We provide articles and answers business related questions for a variety of business specific and general interest publications. Below is a selection of some some of these articles that are packed with hints, tips and ideas for both new and experienced business owners.

What sort of business should I start?

One of the most common questions people have always asked when thinking about venturing off into self-employment and business is, what sort of business should I start?  A new version of this question that has been ushered in by e-commerce and online marketplaces like Amazon is, what should I sell?  Some Content Management Systems (websites that allow you to use drop and drag functions to build your own website) even feature links to online communities of manufacturers to find products to sell, after you have built your website.

This approach often leads would-be business owners to frequently change their focus while chasing the next big thing.  The reality is the next big thing often has a limited life span and this has been true from tulips in the 1600’s to fidget spinners in 2016.   Often the businesses at the forefront of these trends make large profits and everyone who arrives late to the party ends up holding stock they struggle to get rid of when consumers move on to the next fad.

If you are serious about starting a business, we’d like to suggest two different questions you might like to think about instead.  The first is, what problem can I solve?  Often the key to starting a business with solid long-term potential is being the first person to solve a problem that is bothering other people.  Sometimes these great problem-solving ideas come out of nowhere. The cliché, “it just hit me in the shower,” phenomenon.  You can be more deliberate in this process, however.  If you think about things that annoy you, that is a clue that there is a problem that needs solving.  Equally, when you hear other people start sentences with phrases like, “I wish that,” or “why doesn’t someone,” this is a clue that a problem exists.   Start noting down these problems and if you can come up with a solution to one of them, you might just have the start of a business!

The second question you can ask yourself relates to a tongue-in-cheek suggestion that was often heard in American Business Schools before mobile phones replaced every other time keeping device, why don’t you take an existing product and put a clock in it?  While some people have literally taken existing products and added clocks to them, the real question that is being hinted at here is, what existing product or service can you improve on?  We all buy products that don’t do quite what we want or services that are delivered in ways that are not as satisfying as we would like.  If you can find a way to deliver an existing product or service in a way that is better or cheaper than competitors, this can also be the foundation of a great start up!

What's in a name: How to select a business name

One question that several people asked after reading our last piece was, how do I come up with a good name for my business? There is no absolute right or wrong naming strategy to use, but you should consider looking for the following:

• A name that is memorable (will people remember it if they hear or see it again).

• A name that is easy to remember (if someone sees your logo, will they remember your name so they can Google you when they need you).

• A name that says what you do, for example London Acting School speaks for itself.

• A name that conveys a message, be that high quality, low cost or unique products.

You may decide to find a name that incorporates all these elements. You might also decide on a name that incorporates none of them! Remember though, the less of these elements that you incorporate, the more work you are going to have to do and money you are going to have to spend developing brand awareness and communicating your value to potential clients. Keep in mind that if:

• Your business name is not memorable; you might have to expose potential customers to your branding more times before they start to become consciously aware of you.

• Your business name is not easy to remember, you will lose sales because people who would have bought from you end up buying from a competitor who’s name they can remember.

• Potential customers can’t tell what you do from your name you will miss some customers who never stop to consider that you have what they need and you will also miss out on some easy organic search engine traffic.

• Your business name doesn’t communicate what your business is all about at a deeper level, some customers won’t relate to you and won’t buy from you.

It is ok to have a unique name that requires more explanation. Just remember, if you go down this route, you must then actually take the time and spend the money to communicate what you are all about to potential customers.

One final thought, just because you come up with the perfect business name doesn’t mean you can use it.  If the name you like is already in use you will have to come up with a different name, or at least alter the name you like enough so that there can be no confusion between you and the other business that already owns the name.  It’s important to confirm the name you want is available and register it before you commit too much time, energy and money to a name you can’t use.  This is a common mistake and even seasoned veterans occasionally get so excited they forget to check.  Just ask Mark Zuckerberg and his team who got so excited about rebranding the Facebook Group of companies as Meta that nobody checked if the name was available before announcing the new name and showing the new logo to the public.  Now the business that actually has the rights to this name has asked for $20 million to make the name available!

Give the fish, don’t take the cheese

Over the last week a reader sent in a brilliant question which can be summarised as; all businesses seem to say they offer great customer service, how can I demonstrate that when I say that I do too, I really mean it?  This is a very worthwhile question that doesn’t get asked nearly often enough!  To answer it, I am going to share below an email I sent to my own team about seven years ago, because the answer really hasn’t changed over time and probably never will.

