Synergy is the term used to describe a situation where the final outcome is greater than the sum of the individual parts. This can happen when the right two businesses come together and share their information, clients, markets, or other resources. Through synergy, companies can increase revenue and cut costs.
Revenue increases can be found when companies have different, yet complementary products or services that don’t compete with the other business. This gives each company access to larger markets as they share their client base. For example, if a company that sold iPhone accessories teamed up with an iPhone application developer they could both market and sell to each other’s customers without stepping on one other’s toes.
Lowered costs can also take place when two companies come together. The term Economies of Scale refers to the cost advantages associated with expansion of production. Benefits include purchasing supplies in bulk, reducing the number of managers needed, closing an office that isn’t needed anymore, or combining marketing campaigns to reduce cost and risk.
What do you think? Please share an idea or example of how companies can use synergy to increase business and lower costs!
Part I: Reduce Overhead Costs and Debt
Part II: Synergy - Become partners with a complimentary business
Tuesday, November 25, 2008
Monday, November 24, 2008
Strengthen Your Business in Uncertain Times: Part I: Reduce Overhead Costs and Debt
Making sure your company has no unnecessary expenses and a liability is the first step you should take when looking for ways to strengthen your business during uncertain economic times. Here are a couple ways you can look to keep your business lean and operating in the positive.
1. Find and reduce any big costs or debts from things that are obviously not needed to keep your core business operating. One way to do this is to lay out all of your larger expenses and rate them based on two score calculations: Elimination Consequence and Amount Saved.
Elimination Consequence:
Rate each item from 0 to 5 based on how much it hurts your business to eliminate it - 0 means you cannot eliminate it without severely affecting your business and 5 means you can eliminate it without any affect to your business operations.
Amount Saved:
Then rank each item by how much potential money it can save your company - 0 saves no money and 5 saves a lot of money.
To get the total value, multiply the two scores together for each item. For example, your best performing senior sales person may score a 4 on the amount of money saved, but a 1 for the elimination consequence (because it would largely affect your sales to lay them off), their overall score would be: 4 * 1 = 4. The items with the highest scores are the first things you should consider getting rid of. Of course, this is just a tool to help you gain perspective. Where you actually decide to cut costs is up to you.
2. Reduce costs by setting a target goal to cut a certain percentage, say 10 percent, from all the different parts of your business. This is a good alternative if you can’t find any big expenses to get rid of. By tightening the slack a little here and there, it can add up to significant savings for your company as a whole.
Each business is different, so use your creativity to find places to save. Ask yourself how you can produce your product for less. Eliminate production of a product that isn’t performing as well. Or, if your business travels a lot, consider using more fuel efficient vehicles or traveling coach instead of first class. Greening your business is a good way to save money while also increasing your business image.
It’s not always easy to cut costs, but in a down economy only the lean survive. Use your creativity to find places to cut costs while improving their business at the same time. The more of these you can find, the stronger your business will become.
Part I: Reduce Overhead Costs and Debt
Part II: Synergy - Become partners with a complimentary business
1. Find and reduce any big costs or debts from things that are obviously not needed to keep your core business operating. One way to do this is to lay out all of your larger expenses and rate them based on two score calculations: Elimination Consequence and Amount Saved.
Elimination Consequence:
Rate each item from 0 to 5 based on how much it hurts your business to eliminate it - 0 means you cannot eliminate it without severely affecting your business and 5 means you can eliminate it without any affect to your business operations.
Amount Saved:
Then rank each item by how much potential money it can save your company - 0 saves no money and 5 saves a lot of money.
To get the total value, multiply the two scores together for each item. For example, your best performing senior sales person may score a 4 on the amount of money saved, but a 1 for the elimination consequence (because it would largely affect your sales to lay them off), their overall score would be: 4 * 1 = 4. The items with the highest scores are the first things you should consider getting rid of. Of course, this is just a tool to help you gain perspective. Where you actually decide to cut costs is up to you.
2. Reduce costs by setting a target goal to cut a certain percentage, say 10 percent, from all the different parts of your business. This is a good alternative if you can’t find any big expenses to get rid of. By tightening the slack a little here and there, it can add up to significant savings for your company as a whole.
Each business is different, so use your creativity to find places to save. Ask yourself how you can produce your product for less. Eliminate production of a product that isn’t performing as well. Or, if your business travels a lot, consider using more fuel efficient vehicles or traveling coach instead of first class. Greening your business is a good way to save money while also increasing your business image.
It’s not always easy to cut costs, but in a down economy only the lean survive. Use your creativity to find places to cut costs while improving their business at the same time. The more of these you can find, the stronger your business will become.
