Category Archive for "Business Skills Development Series"

Nobody Wins a Price War

Price wars are the nuclear option of the marketplace:  Nobody wins. When two companies are hell-bent on hacking away at each other through discounts and markdowns, one usually lands in bankruptcy while the survivor limps into an uncertain future. It’s almost always just a race to the bottom.  Nonetheless, there are certain scenarios that could make it easier for your business to survive a price war. Your best bet is to avoid price wars altogether, but if you find yourself headed toward one — you should know that there are only a few types of companies that are likely to come out on top: Big Money Companies The company with the biggest bank account clearly has the advantage in a price war. While the competition is worried about how to pay their bills, these companies can live off their reserves until the price war is over and they once again raise prices to normal levels. Diverse Companies Other price war survivors are companies that offer a wide range of products or services. If a price war erupts over a specific product, the impact is not nearly as dangerous as it would be if the company only had a single product offering. The bad news is that when a larger company decides to create a price war, they often slash prices across the board. Low-Cost Companies Some companies are built to be lean and mean in the marketplace. By intentionally structuring themselves to as a low-cost, no-frills alternative, these companies position themselves to survive price wars because they are inherently more capable of absorbing price reductions than the competition. Unfortunately, most small businesses don’t fall into any of these three categories. But even though they lack the money, diversity and cost-efficiency of larger competitors, small businesses have a unique ability to squeeze into a fourth category of price war survivors: Differentiated Companies Small businesses are very adept at identifying and exploiting gaps in the marketplace. For most small businesses, the implementation of non-price differentiation strategies is enough to help them survive a price war. This might mean leveraging your ability to provide personalized service or deciding to specialize in a specific market segment. Anticipate the needs of the marketplace and do whatever is necessary to survive until the price war ends and peace is once again restored to the marketplace. And remember that not all price wars involve actually lowering prices.

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Really, It DOESN’T Matter…

Do you know who your biggest competitor is? Do you know who is stealing your prospects’ attention and keeping them from buying your products or services? You might be surprised to learn that your biggest competitor isn’t the larger business down the street or around the corner.  It’s not the big box store or the mom-and-pop shop, and it’s not anyone on the internet. If you guessed any of these, they are certainly your competitors…but by no means your biggest one. So who IS your biggest competitor? It’s your prospective customer’s indifference. That’s right, indifference. They don’t see you as special or different or better in any way than anywhere else they can buy your product or service. So they buy elsewhere. Or they might buy from you once in a while out of convenience, but you’re not outperforming your competitors there, either. In order to overcome the indifference in your buying public, you need to identify what it is that they’re indifferent about.  Why do they see you the way they do, and more importantly what do they see in your competitors that is costing you some or all of the business you should be getting from them.? To identify strengths in your own company, you must first understand your competitors’ strengths – and weaknesses.  What is their positioning in the marketplace relative to yours? Identify the key features of your competitors’ product or service and contrast that with what you offer. Take the perspective of your customer, because it’s not so important how you see the differences but how your customers see them. What might be making your prospective buyers choose them over you, or vice-versa? Cost, reputation, image, brand identity? These are well known factors in the decision making process, but what are some others that are coming into play as your potential customers decide? Effective competitor analysis provides you with powerful insights for your overall competitive strategy. You can’t succeed if you approach the marketplace with blinders on. You need to know who your competitors are, what they’re doing, how you can effectively respond to their actions and how they will likely respond to yours. For example, competitors in the auto repair business might depend on reputation and quality of work, while clothing stores tend to compete on fashion trends and generation-specific looks. Buying decisions for automobiles may depend on style, reputation, safety and the associated status

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Setting Business Goals – Stop Moving The Goalpost

