Jun 18, 2015 | Customers, Leadership, Operations, Small business
courtesy www.myob.com.au
Most businesses want to grow, even just a bit, it is not only in the DNA, but some scale makes life in most areas easier. So how do small businesses go about it?
4 basic strategies.
1. Empower the team.
Make every front line person as well as the office realise that their input and customer service is essential. It can be done, and it works. Bunnings is king of the hardware space, delivering great outcomes for Coles, whereas Masters has been a disaster for Woolworths, yesterday claiming the scalp of the MD Grant O’Brien. I shop at Bunnings a lot, drives me nuts, but at least their people their have product knowledge useful to a casual renovator, share it with you and smile. My two attempts at Masters have been different, and there won’t be a third. Whilst these are both large businesses, it is no different for a small one. Make everyone aware of the 8 moments of truth, and committed to improving them on each interaction that occurs.
2. Critical processes need to be documented.
This is not just to pass the various audits haunting us, but so that employees and everyone else knows what is important and what to do. Documentation makes for robust repeatable processes. The challenge becomes one of continuous improvement, as once a process is documented, it sometimes takes on a persona as being “done”. Within continuous improvement lurks the obvious but often overlooked fact that to improve you first need a stable, measured processes as the starting point for improvement. Documentation provides that starting point.
3. Automate repetitive tasks.
If the same thing is done regularly, in the same way, automate it. Then you get accuracy, reliability and cost reductions, and who does not want those. Often there is a cost up front, but taken in the context of the potential savings and productivity improvements they are usually small. The most common automation target is customer service. It can be very successful at stripping out costs, but go too far and customers go somewhere else. A “learning” FAQ function makes great sense for many, and make sure you do not lose the opportunity for the personal touch.
4. Make everything searchable.
Documents, emails, social media posts, everything that gets done should be in a central repository searchable by anyone when it is needed. The waste of having documents in silos is enormous, unnecessary and just plain stupid in this day and age.
The technology is now such that it is possible for small businesses to be significant global players in a narrow and deep niche should that be their objective, but even for the local businesses without those grand aspirations, scaling operations is a key consideration in the quest to maximise that other most important resource, your time.
Jun 15, 2015 | Change, Innovation, Small business
Wheels still on?
There are lots of reasons, I have heard them all, and even used a couple myself, but blaming the retailers, engineers, competitors, lack of advertising, or the weather misses the essential truth.
The process is flawed.
We know the constraints of the retailers, they set the rules and suppliers have to live with them. We cannot control the competition, although mostly they are pretty predictable, and resources for advertising are never enough. Our engineers and designers are ours, so we can get the best out of them, if we are good enough, and we cannot predict the weather, let along control it.
The thing we do control, but rarely leverage well is the innovation management processes most of us use.
If 9/10 products fail, surely there must be something wrong with the logic and processes that allowed them to progress through the system to launch, consuming precious resources as they go.
They get spat out, launched, fail, and we blame everything but the stray dog around the corner, and our NPD&C process.
Silly really.
Why are the processes flawed?
There are standard operating procedures taught with minor variations almost everywhere, they are logical, sequential, and like economics assume knowledge and insight. Nothing like the real world really.
Following is a list of the failure-drivers I have seen over the years.
The ideas are narrow. Ask yourself where most ideas that get into the system come from.
- Customers. In many industries, solving a customer problem is a great source of ideas, but in FMCG, customers or as we should call them, buyers, have little idea beyond ways to save a few bob, or copy something else that is doing OK, but they have the shelf space to rent, so we bend over.
- Consumers. We spend millions asking consumers what they want, then trying to interpret the answers in some coherent way, when the truth is as it always was, consumers do not know what they do not know. Henry Fords quip that had he asked his customers what they wanted, they would have answered a faster horse, still holds.
- The bosses wife. Always a good source of ideas, mostly crap, but carrying considerable weight in the system.
- Your sales force. There can be the gem hidden amongst the dross, but usually they are responding to what their customers (read buyers) tell them, what the opposition has done to pinch a shelf facing, or just looking for reasons they are behind budget. Good sales people are usually pretty focussed on the things that make a difference now, not next year or next decade, so at best they may come up with a useful range extension.
The business case. I am in favor of rigorous planning and being held accountable for results, but when you think about it, our ability to tell the future is pretty limited to non-existent, but we persist with executing on a business plan because it is, well, the plan. Every business case I have ever seen has two common features:
- A positive forecast of outcomes. Profits, market share, volumes, whatever it is, the forecast is for great things.
