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Five Tips to Transform Your Business

August 12, 2011

A look at the best turnaround tactics from small companies around the U.S.

By Entrepreneur Staff | June 27, 2011

Sales plummet. Long-time clients disappear. Markets dry up. The economic downturn has been merciless on small business owners. But there are many resilient entrepreneurs who refuse to give up, remaining steadfastly determined to turn their companies around. And indeed they do.

Consider the advice gleaned from the turnarounds featured in our ‘Small Business Comebacks’ series and how it might be useful in your business.

1. Rally your team for ideas.
When revenues at Suzanne Bates’ Wellesley, Mass.-based executive coaching firm took a $600,000 recessionary dip in 2009, she turned to her employees to help find a solution. The 10-employee team at Bates Communications brainstormed how to make coaching services more relevant — and current clients more engaged in the business. Bates’ coaches then reached out to clients with everything from weekly emails to grabbing lunch to sending them leadership articles.

As it turned out, many big clients needed leadership training more than ever — they just couldn’t pay a high price for it. So the company rolled out lower-priced options, including $25 teleseminars and group coaching sessions. Bates also began pitching leadership training to smaller companies, and some non-profits that saw the recession as an opportunity to gain market share.

As a result, Bates Communications pulled in $2.3 million in annual revenue for 2010, compared with $1.3 million the previous year.

2. Analyze sales data to market more effectively.
Recognizing that its’ own website sales would not carry it through the recession, New Hyde Park, N.Y.-based Tuccini Corp., shifted greater attention to selling its fragrances through Amazon.com. Founder Nick Uresin gathered and tested pricing data three times daily for five months to determine how price adjustments — and the timing of those changes — affected sales. For example, he learned that adjusting product prices at 6 p.m. drew in more orders than at, say, 2 p.m.

Using the data, he came up with formulas that led to creating a software program to track sales and automatically adjust prices. For the past four years, Uresin had also been developing another software system to monitor where orders were coming from. Combined, the two systems would help Tuccini greatly improve sales and purchasing.

In 2010, the company more than doubled its annual sales to $3.3 million, compared with the previous year. It also paid off a $500,000 line of credit. The company is now debt-free.

3. Shift resources into initiatives that drive revenue.
At brand strategy firm Parker LePla, the recession knocked 2009 revenues to $1.5 million, down 15% from the previous year. Co-founder Lynn Parker suspended the usual year-end bonuses for employees and used the savings to boost the Seattle-based firm’s advertising budget by more than 80 percent. New initiatives included an online sponsorship with local NPR radio station KPLU, which gave the Seattle-based company a mention each time a listener visited the station’s website and clicked on an audio clip.

“This particular radio station had the best demographics for people in leadership and marketing positions in the region… it was a very successful purchase,” says Parker, who also created a new division of the company focusing on digital branding to get clients thinking about a website’s overall user experience.

The digital division quickly began to generate new business, accounting for as much as 30 percent of annual revenue. Today, Parker LePla employs 11 full-time employees and 2010 annual revenues totaled $2.5 million.

4. Revamp your pricing structure.
When Great Neck, N.Y.-based GovernmentAuctions.org stopped requiring an annual subscription for customers to view its listings of government auctions, it started to win back customers. The new pricing model started with a free three-day trial followed by only monthly subscription fees – a more lucrative offer for price-conscious consumers.

“If we made it less risky for our customers, they would be more likely to activate an account,” says co-founder Ian Aronovich.

Today, nearly 60% of the people who opt for the company’s free trial stay on to sign up for a monthly subscription. The new pricing model generates nearly six times more revenue for every customer who stays for a full year compared with the original $40 flat rate.

In 2010 the company earned more than $930,000 in revenue, a 58% increase from the $588,000 in annual revenue from the year before.

5. Re-examine your business model.
The founders of HuePhoria LLC had once found success selling its hand-painted party glassware to upscale gift boutiques. But after the recession chipped away at sales, the Syracuse, N.Y.-based microbusiness began forging relationships with drop-shippers, other manufacturers and retailers willing to manage the inventory and ship product on-demand. It was a way to expand product offerings without the hassle and expense of housing the inventory.

Taking a page from direct-sales companies like Pampered Chef in which sales reps, mostly women, sell products during parties they throw for their friends, HuePhoria also launched “Ball Moms” in November 2010. The direct-sales program offers women start-up kits for $150 to $599 so they can host parties and sell HuePhoria products for a 25% cut of all sales.

