What would make you leave a business?

Measuring Progress

In last week’s question, I was interested to know what factors you use in business to measure progress, or your ability to reach goals.

In a recent course on writing business plans, I learned that while many businesses use income as a measure of progress, it’s actually counter-productive to do so. For example, a business which wants to earn $120,000 a year needs to bring in $10,000 per month. Perhaps that’s not such a big deal, but if after 6 months it’s realized that the average has been only $5,000 per month, it can be de-motivating.

Perhaps this is why the focus in business plans is driven toward number of customers, or leads, rather than dollars. I might know that a customer is worth about $5,000 in income, and that to reach my goal of $120,000 I need to find 2 customers per month. If, however, after 6 months I realize that I’ve missed my goal by 50%, that’s an extra 6 customers to find in the second half of the year.

As well, since many businesses operate on a recurring basis, that is, where customers come back over time to continue to support the business, the importance of any given month is limited, since there is the secondary influx of consumers that will happen over time. While missing the monthly goals continually will hamper a business’ ability to flourish, people are still aware that minor bumps in the road can still be navigated successfully.

Other ways to measure goals can involve number of positive reviews from clients, the number of referrals acquired and turned into clients, the number of networking events attended at which at least one new contact was made. The goals, though, should be directed at the long-term success of the business, and not the monthly quota – that is, they should be used to benchmark those events which bring your business closer to its eventual success. When you fall short of those goals, it is easier to pick yourself up and move forward, since falling short does not negatively impact your business, but rather, fails to have a positive impact.

Related posts:

1. Question: How do you Measure Progress?
2. Business Health Checkup
3. Question: How do you name your business?

Fortunately, that didn’t ruin my business, but in hindsight, I was running a huge risk. There were certainly projects that I should have turned down for a variety of reasons.

What I discovered during the growth of my business is that there are really only a subset of projects that I personally should be getting involved with. For the rest? I have a nice Rolodex with names of businesses that would love to have those projects, and would do a fantastic job at them.

It’s not that I couldn’t do those projects, but rather, that I shouldn’t be doing those projects. While the short-term gains for me I perceived to be significant, in truth, they probably weren’t nearly as important as I thought at the time. What gains I made through those projects I could have made elsewhere, or made irrelevant through other projects I did.

In any business, it can sometimes be difficult to look at the current situation, and the latest opportunity, and determine whether or not the gains from that option are worth pursuing. What can help with this determination, though, is the presence of a clear goal, and you can look at the opportunity from the perspective of how much closer it gets you in reaching those goals.

For example, a project recently arose in which a client required a fairly complex web application to be built. This isn’t my area of specialty, and it’s not where I would take my business. Reflection told me to pass it on to a friend, who’s business does exactly this type of work.

The return benefits are often late in coming (I rarely take a referral fee directly from handing over a project), but can be more significant that what I’ve given. In this particular case, I landed a dream client I would have never met without this friend.

In other words, giving away a project or client now can have bigger returns. I consider it to be an investment in the relationship I have with the client and the company to whom I pass on the client to.

The client is happier because I forwarded them to someone more qualified. They trust me to tell them about my own expertise, because I’ve already proven that I’m not afraid to say that this isn’t what I do best. Forwarding them to others within my network increases the likelihood that if this client ever has a project that does fit my vision of an ideal project, it will be sent my way.

Likewise, the company who is being referred appreciates the business, and when they come across a project that suits my business more than their own, it too will make its way to my desk.

Oddly enough, this exchange is actually measurable in terms of pure profitability. I try to determine with every project that comes my way how the client found me. Once I do that, I can actually balance the project I got against those I gave away.

To date, I’m still on the leading side of this overall. Sure, there are a few relationships weighted in one direction or the other, but the benefits have far out-weighed the costs overall, and that’s why I will continue to pass along on projects that don’t bring me any closer to my goals, because passing those along is bringing me closer to my goals.

Related posts:

1. A Matter of Trust
2. Willing to Say No
3. Business Health Checkup

However, occasionally a skill will be needed for which some serious cash will have to be paid out. As an example, a business might require an e-Commerce site set up, from which they can sell their product. They can try to create something on their own, but unless someone on their team has the needed knowledge, it will cost them a few thousand dollars to get this set up properly.

A choice must be made at this juncture – do they sink the entire budget into the site, risking that if the development is sub-par, the money may well be wasted, or do they consider offering equity or promise of future revenues in exchange for work done now?

From my experience, both choices are dangerous – the first because there is usually no insurance policy against the worst-case scenario, and the second because it is difficult to find people willing to work on such promises.

