Archive for the ‘Business Strategies’ Category

« Older Entries

Outsourcing Problems in Small Business

Friday, January 1st, 2010

Outsourcing has probably done more to professionalize small businesses than any other recent trend or invention, including information technology. The concept is a simple one: your business should focus on its core function and hire specialized firms to do everything else. For instance, a public relations agency should stick to doing public relations and farm out its personnel, finance, and support work to other firms. The theory is that those other firms would also be concentrating on their own core function, enabling them to do the work more efficiently and better than you ever could. The net result should be that by outsourcing you will get better results for less money: an unbeatable combination.

In most cases, the theory works when put into practice. I know a person whose small advertising agency saved more than $40,000 a year by outsourcing every function that wasn’t directly related to advertising. My own office has saved more than $10,000 a year by outsourcing accounts payable. And along with those savings the job is being done better.

Obviously to eliminate potential problems you need to do your research and shop around to make sure you’re getting the best firm for your dollar. But you also need to keep an eye on the outsourcing firm and yourself.

Just as an employee can get complacent, so too can an outsourcing firm. You need to keep them focused on doing their best for you. While it will require less hands-on management than if you were doing the job in house, you’ll still need to do some periodic oversight. And don’t just focus on the work they’re doing. Make it a practice to regularly solicit new bids for the outsourced work. While you don’t want to switch providers every six months, you also don’t want to pay more than the market price.

Watch out for your own complacency, too. It’s very easy to stop paying attention to areas of your business that you’ve outsourced. For instance, when all my bills were paid in house I scrutinized every invoice before it was paid. I was able to instantly spot even small problems. Once I had outsourced the function I stopped being as vigilant. The firm I’ve hired is very good, but they’re used to looking for larger problems, they look after the dollars rather than the cents. As a result I found my bills slowly creeping upward. Since spotting this trend myself I’ve started being more vigilant. I don’t check every bill as I used to, but once a quarter I take the monthly bills home and spend a weekend studying them.

Tags:
Posted in Business Strategies | Comments Off

What to Do if Your Client or Customer Chooses Not to Pay You

Sunday, November 29th, 2009

This is a real problem, even more destructive than not being hired or being fired. When a customer or client chooses not to use your service or buy your product, you’ve only lost the investment you made in soliciting their business, and potential revenues. When a customer or client chooses not to pay you for work you’ve already done or a product you’ve already provided, the funds are coming right out of your pocket.

In order to solve this problem you need to become an expert on your customer’s business as well as your own. That’s because the problem might not be caused by you at all. The customer’s business may be undercapitalized. Or the client may just be taking advantage of your good nature and relaxed terms. Perhaps he’s decided not to pay for a while to “see what happens.”

In order to solve this problem without losing the client or customer, you need to walk a very careful path. If you’re too aggressive and demonstrate that you’ve lost trust in the other party, you’ll not only lose future business from them, but you’ll probably also have a hard time collecting what you’re already owed. If you don’t bring the issue up at all, it won’t get solved.

The secret here is to try to frame the issue as if it’s really about you. Ask if there is something you’re doing to make it difficult for them to pay on time. Perhaps you can change the date they’re usually billed, or perhaps you should bill them twice a month rather than just once.

Clients or customers who have simply been taking advantage of you will often latch onto one of your suggestions as a way to save face. Having been called on their bad behavior, however nicely, they’ll now toe the line.

Clients who have been having problems of their own will generally be prodded into a confession by your concerns. If a client tells you the reason she’s paying slowly is that her own business is having problems, offer to help. Suggest she speak with your accountant. Offer the name of your banker. Most times, by bringing the issue up and offering to help you’ll at least move your bill to the top of the pile.

If neither of these techniques works you’ll simply have to inform the client or customer that you’ll be charging them interest on their outstanding bills. And even if it means losing a customer, at some point you’ll need to stop doing business with someone who hasn’t paid. If you aren’t able to turn their not paying around, then they’re not worth keeping as a customer.

Tags: , ,
Posted in Business Strategies | Comments Off

Will Outsourcing Firm Estrange your Customers

Friday, November 27th, 2009

The actual problem is that you haven’t accurately defined the core elements of your business. The solution here is to only consider outsourcing those functions that don’t require interaction with customers. You need to reexamine your definition of what your core function is. I’d urge you to consider any area of your business in which you deal with customers or clients as the core of your business. Without customers and clients you have nothing. They are your most precious resource.

While it’s the outsourcing firm’s job to get you to trust them, getting your clients or customers to trust you remains one of your most important tasks. There’s no need to turn this no around. If you’ve made a mistake in defining your core business, simply start over with a new definition.
I’ll lose quality control.

This is also entirely rational believe me, I know firsthand. Make sure you’ve done a top-notch job of researching, interviewing, and checking up on all the candidate firms. Carefully go over exactly what services each will provide and the procedures they’ll follow. Look for steps in the process when you will have a chance to check up on their work. Query their other clients or customers.

