Small Businesses in 2020: Local Vs. Global Part II

Global and Local Small Business

We introduced you yesterday to part one of this article on global businesses and the difference between local and global businesses. There we talked about a business that could only succeed by reaching wider. But what if that isn’t necessary? Today, a look at the local small business market, and our final predictions for what to do for your business in 2020. 

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Lillian’s Story: Thinking Locally for a Small Business

Lillian owns several fusion yoga/barre studios in New York City. Her target was much larger than her audience, in that she served mainly women between the ages of 24 and 45 (she had some male clientele)Lillian had 3 studios in the city. For her, opening a new space was as relatively inexpensive since her capital expenditures (equipment, etc.) were low. Her main costs were rent and labor/training for her talent.

Let’s Look at Lillian’s 3 Factors

What are the business’s ultimate goals?

Lillian was happy growing at her current pace. She was doubling her business every 2-3 years, so she didn’t feel the need to expand faster. She had been approached by the tele-fitness and e-commerce industry, which is growing part of the market and is trying to globalize (e.g. Peletonetc). This would enable her to reach more clients in a very cost-effective way, but Lillian enjoyed the ability to personally interact with her clients. That personal touch was key to her brand.

Target market size?

While technically Lillian had a niche market, her market was much larger than Stan’s. Plus, her business model was such that she could be very profitable with 100-200 clients per studio per day. This meant that she only had to reach a small fraction of her niche to continue her growth trajectory.

Capacity for Growth?

Lillian’s model didn’t carry the same economies of scale as Stan’s. Lillian’s model was more labor and training intensive for her employees and talent. Each new class required a trained instructor. Each instructor could only teach 3-4 classes a day before hitting burn-out. Her need for skilled labor was a stumbling block for globalization.

Lillian's Small Business Was a Great Candidate for Staying Local

We are strong advocates for staying local when it makes sense. Small businesses that focus on their local community benefit from a deep understanding of their customers, support from other local businesses, and most importantly, local marketing and buzz. 

Local marketing is more efficient and arguably more effective than national or global messaging.  

According to a recent study, 50% of people who searched for a store or business visited that location within 24 hours and 60% of searchers said they make use of the information they find on local ads or the business’s webpage 

Geofencing is also an effective tool. Reviews are key as we’ve mentioned before. They are key to a local market strategy. 

According to one survey, 86% of consumers read reviews for local businesses. 

Staying local has many benefits if your business model can support it.  

Predictions for 2020: Going Global or Staying Local?

We predict more businesses will be asking themselves this question in 2020 than at any time before. Technology has advanced to the point where globalization is relatively simple. The success of Alibaba is a clear example of this trend. Shipping and warehouse logistics have also become less expensive and complex. More and more merchant systems are developing ways to be more global, so it makes it easier for their customers. All these trends continue to simplify the process. Globalization used to be only available to large corporations, but no more. Yet local small businesses are a necessary part of the community they fit into.

What’s the Right Choice for Your Small Business?

We hope that after reading this that you understand that this decision is not a one-size-fits-all answer. Like almost everything in life, it depends on your unique set of factors. However, we believe if you do the homework and use the three factors to analyze your business, it will make the decision easier for you to make.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Small Businesses in 2020: Local v. Global Part I

Global and Local Small Business

We are often asked about how to focus your business. Do you look local to the markets in your backyard, or do you use e-commerce to go global? Obviously it isn’t a simple answer. Over the next two days, we’ll share two cases on local and global businesses in 2020. Today you’ll also get a small explainer, and tomorrow our conclusions. Read on now!

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Local vs. Global: How to Make the Right Small Business Decision

When deciding to stay local or expand globally, we need to start with our ultimate business goals. Owners of small to mid-size businesses often face conflicting advice. Weve advocated ourselves for the benefits of working and staying local. For many, that’s the right choice. For some, expanding global makes more sense. Between today and tomorrow, we will look at one client’s desire to look globally and another keeping locally, finding the right market for you.

