Who is your competition?

Are you keeping your eye on the wrong thing?

It’s an interesting question and may be less obvious than it seems.

If you open a pizza shop you might think that your primary competition is other pizza shops.

Your average customer doesn’t think that way. They are likely thinking they want a change from cooking and have a budget for fast food. Do they want burgers, fish and chips, pizza, chicken, Thai food, or something else. This decision will take into account proximity, waiting times, choice, etc. too.

After the decision to buy fast food is made, then they might compare pizza choices.

Get it yet? It’s all about how your customers make a choice.

If you make biofuel you are competing with existing fuels that can be used with existing cars.

If you make a green generation technology you are competing with the existing electricity bill that customers pay. Everyone likes the idea till they have to pay.

If you make an energy drink you are competing with all the other drinks in the fridge at the shop as well as with cafes.

In recruitment you are competing with referrals, an internal recruitment process, and people walking in to a company looking for a job.

Have a think about the substitutes and alternatives for your product. These are your biggest source of competition.  

Competitor matching versus differentiation

Look just all the others and improve your chances of a sale

Want to make money? Simple – just sell product.

Oh, I forgot, first your customers have to buy from you. How do you do that?

Conventional wisdom talks about product differentiation and unique selling points. What’s your USP?

Here’s a great USP – have a product that your customers can buy now.

Go to any aisle in your local supermarket and look at a product category – labels are different colours, logos are different, package shapes might be subtly different. But basically they are the same.

Now look up several similar websites of similar businesses and try spotting more than cosmetic differences. Not easy is it.

Let’s just pause for a minute. What are all your friends, consultants and advisors telling you? It’s to differentiate yourself from your competitors isn’t it. Hmmm….I bet they never put any serious money on the line before.

Keep it simple. Work out which of your competitors are successful and take inspiration from them. Use the same channels for marketing. Use similar language. Describe your products similarly.

By competitor matching your customers will recognise your product as being similar to your competitors and there is a chance that they’ll buy from you.

Give it a go now, after all it’s only been the core strategy for successful businesses for ten thousand years. 

Bootstrap your arse off

Feeling overloaded yet? Cheer up, there's worse to come.

Let’s talk about money for a minute – you don’t have enough and the odds are against someone else investing in you.

To be specific, unless you have a world beating new idea or a really solid business model in conventional business you are going to have a lot of trouble attracting funds.

Even worse, most investors won’t come in until you are essentially bankrupt. This is not from predatory lending instincts, but because they are betting on you to bring your idea to full maturity. There is almost nothing more motivating to an individual than to be deeply in debt and the only way out is to succeed. 

If you are sitting at the early stages of your startup you need to sell product as fast as you can. That is, what is the minimum set of features that you can sell? Spend the minimum you can to get that product up and for sale.

This all means that you will be spending whatever money you can get your hands on. Re-mortgage your house, use your credit card, spend your savings and then seek family and friends as investors. You need to back your own idea, and when it all looks too much go even further into debt. This is called bootstrapping – a short form of the phrase, ‘pulling yourself up by your bootstraps.’

It will hurt. You have made commitments to a lot of people who didn't have much money to spare when they invested in you. You are barely getting by in your own life – house payments will be hard some weeks and instant noodles will be about as fancy as you can get at times. However, this is all normal for the majority of businesses.

Coming out the other side to regular and growing revenue is wonderful, and marks the next stage on your journey.

The 4 M’s – men, money, machine and materials

Project management is important. It is also often overcomplicated.

The 4M’s is a term out of the construction industry and provides a simple but effective way of looking at any task you need to do.

Men  - What people do you need? What skillsets should they have? How many do you need? How do they work together?

Money – what’s the budget? How do you raise the money? What contingency do you have? Purchase versus hire?

Machines – Trucks, cars, cement mixers, PCs, server racks, telephones, and so on. What physical machines/tools do you need to do the job. You can add in office space, software, etc. here too.

Materials – concrete powder, sand, rebar, pencils, glue, USB drives, printing paper, diesel, electricity, stationery, etc. What do you consume to do you consume to deliver your task?

It’s not sophisticated, and misses a lot of aspects such as schedule, reporting, governance etc. However, it does set the core of what you need to do for the task and is a good starting point for any kind of planning.