Over the last couple of weeks, I’ve had two different experiences ordering meals that have caused me to step back and think about what I like as a customer and as an extension of that, how I want to treat our customers. 

Two weeks ago, I ordered a cheese and salad wrap for lunch.  I watched with disbelief at first, then amusement and finally with a little annoyance, when what was happening dawned on me.  The person making the wrap added three pieces of cheese and then took multiple attempts to remove one of them to ensure I received what I can only assume was some sort of mandated allowance of two pieces.  I walked out thinking, “nothing really says you don’t want my business quite like reneging on a piece of cheese!”

Later that same week, I tried a new fish and chip shop that had been recommended to me. They have several coating options for the fish, which apparently, they are quite famous for. I confessed when ordering that I had never been there before and didn’t really know what I wanted, but I settled on some sort of tempura inspired batter. The owner brought my order out to me when it was ready and told me that they had included a couple of extra pieces of fish with different coatings so I could try each of them and decide what I liked best, at no extra cost.

There are two things that I think are worth noting here. Firstly, no one recommended the sandwich shop to me and over the last week I have told several people of my ridiculous experience and suggested they give it a wide berth. Secondly, I went to the fish and chip shop because someone did actually recommend it to me, and I was so impressed with their gesture that I have now recommended it to several other people.

This made me think about how I would like our customers to perceive us, and what I would like them to tell other companies about us. With that in mind, I have made a point to remind myself that whenever I deal with our customers, potential, new or existing; I will always go out of my way to give the fish and never take the cheese. It sounds so simple but give it a go. I suspect that little bit of extra effort will be rewarded with good karma and maybe even new clients.  

Creating your perfect logo

We recently answered a question about selecting a business name.  That has resulted in several people asking questions about designing a logo so we want to outline a general process you can follow.

A logo is important because it is how you represent your new business name, and the character and personality of the business, all in one eye catching image.

Let me say right at the outset, our experience has been that people generally should not design their own logos! This is because the majority of people are not designers and do not have either the artistic ability or necessary technical skills to do so. In reality though, a quality logo should not cost that much, and getting a specialist logo designer to work with you on this certainly shouldn’t result in this being one of your larger start-up expenses. 

Having said that, just because you are using the artistic talent and technical skills of someone else to get a high-quality logo, that does not mean that you should not oversee the project; in fact, you should be calling the shots at all times! The designer might come back to you with suggestions, but be prepared to give guidance on things like:

• Colours

• Size

• Images you want incorporated into the logo

• Fonts

• Symbols

• Overall style (modern, classic, abstract, cartoonish,

military, western, etc. etc.) .

The more clearly you can tell your designer what you want, the more smoothly the process will go. This means you need to give some thought to the above elements at a minimum before you hire a logo designer. 

Sometimes though, it can be hard to even know where to start. If this is you, it helps to think about what your business is going to deliver and what it represents. You can then tell other people about your business and get feedback as to what sort of colours, images etc. they associate with what you are telling them.

For example, when we ran this exercise for a client who was going to sell environmentally friendly cleaning products, we discovered that potential customers associated what the company was going to sell with:

• Light green

• Native trees

• Bees

• Rivers

• Stones

• Mint

• White lettering with a solid font that had rounded edges We couldn’t do much with the mint smell, however the other elements were exactly what was needed to craft a logo that clearly communicated everything about the company that potential customers needed to know.

 Once you know what you want, it can often be helpful to look for other companies with logos that have elements that you like. This makes it much easier to demonstrate to your designer what you want without engaging in a frustrating game that resembles Pictionary or Charades!

When you have decided on how you want your logo to look and have appointed a designer to produce it for you, there are a couple of things you should be aware of. The first is to request the logo in two colours, perhaps the primary colour scheme you have decided on and a version in black and white. This will give you some flexibility when you put

your logo on a variety of different backgrounds because in some cases you might find there is a clash with the colours you have chosen for your logo and the background.

You should also request, and make sure you obtain, the original graphics files for your logo. These are called vector files and are likely to be Adobe Photoshop or Illustrator files and the file extension will be something like .png. The thing to avoid is only getting generic image files like JPEG files, which will end in .jpg. The problem with generic image files is that the background will also form part of the image so you can’t put your logo over just any background, nor can you resize the image without a loss of quality.

What products should I sell: Part 1

We’ve had several questions over the last week about starting online businesses and how to select products to sell, so we want to spend some time on this topic.

