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7 Profit-Boosting Ways to Protect Your Business From a Recession

Posted: 18 Sep 2019 08:00 AM PDT

Pundits may disagree on the date, but they agree on one thing: a recession is coming.

When an economic downturn strikes, you need to be ready. At the same time, you can't miss out on the tail end of a good economy. The current expansion may continue for another year or two, giving you a valuable growth window. The more progress your company makes in that time, the larger your cushion will be when markets do dip.

But, unless you've got a crystal ball, that's a tough balance to strike. The solution? Invest in ways that protect you but also benefit your bottom line.

Growth that protects

Most investments represent risks. Starting a new service line or doubling your sales staff might bring in more revenue, but they also might burn your business. Fortunately, there a few approaches offer the best of both worlds. Consider the following strategies.

1. Refocus on customer retention

When a recession hits, chances are good that your customer base is going to shrink. With that in mind, you might think the best protection is to acquire new customers. But, bear in mind the cost-benefit breakdown of acquisition and retention. Improving retention by just 5% can increase your profits by 25% to 95%.

In other words, your best bet is to strengthen the customer base you've already got. Not only is it more valuable to improve your existing relationships, but you'll lose fewer of them when customers have to make hard choices with their wallets.

What are some low-cost ways to ramp up retention? Personalize your emails. Create educational content that helps users maximize your product. Instruct your customer-service staff to be generous; a customer who's comped a month of service is far less likely to cut ties when money gets tight. 

2. Offer self-service

Customers can, and do, solve most of their own product issues. They might still need expert help for certain challenges, but almost three-fourths of consumers want some sort of self-service. 

Give your customers what they want. Not only does self-service improve your customer experience, but it frees up your staff to address users' trickiest issues. When the recession kicks in, you'll have fewer salaries to pay and your customers will have more time to service themselves. 

To do self-service right, think about your model. Kiosks are a smart approach for brick-and-mortar businesses, while chatbots can handle many needs online or over the phone. Updating your blog with troubleshooting content can fill gaps between chatbot abilities and complex issues that require human attention.

3. Perfect your core product

When business leaders see a recession on the horizon, they often react by trying to get a foothold in new markets. Because nobody can predict which markets will suffer the most, the thinking goes, it's best to get established in as many as possible. 

To see the flaw in that, recall how major tech companies fared during the last recession. Microsoft, which had its hands in everything from gaming systems to tablets to offsite servers, was forced to cut thousands of jobs. Meanwhile, Apple's sales actually grew because it stayed focused on its iPhone, iPod and Mac products. 

Instead of spreading yourself thin, iron out the wrinkles in what you do best. Get customer feedback via focus groups or surveys and use it to direct your R&D efforts. If you only have a little to spend, focus on your interface. A sleeker, easier to use product is one of the most cost-effective boosts to your customer experience.

4. Prove that loyalty pays

If your business does start to slow down, employees will worry that they're aboard a sinking ship. Although a pre-recession period might seem like the wrong time to boost workers' pay, doing so sends a powerful sign to employees that the company is stable and has their back.

Remind team members that recessions are temporary. Provide an across-the-board bump in pay to long-haul employees – say, those who've been there at least three to five years. If you offer profit-sharing, consider boosting the percentage of profits shared for every year of employee tenure. 

What about your here-and-now growth? Studies show that investing in employees actually delivers better ROI than other sorts of spending. University of Pennsylvania researchers discovered that allocating a tenth of a company's revenue to capital improvements increases productivity by about 4%. Investing that same 10% on employee capital, however, boosts productivity by an average of 8.5%. 

5. Strengthen supplier relationships

Recessions create cascades. Even if a supplier is in a seemingly safe space, you never know what will happen when markets begin to fail. Everyone needs to eat, for example, but food distribution services are still susceptible to dips in agricultural production.

Review your supply chain. For critical vendors, ensure you have a backup in case your primary one goes under. For the remainder, put together a plan for shortfalls. For print supplies, for instance, can you work with digital documents in most cases and refill ink cartridges if needed?