The curse of loyal customers

Your market is bigger than you think

Today’s topic is brought to you by actual quantified research on consumer behaviour.

The majority of customers who buy from you are occasional buyers.

Some customers buy from you more than occasionally.

Some customers – the so-called loyal customers - buy from you regularly.

So if most of your customers don’t buy very often, but the sheer volume of them makes up the bulk of your revenues then shouldn’t you be trying to market to this market?

Offering discounts for loyalty works to a degree. If you are in a competitive market then bulk purchase discounts may be necessary. But if you are talking about a regular buyer then it doesn’t make sense to offer discounts unless they are also bulk buyers.

If you build your customer base on regular repeat business, then you are likely only serving a small part of your potential market. Where are the large number of occasional buyers? You are probably putting all your eggs in one basket – not a great way to grow the business.

Put that another way, your whole business is now being held hostage to the whims of a handful of customers. This is fine in the initial stages of growing a business as you need the cash flow and to prove your products. 

But you also need to get past that pretty quickly.

Go chase the majority.

Your competitors face the same risks you do

Somebody has to take a chance. It might as well be you.

If you got to meet your competitors you would be amazed at just how similar you are.

They too are looking for opportunities to grow, but at a low risk. They also want to take on more staff but are not sure if it will pay off. They need funds but are reluctant to take on more debt or dilute themselves by selling equity, and so on.

If there is an obvious opportunity you need to learn to take it. Here’s the rub – the more university education you have the longer you are likely to take to make this decision. You need to work on yourself.

Yes, it can make sense to let someone else take the first mover risk and then improve on what they have done. Sometimes you should be the one to take that risk.

Basically, don’t lie in bed awake at night worrying about your competitors. They are facing all the same issues you are and aren’t any better than you. Have some courage and act on what needs to be done for the good of your own business.

Time to grow a set

Who do you most want as a client and are too afraid to talk to in case you don’t win the job? Time to go talk to them.

Looking to take on employees but don’t really know how? Go talk to your accountant and a lawyer.

Having troubles delegating? It’s time to handover responsibility and not interfere.

Running out of money? Go set up a working capital facility or go raise equity.

Don’t know what to do as a next step to grow the business? Go talk to someone who has a lot of experience in that business.

Having trouble with your main client? Up their rates or fire them. You need multiple clients and you can’t run your business being continually afraid of your main client.

Worried about recession? Build a larger client base

Looking to quit your job to go fulltime on your startup? Make sure that you have savings to get you through a few months and then credit card facilities to go past that – then take a calculated risk.

Those who fight their way to the top usually fight their way back to the bottom again

It is quite illuminating to watch people who fight for everything.

In many ways if you fight for every step you take, then you may end up being quite successful.

However, sooner or later you need to learn to pick your fights.

This is true whether you are working in a big company or running your startup.

Standing up for yourself and not taking no for an answer are important traits, and for most of us we could do with a little more of that.

In business and life we tend to deal with people who we find easy to get on with. If your price is absolutely sensational or you just don’t have competitors then you can last a while being obnoxious.

Sooner or later if you pick fights all the time then people will stop calling, you get less repeat business and word gets around.

Running a startup it is important to take a step back and look at your own emotional reactions to things. There are probably some situations where you are being too passive and should get a few swings in, and there are probably situations where you are giving people grief over absolutely trivial matters. Just try to make sure that your priorities are aligned with those of the business.

Work with people who know what you can do

Does finding customers feel a bit like this?

Getting your first clients is always hard.

You need to be able to convince your potential clients that you know what you are doing, that you can deliver, and if it is more than a one off transaction then you also need to convince them that you will remain in existence.

You can spend weeks preparing marketing documents, product brochures, capability statements and fine tuning your website. The only problem is that they are passive tools in your marketing kit – they don’t win the work, you do.

So if you can, instead of trying to convince complete strangers of your abilities go to people who know you and what you can do.

It is likely that you have colleagues who have moved to different companies, old college friends, old friends, relatives, old suppliers or business contacts, etc. Don’t be afraid to ask people you know.

I can give a good example from just last week. A friend of mine is looking to set up a legal based advisory firm and is working out how to market. Given that he just helped win a major litigation case I can think of no one better than the losing party to that lawsuit as potential customer. Think about it, that company was on the receiving end of his work and appreciate in minute detail how good he and his colleagues are at what they do.