The best place to start is generally figuring out what product you are going to be selling and how much it will cost to make it. For small start-ups this will always fall into one of two categories:

 • Products you have designed and manufactured, or had manufactured, yourself.

• Products you buy wholesale and resell.

This is a big topic so this week we are going to talk about costing products you have designed yourself, next time we’ll talk about products you buy and resell.

There are many exceptions, but this first category often involves products that have something of an artistic element to them. The people who make and sell these items often regard themselves as artists or creative people. Some of the businesses that we have worked with in this category include businesses that make unique floral arrangements, businesses that make cakes, businesses that make sculptures, businesses that design and sell t-shirts and even a business that makes ‘African Donuts’. The only limits are your imagination and your ability to make what you imagine.

You need to ask; can I actually make it myself? If you can, fantastic. You can then move on to calculating how much it costs to make each unit. If your products are very unique, you might have to repeat this process every time you make a product. The costs you are considering include the cost of the raw materials plus the cost of obtaining the raw materials, which will mean shipping or postage costs from the supplier to you.

If you can’t make the product yourself, then you need to identify who can manufacture your product and reach out to several manufacturers to find out how much it will cost to have your product produced. There are several things to be aware of here. The first is protecting your intellectual property. If you have come up with a truly unique product you need to seek out professional legal advice. This will cost money but there is no getting around this.

You also need to be aware of minimum orders. If you must order many units, you are increasing your risk significantly because you may end up with a lot of money tied up in products that you don’t know if you can sell. The simplest solution is to keep looking for someone who will manufacture a small run of products at a low cost so you can obtain a commercial proof of concept.

The third thing to be aware of is shipping costs again. When you are working out how much it costs to have your product manufactured, you need to make sure your unit cost includes the cost of having the units shipped to you. This will be as simple as dividing the total shipping cost buy the number of units and then adding that number onto the unit cost for each unit.

What Product Should I Sell : Part 2

Last time we talked about costing products you designed yourself. This week we are going to look at selecting and buying products wholesale that you can then resell. If you are intending to buy and resell a product, the first question is, do you already know what that product is? If you do, things are relatively straight forward.

 Before you do anything else you need to know how many other people are selling the same product and more importantly, how much they are selling it for? You can’t expect to be selling your product for more than most of your competitors. A quick Google search here can give you an idea.

 Once you have estimated what you can sell your chosen product for, you need to identify possible suppliers. You need to know how much each of these suppliers will sell units to you for. You also need to be aware of minimum orders. If you must order many units, you are increasing your risk significantly because you may end up with a lot of money tied up in products that are untested, at least by you. As a rule, the smaller number of units you can order the better.

 It is also important to be aware of shipping costs per unit. This will be as simple as dividing the total shipping cost by the number of units and then adding that number onto each unit, just like we talked about last time.

 At this point it is also worth asking potential suppliers if they will ship individual units to your customers directly with your logo on the packaging and sales documents. Failing this, a supplier who will post products directly to your customers without any of their own branding can also work.

If you don’t know what you are going to sell, things get a little more complicated. You need to identify a product that you are interested in selling and that customers are interested in buying. One of the simplest ways of doing this is to start watching what the bestselling products on sites like Amazon are. Most marketplace sites will provide this information somewhere, but you might have to dig for it a little bit.

Once you have decided on a product, you can move on to identifying possible suppliers.  Again, you need to know how much each supplier will sell units to you for.  As covered above, you need to be aware of minimum orders, shipping costs and whether a potential supplier will ship individual units directly to your customers with your logo on the packaging and included sales documents.

Similarly, you still need to know how many other people are selling the same product and more importantly, how much they are selling it for, because once again, you can’t expect to be selling the same product for more than your competitors.

We touched on Google above and you should not underestimate how much free information you can get by Googling the product.  It will be very easy to build up a repository of data including who is selling it, how much they are selling it for and how they are advertising/describing it.  When comparing pricing, be mindful that prices can appear to vary more than they actually do because some sellers will include free postage while others will price low and only disclose postage costs at the checkout.  

Next time we’ll take the information you have gathered and use it to figure out if the product you have selected is financially viable.

What Product should I sell: Part 3

If you have been following along with the last two editions, at this point you will know:

• The product you are going to sell.

• Who you are going to use as a supplier.

• How much the unit cost is (including shipping) to purchase each unit.

• How many competitors you have and their average sale price.

 Now you need to determine if your product is actually financially viable from a business standpoint.  The unfortunate reality is that not every great idea makes for a good business.

