Two sides to the flow of cash.

Feb 27, 2015 | Governance, Management, Operations, Personal Rant, Small business

cash flow

Times are tough, success is hard to come by, even for businesses that have been around for a long time,  well and truly beating the hoodoo that stalks new businesses, 9/10 failing in the first few years.

Somebody I have known for a long time, who has run a small businesses delivering a range of very good products to consumers via FMCG retailers is about to go to the wall. 25 years of effort and commitment about to slide down the dunney leaving him with nothing, not even his house, left to him by his parents.

Worse than sad. Tragic.

Many things factor in the eventual failure of this business, but one stands out starkly.

Poor management of his cash.

There are two sides to the challenge of managing cash.

The first is the cash itself.

In this case, from week to week even day to day, he knew how much was in the bank, but when the big bills came in,  it has been a real struggle to pay them, because he was not adequately forecasting the flow of cash, giving him the opportunity to adjust activity as necessary. His bank has been unsympathetic, creditors demanding, and debtors increasingly reluctant to part with their cash, even in this current super low interest rate environment. Meanwhile costs have increased inexorably, way out of line with his ability to extract a corresponding increase in the prices he can charge in the marketplace.

Not pretty, and all too common.

The second is how the cash you have is used, the level of productivity you extract from it. Cash by itself is worthless, its value is in what you do with it. Purchase inventory, pay staff, provide a factory and all the other stuff we call the costs of being in business. After all that is done, most want some reward for the long hours and stress of being in a small business, and then to have some left over to go towards that world trip on retirement.

The productivity of the cash is not measured by the amount you spend, but by what you get for it, and small businesses rarely spend enough time considering ways to increase the productivity of their cash, concentrating on the absolute amounts coming in and going out. Challenge is that there is no explicit measure for cash productivity, and it is not a notion recognised  in the accounting packages everyone uses, the accounting standards, or most peoples mindsets. Best we usually seem to do is have a few ratios like the “Quick” ratio which measures current assets over current liabilities, which are not regularly tracked performance measures, and have room for interpretation and thus manipulation.

Stock turn, debtors days Vs creditors days, Sales or Gross margin/employee, product value produced/realisable value of a piece of machinery, production value/production employee, time taken/task, and many others. There are thousands of ways to measure the productivity of the cash tied up in any business, and every business will be different. However, there will be a few measures for each that capture the essential nature of the business, where an improvement will deliver measurable financial  results.

You should  be seeking and using these key measures of cash productivity in your business.

Back to the case of my acquaintance.

He did not manage his cash flow well enough. Failure to adequately forecast  and thus manage the ebbs and flows of cash into and out of his business, and as a result having to put in place very expensive short term funding in one way or another meant he was always chasing his cash-tail. He also did not measure, almost at all, the productivity of his  cash, allowing the ” hidden” costs of poor cash productivity to kill him. Despite his Income statement, often called the Profit and Loss statement, telling him he was making a modest profit, he has hit the wall.

A sad but unfortunately common story, one I hope you are not seeing first hand.

 

 

 

 

Happy birthday Steve.

Feb 24, 2015 | Branding, Innovation, Small business

 

220px-Steve_Jobs_Headshot_2010-CROP

Today, February 24, 2015 would have been Steve  Jobs 60th birthday.

All lives are valuable, few add as much to others as did that of Jobs. I can only guess he is currently  hanging off his icloud lecturing St Pete on the shortcomings of the design.

There are thousands better qualified than me to comment on his achievements, but the lessons for those running small businesses are clear:

The value of innovation

Focus, focus and more focus.

Immoveable determination

The inestimable value of being different,  bucking convention, and connecting the dots where others see no connection.

The great 1997 “Crazy ones” ad positioned Apple so powerfully in peoples minds that it remains today as perhaps the greatest pieces of positioning communication ever.

Apple under Jobs disrupted markets and created new ones. The  music and telephony markets of 2015 bear almost  no resemblance to those of 2001. Consumers globally behave differently as a result of Jobs insights.

Few companies or certainly individuals can claim to have had so much impact on the world as Jobs, and paradoxically, as he jealously guarded the proprietary nature of Apples digital ecosystem, he shared his insights and experiences widely, such as in the terrific Stanford commencement address, and captured on his death in these quotes and cartoons .

Seth Godin called Jobs a “ruckusmaker” in his post, but I think he made more than a ruckus, he made a hole in the universe.

Vale Steve Jobs.

8 factors to ensure your website delivers value

Feb 23, 2015 | Branding, Marketing, Small business

 

8 factors to build a great site

8 factors to build a great site

First thing you need to do is decide what you want the site to deliver. Once you have that, you can build the site around the objective. A website has really only two possible purposes: first, it may be commercial, second, it may be a hobby.  If you decide that the latter is your sites purpose, save yourself  some time, and  stop reading now.

