No News is Bad News

There’s a famous saying:

No news is good news.

which many believe to be true. In business, however, where other people are involved, whether they be customers, vendors or employees, little could be further from the truth.

Not everyone likes to be informed of every little change, but when change is happening, people generally like to be informed. They like to be reassured that the status quo will remain, or how it will be changing. The lack of news during times of change, or perceived change, is one way to trigger rumor-mongering, which rarely has a happy ending.

This applies not only internally, for example, when an employee is fired (and people start to wonder if the company is starting to downsize), but also externally. As an example, we can examine what happened this week with one well-known company.

Earlier this week, it was discovered that Apple had rejected an eBook reader published by Sony because of the way purchases were made in the application. Specifically, Apple has a standard purchasing procedure (known by developers as IAP) which the Sony application was not using.

Looking at the Apple guidelines, however, it becomes a little unclear as to what the problem with the Sony application might have been, and what the rejection of the application might mean for other applications, for example, the Kindle app. The guidelines clearly state that all purchases made within an app must use the Apple IAP process, which apparently this app did not.

However, initially there was no comment from Apple, and people started to talk. Was Apple about to take on Amazon for violation of their guidelines in allowing people to purchase books without using the IAP process?

Afterward, to deal with the various rumors that had festered, Apple announced that no changes were being made to their policies, though their announcement left some room for doubt as to how accurate that statement might be. The real issue, though, is the length of time it took to get clarification from Apple.

Apple failed by providing no news, which created a world of speculation as to what the news might be, had they cared to share it. Rather than prevent this, Apple responded and failed to solve the problem.

In your business, when change is expected, make sure you provide information, even if that information states that nothing is changing. People like to be reassured, and the preemptive announcement that there is nothing new can save you from dealing with a large number of rumors that have no basis in reality.

When the Menu of Services for your Business is Lacking

A friend recently asked about how to develop her business, when all her prospective clients are requesting a service she does not offer. The service being requested is not, from the perspective of people who understand the industry, an assumed skill, and in this particular case, the friend does not have the skill, nor the desire to acquire it.

My friend asked me, since I’m in the same industry, what I might suggest for her. The truth is, from the description about, there are two possibilities for what’s going on, and each has a different approach.

The first possibility is that her prospects all require her services as well as the complementary service, and will generally only work with firms or freelancers who can provide both. The solution here is simple in concept, though execution can be tricky. Find another business which offers the complementary service, and start sub-contracting that portion of the work to them. In return, that business will send you work in a reciprocal agreement.

While you are unlikely to get an exclusive agreement like this, it can help bring in new business that you would otherwise have never seen, as well as enable you to close contracts that might have been lost.

However, there is another possibility, and it needs to be considered carefully. It is possible that the prospects she has been in discussion with are not her ideal clients. I’m often surprised by how many people in business do not understand who their perfect clients are, and spend great efforts pursuing the wrong types of clients. The perfect client is going to help your business grow in the direction you want it to go. If that client is asking you for something your business does not provide, and does not want to provide, then that is not an ideal client.

In this particular case, I believe the first answer is the better one. Many people in her industry either offer the complementary service themselves, or have a list of providers they use who can. When the menu is lacking, you have to choose to either supplement with an insert from another company, or redefine who and what your busienss is, and what services belong on the menu.

Question: How do you name your business?

Something many businesses struggle with in their early days is finding a name which identifies them. Sole proprietors may have it easy, since they can name it after themselves. However, as soon as additional people join the business, using your name to identify the business may not be the best idea. However, there are certainly exceptions, for example, Dell or Gucci.

When you named your business, how did you choose the name? What vision were you trying to portray with your choice of name?

Mentors

Last week, I asked about finding a mentor, or where you might look to find a mentor. Perhaps the best answer was the one from Jeremy:

Friends in business, business partners, customers that you respect, or hire a business coach!

The best approach here is to address each on its own.

Friends in Business

These are your peers, who have no vested interest in the performance of your business in particular, beyond a desire to see you succeed. They may not have much more experience than you, but their experiences are similar, and yet different enough to be of use. An issue you face now might be one a friend dealt with a while ago. Additionally, this mentorship relationship can be reciprocal, with you giving your friend the benefit of your experiences when they need it.

