The One Tip for the New Business Owner

If there was only one piece of advice I could give a business owner, this is it:

Find a mentor who has been in a similar business situation before (though not necessarily in the same industry), with whom you have good personal chemistry, and with whom you can communicate effectively.

The reason for this is simple – no matter how much advice you read, no matter how many textbooks you study, you will encounter countless situations in which the generic advice doesn’t hold true. Your training won’t help you, nor can you go out and search for an answer. The only resource that can help you is another person.

A mentor for a business owner understands the realities of the business. They understand the issues you’ve faced in the past, and how you handled them. They understand the local culture, and the personalities of the people involved.

And they understand your business.

Mentors can be free, if you have a friend or family member who is willing to step up to the job. If not, there are many small business consultants, who are essentially mentors. While their fees may seem extravagant to the point where they make lawyers look cheap, the value they bring to your business far exceeds their cost.

A good mentor will help you avoid costly mistakes, learn from your own history, and push you to succeed. A good mentor wants you to eventually part ways with them – because that means that you’ve succeeded, which means they’ve done their job well.

Question: How do you calculate salary?

When you hire a new employee in an area for which you have no internal measure to use as a baseline, you must decide how much to offer a prospect in terms of salary. If you’re hiring in an area for which there are industry statistics relative to your location, then that clearly can be used to establish some guidelines.

What if such data is not available? How would you go about determining how much a position is worth to your business?

The Customer is Always Right

Last week, I asked about an issue which divides many people – is the customer always right?

One answer which I came across put the real issue on the table:

The customer is always right until they put down my staff on a personal level. After that, I’m not interested in having that person as a customer.

A good business owner would heed this advice. Your staff need to know that you will stick up for them, and defend them (politely, of course) in disputes with the customer. There may be give and take, and certainly mistakes can be made by anyone, but the general attitude should be that just because the person raising the issue is a customer, it doesn’t give them the right to put down the staff.

The other way to phrase this is as follows:

As long as someone is my customer, they’re always right. But not everyone who pays me for a product or service is my customer. If someone behaves in a way that is not called for, that is completely unprofessional and shows a lack of tolerance, I don’t want that person as as customer. Once that happens, I’m free to consider that person to be in the wrong.

What those actions are that push someone over the edge will vary from person to person, and even situation to situation. But the prudent business owner would realize that there are some people who you don’t need as customers, and don’t improve your business by having them around. If your staff know that you will defend them in front of the customers, they will often step up and do their best to keep the number of incidents in which such a decision needs to be made down to a minimum.

Upsell Your Investors

When Anna Kats came on the Den looking for an investment in her snack business, she already knew what kind of deal she wanted. There was one particular Dragon she had her eye on, and what the terms of that deal would have to include.

Tasty Cheese manufactures healthy snacks from cottage cheese and chocolate, something Anna found to have mass appeal (though Arlene Dickinson didn’t seem to care for the snack). Her past efforts had made her business profitable, but she was looking to expand. She asked for $150,000 for a 20% stake in the business, which, considering the business made no money annually if it paid her a salary, was a fairly aggressive valuation.

Naturally, the dragons were reluctant to give her the valuation she asked for, and one by one they bowed out of the deal.

Except for Jim Treliving, owner of Boston Pizza.

Jim stepped up with an offer, though at a lower valuation than Anna had been looking for. Knowing that she was limited in negotiation room in terms of price, she turned the tables on Jim, asking for an additional feature in the deal. She asked that the product be sold in all Boston Pizza locations, something which would provide immense value to her brand.

While Jim did not promise the result, he did commit himself to looking seriously at that option, and the deal closed.

What this teaches about negotiation is that even when someone appears to be holding all the cards, there are still options. There are factors that can be negotiated that may not affect the price, but will impact the value of the deal to each of the participants. A good salesperson knows how to find those aspects of a deal and play with them to their advantage.

Promises Out of Control

A recent post on Twitter caught my eye:

Company Claims Guaranteed Search Engine Placement Service

Only, of course, this company is not Google, but rather, an SEO company based out of South Africa. Knowing the value of such a statement, they’ve offered to guarantee results, with your money back if they fail. While many SEO companies will talk about this, few offer guarantees, since they don’t control the outcome.

In business, what most SEO companies promise makes sense – they promise effort, based on their experience, to help you reach your goals. However, in most cases, clients do not care about effort – they want results. Except the companies who promise them have, so far, proven to be inept.

Nitch is different. While they may not tell you what they’re doing, they do guarantee that their efforts will not be in vain. They will stake their entire efforts against a hit or miss – if you aren’t on the first page of Google, you get your money back.

Yes, they are promising something out of their control. Google could change the rules, change their algorithms. But even so, there are techniques that will work in the long run, and companies which are in tune with their industry can stay in line with the changing field.

But if you’re going to make a promise, make sure you follow the Nitch example – put your money where your mouth is, especially if delivering on that promise is not within your control.

Business Continuity and Dependencies

When the landlord announced a significant increase in the monthly rent, one small business began to get concerned. Running a fitness facilty has significant overhead, and budgets had been carefully calculated to allow for a certain number of classes to run, for the upkeep of the equipment, and for staff to stay on site. The change in rent meant that a move was in order – but to where?