The importance of setting business goals cannot be overstated, but the fact is that most owners never bother to set clearly defined goals and objectives. And the ones who do usually abandon them and return to their reactive habits before any measurable improvement has been made. It’s like a field goal kicker trying to put it through the uprights while his own team keeps moving the goalpost. Sound familiar? Strategic business goals are critical to achieving improvements or changes in your business. Each goal should clearly state the objective, be accompanied by a written statement defining the benefits of achieving the goal and be measured by milestones to ensure continuing progress is evident. It may sound like a lot of extra work, but well worth it as this practice practically guarantees that your management of the business will remain proactive and productive. Here’s how it works. For example, if you were the owner of “Joe’s Pizza” and you offer both take-out and delivery, but your take-out sales are lagging. First, clearly define your goal and write it down. For example, “I want to increase take-out sales.” Next, follow these three simple rules to define the path to your objective: 1. Goals must be measurable. Successful companies always focus on setting business goals that can be measured. So you decide on a number – and stick to it. In this case it should be a sales or profit dollar amount, or a percentage increase over current figures. An example of a poor choice in this instance would be “units sold” as improvement would be difficult to measure given the widely varying prices of different types of pizza, sides etc. 2. Goals must have a deadline. Set a time frame for your stated objective. If Joe’s Pizza would like to increase sales by 30% over last year, it wouldn’t make sense to set a one month time frame for that goal. Measurable improvement will obviously require more time, and successful achievement of the goal won’t be known until well into the 12 month period. However, measuring improvement in milestones of this-month-this-year vs this-month-last-year will provide valuable insight into your progress. 3. Goals must be attainable. This seems intuitive but you would be surprised how frequently this rule is overlooked. Consider your knowledge of your industry and your competitors. While a 30% increase might seem ambitious, it is certainly attainable whereas a 300%

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Would You Buy Your Business If It Was For Sale?

Statistics show that on average a small business will change owners every five years or so. That means the longer you’ve owned your business, the closer you’re likely getting to selling it. Now, for those of you who are reading this and thinking “no way, I’ll never sell my company”…while that may be true – the content of this article is just as important to you if you’re allowing any of the issues we’ll cover to exist in your business. So, whether you’re going to be selling at some point, or you’re a fifth-generation owner running the family business that you’ll pass on to your kids someday, the strategies outlined here will make you more money until then. The key is to start thinking of your current business in terms of what someone looking to buy your company would see. Motivation: Let’s start with some business-valuation math. Small business sales are traditionally priced based on a formula called multiple of earnings. Simplified, it means that a prospective buyer considers what a business makes for its owner each year, and offers an amount usually between 1 and 3 times that value to buy the company. The multiple generally depends on how long the company has been in business, how competitive it is in the current market and how easily a new owner could assume control of the operation. Goals: What’s it going to take to make this happen? The first goal in improving the value of your business will be to increase your earnings, which is the first element in the valuation of your company. And, since we can’t change how long you’ve been in business (except by staying in business), the next goal is to improve the competitive positioning of your company in the marketplace. Finally, goal number three will be to transition your business to a model that runs itself with more of your guidance and less of your direct participation wherever possible. Again, those of you that feel like you should stop reading because you’ll “never sell”, hang in here for a few more paragraphs…this is going to make a ton of sense to you as well. Problems, Challenges, Headaches. If there is something going on in your company that would concern a potential buyer, chances are it’s taking a big toll on your ownership as well. The fact that you have been able to adapt or “work around” the

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Your Customers Are Looking Online For You…But Who Will They Find?

The digital age is in full swing, but many small business owners still don’t “get it” Most small businesses still don’t have a website. Usually it’s the perceived cost of registering a domain name, setting up hosting, developing the website and then maintaining it that keeps them from taking advantage of the most powerful marketing medium ever invented. What they don’t know is how inexpensive it really is, and more importantly — what NOT making this small investment in their business is actually costing them. In today’s marketplace, customers are looking online and are far more likely to start their buying process there than anywhere else. In the eyes of that buyer, you not having a website pretty much takes you out of the equation. When they Google™ your product or service, all they see is your competitors. Sure there might be some local business or review sites where you are listed, but you really can’t control that content like you can on your own website. And you can’t be dynamic in leading the marketing race for your product or service, or react effectively to the efforts of your competitors. Having a professionally designed, user friendly and functional website is part of today’s measure of how successful your business is. So to those business owners that have gone the route of the free (or way too cheap) “cookie-cutter” template website, ask yourself this: “Would I print out that website and hand it to my customers like a brochure?” Of course you wouldn’t. When you create print media for your company you use professional resources to create a polished look for your brand. Or at least, you should. So where is the sense in allowing the public face of your business on the most customer trafficked medium there is look like your 8 year old nephew threw it together? If you haven’t done so, it’s time you took the importance of a great online presence seriously. Businesses without a website — or with a cheap looking and non-functional one — can have the effect of making potential customers think that you’re not making enough money to afford a good one and they might wonder if doing business with you puts them at risk. In today’s competitive market that could mean the difference between losing money again next quarter, and becoming the fastest growing source for your product or service. Of course

