Businesswise | How to resuscitate a dying business
I desperately need your help. Last year, I started a marketing, consulting, and social media-management business for local start-ups and the first four months were great. I used my connections from my previous employment, got referrals from family and friends and things really took off. Now, everything has practically ground to a halt and there are now months when I barely make anything. What do you think I did wrong, and how can I get my business back on track?
Based on the information you have given me, I can't definitively say where you went wrong, but I do have some ideas. Let's start with your business model basics, the target market, service itself and your marketing approach, all of which may be flawed.
Targeting start-up businesses can be a very risky proposition for marketing consulting services because they usually don't have the budget to hire consultants except where they need technical or highly specialised assistance. In fact, even if your services are retained, it may only be for a very brief time, with limited repeat business, which may translate to high customer acquisition costs and low customer lifetime value. You are, therefore, spending a lot to attract customers who spend very little and don't stay with you long enough.
It is also likely that you'll be paid a fraction of what your service may be worth for another target market, say, for example, small and medium-sized enterprises which have been in business for over three years, are more sophisticated, recognise the value of your service, have bigger budgets and are more committed to a long-term relationship. This is why targeting the most viable market is so important. Otherwise, you risk working twice as hard for half as much money.
Also, research has shown that most local start-ups don't start with a properly developed business plan and usually don't recognise the need for formal marketing plans as an important strategic tool. Following on that point, the big problem you may be facing is that there is no real demand for your service.
Just because start-up businesses lack marketing expertise that could help their businesses grow doesn't mean they recognise it as an important need to be fulfilled. If your strategy is to educate them about the need, that, too, can be problematic as it is very expensive and time-consuming and you won't get returns in the short term to keep the business afloat.
The other potential issue is that your own marketing is flawed starting with the services you provide. Remember that marketing is about delivering the right products and/or services, to the right people, in the right quantities, at the right price, time and place so that you satisfy customers' needs while making a profit.
It is not just about advertising or promoting your company, but is far more wide reaching, starting with understanding your customers and their needs. Remember that social-media marketing is something many businesses believe they can master on their own, although that's often not the case.
I also think you fell into a trap that many start-ups fall prey to believing that a jump-start from family and friends is enough fuel to keep the business moving for a protracted period.
The reality is that when you just start a business, you typically receive a big push from your family, colleagues and well-wishers who will patronise you to show support. This is often not real demand, nor is it sustainable, but so many entrepreneurs are seduced by this initial 'success' that they don't develop or execute a sustainable plan for growth.
If my assessment of the challenges are accurate, then the best course of action to resuscitate this business is to go back to the drawing board and practise your own marketing expertise on your enterprise. Reassess the target market, determine what needs exist and what solutions your business may be able to offer.
I suggest you use focus groups and get credible data to drive the development of your services so that your offerings are specific to real needs and not generic to problems. I can't stress enough how important it will be for you to differentiate yourself from others and have a solid value proposition that is a compelling reason your new, more viable target market should buy from you.
Once you have revamped your business model, do a formal business plan and a five-year strategic marketing plan, which you can update as needed, but which will you force you to do long-term planning for a more sustainable and high-growth potential enterprise.
Yaneek Page is an entrepreneur and trainer, and creator/executive producer of The
Innovators TV series.