However, should it be a commercial  objective, the following will have some value for you.

  1.  A headline with a hook. You may get a couple of seconds at best or catch a visitors attention, you must do it with the headline. There are plenty of posts around that tell you how to write a killer headline, but however you do it, you need to be able to hook and engage a casual reader.  A great headline focuses on a problem that the reader needs solved. It can be a list, question, or many other forms, but is must be about them, not you.
  2. Visual and text alignment. The image on the page must reflect what the page, and site are about. Humans are visual animals, we impute a lot of information from visual cues, make sure they are all aligned.
  3. Logical progression. Being visual we run from headline to sub head, to sub-sub head, and expect there to be a logical progression if information. In the event  we do not find it, our minds meander off somewhere, and a visitor will “bounce”.
  4. Uncluttered clarity. Unclear, disorganised content is death to a casual visitor. They want  to find what they are looking for with a minimum of fuss, trouble, and clicks. Make it hard to navigate and they are gone before you know it, probably never to return. In many ways this is similar to the point above, but clarity is more than a logical progression of headlines, it is also the layout, and visitor centric journey through the levels of information.
  5. Visitor centric page names and headers. A site should be all about the reader, not the site owner. “About us” is perhaps the most common, as well as  the worst page name on the web. A visitor does not care about you, they care about them, and what you can do for them. For heavens sake call them “how we can help” or “problems we solve” or something, anything other than “About us”. (perhaps you can hear a hobby horse)
  6. Relevance and clarity.  Irrelevant material must be banned. Just having a video for the sale of having a video, because somebody told you humans were visual animals, or because the bloke down the road has  one is stupid.
  7. Clear, easy to use, call to action. Does  not matter what it is, click here for info, download the research, even like us, it has to be clear what you want a visitor to do.
  8. Mobile editing. More than  just “mobile friendly” you site needs to be “mobile edited”, Mobile sites play a different role to desktops. Mobile fills a more short term role satisfying an immediate information need, rather than being a tool for research. Therefore much of the information and links that are usually on a website are superfluous to a mobile, just serving to slow down delivery and extend the “finger-flicking” necessary to get the answer.

 

None of this is easy, a website that delivers commercial value rarely happens by accident, particularly now when there are over a billion sites plus the social media platforms vying for the limited attention of your audience.

There are many opportunities to vote for the worst website of all time, this is mine as it combines unsurpassed zealotry with a psychedelic “sicko”  design that is a stomach churner.

 

The 9 imperatives for small businesses when building a brand.

Feb 17, 2015 | Branding, Customers, Marketing, Small business

 

 

Build your brand on solid foundations if you want it to last.

Build your brand on solid foundations if you want it to last.

This is the fourth on the series focusing on how to beat the supermarket gorillas at their own game, by building a brand that has a loyal and evangelistic group of customers . The original summary post, here, followed up by the expanded first post on the supermarket business  model, the third advising to be savvy with data, and the most recent suggesting some ideas to leverage category management for the benefit of small businesses.

Reaching consumers via supermarket retailers remains a tough game, one in which the supermarkets  set all the rules, own the referee, and choose who can play with them. In other words, they are holding all the cards, so to remain in the game, you have to be smart, focused and innovative.

Building a brand is not something that happens overnight, rather it happens over an extended time, and requires vision, patience, and investment. However, the fantastic opportunities for small businesses to play with the big league opened up by digital technology has bent the rules a little.

So, following are the key considerations in your brand building challenge:

Know your starting point.

As with any journey, knowing where you are now, where you want to be, and having some idea of the road in between those points is vital to success. Therefore the logical starting point is a review of your current competitive and strategic environment, along with a critical review of your own capabilities, distinctive or otherwise, and the points that differentiates you from your competitors. A part of your starting point is a clear understanding of what drives success in your business, what drives costs and  revenues, how the business model works, and reacts to stress. Being self aware is as important in business as it is in personal relationships.

Have a clear picture of your customer in mind.

“Customer profiling” is for small businesses one of the opportunities they have that can differentiate them from their bigger competitors, but it takes the will to be able to say “No”, to define who you want to attract, and build your brand offering and communications to appeal to those people specifically. It makes little difference if you are B2B or B2C, the same rules apply. The closer you come to being able to define your ideal customer as a person you know, the better. A real part of this exercise is to be able to think like a customer. Some large companies now employ anthropologists to spend time in the homes of their target customers to see how they operate in the context that they are seeing as an opportunity to offer a branded product to deliver value of some sort

Have a clear view of your brand as a person.

Similarly, defining your brand with human traits is of vital importance. People relate to people not brands, therefore to build empathy, a consumer has to be able to impute behavioural characteristics, beliefs, and personality to your brand.

Build a brand differentiated from competitors in some ways of vital importance to customers.

