Here’s a scenario that can happen to any successful business – smaller competitors grabbing your marketing share.
So you’re king of the proverbial road. You’ve decimated the competition. Business is cruising along on all cylinders with strong sales.
Then, your sales start sputtering. Some of your products and services aren’t selling well. Their margins are decreasing.
Whoa. Don’t panic or rush to make rash decisions. It’s time to pull over to a rest stop to analyze your situation. What’s going on?
Your research reveals smaller companies are pilfering your customers. You’re used to competition but to lose to little-known micro businesses? That’s unthinkable. Or is it?
So small competitors – micro businesses that don’t have your capabilities and financial resources – have entered the marketplace. They’re chipping away at your market share in some of your products and services.
What can you do? You can adjust – further analyze the reasons for the problem and develop solutions.
Here are strategies to consider:
1. Evaluate your revenue streams
This is a step that requires you to let go of your ego. It might be time to refocus your vision.
You might be too diversified – too many niches. Examine your products, services, departments and locations.
Run a cost-benefit analysis of each. Determine which of them has enough long-term revenue potential. Some might not. You should give thought to possibly discontinuing them.
This is accomplished by exploring your income statement. Break it down into segments.
For instance, if a product isn’t profitable, develop a product-line income statement. Do the same for your locations, and create a contribution margin-income statement to split fixed costs from variable costs.
You must decide whether the segment has a positive contribution margin. It’s important for you to know if any of the fixed costs can be avoided if you drop the segment.
Common fixed costs can be assigned to the other segments.
If you were to discontinue a segment, decide if you can repurpose and any employees or equipment.
Finally, evaluate whether a discontinued segment will adversely affect other the sales and parts of your overall business.
You might want to review best practices in financial statements.
2. Write your vision
If you don’t have a written vision for fast growth, the reality is that you’re losing out on potential business. A written business plan is best.
There are many valid reasons to write a business plan. They’re not necessarily to attract capital. Whatever your reasons, avoid writing a mediocre document.
To ensure success, there are key essentials for a top business plan.
But if you don’t have the time and resources to write it, go to plan B – a vision plan. Here’s how to write it. Then, consider the following strategies in your written planning.
3. Partner with your competitors
If you discontinue a product or service, consider approaching your competitors to discuss a mutually beneficial arrangement.
A small competitor is not able to provide everything you can. Therefore, by eliminating a segment that’s offered by the competitors, it’s in your best interest to form a strategic alliance.
Cut a deal for you two to refer business to each other. Each of you will be able to make money and enhance the branding or your specialties.
Besides in this regard, it’s worth remembering a famous tenet: “Keep your friends close and your enemies closer.” It has been attributed to Sun Tzu, Niccolò Machiavelli and Petrarch.
It was also a line by the character Michael Corleone in The Godfather Part II: “My father taught me many things here – he taught me in this room. He taught me – keep your friends close but your enemies closer.”
4. Hire your competitors’ employees
When a competitor feels good about taking your customers in a zero-sum game, you might feel the same way.
If you decide not to discontinue a segment, consider recruiting employees of the competitors. By hiring key people away from competitors, this will likely mean new business for you.
If the employees are talented and closely connected to the customers, it’s entirely possible the customers are loyal to the employees who will bring their customers with them.
5. Acquire your competitors
By buying the competition, you will re-assert your dominance. It’s a common dignified practice. Companies do it all the time.
But many mergers fail because the cultures are too dissimilar. So make certain your cultures are compatible.
Just look what happened to Hewlett-Packard after CEO Carly Fiorina forced the merger with Compaq. HP has never been the same.
Business marriages might seem simple, but the successful acquisition of another company is a complex process. Acquiring a business is much like building a healthy salad – mergers need key ingredients.
6. Whatever you do, stay vigilant
Stay focused. Monitor your marketplace, plan strategically, operate efficiently, train your staff, take excellent care of your customers and aggressively market your business.
Be prepared to adapt in changing conditions.
Cunning and skill are paramount for success for both business and sailboat racing. A salient concept in sailing is course correcting. Here’s how to use sailing principles to course-correct in business.
Always stay focused on growth.
From the Coach’s Corner, related resources:
19 Best Practices in Due Diligence for Profitability — To lead your company to high profitability – and to stay there – due diligence is needed in critical values.
Strategies to Measure, Boost Your Business Performance — If healthy revenue and profit margins are your goal, you must determine the critical factors that lead to success. In essence, business is war in commerce. In order to win, you must know how, why and when to attack.
For Business Growth, the 3 Best Practices in Cutting Costs — You won’t achieve long-term profitable growth by slashing costs. By strategically cutting costs, you will develop a resilient business-growth model. Just as you differentiate your company to your customers, you must differentiate your costs to propel your business growth.
10 Innovation Tips to Boost Your Long-Term Customer Base — Businesspeople are constantly under pressure. Daily events make it challenging to make critical decisions for financial sustainability. Businesses must innovate to survive. Here are 10 key questions to ask about your business.
6 Best Practices for Your Cause-Related Marketing Program — Cause-related marketing programs can, of course, accomplish two goals: Help deserving organizations increase revenue and propel your business to a profitable, stronger image.
“Number one, cash is king…number two, communicate…number three, buy or bury the competition.”