 If you have discovered that competitors are selling the same product for less than you can buy it, obviously you need to find a different product.  You simply go back to the start and work through each step covered so far over again.

 If you have learned that you can buy a product for less than your competitors are selling it, the product has potential. However, it still might not be financially viable. The next step is to decide how much you will sell your product for, taking into account your competitors selling price. If the product your competitors are selling is identical, you may need to engage in price-based competition because there may be no other way to differentiate the product.  This means pricing as low as you can, at least until you can build up stronger reviews than competitors.   

 Now you have decided on a sale price, you are going to subtract your total purchase price per unit (make sure you have included shipping costs payable by you when you are purchasing units as discussed previously) from your intended sale price. This gives you your profit margin per unit.

 PROFIT PER UNIT = SALE PRICE – (PURCHASE COST + SHIPPING TO YOU)

 Next, you need to figure out how much you want to make each week for your business to be worthwhile from your own personal perspective. There is no right answer to this question. As a lean start up, if you have no other source of income, you might want to consider how much it costs to pay your bills and put food on the table each week.  If you still have a day job, you can obviously work on a much lower income target.

 You are now going to divide your income target by the profit per unit that you calculated above.  This will tell you roughly how many units you need to sell each week to make the minimum amount you want to earn.  You also need to consider your personal tax situation at this point, because this profit may be taxable at the end of the financial year.

NUMBER OF SALES NEEDED = DESIRED INCOME / PROFIT PER UNIT

Once you know the number of sales you need each week to make the income you want, you will need to estimate if this seems reasonable. This will require some informed guess work.

For example, if you are going to sell a product that only a small subgroup of the population will buy and you know that they will buy it infrequently, you may have a problem. You might need to find a way to increase your potential customer base, increase your profit margin, or worst case, start over with a new product.  

A great case study is the bedding industry. Many people struggle to understand why mattresses can be so expensive. The markup on mattresses can be 900%. However, mattress retailers also know that on average a customer will only buy a mattress once every 8 years, so they need a very high profit on each sale because the sales are so infrequent.

The Missing Project Management Step

The new year is in full swing, and businesses are starting to undertake projects.  One of the questions we have been asked is, what is the most important thing you can do to make a project successful?  We are going to answer that from a slightly different perspective.  We are going to talk about the important project management step that is often overlooked.  

 Sometime ago I stopped at one of those convenience stores that now sells fuel.  The person at the front of the line was confronted with the question we are all often asked when paying for fuel, “would you like a *insert supposedly on sale item here* for just *insert what may or may not be a low price here*.”  In this case it was a muffin for $2.

 The customer agreed but after trying to pay, the person behind the counter announced that it wasn’t possible to buy anything other than fuel on the, quite aptly named, fuel card.  The customer said he didn’t want the muffin anyway and to just remove it from the transaction.  The person behind the counter then revealed that he couldn’t actually do that.  Helpfully the customer offered to pay the $2 in cash.  The person behind the counter said he couldn’t break up the transaction.  Getting exasperated, the customer then suggested canceling the transaction and starting again without the muffin.  I can only speak for myself but, I think everyone in the growing line was startled to hear the staff member reveal that he didn’t know how to do that either!

 Over the next 15 minutes, 2 staff members seemed to alternate between quiet prayer and hopeful button pushing on the point of sale (POS) terminal.  They tried to call what I presume was a technical support line and after getting through, were placed on hold.  Eventually, the whole system was shut down and restarted, the old, ‘turn it off and back on again’, approach to tech support.

 Finally, the customer was on his way, the next person in line finally reached the counter to pay for her fuel, then without missing a beat, the staff member asked, “would you like a muffin for just $2 today?” At this point me, and the other 12 people who had been standing in the line throughout this ordeal, answered in unison, “no!”

 While waiting in line it occurred to me that I had seen this before.  What happened was a symptom of a common problem that anyone who works on projects will probably have encountered.  Let me go out on a limb here. Without knowing anything about how those POS terminals ended up in those stores, I’d be willing to bet that the roll-out project omitted a key step, staff training (Actually, I’d be willing to bet that it omitted two key steps).