The downside to such a relationship is that finding a friend with sufficient experience, and where having a mentor-like relationship will not impact your friendship, can be difficult. Not every business owner can find such a resource, but if you can, it should certainly be used.

Business Partners

The upside to business partners as mentors is that they know exactly what issues you’re facing, and the implications of the decisions you need to make. The downside, though, is that they also have a vested interest, and some of those interests might not align themselves with your own.

When using a business partner as a mentor, try to find at least one other resource who can act as a mentor as well.

Respected Customers

This one may be surprising, but the perspective customers bring to a business is not to be taken lightly. They see the short-comings of your business, as well as what it is you do well that keeps them around as customers. If you have a customer who has experience with business, and with whom you have a good relationship, try to at least spend some time with them on a regular basis to get feedback on how your business is developing.

Business Coach

This is, perhaps, my least-liked approach to mentorship, though many advocate it. My primary issue with such a mentor is that they are in the business of mentoring, and as such, want to see you succeed. However, this lends itself to a potential pitfall, in that if you succeed too quickly, you may abandon them sooner rather than later. Of course, that also might result in more referrals, but you are a guaranteed customer, while referrals are a maybe.

However, a business coach who has experience running a business (other than their coaching business) could be an extremely valuable resource. If this is the route you are taking, be sure to get personal referrals for a coach from other business people you know and trust.

A Good Entrepreneur Knows How to Listen

Doug Burgoyne came on the den this week pitching his business Frogbox, which supplies hard plastic boxes as a rental in place of cardboard boxes. His pitch, coming in with a valuation of $1.2 million, was that the business is profitable (though apparently not yet to a significant level), and is designed to scale.

The basics of the business model is that Frogbox drops off and picks up sets of hard plastic boxes which are sturdy and waterproof, at a cost to the consumer on par with using new cardboard boxes. A quick check of their website shows that renting 35 boxes with a dolly for a week would cost about $109 plus a delivery fee (in the case I looked up, the delivery fee was $40).

Robery Herjavec and Kevin O’Leary made the first offer with a valuation of $400,000 to which Arlene Dickinson pointed out that the offer was ridiculously low. Jim Treliving and Brett Wilson then put out an offer with an $800,000 valuation. Arlene, who had been pushing a higher valuation, made an equivalent offer to that from Jim and Brett.

Doug Burgoyne, after some discussion, came back with a request – that Jim and Brett join their offer with Arlene, which would mean that the investors would bring the full set of experiences needed. Jim, of course, with his various franchises, could show them how to scale their business to add new cities to their list. Brett could provide more general business experience. Arlene, the master of marketing, would help in bringing their brand into the public awareness.

On air, the dragons accepted, and the deal moved forward with the three dragons. However, after the show, Arlene stepped out of the deal when it became difficult to determine the exact role she are her business, Venture Communications, would play in the marketing of Frogbox. However, Jim Treliving and Brett Wilson continued with the deal and closed recently.

Part of coming on the den with a pitch is being prepared to explore new options. An entrepreneur who believes they know how to run their business better than anyone else and cannot listen to new suggestions will find themselves on the receiving end of harsh criticism from the dragons. At the same time, there are aspects to every business that are truly best understood by the people in the trenches.

Doug was aware that expansion was the key to making the deal go forward. The two offers dealt with the problem in different manners. Jim and Brett were likely to focus on the ability to franchise the business (starting in a new city had a cost of about $60,000 which is not unreasonable for a franchise model). Arlene was more likely to focus on how to market the business more extensively. During growth, both aspects of growing the business are important, but one needs to dominate the other.

Ultimately, the business would take one of the two paths, and that would be determined by conversations between the owners and the prospective investors. As smart business owners, they made the decision before the deal closed, and will be more likely to see success in their growing business.

The Expansion Dilemma

Perhaps this issue is more relevant to those in service-based businesses, though I believe that no matter the nature of your business, this issue will resonate with you. I would be interested in hearing your feedback on this issue – as I believe that it has no right or wrong answers, merely a large set of choices.

