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.