work from home

Sometimes in business, things don’t go the way you planned. Even if you wrote a detailed business plan, you have years of marketing experience, and your friends and family eagerly financed your great idea, you might find that your sales are lower than you expected and you have to come up with a Plan B.

The key is to figure out what you need to change about your business, when you need to change it, and whether it’s going to involve money.

Change is Common

 First, be assured that most entrepreneurs have to come up with another plan. “My guess is the majority of all businesses that start rarely play out the way they were originally planned,” says Michael Camp, academic director for the Center for Entrepreneurship for the Fisher College of Business, Ohio State University. “Having to make modifications is not uncommon.”

t’s okay to make changes, he says. “Most importantly, can you remain true to your original purpose, your original intention?”

There could be many reasons to come up with a Plan B. You might not have enough customers, or your customers aren’t spending much. You might have picked a very competitive field, and you haven’t been able to get the word out to potential customers that you have started a business. Or you might simply not be generating the revenue you’d projected, and your business is running out of cash.

“Success comes not only from doing your homework but from being ready and flexible to innovate in the face of new market innovations,” says Kerry Plemmons, associate clinical professor at the Daniels College of Business, University of Denver.

A Plan B can be a different product or service, or a slight change to what you wanted to offer. “You’ve got to go figure out what the market wants but is not getting,” Plemmons says.For example, you wanted to go into catering, but realize you don’t want to have to hire people for events. So the Plan B might be to become a personal chef. Now you have to let customers know you will come to their homes and cook gourmet meals, instead of preparing 100 entrees for their parties.

“Play to your strength; don’t try to fix your weakness,” says Brad Sugars, founder and chairman of ActionCOACH, a business coaching firm based in Las Vegas. If one of your products outsells all your others, focus more on the profitable product. Or it might make sense to add a product or service if your current line isn’t targeting a wide enough audience.

Kent Smith, a SCORE counselor in Portland, Oregon, says a Plan B doesn’t have to mean a whole new business, just a new market niche. He says he was counseling one entrepreneur whose business buys and resells store fixtures. When a large department store updates its interior, this small business would buy the shelves, display cases, and other pieces.

“It wasn’t bringing them enough money,” Smith says. “It wasn’t happening often enough.”

That company’s Plan B was to add office liquidation to its services. Now, when a firm wants to move into bigger offices and doesn’t want to drag the old furniture to the new location, this business comes in and buy the desks and file cabinets.

Changing the Way You Marke

Some businesses find that instead of changing the operations of the business, they have to change the way they market themselves. Plemmons says you have to come up with a Plan B if you find that you have failed to communicate your value to customers. “Business owners say, ‘Why aren’t customers knocking down my doors?’” he says. “You have to find where your customers are, and find a way to get to them and communicate your value to them.

He says retailers talk about the importance of the location of their store. For a home business, the Internet might be the location. When you build your web site, make sure people can find it on the various search engines. Consider hiring a firm that specializes in search engine optimization, which means that for a price, they can help make sure your web site will come up in the first few pages when someone does a search for your category.

Consider writing a blog, and get other people to link their blogs to yours, or link your products to their blogs. For example, if you sell hand dyed yarn online, get your knitting friends to mention your items on their blogs.

If you’re doing traditional advertising, such as handing out brochures and paying for print ads, figure out how much you spend on marketing, and how much it costs you to win each customer. Maybe you need to change the formula. “Marketing has to be perceived from a mathematical rather than a creative viewpoint,” Sugars says. “If you run a $1,000 ad and get two customers, if you are selling a $200 product, then your marketing strategy is not working.”

A Plan B marketing plan doesn’t necessarily mean you have to spend more money on advertising. It could mean you make more phone calls to produce more leads. Or you need to respond more quickly to your good customers and try to increase your repeat business.

“If you thought you were going to run five ads and get 20 calls and you run five ads and you get two calls, you’ve got a problem with the ads, or the ads are not the way to approach your customers,” Camp says. Maybe you have a service business in which people trust word of mouth more than they do an ad in the local newspaper. In that case, be extremely attentive to your first few customers. Ask them for feedback on the speed and quality of your service. Use the information to generate new business.

