Target Marketing

One of my favorite topics with regard to small businesses is target marketing. Target marketing is concentrating your efforts toward the group of people or businesses that will bring you the most revenue. It is the bull's eye at which you aim your marketing efforts. The reason that this is one of my favorite topics, is that so many small business owners have the mindset that everyone is a potential customer, so that is who the target is -- everyone. For example, if I were to ask someone who owns a retail hat store who their target market is, it is not uncommon for me to receive the answer “well I sell hats, so anyone with a head.” While it is true that everyone could be a customer, it is highly unlikely that your customer breakdown will include an even amount of every type of person or business that is out there. It is probably true that 20% of the people or businesses that bring you 80% of your revenue have very common characteristics, such as demographics (personal information such as age, income, occupation, married or single, etc.), psychographics (purchasing preferences and interests such as personality, values, attitudes, interests, or lifestyles) and geographic (location such as home address, business address, etc.) location.

Once you have identified who your target market is, then you can design a specific marketing message catered to that group with similar characteristics.

Let’s say you know your target market is 15 to 25 year-old men who like country music, are frequent hat buyers, and live in rural areas. You can create an advertising message to appeal to those types of buyers. Additionally, you could buy spots in a newspaper or a magazine that appeals to this type of buyer, rather than use advertising that tries to be all things to all people.

Collections for Small Businesses

In this recent economy, customer budgets have been stretched. As many of you may have discovered, the last person to get paid may be you, the business owner. Although it may be understandable from the customer’s point of view, you are in this slowing economy as well, and the people you owe money to (insurance, rent, loan, payroll) will not care that you have not received all of your money. According to the Commercial Collection Agency Association, the probability of collecting on a bill drops to 70% after 90 days. And it plummets to 23% after a year.

Let’s take a look at some proven collection methods. I’ll warn you there are no silver bullets or magic pills, just good old fashioned proven processes.
· Create payment guidelines and get it in writing – This will create clear expectations of prompt payment. Make sure that the payment guidelines are on your order form, brochure and/or Web site. Also make sure they clearly spell out your terms of sale and payment options. Do not use generic terms, such as “due on receipt” and then not follow through. This will set the wrong example. If you say due on receipt, and the customer doesn’t pay immediately, then penalize them for late payment.
· Review Accounts Receivable reports frequently – Assuming that you have an accounting system in place, you should have an Accounts Receivable report that you can review at least on a weekly basis. This report will tell you what customers are 30, 60, and 90 days late. If you make this analysis a recurring task, just like processing payroll or any other weekly task, you will make it a habit of being informed about collection issues.
· Send a series of reminders – As soon as the payment date is missed, you need to have a system in place that reminds the customer. Using letters, emails, or phone calls will work. You can use software, such as QuickBooks®, to assist you in setting up reminders and even for processing collection letters. Also if you have a late payment charge policy, you need to enforce it each time.
· Be consistent with your collections process – One of the toughest things about staying on top of the collections process is getting too comfortable with the status quo of a tight cash flow. Sometimes you may think it is easier to put the pressure on yourself, your business, and even your family then it is to listen to hard luck stories or to chase deadbeats. But the simple truth is that your business and your stress level will be in much better shape if you are willing to make the tough decisions.
· What to do if all else fails – Many of you know that you will not always win in the collections process and there has to be some type of resolution. You may have to sacrifice at least 50% of the debt to collect anything at all. This may mean that, at some point, you may have to be willing to sue or send the debt to collections. Either option may be costly, but if the debt is significant enough it may well be worth it. Sometimes you may just need to know when enough is enough, and give up on the debt and chalk it up as a lesson learned. I would suggest that should always be your last option