Remember, too, to build rapport with each vendor's point of contact. If a vendor can't fulfill all of its orders, it'll need to pick and choose. In those circumstances, personal relationships tend to dictate which accounts get serviced. Something as simple as sending a "happy birthday" email or a holiday gift can go a long way. At the very least, you'll have an easier time resolving vendor issues in the future.

6. Make marketing more scalable

One of the first areas most companies cut in lean times is marketing. On one hand, it's better to reduce promotional expenses than it is to cut, say, operational or legal ones. But the real issue is that those companies let their marketing budgets get bloated in the first place.

Instead of investing in questionable tactics until you can't anymore, shift your spend toward efficient, scalable ones. For two-thirds of companies, email marketing delivers the best ROI. Once you've drafted a campaign, scaling it is just a matter of collecting more email addresses.

Other online channels are also good bets. When researching a product, where do you start? Most people turn to Google, making SEO a smart investment. Social media is a similar story: It costs the same to update your Facebook page – practically nothing – no matter how many consumers see it.

7. Build a bank of contractors

Even if you do everything else right, the reality is that you're likely to face hard choices in the event of a recession. Keep employees on board if at all possible, but realize that labor costs account for up to 70% of the typical company's expenses.

Think about which business tasks could be easily outsourced. Check sites like Upwork to know what contractors charge for them. Even if you'd have to pay a freelancer more per hour than you would a traditional employee, you're still likely to save money when you factor in employee payroll taxes and benefits. 

What if you're lucky and never have to cut staff? You've built an auxiliary team. Tap them when the core team's capacity gets tight. In the meantime, maintain those contractor relationships by commissioning "nice to have" things like blog posts, website audits and branding updates.

Like it or not, your company can't control the economy. Bond markets could tank tomorrow. A housing crash could happen despite high home prices. Unrest abroad could turn into a general strike at home. 

Just because the economy is uncertain doesn't mean you're at its mercy. Companies can and do come out stronger from recessions. Stay lean and invest wisely, and yours might just be one of them.

How to Rethink Your Hiring Approach

Posted: 18 Sep 2019 07:00 AM PDT

In thinking about the best ways to build an effective talent pipeline, the first thing I'm reminded of isn't how to navigate all the best online recruiting sites, nor is it how to develop a solid cast of candidates. It's not even about the luck it takes to land the perfect employee at the right time.

Instead, I reflect on one of my favorite stories from the Bible – Exodus 31:1-6, in which God brings Moses to the top of Mount Sinai and gives him an exhaustive list of everything He wants Moses to do. Startled and a bit dismayed, Moses finds relief in the knowledge that he'll have a strong team behind him. He wouldn't be alone in his efforts.

To me, it's an accurate metaphor for the hiring process. We tend to get bogged down in all the minute details when searching for the perfect candidate. We agonize over the little things without seeing the big picture. But what really matters is finding people we can trust who complement our skills. After all, we often spend more time with our co-workers than our own families, making an effective approach to hiring absolutely essential.

My scouting process

Whenever there's a critical position on our team that we need to hire for, I tap into my faith. I ask for the right people with the right skill sets to somehow cross my path, and I can't tell you how many times the person shows up within a matter of hours or days or weeks. They've got an amazing story about how they just wound up sitting across from me. Was it God or the universe listening and responding to my request? I'd like to believe so.

I also think there needs to be an alignment of both character and general likability. Again, we spend so much time with our team members that just looking at their skill sets isn't enough. I try to assess whether I could get along with someone on a person-to-person level, regardless of my plans to socialize with coworkers outside of work.

Of course, I don't want to hire people with half the skills I'm searching for just because they're friendly. Avoiding a "style over substance" mentality is key in that area. On the other hand, a wide range of skills and a unique array of experiences doesn't mean much if the candidate doesn't play well with others. And it's not just because they'll be a downer at social events; the team's morale can mean the difference between a groundbreaking project and a lackluster one. Finding talented team members with personalities that harmonize with the group is essential to building a high-functioning team.

