Buy or Build? Buying Existing Business vs Building New one

March 20, 2011


Many buyers of small business are dismayed by the money they have to pay to buy an existing business. They think that they can build the same business from scratch at a much lower cost. And this is true. To understand why this is the case you need to know the concept of book value of a business versus its market value. Book value refers to the money you can get if you sell all of the business assets in the market. The market value is usually higher than book value and is a result of goodwill that is associated with the existing business. It is this goodwill that the buyers of existing business are paying extra for. The goodwill is a result of all the work that existing owner has done to bring the business to its current level.
While it is true that you can build a business from scratch at a lower cost; it comes with its own set of problems. You have to understand both sides of the buy vs. build equation before making a decision. Below we have highlighted pros and cons of buying an existing business as opposed to building a new one. You can make your decision after studying this and looking at your own situation.
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How Can your Employees Help Improve Sales

March 16, 2011


It is our belief that your employees can help improve sales at your business by more than 20% if you help them help you. Most business owners don’t really think of their employees as ones who can help them improve sales; however the front line employees – the ones that interact with customers – can make a big difference in improving your business. These employees are talking to and interacting with your customers all the time. They are responsible for making your customers come back by providing great customer service. In short, they are representing your brand and your business.
So what are the specific ways in which your employees can help improve sales? In our experience of running business for 5 years we have come across multiple opportunities.

  1. They can make your existing customers come back by providing excellence customer service.
  2. They can also help bring new customers by word-of-mouth from existing ones.
  3. They can help you up-sell and cross-sell at the point of order taking and payment.
  4. They are aware of where opportunities exist for improvement in customer service and operations.

It is your responsibility as business owner to make this happen. You have to provide them with the necessary resources and incentives that will motivate them to give their best in front of customers. We have identified below several areas that you need to address.
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How to succeed in running absentee business

March 13, 2011


Small business owners run their business absentee for variety of reasons. Some owners are still holding full-time job while starting a business. Others have more locations than they can handle themselves. While still others just don’t want to spend their entire time on the business. Our estimate is that while majority of small businesses are owner operated, there are number of businesses that are run absentee for the reasons mentioned above.
While it is possible to run and succeed in absentee owner business you need to be aware of the problems that arise when you are doing so. Ignoring these problems can lead to deterioration and even disaster for your business. The most common issue in running the business absentee is that you may not be aware of what’s going on with your business or at least not to the same degree as when you are present 24×7. Even if you come to know about the issues it may be too late to act on. The issues can surface in all areas of the business ranging from operations, quality, purchasing and customer service.
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How to Ask Customers to do Marketing of your Business

March 9, 2011


Most small business owners are at a disadvantage compared to their large competitors when it comes to marketing. After all, small businesses do not have the marketing muscle and budget of the large companies. They have to find innovative ways to do marketing and advertising that is not expensive yet is equally, if not more, effective.
Many small business owners get intimated by this challenge and think that there is no way they can succeed against Goliath in marketing. We believe that is not true. In our earlier post on 5 fundamental rules of marketing we argued that good marketing strategy does not have to cost much. We also showed how you can improve your sales in a low-cost fashion through community involvement. There is another aspect of low cost marketing that is not utilized well by small business owners. That involves seeking help from your existing customers to do the marketing for you.
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Improve your Sales with Up Selling

March 6, 2011


“Would you like fries with that?” – We have all heard this while ordering burger at a fast food place. How many times have you answered it with – “sure”? Well, this is the power of up selling. In its simplest form, it is just a matter of asking customers if they want to add more items to their order. In a more subtle form, it could be something like placing a complementary item to the one that you intend to purchase in a grocery store and enticing you to buy it.
If you are not taking advantage of up selling and cross selling opportunity in your business you are probably losing 20-30% of potential sales. Some companies have really mastered the techniques of up selling by making customers buy additional items at a high price. For example, Ford has increased the average selling price of its cars by making customers want and pay for the extra options in their basic cars. When Apple introduced its next generation of iPad on March 3 it also showed a screen cover that will be sold for $39 for basic model and $69 for leather version. Can you imagine what their profit margin is on these items?
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Do you have what it takes to be Small Business Owner?

