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Low Price, High Value? Small Business Evolution

11/2/2015

 
I read a John Ruskin quote that got me thinking: “There is scarcely anything in the world that some man cannot make a little worse, and sell a little more cheaply. The person who buys on price alone is this man’s lawful prey.”
I think the goal of any small business owner is to make their products a little BETTER and still a little CHEAPER to their customers.  We talk of customer service being the central strategy for small business owners, and we think of that in terms of interaction with our customers: problem resolution, building a relationship, personal attention.  However, when boiled down, customer service, serving the customers, can also be tied directly to the product: give them what they want at the best price.  That! is what will get them to buy from you.
As we get more efficient in producing and delivering our products; as we hammer our suppliers for better pricing; as we get more niche focused, we will have savings to pass along on products that are ever improving.  It’s a marketing evolution that will help a small business owner increase sales, market share, and happy customers.

End with the End in Mind...Your Exit Plan

7/14/2015

 
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Much of the advice I give is in keeping focused on your end game, what I call the Big Picture Goal (BPG). It’s this focus, I believe, that will keep you busy doing the right things, those things that lead you to business success. It’s classic ‘Begin with the end in mind” strategy a la Covey, Collins, and Kiyosaki. But what happens when you finally get there?
Here’s what:
  1. Set a new Big Picture Goal. Maybe your BPG was to get to $1,000,000 in sales and you made it. Now, you might set a new BPG of $10,000,000 or a second location doing the $1M. Alternatively, your BPG might have been more short term in order to ensure survival, and now you’re ready to look even bigger!
  2. Sell the Business. An admirable end for any business is to sell it and retire financially independent. If that is what you have in mind, then start researching how a business in your industry is valued (multiple of sales, multiple of profits, value of assets, etc.) Then, you can start planning for the Big Sale!
  3. The Succession Plan. You might want to step aside and have a new leader manage your business. Just as Bill Gates stepped aside and allowed a ‘real’ CEO to run his company, you might want to set up a plan of succession for a manager/CEO to take over the day-to-day operations of the business. That new manager can SMS text you the good news while you’re fishing!
  4. Close the Doors. Sometimes, the owner is the talent of a micro-business, a talent that just can’t be passed on or sold. If this is the case, then a plan of creating investment savings from profits might be the end game. Yo u still want to leave this with financial security. However, I would still recommend you look for ways to replicate yourself (licensing, website, write a book, etc.).
So, what’s your end game?

Is Your Banker the Drive Through Teller?

7/2/2015

 
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As part of my consulting program and the Dashboard, I ask business owners, “What will it take for you to reach your Big Picture Goal?”  One of the key areas in answering this question is Finances, and invariably an answer is either ‘I need a loan’ or ‘I need a line of credit.’  I follow that one up with, do you know your banker?  One client answered, ‘My banker is whoever’s at the drive-through teller!’  That can’t be your answer.

Once, I was sitting in a meeting with a client when his phone rang.  He saw the Caller ID number and had to answer it.  “Okay…okay…yes…alright…thank you!”  It was his banker, calling to tell him he was about to bounce a big check.  He looked at me, apologized for having to run, and headed out to collect a receivable to cover the check.  Now, proper bookkeeping might have prevented this, but the point is this person knew his banker well enough for his banker to make that call and save him an overdraft charge, if not something more embarrassing.

Would your banker call you, or is your banker the drive-thru window? I’d recommend heading straight out to your bank and start building a relationship with the team there.




Don't buy advertising until you know your objectives!

6/17/2015

 
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First of all, don’t tell any advertising sales people about this blog, or they’ll know that we’ve got ‘em figured out. We’ve figured out a simple way to separate the good ad reps from the not-so-good ones. When you talk to a publication’s sales person, the first question they should ask is, “What are your objectives?” Unfortunately, the first question many of them ask is, “What’s your budget?”

Assuming we’re talking to the right ad rep, we need to have a good answer to the ‘What are your objectives’ question. Have you thought this through? Most of us haven’t when confronted with this insightful question. So, what are your objectives when it comes to advertising/marketing/promotions?

Consider these possibilities:

  1. X number of new customers (say, 100 or 100,000 or 5)

  2. A sold out event (example: 100 tickets sold)

  3. X units sold on your online store (10,000)

  4. Entry into a new market (a new city, state, or age bracket)

  5. Introduce a new product/service (Introducing!)

  6. Create a brand or identity (not a typical small business objective)

  7. Increase traffic on the website (increase traffic by 50%)

  8. Return on Advertising (NOT to pay for itself, but to return 10:1 Sales:Ad expense)

When defining an objective, it is important that it be clear, measurable, and realistic.

Do You Need More Customers?

6/1/2015

 
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I saw a truck the other day that was wrapped bumper to bumper in bright yellow and red, for a painting company. It was quite a change from the typical paint-drip decorated white pickup with ladders you normally see a painter driving. What stuck out to me most was the marketing effort, again rarely seen in the painting business. It made me think that this business was a marketing business whose product is painting houses.

