A basic lesson in business from the Apprentice.

So the Apprentice is back on our TV screens and with it the usual lessons in how not do do business! The first episode saw the teams challenged to buy fish at Billingsgate market and to sell it at a profit, the group that made the biggest profit would win. This is a basic business principle that every would be entrepreneur should be able to master but one group failed miserably. I think there are three key lessons that every business owner needs to remember:

  • Buy at the right price
  • Control costs
  • Be where the customers are

Buy at the right price

We saw the losing team manager buy a significant amount of fish from the first supplier they spoke to at the price the vendor wanted to charge! We should always shop around or at least know the market rate and then haggle. If you know what others are charging for an equivalent product you have a good starting point for your negotiations.

Control costs

Having bought their fish at an inflated price our losers then went on to make the most enormous fishcakes ‘because that’s what the specification said’. This meant that they couldn’t keep their costs down to the level where they could make a profit. It’s a mistake I often see in start-up businesses. Every time you add a little extra this or that your profit margin is compromised unless there is scope to put up your prices to cover the additional costs.

Be where your customers are.

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There’s a time when people want to eat lunch and a time when it’s too late. Lunch has to be ready when your customers want to eat.

Probably the biggest mistake that our hapless losers made was taking too long to prepare their dishes so that they missed the lunchtime trade. You can’t make money when no-one wants to buy. Could you be guilty of taking too long to get to market with your idea because you want it to be perfect or because you aren’t prepared to invest in the help that will get your product or service out there? It’s an easy mistake to make but a good product delivered on time will make more money than a perfect product launched when the market has already been satisfied.

Did you spot any more lessons in this episode? Why not share them here?

I’m sure I’ll be returning to the Apprentice for more blog posts in the coming weeks that is if they don’t drive me to mad first!

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How sound is your business plan?

Neil Clough

Neil Clough (Photo credit: TaylorHerring)

If you have been watching the BBC’s ‘The Apprentice’ you will know that one of the best candidates was eliminated before the final. Lord Sugar appeared to be genuinely upset. Neil Clough was fired because his business plan lacked credibility and because he remained wedded to it for far too long when experienced advisers were pointing out the flaws. Are you in danger of making the same mistake?

Neil’s mistake is one I have encountered many times in my years working as a business adviser to start ups. Too many people think their business will succeed because they think it is a good idea. They eliminate any evidence to the contrary and refuse to listen to conflicting views. I’m not saying that we allow these views necessarily to stop us but we should listen and consider their validity.

What was wrong with Neil’s plan?

For those who haven’t seen the latest edition of the Apprentice Neil’s business idea was around an online platform for selling houses. People would advertise their houses on his website and would then manage the sales process themselves so eliminating the need for an estate agent. However, Neil wanted estate agents to pay him for the privilege of advertising the houses on their books. The idea was born out of Neil selling his own house where the estate agents had failed.

Neil is a consummate salesman, most of us are not so there is flaw number one. We use estate agents because they understand the right buttons to push to sell houses and they can do so dispassionately. We, on the other hand, have an emotional connection to our homes and find it difficult to distance ourselves from that when selling our houses.

Estate agents have a database of potential purchasers whose needs they understand, we do not so we would have to rely on people finding us on the website. As so many of the TV property programmes have shown house hunters frequently dismiss suitable properties they have found on the Internet usually for invalid reasons, so there is flaw number two.

Estate agents are already advertising on the Internet, there are some very big, high traffic websites out there already, why would they advertise on one that was trying to do them out of business? So flaw number three.

It didn’t take very long or any expertise in selling houses to uncover these flaws in Neil’s business plan so why did he stick to the plan for so long? Well part of that will have to do with the TV programme and the pressures of filming but some of it was because Neil really felt he had a good idea. He got too close the the idea to be objective. We can all make the same mistake.

How do we avoid making the same mistake?

I believe we have to look for what could go wrong. We have to find reasons why the idea wouldn’t work. This means being honest with ourselves and being open to other people’s ideas. We have to ensure that we are not too close to the idea to remain objective. We need to conduct research which looks for the weakness as well as the strengths in our proposal. When we know where the problems are we can decide how to address them. We can decide whether some tweaks would make the idea viable or whether we should give up on it and look for an alternative.

When I’m working with potential start ups I frequently play the devil’s advocate, challenging ideas, pointing out competition, finding reasons why the idea won’t work. Some don’t like it! They think I’m being negative. I do it not because I want people to fail but because I want them to succeed. Where possible I will offer alternative suggestions for people to consider or help them to plan the research to help them prove the viability of the plan. I will challenge even if I think the idea is a good one because in defending the idea the entrepreneur can identify the crucial messages for the business plan or a fundraising pitch.