March 2, 2011


Small business owners are a special breed. They don’t like to sit still or take orders from others. They also don’t like to stop even when they have become successful or when they have met with failure. That’s why the term serial entrepreneurs – once an entrepreneur; always an entrepreneur.
Many people who have held job for their life dream of owning a small business – either out of frustration with their current job or because they have lost their job and can’t find one in this difficult economy. They think that just because they have a strong desire to be a small business owner they will succeed. While having a strong desire is a good start; it takes more than that to be a successful business owner. Our experience has shown that the success in small business is dependent on a combination of factors including heredity, upbringing, determination, working style and external support.
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How to plan for employees leaving without warning

February 28, 2011


For small business owners employee attrition is a fact of life. It is estimated that the annual attrition runs as high as 100% for some types of small businesses; particularly the ones that employ hourly workers! This means that you will not have the same set of employees at the end of the year as the ones you started with. This kind of turnover not only increases your cost in the form of hiring and training; but it may also reduce sales by affecting the quality and customer service.
While you can try to keep your employees motivated and use these techniques reduce turnover; the fact remains that the employee turnover will remain high if you are in type of business that employs hourly workers. My brother, who owns a coffee shop, complains that he always fears a call from an employee who will call him to say he is not going to show up for work because he has found another job. It always happens when he is not able to find any replacement on a short notice forcing him to rush to the business from wherever he is.
While you will not be able to prevent your employees from leaving on a short notice; the next step is to try to mitigate the impact on your business as a result by taking certain steps beforehand. Below we have outlined some steps you can undertake that will help you take care of business even when your employees leave suddenly.
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Improve Sales by Helping Customers Make Choice

February 23, 2011


Every one of us has been to a soup isle in the grocery store at some point. Have you noticed the number of choices they have for sale? There are endless shelves stocked with soups from different companies in myriad variations. Just imagine having to make a decision on what soup to get – Campbell or Progresso, ready-to-eat or condensed, Mushroom or Minestrone, low salt minestrone or regular or high fiber and on and on. Is your head spinning yet?
Psychology professor Barry Schwartz makes good arguments in his book The Paradox of Choice: Why more is less on why you sell less when you provide customers too many choices. When customers cannot make up their minds on what to get they will simply just walk away without making any purchase.
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Filed Under: Customers, Marketing, Operations, Sales

Proven Techniques to Deal with Customer Complaints

February 21, 2011


For small business owners (and for large ones too) customer complaints is a fact of life. Every business runs into few customers who are not happy with the service or product or something else. The complaints in and of themselves are not going to hurt your business much. It is how you deal with them that determines how they will impact your future business.
We have heard many business owners say – “but I know that this customer is wrong. He/she is just trying to get free stuff or get discount by complaining and making a scene.” And they may be right; but does it really matter who is right or who is wrong? At the end of the day, it is about who has the power to hurt your future business. It is these customers who are complaining – genuine or sham.
So, is there anything you, as a small business owner, can do to alleviate this problem? Obviously, you cannot stop customers from complaining; although you can reduce the number of genuine complaints by providing excellent products and services. Based on our experience in running multiple restaurants we have come up with these guidelines to deal with customer complaints and mitigate their impact on the business.
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Checklist to Understand Marketing Benefits of Franchise

January 31, 2011

In the post about benefits of buying a franchise versus independent business we argued that one of the primary benefits provided by franchise is better marketing at a lower cost. By leveraging their size and expertise a franchise can create better brand and improve sales for all franchisees. Subway positioned itself as the Diet Sandwich Shop in the minds of all Americans by running the “Jared” campaign for number of years.
However, not all franchises do such a good job of marketing. A number of them waste their and franchisees’ money by spending on frivolous, useless marketing activities. That’s why it is important to understand the value provided by franchise in terms of marketing and compare it against the investment you have to make as a franchisee – in other words the return on your marketing spend.
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