For many businesses the coming couple of years will be really tough. Although we are, in theory, out of recession the financial difficulties which come from an economic downturn will continue to be felt way into the future.
If you own a service business there are things you can do to make yourself as resilient as possible and I include my take on the most important ones below:
In a service company the level of customer spend can be quite high. For this reason it is vital that you review the level of credit you are prepared to give clients and stick to it. My payment terms require that clients pay either by monthly standing order or on date of invoice. Even if they don’t pay immediately at least I can chase from the earliest possible point.
Ensure you invoice promptly after work is completed, and, if the job spans several months, agree stage payments with your client so they don’t owe you more than 1 months worth of work.
Bare in mind that none of us really knows what is going on in another company. A seemingly sound company can be on the verge of collapse due to cash flow problems. Credit checking services can help you assess the credit worthiness of a business, but remember their information is out of date to some degree and they don’t pick up the full picture. The only way to ensure you don’t get caught out is to collect the money owed to you as quickly as possible.
Remember, even the banks are reluctant to be banks at the moment – so don’t fall into the trap of acting like one!
A key way to survive the recession is to provide the BEST service you can and be as close to your customers as possible. I see many service providers who think they can get away with average service and who assume clients will stick with them regardless. This is an arrogant assumption which will lead them, quite rightly, to lose good clients to much more customer orientated businesses.
For any business, but particularly for service companies, the relationship you have with your clients is king. A client who knows you well, and believes you are giving him the best, most focussed service available, is unlikely to shop elsewhere, even if he has the possibility of getting the service ‘cheaper’.
Build your referral network
We all know that people buy from people. You are much more likely to engage a supplier who has been recommended to you by a trusted advisor/contact than one you have met fleetingly at a networking event.
For this reason I think it is important to build up a network of people around you who:
– although they are not competitors to you, have the same types of customers as you do.
– understand exactly who an ideal client is for you so they can spot one when they meet them
– understand exactly what you do and the problems you solve for your clients
– are people you would be happy to refer to your contacts so the relationship is mutually rewarding
If you have a strong network you can be much more focussed in your marketing and will be much more likely to get the type of new clients you need.
At the end of the day those businesses which will remain standing will be stronger than they were before the recession, because they will have grasped exactly what makes a great business. The prize for getting it right is not only survival, but the opportunity to achieve great heights once business becomes easier again.