Profitability always a cash-22 situation
I have recently set up a high-pressure water cleaning small business as a sole operator. I have two approaches to marketing at this stage, but would appreciate a view on whether these are appropriate. I advertise in our local paper regularly, and have designed a flyer for letterbox drop with a few key messages about the service. I will work in specific suburbs near to home to gauge interest. I expect building my profile to be a challenge, and would welcome any suggestions.
I have recently set up a high-pressure water cleaning small business as a sole operator. I have two approaches to marketing at this stage, but would appreciate a view on whether these are appropriate. I advertise in our local paper regularly, and have designed a flyer for letterbox drop with a few key messages about the service. I will work in specific suburbs near to home to gauge interest. I expect building my profile to be a challenge, and would welcome any suggestions.THE first thing you need to make sure of is that you know your customers and you're clear on what they are looking for from you as a service person. Are you dependable and trusted in the community? Is your service good value and are you in the best in the business? Make a list of the attributes that you think your customers value and make sure every piece of marketing showcases these traits.Letterbox drops generally have a low take-up, so don't spend a lot of money on the design, but rather use it as a test case. Advertising in the local paper is a good strategy, especially if there isn't much competition in your area. I assume you have a website that people can look at, so make sure it's up-to-date with valuable information. Put up pictures of yourself and your staff, before and after photos of the jobs you've done, testimonials from satisfied customers and, of course, your contact details. People want to know that the person they are hiring is someone they can trust, so market yourself in a way that will resonate with your potential customers.My partner and I have been running a creative communications/design business for about four years. Three years ago we secured a $30,000 overdraft and since then our cash flow has been OK. We've managed to save $12,000 and last year's turnover was about $205,000 with $75,000 clear profit. While we are hardly making millions, we are doing all right and slowly building our client base and reputation. Neither of us own a home and between us we have maybe $10,000 personal debt. We wanted to increase the overdraft to between $50k and $80k in order to consolidate that debt, take advantage of the low interest rate and ensure our cash flow for the next two years. We were told by the bank manager that $50,000 is as far as they will go unsecured and even then she didn't exactly sound as if it would happen. What can we do to secure an increase in the overdraft? Would you suggest trying another bank, saving more for longer, etc?YOU can definitely try another bank but an unsecured overdraft probably taps out at around $50,000 no matter where you go. Think about it from the bank's perspective. They are going to want protection in the event something goes wrong with the business, so they'll want to know what you'll be able to sell. In the creative communications industry, your most valuable asset is you which is not easily sellable!I understand why you want to increase your overdraft, but your best option is to continue to save and use that money as the safety net you need.Right now you have negative carry which means you're earning a low rate on your $12,000 savings but will pay a high rate on your overdraft. So if you need more cash, save more cash and use that for liquidity purposes. Head down, bum up, mate, and good job thus far. It sounds like you're giving it a good go.Mark Bouris is executive chairman of Yellow Brick Road, a wealth management company and small business adviser offering products and services for home loans, financial planning, insurance, superannuation, investments, accounting and tax. www.ybr.com.auIf you have a question for Mark Bouris, email it to Max Mason at email@example.com.