Unfortunately, this story is not unique. Many businesses, especially in the early stages, are running between paycheques, balancing their bills against the upcoming revenue, and squeezing out the dollars wherever they can. The rainy day fund doesn’t exist – because it’s been raining since the business began.

Some will say that it takes money to earn money, while others may dispute that. Certainly having a small reserve can’t hurt, and if your business depends on some factor outside its control in order to survive, that can create difficulties. Whatever is outside your control is a risk, and risks must be managed.

If it’s rent, as in the case of the fitness center, then make sure you understand the terms of your lease, and how much your rent could increase by should the landlord exert their right to a maximal increase (assuming some form of rent control). Ensure that you have enough of a buffer that from the day of being given notice of the increase, you could continue to operate while searching for new facilities for a reasonable amount of time.

As a rule of thumb, any factor outside your control should be assumed to be about to go downhill, and fast. Your planning should deal with that scenario. While it’s rare for all facets of a business to face such difficulties all at once, being prepared can change events from difficulties to following a script.

Enchanted with Enchantment

Enchantment by Guy Kawasaki

Enchantment by Guy Kawasaki

I was fortunate to receive a copy of Enchantment courtesy of Guy Kawasaki. I had not read his previous books, but make use of his site Alltop (where I am featured under the listing Small Business), and was interested in reading more from the man known as the Chief Evangelist for Apple.

Having read this book, I am eager to get my hands on the rest of Guy’s publications.

Enchantment describes the process by which people have become enchanted with various things, whether people, causes, products, companies, or events. For any business, such information is critical – though, as Guy points out several times in this book, couples would do well to heed some of the advice and suggestions.

Enchanting people takes into account many factors, and to try to reduce the book to a single page of review would be impossible. Throughout the book, Guy kept me enchanted with its content, wanting to read more, to continue deriving benefit from each and every section.

The best comment I can make, having read through the book twice and in the middle of a third reading, is that if you were to select one book to read to improve your business, this should be it. It is absolutely critical that a business owner understand the art of enchantment, and this book contains all the tricks and tips you need to succeed.

Question: Are Your Customers Always Right?

There’s a famous saying that “the customer is always right”, but many people who work in businesses and interact with customers on a daily basis will disagree. There are certainly times when this saying might not be true, but in some businesses, this is taken to an extreme level.

In your business, what do you tell your employees? Do you tell them the customer is always right, or do you take another approach?

Fake it Until You Break It

Last week, I asked about how to reconcile the two sayings: fake it until you make it and don’t bite off more than you can chew without damaging your reputation. Unfortunately, too many small businesses fail for the simple reason that they don’t understand how these two sayings relate to their business, and how they should influence their actions.

The first saying, fake it until you make it, is about giving the impression of being larger than you are, more established, more credible. It’s about impressions – that until you have the data backing you up, act as though you do.

The second saying is about accepting challenges: don’t bite off more than you can chew, or, in other words, don’t accept a challenge you can’t complete.

Just because you act larger than you are does not mean you have to accept every challenge. Even for large companies, not every project is a good fit. Saying no to a project is not a sign of being small, but rather, of knowing and accepting your own limitations. While you may feel pressure to act big and say yes, sometimes the better course of action is to be even bigger, and say no.

A business which manages to learn what types of projects it can do well at, and what types of projects exceed its capacities, and makes decisions accordingly, will not be taken for a small player, but for a seasoned business.

After all, it takes some experience to understand that certain projects, once accepted, can destroy a business as it fails to achieve its objectives.

Who’s Wearing the Pants in the Den?

When Carley Stenson came onto the Den with her business, she clearly indicated who was in charge. Her fiesty presentation for a business with a low barrier to entry turned away four of the Dragons, but garnered her a deal from the fifth.

Siams Pants, a comfortable, one-size-fits-all Thailand Fisherman’s Pant, retail for $32, and are the base of her growing business. Starting with $5,000 and an initial inventory, Carley managed to expand her business, locking down a supplier. Her biggest problem, though, was distribution. While alone she managed to grow her business, every sale was a significant amount of effort, which would mean she would need to find a representative in any city or country she wanted to reach.

The four Dragons who bowed out did so for some simple reasons – the business was not terribly large, even if it were to succeed, and the barriers to entry for a competitor were non-existant. After all, anyone could manufacture identical pants, or have them imported. Carley’s response that the reality is that she is alone in her market failed to sway any opinions.

Any, that is, except for Jim Treliving. He made an offer, for the simple reason that for him, distribution was not an issue. If the reason for lack of growth was an inability to reach out across the country, Jim could certainly provide assistance there.

Additionally, the lively presentation demonstrated many qualities of a good entrepreneur – to keep pushing, to keep chasing after the sale even when it seems increasingly unlikely that it will succeed. If anyone could make the business succeed, it would be someone with a passion, who had demonstrated her ability to succeed if given the chance.

If you are looking for a quality presentation of a business or product, look no further than Carley Stenson – she has the passion, and she has the credibility. Sometimes, to get a deal, that’s what it takes.