Virtual Motive

July 14, 2007

What Every Small Business Can Learn From Chapter 11

Filed under: Uncategorized — Administrator @ 8:05 pm

Mention bankruptcy, and a feeling of dreadful fascination comes over most folks. Like the blond in the horror movie who can’t help but walk toward the danger, instead of running away.

Bankruptcy is a process. What you have to do to file, counsel with a debt management specialist, do a thorough audit of your books, and from what you learn create a restructuring plan, these are how you can benefit from Chapter 11.

But don’t file, act. Unless there is no part of your operation thats turning a profit. If nothing is working, liquidate, you’re in the wrong business.

Perato’s Principle or the 80/20 rule, predicts that 20% of your customers provide 80% of your profit, not income, profit. This is the principle place where small businessmen get there concepts mixed up. Profit is whats left over after everything, and everyone is paid for, including you.

Thats what the company has to reinvest in its self. This is very important to understand. The inverse of the rule is that you spend 80% of your resources on the least profitable 20%. Think about it, honestly. This department, or that division, that if they just that one contract, that one big order. It just never seems to happen.

How it plays out is different for each business or service. Since this is my blog, and you don’t seem to busy, let you tell you a story that gives you an idea of the nature of the problem.

Fifteen or so years ago, I spent some of my youth just roaming around the country. I got to see a lot that tourist would not, and I got to know people.

In Compton Ca., I met a thirtysomething year old man, who had worked in the overhead door installation and repair business for a decade. He decided that there was enough business in L.A. for everyone, so he opened his own shop.

When I met him, he and his nephew averaged about to calls a week. Not much work. To keep us around, he would pay us minimum wage to go into different industrial areas, and sticker doors. This is a simple, practical , and automatic, marketing technique. We walk down the back rows of these businesses, where the big roll up doors for deliveries are, and introduce ourselves, ask how there doors were working, make any quick little adjustments (for free), and ask if we could put a stick on business card on the track where the chain to operate the door attached.

When you have a problem with an overhead door, it is usually when you are rolling it up or down. If something goes wrong, our automatic marketing system is right there, with the solution. Call us. Within six months, the nephew and I, each had our own service truck, and helper. Do not under estimate the power of graphics on your service fleet. We had two trucks, and people would comment that they saw our trucks all over town. In L.A.. They did, we had customers from the Beverly Hills all the way down into Orange County.

The problem was we were spending to much time working on worn out doors that should have been replaced. I told my boss it was time for him to raise his prices, to what was in line with the more successful companies . He was reluctant, and I was burned out, so I moved to Hawaii.

Even with great marketing, you can work yourself broke. You have to have systems in place that allow you to know where the money comes from, and where it goes. If its not going to what is profitable, you need to restructure so that it is.

Don’t have a little guy additude, that thinks , marketing, and financial planning, restructuring, are just for the big players. No indeed. They are for the successful players.

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Filed under: Uncategorized — Administrator @ 8:04 pm

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