No Competitors is Good. Right?

Imagine you are new to business ownership and you are considering buying a new venture. Which one of these two businesses would you buy? The first is selling a new concept totally new to the market and where no competitors exist. The second is selling a version of a product that has been around for years and where dozens of competitors are in the market.

Your first reaction is likely to be to buy the new concept business, because you have been told by people (including me to a degree) that being unique is good and it will be easier to sell and keep a high price if no competitors are around to bug you. But you would be wrong.

The problem with the new concept business is, at least for someone new to business ownership, you need to spend a long time and a lot of money EDUCATING the market about your new concept before they are ready to buy. This is fine if you have deep pockets and can take a longer term view of ROI, but for most small business owners newer to the game, you need a quick payback and that will more likely come from a tried-and-try product or service. The key is to look for or develop a COMPARATIVE advantage from your competitors so that you can carve out a niche in the already developed pool of demand that exists. Better, faster, cheaper, more colours, less waste or whatever feature that will set you apart.

So don’t fear competitors. Embrace them. Hang out with them and learn their weaknesses and how you can be better. It is likely that if they have been around for a while they will have become fat and lazy. You will be able to take a proven idea and do it better than many of them, therefore building your business quicker than they can react to and building a successful enterprise for your future.

Andy Burrows

Business Builder

Disaster Planning (Revival)

In January I posted an article about the Haiti earthquake and wouldn't it be terrible if the same thing happened in NZ. How would your business cope? Well, the same sized quake has hit Canterbury and many businesses are severly affected. Wake up and smell the roses. It is time you gave some serious thought into some disaster planning of your own.

I thought it timely to reproduce that January post below:

For more than a week now we have been shocked at the scenes of utter devastation and chaos that is happening in Haiti since the magnitude 7.0 earthquake struck on the 12th of January. In New Zealand we also live in fear of “the big one” hitting us one day as we exist in a similar area of tectonic instability. It’s not a question of if, but when.

How would your company cope if a major earthquake struck tomorrow and have you done anything about planning for how you would recover as fast as possible? A disaster plan will allow you to make decisions before a disaster strikes your business and forces you to determine how you are going to deal with one should it happen.

A disaster plan will allow you to deal and come to terms with the disaster situation in those first critical hours or days rather than deciding on how you are going to deal with it.

A plan is ideal for recognising physical disasters such as fires, floods and the very real act of terrorism. It will help you to identify possible threats and take the necessary preventative action while preparing the business to deal with it effectively. The first step may be to set up a disaster planning team that includes staff responsible for: HR, buildings, PR, IT, general management. Consider including an outside advisor in the group as often they will see risks that people from within the company may miss.

Next the team should assess the risks to the company. This would include such things as: insurance cover levels, building and equipment maintenance, alarm systems, fire detection and evacuation, back-up off site of records, power, etc. From here a disaster plan can be designed and implemented. Remember to update it every year and modify it to suit the changing situation.

Below is a suggested checklist in which you will need to assess, implement and determine for your disaster plan. Contact the auther with help in pulling this together, so you can better focus on core activities.



The Disaster Plan:

Key Issues Must address:

• Key personnel and their out of hours contact details
• Key personnel responsibilities and authority
• The location of the Disaster teams control centre (this should be off the work site where possible)

Items to Cover
(consider all functions and areas of your business including employees, customers, etc)

• Functions and procedure prioritised
• Floor plans
• Evacuation area
• Evacuation procedures
• Precautionary measures
• Procedures for jobs to be done while the recovery is taking place
• A list of all suppliers and businesses for emergency equipment and supplies
• Other emergency numbers or contacts

Employee Information

• Ensure all employees have provided their details and/or phone numbers for after hours contact
• Have a counselling service or agency decided so that they can provide counselling and help to employees to deal with the disaster
• Communicate with employees about what is going to happen, etc to keep them in the loop of what is happening and what they should do, etc.
• Advise employees of who to contact should they have any problems
• Consider an alternative to pay employees should the usual method be destroyed or unavailable

Alternative Premises

• Determine an alternative place to carry on business should yours be destroyed
• Consider making arrangements with other businesses to share space until things are back to normal