Building a cohesive community

Our hiring approach at Nature Nate's Honey Co. is probably why we had such a great experience doing an exercise over at The Richards Group, an ad agency we hired in Dallas. They started by introducing each other – not themselves, but their teammates – with details about their professional backgrounds and a few personal highlights before asking us to do the same. We did it without hesitation or even thinking, and when we were done, they told us they'd never seen a group describe one another in such detail.

I realized this was a reflection of the community we've built inside our organization, a community that's united in its desire to make a difference in people's lives. We're driven not by the primal need for a paycheck but by an altruistic affinity to help others. It may not be as clear-cut as one or two things you look for in people, but I think this is the larger, clearer answer. I don't want to hire someone who just needs any job; I want to build an internal community that's willing to celebrate the successes together and encourage one another through the inevitable failures.

How my experiences shaped my hiring views

I didn't always have this kind of collective mindset. I always saw myself as a great individual contributor. I felt I could work harder, longer and smarter than anyone else and achieve the best results all on my own.

That mindset changed when I was in full-time ministry. In 2008, we were creating an initiative called I Am Second, which actually became an international phenomenon. We had a budget and were tasked with assembling a team. Not only was it the first time I had to construct a team, but it also felt counterintuitive to me given my preference for working alone. But once we found an ambitious creative director and tenacious project manager, it was the perfect alignment of skills to accomplish this huge task.

Through this exercise, I realized I never initially wanted to be a manager because I bought into the negative stigma surrounding the term. I didn't want to be a power-hungry autocrat who told everyone what to do. But once I learned about my role as a leader and the impact I could have, it became clear that inspiring people was my primary objective.

Acquiring more effective hiring methods

Ultimately, the last thing I want an employee to think is, "What am I doing here?" I want everyone to understand his or her role and purpose at the organization. Even when they're doing the grunt work and desperately trying to meet deadlines, they should still feel that they're affecting the lives of those around them. And ideally, by incorporating the following strategies into your own hiring practices, you'll achieve that same connection with your team members.

1. Understand the job completely

It sounds elementary, but you can't find the right employees without fully understanding the role they're about to fill. That becomes especially easy to forget if you're running a startup or some kind of fledgling business. You don't have all your needs mapped out yet, and when the best candidate comes along, you won't notice because you don't know where they'll fit into the company. 

Entrepreneurs also have a tendency to focus solely on who's available instead of what their real need is. While that degree of pragmatism is commendable, it can become costlier in the long run when you invest in employees with little ROI.

That's why developing and/or revising your job descriptions is one of your first major steps in advancing your hiring approach. Consider that nearly half of all workers (47%) lack clarity in their roles. This is a vitally important characteristic, as high clarity leads to higher levels of effectiveness, retention, and productivity. 

A proper job description is the foundation for that clarity. It doesn't have to be elaborate, but you should put some time into figuring out what skill sets you really need. That might mean meeting with your current employees to analyze their roles and responsibilities. It might also entail asking where some of the gaps are. Understanding where your team needs extra help is one of the best ways to identify what you need in the long run.

2. Invest in every employee

As a leader of the organization, you have to be prepared to invest in every person who helps you keep the lights on. And it's not just for them – you owe it to yourself and the organization to help everyone reach their full potential. I see myself at the bottom of the ladder. In order for me to be as successful as I can be, I have to serve everyone else.

The stereotype is that entrepreneurs see hiring someone as the end of a journey instead of the beginning. But while hiring someone marks the end of the search for a specific person, it also indicates the beginning of building your relationship with them. New employees need your support to grow within the company. At Corning Glass Works, for example, employees who attended a structured company orientation program were 69% more likely to remain at their jobs for at least three years. The investment pays off.

You have to be ready to encourage your employees in multiple ways, whether that means walking them through a comprehensive onboarding, complimenting them on some of the smaller tasks they complete or holding regular one-on-ones with them to find out what else they need. They've filled a void in your organization. Now it's time for you to return the favor.