Get creative, don’t focus all your time and efforts on documents and get out there and shake the tree.

If you always succeed then you aren’t trying hard enough

At least he tried - and something can be salvaged out of it.

The future is always uncertain and business is about taking the chance that things will work out.

And some of the time things will not work out. Most ideas, if you are lucky, break even. The worst cost you a lot, and the best make you a good profit.

Most of us out there in business are actually just contracting ourselves by the hour. You are being paid better than if you were an employee, with the risk that there are times when you don’t get work.

When you start selling products and/or have employees then you are starting to take a gamble – but a calculated one.

On a personal level I have learned more about marketing and my own attitudes to marketing and sales through some spectacular failures. If the product had worked it would have just broken even, as it is I ended up out of pocket – but not too much.

Remember the old line – “If you get it right 50% of the time then you are doing better than most.”

Take some chances – that’s where growth comes from.

Don’t confuse your customers

Do you expect too much of your customers?

• Do you currently offer the service you are marketing or not?
• Is your sales force friendly and professional but your back office bureaucratic and resentful?
• Do you offer follow-up support?
• Do you offer a few, clearly differentiated products, or do you offer a multitude?
• Are your contracts straightforward and consistent with normal industry practice?
• Is pricing clear?
• Is the product offering clear and is it comparable to similar products in the market?
• Is your website easy to follow with all key information on the home page?
• Is it easy to find your business and park there?
• Do your own staff understand what the company does and who they should pass on messages to when somebody rings?
• Does the customer experience in your physical location match the promise of the brand? And so on.

Make your services and products simple to buy and growth in sales will follow.

Democratic in, autocratic out

Business is not a democracy. You need to make money to pay your debts, wages, rent, overheads and the shareholders.

Strong leadership is required. Decisions need to be made, priorities set, changes in direction given, and the hard calls when they are required such as to let people go.

You also need to keep an eye out for underperformers and those really not contributing as they should. As a manager your employees have a myriad of ways to hide lack of progress. You need to pick up on this quickly as if you don’t, or even worse you show favouritism to those people, morale will go down quickly and unnecessary politics will rise pretty quickly.

Involving people in decisions is a key way to keep them involved, feeling they can contribute and that they are listened to. This is the ‘democratic in’ process. You let people say what they mean, and if there is no retribution you are building a better culture and focus for the future.

When you have enough information to make the decision that is required then make it – be autocratic. Tell your people that you appreciated their input and that on balance the option you are going with appears to be the best for the company. That will help defuse some of the ill feelings.

As the company grows do your best to keep that kind of culture.

Also, whatever you do, delegate some decisions as it not only helps lighten your load but it helps your managers and staff take more responsibility too.

If you think everyone else is the problem, then you are the problem

Are your employees taking too long to do their work, and when it’s done it is never right?

Are your suppliers always running late?

Are your customers too demanding and don’t seem to understand what it takes to deliver?

Are your sales team not scoring enough sales?

When you think everyone else is the problem it’s time to look in the mirror – it’s probably you.

We all have grumpy days, sometimes weeks or months. That’s normal but keep your reactions in check so you don’t damage your relationships.

It’s good to remember that you are different. Something motivated you to start your business and now you have the drive to make it grow and succeed. You work the long hours and take the risks because you believe it will all pay off.

However, pretty much no-one else you are dealing with is like you – so stop expecting them to be.

When you think everyone else is the problem it means you need to adjust your expectations.

Gold before glory

Is there really more profit in the spotlight?

You wouldn’t pick your average real world CEO out in a crowd. They look normal, they dress normal, their car is good but not too flash and they may even live in the same house they have for years.

This is in total contrast with high profile CEOs from listed companies or the popular media image of exceedingly well groomed individuals driving only the best cars and deporting themselves with an over developed sense of self-entitlement.

Good profits are often found in mundane things. You supply something the market needs and as you grow you pick up more customers and reduce your unit costs on the way, with an odd acquisition here and there and suddenly you are doing well.

You won’t find a lot of these CEOs in the media. At best you might find their name mentioned on the company website, but that’s it. They likely fulfil their needs for a sense of purpose and satisfaction through their quiet achievements.

