3 Easy Cash Flow Tips For a Recession-Proof Small Business

According to the Small Business Administration, not managing your cash flow is one of the leading reasons small businesses go belly-up. So here are a few tips to help ensure your cash flows quickly from your customers to your bank account…and from there, to your own creditors, employees, and you.

 

1. Adjust your billing cycle.

If your business typically bills net 30 after you deliver your product or service, it’s like you’re loaning your customers money for a month. That might make sense when the economy is booming. But when it’s slow? Not so much. You can help keep the cash flowing by billing net 15 if you normally bill net 30. Better yet, ask for a retainer or a deposit up-front. You bad debt expenses should go down, and you’ll have more cash on hand. (Yes, you may lose a customer or two. But do you really want customers who can’t afford to pay net 15?)

 

2. Adjust your pricing strategy.

It’s a cliché, but it is all about volume. A small price increase across a wide customer base can put a lot of new money in the bank. Of course, you have to be strategic. Make slight adjustments. Make sure your prices remain competitive. And if customers ask, you can honestly say that your prices should be even higher.

 

3. Adjust your collections processes.

So you’re a nice guy. Or a nice gal. You’re forgiving. Understanding. Sympathetic. Well, get over it! In a recession, you can’t afford to be “nice” when it comes to collections. Stay within the law, of course, but be aggressive when it’s time to collect overdue accounts. Hire a professional collection agency if necessary. Need some incentive? How’s this: the money you collect today may be the money that backs your paycheck tomorrow. I hope these tips will help you keep the cash flowing in your business…no matter what the economy is doing.

Rising Online Competition May Dilute Ad Effectiveness

To all the marketers who think they are saving money while increasing ad effectiveness via online media channels, MIT Sloan Assistant Professor Alessandro Bonatti has a message for you: Not so fast. Bonatti and co-researcher, Yale-based Dirk Bergemann agree that online advertising allows marketers to target specific demographic groups efficiently. However, in highly competitive industries, many marketers may end up chasing the same group of customers.

The higher level of competition will result in decreased profitability for marketers, partly because of higher advertising costs and partly because of lower prices needed to win customers. Bonatti says, “[s]o while online advertising certainly has the potential to drive out traditional advertising, it does not necessarily follow that online advertisers will make more money.”

Bonatti suggests that online ad effectiveness will vary by industry. “You can make a lot of money through super-powerful targeting if you are a monopolist, but not in a competitive market.” These findings are important to consider with respect to the CPM (cost per thousand impressions) that ad networks are commanding for specific industries. In the last three quarters of 2009, costs increased for food, entertainment, and real estate marketers. For example, food marketers saw their CPM impressions rise from $1.50 in the first quarter to $6.94 in the third quarter.

This topic is too complex to fully analyze in a blog post, but Bonatti’s take-away message can be easily summarized. Marketers will need to review their industry and their targets as they shift part of their ad budgets online. In some cases, it may be more cost-efficient to stay with traditional media.

[Source: MIT Study Debunks Online Ad Advantages, marketingcharts, December 2009]

Online Sponsored Search Ads. Make them more effective.

Visually clean, relevant ads can make a huge difference to the success of your search campaign. Be sure your ad appears professional, that your text matches your keywords and what you offer, then users will be more likely to click through and visit your site.

Key Points

• Match the tone of your ad to your product’s price point and positioning, and include the top benefits your customers are looking for.
• Direct your ad to unique landing URLs, so that users can easily find your offer.
• If you’re targeting a certain geographic area, be sure to include that location in your ad.
• Make sure titles are between 6 and 25 characters, descriptions 6 to 70 characters, and the display URL is no more than 35 characters.
• Create multiple ads with different messaging, to test multiple ads at once. Tracking tools will show you the better performing ads.
• Consider using dynamic text in your ad to make the ad more relevant to the searcher’s query.

Remember, a click through is only the first step. If the ads do not get the user to convert once they are on your site, you may have wasted your money for that click. Be sure your website is “up to snuf” and you can deliver on your promises.

Interactive to Play Bigger Role in 2010 Local Media Markets

The local media market has long been owned by local TV stations, newspapers and Yellow Pages. While the recession definitely slowed this market, the recovery, paired with marketer interest in new forms of media, means the industry is looking at big changes in 2010. BIA/Kelsey analysts value this market at $140 billion. Neal Polachek, president at BIA/Kelsey predicts, “as the economy inches toward recovery and digital media continue to gain ground aided by mobile and social momentum, 2010 will certainly be a pivotal year to track.”

Here’s what the research shop sees happening in the local media market in 2010.

Search Market Recovery – The increased activity in the market will mean higher costs for advertisers active in paid search.

Yellow Pages – These publishers will seek to diversify their products and may move into mobile search.

Local Broadcasters – These business will operate from a position of strength with their expertise in local brands, content and sales forces.

Vertical Ad Networks – This rapidly changing channel may find money in hyper-local sites and local lifestyle networks.

Twitter/Facebook – Analysts expect social media outlets to monetize their models by offering geo-targeted audiences.

It’s too soon to tell which of these predictions will prove most accurate. But businesses looking for new ways to reach customers in local marketers have no shortage of options to try.

[Source: BIA/Kelsey Analysts Identify Key Local Media Trends to Watch in 2010, Company release, January 2010]

Younger Consumers Shifting Online Time Away from Blogs

Most analysts and marketers know that younger consumers have typically been bigger Internet users than older consumers. Web use by younger consumers is nearly ubiquitous (93%) while adults over age 65 now have a usage rate of 38%. The bigger news, according to a Pew Internet and American Life Project report, is that the type of Internet use varies drastically by age group.

Online consumers who write blogs:

18-29 year olds: 15% (down from 24% in December 2007)
30+ year olds: 11% (up from 7% in December 2007)

Online consumers who use Twitter:

12-17 year olds: 8%
18-29 year olds: 33%

Online consumers who use social networking sites:

12-17 year olds 73%
18-29 year olds 72%

All online adults 47%

These statistics point to some interesting trends. Ben Parr, writing for Mashable, suggests that the younger audience’s shift away from blogs and teens’ lack of interest in Twitter may mean these age groups don’t want to create content. Perhaps younger consumers lack sufficient time or an audience for their blogs. Parr may be correct that the average teen is not interested in reading lengthy personal posts. If that is the case, we have to wonder why teens aren’t flocking to Twitter, the perfect venue for brief posts. The reason may have to do with the media rich environment that social networks offer teens. In addition to writing brief comments on friends’ pages, teens can also view videos and upload photos. Until additional studies reveal exactly why teens find certain online destinations more appealing than others, marketers would do well to reach for younger audiences through social media sites.

[Sources: Parr, Brent. Teens Don’t Tweet or Blog, Mashable, 2.3.10; Social Media and Young Adults Summary, Pew Internet and American Life Project, 2010]