in a merger, excess debt capacity and cash flow is usually created.

Bottom line, the combined entity should be leaner, larger, more profitable and better capable of surviving a prolonged downturn.

Contact CFA (713.465.4055) if you would like to look at how a Horizontal Integration could help your business.

News

This video is a very good graphical illustration of what caused our current credit situation. Enjoy.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

News crisis of credit, video

By: Matt Register

The Glass Ceiling

In the life cycle of small businesses, there are predictable patterns that emerge. The $10MM glass ceiling is one of them. As an entrepreneur grows his business, the procedures and practices that gets him to a $10MM run rate are not the practices that will get him to $30MM. The ability to run lean, to take on multiple roles instead of hiring a new employee, keeping overhead to a bare minimum are all things that allowed the company to get where it is today. That is not, however, what will get them to the next level. The ability to identify the need for changes in operations is the difference between companies perpetually stuck at the $10MM size and those who leave that milestone in the rear-view mirror.

Why Now?

Private companies have the ability to think beyond the next quarter. A longer-term approach to business will allow the entrepreneur to build the company he wants to be in the next economic upswing during the current downturn. This is opposite of public-company short-term thinking. Those businesses attempt to grow during an upturn, simultaneously digesting new equipment, procedures, personnel, and an increase in orders. Predictably, this results in confusion, dropped orders, employee dissatisfaction, and a disjointed message to the customer.

By taking advantage of the downturn to prepare your business, you can attack the next upturn with the capacity, systems, procedures, and processes to take advantage of the economic opportunity.

There are several reasons why this is a good time to build infrastructure:

1. Cash is coming out of working capital – As volumes decrease, businesses find that they have an abundance of cash. This reduction in working capital can be the capital you need to implement these business changes.
2. Equipment is cheap – By buying capital equipment off-market, you have the opportunity to take advantage of cheaper prices and better delivery. You can probably find canceled orders from competitors at a bargain.
3. High volume of qualified personnel – With layoffs abundant, qualified employees are more available than ever.
4. You have the time – Even though it never feels like it, you have more time now than you will be when the orders are pouring in. Take advantage of this time and digest the changes before your capacity is stretched.

Build the company you want to be. The time, capital, and organizational energy spent in the trough of the economic cycle is directly correlated to the peak-to-peak increases in enterprise value of your company.

What to Change?

While this is not intended to be an all-encompassing list, here are a few areas to look for changes that will have the most drastic effect on your business.

1. Implement an MRP or ERP computer system – While it is certainly possible for a small company to be managed from a yellow legal pad, it has limitations. Companies that implement a software-based platform that allows for the sharing of information are able to handle increased volumes. The ability to have the information and tools at your fingertips is a force multiplier and can allow your company to handle a drastically increased volume without a drastically increased management team. There is pain associated in implementing these systems and it is not something you want to do with a full plate of work. Implement and practice during the downturn to ensure you are fully prepared when the market returns and you are facing an increase in volume.
2. Marketing – Marketing is typically the first expense to be cut during a downturn. This can work to your advantage. Reach out and touch those potential customers while your competitors are not. This will be hard to directly correlate to sales, especially in the near term. A well thought out (but not necessarily expensive) marketing plan sending the right message to the right people over time will have dramatic effects on your business. Increase your market share while your competition “cuts costs”. Here is an interesting article I found on this subject.
3. Improve accounting – Take the time now to take your accounting to the next level. The best-case scenario for any kind of exit scenario is years of audited financials. While this can be painful and a stretch for some small businesses, increasing the level of accountability will pay dividends in the event of a sale, recapitalization, or other capital transaction later. If you are doing nothing, have a review conducted at the end of the year. If you are having reviews done, move to audits.
4. Improve cost accounting – Spend some time examining your cost accounting methods and how helpful they are for your understanding how much your process truly cost you. While some information costs more to collect than the information has value, truly understanding the cost drivers of your business can give you a competitive advantage over your competitors. It is fascinating to see how many people do not grasp how much things cost them in their business. This can result in incorrect pricing and hemorrhaging of profits when it is not necessary and entirely avoidable.
5. Improve sales techniques – No, I am not talking about buying your salesmen a new blue power suit. I am talking about stratifying your customer base to the point that you understand which customers are profitable and which ones are not. It is not enough for you, the owner, to know. Your sales force must be trained to identify the profit drivers and sell accordingly.
6. Information Management Solutions – Jay Silverman, CEO of I-Safe Solutions, says now is the perfect time to take legacy data (paper) and convert it into a searchable, digital, usable information source to be a competitive advantage in your business. The time to implement these necessary changes is not when you are understaffed and working 80 hours a week trying to keep up with orders.
7. Fix the bottlenecks – The last couple of good years should have exposed at least one bottleneck in your operations. Install the capacity to overcome those bottlenecks now. Fixing one bottleneck exposes the next one. Think through your company from a workflow perspective. You should be able to identify the next several bottlenecks and fix them proactively prior to them limiting the volume of your company.