Part I: Reduce Overhead Costs and Debt
Part II: Synergy - Become partners with a complimentary business
Thursday, November 6, 2008
Business Strategies for a Recession
As the credit crisis hangs over our economic future, many small business owners may be asking the same question: What can I do to recession proof my business? Luckily, as a small business, you have the capability to adapt quickly – an advantage your larger competitors don’t have. Here are a few things you can do to get your business in shape:
Diversify and avoid the middle market
As the current market slows, you can strengthen your client base by broadening the services and products you offer. By providing things that your competitors don’t have, you can attract new customers and stay appealing to your old ones. You never want to get too dependent on one customer’s support because they could disappear and so would your business. As you begin to brainstorm new product ideas, focus on the things that people can’t go without and avoid the middle market. During a recession, people are more likely to choose a similar product that costs less compared to the slightly nicer one. They don’t want to pay extra for ambiance, so strip down your product to the essentials.
Increase marketing, but do it cheaply and consistently
During slower times you have to find new ways to attract customers and make sales. The key is to not expose your business to expensive marketing campaigns like image building or large ad spaces. Their success is hard to measure and may not even work. Instead, offer promotions and coupons. People are looking for good deals, and it makes them feel better to know that they are saving money. This reduces upfront marketing costs by ensuring a purchase before any money is spent. Short term promotions and coupons allow you to attract the attention of bargain shoppers without needing to cut your prices long term. They also give you the chance to hook new customers onto your product. Lastly, make sure you market consistently, all year long, so that you are always attracting new business for the future.
Go green to save green
Making your business greener can save costs and is good for the environment. It gives customers another reason to choose you over someone else. Start off by reviewing your energy costs. You can call your electricity company to request a free energy audit. Sometimes they will even visit your business to tell you where you can reduce energy costs. Simple things like changing from halogen light bulbs to L.E.D. bulbs can cut your energy bill way down. One company in Florida saw their energy bill decrease by half just from changing the bulbs they used. Going green is an ongoing process, but if you start off with the obvious fixes that are cheap to change you’ll start to see savings right away.
No matter what the economic circumstances happen to be, there are always businesses that do well and those that fall behind. Being smart about the products you offer, how you market them, and where you cut costs can keep your business running profitably. The business changes you ultimately decide to make are only limited by your creativity and flexibility.
Please feel free to share any business ideas you think are important to be successful during a recession!
Diversify and avoid the middle market
As the current market slows, you can strengthen your client base by broadening the services and products you offer. By providing things that your competitors don’t have, you can attract new customers and stay appealing to your old ones. You never want to get too dependent on one customer’s support because they could disappear and so would your business. As you begin to brainstorm new product ideas, focus on the things that people can’t go without and avoid the middle market. During a recession, people are more likely to choose a similar product that costs less compared to the slightly nicer one. They don’t want to pay extra for ambiance, so strip down your product to the essentials.
Increase marketing, but do it cheaply and consistently
During slower times you have to find new ways to attract customers and make sales. The key is to not expose your business to expensive marketing campaigns like image building or large ad spaces. Their success is hard to measure and may not even work. Instead, offer promotions and coupons. People are looking for good deals, and it makes them feel better to know that they are saving money. This reduces upfront marketing costs by ensuring a purchase before any money is spent. Short term promotions and coupons allow you to attract the attention of bargain shoppers without needing to cut your prices long term. They also give you the chance to hook new customers onto your product. Lastly, make sure you market consistently, all year long, so that you are always attracting new business for the future.
Go green to save green
Making your business greener can save costs and is good for the environment. It gives customers another reason to choose you over someone else. Start off by reviewing your energy costs. You can call your electricity company to request a free energy audit. Sometimes they will even visit your business to tell you where you can reduce energy costs. Simple things like changing from halogen light bulbs to L.E.D. bulbs can cut your energy bill way down. One company in Florida saw their energy bill decrease by half just from changing the bulbs they used. Going green is an ongoing process, but if you start off with the obvious fixes that are cheap to change you’ll start to see savings right away.
No matter what the economic circumstances happen to be, there are always businesses that do well and those that fall behind. Being smart about the products you offer, how you market them, and where you cut costs can keep your business running profitably. The business changes you ultimately decide to make are only limited by your creativity and flexibility.
Please feel free to share any business ideas you think are important to be successful during a recession!