Ironically, this is a problem where you don’t want to have too much trust in another party. Explain that while you trust the firm to do a good job, you need to have some oversight role in the process. Say that you’re not looking to control them, only to keep a watchful eye on the bottom line. You may want to hint that the level of your oversight could diminish over time as you become more comfortable with them. Also, insist on their conducting internal oversight as well. Remember, the person who brings you into their company may concentrate only on marketing.

Tags: ,
Posted in Business Strategies | Comments Off

Why My Staff Works Hard

Tuesday, November 24th, 2009

I have to admit, I’ve never been nominated for the boss-of-the-year award. I expect a lot from my employees and believe an office is a place of business, not a home away from home. That being said, I’ve never had any trouble hiring people. Why? Because I always pay fair market value and I’m clear about my goals and expectations. I’d humbly suggest that if you adopt an approach to hiring similar to mine you might also avoid hiring problems.

My staff works hard because I try not to have any more people on the payroll than I need. Because I run such a tight ship I look for people who are flexible and adaptable. If I need a specialist for a period of time I hire a temp or consultant. The characteristics I most value, in addition to flexibility, are predictability and candor. I’d rather have a person who consistently does B work, than someone who sometimes does A work but other times falls down to C work. Predictability allows me to compensate in advance for any failings so I know all the bases will be covered. I’d also rather have someone who admits he doesn’t know something, or has made a mistake, than someone who tries to wing it or cover up an error. I’m not looking for my staff to be superstars . . . that’s my job. I just want them to work hard, do their best, and be honest with me. I plan on staffers staying with me for anywhere from one to three years. Shorter than that and a temp would be more economical. Longer than that and it would be more profitable to outsource the job.

Tags: ,
Posted in Business Strategies | Comments Off

Two Problems of Hiring a Staff

Saturday, November 21st, 2009

First problem – he turned down my offer.

If you found only one candidate who was head and shoulders above the rest, and he turned your job offer down, then this is a real problem. Otherwise it’s just a mask for annoyance at someone rejecting you. Rephrase this problem so you don’t act as if it’s a rejection of you. This isn’t about you, it’s about him, the job description, or the salary.

Go back and double-check your earlier research into the market value for the position. Make sure that you weren’t low balling the salary. Similarly, reanalyze the job profile. Are you expecting too much? Consider whether you did anything during the interview process to make the candidate uncomfortable or angry. While it’s not your role as an interviewer to get the candidates to trust you, making them restive won’t help you attract quality people.

Like all appeals, this one begins by discerning the reason for the no. Contact the candidate and express surprise at his rejection. Explain that you were very impressed by him, are disappointed by his decision, and would be grateful for some feedback about the process. Don’t be a supplicant. Instead ask him what the motivating factors were for his decision, so you can have a better idea of what future candidates will think.

If he says you weren’t offering enough salary, say that you have an honest disagreement about market value. Note that all you can do is promise to pay more as the market increases. If that’s not sufficient, wish him well. You cannot start paying more than market value for people or there will be no limit to your payroll.

If he says there was something troubling about the job description, solicit details and see if you can reach some kind of compromise. For instance, if he objects to the travel demands, explain that perhaps he misunderstood, and note that much of the client contact can be done through teleconferencing instead.

Second problem – he wants a contract.

You need to frame your problem a bit more narrowly in order to solve it. Just wanting a contract isn’t really a problem, since a contract can say as much or as little as you’d like. It’s only a problem if the employee wants a contract that restricts your freedoms, either by guaranteeing him a certain term of employment and/or specified salary increases.

You need to become an expert on the wide variety of things that can be part of a contract. For example, just because there’s an employment contract doesn’t mean the employee isn’t still employed “at will.” The contract can specifically say employment is at will. It can simply be a formal statement of the terms of the at will employment. The contract could describe the job, state the salary, outline the benefits, and even explore severance pay, just as long as it doesn’t say how long the employee will be working for you, and what his future salary increases will be. You could even turn the employee’s request for a contract to your advantage by inserting a clause that temporarily keeps the employee from working for a competitor if they leave or are terminated.

You’ll create a tremendous level of trust between you and a job candidate if you don’t immediately rule out the idea of an employment contract. Often, all a candidate is looking for is a written guarantee of what is being offered verbally. Even savvy candidates might be satisfied with just negotiating a severance package, in exchange for a no compete clause.

Because an employment contract can contain whatever you want, there’s no need for you to immediately say no when a candidate asks for one. Rather than the candidate appealing your no, or your appealing their turning down your job offer, the two of you can simply negotiate the terms of an agreement that’s mutually satisfying.

Tags: ,
Posted in Business Strategies | Comments Off

« Older Entries