3. Treat turnover as the opportunity it is

Successful entrepreneurs recognize that not every employee will be with them for the long haul. People often work at an organization seasonally. So instead of planning for an employee's 20-year tenure and eventual retirement, prepare for the possibility that he may not be there forever.

For employees who leave for a new opportunity, it's important that you appreciate their time with the company and their impact, and that you take the chance to reassess your needs for filling that role. Not only will a positive sendoff enable you to keep a relationship with someone who may cross your path again, but it shows your employees the kind of leader you are.

There will also be occasions when you realize the need to let someone go. It isn't always the result of something as dramatic as negligence; sometimes, it's just not a good fit. Some employees seem perfect in the interview process and perform exceptionally in the first few months before becoming less suitable for the position. That happens.

Make a mutual goal with HR to make the transition as least disruptive as possible for the employee and his or her family. It's that kind of compassion that's propelled Nature Nate's to where it is today. It sounds idealistic because it is.

Not every talent pipeline and vetting process will be successful, but the respect you show every employee can always pay off. If there's one thing my experiences have taught me about hiring, it's that there are more creative, innovative and thoughtful ways to find the best candidates than by asking them about their greatest strengths and weaknesses.

How to Never Run Out of Content Ideas For Your Blog

Posted: 18 Sep 2019 07:00 AM PDT

A blog can be one of the most valuable aspects of your website. It's where you get to create content relevant to your industry, educate your audience on important topics and add personality to your writing. However, coming up with ideas isn't always a pleasant endeavor. Sometimes it takes a lot of brainpower to figure out precisely what your target audience wants to read about and what will keep them engaged for the long haul.

That's why it's essential to come up with fresh ways to curate ideas for your content calendar. According to recent studies, 53 percent of marketers consider blog content creation a top priority for their business. Without having a plan for your content marketing strategy, it's easy to experience burnout because information keeps overlapping. It'll feel like you've gone over the same topic a million times, which will irritate and bore your audience.

To ensure you don't run out of creative, compelling topics for your blog, it's essential to:

  • Collect consistent feedback from your readers.

  • Stay up-to-date on your industry's trending topics and current events.

  • Use social media to gain inspiration.

  • Create a swipe file of documents, images and media relevant to your niche.

Knowing how essential it is to make sure you never run out of content ideas for your blog, here are more details on the four ways to get started.

Collect feedback from your audience

The most direct way to get honest feedback about what type of content your audience wants to consume is by asking for it. Reaching out to your readers and finding out what kind of content they're interested in learning more about brings you closer to giving them what they want.

There are different ways to go about collecting feedback. Send them a survey asking them what kind of content they'd like to see from you and how you can help them out. Take it a step further by turning it into a conversational form that works with your audience's answers and feeds them questions relevant to their responses. 

Conversational forms provide a higher completion rate and create a less overwhelming, daunting experience for your users. Questions are given one at a time and change based on how people answer for increased relevance. Providing a positive UX is crucial to gather as much feedback as possible. People don't go out of their way to fill out surveys, so making the process smooth is a must. Ask questions that are user-focused and aim to cater to your audience's needs for the best results.

Stay on top of current events and trends

Naturally, many people like to stay on top of current events and trends happening within their industry. Aim to stay on top of trending topics so you're always able to create content ideas your audience loves.

Make it a habit to do your research about everything happening in your niche. With the right tools, it's much easier to keep track and stay informed. 

  • Use Google News to search for popular keywords that will give you the most current information on that topic. It's updated around the clock to provide recent information about any topic you choose.

  • AnswerThePublic lets you enter keywords and provides you with the latest, most frequently asked questions surrounding that topic. It's a great way to see what people want to know and how your blog content could be the answer they're looking for.

  • Use Reddit to stay on top of what users are talking about. You can stay on top of the latest events and hot topics surrounding your industry by using its filters based on what you want to see. For example, you can search keywords in the search bar at the top to get specific results. Reddit's tabs let you filter what kind of content you're looking for, choosing from hot, new, rising, controversial, top, gilded and promoted.