Monday, November 3, 2008
Why Online Business Makes Sense in a Recession
As Wall Street swings up and down, consumer spending drops, and news headlines reveal banks failing left and right from the mortgage crisis, it seems probable (if not inevitable) that our economy is heading towards a recession. But don’t crumple up and toss away your well-thought out, ingenious business plan yet! A slow economy does not necessarily mean that your business can’t make money. There are still plenty of opportunities for success if you engage in the right sector, and the best place to be right now is virtual.
Ecommerce was up 13% in the first quarter of 2008 with online revenues at over $32 billion. Compared to store sales, online retail is growing at triple the rate, which means that customers are increasingly shopping online. One study by Nielsen Online suggested that convenience and ease of use is a big reason why people are changing their buying habits. People are able to shop any time of the day while having access to a large selection of products and prices to compare between.
High gas prices are also causing shoppers to think twice about spending extra money to drive to the mall. In some cases it costs more to drive to the store and pick up the item than it does to have it delivered to your doorstep. Stores like Zappos.com, an online retail shoe store, have created entire businesses by exploiting the convenience of online shopping and free shipping. Their business model supports free shipping (both ways) with a 365 day return policy. Because storefront costs are low, they can pass along savings to their customers in the form of free shipping. Zappos was founded in 1999 and they’re projecting over $1 billion in sales for 2008.
Starting a business online allows you to cut out overhead expenses typically associated with launching a new company. By starting online you can reduce the rental payment, utility bills, and staff wages from your costs. And you can keep your online store open 24 hours a day, 7 days a week. This flexibility lets you keep your day job while you work on your personal business at your own time and pace.
If you have more than one business idea, you can try them all out with little additional cost to see which one will work best. Online Ecommerce tools allow you to test out your market before you risk too much investment capital. For instance, if you’re thinking about selling a product, you can test out the market by selling on EBay before spending the money to set up and market a new website. EBay already has millions of customers coming to their website regularly, so why not take advantage of that?
Another benefit of having an online business is that it allows for automation. You can save a lot of your own personal time, risk, and frustration if you create your business so that you can outsource its functions to places that already specialize in them. Once your business has gained some success, you can contract out things like manufacturing, order fulfillment, or customer service. By doing this you can potentially free yourself from the majority of the day-to-day operations, giving yourself time to focus on more important things like designing your next great product or idea.
As the U.S. economy remains unstable, the internet provides a customer base with less boundaries and more diversity. Not only can you sell your products or services to people worldwide, buy you can also find potentially new, untouched markets.
These are just a few of the advantages of starting an online business during a recession. Please share any thoughts or ideas you have on the topic!
Ecommerce was up 13% in the first quarter of 2008 with online revenues at over $32 billion. Compared to store sales, online retail is growing at triple the rate, which means that customers are increasingly shopping online. One study by Nielsen Online suggested that convenience and ease of use is a big reason why people are changing their buying habits. People are able to shop any time of the day while having access to a large selection of products and prices to compare between.
High gas prices are also causing shoppers to think twice about spending extra money to drive to the mall. In some cases it costs more to drive to the store and pick up the item than it does to have it delivered to your doorstep. Stores like Zappos.com, an online retail shoe store, have created entire businesses by exploiting the convenience of online shopping and free shipping. Their business model supports free shipping (both ways) with a 365 day return policy. Because storefront costs are low, they can pass along savings to their customers in the form of free shipping. Zappos was founded in 1999 and they’re projecting over $1 billion in sales for 2008.
Starting a business online allows you to cut out overhead expenses typically associated with launching a new company. By starting online you can reduce the rental payment, utility bills, and staff wages from your costs. And you can keep your online store open 24 hours a day, 7 days a week. This flexibility lets you keep your day job while you work on your personal business at your own time and pace.
If you have more than one business idea, you can try them all out with little additional cost to see which one will work best. Online Ecommerce tools allow you to test out your market before you risk too much investment capital. For instance, if you’re thinking about selling a product, you can test out the market by selling on EBay before spending the money to set up and market a new website. EBay already has millions of customers coming to their website regularly, so why not take advantage of that?
Another benefit of having an online business is that it allows for automation. You can save a lot of your own personal time, risk, and frustration if you create your business so that you can outsource its functions to places that already specialize in them. Once your business has gained some success, you can contract out things like manufacturing, order fulfillment, or customer service. By doing this you can potentially free yourself from the majority of the day-to-day operations, giving yourself time to focus on more important things like designing your next great product or idea.
As the U.S. economy remains unstable, the internet provides a customer base with less boundaries and more diversity. Not only can you sell your products or services to people worldwide, buy you can also find potentially new, untouched markets.
These are just a few of the advantages of starting an online business during a recession. Please share any thoughts or ideas you have on the topic!
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