8 unfortunate realities facing every small business entrepreneur

8 unfortunate realities facing every small business entrepreneur

Oct 3, 2017 | Customers, Innovation, Small business

Every time I turn around I see another ad touting the ‘laptop lifestyle’. Travel, work occasionally, and have the money rolling in, just because you have invested in yourself and bought a course from a self-styled guru.

Of course it does happen, but very occasionally, and each time it does the person has met a number of key hurdles.

When you think about it the rules of  business apply irrespective of the size or nature of your business.

There has to be a market. Nothing succeeds without customers, and customers do not come to you simply because you are following your passion, which is the usual pitch. I would  love to be able to make lots of money by splitting my time between surfing, tramping through mountain streams in search of that elusive rainbow trout, and drinking lots of expensive wine, but have not found anybody willing to fund me as yet. From time to time, an entrepreneur creates a market, the magic can happen, but if your name is not Steve Jobs, Peter Theil, or Richard Branson, do  not count on it.

You have to create value. Being paid is simply a by-product of creating value for someone else. It does  not matter what the product is, someone will only pay for it when they see that they will get something out of it greater than the cost to them.

You need  to pay the bills. Every business has expenses, some are discretionary, others are overheads, that show up irrespective of any revenue generation. Those bills need to be paid, you need to eat, and the kids need a roof. This reality is the one that stops many from following the whacky advice to ‘follow your dreams’ and luckily so. However, the business management task is to reduce expenses, particularly the fixed expenses as much as possible, while still generating the revenue and absolute margins.

There is a lesson in every set-back. Life is a learning experience, and failing to learn from every situation you find yourself in is short-changing yourself. As a young product manager I also had to cover the sales territories of the NSW reps when they were on leave. Every couple of months I had to take 2-3 weeks out of what I believed was a busy and useful schedule to go around stores and sell to people who really did not want to see me, I hated it, but learnt more in those months than I realised, and now insist that all marketing people I hire have a period ‘on the road’.

Time is your most important asset. Time is our only truly non-renewable resource, and yet it is so easy to waste. Professionals tend to organise their time more productively than amateurs, they spend time practising, honing their skills, so that when the time comes they perform on cue.. We all see ourselves as photographers, as we now all have a camera in our pockets. However you can always tell an amateur shot from a professional one, the pro is better in a whole range of subtle ways, simply because the professional has spent the time to practise, and learn the skills.

Be different and be a master. Success rarely comes to those who are the same as everyone else. It comes to those who are different,  who have a unique take, and who are the masters of  their craft. In the digital world, the mantra I use is ‘pick your niche and own it‘ or as Steve Martin says, ‘be so good they cannot ignore you‘

Evolve and adapt. For most of human history, the past has been a pretty good indicator of the future, change happened slowly. Not so any more, relying on the past to forecast the future is a sure way to be wrong. Owners of small businesses have the power to move quickly, adapt their processes, learn by trial and error while their larger competitors are still at lunch. Of course, they do not have the depth of resources to be wrong too often, so it is a Darwinian process.

There are no silver bullets. We humans usually look for the easy way, and this is the hook used to sell us the silver bullet that turns out to be lead. You can get lucky, who you know does count, but the old adage that the harder I work the luckier I get holds.

Apart from these challenging realities, being an entrepreneur is really a doddle!

11 growth strategies for small businesses

11 growth strategies for small businesses

Aug 23, 2017 | Leadership, Management, Small business

The last 23 years of working with, reconstructing, and observing small businesses in all sorts of situations has resulted in a pile of insights on many areas of business. A common fact or is the desire to grow, even when in the darkest times, almost all businesses aspire to grow. This is not ego, or self-delusion, it is simply a general acknowledgement that to stand still is to be overtaken.

Grow or get trampled.

The common factor of those that have successfully grown is that they do not follow any recipe, there is no guaranteed growth map, but it is clear that they have all combined some common elements in different ways to succeed.

Be different.

Every successful business I have seen has done something different to those around them, with whom they compete on a day to day basis. Being part of the crowd results at best, at being on the top of the ‘average’ range. Differentiation in the manner that they deliver value to their customers is perhaps  the most common element of success I have seen. It need not be a major thing at first glance, but combined with some of the following elements, differentiation becomes a powerful driver of growth.

Great product.

As the old advertising  saying goes, ‘The customer is not stupid, she is your wife’ . There is no situation where an average product can sustain above average performance. All the clichés and PR gloss in the world will not do any more than get a first sale, after that the product has to deliver value greater than available alternatives. It is the form of that value that differs dramatically, and value does not always mean technical quality, it means fit for purpose.

Growth is a relentless master.

Growth never happens in isolation of focus, effort and commitment. Every sustainable growth business I have seen, or read about, has somewhere in its DNA, a focus on growth, in a way that seizes opportunity, makes it work, learns from what does not work, and goes again. It can apply this focus while ensuring that the every-day operations, the ones that pay the bills today, are well taken care of.