If you need an opinion from an objective outsider who wants you to succeed why not book a complimentary half hour session to see how I can help. Book here.

As for Neil Clough, I am absolutely sure he will succeed. He has demonstrated many skills ( and quite a lot of arrogance) to a nationwide audience. Those who watched , ‘The Apprentice You’re Fired’ will have seen beyond the arrogance to the man’s vulnerabilities. He has a achieved a certain amount of celebrity which he should be able to use as a catalyst for his future ambitions. He will receive job offers and other opportunities, who knows he may even get one from Lord Sugar.

Credibility wins customers

I’ve had an interesting day with two very different perspectives on the importance of credibility to win customers. I spent the morning with a number of other business owners recording video testimonials. We all understand the importance of establishing credibility in the minds of prospects. This evening, at a networking event, I met a lady who virtually dismissed me when I started talking about qualifications!

Bill Clinton: a credible man.

Bill Clinton established his credibility with me not just with his achievements but with his grasp of the issues and the statistics.

Prospects want proof

Most prospects are sceptical, they want proof that their investment will yield results. Many will have had their fingers burned by earlier purchases that didn’t deliver on their promises. They will be reluctant to make the same mistake twice. So we have to work hard to establish our credibility. Video testimonials from happy customers can help, qualifications, statistics and results are also important.

The lady I met this evening works in the field of well-being education, she is very polished and believes passionately in what she does. She is selling talks on cancer prevention. From a marketing perspective this is a tricky area because you can’t make claims without proof. We therefore talked about ways to gain new customers and I suggested working with health professionals who believed in complimentary therapies. I suggested that my neighbour, who is an eminent cancer research professor, could be a really good contact. The conversation fell apart when I suggested that my neighbour might not be willing to go to listen to a talk by someone without qualifications in the field but might be persuaded to meet individually on my introduction. I was told that my mention of qualifications meant I didn’t ‘get it’ and there was no point in continuing the conversation!

Don’t dismiss prospects because they challenge your credibility

All good sales people know that objections do not mean that a prospect will not buy, they mean that the prospect is interested but need their concerns to be addressed before they’ll spend money. As soon as I mentioned qualifications this lady dismissed me as a prospect or someone who could help her business. How wrong!

I’ll admit to being sceptical about whether cancer is preventable but I want to believe it is. I know there is much we can do to minimise our risk so I could have been interested in what this lady had to offer. I wanted to know what made her an expert worthy of my investment, all I got was ‘all my reading’ and ‘I believe’. Well I can read so a quick search on the internet when I got home found me plenty of reading material. I don’t need to pay someone to share her reading or her beliefs with me. I want solid information supported by sound evidence. I want to know I am paying for genuine expertise.

I will not pay someone who implied that all cancer research specialists are not interested in prevention because they are in the control of the drugs companies who don’t want to find a cure. I know a couple of people who have devoted their lives to the battle with cancer, to suggest they are not interested in eliminating this awful disease is insulting to say the least.To me this lady’s attitude amounted to conspiracy theory and would therefore only influence other conspiracy theorists. This diminishes her credibility as an expert rather than increasing it.

What are the lessons for owners of small businesses?

  • Be clear about how you will establish credibility with your prospects, qualifications, testimonials, results, academic articles can all help.
  • Understand the objections that your prospects will raise and prepare your counter. Don’t walk away leaving a potential sale on the table.
  • Be respectful of your competition but know how you compete and sell the benefits of your offer when compared to your competitors.
  • Don’t be defensive. A lack of qualifications does not equal a lack of expertise but we do have to think of other ways to establish our credibility.

This lady’s business is new, I suspect it will not last long if she treats other people as she treated me. That would be a shame because she is articulate, passionate and has laudable aims. I hope that she will read this article and think twice about how to ‘sell’ her services.

Are you sometimes too quick to dismiss prospects? Do you need to work harder at establishing your credibility? I can help you to define and communicate what makes you the right choice for your prospects. I’ve been working with owners of small businesses for 21 years and have helped many to hone their marketing messages to win new customers. (You can see video testimonials from some of my customers on the About page ) Book a free, no obligation 30 minute initial consultation here.

Rich men (and probably women) can do Maths!

I’ve just seen two fantastic examples of highly successful businessmen do some complex mental maths at the speed of light. Is this the ability that separates the multi millionaires from the rest of us?