- Detailed cost analysis. This includes the costs to manufacture, buy shelf space, promotional programs, advertising, research, and all the rest. Again, all if we are honest with ourselves, factors we can only really take a best guess at. The only thing we know for sure is that the forecasts will be wrong.
We believe our own bullshit. Because we have spent all that time, effort, and money creating a business case, we then use them to prioritise the options on the basis of the best returns.
We fail at articulating the product. Every successful product I have seen has some essential component that both makes it different to anything else around, and in the process adds value to sufficient lives for there to be an incremental source of new demand. If all we do is cut the existing cake differently, the only winner is the retailer. Somehow we need to make the cake bigger, find that new and elusive consumer demand.
We fail to brief designers. This follows the previous failure, we stumble at articulating the product specs against which the technologists, engineers and creatives have to execute. If we do not know, how can they? Besides, they are usually brought in too late in the design process, they respond to the performance specs marketing tells them the market wants, instead of being a proactive part of designing the specs. This usually ensures that few operational or technology innovations get a guernsey.
Momentum. Once a project starts to move along, it builds momentum, garners support in all sorts of places, and becomes a “project” to be completed, rather than an expression of new consumer demand.
The net result of all the above is that the biggest risk is at the end, when the sunk cost in resources and ego play against anything other than a gung ho launch.
So what is the solution to all this waste, apart from just getting better at fortune telling?
Take some lessons for the “lean” movement, the operational implementation of the scientific method.
Iterate in small steps, get a few consumers involved early in a hands on way to see of if your value proposition is sound, do a series of small experiments testing hypotheses, and be prepared to be wrong, and alter the approach. Deploy genuine cross functional teams from both inside and outside the organisation, engage in constructive “devils advocate” thinking, and most important of all, have a strategy for the business that drives the new product development process to contribute to the strategic outcomes, not just the forecast sales and financial ones.
None of this is easy, but that is why there is so much upside, the corporate clones cannot see the opportunities. It is also why increasingly, small and medium business has an advantage over the corporate behemoths that dominate the landscape. They are able to take quick decisions based in instinct, experience, discontinuities that emerge, and an intimacy with customers large businesses can only dream about.
Call me when I can help.
Jun 5, 2015 | Governance, Management, Small business
whoops!
Do I have enough cash to……………….?
This is one the 4 fundamental questions for small business survival, and is the one I hear far too often. It is all to do with how much cash is available at any given time to pay the bills.
It is almost inexplicable to me that many operators of small business do not understand their cash flow, how it works, how it can be managed, and how to leverage it. After all, it is their lifeblood.
The sad reality was brought home again a week or so ago talking to a tradie I met casually who was hurting badly because a developer he had subbied for over many ears was not paying him, and he in turn was not paying his bills, as he had used up his overdraft. He was in effect funding the developer, and ultimately the receiver, and seemed unlikely to get any of his money back.
A common occurrence and all too easy to address with a bit of planning.
There are some pretty simple things that can be done to assist in the management of cash, but like all things it takes a little bit of work up front, and a disciplined process
1. Routine.
The steps to a positive cash flow are simple, if you make them a part of your routine, you can follow them with little effort, although at first, it can be a bit confronting.
- Have robust, enforceable and explicit terms of trade. For anything that requires credit terms to be extended, make sure you have a signed agreement that specifics all aspects of the terms under which you agree to provide your goods and services. These terms are an enforceable contract, and in the event it is necessary, is actionable. There are templates available that can be personalised for your needs and used without cost or with just a small charge. Some service providers such as EC Credit Control will assist in the preparation, as will your bank, although your bank has a vested interest in lending you money, not making what you have work harder.
- Do credit checks. By giving credit, you are effectively lending someone your money. It makes sense to check if they have any history of fraud or default, which can be done easily for a modest fee. You pay for access to a database that is in effect a credit footprint of everyone who has applied for and been given credit, and the data includes their credit history, and any outstanding judgements. Veda is one of the agencies that provides this information as a service, there are several, most banks will provide the service for a fee, often they wholesale services like Veda. Often if you choose to outsource your debtor management in some way, these sorts of checks are a part of the service.
