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!

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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!

 

From Idea to Commercialization in 4 Days

When not consulting with small businesses who have revenues, I often volunteer time with a start-up nonprofit named EntreDot. The entrepreneurs with whom I have the pleasure of interacting through this connection are amazing. Within the innovation centers that the organization operates, there are many second career entrepreneurs. However, a different demographic intrigues even more: high school students. This past week, I had the opportunity to advise students at Wake Forest Rolesville High School in how to launch a business. What a blast!

While adults often underestimate what a young entrepreneur can do, this group has been a very pleasant surprise. The students were allocated into teams to prepare a business pitch in five days. Coming into the week, they had not previously been working together. One of the student teams did not even begin their business until Tuesday and only then as a result of teachers requesting they form a separate team because their original team had grown to too many participants. Faced with a four day deadline, this group of young entrepreneurs launched Bands For Boston. Bands For Boston is a social cause enterprise that is selling wristbands to support the Boston community in the aftermath of this week’s tragic bombings at the Boston Marathon. 

Bands For Boston

The student team used the debit card of one of their own to order the first 250 bands on Tuesday. By Wednesday, they had enough pre-orders that they went ahead and ordered an additional 250 bands. Through networking, social media, and some joint promotions, the team looks to sell over 1,000 bands in their first 10 days in business at a price of $5 each. Initially, they plan to contribute 60% of the proceeds to the American Red Cross to support relief efforts. They are hoping that, as volume grows, they will be able to raise the percentage contributed to 80%.

A process was followed by these young entrepreneurs that is significant for new small business founders of any age.

  • Ideation – The team first thought about doing lanyards for key chains, but thought that they couldn’t get enough traction. Once they decided to do the wrist bands, their thoughts gelled and they were able to unite around an idea that evoked passion. Quick math showed the team that, if they would put forth the effort, there was enough demand for what the proposed to create sales substantive enough to reward their efforts.
  • Conceptualization – The next effort the team went through was to identify target buyers. The first concentric circle they considered were student peers, followed by neighbors and Twitter followers. At each level, they were able to verify demand. They they put together a business model to order from an online source and deliver the bands to those who purchased on a pre-sale basis.
  • Creation – The proof of concept for the idea came into focus as the first set of bands arrived, were distributed after school, and new customers were identified as those who saw others wearing the bands. They had established some name recognition and were on their way to a business.
  • Evaluation – At the three day mark, they began dealing with inventory, marketing, and finance issues relative to reorders, expanding their reach to other geographic markets, and planning how to scale the business.
  • Preparation – The team was now confronted with the challenge of how to launch on a broader basis and put into place the team responsibilities that would facilitate growth. They are pursuing relationships with sports teams in the Boston area to have promotions at games whereby the bands could be given away to early attendees and sold to subsequent ones.

Commercialization is now the challenge of the team. They are trying to figure out how long these bands will be popular and what they may do for an encore. In the meantime, they have tapped a latent demand while helping a community and earning some income. Kudos!

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.

 

Rethink What it Takes to Innovate

Innovation inside big businesses requires a culture in which people feel relaxed, fairly rewarded, and valued. The same applies to small businesses, right? Recently, Charles Day, the CEO of Lookinglass, wrote an article for Fastcocreate on this truism as it relates to creative talent. He observes that, “Many creative businesses limit their talent recruitment and retention strategies to money and flattery.”

Day recommends the following 8 means to attract and retain top creative talent. Consider how many of these practices may be good human resources concepts that would apply across the board!

upside down worker

1. BUILD AN EVANGELICAL BUSINESS

Creative people yearn to make one thing more than any other. A difference. They want to solve problems they believe are important. Ten years ago, Netflix and Blockbuster were in the same business. The difference lay in their respective visions of the future of movie rentals. Internet-supplied delivery at your convenience? Or rainy Thursday nights staring at an empty shelf in a store? Which set of problems would you rather solve? 

2. AVOID THE DEFLATIONARY VALUE OF MONEY

In Daniel Pink’s excellent book, Drive, he explains that many creative people are in fact demotivated by money. In some cases it makes them perform worse, because when a task becomes “work,” creative people tend to feel restricted. As a manager, focus whenever you can on highlighting the intrinsic value of solving a client’s problem. And when your company decides it must “do it for the money”–an economic reality in virtually every business–be mindful of the impact this has on your most creative people.

3. PAY FAIRLY

There is a time to spend money. Paying “below the market” shatters trust. Many companies ignore this truth, underpaying early on when the company can, then overpaying later in order to keep talent locked in place. This builds suspicion and destroys loyalty. Instead be relentlessly pro-active in maintaining market-parity compensation, with bonuses for extraordinary results.

4. MEASURE PROGRESS

At Rosetta, one of the industry’s fastest growing interactive agencies, the rigor of the employee review program stands in stark contrast to most creative businesses. Employees are measured on a set of four published benchmarks that encourage both personal initiative and collaboration. The system is transparent and consistent. At the end of the year, everyone is evaluated and rated against their own peer group at their own level. This ensures that every employee has a clear understanding of how much progress they have made. According to a recent Harvard Business Review study, nothing matters more to ambitious people.

5. ENGINEER ENGAGEMENT

Gallup Organization research has shown that most people become less engaged with an organization over time. Nothing dilutes loyalty more than a company’s willingness to support under-performers. Be relentless about improving or firing the weakest links and raising standards and expectations. It attracts and unlocks greatness. 

6. INVEST IN INDIVIDUALITY

Google famously attributes its growth to the investment it’s made in allowing 20 percent of engineers’ time to be used for anything they want, so long as it makes Google a better company. Creative companies that charge by the hour can’t match this level of investment. But when you decide to invest zero in the possibility that your talent can create value in unpredictable ways, it suggests you think they are not capable of doing so.

7. BE OPEN. BE HONEST

Transparency is essential to attracting and retaining great talent. We define transparency as this: telling what you can and explaining what you can’t. Sharing openly encourages your people to give you the benefit of the doubt. Critical to building loyalty.

8. SAY THANK YOU

The artist in all of us needs to be recognized. So does the human being. And yet most companies are slow to praise or even to thank. Which is strange since each of us makes a choice every day about where we work. It need not, after all, be here. Saying thank you at the end of every day has always seemed to me to be a small acknowledgement that you take neither their talent nor their choice for granted.