I have talked before about the importance of knowing our numbers but these two gentlemen demonstrated just how important mental arithmetic is. The ability to work out percentages, profit margins, break even points, market share etc. in an instant can give an entrepreneur real competitive advantage.

another version of Image:Arithmetic symbols.svg

We all need to be competent in Maths to succeed in business.svg (Photo credit: Wikipedia)

When I am running start your own business courses participants usually groan when I introduce numbers. It’s the area where most have the least confidence.  Most need calculators for even simple sums. Yesterday I bought a round of three drinks, the barmaid had to key each item into the till before she could tell me what I owed.The last time I went to the fish and chip shop the assistant was surprised that I had the right money sorted before he had rung the order into the till. I’m no mathematical genius but it wasn’t a complicated sum.

I know we have changed the way we teach maths in the UK in recent years, I hope that the result will be a generation that is confident and competent with numbers and that is less dependent on the calculator. Ultimately I hope it will lead to more successful entrepreneurs in the future.

A great example from a small business

I often quote examples of businesses doing things wrong so today I’m going to redress the balance a bit and talk about one business doing a number of things right!

After months of frustrations with my very unprofessional window cleaner I finally gave him his marching orders a couple of weeks ago. I was therefore receptive to the knock on the door asking me if I would be interested in a quote for window cleaning. The quote was very reasonable so I said yes, I was given a slip of paper with some details of the service and told to expect a call from ‘my boss’. A few days later the boss called and said they would be cleaning my windows the day after, he agreed to arrive at a time to suit me.

Make a good first impression

Gabor duly arrived in a smart, liveried van at the agreed time. Both he and his assistant were wearing polo shirts branded with the company name and logo. First impressions were excellent.

Spotless booklet

Anticipating and answering customer questions brings a degree of professionalism uncommon in the window cleaning industry.

Gabor explained the window cleaning system they used highlighting the features and benefits of the service and pointing out that the windows would be left to dry naturally so addressing head on any complaint I might have raised. He then produced an information booklet explaining the system, demonstrating his knowledge of the window cleaning market and health and safety and outlining his terms of business. Finally having agreed terms he asked me to complete and sign an agreement. All very professional.

Gabor and his assistant then cleaned the windows, frames and seals as agreed and I paid for an excellent job. I am confident that they will be back in four weeks as agreed.

So what can we learn?

  • Stand out from the crowd. Rather than leaving fliers through our doors Spotless Windows had a professional sales team knocking on doors and engaging with potential customers. Some people might have objected to the intrusion but enough have signed up for them to make a start.
  • Look professional. Liveried vans and staff ‘uniforms’ give the impression of a professional outfit and suggested that the service would be professional.
  • The information booklet is reassuring. It gives a good explanation of the service highlighting the benefits over traditional window cleaning. It has an FAQs section to deal with queries and potential objections and give contact details to give substance to the offer. It also mentions a couple of additional services that the company offers.
  • Spot an opportunity and seize it. Gabor has identified a new system that will allow window cleaners to adapt to changes in health and safety law and he has grabbed the opportunity with both hands. This has put him ahead of the game and will make it more difficult for new entrants into the market to get a foothold,
  • Use modern technology. Not only does the cleaning system used adopt the latest technology but the company will also use text messaging to inform customers of their cleaning days and we can use technology to pay our bills.
  • State your terms clearly. The agreement sets out what we can expect and what we are committing to. The terms are reasonable to both parties and should prevent misunderstandings and disagreements.
  • Give a good service. When you give a good service your customers become your advocates and may enable you to reduce your advertising expenditure.

My only criticism: I believe that Gabor is Hungarian which means that there are a few minor grammatical mistakes in his booklet and agreement but they are still better written than many produced by native English speakers. He has shown the rest of us how to do business and I wish him every success with his business. I’m sure he will do very well indeed.

Does your business rely on favours?

It’s very tempting, especially when starting a business, to rely on the goodwill of other people. That might mean using voluntary help to serve your customers or to take care of your marketing or administration. It might mean negotiating a deal to use empty or underused premises. The problem with favours is that they are unsustainable.

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Your friends might have better things to do than working for you for no reward.

When people are doing you a favour they are not generally as committed as they would be if they were doing it for a reward. They will prioritise family, home, work and possibly friends ahead of you. If they can’t come in today that’s bad luck but they have less guilt because they are doing you a favour. It’s the same with premises, a landlord might be happy to let you use his premises until such time as he gets a better commercial deal. At that point you will be kicked out with little notice. A venue might be prepared to host one event for you but, unless it leads to significant business, they will be reluctant to host another without payment. When you seek a favour you will always be vulnerable to a better offer.

Set your prices as if you were paying

Now you may not be able to afford to pay commercial rates for staff or premises when you start out but it is vital that you set your prices as if you were paying. People may do you a favour to give you a start but they are unlikely to want to make a long term commitment. Once you are up and running you will be expected to pay, if you have not factored that into your pricing strategy how will you cope? It’s not easy to raise prices and keep customers.