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The Customer Is Always Right, Right? Wrong…

So, let’s get this straight. You’ve told your employees that no matter what the customer does, no matter how rude, unreasonable and petty they might be, that they are to treat that customer as through they’re the best one you have? You’ve sent a clear signal to your staff that under no circumstances is your loyalty and concern with them – your faithful and diligent employees – but that you only care about the customer and that your desire is that employees take all the abuse and mistreatment a customer can dish out, and do it with a smile on their face? And you think THAT is the formula for great customer service?  Think again. Let’s use as an example an anecdote I once heard about a Southwest Airlines passenger who consistently shared her displeasure with the fact that they didn’t have assigned seats, nor a first class cabin, that she hated their boarding procedure, the flight attendant’s uniforms and the casual atmosphere aboard the plane. After a series of complaint letters from the same passenger, Southwest’s customer relations department “kicked it upstairs” and the file made it all the way to the CEO’s desk. When they received the file back a few days later, they were surprised to find a copy of a hand-written note from CEO Herb Kelleher to the customer: The note simply said “Dear Mrs. Smith, We will miss you.  Herb.” Now, is that a true story? Who knows? But who cares? The fact of the matter is that it sounds like something an intelligent CEO of a major corporation should and would have the presence of mind to do in such a circumstance. The phrase “The Customer Is Always Right” was originated by Selfridge’s Department Store in London in the early 1900’s. To this day it is used by companies to try and convince customers that they will receive great service, and to promote a high level of customer service from employees. But an increasing number of businesses are moving away from that mantra, because they’ve learned that in fact what it does is decrease the level of customer service, and customer satisfaction. It causes problems on the “front line” by lowering employee morale when they are forced to deal pleasantly with customers who are determined to intentionally cause problems. It also serves to give those intentional troublemakers an unfair advantage over your staff, and

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What Is The Plan If You Do Not Show Up For Work Tomorrow?

Think about the last time you were unexpectedly out of the office for the day. No matter the reason, you weren’t there and one of two things happened: Either your mobile phone rang all day long with issues at the office, or it didn’t ring at all, leaving you to wonder what the heck (if anything) was going on. In either case it was a huge headache for you, in addition to whatever it was that kept you out that day in the first place. Now, what if that day became days, or weeks? What would happen to your business if fate reared its ugly head and you were out for a month, or longer? For a day, your staff could probably “wing it” and get by. But any longer and there are sure to be meetings to reschedule, projects to postpone, employee issues to handle, payroll and bookkeeping issues to be dealt with and so on.  Most or all of that simply won’t get done without a business contingency plan.  So take a moment and consider…what is the plan if you do not show up for work tomorrow?  Who is going to do everything that you do if you’re not there? Don’t feel too bad if you don’t have the answer, because the fact is that most companies don’t either. It’s not by design, but most companies will be forced to “wing it” if the owner or key executive is suddenly sidelined. So if you’re in that situation you shouldn’t feel bad because you’re not the only one, but now that you’ve read this and are aware that you’re at risk — you should certainly feel bad if you fail to do anything to prevent it. So, what to do? Create a business contingency plan. Just like everything else you accomplish in your business, this issue needs a solid plan in place to manage you through it. Develop a strategy that covers everything you do for the business, whether that means having someone else do it temporarily or a system that allows you to delay certain responsibilities until your return. The simplest way to come up with your list is to keep a journal of everything you do each day, for a least a week — perhaps longer depending on your particular business. Then, go through your list and figure out who can do what in your absence, what

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Three Things Customers Are Not Telling You…