CFA-Houston prides itself on our ability to help entrepreneurs maximize the value of their hard-earned asset. While a down market might not be the time for a total exit of your business, it might be the right time for a partial sale or recapitalization. Any type of growth and organizational change has associated risks. Getting an equity partner involved now might enable you to share the risk of change while participating in the profits they produce. It would also give you the opportunity to “get some chips off the table” to diversify your assets and participate in any future rise in the markets.

CFA-Houston has relationships with many equity partners who are looking for opportunities even in this uncertain market.

News mrp, organizational change, preparing for next boom, recapitalization

By: Larry Rogers

First in a series:

As of January 2009, many banks and non-bank lenders are caught in a ‘liquidity trap’ where they must fix their own balance sheets before they can resume lending to customers.  Getting buyout financing is harder than ever and new loans are secured by both cash flow and hard assets.  On Wall Street, there’s a big slowdown in mergers & acquisitions.

Wall Street’s train wreck is Main Street’s opportunity.  Smart business owners and their advisors will certainly use these changes to their advantage.  Here are some ideas for owners considering a capital transaction in 2009:

1.    Cash is king. Instead of an illiquid investment in a private company, this is probably a good year to have cash.  Consider a buyout or recap if you have another use for money. There are many opportunities in financial investments and real estate, for example.

2.    Debt is cheap. For borrowers that qualify, interest rates are as low as they have been in a lifetime.  If you have good credit and debt-free assets, consider recapitalizing with low-cost debt.  Ask for an estimate of your secured debt capacity.

3.    Taxes are low. Regardless of your political persuasion, it looks like taxes will go up – maybe as early as this year.  We certainly don’t know the outcome, but if the tax on gains goes back to the old rate, then a deal now is worth 18% more than a deal later.  After taxes, you could keep more today than you might get by waiting for a better market someday.

4.    Owner financing is back. Owner financing was risky back in the days of over-leveraged buyouts.  In today’s under-leveraged buyouts, the owner can take the place of last year’s bank loan.  Instead of getting taxable cash and then buying an annuity, you can more than double your retirement income with a tax-deferred note.

5.    Value is relative. Even in a down market, there are always investors looking to invest in good companies.  These well-capitalized buyers do deals in good times and bad.  If your business is flat when everyone else is down, you might be the most attractive company in your industry.

6.    Get paid twice. Don’t sell it all when the market is down.  Sell up to 80% and keep the rest.  As the business grows and pays down debt, the part you keep can be worth as much as the part you sell.  Ask an advisor about this ‘second bite of the apple’ transaction.

In summary, there’s no such thing as a bad time to do good business.  Now more than ever, it’s important to talk with an experienced advisor – one that has done many transactions in both good and bad times.  Consult your advisor to discuss these and other ideas for a successful capital transaction in 2009.

News 2009, cash is king, debt is cheap, liquidity trap, value is relative

By: George Walden

During the last period of economic boom many companies expanded through debt financing. The logic was if one machine is making money then adding three machines will make three times the money. As long as the economy was strong and margins remained high this was viewed as good thinking. After all, even if the economy dropped, the value of the equipment, even leveraged, would be equity that could be used to raise capital in a downturn.