What’s your back up plan?

It’s also important to have a back up plan. What will happen if a key volunteer can’t come in? Do you have someone else you can call upon? Have you researched alternative premises in case your landlord gives you notice?

Recently I’ve heard several sob stories where people have relied on favours which have not been sustainable. One successful business found themselves with less than two weeks to find a new premises. Another business owner didn’t have access to vital business performance information because the friend who was doing her a favour had other priorities. In another case a business organisation was struggling to find hosts for events because another organisation had used up some favours from potential venues.

Have you got the right business model?

The trouble with favours is that it’s almost impossible to get them formalised in a contract. When we negotiate a commercial deal we can at least get notice periods built into the contract so we have wriggle room. We can also set our prices on a proper, sustainable basis. If you can’t manage without favours is your business model really sustainable? If people will not pay enough to cover the costs of staff, premises, catering etc. then what you offer is not valuable enough to them. Sometimes we have to listen to the feedback and take tough decisions however much it hurts. That doesn’t necessarily mean giving up but it does mean looking at the business model.

If you need help developing a sustainable business model email me. We have a range of services designed to help you start and grow a business.

In September 2013 The Training Pack will celebrate 21 years of helping people to start and grow businesses. We offer training, one to one advice and practical marketing help on a cost effective basis. If you would like to find out how we can help you book yourself in for one of our free 30 minute no obligation initial consultation calls? 

Growing business, lessons from gardeners. Lesson 3.

Great gardeners know that they get the most impact when they sow in drifts. If one seed doesn’t germinate there will be others to take its place so the effect is not lost. However sow in small patches and when a seed doesn’t germinate our gardener is left with a bare patch of soil. In business we limit the potential for marketing success if our target is too small so we need to have enough people in our sites to make an impact.

List building

Gardeners plant in drifts for maximum effect. Marketers need to reach enough prospects to generate sales

Is your list big enough?

Now let’s assume that you want to make £1000 from your marketing campaign and your customers’ average spend is £25 so you would need to make 40 sales to achieve your target. If you got a 2% conversion rate from your marketing you would be doing very well. You will therefore need to reach 2000 people to achieve your goal. Now in reality you are unlikely to make a 2% return on a cold list so you need many more names on the list or to work hard at warming the prospects on your list before you make an offer. If you don’t sow enough ‘seeds’ your mailing will not have the impact you need to reach your sales target.

I talked about the importance of list building in my last post, if you haven’t already read that you can see it here.  But building a list can take time so today we’re going to consider some other ways to reach more prospects in your potential target market.

Buy a list

One way to add multiple names to your marketing campaigns is to buy a mailing list.   This will allow you to purchase a number of names that meet your target customer’s profile. You should be able to find lots of potential list suppliers with an Internet search but always check that the data is collected in a legal manner and is kept up to date. Ask how the list is compiled and both how and how often the data is cleaned.

When you buy a list buy it for multiple use. As we discussed in the last post a one off mailing is unlikely to yield results and if you mail to a list you have purchased for single use only the list holder is likely to come after you! Consider what information to buy. For a small additional charge you should be able to get phone numbers for the people on the list. A follow up phone call can dramatically increase your conversion rates.

Leaflet distribution

Distributing fliers or postcards to your target market is a relatively inexpensive way of raising your profile to a defined target market.

Door drops can work if you are selling to the consumer market but don’t expect a massive response. Making a special offer on production of the flier or via a special code will allow you to measure response. Make sure you print on both sides of the document. It doesn’t cost much more to print double sided and it will increase your chances of success. Fliers are like toast! Drop a slice of toast and nine times out of 10 it will drop butter side down. Print one side of a flier and when that lands print side down your prospect will not see your message before the flier gets deposited in the recycling bin.

Consider inserting your fliers with publications your target market is likely to read. Most magazines and many newspapers offer a mailing distribution service and you can usually select which areas you want to target. Inserts get a better response than advertising in the publication itself.

A selection of other ideas

  • use a telemarketing company to generate warm leads for you
  • find people with high traffic to your target market and offer to pay an affiliate fee to for sales made via their affiliate code
  • offer to speak at events where your target market hangs out
  • use internet advertising via Google adwords or Facebook

I would love to hear any other ideas you have or how these suggestions have worked for you.

So don’t have any bare patches in your garden, make sure you sow enough marketing seeds for your leads to germinate enough sales. If you need any help developing these ideas comment here or email me at glenda dot shawley at thetrainingpack dot co dot UK.