Posted on 10/31/2009 11:07:34 AM PDT by Blue Collar Muse
I had to drop prices to continue to sell at all. I serve the middle-man portion of the shipping chain. I am fortunate in that I’ve been doing this for years now so at least my customers bought from me, albeit at a reduced price. I had the volume and was a long term seller and consistent provider. Some of the newer guys and those who could skate with bad customer service during the fat years got cut off entirely.
I do see signs of improvement. My receivables have gotten better. Whereas 90 days ago, I was waiting longer for less money, last week I was getting paid promptly although still at the reduced rates. I was encouraged by that and hope it’s a good sign that with cash in the pipeline, prices may be going back up.
But I can’t wait for that. 2008 was a great year and we paid off a boatload of debt and streamlined several things. It meant we put off a couple of other projects (which are still on hold) but had we done differently, I’d be out of business today and on the hook personally for a lot of business debt. I’m already looking at ways to continue to streamline operating costs to make sure we make it another 6 months. If prices don’t rise by then, I’ll shut it down.
I have a couple of other irons in the fire that should help weather the storm. One of which just might be able to use Woopra. If you have a referral or affiliate link, please pass it on. I like the screen shot and it sounds intriguing. Feel free to send me a private response with those particulars or post it public if you don’t care.
Thanks
Frankly as a small business owner/manager, we’re down almost 45% from same time last year. This is a small telecom, so it shouldln’t be affected as much as tangible products, but it is. People are holding onto their money. This time last year people would put on average $50-$100 on their prepay accounts. Now they’re putting on average $30-$40. And this is for many to talk to their locked up children. Even our foreign customers aren’t spending. I certainly hope we’ve bottomed out, but we’ll see.
I own a small business involved in commercial construction.
Last September when the Fannie/Freddie fiasco hit the fan all projects being bid were pulled off the table by the investors, and very little has been done since. I’ve had to let my people go after investing my own money and credit towards holding on to them as long as I could.
I’ve been through recessions before, but before there has always been the promise of new and greater growth on the horizon. Now we have a Marxist government in place which promises to punish via high taxes and smothering regulation any business which dares show a profit. This means private sector businesses across the board are going to be very reluctant to invest in new construction or new employee hiring.
I don’t see a real recovery unless and until the African Idiot in the White House and his henchmen are defeated.
God help us.
Yep, we had to shut our call center down and just go to prepay accounts that people can pay over the internet, that was 25 jobs down the tubes because a stupid regulation that says 1/5 of my employees has to speak Spanish. So I just shut it down, and shipped the jobs to Mexico for half price...now they all speak Spanish, and I’m not having to pay insurance premiums or payroll taxes, it was the only way I could survive. Especially with the recessed spending.
Not to mention that the bi-linguals thought they should have more pay than someone doing the same job in English and they wanted the 75% insurance premiums that full timers were getting when they only wanted to work 20 hours a week because they didn’t want to lose their Section 8 housing and food stamps.
No mas!
One thought that may help: A few years ago, a relative of mine who has a pretty big manufacturing company in the Midwest was facing the same thing with his receivables. His industry was 100% net 30 terms and he was convinced he couldn't get cash upfront but I had just read a psychology book called Influence by Robert Cialdini (spelling?). I had him move his entire product catalog to an online site that was password protected (so only customers could log in and see prices). At checkout, the system applied a surcharge of 3% to 5% if someone chose "bill to account" as the payment method, but no surcharge if they paid with a credit card, PayPal, or eCheck. The psychology of people saving money was enough of an incentive for many of them to change their habits, especially since they still got 30 days to pay their credit card bill.
The net effect was: Many, many, many of his customers chose to save money and pay via credit card. Even though it cost him the merchant fees, having cash in his hand the day of the order was a huge boost to his finances. The customers that still chose to bill to account were paying the equivalent of between 36% and 60% interest annually, earning him a much higher return than virtually any investment he owned. Although small on each order, this turned into a huge profit stream.
In either case, he won. Cash upfront, less a small merchant fee, or "lend" money to his customers for 30 days at 36% to 60% effective interest.
The biggest fear most business owners face is that customers will leave. The thing is, most of them don't. This same factory also boosted profits substantially by lowering the prices on one of its main products, but increasing a small "add-on" item by 1,000% (this item had 90% profit margins after the price adjustment). By pushing more of the add-on items, they were able to brag about their low prices, get market share, and still make more money as people didn't think twice about throwing on a small item to each purchase. Any business with at least a few hundred thousand in sales should be able to add $25,000 to $30,000 in profit by doing that. If you can combine it with the earlier payment method, it can change the financials drastically.
One of my very first businesses out of college was a small online retail store than generated only $330,000 in sales. Yet, because I used the high-margin add on technique, pre-tax profits were roughly $150,000 per year. That was what provided me the stream of cash necessary to launch everything else without using any debt. Most business owners forget that sales are meaningless; what matters is how much cash ends up in your pocket every month, as the owner. (That business still exists, and has only 2 people working in it. Every month, it sends up its excess cash to headquarters for me to invest in stocks, bonds, or whatever else interests me at the time.)
I think what's happening is the recession caused business owners to evaluate their own cost structure and look for alternatives to traditional services. I would never have thought that I'd be using Internet delivered phone services but it worked so well, we switched everything over within six months. The cumulative cost the phone companies will be tens of thousands of dollars per year but all of that money ends up in our bottom line.
Ten years ago, Sprint, AT&T, and a few of the other telecoms warned in their SEC 10K filing (buried hundreds of pages into the document) that the telecommunications industry was verging on extinction in its present form and all future revenue would come from wireless or Internet related services. They said that VoIP would eventually lead to phone service being a free commodity, just like text on the Internet. They were right and I think we're seeing that happen at an accelerated rate as a result of cost cutting.
If I were in that business, I'd be running like the wind, draining cash out of it and moving into other, more profitable industries. That's just me (My general rule is I don't like any one source to account for more than 25% of earnings as a safety valve and I like to feel good about the long-term prospects of each industry).
This isn't just telecommunications - it's happening everywhere. If I owned a cigarette shop, I'd have one foot out the backdoor, too, because there are patents in the works for devices that deliver nicotine exactly like a cigarette but the cartridges go into the electronic cigarette itself. As more and more cities pass smoking bans, it would only take one of the majors to introduce the device and the entire cigarette industry gets taken by the first one on the field like the iPhone and Apple. (Now, cigar shops, on the other hand, will be unaffected because the reason someone buys a cigar is entirely different from a cigarette; the former is a specific type of customer with a specific type of image, whereas the latter is mostly a nicotine delivery device that happens to be in cancerous form).
What I find particular interesting is the disclosure in most bank 10K filings now: a lot of them think that banking will become obsolete within a few decades because sites like Prosper.com will allow business owners and individuals to borrow money on more favorable terms and allow depositors to earn higher rates of interest. That will be a seismic shift if they are correct. That's why most of them moved into institutional banking, underwriting, and fee-based businesses such as insurance brokerage.
Wow. Isn’t ‘diversity’ swell!? /sarc
Yeah, I hear ya. Our is all VOIP except for the T-1’s. Just had to write a new business plan and go pre-pay so they could pay over the internet and by phone...no invoicing accounts. And yes, this is just one of several enterprises. We learned early on not to put all the eggs in one basket, including banking.
Dad always said, only risk what you can afford to lose...scatter the rest, including at least one coffee can in the back yard, lol
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.