The three factors that drive the decision

Three factors ultimately drive our recommendations when faced with the question of local or global:  

      1. What are the business’s ultimate goals? Do they want rapid expansion vs. steady, long-lasting growth? That will drive this decision.  
      2. What is the target market size? How large is the local target market? This will drive the recommendation.  
      3. How much capacity does the business have to grow? Can the business manage the expansion, or not?

Stan’s Story: A Global Small Business

Stan owns a niche fashion business, geared primarily to a sub-segment of the gay community. He has been wildly successful in New York City. His target market is rather narrow, and his appeal is to young gay men between the ages of 18-34. He has a few storefronts in NYC, but it is expensive and time consuming to open storefronts in other locations. Luckily, he has a vibrant e-commerce platform that has enabled him to reach other cities in the US. 

Let’s Look at Stan’s 3 Factors

What are the business’s ultimate goals?

Fashion is fickle. What’s hot for one generation or age group doesn’t always translate to the next. For Stan to maximum his business’ potential, expanding quickly to capitalize on trends is key. He needed to strike while his style was hot.

Target market size?

Stan has classical niche market. Even in large American cities, he could tap out on its potential quickly. He has a successful marketing formula that has very successful in reaching his target, and it could be easily expanded. He has shown he could be successful with that model in the US

Capacity for growth?

Stan marketing model was very scalable. He relied heavily on digital media and influencers. His marketing strategy and tactics were ripe for economies of scale. His cost structure would also benefit from economies of scale mainly to efficiencies in production and distribution.

Stan’s Small Business was a Great Candidate for Going Global

E-commerce based, specialty goods are primed for globalization. With his laser-focus on a narrowly defined target market makes going global much easier. When you add in the benefits he would accrue from economies of scale the choice was clear 

However, it is important to note, that globalization is not without its challenges. Finding the right merchant services provider that can handle international payments is not easy, so he needed to be mindful of whom he chose. Secondly, translating copy and web design is also challenging. For Stan, we focused on the UK, Canada, and Australia, first. The EU, Brazil, and Mexico followed.

Tomorrow...

Stay tuned tomorrow for another story, one that looks instead at how a small business can exist on the local level and succeed. Plus, our guess as to whether local or global small businesses will be more successful in 2020.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Struggling to Retain Talent – Is the SECURE Act the Answer?

Capitol Hill, where the SECURE Act has been passed

Jacquie owns a small boutique fashion business in New York City. Fashion is a tough business. Trends change quickly and working capital needs are high. Jacquie has been successful, but she was struggling lately because she kept losing talent. It was so costly to keep hiring and retraining people, but she could afford the cost of benefits. We were brought on to help her with retention. We did some digging to see if the SECURE Act might help her. Here’s what we learned.

Feeling like your business isn’t going the right way? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Jacquie’s Retention Issues

This is going to sound very familiar to most small business owners. Many of Jacquie’s employees wanted health insurance and retirement benefits. We’ve covered both in the past, but we were curious about how the SECURE Act might help Jacquie. It’s been billed and hyped as major legislation to help small businesses, so we want to know if it might help Jacquie with one of her key issues. When your employees (and you) live paycheck to paycheck, things like this are important.

What Does the SECURE Act Do?

In plain English, the SECURE Act enables small businesses to offer Simple IRA plans with a few key advantages.  

      •  No administration costs unlike 401(k)s 
      • Employers only fund matching is only up to 3%. 
      • Higher contribution limits than Traditional IRAs as it allows up to $13,000 in deferred salary 
      • No compliance testing, which is burdensome for most small businesses 
      • Allows part-time employees to participate 
      • Provides a maximum $500 tax credit for instituting one. 

Now, nothing is free. So, if you offer this plan, there are couple of drawbacks. 

      • More people are eligible, so there are higher matching costs 
      • Match costs are mandatory. You are required to match 2% of everyone eligible, whether or not they participate or up to 3% of those who do.

What Did This Mean for Jacquie?