 How often have you seen a project timeline, perhaps a Gantt chart, or a PERT diagram, that makes no reference to staff training?  I’ve lost count of how many times I’ve seen this, and if you start to ask why this stage of the project is missing, you get some bewildering answers.  Some that I’ve recorded over the years include:

• We don’t have time for that

• We don’t have enough funding allocated to the project for training

• We don’t have thle resources

• Managers should organise training for their staff once we go live

• We’ll make a member of the project team available to answer questions for a while

• We expect the users will familiarise themselves with the changes on their own time

• People will learn the new system as they go

 To translate, “we’re not going to cost this project properly or plan it out to completion because if we do, we might realise we don’t have enough money, time, or both to do it properly.  We are going to build three quarters of the bridge and hope everyone just jumps the gap at the end.”  

 And to be clear, by definition we are talking about a project that is not properly costed.  The failure to cost in training means that you will inevitably incur a raft of soft costs later that are also not costed into the project, may never be accurately captured, and could quite easily end up costing more than the training would have in the first place!

 So really, what does a project with no training element look like?  Well, it’s rarely good and can be disastrous.  In this case, the end result was two frustrated staff members and I suspect 12 customers who decided the competitor down the road was a better option next time. What was the cost differential between losing 12 customers and training two staff members?  I have no idea, but the key point here is I very much doubt the person who costed this POS terminal roll-out project has any idea either.   

 So let me go out on another limb here and say, if you can’t accommodate training in your project plan for whatever reason, you need to consider that you don’t have a viable project at that point.  That is not to say that your project should never go ahead, but perhaps it should be postponed until training can be incorporated.   You may just find that waiting lowers the overall real cost of your project considerably!

The Other Missing Project Management Step

 Last time I made a passing reference to another missing project management step and a number of curious readers have asked what it is.  This missing step can actually be more serious because unlike training, which we spoke about last time, it is often impossible to go back and retrospectively undo the damage if you miss this step.  The missing step we are talking about is stakeholder consultation, and more specifically consultation with end users.   

 You may have heard a variation of this story about a company that spent a large amount of money to automate a system that weighed packed boxes on its production line.  When a box was underweight, it stopped the conveyer belt and sounded an alarm so someone could remove and check the box.  As the story goes, the directors went to inspect the production line to see this new and expensive system in action.  They found a pedestal fan beside the conveyer belt.  The foreman told them that it was taking too much time to check each box and restart the conveyor belt every time an underweight box went past so he set up the $10 fan to blow underweight boxes off the conveyor before they could trigger the system.   

 Before you assume this is just a story, let me tell you about another example that I know to be true.  A very large Australian finance company rolled out a new VoIP phone system for all their call centres.  That is to say, middle and lower-level management rolled out this system with no consultation with end users.  Several months went by before a General Manager decided to take it upon himself to investigate why the company’s poor reputation for customer service was getting even worse.  One call center employee told him that not being able to put callers on hold was probably a significant factor.  His first reaction was that it was not conceivable that all the company’s Australian call centers had a phone system that didn’t allow callers to be put on hold.  Sure enough though, that is exactly what had been rolled out.  

 If the person in the call center didn’t know the answer to a customer’s query, they might have to make half a dozen or more calls to find someone who knew the answer and was prepared to pick up their phone.  While this was happening, the client was on the phone with the exasperated call center person the whole time, being told over and over that no one was answering.  Imagine the impression this left clients with. And to make things worse, lower and mid-level managers became aware of this problem shortly after the new phone system went live and were actively hiding it from senior managers so they wouldn’t look bad!  

 Granted this company had quite a few entrenched cultural problems that contributed to how this all played out and they ended up being taken over by a larger competitor when their share price sank low enough.  Having said that though, one of the key elements at work here is good old-fashioned arrogance.  The belief that end users shouldn’t be involved in making decisions, or for our purposes scoping projects, because end users tend to hold non-management roles and, ‘managers know better’.   The irony with this of course is that generally the people who know the most about what is happening in an organisation in detail, and consequently what needs to be done, are the people at the ‘coal face’.

 The implications of this for project managers are obvious, but so often ignored.  With that in mind, I have often made the following suggestions to clients who were project managers or who were business owners about to embark on projects:

•   To begin with, build in a consultation step. Accept that you don’t know everything, and you certainly don’t know enough to put together a complex project that affects other stakeholders without their help.

• If you have a project team, make sure some end users are on that team.

• If you find yourself starting to think that you know more about what needs to be delivered than the end users, take a deep breath and get over yourself. Seriously, it doesn’t matter what title is on your business card, if you are not the end user than you have to realize that the end users’ opinions are at least as important as, and probably more important, than yours.