There is little point in being the same, or very similar to everyone else when dealing with supermarkets. Negotiations then just becomes an auction between suppliers for shelf space, and once you have succeeded there, you face a reverse  auction for the consumers dollars. Neither are winning strategies. Small businesses by their nature do not have the scale to serve everyone, so having a clear offer to a small group, sufficiently powerful that they are not  prepared to accept a substitute is the desired outcome. If you can sit in front of one of the gorillas, knowing you only want distribution in one, and knowing that at least some of your customers will be prepared to either change their store choice to get your product, or build a bit of loyalty to their current store because it stocks your product, you  have some leverage in the discussions. It is all about negotiation leverage, and differentiation that delivers value to consumers gives leverage.

Aim for the long term.

‘Lifetime customer value” has become a  bit of a cliché in recent times, but that does not mean it is of less value as an idea. Building in the triggers that will bring our existing customers back time and time again is a far better way of building a brand and a business than to be constantly out fishing for  new customers. The digital tools now available have given us a wide array of tools that assist in the calculation  of the cost of acquisition and retention of customers. Marketing expenditure can be now absolutely accountable for results, and sensitive to even very small changes in tactics, and this is a potent  tool small business can use against their bigger rivals, and to build brand loyalty. Knowing what sorts of marketing activity engages existing customers is of way more value than going fishing for new ones.

 Consistency and predictability.

These two words are factors that always come up in consumer research seeking to identify the foundations of good brands. Consumers know what they stand for, know they will have those things delivered with  no surprises. However, the notion of consistency goes further, to the way the brand is packaged, advertised, an positioned, they are all consistent over  along period of time, change coming as evolutionary rather than revolutionary. Consumers also want to be entertained, intrigued, and engaged with their brands, and that will not happen if they are boring, so the communications have to walk that fine line of being consistent, while being constantly fresh and interesting. Few succeed, but those that do become significant players in their niche, weather that niche be a global market, like Apple, or a local market.

Differentiation.

Whatever else you develop your brand to be, and to do, make it different to everything else out there that could fill the same customer need. Without your own distinctive identity, you will be simply one of the forgotten brands that fight for shelf space on the basis of price, and then all you do is deliver profits to the supermarkets. However, differentiation does not mean a different pack size, or colour scheme, it means genuinely solving the consumers problem or addressing the “job to be done” in a different way, one that adds value by reflecting the job. You must however be very focused about what value you add to who, and why they should buy your brand over the other guy. The final implication here is that you know your competitor well, well enough to counter their obvious and logical competitive responses in the manner in which you build your brand.

Communications must be in the customer language.

Brands that communicate in the language customers use in the context in which the product is used have a chance of success, as the customers relate to the context and language. Many years ago I was a part of the team, an observer really as I was just a young graduate,  that created the “you ought to be congratulated” advertising that gave Meadow Lea margarine a stranglehold on the Australian market for 30 years. In a market with many heavily   advertised brands, Meadow Lea held a share of more than three times its closest rival for many years. The line, and the ads themselves spoke in the language of the primary customer, busy, smart women with families who were juggling multiple roles and responsibilities.

Plan and integrate your marketing activity across platforms.

In the “old days” the scope of available marketing activity was limited to the paid media, paid public relations, sales promotions and a few others. Now, that has changed, and the menu of available marketing tools has exploded. This huge array of options also makes life for the marketers complicated and dangerous, so great care must be taken to be consistent in your message and positioning across the whole array of marketing tools that are employed, and you need to be employing a range of them, rather than  a few, depending on the behaviour of your customers. These days, social media platforms play a huge role in the development of an opportunity to sell, but in fact they do not yet do much in the way of brand-building.  The core of much brand building activity is your website, to which you drive potential customers so they can check you out, and existing customers to reinforce the value of your brand in more “long form” ways like recipes, hints, detailed information, whatever is relevant to the consumers relationship with the product category and your brand. However, the most common problem with websites is that people “set and forget”. They need to be living creatures, fed and nurtured like the family pet if they are to deliver a return.

 

Two final thoughts.

  1.  Even if you do all the above right, better than anyone else, but your product sucks, you will have wasted all that effort , time and money. The consumer is not a fool, they will not mistake good marketing for a good product, at least, not more than once.
  2. If you want your brand to last, to stand the test of time and competition, build it on solid foundations, but make it flexible enough to adjust to consumers as they evolve.

4 steps to identify a Unique Value Proposition

Feb 16, 2015 | Customers, Marketing, Small business

crowd

Being different is fundamental to being profitable, as if you are the same as everyone else in everything you do, then the discriminator becomes price, and being the cheapest is rarely a profitable strategy.

Often this notion is written about as a ‘Unique Selling Proposition”, useful, but in this connected world, you have to be able to demonstrate your value before you have a chance at a sale, therefore it helps to have the value proposition at  the forefront of your thinking.