With eight direct-sales reps, Ball Moms now account for 44% of HuePhoria’s revenues, while drop-shipping accounts for 35% and third-party retail sales only 19%.

Sales in the first quarter of 2011 are up 72%, compared with the same period last year. The company is on track earn $300,000 in annual revenues in 2011, its best year yet.

Related: Banking on a New Business Model

~ Jane Porter, Jason Fell, and Kelly K. Spors contributed to this article.

Comments: (0) Tags: Business Development, News, Small Business

New businesses should be ready for Plan B

May 16, 2011

By Cheryl Hall

cherylhall@dallasnews.com

Published 10 May 2011 07:20 PM

Entrepreneurship expert John Mullins warns that having a solid game plan before you launch a business isn’t all that it’s cracked up to be.

Things rarely work out according to plan, so you’d better be prepared to quickly shift gears and move to a Plan B, the London Business School professor says.

“The business-plan-driven culture that’s been built over the past couple of decades in the entrepreneurship world is simply wrong,” says Mullins, who spoke at SMU recently for Engineering & Humanity Week 2011. “If the founders of Google , PayPal or Starbucks had stuck to their original business plans and not made radical changes, they likely wouldn’t be household brands that have delivered huge returns for investors.”

Although Mullins urges caution, his message is also one of encouragement. Yes, your first plan is likely to falter. But if you pay close attention and make quick adjustments as real-world flaws crop up, you might just create that next can’t-live-without product or service.

“Visionaries often try to translate their passion into a business plan — one that typically teeters on a pile of untested assumptions,” Mullins says. “Blindly executing a plan without the benefit of real-life experience straps the visionary into a straightjacket. They ignore the facts in order to try to achieve the plan.”

Outside the lectern

Mullins, who has an MBA from the Stanford Graduate School of Business and a doctorate in marketing from the University of Minnesota, isn’t just a professor speaking from a lectern. He founded two high-growth companies and took one of them public.

The world has plenty of innovators, Mullins says. But true entrepreneurs, those who apply invention in the marketplace and produce significant impact, are in short supply. Innovators have to get smarter about how they bring their innovations to market. Otherwise they squander money, time and entrepreneurial talent.

So ask yourself these questions: Why are you doing this? What problem are you solving? What can you learn from others before you take your first step?

There’s no way to completely sidestep the learning pains of your first plan. Initial assumptions are leaps of faith. And to prove or disprove them you have to, well, leap.

Mullins suggests creating a “dashboard” of measurable results and data. “When those leaps are shown to be lacking by empirical data, the innovator can course-correct before it is too late.”

His book, Getting to Plan B: Breaking Through to a Better Business Model (Harvard Business Press, 2009), co-authored with Randy Komisar, uses case studies to turn abstract concepts into real-life understanding.

For Starbucks, the original concept was to create stores that sold freshly ground coffee by the pound to take home, Mullins says. “Howard Schultz took a vacation in Italy, saw the coffee bar culture there and the rest is history.”

Beyond Plan B

Frankly, Plan B isn’t likely to be your answer either. You might have to work your way down the alphabet.

“Google had no business model at all for Plan A, just a Ph.D. project,” Mullins says. “Plan B was to license their better search technology to the likes of Yahoo , AOL and others, which did not work. Plan C, the idea of paid listings on one side of the page alongside objective search results on the other side [copied from another search company called Overture], was what worked.”

For PayPal, safely exchanging money on the web was Max Levchin’s seventh application for his cryptography skills, Mullins says. “His initial idea, encrypting wireless transmissions from PDAs to wired devices, did not work, nor did plans B through F. Plan G is what worked.”

As for the quintessential transformational company, think of Apple in the early 2000s. “Innovative, yes. Design-conscious, yes. Profitable, no.”

Now think iPod, iTunes , iPad, Apple Stores and iTune Apps Stores.

“Steve Jobs revolutionized his company and made it the most valuable company in the world in terms of market cap,” Mullins says. “No one has delivered such results by reinventing the company before.”

Mullins’ tips

John Mullins says you can significantly reduce your risk of failure, save years of wasted time and loads of investors’ money if you:

1. Compare your idea with existing businesses to steal what works, avoid what doesn’t and add improvements.

2. Identify “leaps of faith,” the untested questions you are banking your business on.

3. Conduct fast, inexpensive, data-driven experiments to support or refute those questions.

4. Use this data to make smart strategic changes and course-correct before it’s too late.

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Five Tips to Transform Your Business

New businesses should be ready for Plan B