Category Archives: Family Businesses

The “Cheese” Has Been Moved!

There was a book published a few years ago entitled, “Who Moved My Cheese?” In this book, the author made observations about the employment market and how many who thought their jobs safe were laid off, unawares. The main reason these former employees were finding it rough to obtain rewarding (or any!) new work was that the recruiting and hiring world had changed since their last go around. Small businesses are having  a similar “wake up and smell the coffee” experience with regards to finding customers.Mouse carrying cheese

With the surge in social media and internet based marketing, many small companies are falling behind in their marketing and sales and don’t know how to catch up. Recently, I spent some time with a businessman who had built a business model around websites, online advertising, working the search engine algorithms, and investing his personal time in keeping it all working smoothly, despite being a millionaire. The irony? He was not in a high growth startup, the darling of the media and purported environment where people spend countless hours on such matters. He owns a number of residential facilities for people recovering from substance abuse challenges. Keeping his vacancy rate as low as possible is his primary metric. Though he is in a non-sexy industry niche, he and his team recognize that customer pipeline development begin s with an internet strategy.

The two of us were discussing his strategy and tactics with some others over a meal and the question arose as to what is the role of relationships and “boots on the street” in his model. Together, we explained that target clients are most likely to perform some internet research on your organization before a personal meeting ever occurs. Furthermore, we argued that relationships are being initiated and nurtured over the internet at a quickening pace. We were not saying that the interpersonal meeting away from all things digital was unimportant; what we were explaining was that, in a time compressed world with information at our fingertips, the small business owner must earn the right to have the personal conversation by having a strong online presence.

Some basics to creating that presence:

  1. Your website needs “rich,” updated content — videos, pictures, etc. that you keep current
  2. Making use of Google Local and other local business listing services like Yelp is key – do it!
  3. You should advertise online or simply use social media to drive traffic to your site
  4. Determining what information to share through business social media accounts begins with having a target
  5. Break your customer base down into segments, each of which you can target with messages that resonate
    • You may need additional, mini-websites (called “micro-sites”) for each segment
    • You definitely need wording that is unique to each segment
    • Your social media and/or advertising needs to be a priority!

If you want more and better customers, be purposeful about how you develop new business in a digital world!

Success Bred From Culture

In a post today for Inc. magazine online, Scott Elser, who is the co-founder of Launchpad Advertising, discussed what he and the founding team consider to be the driving force in the company’s success: culture. Elser described how he and his partner left a big advertising agency to create their own. In typical fashion, they did tons of analysis, planning and revisions. However, by devoting precious time to define the work culture they wanted to have inside the agency, they successfully set the “DNA” for all who joined them in their dream.

The co-founders knew they had to combat the stereotypes of arrogance and poor attitudes that prevail in the industry. Elser writes, “While most people I’ve worked with at agencies are great, there are always a few that bring their own brand of “I am awesome and you are not.” That attitude can set the tone for an entire office. They make things miserable for everyone. We wanted to create something different–an agency that people actually wanted to work at–and started that effort on day one. Long before we had employees, we envisioned a day in the life at the Launchpad of the future. What would the culture be like? How would people feel about working at this agency? What would they say to their friends about the agency? “

Corporate culture diagramWord to the Wise (Founder)

While it is easy to become consumed with any of a number of details during start-up mode, one should not lose sight of the value of a strong company culture. Culture does not just happen; it must be created! Think through what you have enjoyed when working with others in the past and what you desire to avoid. Consider what intangibles create a great place to work versus those that create division, boredom, and low morale.

Launchpad created an objective that is paraphrased by Elser in his blog post as follows:

“Like any job, there are good days and not so good days. But we want to create an agency where each and every person who works there can come to work every day believing that today can be a great day.”

He goes on to offer the following observations:

From this strategic objective was born what has become our primary rule: the Launchpad No Jerks Policy. It’s born of the belief that there are talented people out there who are also nice people, so there’s no reason to hire someone with a negative attitude, huge ego or destructive personality. 

It was a year later we hired our first employee, and we’ve since staffed up to become a 50-plus person shop. From day one our No Jerks Policy has driven every hiring decision we’ve ever made. Even contractors and freelancers are held to this standard. The result is an agency that delivers a great creative product and is great to work at. There’s more collaboration, ideas really can come from anyone and the environment is more “drama free” than any company I’ve ever worked at before. We’re an agency where the owners hold themselves to the same standards as everyone else. 