When to Change the Plan

Camp says these early months of gathering feedback are very important. That’s why you need to give your new business time before you decide to change your marketing plan, your product, or your whole business. “With any home-based business, plan on a minimum of six months and a half dozen customers if it’s service-oriented. If it’s product-oriented, give it 12 months and up to 24 customers who are buying,” he says. You’ll need that much time and that many customers to see if your business has the potential you thought it did when you got into the business.

Smith agrees that it will take time to build the business. “You shouldn’t really give up too quickly on any new business,” he says. “It takes a while for people to know you’re there.”

It might help to have the Plan B ready before you start the business. Maybe you decide ahead of time that if you can’t sell enough of your t-shirts at local festivals the first few months, you will sell them online on Café Press. Or you figure if no one finds your hemp scarves on eBay, you will take them to your local craft cooperative.

“Be proactive,” Sugars says. “Keep thinking of Plan B before you need a Plan B.”

Finance & Fortune

Smith says Plan B could be a different pricing structure. Maybe you’re charging too little for your consulting service. “If everyone else is charging $80 an hour and you’re only charging $45, people think you couldn’t be that good,” he says.

Camp says the opposite might be true. You might be charging a premium price, and your market is not used to paying a high price. “Maybe you need a pricing adjustment, or a building awareness adjustment,” he says.

Maybe your customers are willing to pay a high price, but they need a while to make that decision. For example, he says, if you are in the business of installing home theater systems, it might take months before a customer decides to splurge for a few thousand dollars.

Because of these and other delays in your cash flow, you might be tempted to try to get a loan or find an investor. That might be difficult, Smith says, especially if your company is struggling. “The banks don’t like to refinance, so your chances of getting a loan at a bank are pretty slim unless you have an order from a big company, and a purchase order that they signed,” he says.

You might be better off asking relatives and friends for money, especially if you can show them that you need the money for a short time and you’re using it to fill a big order. Ask them to invest only if you are willing to bring them on as partners, which means they will own part of you company, and they will have some control over operations.

Also try your suppliers. Based on the relationship you’ve built with your wholesaler or your vendors, you might be able to get a line of credit from them. “You have to show business is picking up,” Camp says. “Maybe the Christmas season is upcoming and last year you did X dollars, and you need this to get you through.”

He adds that credit cards should be the last source of a loan, because you will get stuck paying high interest rates and possibly late fees.

Smith suggests asking your suppliers if they will take back some inventory. They might charge you a fee of about 15 percent, but at least this might help your cash flow situation for the short term. If that doesn’t work, try to sell your inventory on eBay or other sites. Although the web site was once a place to sell collectibles, today even large corporations use eBay to sell not only unsold items, but also machinery parts and other “practicals.”

Plemmons cautions against spending more of your own or other people’s money on your business if it seems to be failing. He compares it to gambling with new money to try to win back the money you lost. “Guess what, the slot machine doesn’t care how much money you already put it,” he says.

Try to step back and pretend you are a new investor to this business. “Would I invest one dollar in this if I hadn’t put money into it already?” he asks. “Everybody is emotionally swayed by the $100,000 I already put into it. That is not the right approach. The right approach is to eliminate sunk costs.”

Instead of taking on more debt, seek free advice from an objective outsider such as a SCORE counselor or a Small Business Development Center counselor. Maybe you don’t need more money, just more expertise. Ask your friends and family to serve on your advisory board. “It’s amazing how many people think that’s a compliment,” Plemmons says. “Tell them, ‘I’m not going to pay you, but I’ll buy you lunch because I want your advice, and maybe you’ll get stock options.”

As a last resort, consider taking a part-time job. “You could get a job on the side,” Smith says. “There are an awful lot of people working full-time and doing Internet things on the side for a few hours a day. But again, don’t give up on Plan A too quickly.” HBM

Nora Caley is a freelance writer based in Denver. She specializes in business articles.

 Previously published in the August 2007 issue of HOME BUSINESS® Magazine, an international publication for the growing and dynamic home-based market. Available on newsstands, in bookstores and chain stores, and via subscriptions ($15.00 for 1 year, six issues). Visit www.homebusinessmag.com