Then just like the housing market, the phrase “mark to market” enters the valuation. Suddenly you find you’re upside down in the market. Whether you borrowed money to expand your organization, equipment, or inventory; all have suddenly become less valuable in a down economy. The true value of the equipment is the value of the goods produced by the equipment, not the intrinsic value of the equipment itself. The inventory values have declined. There is too much equipment on the market at the same time and suddenly the value of your asset has been cut in half. Your people are being paid a premium especially when compared to foreign markets but they are refusing to go along with your cost cutting measures.

The dictionary defines under-capitalization as follows:“A business has insufficient capital to carry out its normal functions. Of, relating to, or being a firm that has insufficient long-term equity to support its assets. An example would be a rapidly growing company that finds itself financing its operations primarily with short term loans may be considered undercapitalized. ”

The common business owner mantra, “I feel like I am working for the bank”, is never so true a when you are undercapitalized. With this downturn business owners should expect sales to decline, margins to tighten, profits to shrink and capital to become more expensive and more scarce. Most business owners will not make the changes needed and risk everything on the belief that they can just get by until the next upturn. Some might even be purchased out of foreclosure.

There are things you can do to mitigate the current situation.

1. Begin cost cutting measures immediately: Don’t wait for the economy to affect your business.

2. Try to convert short term debt to long term debt: While some banks are cutting back their business many are still lending or are being mandated to lend. Be first in line and present a plan as to why converting the short term debt to long term debt makes the business a stronger entity for the future. Advisory firms can help you with this process.

3. Let go of marginal people: Most businesses run with the axiom of the 80/20 rule. Twenty percent of the people produce 80% of the business. Be honest about who is producing for the company. No one likes to release people but if reducing overhead protects the company, better to lose one or a few than lose the company and put everyone in the unemployment line.

4. Reduce excess inventory: Most industrial companies have inventory issues. Scrap what is not useful and sell the rest. Cash is king during a down economic period. Inventory that is lying on your floor or rusting outside doesn’t do you or your business any good.

5. Return or sell excess equipment: Just getting off of a note can be a victory for a company in an economic downturn.

6. Convert debt to equity: Good companies still attract investors even in a down economic period. Consider giving up some equity to raise cash or reduce debt. Finding the right type of capital while the company is still relatively strong can very effectively set you up for the next economic upturn.

These are just a few ideas for implementing strategies for a slow down. Those owners that accept the situation and make the necessary adjustments will probably fare very well over the next cycle. I am not saying all businesses will diminish in this economic setting. Some will excel. They are the flexible companies that attack situations as an opportunity.

If you need an analysis of your current situation speak to an experienced firm that has successfully helped others in previous downturns. Now is the time to work out a plan with your advisors. Waiting until it is too late benefits no one.

News downturn, survive, under-capitalized

From Forbes.com. Read the entire article HERE.

WASHINGTON (Thomson Financial) – Market turbulence and tightening credit conditions are not expected to have a significant impact on small business loans, although the Federal Reserve Board is continuing to monitor the situation to be sure, Federal Reserve Board Governor Fred Mishkin told members of Congress today.

‘There are good reasons to believe, and some evidence to suggest, that the recent financial market disruptions have not seriously harmed access to credit by small businesses, and if the disruptions continue to be resolved in an orderly manner, will be unlikely to do so in the future,’ Mishkin said in prepared testimony before the House Committee on Small Business.

Mishkin stressed that the Fed’s conclusion on this issue is preliminary, as there is little hard data that small companies will escape tighter credit conditions that have hit other sectors of the economy. He also said it is possible that poor market conditions ‘could spill over to the market for small business loans,’ and said the Fed’s recent decisions to lower the federal funds rate was meant to offset tight credit conditions on the broader economy.

However, Mishkin noted several factors that give the Fed reason to believe small business’s access to credit will remain largely unaffected.

For example, he said the securitization of small business loans has been ‘modest,’ meaning the recent market turmoil related to securitized real estate and other loans is not expected to have a ‘large direct effect’ on small business lending.

