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Smart ways to invest less for higher returns

Sunday, December 13, 2009   By Mike Reddy


There have been recent increases in business and consumer confidence in many developed economies and expectations are growing that the worst of the global financial crisis and its associated recessions may be over. However, the optimism is mixed with caution. 

Consumers are looking for good value at a lower price and businesses are exploring ways to use new strategies and technology to invest less and get a higher return. 

If you’re an SME business looking to work smarter at lower cost, consider these strategie.
Social networking

Traditional marketing can be expensive. Many businesses are using the internet to reach a large customer base at low cost.

Facebook now has 250 million members, and writers such as USA Today’s Jon Swartz suggest this has serious implications for business – both big and small. More than 100,000 small businesses are present on Facebook and 10,000 websites use Facebook Connect, which facilitates information sharing about sites. Facebook and other social networking sites such as MySpace also provide businesses with a low cost way to build business relationships.

Social networking sites also provide opportunities for viral marketing. Small businesses could use a variation on the strategy that Ford used when it launched the Fiesta into the American market. It let 100 bloggers drive the car for six months, provided that they wrote about it and uploaded monthly videos onto YouTube.

Some businesses are writing their own blog or using Twitter. The audience is limited to readers interested in your message. It’s a powerful form of relationship marketing that is cheaper than traditional methods such as newsletters or fliers.

Forming alliances

A US National Small Business Association survey found that 27% of business owners planned to form strategic alliances over the next year. It is partly a matter of cost-saving, something that can be important at a time when small businesses may be having trouble with cash flow or raising finance. The Wall Street Journal reports on a website business that, rather than pay for advertising and PR, bartered services by building websites for their marketers. Other businesses are joining forces to share expertise and workload.

Remote working and outsourcing

WorldatWork reports that the number of people working remotely at least part of the time increased 39 percent between 2006 and 2008. During tough economic times, you may not want to use higher pay to attract or retain talented staff. However, you might be able to keep them in a non-monetary way. The internet makes remote working an increasingly feasible. It’s not for everyone, as it requires a results-based work culture. It’s also a way to reduce some costs, such as office space.

At a time when small businesses are reluctant to hire, it’s now possible to outsource professional services through the internet at a relatively low cost. Over 60,000 companies source professional services through websites such as Elance. They also provide an opportunity to outsource globally, not just locally.

Outsourcing IT

Hiring server capacity can be a cheaper option than running all applications from your own server. Only two per cent of businesses with under 100 employees currently do this but 37 per cent are interested in the idea, according to a Forrester Research report. BusinessWeek reports that businesses can currently outsource not only to large market players (such as Google, Amazon or Microsoft) but to many small ‘cloud computing’ service providers.

Pro bono work

If you’re working at less than full capacity, pro-bono work may be a way to not only keep staff occupied but build a presence in your local community. The Wall Street Journal reports on this as a customer relationship building trend that can also be linked in with low-cost marketing; businesses could upload videos to You Tube, documenting the pro-bono work.

Rebalancing product mix

A June Accenture study found that 67 per cent of consumers expected to be cautious about spending for up to three years. But people still want their little touches of luxury so find ways to offer these ‘treats’. Accenture reports for instance that while sales at premium coffee outlets have fallen, they have risen for some less fashionable vendors who sell more cheaply. Inexpensive treats such as the simple chocolate bar also seem to be faring well.

Mike Reddy is a Chartered Accountant, business coach and advisor helping businesses in Sydney, Melbourne, Brisbane and Gold Coast to easily increase their profits and cash flow. He is currently President of the North Sydney Chamber of Commerce, a Regional Councillor for Sydney North East and a member of the Institute of Chartered Accountants Sydney leadership team. As well as advising businesses, Mike presents business development seminars and webinars and is regularly contacted by the media to comment on small business matters. You can connect with him on Facebook, Twitter and Google+.