If your desires also include public recognition of your success then this is good too. For some businesses it makes sense to have a high public profile – even for the CEO. This may be for branding or marketing purposes.

However, I am talking about you and your preferences. Take a step back from what you are doing and ask yourself if you are taking on challenges to test yourself and show that you can still deliver the goods. That is, are you seeking to affirm your own worth by still doing all the work – going for the glory.

It is always good to ask if there is something you can do with a product or service that allows your company to deliver a consistent profitable service that doesn’t require such a commitment to hectic schedules or proving personal worth. In other words, is there an opportunity to go for the gold without the glory?

Establishing credibility

Instantly credible

Buyers like to see that you are a solid company with a good track record and are going to remain in business for a long time. But you are a startup – so how on earth can you show that.

Establishing credibility is a bit like presenting yourself well for a job interview.

Here are some of the key things I have seen.

1. Never use your home address – get a virtual address in the city, or an established business centre.
2. Have a professional looking website – don’t just do it yourself. This is key.
3. Get a professional logo – pay a graphic designer to do it – again, don’t just do it yourself.
4. Prepare basic marketing material, plus sales documents such as pricing lists, and contracts.
5. If you don’t have an office, then meet your client in their office or at a café near them.
6. If your car is really crap then catch a cab to your client’s office.
7. Presentations to a crowd are much more effective than one on one sales efforts. People see more credibility when they can see other heads bobbing up and down at a group presentation or seminar. Weird but true.
8. Get a decent set of clothes, even if you are dirt poor and have to eat instant noodles in the rest of your life, for business you should look the part.
9. Don’t overdress - if everything you wear is too expensive then that will put people off. A parallel to this is the personal trainer I saw who drove a Porsche 911 with magnetic signs for his business. I bet he lost a lot of potential customers by doing that – a Porsche is a great car, but he was telling the world that his prices were high.
10. Use referrals to talk to people. Name drop a bit to establish credibility.
11. If one of your staff has more experience in the industry than you, consider taking them along to talk in the language that your clients use about that business.

The list of tips and tricks goes on and I’d be happy to hear any more.

Food businesses can be a rude awakening

Salary, unsold inventory ...  HELP!

I worked in hospitality for 7 years and I have absolutely no illusions about how tough a business it is.

First off, you work insane hours. You need to buy your produce, and prepare it, often in the wee hours of the morning. You also work 6 days a week and will often be working 12 hour days. There is basically no time for work life balance.

You may enjoy dinner parties and entertaining people but that skill set doesn’t translate into running a business. Diner’s expectations are set by how much time they have, the cost of the meal versus the quality, prompt and polite service, convenience of location and parking, etc.

The idea that you can hire a professional manager just doesn’t work. First, they will try to run the business as they see fit, but they are spending your money not their own, so they won’t get it. Secondly and most importantly, there are not enough margins in the business to pay for a manager. You are it – now get over it.  

You may be able to get someone to be a supervisor for busy shifts, but that’s it.

Fast food is even more brutal. Think about places that sell sandwiches or similar in the middle of town. A lunch service is about an hour and a bit, and for places in the central business district there are only 5 trading days a week – that means that you need to make most of your money in 5-8 hours each week.  Efficiency is key.  That’s why there is a lot of pre-prepared meals out there, and where food is made up the most successful business (e.g. Subway) have an assembly line.

If you are making coffee to attract customers, make sure that you still have some staff just selling the ready made goods and not coffees. I have seen a lot of lost sales in fast food where customers who came to buy the main product walk off in disgust when they have to wait for 10 minutes to buy something that would take 10 seconds to transact just because all the staff are making drinks.

When you first open you will get more customers than the long term average. People often go somewhere new for the novelty of it all. They will soon find somewhere else, so don’t build your business around this honeymoon period.

Don’t get me wrong, hospitality can be very rewarding on a personal and monetary level, just understand what you are getting into as the establishment costs are very high. It is hard to stay afloat when you are learning about the business from the beginning and your loan and salary payments are much higher than your earnings.

What’s the minimum product they will buy

100 miles to the gallon and naturally air conditioned

I keep hearing how getting your product right before you sell it is the most important factor in startup success. It is true, but only up to a point.