Also, large banks tend to be more involved in loan securitization markets and thus are more exposed to the recent market disruptions, unlike smaller banks that tend to be more involved in small business lending.

‘These banks are relatively unaffected by disruptions to the securitization markets,’ he said. ‘Thus, once again, we would expect that the direct effect of current events on small businesses would be limited.’

Mishkin also said the Fed’s conversation with bankers shows that small business loans are expanded at a ‘fairly robust pace’ through mid-October. ‘Such data and our conversations with bankers suggest that, at least to date, the supply of credit to small businesses remains healthy,’ he said.

Nonetheless, Mishkin said small businesses will likely feel some side effects of the credit crunch, such as through higher risk premiums and overall tighter credit standards. He said the Fed’s senior loan officer survey shows that bank lending practices have tightened over the last three months, and that a survey of independent businesses in early September shows credit has been harder to obtain for small companies.

‘While these survey data certainly suggest that some tightening has occurred, it is important to observe that they also suggest that, at least for now, the effects have generally been quite limited,’ Mishkin said.

Mishkin said the Fed would continue to monitor small business access to credit, and in particular whether the tendency of small companies to use real estate to secure loans will be affected by a drop in real estate prices. He also said the Fed would watch to see if bank lending is constrained by bank losses related to the housing downturn.

He said the health of small companies is critical to the health of the US economy, since these companies with less than 500 employees are responsible for the employment of half of all US private sector workers, and create half of the new jobs created each year.

Mishkin spoke just weeks after the Fed turned in its latest analysis on small business lending, a topic on which is it required to report to Congress every five years.

He said the latest report, covering 2002 through to early 2007, showed that financing flows to large and small companies has increased, and that 80 pct of the small companies that applied for credit received it.

News credit crunch, small business

From the TimesOnline. Read the article HERE.

WITH so much energy required to grow a business, few entrepreneurs pay enough attention to developing the skills needed to sell it.

Ashley Ward, chairman of the European Leadership Programme:

Many first-time vendors blow it, often through greed. Most people overvalue their own business. You have to be very pragmatic and tell it like it is, warts and all; any surprises will be punished tenfold. During negotiations, focus on running the business. If you have a bad month or lose a big customer, the deal’s off.

Michael Rendell, partner at Price Waterhouse Coopers:

Succession planning isn’t something you can do six months before you decide to move on. You need to identify a number of individuals who could step into the role you are giving up – ideally, two to three years before you sell, so there is time to develop them. Try to find several people: you don’t know where the business might be by the time you come to sell.

Gerard Burke, Cranfield School of Management:

The process of negotiating a sale is usually extremely time- and energy-consuming: many entrepreneurs tell me it is the hardest thing they have ever done. There are lots of issues around how open you can be with staff – and keeping it quiet can be very difficult. Then there’s what to do afterwards: for many people, it can feel like a bereavement when a business is sold. Start planning five years beforehand to get through the emotional and practical side.

Hugo Haddon-Grant, managing partner, Cavendish Corporate Finance

Quite often, selling is not as rational a decision as it might be. There could be a family problem or other issues that mean an entrepreneur wants to sell quickly. One of the big problems we see is people wanting to sell their business yesterday: with a bit of planning you can get a better value out of the asset.

It’s worth getting in a professional so you can continue to focus on running the business.

Dr Nick Gostick, incubation manager, BioCity Nottingham

You need to make yourself redundant. It’s likely with a trade sale that what the buyer is after is the customers. They will be looking for the business, not the business owner. A trade buyer will probably integrate your company into an existing business, and self-made entrepreneurs are often not very good employees.

If the business can function without you it’s probably more valuable – a business dependent on one person is very vulnerable. Making yourself obsolete is one step towards making the business saleable. Remember, once you have sold, you have got what you need; you’ve got the money and the experience, and that is a badge of honour that investors like to see. Now you can get involved in other businesses – and second time around is a very nice place to be.