How about your company–whether it employs 5 or 500, you must consider how many “jerks” are members of your staff. What are the implications to customers/clients, attracting new employees, retaining top performers, and being able to delegate as the business outgrows your ability to manage it all? 

Company culture is the result of best intentions mixed with a long term commitment. 

 

Entrepreneurial Banking

There is a long standing feud between bankers and entrepreneurs. What, one may ask, is the point of contention? Money, of course! Banks have money and entrepreneurs would like some of it in the form of loans to fund their start-ups. However, many in the banking community  consider start-ups far too risky. As a result of tougher credit standards enacted during the recession, less small businesses than perhaps at any prior point are qualifying for loans–even if they have strong management teams, revenues, and a significant upside.

What if banks awakened to the possibility of viewing start-ups as a diversification in a portfolio of loans? What if entrepreneurial ventures became appetizing to banks exactly because they represent a potential upside that is greater than the average loan return and, therefore, worth a strategic role in an array of credit decisions? Joy of all joys!

bank caricature

Recently, the Evening Standard profiled Ana Botin, head of Santander in the UK . The article featured Botin’s views on why her bank vowed to support small to medium sized businesses across the UK. It was 

reported that Santander “didn’t want to play it safe and that they had in fact spotted a gap for high growth, risky companies who needed financial support without losing a chunk of equity.” Despite being a big player in the savings and mortgages arena, plus enjoying success in the retail sector with 14.6 million customers, the bank had made a bold move to more aggressively support SMEs.

Kelly Dolan, writing for Entrepreneur Country, reports witnessing Botin open an event organised by Santander Breakthrough in Oxford last year in which she shared her personal story of entrepreneurial beginnings in venture capital and consulting prior to embarking on her current banking career.  Dolan also noted the “passion Botin displayed when speaking on the founding story of Santander, once a small Spanish bank that prided itself in helping local businesses get off the ground. Ana then spoke metaphorically on how she had witnessed how similar the banking industry was to an army, and that as CEO it was her mission to break down barriers and infiltrate the ranks so that bankers could finally begin to understand the importance of UK SMEs and why they were so crucial to British economy, which would of course reflect on the success of the bank. And for anyone that may have doubted her rhetoric on the day, you only had to spot Ana laughing and joking away with fellow keynote and Ella’s Kitchen Founder Paul Lindley during the interval to see that she felt right at home conversing with entrepreneurs. Ana’s presence and the Breakthrough event as a whole, which the bank runs for free across the UK to enable entrepreneurs to seek knowledge, network and share ideas, demonstrated to me that Ana had big plans for small business owners, along with a serious dose of empathy due to once being in their very position once before.”

 

Noting how rare Botin, her story, and Santander’s appreciation of the SME market are, Dolan questions whether more banks European banks should get into the “game.” I wonder the same thing about banks in the United States. It certainly seems that many of the larger banks seem disinterested in any deal that is truly entrepreneurial, disdaining the risk though the potential “hockey stick” growth is certainly desirable. Community banks seem slightly more supportive, and venture banks more so still. Let’s hope that many more will observe Santander having success and reconsider their own models!

 

Overcoming Price Objections in Small Business

Many the small business entrepreneur complains about not being able to charge enough to make good profits. Yet, in the business world around us, we all see businesses who seem to be doing very well and who charge the proverbial “arm and a leg” for what they do. Why is it that some niches seem more capable of avoiding price sensitivity than others? For instance, goods that carry with them a great customer experience command a luxury price. Mark Stiving took note of how the healthcare industry is a conundrum when it comes to pricing. In an article for All Business, he made the following observations:

“It’s something we all need. It’s an industry where there is huge pressure from major insurance companies, the media, governmental agencies, and even consumer groups to cut costs and prices. However, even with these factors prices have never been driven down to commodity levels or even to parity.”

Pricing

This is in sharp contrast with the experience of many small business owners. I hear all the time about being beat up on price, having to price services in competitive bid situations near the bottom, and many other such war stories. As you can imagine, I often am advising clients to compete on value versus price. Just how does one go about this?

Stiving continues in his piece, noting the following consumer behavior in healthcare:

“How is this possible? Like almost everything in pricing, human psychology is at the root. For example, when was the last time you used price to decide where you were going to have a medical procedure done? When was the last time you even knew the price of the service before going in?