Marketing is shaped by the need.

Too often marketing is seen as a formulaic process that just requires the appropriate level of investment and capability to be successful. Wrong. Every situation requires a differing mix of marketing elements, and there are no two situations where the template will just ‘work’. Just ‘doing marketing’ will not lead to growth, the marketing has to be connected to the intended customers viscerally or it just becomes another of the millions of messages to which we are all subjected every day.

Find a niche and own it.

Whether you are the corner store of Apple, you cannot be all things to all people, in one way or another, you need to focus on those to whom you can deliver superior value. The evaluation of your target niche, the motivations of those at the bottom of the niche who are likely to be your best, stickiest, long term customers, then delivering value to them, is a key to growth. Once you have consolidated your niche, widen it a bit, seek adjacencies, look for novel uses of your capabilities in other niches, but never forget the niche.

Growth is long term.

Nothing useful happens overnight. Growth happens as a result of patience, commitment, and an ability to remain focussed on the goals, even when the short term stuff looks dark, or there is some compelling distraction. While it is fine to experiment, sustainable growth comes from building smaller success over time, not from frequent changes in direction. When looked at in hindsight, successful growth always has some elements of compounding small success present. Remember the fable of  the wise adviser who wanted nothing but compounding grains of rice on his chessboard, each square having double the grains of rice of the previous.

Seek leverage.

Identifying the means by which you can apply leverage to the assets you can deploy always pays dividends. Often this means combining your marketing with the behaviour  drivers of those in your niche to deliver some unique value, bit just as often is means ensuring that the basic processes that deliver the cash every day are robust, and repeatable. Having Standard Operating Procedures that are a part of  the operational DNA saves huge amounts of time and energy better applied to activities outside the mundane . Successful growth engines always have their core processes working well, and those growth activities seeking the points of greatest leverage.

Insights not data.

These days we run the risk of being overwhelmed with data, unlike when I started in business, when quality data was a rare beast, hard won. Today there is just so much data that the real skill is sorting it out and finding the hidden gems that offer insights you can leverage.  Data guru Avinash Kaushik calls it ‘data puking’ which is in my view a fine description. The metaphor I use is going into a library, without any idea what you might be looking for. You end up overwhelmed by the choice, with little chance of finding the right book.

Recognise your ecosystem.

What makes successful businesses successful is an ability to mix and match the best options for  their target customers, in ways that best deliver leverage for both parties. Growth is a two way street, no business can be sustainably successful unless their customers and suppliers are also successful. The task is to make the pie bigger so everyone benefits, not to take a bigger share of a static pie.

No silver bullets.

Growth comes from hard work, focus, determination, commitment, and not from luck or circumstances. My old dad used to say, the harder I work  the luckier I get. And that has been echoed by every successful person I have ever come across. It is never left to chance, it is a managed, deliberate process of making choices between alternative applications of limited available resources, being proved right more often than not, and learning from the times when you are wrong.

Clarity.

Finally, and perhaps most importantly, is clarity. We are in a world that is intensively competitive for the attention of those we may be able to serve. It does not matter if you are the corner store, or a multinational, your marketing challenge is to gain, then hold attention of those we can best serve, while we relate to them the reasons their best interests are best served, their challenges overcome, by working with you. The first test is to ask a few of your employees, close friends, and current customers what problem you solve, looking for a consistent and clear response. In its absence you have some work to do.

A lot of this is common sense, an increasingly rare thing in a complex world.

 

 

 

 

 

A simple way to value your SME

A simple way to value your SME

Aug 21, 2017 | Governance, Management, Small business

The value of your business is absolutely dependent on its ability to generate free cash flow, which in its simplest terms, is the cash required to keep the business running, after necessary capital expenditures have been considered. It is a measure with many formulas that differ only in the detail, and means of determining the meaning of ‘necessary capital’

The durability of that free cash flow is simply an estimate of the confidence you can have in projecting that free cash flow into the future. The durability is usually expressed as a discounted cash flow, which simply applies a rate of inflation expected over time to the current value of a dollar. However, this is only half the calculation as financial projections are impacted by far more than just inflation. They are impacted by competition, regulation, emerging technology, and many other factors. In 2001, who would have thought the global Blockbuster video rental chain, who had built a multibillion dollar turnover, had 54,000 employees, and thousands of franchised and owned stores worldwide would be dead in a decade.

This thought was sparked by a conversation I was involved with that wondered at the difference in the value of two service businesses, that on the surface look very similar. One of them was a successful but modest sized suburban accounting practise, the second a similarly sized suburban wealth management practice. The wealth business had a market value several times the value of the accounting practice, should either of  the principals choose to sell up and enjoy a retirement.