Tommy Young, Bank of Scotland Corporate’s head of commercial banking for England and Wales:

Small businesses often become very dependent on one person. Succession planning is seen as something only big business needs to do but it’s even more important for the small business, where the void will be so large if that one crucial person wants to leave.

I see entrepreneurs so focused on driving the business that they forget to look at the longer term. The consequence is that it can then take them several years of extra work to be in a position to move on. The answer is to bring in people who complement your skills and give them the mandate to make decisions.

News tips, when to sell

From Rediff News. Read the entire article HERE.

After the rush of a small-business launch and the initial influx of curious customers, many small businesses reach a plateau. The proprietors are busy working hard to sustain the business doing what they’ve always done because it’s worked so far, but this approach often means the business acquires and retains a certain customer base and sales volume and then “hits a wall”.

Any business, but particularly a small business, must constantly adapt to changing market conditions, new business tools, and new sales opportunities to continue to grow and prosper. The small business owner must have one eye on routine operational tasks and one eye scanning the horizon for new opportunities. In this article we will discuss 10 breakout ideas for small businesses looking for growth opportunities.

Add complementary products and services

A great way to increase sales and bring new customers to your sales base is adding new complementary products and services. But how do you decide what to add without turning your business into a third-rate Wal-Mart? A great place to start is by reviewing the definition of your business.

For example, if you sell house siding, ask yourself, are you in the siding business or the exterior building materials business? The result may be that you redefine your business and add gutters and downspouts, roofing and other coverings to your product line.

Another surprisingly simple way to build a list of new products or services is to ask your customers what else they might buy from you if your business sold it. A few friendly conversations with customers and staff will likely get you more information than thousands of dollars spent on professional customer surveys.

Be sure to ask how much they would want to buy and how often to get a sense of whether the demand would be great enough to warrant the additional costs of building up this area of your business.

Explore new market niches

One way to find a new market niche is to seek alternative applications for your existing products and services, and we have a Cheez-y example of how this works. Kraft started out with a spreadable cheese product in a jar that could be spread on crackers for snacks – it was called Cheez Whiz.

This was fine, but selling a cracker topping will only take you so far in this world. That’s why Kraft expanded the scope of Cheez Whiz and started promoting it as a base for a variety of dips and food toppings. Soon Cheez Whiz was an ingredient in all sorts of recipes. Kraft wasn’t satisfied with only human consumption though. One of the latest unique uses of Cheez Whiz comes from a California fishing lure and bait company that sells Cheez Whiz in a prepackaged bait application, and it buys Cheez Whiz in 55 gallon drums.

If Kraft had stuck with the spreadable-cheese concept, sure, it would have covered a lot of crackers. But by thinking outside of its original intent, Kraft expanded the market and attracted customers it never would have targeted initially.

Find an unmet need in your industry and fill it

When you talk to your customers and clients, listen closely for this phrase: “If only they made/sold X”. Your job as a business is to find out what X is and provide it. It sounds obvious, but customers will tell you what they want if you will only take the time to listen. And the good news is that if you can find a way to fill that need, breakout sales are virtually guaranteed.

Take, for example, the local lumber yard that feels the heat as big box retailers muscle their way into the lumber business. There’s no way the smaller outfit can compete with the large volume and low prices of the big boxes. Instead the owner listens to his customers who tell him that the big chain stores lack custom or hard-to-find millwork and hardware.

This is an unmet need just waiting to be filled, and it could bring a new client base of suburban do-it-yourselfers who want to buy their unique weekend needs all in one place.

Use Internet and catalog sales tools

If you are reading this article, you’re no doubt aware that that the Internet has more to offer than photos of pets dressed up like humans … or humans dressed up like pets.

Many small businesses limit their sales reach and distribution to on-site, over-the-counter sales, but ecommerce can enhance your market reach, customer base and sales volume. Rather than the standard brick-and-mortar sales front, consider selling from a website, from an online storefront, a blog or from a printed catalog.

Let others sell your private-label products

By allowing distributors, wholesalers, big box stores and competitors to sell your products under their own label (also known as a white label product), you may be able to realise the benefits of increased production volume, including reduced unit cost, increased fixed-cost amortization possibilities, and increased sales revenue, all of which can bring significant bottom line growth to a small business.

