Driving new business – the small business challenge

Growing a business has its obvious challenges. The owner(s), usually with limited allotment of initial resources, must battle the clock in creating a meaningful strategy to steal market share from larger competitors. A few pivotal client relationships can make or break the entire business. In many ways, these challenges have not changed over time--but in 2008, there are also new ways to compete.

To better understand the issues facing small businesses today we surveyed close to 500 small businesses nationwide from a wide variety of industries, with the objective of understanding the following about owners of small businesses:[1]

• How they value new client relationships

• How they approach lead generation

• How they utilize the Internet’s networking features

New client relationships: the lifeblood of small business

According to our survey, small businesses place far more emphasis on new client relationships as 39% of our respondents count on new business for at least half of their annual revenues. Despite the obvious risks involved in depending too much on a small handful of clients, more than one-third (34%) of businesses surveyed are adding no more than three new clients per year. To add these new customers/clients 61% of respondents answered that client referrals and other forms of word-of-mouth marketing account for at least 50% of new business.

An immediate conclusion one could draw from the survey results is that small business must continue to find new sources of revenue to sustain and thrive. Most of the businesses in our survey are unable to rest on the revenues generated from their existing clients.

Online lead generation is being deployed as a vehicle for attracting new customers and clients without dramatically growing ones sales force. The promise of an even playing field across all vendors who place their advertisements on PPC networks such as Google and Yahoo is incredibly enticing. It was quite surprising to find that only 9% of the respondents where using online lead generation. It was more unexpected to see only 6% respondents attributed online lead generation to garnering 50% of their new client revenue. With 67% of respondents expressing concern about the ROI of launching new marketing campaigns, it is not surprising that the number of small businesses who utilize online lead generation is so low. Of all marketing tools utilized by our respondents, only word-of-mouth delivered greater impact than its utilization.[2]

Let’s just get more words-of-mouth

It would seem logical that the ideal way for a small business to grow would be to find more folks that could drive more business. This premise has ignited a new professional use of online networking, such as Facebook, Myspace, and LinkedIn. Using online networking businesses could extend beyond the rolodexes, gaining better access not just to their existing contacts but to their contacts’ contacts.

Corporate and private recruiters are turning to online networks to help them gain access to the people who know people who would be ideal candidates for open positions. Money managers are tracking business acquisitions in search of prospects that need private wealth management or insurance policies. Growing your network takes time and dedication. Keep in mind that the goal is to reach beyond ones immediate network. Once extended, the professional network becomes a viable medium for finding new clients. And while online networking is a great tool if you are looking to acquire only a few new clients, what if you need to find 15 new clients, or 20 new clients or 50 new clients per year.[3] How can you add enough mouths (in the word-of-mouth mantra) to drive the business that you need to sustain your growth? With only 17% of our respondents having the patience to wait for results from initiating new marketing initiatives it is no surprise that only 11% of those surveyed belong to an online network.[4]

Social media however, has reminded us that an introduction from a 3^rd party is the ideal way to meet prospects. Qualified introductions by 3^rd parties have played a role in the lives of numerous professionals belonging to a variety of industries; from real estate agents, brokers, recruiters and many others. The role of these 3^rd parties is to serve as a conduit between 2 parties with common business needs and wants.

A new kind of online network

What a small business needs is a quick, easy and effective method for expanding and generating new prospects. Salesconx, an online marketplace for business referrals, provides a forum for small businesses, marketers and sales professionals to exchange professional referrals with fees attached to each relationship. All a small business needs to do is post its business referral requirements and establish a fee that it is willing to pay for an introduction. The request will be distributed (pushed and pulled) to the 1,000+ members of Salesconx who have access to the customers that the business is looking to meet. Those interested will respond and the business selects only those they are comfortable working with. A business could even submit a post that pays only on success. Salesconx minimizes the risk and upfront costs associated with traditional marketing campaigns delivering the results that make businesses grow.

Note: anyone interested in obtaining the full survey results should email me.

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[1] 82% of participating companies reported less than $500,000 in annual sales.

[2] 22% of the respondents use word-of-mouth initiatives to drive new business and 32% of the respondents say that word-of-mouth accounts for more than 50% of their new business.

[3] 30% of the respondents were adding at least 20 new clients per year with 11% adding over 100 per year.

[4] As of December 26, 2007 Facebook has approximately 50,000,000 users and LinkedIn has approximately 14,000,000 thus accounting for only 11% of the participants.