  • Quora is a Q&A platform where users can learn about all kinds of topics and ask questions they receive from other users. It shows you questions posed by your target audience when you search for relevant keywords so you know how to cater to them better. Answer users' questions and then link them to the full blog post so you increase engagement and drive organic traffic to your website.

Engage on social media 

The more you know your audience, the better you'll know what they want so you can create blog posts that speak to them. A great way to get inside their heads and gauge their perspective is through social media. People tend to be more honest, straightforward and authentic when expressing themselves on social platforms, and this is no different when it comes to your readers. 

Take advantage of social media and use it to get to know your audience on a deeper level. Track trending keywords and hashtags relevant to your industry to see what your audience has to say. Encourage engagement by reaching out to your followers, replying to their comments and asking them questions. It's crucial to acknowledge users who interact with you because it humanizes your brand.

You can also use social media to network with other professionals in your niche and spark a conversation about your target markets. It's beneficial to gain other leaders' perspectives so you can look at things from a different angle and, hopefully, get ideas out of it. It also gives you valuable insight and material to consider working with for your blog.

Create a swipe file 

If you don't already have a swipe file, now's a great time to create one. It's a collection of articles, news, visuals, emails and other types of content that give you material to work with later. These examples aren't for copying; instead, they're there for you to gain inspiration for your content strategy. When you come across something interesting, resourceful, or unique, save it to your swipe file. 

Think back to a time you were so in awe of someone else's writing or other creative abilities that it made you envy their talent. A swipe file lets you keep those awe-inspiring pieces of content in one place so that creating topic ideas is more of an adventure than a death sentence.

Creating a swipe file allows you to:

  • Find and develop your brand voice

  • Enhance your writing skills

  • Become a better, more experienced blogger

  • Learn from others' achievements and pitfalls

It's easy to create one. You can use Google Drive, software like Evernote, use a browser extension, or create a digital folder. Store information like screenshots, images, links, notes and whatever else gets your creative juices flowing. Regardless of where you store your swipe file, make it easily accessible and keep it organized so everything is easy to find. 

If you run a blog, you know how important it is never to run out of ideas for it. It can be daunting to create a content calendar when you aren't quite sure where to get inspiration from or what your audience wants. However, if you know where to look and trust in your audience's feedback, you'll find that coming up with ideas really isn't that daunting after all.

3 Non-financial Factors That Affect the Value of Your Business

Posted: 18 Sep 2019 05:00 AM PDT

  • The top three nonfinancial factors that can drastically affect business values are management structures, diversity, and growth potential. 
  • If you're the buyer, these factors can help you see the bigger picture outside the numbers and get an idea of what's actually driving the business's success.
  • If you're the owner, these factors can give you a sense for which value drivers are important and what levers you can be pulling to maximize the value of your business for potential buyers.

While numbers can tell you a lot about how much a business is worth, it can't tell you everything. When considering buying or selling a business, there a number of vital factors, unrelated to finances, that must be considered.  

Determining the value of a business starts with looking at several years of data to determine growth trends – monetary and otherwise. Has the company been improving, or have earnings been flat? How has the internal structure evolved? Maybe the owner has already checked out and the company has been slowly going downhill for several years. We like to call this the "glider effect," and, unfortunately, it happens a lot.

Gliders, without the benefit of an engine, may float for a while – but they always come back to the ground. Without the jet propulsion of drive and a healthy appetite for risk-taking, the same often happens to business owners.

It's a curious thing that sometimes happens as business owners get older: They tend to become more risk-averse. Rather than getting excited about borrowing millions of dollars to invest in their businesses, they become more fearful of taking on any debt or risk. They move from wanting to invest in technology to keep pace with the industry to thinking, "our processes work just fine." Or maybe they stop replacing employees with poor performance, deciding that as long as work is getting done at a minimal level, they don't want to rock the boat.

While the financials and cash flow of the company are crucially important to the value of a company, non-financial factors can literally make a company unsellable. In fact, non-financial factors often make or break a sale.