The key is getting the product to a level where it meets the minimum requirements of your customers. In other words, it is something you can actually sell.

All of us have an ultimate design or product in mind when we start our business, but the simple fact is that we would go broke if we waited until we reached that level before we start selling.

Let me say it again folks, cash is king.

If you have no income then you can’t pay for improvements to your product or service, so get out there and flog whatever you can up front and then take the opportunity to improve it as you go.

Talking in the third person

There's no I in team

One of the weirdest tricks I learned in marketing and sales is to talk about the company in the third person.

Instead of saying “I can do that for you,” try saying something like Company X can do that for you.

Use ‘we’, ‘us’ and ‘our’ in your conversations and advertising material too.

Part of the reason that it works is that it is talking about the company which has a purpose separate to you the individual. If you only talk about yourself then customers will judge everything through how you look and appear. 

When you say the company does things then they are thinking about the capability of the company, and less about you and your shortcomings.

It is very uncomfortable to do at first, but it is worth it. Give it a try.

Act like you’ll get paid and you will

I trust that you'll pay on time

This was one of the first things I was told when I went into my first consulting business.

It is an odd comment on human behaviour and when put into practice it works well. I have learned the hard way what happens when you don’t.

Here’s what you do.

1. Provide a written quote and contract up front and in a timely manner.
2. State pre-payment terms up front, make it prominent on your invoice and let them know politely they’ll have to pay before you begin work.
3. Prepare the invoice on the day it is due . For example, on the last day of the month, when the product is delivered, etc.
4. When a bill is overdue ring up politely and ask about the status of it. If that doesn’t work, resend the bill but as a re-issue and first reminder.

If you act like it is okay to be paid late, or not to contract terms then your customer will always treat you that way. Remember, they have other people they need to pay as well, so if they are managing their cash flows by paying some people late, you need to make sure that it isn’t you.

Basic practice versus best practice

Sure a crane would be better, but this works.

We hear things like the following all the time.

• To get maximum benefit you must exercise for at least 30 minutes with a pulse of 120 to 130.
• Eat anti-oxidants to minimize cell damage – reduce your risk of cancer. Goji berries are the ultimate superfood.
• Our oil minimizes damage to your car at start up.
• These statements all tap into our underlying fear that we are missing out on something or we are not doing something right.

In the business world we are also hit with the ultimate marketing program, best practice in project management, integrated enterprise software that takes care of every function that a company could ever want, and so on.

Am I the only one who has a problem with all this? Remember folks, the perfect is the enemy of the good.

Your key focus should be on basic practice – the fundamentals, rather than the subtle nuances involved with that extra bit of productivity.

• What are the basics that your company needs to do?
• What service do your clients need and want?
• Is your location easy to access?
• Is your website and e-commerce functionality easy to understand and use?
• Do your employees know their jobs and boundaries?
• Do your employees know who to refer to for more complicated issues or areas outside their job description?
• Do you communicate with each other effectively?
• Do you have enough staff?
• Is your marketing adequate?

This list could grow a lot longer – but you get the picture.

Rattling the tin

Ever notice how panhandlers always have a few coins in their cup. This is actually very smart as it shows a fundamental understanding of humans – we hate being the first to tip our money in.

This neatly describes one of the key dilemmas most startups face in signing up new customers and raising funds.

Basically, you find a lot of interested parties who aren’t willing to sign up until they have the comfort that other and hopefully bigger name companies have signed up.

Remember, most decision makers, and especially their procurement people are risk averse. After all, that’s part of what they get paid to do.

If you are literally fundraising for a project then follow the panhandler strategy of putting a bit of your own money in – also known as putting some skin in the game. Most funders will not speak to you again if you are not showing this willingness to put your own funds at risk.

When you are talking to funders it is also normal to talk as if they are the putting the last few coins in. It is never directly said, but implied through a relaxed approach that is clearly not desperate. There is a fine legal line to be walked here, but pretty much most company IPO’s, property deals and major industrial projects use just this principle. Basically you never let them know where you stand with other investors.

A similar approach can be used in signing up customers for something such as an online business.

For many this approach is really uncomfortable and feels like being a con artist. Remember, you are offering them a deal and they only get so much information till they sign up – after all they need to take a risk too.