What to do when the phone stops ringing

The honeymoon is over. You've been in business for a while and are making some money and then things start to hit a lull. Customers aren't calling as often and your employees aren't as busy taking orders any more. What do you do now?

There are two types of businesses that fall into this situation, which requires swift and immediate action. The first type are new businesses that enjoy some initial success, which could occur for a variety of reasons. Perhaps they have opened a new restaurant in town and lots of people want to check it out. Or maybe they found a niche market that gets quickly discovered by customers seeking their product or service.

The second type of business is one where the company has been established for years and has relied on a steady stream of regular customers. They are accustomed to getting business from their old customers and getting new ones from word of mouth referrals from their established clientele.

For both of these types of companies that have suddenly faced a downturn in their business, the task at hand is the same: determine the reasons for the downturn and develop a plan to turn things around.

Why is my business going south?

When business starts going bad, try to look for valid reasons, not excuses. It's easy to say that your customers just aren't spending as much money as they used to anymore or that new competitors are taking business from you, but these characteristics may just be symptoms of the problem.

If you were able to occupy a niche market that is now highly competitive, try to find out why you have been losing business to your competitors. Perhaps they are offering something you are not - better product, better service, lower price. The market wouldn't encourage other companies to enter it unless there was a reasonable opportunity to do so.

Look to your customers and employees for answers. Your customers will tell you whether they are satisfied with your product and service, and whether they feel that they are getting their money's worth. Your employees will tell you what the customers are saying about the company and what types of problems may exist internally.

Implementing solutions

Once you think you've got a handle on the problem(s), put together a plan to implement some meaningful solutions. You can increase profits (or reduce losses) in basically two ways: increase revenues or decrease costs.

The first place to look to increase revenues is marketing. Since marketing is not cheap, you have to look for ways to do it cost effectively. Your best source of new customers is old customers. For those that are active, see if they can do more business with you and if they can refer you to other potential customers. For those that are inactive, find out why and see if there is anything you can do to lure them back.

If you must do direct advertising, try to target your market as specifically as possible and look for advertising mediums that can reach that market, such as local newspapers, trade publications, or mailing lists.

You may be able to increase revenues by expanding the scope of your services. Perhaps there are complementary services to the ones you already offer that can be marketed to your existing customers. It may also be very easy to offer your services to a wider geographical area than you currently cover without driving up costs substantially.

Don't look to layoffs first

Many companies react to business downturns by immediately laying off employees in order to cut down expenses. While this might seem like a reasonable short term solution, it does carry with it an immediate reduction of employee moral which could have long term effects on the product or service being provided.

The first things to look for when trying to cut expenses are those that don't significantly affect the product you are providing. If the impact of laying off employees means that orders can't be filled on time, or customers can't be serviced properly, you will just end up making a bad situation worse.

Try to cut expenses by streamlining the existing operation. You can do this by closely examining the critical areas of the company that define how it delivers its product - these are typically called "critical" or "core" business processes. By focusing on these processes and acknowledging that the majority of the company's resources should be dedicated to them, it is fairly easy to identify when significant expenses are going to non-critical areas.

When business starts going bad, make sure you know why. Then look for practical solutions. Impractical ones don't fo far.