4 Secrets To Improve Your Business
 By Amanda C. Garrett

Stumped about how to improve your small business? Here are five suggestions that many small-business owners overlook.

1. Get Customer Feedback
This is so easy, it’s a wonder so many small businesses neglect it.

Talk to customers to get feedback on your products or services. Who knows better what works and what doesn’t than the people who buy (or don’t buy) what you sell?

Business owners are quick to consult partners and question vendors without ever thinking to ask the real experts – the customers who either spend or don’t spend their hard-earned money.

Follow the feedback your customers offer and you’ll small business will get a boost.

2. Watch Your Debt
Debt and interest payments can sap small-business profits.

There are times when taking on debt, such as to fund a major expansion or buy an expensive asset, is a good business decision. But bad debt decisions, such as running up credit card balances to pay for day-to-day necessities, can seriously hamper your business.

It’s tempting to buy on credit to own today what you otherwise would have to defer into the future. But ongoing debt not only sucks cash from profits, it also reduces what is left to spend on operations.

Every dime spent on interest is a dime not spent on marketing, advertising or inventory. For that matter, every dime spent on interest is a dime not spent paying off the actual debt, the amount owed for the goods or services purchased. Perpetual debt means forever paying for the privilege of paying for what you bought – at the expense of your ongoing operations.

3. Look For A Niche
Do you think it’s impossible to compete with the big guys, who offer lower prices, wider selection and higher-end extras than your small business offers?

Then quit considering them to be direct competitors. If they truly were direct competitors, you already would have lost to the competition since they have many times more customers and many times more profit.

Instead, target segments of the big guys’ customer base with niche marketing. Appeal to those people who shop at the bigger outlets only because they have no other option. Many of these customers would prefer not to do business with big, impersonal companies if they could just find a vendor who gave them more of what they wanted.

Perhaps you can attract customers who prefer a personalized or more intimate experience. If there are customers in the big guys’ market base hungering for something they can’t get at Mammoth Inc., you ought to be able to attract them and hold on to them by giving them what they want.

Caution: Don’t waste time directly competing for customers who clearly prefer the lower prices, wider selection and other benefits inherent in larger outlets.

4. Make Your Marketing Efficient
How do you know that the money you spend to attract customers is spent profitably? To answer that question, you must know what it costs to attract a customer.

A rough gauge is the amount you spend marketing divided by the number of your customers. Compare that amount to the average profit per customer by dividing profits (not gross sales) by the number of buying customers. If the cost to attract is greater than the profit per customer, you’ve got a problem.

An even truer picture of marketing effectiveness is the cost of retaining customers. If feasible, track each customer’s purchases over time.

How many are attracted, but buy only once? How many come back again and again?

If your customer base changes every year, your marketing dollar is buying one- or two-time buyers. That’s expensive. But if you’re getting repeat customers, it means more bang for your marketing buck. If you can identify repeat buyers, find out what brings them back. Then do more of that.

(Posted August 2006)

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