If consumers think  value is what you have to offer, they will buy it.

First, a definition.

A UVP is something  that clearly differentiates you from your opposition, it creates a point around which your target market can choose you simply because the others do not have what you do, and therefore cannot offer the same value. This does not mean you have to be the “best”, few would argue that a Hyundai is a better car than a Mercedes, but amongst its peers, it offers more electronic “bling” than the others, for the same money. If the bling is what you want, buy a Hyundai.

Second, make your UVP as clear as crystal. There is little point making the investment in identifying and creating the supporting infrastructure of a UVP, and then not clearly telling people what it is. This also acts as a focal point to attract the sorts of customers you specifically want, as they will be attracted by the UVP, others less so, so perhaps they go elsewhere. This creating of a “choice” mechanism is a powerful marketing tool.

Third, how do you identify and develop a UVP?

There are a lot of tools, and tricks, but no substitute for thoughtful, creative and extensive market and customer research and feedback. There is however, a relatively simple series of questions you can ask yourself to uncover the UVP.

  1. Identify clearly the offers of your major competitors. What they do well, what they do poorly, any guarantees they have in place, what they can do that you cannot, and vice versa, and any other factors relevant to a sale in your category, like geography, parking availability, speed of service, and so on.
  2. Understand the trends in your industry, in order to try and anticipate where it may be heading. Things such as the impact of technology, regulation, industry imposed standards, and the general levels of quality, service, and delivery that apply.
  3. Focus on your target market. Every market has characteristics of product, customer, business model, distribution channels and common cost and revenue drivers. Understand as completely as you can what these all are, looking for the typical distribution of characteristics for each parameter of importance. For example, if you are selling men’s suits, the target market is men, identify the typical or average customer, he may be 40 years old, a middle ranking executive, with two kids a wife who works, mortgage and 2 cars. However, that doesn’t not mean that single 25 year olds may not buy, it is just that there are less of them currently, they are less likely to buy, and almost certainly, they do not  buy multiple suits.
  4. Identify your specific ideal customer. The better you can identify the specific person you are targeting the better you will be able to craft a UVP of value to them, and communicate it. To continue the analogy above,  25 year old single men may not need as many suits as their 40 year old counterpart, but the one they want is not for every day wear, so they may be prepared to pay much more for the quality and styling you can offer. It may also be that your target customer is that 25 year olds partner?

When you think that an old head that has done this sort of exercise many times may be able to help, give me a call.

26 ways small business can  go broke being successful

Feb 6, 2015 | Governance, Management, Marketing, Small business

 

Wile e

9/10 small businesses fail in the first 3 years, leaving behind a pile of financial and emotional debt that generally weighs heavily on the “owner”.

Often, the failure comes as a surprise to the owner, full of optimism and the sense of freedom and commitment that usually goes with a start-up, irrespective of the nature of the start-up, globally targeted tech innovation, or a sandwich shop in the local mall. However, the signs are usually pretty obvious to an observer who knows the symptoms.

 

 

  • Mistaking sales for profitability
  • Having the wrong customers
  • Not managing their cash
  • Not knowing the difference between cash flow and net profit on the P&L
  • Losing sight of the reason they are in business
  • Poor allocation of limited resources, particularly time
  • Outsourcing tasks to the cheapest available resource, rather than the most appropriate
  • Not understanding the detail of their cost drivers
  • Thinking that the competition thinks and acts like them
  • Mistaking speed for efficiency and productivity
  • Not treating existing customers like gold
  • Not recognising when the horse is dead
  • Poor hiring decisions under pressure to fill a seat
  • Not leveraging the digital productivity tools now available
  • Not understanding their primary customers sufficiently well
  • Failing to leverage obvious collaborative opportunities to engage and serve customers
  • Chasing the next customer rather than obsessing about the current.
  • Taking the money of anything that walks through the door
  • Not being able to say “No”
  • Missing some of the regulatory stuff, particularly in relation to staff
  • Not understanding and leveraging the digital tools available
  • Failure to plan
  • Failure to recognise when an existing plan is leading to a dead end
  • Unclear business model
  • Inconsistent application of the business model
  • Price increase “phobia”

The list can go on and on, I am sure you can add some, but people still keep trying. Being prepared to work 18 hours a day,(or often just being sucked in) be the worst paid in the place, risking the house after  writing a 100 page business plan for the bank against a template you got from the web that you know they will never read, and being patronised by employees of some institution whose riskiest act today will be to have chicken instead of ham on their sandwich.

Who would not want to work for themselves?

In 20 years of being such a dumb-arse, I have seen all the above, and more, while usually making less than I did as a corporate operator, but reveling in the personal and intellectual freedom. If that experience could help you to avoid that “oh shit why didn’t I see that “step, give me a call.