Operations

• Determine possibly delays should something happen
• Aim to be operational as soon as possible after the disaster (next day)
• Inform customers and suppliers immediately to let them know what has happened otherwise they may disappear
• Brief and prepare your PR representative to deal with media

Communications

• Advise your telephone company and request them to forward your calls to your designated place
• Prepare your personnel so that they know what to tell your customers, suppliers, etc.
• Decide on where your mail should be sent

Equipment and Resources

• Ensure that you know and are able to identify where critical documents are so they can be retrieved
• Store backups off site of materials, documents, etc
• Define which resources would be needed during the recovery period and make them available
• Make sure money is available at all times
• Consider hiring instead of buying new equipment – it maybe the best option
• Keep the Disaster Plan in a number of locations so that it can be accessed should it need to be

A Formula For Great Results

There is a formula in business (one of many!) that states:

Decisions X Actions = Results

If you can make GOOD decisions or GREAT ones, and do something about implementing them, then you are likely to achieve good or great RESULTS. This made perfect sense to me when I was shown the formula as part of a wider discussion about choices and the things we need to do in order to succeed. But when I went away I started to wonder: how do you make good decisions, or at least make more good decisions than bad?

I gave this some thought and came up with the following list of five principles that help me make good decisions and which you may find helps you. I stress that this is MY list and you may want to add or change one or two things. I would welcome feedback on what YOUR list looks like.

1. The principle of GOAL SETTING. In military terms having a clear objective is vital to a successful campaign. Flexibility of manoeuvres may be required to achieve the objective and the time frame may change, but both are perfectly acceptable. When making a decision ask yourself: “Will this move me closer to my objective or move me further away?” If it moves you further away, you may want to rethink the decision.

2. The principle of INTELLIGENCE. Also borrowed from the military. Get the facts before making a decision. If you haven’t got enough facts then seriously consider postponing the decision. Also in a wider sense, always be open to learning opportunities.

3. The principle of FOCUS. Do what you do best. Either drop the rest or delegate it. Know when to say NO to people who want to suck up your time and prevent you from focusing on what is important

4. The principle of VALUES. Decide on your core values and stick to them. Pass on things that don’t measure up to your values, even if it seems that you may be passing up on a chance to make some quick money. That is the real test of your values.

5. The principle of ACTION. Once you have made a decision be prepared to move swiftly to implement it. Commit enough resources (but don’t waste too much either) to ensure the success of the action and the achievement of the goal.

That is five ideas that will help you make better decisions and in turn help you achieve better results. If you have other ideas that help you that I haven’t listed, please drop me a line. Thanks

I Love It When a Plan Comes Together

Watching the All Blacks take apart their opposition, like they did the Boks on Saturday, is always a satisfying experience. Doing it in the clinical and comprehensive way they did was doubly satisfying. To a man everyone had a great game. They all seemed to have a specific role and executed it well, both on attack and in defence. The Boks were simply shut down at every stage and never allowed a look-in.

That type of performance does not come about by chance. Sure, the Boks probably took the game a bit lightly and figured that sooner or later they would get an intercept try and things would swing their way, but the All Black’s game plan did not allow that to happen. The All Blacks obviously had a plan and they stuck to it. And it was beautiful to watch.

So too in business it is a beautiful thing when a plan is well put together and executed with focus. The game of business is a lot longer than 80 minutes and a lot of outside factors influence the run of play, but some good planning and day to day actions that are aligned to the plan will help a business achieve a winning score. So what are some important elements of a good business plan?

Objectives. Setting clear, realistic objectives help to provide a long term target and also help to measure decisions against. Will this help us achieve our objectives? Yes, then let’s do it. No, then let’s think again.
Realistic Financials. Setting a lofty target is one thing, but financial predictions of super profits and huge returns are not helpful. Targets and assumptions need to be defensible, especially if you are taking the plan to the bank or other investors.

Cash Flow. Along side projected P&L figures, attention should be given to the effects of cash flow on the business. Having a growing profit is one thing, but how will this be financed and will the company run out of cash before the goals are half way achieved.