What motivates YOU to work on a project is not likely to motivate someone else to work on that same project. If you’re inspired by the idea of working on a particular product, you may be happy to do so for little or no compensation. But your pet project is not someone else’s, and they don’t have the same belief in the project that you have. They have no reason to trust in the success (including the fact that you’re putting everything you’ve got into it).

They’re going to be motivated by being paid, in general. They don’t want a piece of your business, or a promise to pay. They want cash. While on a successful project it might have been better to accept equity, other businesses don’t manage their risk of being unable to meet payroll by relying on the risks of other businesses being profitable.

While it’s fantastic if you can assemble an entire team of motivated individuals, each of whom is willing to work in exchange for a piece of the pie, once that team is assembled, extending it usually proves difficult.

If you find yourself in such a situation, then the question you should be asking potential service providers is not whether or not they can reduce their price for a particular product, but whether or not they can find a cheaper product that would meet your needs for the short-term. If you can’t afford the $5,000 full solution, maybe there’s a different $1,000 solution that will work until you can afford more.

Just don’t expect to get the bargain, instead, see if you can get a more appropriate solution for your budget.

Related posts:

1. Work With the Rules
2. Promise to Deliver
3. Pouring the Foundation

However, there are a few different ways that people use to locate and refine business ideas, and they are worth discussing.

The first is what is usually called scratching an itch. That is, you have a problem which you face on a regular basis, and find a solution to it. You then try to see if there is, perhaps, a market for that solution, and build a business around it, if there is. If your solution is truly unique, and the problem sufficiently common, then this has the potential to create an entire market on its own.

The next option is to look at an existing product or process, and refine it. That is, your product is based on improving something which already exists. The upside is that you are well aware of who uses the product, and perhaps, how to market to them. The downside is that you will need to steal customers from other vendors, which can be extremely difficult for the new player to do.

Alternatively, you can build a business by bundling other services or products together in a unique combination. This is one of the strategies suggested by the book Blue Ocean Strategy which worked for Cirque du Soleil, as an example, combining the circus with other forms of theatre entertainment. While perhaps riskier than entering well-defined markets, the rewards can also be greater. Additionally, much of what will build such a business already exists, and the innovation is in how it is presented and delivered.

There may be other ways of coming up with ideas, but these strategies should provide some measure of relief in that they show the groundwork for ideas is right around you, if you know how to open your eyes to the opportunities.

Related posts:

1. Breaking Down Barriers
2. New Business from Old
3. Unique Value Proposition Turns into a Business

What fascinated me about all this is the fact that I’ve recently been reading the book Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne (click here for my brief review of the book), in which they address this exact problem in marketing. To break their book down into its most basic pieces, the authors describe two fundamental methods of marketing a new product or service.

In the one method, which they title Red Ocean Strategy, the creator of the product or service is looking to compete in a predefined market for which there are already competing products. As an example, a business might create a new travel mug, and try to sell it in coffee shops and housewares stores. They will compete against all other travel mugs, comparing size, durability, effectiveness, and price. At the end of the day, though, there are a finite number of buyers for the product, and many of them are already committed to other brands. As such, this is a difficult type of market to break into.

The other method is that described by the title, Blue Ocean Strategy. In this, the product defines a new market, which does not have any competition because the product or service is really that new and unique. One example from the book is that of Cirque du Soleil, which combined the circus with stage theater to create a completely new genre of entertainment. Since it is a new market, the competition is not [yet] relevant, and other forms of marketing the product become possible. In my opinion, the Handi-Tray really has the potential to make use of such a strategy.

The Handi-Tray combines a quality serving tray with an advertising medium, which is fairly unique. While either portion on its own would be difficult to market – there are other (possibly inferior) trays available, and there are many ways to create advertising space in a restaurant. However, the two combined is a unique product. This would, perhaps, create a candidate for a Blue Ocean Strategy, with a caveat – they are still competing against existing trays.

Perhaps on of the approaches they may want to take is to look at event-based advertising to get the trays into restaurants. If, for example, a company is booking an entire restaurant for an event, they may be interested in having the trays featuring their company logo be used during their luncheon. At the end of the event, the trays might be left at the restaurant, or they may be taken away with the patrons. However, the wait staff would have been given a free taste of the new tray, the management would have seen some of the possible applications, and look into buying them.

If you’re looking to start a new product or service, it would be worth looking into new and alternative ways of marketing your product. If you can find a way to do so in a novel way, and the product has merit on its own, you may be well on the way to creating a successful product.