At some point during the life of a business, the amount of work coming in the door will exceed the limits of the business. Product based businesses will see this when demand outstrips their ability to supply, service-based businesses will see this when the demands on their time exceed the number of hours available to work. In a large business, this issue may have already been solved, either by having a process for increasing the supply, or by increasing the price to reduce demand.

However, smaller businesses walk with trepidation when faced with this issue. On the one hand, their ability to increase supply is severely limited – they may not have the necessary cash flow to handle additional hires, or to front the money required to pay for additional goods. On the other hand, the inability to supply the increasing demand may hamper their ability to expand, and may result in a negative impact on their existing business.

Additionally, there is the inability to see the future, which means that the business owner trying to decide whether or not the sudden increase in demand justifies hiring another employee must guess (hopefully with some helpful data) whether the sudden demand is merely a spike in activity, or if it is sustainable. This has ramifications on what is needed to ensure that the decision is made with appropriate resources allocated to support it, should the spike in demand be followed by a dip.

To determine how to best handle the spike in demand, it is necessary to look at the goals for the business. If the aim is to grow by hiring more people, to increase the supply, then the spike in demand can be one way of moving toward that goal sooner than expected. If the aim is to reach a certain level of activity, or, in other words, to cap the supply at a certain point (for example, to work 40 hours per week), then the decision that needs to be made is only how to go about reducing the demand – should you raise your prices, or merely refuse to take on additional customers?

Others, though, are stuck between the two decisions. While they don’t mind working more than a certain number of hours, or, in other words, to work with an expanding business, they also may not be actively looking to expand. As a result, they are unprepared for the expansion, both from a fiscal point of view, and psychologically as well.

Some may choose to bridge the gap by using sub-contractors to take on the work they are unable to do. This can help defer the decision until it is clear whether or not the increase in demand is going to be enduring, but it also exposes the business owner to various risks associated with delegating work (the quality may not be up to standard, managing the contractor can be complicated). Others may raise prices moderately, in an attempt to drive up margins while they debate internally how to handle the demand.

What would you do? How have you handled sudden spikes in demand beyond your abilities to provide?

Marketing – Paying Attention to What is Not Said

Working in business consulting, some of my time is spent dealing with the issue of marketing – namely, assisting clients in getting the word about their product or service out to their target market. Sometimes, the issue is reaching the target audience, which is usually fairly simple to solve. Other times, the issue is about conversions – turning the audience into customers.

Reaching the target market is a fairly simple problem, though implementing the solution may not be easy. Once you understand which groups make up your target market, you can determine using a variety of processes where your audience receives information from, how they make purchase decisions, and then make sure you are placed accordingly. The placement itself may be complex, or expensive, but determining where to be placed is neither.

However, a low conversion rate is much more difficult to diagnose. As an example, I could offer a book on this site, and the sales might be less than hoped (as an aside, I’ve never offered anything for sale on this site, so this example is complete hypothetical). I could look and determine whether or not people were looking at the book via Google Analytics. I could look into how people find the book, and how many buy the book.

What this teaches me, though, is merely a statistic – it does not provide a reason why fewer people complete the purchasing process than start it. Is it because it takes too many steps to complete the purchase? Is the book too expensive? Perhaps the topic is boring and no one wants to read it. Any of these is possible.

To complicate this further, even if a prospect told me why they did not follow through with the purchase, I may still not gain much valuable information. For example, I might be told the price was too high, but lowering the price might not have increased the number of sales sufficiently to cover the difference. That prospect in particular might not have purchased even at a lower price, because the price was not the core issue!

The prospect might have declined to purchase because they couldn’t see the value in what I was offering, and used the price as an explanation – it was too expensive for an unknown entity. To convert them, I would need to explain to them what the value is in making the purchase, except nobody told me that was a problem.

Good marketing involves listening to prospects, and hearing what isn’t said. Are you talking to the right person? Have you addressed their true concerns? Does the person you’re talking to need approval from someone else in their organization, who may have a different agenda? In other words, beneath the cover of the excuses for no purchase being made, what was the real reason that the prospect didn’t become a customer?