- Issue invoices immediately and follow up politely but persistently and in a highly predictable manner. Most businesses wait until they receive an invoice before they initiate any consideration of a credit period, let alone get around to paying, so the sooner you issue the invoice, the earlier you have a chance to be paid. A client of mine about two years ago instituted a process of sending a polite “thanks in advance” for payment on the invoice due in a couple of days. He thanks his clients for the expected payment, indicating being paid on time is one of the ways he manages to maintain the high value he is able to deliver. It had a significant impact on his debtor days, and served a marketing purpose to highlight the quality of the service he provided, and as it was highly automated. After the initial set-up and a few teething problems, the process became virtually automatic, and a boost to his business.
- Keep the credit period ASAP. In this case, the acronym is As Short As Possible. Generally the negotiation on credit terms will take place at the beginning of the relationship, and that is the best time. Make it as short as possible, I always advise starting with 7 days from invoice date, be very happy with 21, and if it is in your interests, give a bit more, but if you start with 30 days from the end of the month, watch your sales bunch into the beginning of the month, which effectively gives a customer up to 60 days to pay, before the invoice is overdue, and you can start chasing payment. This is a gap you are funding, bankrolling your customers, and generally people in business are not there to be a philanthropist, leave that to Bill Gates.
- Do a weekly rolling 13 week cash forecast. This is a simple exercise, but knowing what is coming at you offers the opportunity to manage it with the least pain, ignoring it can be terminal. Generally this cannot be automated, but most bookkeepers and service providers can do it simply, although most would say monthly is sufficient. I strongly recommend weekly for small businesses.
2. Automate.
One of the more innovative automations I have seen is the one noted above, but most of the basic bookkeeping routines are now highly automatable via mobile connections into software that can manage all the recording and invoicing processes. For a tradie, assembly and issue of an invoice via email against a signed and dated acceptance of the cost can be done on site the moment a job is complete. No paperwork to end a long day. Automating can cost a bit to set up, and ensure it all works, but the expense is well worth it.
3. Outsource.
Most parts of the process can be easily outsourced if you choose not to do it yourself. Think of this outsourcing cost as insurance, and the cost of buying back a bit of your own time and peace of mind.
- Book-keeping. There are many book-keeping services available, and whilst they may vary in quality and cost, it is pretty easy these days to find one you are comfortable with, who provide the mix of services you require.
- Debtor and debt management. There are many service combinations possible from the straight invoice financing where you in effect sell your invoices to a finance broker who then owns the debt, to more relationship sympathetic arrangements where a third party undertakes to be your accounts receivable function, and often do some of the risk assessment functions noted above. Selling your debt, or “factoring” still smells of desperation, but outsourcing accounts receivable is pretty sensible and often very cost effective.
4. Leverage.
Most understand the concept of leverage when it comes to moving a physically heavy object, but have never thought of it in relation to their business, and particularly their two most crucial resources, their time and their cash.
- Closely managing terms and collections so that your average debtors is shorter than your average creditors means you are collectively enjoying having your creditors fund your business. However, I recommend paying your bills as they come due, as a history of reliability can pay big dividends when things suddenly go pear-shaped.
- Inventory. In many businesses the greatest consumer of cash is inventory, and closely managing it can save considerable sums. For a retailer like a fruit and veggie market, they take most of their revenue by cash or credit card, for which they get paid within 24 hours, but often pay for their stock on 21 or 30 days, by which time they have turned the stock over several times. Lovely. Measuring stock turn is a great metric if you have inventory.
Finally, there is a further measure not usually recommended that I particularly favour, Net Cash Consumption or NCC. It is a simple measure you can apply over any period, simply the difference between cash in and cash out over a time period. For small businesses I usually exclude capital items, so it is a measure of trading cash generation, or destruction. If the measure is positive, that is a good start, if it is negative for any extended period, trouble. I usually recommend a rolling 3 month measure, short enough to be sensitive, long enough to accommodate the operational vagaries that occur like paying the receptionist long service leave. Adding it as a graph on the bottom of your cash flow forecast automates it. Easy.
If you would like more information, or the opportunity to discuss any of this, just give me a call.
May 29, 2015 | Branding, Marketing, Small business
Build to last
“Brand” is a widely misused and misunderstood term, often referring to a whole range of devices, symbols and expressions that are no more than single elements of the whole.
Building a brand in the digital age of speed, idea cloning and ubiquitous communication is a real challenge, but those who get it right, win big time.
Just look at Apple. When Steve Jobs came back, it was just about broke, now it is one of the largest, and most successful corporations the world has ever seen.
Do you need any more evidence that branding in the digital age works?
