No matter how many different ways we crunched the numbers, the result was the same. The business was going to run out of cash in less than two months.
In four months, many of our sponsors were due to renew their membership. But that still left a two-month window during which we would have no money for salaries or business expenses.
Every business owner, especially those with minimal experience (I definitely landed in that category), goes through a similar situation at some point. But if you find yourself there, how do you count yourself among those who survived, rather than among those that crashed and burned?
I’ve come through slow patches (a euphemism for “Help! We’re going bankrupt”) on a number of occasions and, every time, I learn something new.
In this article, I’ll share the lessons I learned from these occasions, as well as the simple solution that got us safely through the above conundrum. With hindsight, it’s an obvious fix that seems too simplistic.
But it invariably works…
Learning Economic Lessons the Hard Way
In the first four parts of this article series we’ve considered why the B2B industry is so lucrative and comparatively easy to sell to, how to use marketing psychology to win clients, how to get inside access to important industry contacts and how to make a success of telephone sales.
So, if the B2B market is so amazing, how did I get into a situation where we were about to run out of funds?
The most clichéd way possible. A couple of sales fell through and a couple of clients were dragging their heels settling outstanding invoices.
If you don’t plan ahead for this kind of event, it’s amazing how quickly you can go from comfortable to full-on panic.
Our situation wasn’t helped by the fact that most of our clients were on an annual contract and most signed up at more or less the same time, within a period of just a few weeks. This meant that once a year we had a big influx of cash, and not much arriving in-between.
Relying on this once-a-year bonanza was foolish and was a mistake I never repeated. But there were other mistakes made over the years. Here are some of the lessons I’ve learned from those occasions.
- Don’t be complacent
If you don’t love sales and marketing, it’s the most natural thing in the world to sell just enough to get by, and then get busy doing other things.
Seeking out new clients should be a regular part of your ongoing work. It doesn’t have to take up the majority of your time, but it should take up SOME of your time. Waiting until you’re nearly broke to find new customers is a risky strategy.
- Don’t extend credit
It’s not unusual for companies to settle bills via a 30-day invoice but beware of any company that wants to spread payments out longer. If you’re going to agree to such an arrangement you should be charging extra for the privilege. Unless you’re a finance company that makes money by staying liquid and investing funds, offering interest-free credit is not wise.
- Don’t rely on one client
Relying on a single client means you’re only ever one lost customer away from having nothing.
If you’re offered a contract that will limit you to one client, and the offer is too lucrative to resist, at least be sure to put money aside that you can fall back on if the relationship ends suddenly.
You should also maintain your network of contacts by keeping in touch with former clients and prospects. That way, if you suddenly find yourself scrambling to find new clients, you’re tapping into a warm market.
- Diversification is key
No matter how well business is ticking along, you should always be thinking about next year, the next five years, and the next ten years. How is your business going to evolve? How is it going to stay abreast of new technology? And how can you broaden your reach?
A good place to start is to consider how you might tweak your product or service to make it useful to other sectors. If you can side-step into new verticals, you can open yourself up to a whole new audience.
But I Need Cash Now!
Hindsight’s fun, isn’t it?
If you’re almost out of cash and need to make some sales TODAY, learning about all the things you SHOULD have been doing to avoid your current predicament isn’t helpful.
You could Google some ideas, but you’re mainly going to get advice like…
- Don’t Panic: Good advice but this doesn’t advance your cause.
- Don’t Stop Buying Advertising: Again, good advice – you need advertising to bring in new clients – but it’s not helpful if you primarily bring in clients through free marketing methods such as networking, word-of-mouth and SEO. It’s even less helpful if you’ve already run out of cash.
What you REALLY need is a solid action plan that directly leads to sales and income. So, here are three strategies that I’ve found to be effective for making quick sales.
- Ask for Referrals
You should be doing this regularly anyway, but if you haven’t previously or at least for a while, ring all of your clients and ask if they know anyone who may be interested in your services.
What you’re looking for is the specific name of someone who works at a specific company. This allows you to call them, introduce yourself as having a mutual friend and start a discussion.
- Create a Fire Sale
If you’re making new contacts and looking for swift sales, it helps to have something new to offer. Fire sales are, broadly speaking, a collection of goods or services sold for a very low price. And while you can’t use this technique often, when you need some income fast, it’s a solid option.
Try bundling together some of your best stuff and put a price on it that is too irresistible to pass up. It needs to be limited in terms of numbers of period of availability. And you should offer it to your existing clients, your most promising leads and then everyone else – in that order.
If your existing clients already have some or all of what you’re offering, offer an extension on their contract if they renew early. However, take care with this strategy. Overextend the offer and you could be creating future difficulties. But next year’s problems are irrelevant if you don’t survive past next month. Sometimes it’s better to concentrate on the immediate issues and focus on future challenges once you’ve earned some breathing room.
- Create a New Product Based on Time
Forget about spending months creating a new product and carefully testing it. You don’t have that kind of time when money’s short and bills are due. In this instance, your new product is going to be a service in which you give your time in exchange for a high fee.
This isn’t going to be a cut-down offer. It’s going to be expensive and it’s going to be extremely limited. In PART TWO of this article series, I told the story of how I created a year’s worth of advertising, called it a sponsorship package and limited the availability to just 24 units. That’s one example of a ‘new product’.
Another option would be to offer a “done for you” service in which you offer a hands-on service to complement the product you sell.
Or you could offer an intensive, personalized coaching service and limit it to just a handful of students.
The key is to make it EXTREMELY scarce but valuable enough that, once you sell your inventory, you’ve raised enough capital to get you through your rough patch.
The Ultimate Solution
If none of these efforts pan out, or, if you’re smart and willing to attack your deficit from ALL of these different angles, there is one further technique that is proven to work.
It’s proven because you’ve already done it.
All you have to do is think back to the first few weeks or months of your business’ origin and repeat whatever it was you did to get the ball rolling.
Because the chances are good that, immediately after winning a bunch of clients, you got so busy working on your business you stopped what you did that was so successful in the first place.
In my case, I sold a good number of sponsorship packages (see PART TWO for the full story), raised enough capital to see us through the year and turned my focus to looking after our new clients and marketing our website. What I didn’t do, and should have been making time for, was regularly looking for new clients – month in and month out.
What worked for me in the beginning was hitting the phones hard for several days and not stopping until we had enough income to see us through our first year. What would happen if I merely repeated that exercise?
Nothing surprising. I hit the phones for a couple of days and bagged enough new clients to get us through the next couple of months – at least until the bulk of our clients renewed their membership for another year.
It’s an obvious fix, and it might seem too simplistic, but what worked in the past invariably works in the present. You’ve just got to knuckle down, harness the enthusiasm you had when your business was new and exciting, and do whatever you did so successfully the first time around.
A small business owner once told me that when business was slow, everyone would put 50 bucks in a pot and they’d all hit the phones for an afternoon. The first person to win three new clients won the pot.
Simple, but effective.
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There are lots of similarities between the business-to-business (B2B) and the business-to-consumer (B2C) sectors. The same marketing techniques can be used for each, the challenges are much the same and a savvy-business owner will always find ways to turn a profit.
But where the B2B sector wins out is the reduced level of competition, an audience that is less cynical and more inclined to spend as well as typically higher profit margins.
I discovered all of this by accident. But, 12 years later, having experienced both sectors, I wouldn’t switch places.
If your B2C business is struggling or you’re looking for a new venture, do some research into how your product or idea could be adapted for the business market. Once you’ve experienced it for yourself, I doubt you’ll be in a hurry to leave.
If you have any questions about B2B marketing or anything discussed in this article series, please post in the comments below.