Here's a look at some major small business problems and the solutions four companies pursued
If your company has money in the bank, is current on its payments, is getting repeat business and making a profit, then you can enjoy unusually smooth sailing. Otherwise, you're headed for troubled waters.
You've heard it again and again--three out of five businesses fold. Poor management is a major cause of business failure. But the key to survival is still in sound planning. Assessing problems as they arise and learning how to solve them is critical to business success.
BE examines four challenges faced by entrepreneurs and how they were resolved.
1 UPDATING YOUR MARKETING STRATEGY
What happens when an old-fashioned elixir mixes with newfangled marketing techniques? Ideally, a rejuvenated product with increased exposure that translates into greater sales and earnings. Case in point: Painex Corp. in Detroit. The company wasn't making money because it wasn't selling enough of its product.
The family-owned firm makes Ringmaster, an over-the-counter, topical analgesic ointment that relieves muscular aches and pains. Until eight years ago, Painex's founder and CEO, Frank Sewell, sold the salve via word of mouth. Then his son, Douglas, joined the business. As company president, Doug moved away from Ringmaster's outdated sales image and started promoting it as a viable alternative to aspirin and other analgesics. His newfangled, mainstream approaches helped boost Painex's sales from $25,000 in 1987 to $275,000 in 1994. This year's sales are projected at $325,000.
Douglas capitalized on his father's original concept of documenting testimonials from a variety of users. Only this time, he took to the airwaves via infomercials on satellite television. Last year,
Painex hired a media consultant to help produce a 30-minute videotape for $30,000.
To pay for airtime, Painex gave 30% of any money generated to the satellite network. There was an additional fee for having a toll-free phone number, which cost $1,000 per month for the initial three months, with subsequent fees of $1 per call. But in mid-July, the satellite company was sold and all former schedules were pre-empted
The infomercial was a break-even venture, says Doug. "While it was a costly marketing tool, it allowed us to increase our product exposure."
The company had initially focused its marketing plan on boosting sales in the metro Detroit area by increasing the number of outlets where the product was sold. "We contacted Perry Drugs, a large local drugstore chain and a division of Rite Aid Drugs. [Perry] put the product in 70 stores," says the elder Sewell.
Instead, Painex advertised in an unlikely place: a local dance program that ran on a black-owned television station. The commercials ran on a rotating schedule and, in exchange, the station got 10% of sales via Perry Drugs, a payment method known as percentage of inquiry.
"We think younger people saw it and gave the information to their parents," says Douglas, who holds a bachelor's in business administration from the University of Detroit. The commercial generated $20,000 in wholesale sales for...