While Apple is not the corner store, the foundations of Apple can be applied to every brand, and every business, from the corner store right up to Apple, whose retailing operations in the Apple stores are setting new benchmarks for retail performance.
1. Start inside. No brand can exist in isolation of the internal values and culture of the business they represent. No amount of smart advertising and slick promotion can substitute for great customer experience and value generation, which starts inside.
2. Seduce, don’t sell. Today’s consumers are smart, advertising sensitive and cynical, they need to be seduced by the superior value your brand represents, the experience it delivers. Purchase decisions are not always rational, and when a successful brand is involved in the choice, the equation usually does not have much weight on the price component of the value equation.
3. Lead, don’t follow. Brands have the capacity to lead consumers towards a place they have not been before, or not considered, as they create new value propositions. They look for trends that have the potential to crash into each other at some point, and change behaviour, and then see them before anyone else. Then they build an offer at the point of intersection, often creating the disruption themselves. The great ice hockey player Wayne Gretsky said he did not skate to the puck, he skated to where the puck would be. Successful brands do the same thing, lead, they certainly do not follow or react fads and short term “opportunities”.
4. Sweat the small stuff. Every potential touch point a customer may have at some point with a brand is an opportunity to enhance the brand, or add to the depreciation. Jobs’ fanatical dedication to making even the things no consumer was ever likely to see perfect is legend, but provided a platform for consumers belief that Apple was simply “better”
5. Commitment and focus. Brands that succeed do so because over a considerable period that stay focused on their core “Why” as Simon Sinek would put it. They do not succumb to corporate politics, marketing “short-termism”, and distractions from the market, they hunker down for the long term and deliver what the brand stands for at every opportunity.
6. Broad appeal. Really successful brands have a set of values that cross normal product category lines, and they are able to deliver in differing categories. They are able to accommodate shifts in consumer behaviour because they are not defined by their product attributes, but by their values and relationships with customers.
7. Relish and learn from competition. Marketplaces are demanding places, and only the best survive and prosper. Watching the steps and missteps of competitors makes brands stronger, and when a strong brand has strong competition, they both get better. That is the nature of competition.
8. Design is crucial. A well designed and executed product, and peripheral material like adverting, packaging, and look and feel of the product itself can deliver a unique message to consumers about the values that their purchase choice is delivering to them. Unmistakable, and remarkable are terms that every brand owner should chase for their offering.
9. Defy conventional wisdom. Unless a brand is distinctive, memorable and creates value, it will go unnoticed, and the best way to be noticed is to defy conventional wisdom. Do not do what everyone else is doing, find a way to add value by being different.
10. Communicate facts that resonate. Today’s smart consumers are less likely to be seduced by flimsy claims their parents accepted, they want solid information, facts that are relevant to them on which to make what they see as rational purchase decisions. They recognise preferences are no longer formed by fancy and extensive advertising, but by the realities that their target customers believe.
11. Design for people. Successful brands are never for everyone, their do not squander scarce resources trying to be so. In contrast, the design the brand experience is designed for the specific people who are most likely to be their loyal and lifelong customers.
A brand is more than a collection of attributes and deliverables, it is a long term strategic platform for growth and profitability. Why would you not invest in that?
May 8, 2015 | Communication, Marketing, Small business, Social Media
I am speaking to small businesses all the time, and there are a lot of common conversations that occur. One of the most common is about advertising, particularly as it relates to advertising with Facebook and Google.
The conversations take a pretty common route.
The first thing to understand is the huge differences in a potential customers situation as they encounter Facebook ads, and Google AdWords.
The reasons people go to these two platforms are different.
Facebook is social, people are not there to buy stuff, so the path from the social to a transaction usually has a number of steps.
By contrast, a Google search is very specific, “I want information on XX”. Sometimes it will be for the purpose of researching, and sometimes they are committed to making a purchase of a product in your category. They are a “sale ready” audience.
It is for this reason I often recommend people start with AdWords as a means to advertise digitally, learn, and perhaps later use Facebook.
Irrespective of the platform choice, following are the 12 things that make sense to me that you should consider as you start on the digital advertising journey.
- Learn about the platforms, at least in principal, so you understand the stuff told to you by so called experts, and are in a position to ask intelligent questions.
- Start small, figure what works, and expand along the best path, always being prepared to adjust as you learn more. Having a plan, and ensuring the plan is captured in a detailed brief is essential, even if you are doing all the work yourself.