Related posts:

1. Handy Solution Catches a Deal
2. Finding Ideas for Business
3. Social Media is Not a Strategy, but you need a Social Media Strategy

However, at a more fundamental level, what’s important is that you love what you do, and the reason is that when you’re running your own business, it isn’t always a smooth road. Sometimes things go well, and everyone is happy. Clients get the service or products they need, employees are being treated nicely, vendors are aligned with your own goals.

Sometimes, though, the road is rough. While the ending may be sunny, you need some motivation to make you stick with it. You need something (other than cash) to convince you that it’s worth running along this road. If you love the work you do, then the motivation is the fact that while you may not enjoy this particular period of time, you do in fact enjoy the bigger picture of the work you’re involved in.

I love what I do. Not every day, and I have certainly had my share of sleepless nights wondering whether my business will survive one crisis or another. But what pushes me to persevere is that I know that ultimately the crisis will be water under the bridge, I’ll have learned how to deal with yet another situation, and my business will be stronger for it.

And at the same time, I do, in fact, love the work I do.

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An owner and a manager of a business cannot exist for an extended period of time in a single individual.

Of course, there is a limitation built into the statement itself – most businesses start out as a single person, or a couple of people, and only over time does the business grow to the point where ownership and management can be split into separate people. Perhaps another way of looking at this is that when a business starts, its concern is tactics, or how it will survive in the short-term. As the business grows, an additional concern begins to take shape in the form of strategy, that is, how the business will survive in the long-term.

The same person cannot deal with both tactics and strategy at the same time. The simple reason for this is that the two are frequently at odds with each other. An action might be needed to manage cash-flow today which removes funding from a project that will carry the business through the next year. Neither option is right or wrong, but a single person is not likely to be able to balance both needs fairly.

The owner is generally concerned with strategy, since their role is the ultimate bottom-line of the company. This means that the owner is likely to be out chasing sales, to be out bringing in more business of the nature in which the business is intended to grow. That being the case, it would not be possible for that person to also manage the day-to-day business of the company. As a result, one of the first hirings a business will find itself making is to get that of an operations officer, or office manager, who will take over that aspect of the business, allowing the owner to focus on the future.

Related posts:

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2. The Founder’s Exit Strategy
3. Social Media is Not a Strategy, but you need a Social Media Strategy

My wife registered as a Fitness Instructor, and is running a few classes in the area. As she just started running a couple new classes, she wanted to make sure that enough people knew about the classes to get a decent showing each time. This is where I came into play.

While she focused on getting her classes set up, finding a new location for each one, and working out details with the various locations, I thought about her ability to market herself online. She already had a page on Facebook from some previous classes, so she quickly posted an advertisement there.

Next, we registered her domain name – lindsaykochman.com – to make sure that we had something to start with. While she may not always use her own name for her business, it would buy her some time until she decides what name to operate under. Additionally, with her name becoming in use and people searching for her online, it is prudent to own your own name online.

She would need more than a domain, though, she would need a website. Nothing terribly fancy, but a place where she could post her class schedule, push out additional information about herself and the classes she runs, and most of all, begin working on her mailing list. For all this, the answer was a basic hosting plan with WordPress running on it. The famous 5-minute setup actually takes a little longer in elapsed time, but also means that once set up, she could manage the content of the site on her own.

A couple hours after starting, she had a website up and running. It included a mail sign-up form (using G-Lock Opt-in), a basic schedule, and some basic information. Analytics for the site were added so that she can track visitors to her site, and a contact form to allow people to get in touch with her was added.

The entire cost for this was less that $100, the elapsed time was about 3 hours from start to finish. The result was that she’s set up and ready to go, with all the basic pieces in place for whenever she chooses to use it.

When you started your latest idea for a business, did you put all this into place? What else did you do to help your business get itself off on the right start?

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3. Protect Your Name and Reputation

The Old System

Under the old system, the salesperson would provide you with [biased] information, then try to convince you why you should buy it. A sense of urgency was often created, as though the sole opportunity to make this purchase at this fantastic price is about to go away. The salesperson was concerned solely with the idea of making a sale.

Over time, however, it has become clear that the concept of a special deal never did really exist, that the prices were always on special, with various modifications of the exact terms. The last opportunity is just one in a long line of opportunities. Additionally, with the ease of doing your own research, it has become more difficult to sell patently false information.

Despite this, such marketing techniques still exist, and are the subject of expensive courses claiming wildly [false] stories of success with the system.