When quizzed, the customer retention rate of the wealth practice was far greater than the accounting business, as was the share of the clients wallet that they had. There are accounting practises, selling pretty standardised services on every street corner, all with a similar offering solving similar problems for a potential client, whereas Wealth management is a way more specialised business, focussed on bespoke solutions to the wealth retention problems faced by wealthy individuals.

Therefore the durability of  cash flow from the wealth management business is considered by those who might be considering buying such a business to be more reliable into the future than that of an  accounting practise.

How does this apply to your business.

If you want to open a sandwich shop in a strip shopping precinct, there is nothing stopping someone opening a competitor next door, indeed, they often do when the first is seen to be successful. However, a similar sandwich shop in a shopping mall will not have a competitor next door, as the mall will not allow it. You do however pay for the privilege of that increased  certainty with the lease rates and turnover ‘tax’ extracted by the mall ownership.

The more specific and specialised  the problem you solve for customers, the less likely they will be to move elsewhere, and you are able to price your services accordingly, delivering both a higher free cash flow, and greater confidence in the durability of that cash flow. It also follows that clients are harder to find,  so the marketing costs prior to them becoming a client are likely to be higher.

The value of your business is absolutely dependent on the amount of free cash flow, and the expected durability of that cash flow. Little else really matters beyond arguing about the book value of fixed assets and any inventory.

 

9 questions for a ‘quick and dirty’ StrategyAudit.

9 questions for a ‘quick and dirty’ StrategyAudit.

Aug 9, 2017 | Small business, Strategy

In 1712 the British government started taxing newspapers by the number of pages they printed. The predictable response was that newspapers started printing on what became known as ‘Broadsheet’ paper to minimise their tax. A rational commercial response, but by the time the tax was abolished in  1855, people had forgotten why they needed these huge, unwieldy pages, and somehow they became  a sign of a ‘serious’ newspaper.

Had the Sydney Morning Herald asked any commuter who still bought their broadsheet paper before March 2013,  would they prefer a smaller format, they would have answered with one word: Please.  Common sense caught up with them and the change was finally made, it only took 170 years.

This is just one example of thousands of a key strategic question that should always be asked, ‘Why do it that way”. When I get an answer to the question that sounds anything like, ‘because that is the way it has always been,’ I shudder, and when that say ‘customers prefer it that way’ I ask to see the research, which in most cases has been chewed by the dog.

There are 8 more common questions I work into conversations early on that give me a rough idea of the problems they face, and the ‘shape’ of  an assignment, should it eventuate.

  • What would a VC investor do? Those who put up capital with a view to an exit at a profit at an early date look for the 20% of every business that produces the 80% of profits, and having found it, tend to remove as much of the 80% of activity as they can in order to generate their return. It can be a bloody exercise when done by an outsider, but turning a managements mind to the question almost always opens up their minds to a far more critical analysis of their current business that had otherwise been done.

 

  • Are the organisation structure and capabilities capable of delivering the strategic outcomes planned?. There is a trick in the question, as many businesses do  not have a clear idea of their strategy, so are unable to articulate how the organisation can deliver on it. The correct sequence is to have a robust strategy based on the “why” or values of the business, however you choose to express it, followed by an analysis of  the structure and capabilities required to deliver. Which is the cart and which is the horse should be very clear.

 

  • Which pieces do not fit? To some degree, this is a similar question to the one about what a VC would do, just a bit less intimidating, and more sensitive to the cultural and operational shape of the business, and its capabilities. There are always bits that do not fit, that do not carry their own weight. Each part of a  business should add to the whole in a manner that is greater than just the sum of the parts. If a part does not add to the greater sum, either get rid of it, or  improve its performance very quickly so that it does.

 

  • What does the long term look like? I ask this question at all levels, hoping to find consistent answers, which is a great sign, but unfortunately as rare as hens teeth. Assessing every major decision against the framework of the desired long term objective ensures at least some degree of alignment and consistency in decision making.

 

  • Why do customers do business with you? It always surprises how often the answer to that question is either “price” or “they always come back”. Neither is a sufficient answer. If you are the cheapest around, that is a good way to go broke eventually, and if you cannot articulate why someone does business with you, in other words, repeat back to you your value proposition, you are equally in trouble.

 

  • How much business comes from repeat customers, and what is your share of their wallet? Servicing an existing customer in any market is cheaper than finding a new one, so cherish the ones you have. Similarly, if you have a 10% share of wallet, the most effective way to increase sales is to increase your share of their wallet. When there is no credible answer, to either question, it is a danger neon sign.

 

  • Who are your major and potential competitors? Knowing your current major competitors and their capabilities is essential to survival in competitive markets, and in many, being able to see over the horizon sufficiently to see who the potential competitors may be is a great sign of strategic awareness.