The cost to hire and train an employee was around $2,500 for Jacquie. Plus, an added $2,000 or so in opportunity cost as that employee got up to speed. Together that’s around $4,500 per new employee. Jacquie’s average annual salary was around $50,000 for a full-time employee and $30,000 for a part-time employee. Her turnover rate was around 20-25%. 

Math alert!!

There is a little math here, but it is important. So, we had to weigh the cost of the Simple IRA vs. the cost of retraining. Jacquie has around 15-20 employees. She lost about 3-5 a year. Therefore, the turnover cost was between $13,500 – $22,500 per year. Her total payroll was around $700,000 per year. The cost of the Simple IRA would be $14,400 using the 2% method, less the $500 credit. So, in total, it was going to be around $13,900. We did this as the worst-case scenario as it is very difficult to estimate how many people will participate.

The Simple IRA Wasn’t the Solution for Jacquie

Given the cost was around $13-14 K, her turn-over would have to drop from 3-5 a year to 1-2 a year for it to payout. It didn’t seem reasonable to believe that we would see a 50% reduction in retention rate from just offering a retirement plan. 

Unfortunately, Jacquie wasn’t in the financial situation where she could afford additional costs. Therefore, while she wanted to do it, she could not. It was frustrating, but it was the right call to prevent instant failure. We may revisit it in the future once there is more data on the success or failure of the program. It just didn’t make sense for Jacquie to be an early adopter while she is struggling.

A SECURE Act Summary

While the Simple IRA might be perfect for some businesses, the mandatory contributions can make it costly if you have higherwage employees. While nice, the tax credit doesn’t do much to defray the cost. It’s great to have the option. It will just depend on your financial situation whether it makes sense.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

3 Steps to Improve Collaboration within Your Small Business

We’ve all been in one of these organizations where work is siloed, and where trust is low. How long did you want to stay at the job? Workplaces like that unfortunately abound. Frankly, it’s toxic. It’s also nearly impossible to accomplish anything solo these days. That’s why we talk about building a great team so oftenIf you want to succeed, it’s time to foster real collaboration in your small business.

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

What Research Tells Us

There have been several studies that suggest that a collaborative culture is up to five times more likely to be high-performing. This isn’t just a nice-to-have. It’s a competitive advantage. So here are our three biggest tips to promote small business collaboration for your in-office talent. 

3 Simple Steps to Improve Small Business Collaboration

These steps may seem like common sense. But they all take time, which is always in scarce supply. 

1. Hang out with your employees

Building trust means spending time together outside normal business hours. This can be tough for non-co-located teams, but it can be done. People often think of the Google workspaces as indulgent, but they’re not. They create spaces for people to hang-out. We often forget that it’s the bonds we create between co-workers that is the social glue that makes the team function better. These are best when organic, but structured, “mandatory” events can work. However, I would argue the social return is less.

2. Make it a cultural norm

Ok, yes, that’s a bit of corporate speak. In plain English, this means that you make it clear that you expect everyone to collaborate, starting with yourself. Peer pressure is a powerful motivating force. But so is leading by example. Rewarding the behavior that you want to see has a powerful effect. People will take notice. Holding yourself accountable to the same norms is possibly even more important. 

Secondly, make sure that any new employee is aware of the rules. It is helpful to include collaboration in the job description and onboarding plan when expanding your business. You may want to create a ‘buddy’ system for new hiresdelegating responsibilities to the more social members of your teamThat might seem very 3rd grade, but studies have should that social acceptance is key to longterm success. A buddy is a way to reduce the social stress of entering a group.

3. Use the technology of today to keep in touch

With everything at our fingertips today, there’s no excuse not to communicate. There are a plethora of platforms to use. It may seem that there a new 5 every month. Slack is the tool we use. Others have recommended Loomioor the Google Suite of product, and more. Find one or two that work for you and your team. It’s been our experience that it doesn’t really matter which platform you use, just that you are using one. If you are afraid of the cost, it’s important to note that: 

Seventy percent of small business owners agree that their collaborative communication tools benefit productivity. 