The New System

The new system came from the idea that people are able to judge for themselves whether or not they need a product. The idea of a sale is to reach out to as many people as possible to identify their needs, and then to sell a product that solves a real problem. With this mentality, the vast majority of the people you communicate with DO NOT BECOME CUSTOMERS! Rather, you are providing information to thousands in the hopes that you’ll be able to help a few dozen.

As a result, what you end up doing under the new system is focusing not on the product or service, but on the relationship. While you don’t hide what your angle is, you also don’t focus on it. You don’t subject your audience with a sales pitch, but with discussions about real issues they face. As your credibility grows, they will approach you to find out if you can help them.

Dissention

I’ve been accused of being naive with this approach, that in reality, if you don’t try to sell people something, they won’t buy. As such, I would like to reply as follows.

If you look on this site, you will see that I do not sell any products or services directly from the site. I do have sections of the site that talk about the types of services I offer, and I encourage people to get in touch with me. People do contact me, and I’ve worked and continue to work with many of my readers. That being said, I don’t think I have something to offer every reader in terms of work for me. But I do continue to provide advice and information in the hope that it will help you in growing your business.

Will this system work for you? I can’t promise that.

But if you focus on content and relationships, then you will end up growing your network, and perhaps bringing it into your next venture if the first doesn’t work out. Focus on the hard sale, and you’ll find yourself being ignored by people who don’t want to be sold to, and you will make it more difficult to try to start a second venture on the success or failure of the first.

Related posts:

1. The Difference Between Marketing and Sales
2. Persistence is Required
3. First Steps for a New Business

Business Boon

Some businesses have applied Twitter to increase their revenues. Pushing out information in an easy-to-share manner, new products and services can be promoted quickly and easily.

One ice cream cart in Toronto used Twitter to post the special flavor of the day each morning. Another mobile business used it to update their location on a regular basis (though now there’s another service just for this feature).

Another typical use is for customer service – Twitter provides a very public way for customers to connect with a company and get issues resolved rapidly. Because the feeds are generally public, a good customer service response can gain a lot of positive publicity.

The search functionality as well is beneficial to businesses. Needs can be identified, and potential customers can be found by looking through posts and filtering by a variety of keywords. Posting questions to the public can gain interesting feedback as the crowd weighs in on the issues.

Business Bane

Of course, no system is perfect. A large number of the posts on Twitter are completely inane, not to mention those generated by bots. While choosing who to follow, as I do, can limit the amount of complete rubbish entering your feed, there’s never any complete escaping it (unless, of course, you just don’t visit the site at all). From a business perspective, having employees spend time on Twitter can result in large amounts of wasted time as people click through links, read posts that have nothing to do with their work, and potentially post information damaging to the business (although this last point has more to do with trusting your employees to be responsible than Twitter in particular).

As such, the time spent on Twitter in the business world can be something that drains time from other, more productive tasks.

Summary

Personally, I use Twitter, and have found it to be quite useful for sharing information, getting answers to questions, and engaging with people I would otherwise not interact with. However, like most things in life, the issue here is not black and white, but one of responsible use and moderation.

How about you? What do you think of Twitter, and what are some of the issues you see businesses facing with the now massive micro-blogging engine?

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1. Twitter Brings Business – and Loses Business
2. Twitter Strikes Again
3. Business and Social Media – Part 3

Until, that is, I was explained the social aspect to golf.

On a typical golf course, people go out in sets of four to play each round. Because there needs to be a gap between players, the clubs will generally insist on this amount of grouping. When a pair shows up and wants to golf, they will be asked to wait until another pair arrives, and then they can golf as a foursome. As a result, you will end up spending a couple hours with people you are now meeting for the first time.

If your clientèle is of the type to play golf, then this can be a great way to gain an introduction to some people you would otherwise have difficulty locating. Not only that, but you will also have the opportunity to spend a few hours with them, making your 30 second elevator pitch into a two hour discussion about their business and how you might be able to help them.

In golf, unlike many other sports, it’s considered acceptable to discuss business while playing. Not only that, but social etiquette on the links frowns upon the use of cell phones (no one will be happy if your phone rings while they’re in the middle of lining up their putt). As a result, you are expected to hold conversation with your fellow players.

This is one of the best ways to network. You get to enjoy some time in the sun, perfect your golf game, meet new people, and grow your business all at the same time.

I looked up the price of membership out of curiosity.At one club, the annual membership is about $5000, while others did not list prices. This, however, is the price of exclusivity, and a worthwhile business expense. While I’m not rushing out to get a membership right now, it’s certainly in my list of potential places to continue my networking efforts.