This technique also allows the possibility of market segmentation under your own or other labels.

Build a better mousetrap – or at least buy one

We’re all aware of the “build a better mousetrap” strategy as a breakout technique, but many small business owners don’t know how to find technological innovations, patented products and processes in their industry, or how to license needed new technologies. There are a number of proprietary property licensing firms servicing companies of all sizes. These are easily found online if you search for “Technology Licensing”.

There are two types of licensing (in-licensing and out-licensing) and not all firms handle both types. In-licensing involves searching for a particular tech innovation to make a better or different product, or a technique to make it at a lower cost.

In this instance you would ask a proprietary licensing firm to search and acquire a license for your business to acquire the needed, and usually protected, technology. Conversely, if your firm has developed and patented proprietary technology that you want to license to others, an out-license firm will search for businesses interested in buying a license for the technology or innovation from your firm for their own use.

Improve productivity and efficiency through enterprise management software

Enterprise management software integrates your company’s existing and separate business functions and project tracking into one system. This streamlines operations, and can provide a parallel off-site system for backup and access from anywhere in the world. Software like this was once reserved for large firms with large budgets and the only suppliers were industry icons like SaaS, Microsoft and SAP.

These approaches can significantly reduce administrative staff load and costs, enhance productivity, efficiency and project tracking accuracy. This functional improvement can bring your business to a whole new level. The good news is that this software can now be had at reasonable rates from a variety of smaller software companies.

Align your products and services with popular values and trends

You may be able to align your company brand, products and services with local festivals, sports teams, known tourism sites, etc., to piggyback on their advertising, promotions and branding. In some cities local merchants combine their advertising with weekend festivals, the regional NFL and AHL team promotions, and profit from package bus tours to local historical sites.

Your business may also benefit from an association with popular commonly held themes such as an environmentally oriented program. This type of branding can enhance the reputation and credibility of your firm in your region and hype your sales.

A small business can often benefit from identifying with “hot” issues. Rather than offering direct dollar discounts, many auto dealerships and auto companies began offering free gasoline points as fuel prices skyrocketed in 2007-2008. The move spiked their sales and spread their promotional costs over an extended period.

In a similar vein, many small-scale fruit and produce farmers were feeling a price squeeze from the supermarket chains until they banded together to fund “buy locally grown food” campaigns.

Make use of clubs, associations and your competitors

Present your products and services to organizations with members who could be customers. Take advantage of your podium access at local service clubs like Rotary, Lions Club, Elks, VFW and the American Legion.

If you are a chamber of commerce or trade association member, volunteer to be a presenter at some of their seminars. If you can speak directly about your business, that’s always best, but your presence and individual contacts at these meetings are excellent breakout opportunities.

As a presenter at one of the service clubs you are viewed as an expert and an authority on the subject. Your bio will include your company name, and people like to work with an expert.

It may sound crazy, but it also pays to work with your competitors to grow the market in your industry. Rival hotels and golf courses in resort locations often work together closely to bring more customers to their location. They then compete for the business once the location visit is confirmed. It’s called “destination marketing”.

Co-competition and “clustering” with competitors can be a breakout technique that works to increase your business.

Export your products and services

Exporting your products and services takes some preparation in documentation, setting up dealers or distributors in foreign countries, learning the importation rules and tariff schedules for the destination countries and learning something about payment conditions and letters of credit.

Determining your transportation mode, understanding transfer of ownership laws, and being knowledgeable about any cultural issues involved is also important.

Exporting makes the world your marketplace and exposes you to customer populations with huge sales potentials, especially in emerging markets with a growing middle class.

Conclusion

There are many ways to adapt, invigorate and position a small business for a breakout to the next level of sales growth and profitability. It takes owner vigilance, awareness and creativity. It also tends to be the fun part of the business as well as its best chance for continued growth and success. In the business world, the only constant is change.

Adapt, break out and prosper.

News growth, tips