This doesn’t mean that you should spend money without a goal in mind. But, trying out one or two to find right fit probably makes sense.

Collaboration Isn’t New, But It Could Revitalize Your Small Business

Like we said at the beginning, a lot of this will seem like common sense. The shocking thing is how little of it is done in practice. Change like this starts at the top. If you aren’t living it, your team won’t follow. If you are pushing it, it will likely never get done.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

7 Behaviors of Successful Small Businesses

Looking back on what has made some of our clients successful, we’ve made a list of 7 behaviors all these successful small business owners have in common. This list probably isn’t all encompassing, but these behaviors all played an important role in making the different between successful business owners and unsuccessful ones. Whether you’re starting up your small business or looking for a revival, these tips are for you. 

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

1. Setting Reasonable Expectations

If there is one thing that we’ve learned in our 25 years in business, it’s that nothing will go exactly as it is expected. Yes, that’s right. I’ll guarantee you that something will go wrong. This is the key behavior to keep in mind to make a successful small business.  

So, should you through up your hands and not build a plan? No. Instead, it is the opposite. It’s important to ask your where things could go wrong and put metrics in place to flag them early. If you accept the fact that not everything will go to plan, you ready when it doesn’t. Prepare for stressYou don’t waste time and energy in crisis mode. Instead, you get to work fixing. Learning requires mistakes. It’s a given. Knowing they’ll happen makes it easier to deal with them. 

2. Know You Market & Where You Stand

Do you know your positioning within your market? All our most successful businesses do. Positioning is a fundamental tool in your toolkit. There are several different templates by different authors. This format is the one we like the most, when pitching your business but also when understanding your own standing: 

[Problem insight]. Unlike [competitive set], [Company Name] is the only [market category] that provides [unique benefit]. That’s because we [support statement 1] and [support statement 2]. 

Here’s a simple example for a fictional electric car: 

25% of people want to be green but unwilling to give up performance for emissions. Unlike traditional electric vehicles, Turbo X is the only electric car that provide performance level of combustion vehicle without the emissions. That’s because we have a patented engine design and improved fuel cells. 

This is an internal document. It’s not for selling, but it for you to map out your territory. 

3. Make Time for Planning

Yes, we’ve heard all the excuses. We’ve made them, too. But, the most successful small business owners make time for planning in their behavior. It’s so easy to get caught up in the day-to-day fire drills or operations. However, I promise you, if you take at least 1-2 hours a week to review your performance and refine your plans, you will be more successful.

4. Cultivate your Talent

There was an interesting article on LinkedIn that dispelled the myth that millennials and Gen Z’ers love job hopping. They don’t. They leave because they aren’t getting the training and exposure that they need. It’s been my belief for awhile that companies left their people, not the other way around. The most successful businesses cultivate their talent, as it much more expensive to hire and retrain than it is to invest in keeping the talent. 

5. Provide the Right Incentives

Paychecks aren’t enough. Good talent can get a paycheck anywhere. The reason people stay is because they feel a part of something more. Every person has different motivations. But, humans are social creatures. We are more likely to stay with people to whom we feel connected. It’s often the non-financial rewards that keep people. That doesn’t mean that you completely forgo financial compensation. It means the most successful businesses do both within their corporate behavior.

6. Delegate, Please!!

We have written what feels like a thousand blog posts on delegationso we’re not going to go into detail here. Suffice it to say, that successful businesses delegate, unsuccessful businesses do not. 

7. Value Digital Visibility

It may seem odd in 2020 to say that digital visibility is important. However, it is. It’s surprising how many small businesses fail to realize the importance of being visible on-line. It’s the simple things like Google My Business, social media like LinkedIn, and a website. If you are invisible and only slightly visible where most people go to look for information, you will be overlooked, and that’s lost revenue. 

Follow These Seven Behavior Tips, and You’ll Be Looking at a Successful Small Business

These seven behaviors of successful businesses aren’t exclusive, but they are those that we have seen come up most often in our work with our clients. There are others but improving in a few of these will definitely help move your business forward.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.