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1. Unique Value Proposition Turns into a Business
2. First Steps for a New Business
3. Time for Work, Time for Play

I advise some companies on strategy, helping the owners figure out where their business is today, and where they would like to see it in 5 years. These two pieces of information can then be used to devise a road map for success for the business – we can plan what needs to be done in order for the business to reach its ultimate goal.

On occasion, I’ll encounter resistance toward adopting a map – especially when the business currently is successful at what it does. This is mindful of the following story:

A businessman is on vacation in the Caribbean, when he sees a fisherman come into the dock at noon with a few fish. He approaches the fisherman and asks why he ends his day so early. The fisherman responds:

“I get up early and head out fishing. By noon I’ve caught enough fish to support my family. I sell the fish, take a short siesta, spend some time with the family, and spend some time with my friends.”

The businessman asks, “Why don’t you fish all day, and earn more money. Pretty soon you would be able to buy another boat, and expand your business!”

The fisherman asks, “But what then?”

“Why, you could keep expanding until you have an entire fleet of boats!”

“And then?”

“You could sell directly to the resellers with that kind of volume – you could open your own fishery!”

“And then?”

“You could hire a manager to run the business and retire and live off the company! You could spend your time fishing, taking a siesta, and spending time with your family and friends.”

The story illustrates that sometimes, the end goal might bring us back to where we started from, and so we could avoid a lot of work by just staying where we are. If the goal is just money, then this is what often happens.

A business, however, is concerned with profits for another reason – usually expressed in the mission statement of the business. The goal is therefore not circular in nature. As such, this story does not apply.

If a business aims to get somewhere, then it can plan a route. It can measure progress. It can make sure it does not get lost along the way. But if the business has no aim, then it can spend years wandering in circles. It’s failure to move in a targeted manner can bring it to a state of irrelevance as its industry passes it by. Mistakes can be made repeatedly as no clear goal exists.

Is your business wandering around in the dark? Or does it have a clear vision and goal, and a map to get there?

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1. Mixing Family and Business
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3. When Time Runs Out

Family and business don’t mix.

However, in recent months, I’ve witnessed cases where family and business truly don’t mix, and other cases where it was perhaps because of family involvement that the business was such a success. Certainly, no two cases are exactly alike, but perhaps with this article, some of the issues will become clear, and you can judge for yourself.

Why should you mix?

Perhaps before dealing with the reasons to avoid going into business with members of the family, it is necessary to understand why people might choose to go into business with family members.

• You already know the people, so it’s unlikely that you’ll be surprised by unexpected behavior. This predictability can help hold a business together when two random people might have fallen apart.
• You’re all in it together – there is often with family members a desire to succeed as a family unit, as opposed to each partner being in it for themselves (whether or not they act that way is a completely different story).
• They’re available – families will often stick up for one another, so raising capital, or getting a critical introduction can often be facilitated through members of the family.
• Your family will stick up for you, often even when you haven’t earned it yet.

Why you should stay away?

This is actually the easier question to answer:

• You have to deal with these people all the time, so it makes it hard to turn off the business and turn on the family life, and the same applies in reverse.
• Failures will likely haunt you for the rest of your life, especially if a family member loses money on your venture.
• Customers will find that if they have an issue with one member of the family, they are less likely (though still possible) to get a satisfactory resolution from another member of the family.
• Conflict resolution can be nearly impossible.
• Dealing with a member of the family slacking off can often destroy a business by either creating too much fighting within the business, or allowing the slacker to stay because they’re family.
• Nepotism is rampant in family-based businesses, as the name implies.

Which should you do?

If you’re debating working with a family member, make sure that you would want that person as a partner even if they were not related to you. Also, ensure that you can maintain a division between work life and family life, and that you have in place a means to resolve conflicts, which will arise (it’s not a question of if, but when, and over what).

Related posts:

1. Networking – Your Personal Mafia Family
2. Business and Social Media – Part 4
3. Mixing Work and Home

This contest was being sponsored by Funding Universe, a site which helps pair investors and businesses. The rules were as stated above, with the addition that people could give up to 5 “stars” to each idea, and could vote for each idea once per day. The length of the contest was 2 weeks, so that meant someone voting every day could contribute up to 70 votes for their favorite idea.

The prize? $2,000 cash, plus the opportunity to have your idea presented to a bunch of investors, if you want them to.

At first, the concept of the contest sounds good – see a bunch of business ideas, and then the best idea gets voted to the top, and therefore wins.

In reality, this is just a popularity contest.