 

  • What is the exit strategy? In most cases, public companies do not have one, and it is really not necessary for them, what they really need is a comprehensive succession plan, with the associated capability development activities. For everyone else, the lack of an exit strategy signals a lack of focus on outcomes. Even when the owners, who are generally also the managers in most of my clients, intend to work ‘forever,’ there needs to be an exit strategy as part of the strategic planning exercise, and often the succession planning is how to bring along young ‘Georgie’ the son/daughter of the owner, who might not make it in a meritocracy.

When you would like to have a conversation that goes a bit deeper, give me a call.

Image via Pinterest

 

 

How to ensure your copy does not get read.

How to ensure your copy does not get read.

Jul 21, 2017 | Communication, Marketing, Small business

Copywriting is easy.

That is what you tell yourself, after all, you can write, you are a professional, very used to communicating, and doing it successfully.

My sister is a writer, and every now and again she grabs one of my posts over which I have slaved (yes, it is OK to have family subscribed) and goes into what I call her ‘Teacher mode’

Out comes the red pen and professional editor and she rewrites my posts.

They are subtly altered, so the intent of the post is clearer, makes a greater impact on the reader, and ends up being way, way better.

It galls me a bit that it is a skill beyond mine,  but on the other hand, she makes me feel better by telling me she could never dream up the topics and angles that I do, all she does is polish it a bit.

We are inundated with copy, it comes at us at all times, through all our devices,  and now is increasingly visual  as a means to fight the war for your attention. However, like most things the volume going up does not have any real impact on the quality, if anything the average has dropped as we become ‘do-it-yourselfers’ in order to keep the volume up.

The headline is the most important element of copy in any piece. If you fail to cut through, catch attention, and create an urge to read on, it does not matter how good the rest is, it will not be seen.

There is piles of advice around on how to write a great headline, most of it pretty good, but also so much that we tend to get tunnel vision, and forget most of it, so following are 4 basic things I see continuously that ensures I do not open a piece.

Talking about yourself.

Nobody cares about you, except perhaps your mother, or in my case, my sister. They care about themselves, their lives, and their problems. A good headline reflects those needs, pain points, and offers help to a specific group that you wish to communicate with, and at  the very least, creates interest.

If you are a dentist, do not talk about how modern your equipment is, or how many degrees you may have, address the reason someone  may be looking for a dentist. They have broken a tooth, their child has a crooked bite, or they have a toothache that needs attention.

Using jargon.

Every industry has jargon, it acts as shorthand for insiders, so if you want to grab the attention of your competitors, use the jargon they understand, but if you would rather catch the attention of those who might want to act on what you say, avoid it like the plague.

Last week I saw a headline that promised: ‘to deliver a sophisticated customer centric e-commerce solution to SME’s’ . How much better would it have been if the headline simply promised to make it easy from small businesses to get paid.

Showing how clever you are.

For your potential customer, clear beats clever every single time. It may not get a chuckle from your mates in the pub after work, but so what, they are already your mates, and not required to pay your bills. The most common offender is the use of a pun, never as funny in a headline as in the pub, followed closely by the use of ‘digital shorthand’ such as ‘gr8’.

Allowing grammatical and spelling errors.

Perhaps it is just my age, but a spelling or grammatical error in a headline or sub head ensures I do not open it. Not only does it offend my sense of what is right, it demonstrates that the writer is either too stupid to understand the basic rules of written communication, or that they have so little concern for my time that they did not make the effort to get it right. Why would I read it in either case?

The difference between ordinary copy, and great copy is a big bagful of money, and a lot of effort, experience and specialist skill.

 

The marketing flip, with pike & twist.

The marketing flip, with pike & twist.

Jul 5, 2017 | Branding, Marketing, Small business

The marketing degree of difficulty has exploded, making getting a good score  exponentially more difficult.

There used to be a few TV and radio stations, newspapers and magazines by which to reach potential customers, and supply them with the information you thought they needed to buy your stuff.  It was mass marketing, with little to no ability to customise, personalise, or engage.

The name of the game was scale.

Scale of capital to control the means of communication and mass produce products for sale

Scale of financial resources  to afford the advertising costs demanded by the communication owners

Scale of markets, mass consumers

Scale of intermediaries like supermarket chains, and suppliers of capital and equipment.

Scale had all the power.

In 15 years, less than half my working life, marketing has flipped.

Individuals now have all the power

Marketing has to be personalised, one on one, or it will be ignored

Media channels are now virtually infinite, and the cost can be modest to free

Brands are only as good as the last delivery of value to the individual

However, the objective remains the same, just as with the fancy dive. It is to go through the surface with as little splash and disturbance as possible, a good old fashioned, well executed and relatively simple swan dive can achieve that objective as well as the fancy risky, and hugely complicated combinations of tricks.

Next time you are contemplating a complicated marketing dive with a pike and twist, consider the benefits of simplicity.