Brevity. It is not necessary to write a 30 page plan to be effective. It is better to keep the plan to under 5 pages and put the detail in some other supporting documents. A weighty document is likely to be relegated to the shelf because it is too long to be referred to on an on-going basis. I would rather see a 5 page plan that is covered in hand written notes, with coffee cup stains and bent edges being used. At least it is more likely to be read and updated on a frequent basis.

Review. The best plans and more like a blueprint for a house. They are a living document that is referred to on a constant basis and updated due to changing circumstances. The ultimate goals may not change, but the path or timing towards those goals may.


Those are a few points that will help to keep the planning process real and effective. There are others and I will cover off on subsequent posts. Meantime I look forward to another AB win on Saturday and will be interested how they adjust their game plan to take account of the wounded Boks. Go ABs!!

New Strategies for a New Financial Year

The past year has been one of survival for many businesses. One of battening down the hatches, shedding costs, looking inwardly and waiting for the storm to pass. Well, the storm appears to be on the wane and now is the time to start looking outward and identify new opportunities that will be there.

The storm that was the global financial crisis has left some lingering damage however and this will make taking advantage of opportunities difficult for some. Credit is still tight, banks are risk averse and many businesses have consumed what fat they had while in survival mode. Despite this I have listed a few tips below about areas that business owners should look at during the new financial year as possible strategies for re-growth.

Tip #1: Innovate Across The Business

Make a commitment to researching and testing new ways of getting things done, from production to marketing, product design to packaging – in short, find a way to renew the energy and enthusiasm for new ideas you had when you first launched your business, then improve on it with the wisdom of experience.

Tip #2: Pursue New Growth Opportunities

Most business owners are well aware that in order to be a success a business needs to grow its sales and profits; therefore you need to diligently establish sales and profit targets and measure your progress. Research under-served segments of your markets, explore value-add sidelines and incentives to encourage more sales, more frequently.

Tip #3: Improve Quality

Quality issues have been at the heart of business management issues since the 1960s, culminating in the strategies of Total Quality Management (TQM). Quality issues are interwoven into the very fabric of business ownership, and include issues such as customer relationships and customer satisfaction, supplier relationships, manufacturing and service delivery.

Tip #4: Explore New Marketing Methods

Marketing in its broadest sense encapsulates advertising, public relations, selling and distribution. It is basically the act of letting people know what you have to sell, where they can get it and what value it has. In order to grow a business, a business owner must be constantly looking at creating and putting in place new marketing methods in order to gain access to new prospects and customers for the business.

Tip #5: Deal With Staff Issues

Good employees are critical to the growth of any business, but more especially SMEs. Therefore don’t let staff issues remain unresolved. Take care of employees and develop them, making sure they are satisfied in their jobs and have the knowledge and resources to perform well. Employee loyalty is especially important in times of recovery when you want employees to achieve more – while pay rises might be out of reach, actively offer smaller rewards such as lunches, unqualified praise, training or mentoring. Some of your staff (especially the good ones) may also use the period of recovery to start looking for a new job. Make sure you keep communicating your thanks to them for a job well done in 2009 and what plans for growth you are now thinking about.

Checklist for business owners:
1. Innovate in at least one area of your business over the next 12 months.
2. Focus on growing your sales and profits in new areas.
3. Institute some form of quality management into your business.
4. Add at least one new marketing method into your business this year
5. Take care of your staff.

For help in implementing any of these strategies contact the author at andyburrows@iconbusinesssolutions.com

Is It Time to Fire Some of Your Customers?

The customer is always right. Correct? Wrong!

The RIGHT customer is always right for your business. Unfortunately most of us don't know who the right customers are for our business. So we take on board anyone who has a heart beat, without ever identifying the right customer profile for our business.

But who is the right customer for your business and how do you identify the ones to avoid, or actively send elsewhere? Master this and you will build a much stronger business in the long term, have happier staff and more money in the bank.

FIRSTLY, IDENTIFY YOUR PERFECT CUSTOMER.

