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Small Business Digest



Boosting the Bottom Line Is Critical for Small-Business Leaders

Too often, small-business leaders focus on “making payroll” rather than beefing up the bottom line.

Credit-crunch and cash-flow fears often take precedence over adding profit on the top-10 to-do list.

This trend is evident from data gathered last year.  Nearly two-thirds (64%) of small businesses either didn’t make a profit last year or failed to increase their profit, according to the year-end report from the National Small Business Association.

One expert says it doesn't have to be that way. There are simple, creative steps any business can take to improve its bottom line—whether the company is a “solopreneur,” a small business with a few employees, or a medium-size enterprise.

This is the thrust of Patricia Sigmon’s advice to business managers.  She is a successful entrepreneur, a sought-after speaker and a leading expert in the field of profit management.

Step 1. Change the rules of operation:  To compete in today’s marketplace, small companies need to generate more sales while reducing expenses and tweaking costly administrative processes. To increase sales, try cross-selling—offering new services or goods that complement the business’s current offerings (e.g., a chiropractor selling vitamins).

Switch to a “relationship-based” sales model that gets customers coming back to the company—offering monthly or yearly service plans or a bundle of visits at a discounted price (e.g., a series of 10 gym visits).

Or lure them in the door with specials or giveaways. To trim expenses, start by automating with up-to-date, real-time records for sales, expenses, time spent and more. Review these data constantly, including those for office spending and pricing decisions, to keep the business running lean and mean. Finally, audit administrative functions. Could some specialized tasks be outsourced to save money? Would hiring part-timers to do these tasks be more cost-effective?

Step 2. Stay visible and connected:  Even if the company has been around for decades, it’s important to stand up to the competition and wear its reputation on every employee’s sleeve. Accreditations, licenses, and certifications—for the business or for individual employees—can set the company apart from the competition.

Take the company’s reputation online, utilizing social media, the Web site and a blog to connect with clients and make strategic alliances. Use ad-sharing with complementary businesses, and take advantage of affiliated marketing online tools to drive new customers to the site. Also, eliminate stale, ineffective alliances that may be dragging the company down.

Step 3. Maximize cash flow:  One of the best ways to achieve a stable cash flow is to offer prepaid retainers or ongoing payment plans. For example, instead of a one-shot eight-hour job at $125 an hour, offer a discounted 10-hour retainer plan at $100 an hour. At first, this may not seem as lucrative, but it establishes a relationship and keeps the door open for additional work. Maintenance contracts, for service-based businesses, are another great way to create a brand-new revenue stream. Other ways to keep the cash flowing include once-a-year or once-a-month contract-renewal fees (for registration, maintenance, subscription, usage, etc.), thus managing workload so many customers get ongoing service, rather than just one large client’s holding up service for everyone else; and managing credit payments to avoid fees or to take advantage of discounts and better terms.

Step 4. Streamline management costs: How efficient are employees? How many customer leads does the company generate? How much is owed in Accounts Receivables? Questions such as these need to be answered immediately, and to do so, the company needs to automate the process.

Create a user-friendly system for employees to access and add data; keep all information updated and synchronized; and be sure to build back-office, administrative time (to manage accounts and the business) into project fees, hourly rates or ongoing charges. Automation will allow the business to run smoothly, and will help a scaled-down workforce to accomplish more back-office work.

Step 5. Raise the marketing bar:  Not long ago, networking meant suit-wearing men and women, “Hello” labels, cocktails, big smiles and big handshakes. Today, marketing is all about immediacy. Give the business an instant presence through online networks, including Facebook, Twitter, YouTube, and LinkedIn. Set up group meetings, sales presentations and special promotions using Webinars.

Or, offer tutorials, demos, or new certification sessions as Webcasts or podcasts for immediate download. Don't forget to measure all of the marketing efforts to see which ones are indeed cost-effective. This effort can be done with a Customer Relationship Management (CRM) software solution linked to the accounts-receivable system.

Step 6. Make everyone a salesperson: From telephone to e-mail to face-to-face meetings, opportunities abound for every employee to spread the company’s message and engage in potential sales-generating behavior.

Jobs are no longer about just going to the office and biding one’s time. Everyone needs to pitch in to help: cutting costs, selling, networking on the Web, marketing and more. Get them motivated to sell the company’s message by encouraging self-development or through roundtables, conferences, lunch meetings and Webinars. Reward employees who seek continuing education or who make an extra effort to represent the company inside and outside of work.

Sigmon is founder and president of David Advisory Group (, a boutique firm that specializes in helping CEOs and small and midsize businesses re-engineer their business practices to generate more profit, cut inefficiency and optimize their earning potential. Her new book is Six Steps to Creating Profit (Wiley).

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