That led me to think about some past seminars I’ve given and blogs I’ve written about “What business are you in?” That question was answered in a short list of types of businesses, identified by the ‘need’ they fulfill for their customers. For example, the need for physical health can be met at a gym. This painter’s truck made me start to reconsider that angle. While I’m not ready to change my ideas completely, I am ready to start considering that we all need to be in one of three types of business:

1. I’m in the Customer Service Business! I’ve always said that Southwest Airlines is in the Customer Service Business. Their focus is on the passenger. I’ve even contended that if you were to take away their airplanes and give them, say, running shoes, they would continue on without a hitch, because they are in the customer service business and simply use their products to deliver that special experience. One of my favorite lines is, “We don’t want to tell YOU we have great customer service, we want YOU to tell OTHERS!” Know where that came from?

2. I’m in the Sales Business. Again, this business is not about the products, but is about building relationships with its customers. The focus is on creating a finely tuned sales machine that increases that top line each month and each year. When product is considered, it is designed with the sales process in mind. I might put Amazon.com in this category. They have built a great sales machine. They keep adding new products without a hitch because their sales system works so well.

3. I’m in the Marketing Business. Proctor and Gamble is in the marketing business. They know how to create products driven by their market, get it positioned right in front of them, and get the word out so that their customers flock to purchase thier products. They are not about the ‘best widget available!’ They are about marketing.

So, am I recommending that you become a Sales, Marketing or Customer Service Business? Yes! However, I’m not asking you to abandon your core strength, which is creating products that satisfy your customers’ needs. I’m simply recommending that you make one of the three methods central to your business. That way, you’ll get a steady flow of the customers you need.




Setting the Tone: Collecting Your Cash

5/27/2015

 
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For a small business, one of the most difficult tasks is to collect on receivables: invoices.  Small business owners work very hard on building a strong relationship with each customer.  Many even become personal friends with clients.  Therefore, it can become very difficult to collect money when it’s due, and it gets harder and and more uncomfortable with each over-due minute.   But cash is cash and is the life-blood of our businesses.  So what’s the solution?

My advice is to have a very aggressive, disciplined cash collections process, as such:

  1. Get your invoices out on time.  In fact, I say get them out early.  I used to send invoices to builders even before we were finished with our work, knowing that they typically pay 45-60 days out.
  2. Be firm on your invoice.  Make the due date clear and consistent.  If you need to be a bank and offer terms, then getting this invoice out on time (i.e. early) is even more important.  Be sure to include a little nudge, like “please remit payment immediately.”
  3. Give them a small grace period after the due date, but once they hit that date, send them a ‘nasty-gram’ immediately.  Politely inform them that payment is past-due and that you expect payment in full immediately.  This letter can be gracious and firm.  And because it’s a letter, it is impersonal enough that it shouldn’t get in the way of your relationship.
  4. If the customer still hasn’t paid, then it’s time for a phone call: “Hey [name], can I stop by and pick up that check?”  Friendly, but with a firm expectation of payment.
You can come up with your own formula.  The point is to have some firmness and some discipline.  That sends a message to your customers that you expect payment, and they will start to put you at the front of the line when they write checks.  This will also help you maintain that great relationship because there won’t be any hard or uncomfortable feelings that go along with a long-outstanding invoice.




Chicken Wing Guide to Small Business

5/11/2015

 
As many of you know, one of my favorite foods is the famous Buffalo Wing.  In today’s blog, I’ll cover The Chicken Wing Guide to Small Business.

Here are the Categories:

Suicide.  If you’ve ever eaten a ’suicide’ flavored wing, you know that the first two, three, maybe four wings are really good.  However, by the time you start to pick up the fourth or fifth wing, all kinds of alarms are going off trying to keep you from the next wing: cleared sinuses, sweaty forehead, blazing mouth, and rumbling stomach.  A small business in this category is the one that outgrows its strategy and quickly heads down the path of destruction.  These are the businesses that seek out the one HUGE customer that will make them rich.  Instead, they find that that customer leads to a faster exit.
Hot.  These are the best wings.  Full flavor plus the punch of a good, hot sauce.  A HOT business is one that is finally cooking.  Typically, for a business to be HOT, it must catch a break.  A key alliance, deal, or breakthrough will take this business quickly from Medium to HOT, but avoid the suicide temptations.
Medium.  Medium is safe, for both wings and business.  A medium-flavored wing will have some of the zing of a HOT wing, but save the mouth from the fiery after effects.  A Medium business is a little more mature.  It has weathered the startup storm and has moved on to the ‘cash cow’ phase of business.  New sales will come from referrals and word-of-mouth.  This business has been there, done that, and doesn’t need to impress anybody by trying too hard.
Mild.  We’re starting to reach the limits of way I’d call a true ‘Buffalo’ wing.  Eating a wing with Mild sauce says, “I’ll join you in eating these things, but I’d really be eating something else.”  Same thing for the Mild business.  This business is likely to be more of a hobby than a business.  From mowing your neighbor’s lawn to selling crafts once a year at a show, this is not a full-time gig.
Before closing, I should mention Teriyaki and Honey BBQ.  I normally would not accept Honey BBQ as a wing sauce, but the inventor of the original Buffalo Wing, the Anchor Bar in Buffalo, does offer Honey BBQ — so it gets an exception.  Teriyaki, though, will not receive an exception.
So, what kind of business would I describe as Honey BBQ?  This is the business that was fueled by Passion!  This business owner would not take “NO” for an answer.  When everyone else was full of doubt, this entrepreneur was full of enough spice to push her/his way through and was sweet enough to get what they needed!
That’s the Chicken Wing Guide to Small Business.

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    Stuart Preston, small business advisor, coach, consultant.

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