Improving Your Odds:
The Three Cs of a Venture Turnaround
By Andrew Ross
In a 1998 study of small businesses released by Wells Fargo and the
National Federation of Independent Business’s Education Foundation, the
data showed that “over the lifetime of a business, 39% are profitable,
30% break even, and 30% lose money.” Clearly, it is very common for a
start-up enterprise to fall short of the founder’s objectives.
When a social enterprise is not meeting its objectives, it should
implement a business planning process similar to one that a start-up
company conducts. The more time you can spend on this analysis, the
better. But when you need to turn around a social enterprise quickly,
address the three “Cs”—costs, customers, and competition—as soon as
possible:
COSTS – Divide costs into “buckets”: payroll costs (including benefits),
direct expenses (materials, selling expenses, etc.), and overhead (rent,
utilities, administrative costs, etc.). Compare these expenses as
percentages of revenue to industry standards. As a resource, you may
want to review Annual Statement Studies (http://www.rmahq.org), a report
released each year by the Risk Management Association. Then set
aggressive goals to bring your costs closer to industry standards and
enact cost cutting programs.
CUSTOMERS – While securing new customers is a time-consuming process,
you should also speak to your existing customers about your performance.
You may not want to hear their complaints, but you need to know what
changes you can make to gain higher customer satisfaction and sales.
Talk to a broad range of customers, including those who come back
repeatedly as well as one-time buyers. Remember, your customers have a
vested interest in seeing you improve your product and service – don’t
be afraid to talk to them.
COMPETITION – Remember the axiom: “Keep your friends close and your
enemies closer.” Your competition is a rich source of information about
opportunities to streamline your operations, adjust pricing, and
benchmark costs. What niche do you fill in your market? Your customers
have a choice, and your product offering compared to those of your competitors
are what get you a sale. Conduct research to find out as much as
possible about your competition (size, ownership, amount of capital,
product lines, pricing, locations, etc.). Finding this information is
often easier than you might think – some items can be found through
Internet research. To collect information on pricing or details about
services or products, you may actually want to talk directly with your
competitors. The more you know about your competition, the easier it
will be to show your customers what sets you apart from the pack.
Turning around an underperforming venture is never an easy task. It is
an emotional process – you may feel like you are responsible for a
failing business. You are fortunate in that your business is still in
operation; what has happened is in the past. As the old saying goes
“People don’t plan to fail, they fail to plan,” and by rapidly
addressing these three “Cs,” you can develop a good plan to turn around
your social enterprise.
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