Social Media is Not a Strategy, but you need a Social Media Strategy

Trying to trace down the origin of the saying “Social Media is not a strategy” was more difficult than I expected, though I have been able to confirm that it’s been around since at least 2004. Some businesses get this – social media is a tool, just like radio is a tool, and sandwich-board men are a tool. A marketing strategy makes use of tools, but tools do not create a strategy. That is, throwing together a bunch of tools does not create a coherent strategy.

Social Media is even less like radio or TV, in that there are many aspects to social media, each of which is a tool on its own. Perhaps this is where the confusion arises – does the creation of a Facebook page, a blog, a Twitter feed, some presence on Linked In – do those add up to a strategy?

As many business people I know who utilize Social Media heavily in their marketing efforts will tell you, using the tools does not make a strategy, though a strategy uses the tools. A coherent Social Media strategy understands the role each of the tools can play, the type of work needed to balance the various aspects to Social Media against one another. The strategy involves more than just the tools, but also how they will be used.

Will the Twitter feed be used to showcase products, or will it be for chatting with the target market?

Will the blog focus on issues internal to the company, or external to the industry?

Who will manage the Facebook page?

The answers to these questions, and many more besides, result in the creation of a sound strategy, one which has an objective, and shows how the various tools will be used to bring the goal closer to fruition.

For example, my strategy with my blog here is not to promote my own work, or my business. It’s to help showcase my expertise by talking about issues relating to my target market. While occasionally I will talk about my business, it’s not really about that – it’s about issues potential customers might want answered. Ultimately, some of the readers of this blog may choose to work with me, but only because I’ve already established credibility with them through my writing (over 170,000 words to date).

Strategies don’t need to be complicated, but they need to involve more than just a tool, or set of tools. Social Media is a set of tools – not a strategy.

Question: Where did you find a mentor?

Something advocated by most advisers for business owners, which I’ve promoted here as well many times, is that you find a mentor – someone who can advise you in regard to your specific issues, and help you navigate the world of business from having been in your shoes before. The value of such a person is not questioned – but finding an appropriate mentor can be quite the challenge.

Where would you find your mentor, or, if you already have a mentor, how did you select him or her?

Retaining Customers

Last week, I asked what it was that would drive you away from a business. Not surprisingly, the most common answer was customer service, or rather, poor customer service. While consumers can be tolerant of poor quality and high prices, service is something we’re unforgiving of, unless we’ve been prepared to accept it.

As an example, going to dollar stores in general does not make one think of good customer service. The expectation there is that the prices be a dollar (or, with inflation, perhaps as much as two or three dollars). The criteria for measuring the store is in its name, thus there is more flexibility in terms of other factors such as service.

Other businesses, though, do not have that luxury. We expect, when entering a store, to be received in a friendly manner, that the sales staff be knowledgeable about their products. Customers don’t like to wait in line, or be ignored while the staff chat on the floor.

This extends to online stores as well. When we shop online, we have an expectation that we will be notified whether items are in stock, the estimated shipping times, and any extra fees that may apply. The site is expected to have a current security certificate, to ensure that our credit card information is being sent to the site in a secure manner, and being handled responsibly.

If a store processed your card, and you immediately were contacted by fraud alert that several transactions had been processed seconds apart, you would be concerned. Even if the reason for the multiple transactions was later determined to be legitimate, corresponding to each of the expected deliveries, you would not be impressed with the site. If this resulted in a delay in your order being processed, you would be concerned, since the site had precipitated the problem.

This is not an unusual scenario. A recent order placed on the Best Buy website for several hundred dollars of miscellaneous equipment was split into four shipments. A separate charge was placed for each portion of the order (though they were all ordered as a single unit), since the site policy is to bill as the orders are shipped. This makes sense when shipments are being made on different days, but not when they’re all shipped on one day. Not a surprise, the credit card company held the transaction until I verified that the transaction were okay.

Several hours later, I got an email from Best Buy saying that the order was being held because my card was denied. This, in fact, was not correct – the credit card processor had sent an error message that Best Buy was to contact them in regard to the charge, and they had already approved the charge.

In this, the site failed in my expectations. They looked at the order from the perspective of computational simplicity, not from customer experience. Since this had been a compounding of previous bad experiences with their store, they lost me as a customer. The issue was completely in regard to service – and when a store fails in its customer service, it will lose potentially more than just the one customer who had the bad experience.