- Tracking and metrics. Before you start, know the source of visitors to your website, and track the changes that occur after the ads are placed. The huge change that has occurred with digital advertising is that we can now answer the question “which half of our advertising is wasted.”
- Define those you want to reach, in as much detail as possible. There are many different, although overlapping audiences you can target: current Facebook fans, and their friends, your current mailing lists held in whatever form they may be, visitors to your website, your competitors customers and friends, (particularly Facebook) and “lookalikes” to any of the above. The choices in the platforms are pretty good, take the time to really understand the choices you are making.
- Build relationships with current customers/fans. We all know that it is easier to get more business from an existing relationship, whatever the form of that relationship, than it is to start from scratch and build a new one to the point where they are prepared to buy from you.
- Create “stickiness” and trust by offering free advice, content, and ideas, and advice, and in responding, do so on a personal level. Webinars, podcasts, lists, blog posts, all serve differing needs in the process and the old adage that you have to give a bit before you can expect anything to come back, still works.
- Understand the customer journey. Facebook particularly, but also Google, require conversion to a sale after the initial contact. To do that you need to provide access the offers, products and relevant information through a landing page process of some sort, leading to a shopping cart, or sign up form. At each point, the potential customer has to make a choice, “do I proceed or not?” and making that choice easy, to the point of automatic requires real understanding of their mindset.
- Landing page optimisation. The differences in performance of differing landing page copy and design is astonishing, so the optimisation of landing pages is a whole process, even an art in itself.
- Create the process before you place the ads. A very common common mistake is to place some ads, they often do not cost much, then when a response arrives, you start wondering what to do with it. Wrong way around. Have the process mapped out, with the follow up content written and the delivery sequences mapped out.
- Analyse and analyse. Obviously having the right metrics to analyse is important, but tracking visitors, conversion rates, and the path a visitor takes to a transaction is enormously valuable in optimising the process. To some extent this is a repeat of step three, but the emphasis here is on the continuous improvement by testing and tweaking of the communication.
- Have a budget, and stick to it. Tracking conversion rates and the cost per conversion at each point in the customers journey as per the point above is vital. The opportunity to measure the conversion costs has never been greater, so make sure you do, and you give yourself time to correct the mistakes you will inevitably make.
- Rinse and repeat, to learn and improve.
You can pay someone too do all this for you, but even if you do, it is reassuring to understand the principals of the process. Most small businesses are careful with the pennies, so making the effort to understand where your money is going, and how to maximise the impact gives the confidence to make the commitment.
May 6, 2015 | Branding, Marketing, Small business
courtesy Hugh McLeod
20 years of working with small businesses and it seems the attitudes to marketing have not changed much.
Most recognise the change in the tools. They seek to engage with social media by being “on facebook” and “Liking” a few people, having a few Apps and sharing photos on their phones, and many have a website that is little more than an electronic brochure at best. The list goes on a bit, but the reasons for this lack of recognition of the importance of marketing have a very few, but very common roots.
Founder focus. Most founders come from a specific background, engineering, accounting, bricklaying, and they are good at it, focus on it, and seek to provide service by doing it better, more often, they often see just lots of one sort of tree, rather than a forest.
Where is the money? The limited funds small businesses have are generally allocated against the specifics they understand and need to build a businesses. T
o continue the analogy, an better computer system, bigger truck to carry the building materials around, things that relate to the core reason for being in business, not this fluffy ill defined marketing stuff. Besides,” I have a website, and it does nothing for me”.
Everyone’s a marketer. Probably the deepest, darkest hole. Everyone knows a kid who can set up their devices and do a website for them, or they edited the school magazine so know how to write and edit copy, the summer intern “knows” social media, and the flaky new age couple down the road know all about the new stuff ‘happening”. God save me from pretend marketers, but they are cheap, if not free, and usually make an unholy mess.
This will sell itself. The product is so good, all we have to do is make it available. How often have I heard that old furphy?
Better do something! And the last, often literally, reason marketing pops onto the radar is a recognition that if nothing changes, the “cleaners” will arrive. “We are suffering, better do something, maybe marketing is the answer”. Too little too late, and there is often insufficient money left to make a difference.
Sad but true for way too many.
What have I missed that you have seen?
The right way to go about all this is to recognise that everyone must be in marketing from day one, weather they like it or not, it is an investment in the business, no different to the truck, or computer system necessary to deliver the service you offer.