Take my idea, for example. The idea is actually a project I’m working on, called Casual Wine Reviews. I submitted it to the contest on Monday, and have been getting about 120 votes per day. That translates into about 25 or so people voting for my idea. The catch, of course, is that I know most of the people voting for the idea, they’re my friends who want to help me win. The person with the most friends is the one who will win this contest.

OK, maybe not the most popular person, but certainly the person with the most influence is going to win. The reason is simple – people are more likely to go onto this site and vote every day because they know one of the contestants than because they care about the contest itself.

Naturally, I’m going to ask you to vote for my idea – vote early, and vote often – but the whole concept of this contest is fundamentally flawed. What really needs to happen is that the people eligible to vote need to be stated before-hand, and then once the ideas are in, they decide which idea they think is best. Trying to figure out what the public thinks is best is just looking to see who can influence the most voters.

So, if you can, visit http://apps.facebook.com/idea-pitch/ and add the application. Then vote for Casual Wine Reviews and give it 5 stars. Then go back the next day and repeat, and so on, until the contest is over. I would really appreciate it! (If you want to tell your friends, that would be helpful as well.)

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• Answering customer questions
• Reaching out to new clients
• Dealing with legal and financial issues
• Working with employees
• Managing cash flow

If you want your business to grow exponentially, all of these will require some of your attention. The problem, though, is that there are not enough hours in the day to deal with all these issues. Some of these, however, are more important to your business’ ability to undergo explosive growth than others.

I was reading an article the other day in which the author discussed why it’s hard to get investors into a business which provides hourly services. The basic issue was growth and expansion – the business would only be able to grow by hiring more people to bill hours. If there’s little to be levered, then there’s little to invest in.

This is a function of the same issue as how you grow your business, which comes back to the question of what your business priorities are.

If your business is involved in distribution, then the cap on your business is how many customers you can reach for as small an investment as possible. If you manufacture a product, then the cap is the production limit. If you’re in a service based industry, then the cap is the amount of service you can provide for a single time-investment.

Work Once, Get Paid Often

Think about the author of a book. They spend hundreds or thousands of hours writing their book, and then sit back and collect money as copies are sold. Once the initial job of writing is done, further time investment is not needed to get paid again. (For argument’s sake, I’ll ignore book tours, speaking engagements, and so on.)

In your business, you want to do something similar. You need to make it a priority to develop something reusable. Maybe it needs to be customized, but the core of the work can be reused as often as you want. As an example, if you develop some software, you want to be able to sell the same program to many customers. Since you can charge the same amount for the 100th copy of the program as you did for the first, the only remaining cost is customer acquisition.

Customer Acquisition

The one cost your business will always have is how it attracts customers. Whether you are paying for advertising, pushing your website through SEO, or cold-calling prospects, there will be some cost to acquire a new customer. In the perfect business, this is your only cost.

In the previous example of writing a program, the cost to distribute the new program is negligible. Finding a customer, however, can cost significant amounts of money or time. As such, another priority of your business is to reduce that cost as well, and to find ways to leverage your current customers to make future sales at a reduced cost.

Priorities

The priorities of your business are therefore two-fold. You need to leverage your business to bring down costs, both by reducing the cost associated with each sale or service provision, and by reducing the cost of customer acquisition. Only then will your business be able to undergo explosive growth.

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1. Growth and the Panic Response
2. The Most Important Client
3. Readers Respond: Questions to Ask About Your Business

Experiment

First, there’s the fact that making the liqueur involves a significant amount of experimentation. I started off with a recipe, but when making each batch, I try something a little different, to see if I can get my recipe even better. I taste a batch, and find it too sweet, so in the next batch, I reduce the sugar. Or maybe there’s not enough vanilla, so I add a small amount of extract to each batch.

Business is like that too. You can take a formula for a successful business, but then you tweak it. You try a different advertising campaign, and measure the results. You stock different products, offer different specials. Eventually, you’ll find something that works for you. It may have started with a recipe, but the end result is far different from the description in your downloaded business template.

Iterate

Each time I make my liqueur, it takes between 3 and 6 months before I’ll know how it came out. After I make each batch, I wonder if I got it right, but I wait to see how it came out before trying something different. Occasionally I’ll make a couple batches at the same time, each slightly different from the other. But then I wait for them to be ready before trying something else.

In business, when you experiment, there’s a period of time before you’ll know whether your attempt was successful. While you may be tempted to try different things at the same time, you need to be able to measure your success with each experiment, so you can figure out what works and what doesn’t.