One of the best ways to identify your niche is to paint a picture of the perfect customer for your business. Which customers do you love to deal with? Which customers are the most profitable and professional? Which customers pay on time and never complain about the price? Which customers do you want to get referrals from?


An easy way to do this is to look at your top 20% of customers, and identify what they all have in common. It could be a common need or amount of money they spend with you each month...or how often they buy from you.... or where they live.... or why they came to use your products or services in the first place. Are they '30 something", with 2 or more children who live on the North Shore and drive a Toyota Camry?

THE MORE CLEARLY YOU CAN IDENTIFY YOUR PERFECT CUSTOMER THE MORE PROFITABLE YOUR BUSINESS WILL BECOME.

Once you have done this, then you can start to develop a strategy on how you are going to get more customers like these. It will make a HUGE difference in how you market to these people and how cost effective your advertising and marketing will be. History is 20/20 vision and a great information source for your future, only if you use it to your advantage. Every ad that doesn't work or campaign that doesn't get you results is a learning opportunity... but only if you learn from it.


DON’T GET DISTRACTED BY THE “D” CLASS CUSTOMERS

The idea of actively sending a customer away from your business, possibly to a competitor, is contrary to what many business owners this is logical practice. But pick your customer (or prospective customer) and it can be one of the most empowering feelings that you can achieve in business and will set you on a path to better profitability and better customer service.

The customers to chase away are the ones who seldom buy from you, often complain about minor things, are often the slowest payers and generally a pain in the butt. While you were building your business you put up with this type of buyer, because you felt that any business was better that no business. In reality this type of customer is unprofitable and you would have probably been better off without them to start with. If a business has too many ‘D’ class clients then it surely will go bust, life will be hard and the business will be too susceptible to all sorts of troubles from employees not wanting to work there, to deliveries going missing, to dirty workspaces etc.

Now you know better, so go out there and target more “A class” customers to build you business on and while you are at it, save you and your staff a lot of grief by firing a “D class” customer or two.

For help in defining what sort of customer is right for you an d how to attract more of them, email the author at andyburrows@iconbusinesssolutions.com

The Power of Margins

If there is one certainty in a growth business it is that it is going to consume all the cash you can get your hands on.

If all you had to do was fund work in progress, you just might be able to cope, but there are very large costs associated with growth which need to be funded well in advance of sales. Staff need to be recruited and trained, accommodation needs to be in place, inventory needs to be purchased and stored, computer software and hardware systems need to be implemented and so on. Infrastructure and support costs are lumpy and often need to be in place well before they are needed. Without access to a ready source of cash, growth businesses stall and lose their momentum.

The obvious solution is to have a source of finance available to meet the increasing demand for funding. But banks tend to shy away from high growth enterprises, as they typically don't have the bricks and mortar to secure the debt. That leaves equity funding as the only practical external source of funds.

However, new equity dilutes existing shareholdings. If the business is privately held, then the funds will have to come from the private equity sector and the money will come with conditions.

The only practical path out of this trap is to generate higher levels of cash organically. You do this by increasing margins - reducing expenses or increasing prices. While this may seem a bit impractical, in fact, the high growth business is well positioned to do exactly that. While some progress may be made by reducing expenses, the major source of extra cash will need to come from increasing prices.

High growth businesses are in a unique position. They achieve high growth because they have a number of key product/market characteristics. Typically they satisfy a compelling need, have a sustainable competitive advantage and target a well defined niche market.

Generally, they work in emerging markets where demand exceeds supply. This unusual situation actually allows them to push up their prices as, at least at the margin, the market is not sensitive to small increments in price. A lift in prices increases their margins and generates additional free cash.

Apart from fuelling growth, higher margins allow the business to take greater risks, recover from mistakes and fight off competition. It is like having a war chest which you can use at your discretion to use in the best interest of the business. It could, for example, be used to increase the rate of R&D and thus improve your long-term competitive position or it could be used to undertake an acquisition to overcome a market or growth constraint.

We should never take our sales prices as a given. By changing product positioning, target customers, problems addressed and distribution channels, we can often find ways of increasing the price and therefore the margins. Any sustainable increase in margins will greatly improve the resilience, growth prospects and profitability of the business.