Customers lie. They do it all the time. They don’t do it to hurt your feelings, rather they do it to protect your feelings and avoid confrontation with you. Have you ever thought all was well with a client, and even asked them how things were going and had them tell you “great”…and then, without any reason or warning, they were gone? That customer didn’t tell you there was a problem, but there were warning signs that you missed. There always are, and identifying the things customers are not telling you is critical to your success with them. Here are three examples of what your customers really want, but will never tell you: They want to know that you UNDERSTAND their business. When you pitch a new client, is your first statement “I’d like to know more about your business”? If not, you’ve just significantly reduced your chances of getting that sale. Most salespeople start by immediately talking about their product or service and how well it performs, not understanding that they just offended the client because they didn’t make the effort to learn about them first. Customers want to know that you understand their business before they’ll listen to how your product or service is good for them. But they won’t tell you that, they just won’t hire you or buy from you. When you go in and start with you, it’s just another sales pitch and it doesn’t matter what you’re selling. Instead, start by demonstrating that you’re interested in knowing more about their business and their needs, and then relate how your product or service serves that need. They won’t tell you, but what they want is for you to focus on them, instead of you. Do that, and everything you say afterward becomes more important. They want to know that you VALUE their business. Always say “thank you”, and make sure your staff does as well. More customers will tell people that they’re happy with your company because of the kindness and gratitude you show them than they ever will about their satisfaction with your product or service. Always treating them with an outward showing of how much you appreciate their business will solidify their loyalty and make it far less likely that a competitor will steal them away, even at a cheaper price. Take the time to send notes or make “thank you” calls, and make

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Is it the Economy, or is it YOU?

Do you think your sales & marketing results are terrible simply because of a poor economy? If so, think again. Many companies are achieving better results now than ever before.   The Winners and Losers Those organizations that are investing in improving their sales & marketing skills are seeing a significant return on their investment. They’re the winners. So it should come as no surprise that those that are cutting development budgets and staff members due to the ‘poor economy’ are the ones who are seeing declining results — the losers. Is your organization a winner or a loser? How to Become a Winner Here are some ways to increase your sales & marketing results, no matter what the economy is doing: More Business Is Out There, But You Have To Go Get It Are you sitting at your desk waiting for the phone to ring with a customer on the other end? This strategy may have worked five years ago, but now it’s the companies that are skillfully churning out new prospects — and asking for more business from the clients they already have — that are reaping the rewards. How many new prospects have you contacted this month? Be Grateful and Responsive Are you properly thanking your customers? Are you sending thank you letters (not just receipts), making thank you calls, thanking them personally? Doing so lets them know how important their business is to you. This is so important in terms of receiving future business from your clients that it cannot be overstated. Do you have a formal program in place to achieve this? Build Lasting Relationships Are you regularly receiving contact from new clients that were referred by existing ones? What are you doing to foster and build relationships with your customers that will lead them to suggest your product or service to others? When you build strong, lasting relationships with your clients, you create a social framework for years of future referrals. How many raving fans have you created for your business this year? Invest in your Skills Have you increased or decreased your training budget this year? Are you even providing training for your staff? When was the last time you personally attended training? It’s crucial to continually invest in skills and strategy improvement for you and your staff.   For more information or to discuss your particular needs in this area with an

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Seven Strategies to Keep Cash Flowing

Cash flow is the lifeblood of every business. All too often though, business owners fail to pay enough attention to bringing cash into the company as quickly as possible. Next thing they know, there is not enough money on hand to pay staff, suppliers and vendors. There are several key things business owners can do to try and make sure this never happens to them. The idea is to be consistent with your approach to cash management, and keep the business in the best financial condition possible at all times. Strategy # 1 – Only Deal with Quality Customers It’s essential to deal only with quality customers who appreciate the value of your product or service, and are willing and able to pay promptly in return. A business with a cash flow crunch almost always fits into the 80/20 rule where only 20% of sales are coming from the 80% of customers who are the most difficult to deal with. Strategy # 2 – Get Paid Up-Front Whenever Possible Ask for payment up-front, or even C.O.D. Too many businesses offer terms automatically, when the fact is that many of their customers are more than willing to pay up-front. Strategy # 3 – When you Offer Terms, Be Selective Don’t offer payment terms to just anybody. Reserve terms for selected clients who genuinely need and deserve them, and are willing (and likely) to pay on time. Instead of terms, offer incentives to pay up-front. Given the fact that most companies that offer terms carry an A/R balance that is a significant percentage of their annual gross, a 5% (sometimes even 10%) discount for payment in advance can be a very wise exchange. Strategy # 4 – Tighten Up Your Terms Although many businesses offer 30-day terms as a matter of course, this delays the time it takes for the business to receive the money it is owed. Instead, when it’s necessary to offer terms – reduce them to 7 or 14 days max and follow up with overdue accounts promptly. Give customers a reasonable amount of time to pay, and don’t compromise your company’s financial health by volunteering to be your customer’s overdraft line. Strategy # 5 – Negotiate Scheduled Payments Another way to bring cash into the business faster is to break up payments for larger jobs into a down-payment and progress payments at specified intervals during the project. You

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