Wait

After making each batch of liqueur, I need to wait until it’s had a chance to settle, for the flavors to blend properly. I’ve tried sampling it too early, and it can spoil an entire bottle by opening and decanting too early. Trying something in business is the same – sometimes you need to let things run their course before trying to measure their success. Measuring the success of a 2 year plan after 6 months won’t get you accurate results.

Document

How do you know what works? As I bottle each batch of liqueur, I write on the bottle exactly what I tried in that batch. When I open the bottle several months later, I make sure to copy those notes so that I can apply what I learned from that batch. Last, I include my tasting impressions with the notes on the recipe so that I can reproduce a particular taste.

In business, if you don’t write down what you did and what happened, you’ll have a hard time reproducing certain results. Not only that, but you risk deluding yourself later on into thinking that a particular experiment had better results than it actually did. If you try to reproduce the event, you’re more likely to end up running a new experiment rather than doing something tried and true.

Summary

A business can be started with a recipe, but like many things homemade, the recipe gets changed to suit your personality. You’ll also try things, and, if you do it right, will have other people asking you what your secret recipe is for success. Why not be able to give it to them?

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2. Business Health Checkup
3. Looking for a Business Mentor

Two roads diverged in a wood, and I–
I took the one less traveled by,
And that has made all the difference.

Robert Frost

The poem is an analogy for life – we can take the route that everyone else has tried, or we can explore new roads, which may be more difficult, but may also be more rewarding.

Last week, I posted the following message on various social sites I belong to:

Thanks to the various people who have expressed their faith that “this too shall pass” and the future is bright, even if I can’t see it now.

There was an immediate response from a variety of people, concerned that this had been triggered by some major event. I had to post a follow-up to that post quickly to indicate that this was not influenced by anything unusual, just life in general.

In life, most people will take the well-traveled road, whether out of fear of the unknown, aversion to risk, or merely a lack of interest in trying something different. However, there is another way to think about the two roads diverging in a wood.

Often we will find ourselves on a road, and see another running beside us. We don’t like the road we’re on, but we can’t jump the guardrail to the other road. We continue on our way, continually looking for a way to get to the other road, and not paying attention to the one we’re already on.

Enough abstractions – here’s part of my story.

I’m running a small advising business, helping small and medium-sized businesses get the technology they need to grow larger, run more smoothly, lower their operating costs. A normal client will walk me through their day-to-day operations, the infrastructure they already have in place, and some ideas for what they want to change. I’ll then draft some suggestions for improvements and change to that infrastructure, and, if the client agrees, assist in implementing those suggestions.

I don’t run with a given client for a long period of time typically. While implementation of a strategy can take 6 to 12 months from start to finish, there’s often not a lot of work that I’m doing personally during that stage. This translates loosely into low profitability during that stage of the project. While during the early stages I’m earning close to 100% of my billings, during the middle and late stages of a project it can be as low as 5%.

The effect of this is that my business requires a large number of clients at various stages. So when you close two accounts in one week, it’s tough.

However, this isn’t unusual by any means. While I can witness other businesses experiencing rapid and steady growth, not every business works that way. For some, the road to stability is littered with speed bumps and construction zones.

What’s important to realize is that to some degree, what you experience in your business has happened to hundreds or thousands of other similar business. I don’t believe that there is any business that can honestly state that the fundamental nature of its business model is unique.

Instead of looking to the businesses which have taken a different route, you need to look at the route your business is taking. Find another (successful) business that underwent the particular stage your business is in today. Look at what was done to get out of that stage and onto the next. See if you can apply some of the lessons to your own business.

However, you must focus on your own road, not on the road that others have been traveling on. It’s only that which will allow your business to reach the success that you envision for it.

Related posts:

1. The Road to Success is Always Under Construction
2. You Have to Love What You Do
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The road to success is always under construction.

I used this mug during the end of high school and the five years I spent at university, which is appropriate, considering that education is often considered to be key to success. Granted that achieving success depends heavily on how you define success itself, but in almost every sense, education, formal or otherwise, will play a key role.

The reason this came to mind now is that I’ve recently been looking to expand my educational background, and have been hard put to decide what continuing education I want to pursue. I’ve been out of university for almost 4 years now, and have had limited formal education in the meantime.

However, those who will succeed will always be learning:

Who is wise? One who learns from every person.

Over the last four years, while I have not been learning in the classroom, I have been exposed to learning opportunities elsewhere – at home, online, at the office. I have tried to further my knowledge at every turn.

If you, like me, are looking to succeed, then you need to continue to learn every day. You need to somehow further your knowledge and understanding on a regular basis. This might mean taking a course, but it could also mean reading the newspaper every day (and not just the comics). You could read a selection of blog articles.