A common issue with small-to-medium-sized businesses is the amount of involvement the owner has in the company. 

For example, my company recently listed a successful trucking and logistics company. It was spinning off more than $500,000 a year in cash flow and attracted buyers from several states – but, ultimately, the company was unsellable. In the Value Builder System, we call this the hub and spoke. The owner was the hub, and the spokes were all his customers, employees and suppliers. They all came to him. 

If you took the owner out of the picture, everything stopped. He was the company. With $500,000 in earnings, the owner had more than enough money to hire a manager or someone to delegate this work, but sadly he never did out of pride. Deep down, it seemed that he enjoyed feeling like the business depended on his involvement (which can be a common theme among business owners who, at some point, have transferred much of their personal identity to the business). After a year of working with him, and seeing his unwillingness to hire someone, we terminated our relationship. To this day, the company has not sold.

Clearly, it's important to maintain a focus on the non-financials that can make or break a company's sellability. Here are three non-financial factors to consider, whether you are the business owner or a potential buyer. 

1. A strong management team

Take time to consider whether the business would come to a standstill without the owner's involvement. What percentage of involvement would be required from the owner for it to continue to generate its historic cash flow? 

As I noted in my example above, the reason some companies don't sell is that they are entirely dependent on one person. If the owner is the entire company – the "hub" of the wheel – then the wheel is easily broken once he or she leaves. All the spokes (the other stakeholders, partners, employees, etc.) crumble without the hub holding them together.

Instead, if an owner puts a strong management team in place, it directly impacts the health of the business. It becomes easier to train the new owner on the inner workings of the business from a day-to-day standpoint and ensures the longevity of the business if key employees stay on with the firm. 

It's vital that owners, in particular, take time to evaluate this early. However, one-third of business owners have not considered management succession because they've been so focused on the day-to-day aspects of their businesses. Only 25% of them are confident that their management teams would be successful without the owner's involvement.

As an owner, start by evaluating your employees and determining how you can cover vital responsibilities in your absence. Some selections might be obvious: a one-level promotion for all key employees, for example. But there also might be wider gaps that you'll have to get creative to fill. In some cases, you might have to bring in outsiders: board members, accountants, or personal contacts who have the appropriate experience. Without these considerations, you're only selling a job, not a company. 

2. Diversified human capital risk

When a company is dependent on any one customer, employee, or supplier, it can be equally detrimental. For example, if a single client provides more than half of an owner's income, the owner becomes more of a contractor than a business owner. Plus, it poses a huge risk if a client stops requiring the business's services for any reason.

One common issue is when a company is overly dependent on a few key employees. My company was tasked with selling a drilling business in which two key employees were not tied down with any type of "golden handcuffs." This presented an issue when trying to sell the business, as the buyer had no guarantee whether the employees would stay on with the company post-sale. This is a common problem — in one study, 33% of acquired workers left within the first year of a company's sale.

As an owner, reduce your dependency on any one employee, customer, or supplier. If you have key employees, research ways to put those "golden handcuffs" on so they stay. If you have a customer that is more than 10% of your business, it's time to diversify. Or if you are tied to a supplier, consider whether you can you diversify that dependency among a group of suppliers. 

3. Growth potential for customers, markets and products

While financial statements can be indicative of a company's growth potential, there are a number of non-financial elements that can paint a clear picture of its future (or lack thereof). 

Ask, "What is the growth potential of the company?" If someone took over the company, could he or she expand it? Would it be possible to duplicate the business model in another city or state?  

Potential investors or buyers want to be able to see a clear growth strategy in the business plan, including expansion in customer base, markets and potentially even products. Then, they want to see how this will impact sales and the bottom line. 

It's hard to weigh financial and non-financial issues. If a company is not making any money, it definitely isn't going to have much value. But, too often, owners of financially successful companies don't realize they're actually unsellable because of a non-financial issue. 

By keeping these factors in mind, owners can steer clear of the "glider path" trap, and buyers can watch out for it as a red flag. If the company isn't actively growing, it can only glide for so long before it falls back to the ground.
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