Most people don’t pay attention to prices because their insurance company pays. Yet virtually everyone has co-pays, and therefore knows the general cost and has an incentive to ‘price shop’. Think about it. Even a 10% co-pay on $1,000 is $100. Isn’t it worth $100 to find the best deal for a procedure? So most people have financial incentives to shop for price, but don’t.”
Let’s focus on several key words and phrases from the quote.
  1. Human psychology. If you are sharp enough to have built a target market strategy, you have surely thought through who you want to serve. What is often overlooked, however, is how and why people buy. As is pointed out, consumers have habits. Observe the habits and then customize your approach to what you see.
  2. Insurance company pays. This fact is significant because it illustrates that many buying decisions are facilitated by removing the consumer from having to make a painful (excuse the pun) choice. Think of software as a service as another type of business wherein the monthly $9.99 or whatever you allow to be charged to your card on file is “out of sight, out of mind.” How can you make purchasing easier and less “thinky” for your customers so that the decision is almost automatic? Do you have something that could be billed on a recurring basis at a lower price point?
  3. But don’t. In describing how healthcare consumers do not look around for alternatives, Stiving makes a keen observation. Even when alternatives exist, they are often not sought out. Those who study consumer behavior far more than me would point out that the trouble associated with switching to something new holds many buyers back from changing to what may even be a better value. How can you use this behavioral paradigm to your advantage? Can you make it easier for others to but from you instead of the competition? How can you make it harder for existing customers to stop buying from you?

Finding a way to address these three issues in your own business will pay off. As you are able to make inroads, you will find that your pricing becomes justified and that you won’t have to fight as hard to maintain price integrity.

 

Stay Out of the Ditches of Entrepreneurial Growth

Having studied causes of business failure and what can be reversed versus what is usually fatal, I can assure that a leading problem for small businesses is unplanned growth. When the pace of advancement exceeds the ability of the infrastructure to keep up–in any category–there will be problems galore. Bankers, CPAs, and attorneys have all witnessed this phenomenon with their small business clients and wished they could have persuaded the founder to slow things down until growth became more manageable.

Jeff Cornwall, of Belmont University in Tennessee, writes a popular blog entitled The Entrepreneurial Mind. In a recent post, he says that, “The road to growth can be both narrow and treacherous.  There is not a lot of room for error, and when you make a mistake it can lead to serious or even fatal consequences for the business. There are two ditches alongside the road to growth.” Below, I have featured excerpts from his post on the subject of the two ditches:two ditches

  • One ditch is the one that catches those businesses that underestimate what they have to do to manage their growth.  This is the ditch that most people worry about with fast growing businesses.

Entrepreneurs who end up in this ditch spend too much time continuing to be involved in the day-to-day operations of the business and not enough time working on creating an organization that can support growth.

These entrepreneurs move too slowly to build a team to whom they can begin to delegate important functions and tasks.  As they add employees, they don’t create systems and procedures that make sure work gets done efficiently and effectively.  They don’t think about what organizational structure will best support their strategy and achieve their goals.  And they don’t take the time necessary to intentionally build the culture they want to have within their business.

Entrepreneurs who get caught in this ditch alienate customers with poor service and lose their best employees due to frustration with the constant internal chaos.

If failure is the ultimate result, it is not because of a poor product.  It is due to poorly managed growth.

  • The other ditch is the one that catches those entrepreneurs who actually over-prepare for growth.

These entrepreneurs hire too many managers too quickly, added overhead expenses that the business is not yet ready to support.

They also make systems and procedures that are much more complicated than necessary, also adding to cost and bogging down employees and customers in excess complexity and paperwork.

Eventually it can seem like employees are serving the system, rather than the system supporting them and making their jobs more manageable.  And even worse, customers can begin to feel like they are serving the company rather than the company serving them.

If failure is the ultimate result for entrepreneurs who end up in this ditch, it is due to over-managed growth that kills the innovation that made the business special and successful.

What, then, is the solution? Cornwall suggests (and I would concur!) balance. The choice to grow should be a conscious choice. Sure–everyone who begins a business hopes it will be successful. Note, however, that growth is not necessarily a sign of success, but can be like an albatross hung around one’s neck. Managed, sustainable growth is more likely to be a solid measurement of success in small business. 

Determine how you will handle the growth long before it arrives so that you neither allow the enterprise to flail out of control nor squelch its inertia with an overkill of “orbiting the giant hairball.”