Personally, I’ve delayed making the decision to go back to school yet again. However, in the interim, I’m working to build a solid foundation for various concepts I’ve been exposed to, but never formally taught. Small and medium-sized businesses are comprised of a few functions, and I’ve taken it upon myself to learn the fundamentals of each section:

• Marketing and Advertising
• Sales
• Inventory Management
• Bookkeeping and Accounting
• Legalities
• Hiring and Payroll
• Banking and Loans
• Project Management
• Product Research and Development

Naturally, this list is far from complete, and not everything in this list applies to every business. At the same time, I have a basic understanding of many of these concepts already. However, the aim is to increase that understanding by self-study, reading a selection of books on these topics, talking to people, and reading articles online.

Over the next few weeks, I’ll be collating some of the readings that I’m doing in a resource section on this site. If you have some suggestions for other subjects that may be relevant, I would love to hear them.

Related posts:

1. Keep the Learning Growing
2. Book Education vs. Job Training
3. Knowledge and Experience

Unfortunately, this fact is often ignored when selecting partners or investors. Quite understandable, when you consider that what’s being evaluated is the skills being offered or the amount of money versus equity being bartered. However, what is often overlooked is that few people have truly unique skills (although they may be unique in the particular combination, or availability) and that money is cheap.

Partners

There are a few reasons to have a partner in any business:

• No one person has all the skills necessary to run a successful business, but with two people, you can get a lot closer to having all the needed skills
• A partner can act as a sounding board for new ideas, and save you from chasing after non-profitable ideas while the money-maker is ignored

For the first point, you can solve this issue by hiring someone with the required skills. This on its own is not actually worth any equity in your business. (Note, you might give up equity instead of paying someone if you don’t have any money invested in the business which can be used to pay someone.)

The second point, however, is why you give up some ownership in the company. The partner is going to help you achieve success in your business. For that, you want someone who has a vested interest in your company, but also, you want someone you can work well with.

Investors

Like a partner, an investor, especially in the early stages of the business, brings more than just money to the table:

• Cash, of course, is the reason you go looking for an investor
• Experience is what comes along, with your investor becoming either a member of the board, or at least an adviser to your business

As I mentioned above, cash is cheap. If you have an okay credit rating, you can get a loan from the bank, not giving up any equity, but paying some interest instead. Alternatively, you can borrow money from family and friends to help get your business off the ground. For cash alone, there is little reason to give up any equity in your business.

Experience is different. A good investor will have experience running a company, and want to help you succeed. Of course, they’re also looking for a return on their investment, but a good angel will want to be involved, and you’ll want to listen to them. (That’s not to say that you will DO everything they suggest, but you should listen.)

Summary

As described, both founders and investors are there to provide suggestions and opinions. This being the case, you should be sure that the people you bring into your company are people you can work with. You need to be able to listen to them, and you need to be able to get along with them on a personal level.

If you do, you’ll find yourself with the advice and support that will help your business succeed.

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• Facebook – this is primarily where I keep in touch with family and friends online. While I promote my business there as well, I consider it to be more of a social than professional environment.
• LinkedIn – my business profile, where I look to establish new connections. My time on the site is spent answering questions and participating in various groups. I keep my profile up to date, and encourage my clients to find me there.
• Twitter – a news feed over which I have limited control. I try to interact a bit, but mostly, I’m watching, looking for trends, interesting articles, and active news.
• Google Reader/Buzz – I use this to follow what others are reading. Similar to my use of Twitter, except here I can apply better filters by person. I also pull in various RSS feeds here to provide me with reading material when I have the time.
• Answers.onstartups.com – curious to know what other start-up owners are asking? Check here. I’ve asked questions, and try to provide as many answers as I can.
• AdviceTap – a small network of consultants, this site is dedicated to issues and questions that consultants of various types face. As I do consulting, this site provides me with valuable information and questions that I can use to further my own business, along with valuable connections.
• Sprouter – a network devoted to entrepreneurs, this site has a really high ratio of quality content to noise. Again, like Twitter, I try to watch and listen for what others are talking about.
• Blellow – a varied network, I haven’t really nailed down how to use it for my business, but it isn’t really a social network. So far I’ve gotten some technical answers, seen some interesting work.
• Stack Overflow – if you’re in a technical position, this site will become a lifesaver. You can get technical answers in a matter of minutes that are specific to your particular scenario.

What sites do you visit for growing your network or your business? How do you find they help you?

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1. The Right Time to Network
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