• Talk with as many of the stakeholders that will be impacted by the project that you can identify as a bare minimum, but in reality, you should actively be working with these stakeholders.

• Don’t meet with stakeholders once and just tick the ‘consultation box’. Keep meeting with and getting input from stakeholders, particularly end users, right throughout the project.

• Recognize that if the deliverable is a new or modified product, you have 2 distinct types of end users that must be happy; the people that will buy the product and the staff that are going to have to sell it to them.

 If you want a successful project, you can’t be arrogant.  You need to consult with all stakeholders, particularly the end users, from beginning to end.  If you don’t, you might find yourself having to explain why you spent hundreds of thousands of dollars when a $10 fan would have worked just fine.

How should I spend my time?

Last week we received a great question from a local small business owner.  Like most small business owners, this person wears a lot of different hats in their business, which can be overwhelming.  They wanted advice on how to structure their days and what activities to prioritise to improve their productivity.  

There are a lot of different ways to answer this question, but we are going to introduce a concept from the world of Lean Six Sigma to provide an answer from a perspective that is not commonly considered by small business owners.  This concept is value adding.  

All businesses exist to meet the needs of customers.  If a business is not meeting the needs of customers, it won’t last long!  This means that when we talk about value adding, it must be from the perspective of our customers.  With this in mind, we can define value adding as:

•  An activity that changes the form, function or some other characteristic of an item or service in a way that the customer values and is prepared to pay for.

Conversely, any activity that doesn’t do this is not value adding (NVA).  That sounds great in theory, however in practice it’s not quite that simple.  There are actually three separate categories of NVA activities that we need to understand.  These can be defined as:

• Type 1 NVA activities don’t add value from a customer’s perspective directly but are necessary to enable value adding activities.

• Type 2 NVA activities don’t add value from a customer’s perspective however they are mandatory.

• Type 3 NVA activities don’t add value from a customer’s perspective and are actually optional.  

 To make this clearer, we can look at an example of each.  We’ll use the example of a small house painting business.  At the most fundamental level, customers hire this business because they want their walls to be specific colours.  Any activity that is directly involved in putting the right colours on the right walls in the agreed time frame at the quoted price is value adding.  To really simplify things, this means, dipping, brushing, and rolling.

 However, in order to travel to the customer’s house to engage in the value adding activities, the painter needs to be able to drive, and this means putting petrol in their vehicle.  So, while not value adding from the customer’s perspective, stopping to get petrol is a Type 1 NVA activity because while it doesn’t add value from a customer’s perspective directly, it is necessary to enable value adding activities.

 Every three months this painter also must sit down and lodge their Business Activity Statement.  This clearly doesn’t add value from the customer’s perspective and also isn’t necessary to enable value adding activities.  However, it is unfortunately mandatory and unavoidable. So, this is a Type 2 NVA activity.

 Finally, this painter might decide to spend some time on Facebook arguing with someone who has posted a comment saying people should save money by doing their own painting.  This activity doesn’t add value from a customer’s perspective and doesn’t enable other value adding activities. It is completely optional and is obviously a Type 3 NVA activity.

 So how does knowing what is value adding and what NVA categories other activities fall into help us to decide how to spend our time?   We said earlier that customers only pay for value adding activities and businesses exist to meet customers’ needs for products and services that have had value added from their perspective.  It naturally follows that business owners should prioritise value adding activities above everything else, followed by Type 1 NVA activities.

 Type 2 NVA activities should be automated, outsourced or even avoided to the extent possible.  Sure, you can’t get out of lodging your Business Activity Statement, but there is no reason why a bookkeeper can’t do this while you concentrate on value adding activities in your business.  As for Type 3 NVA activities, every one of these that you can identify in your business should be ruthlessly removed!

The Eisenhower Matrix: Another Approach to Time Management

Last time we answered a question from a local business owner who was struggling with time management.   We approached this question from the perspective of dividing activities into those that add value from the customer’s perspective or enable these activities, those that aren’t related to adding value but are unavoidable and finally activities that neither add value nor are necessary.  We suggested concentrating on the value adding activities, removing optional non-value adding activities and accommodating everything in between.

One reader emailed to say that they tried to apply this approach but found they didn’t know where to start because there were so many activities that seemed to add value in some way or were unavoidable. They felt that they were unable to make a decision on where to start.  This ‘decision paralysis’ happens to a lot of people, even Presidents.  So, we are going to look at another time management tool that was actually created in part by a former American President.

The Eisenhower Matrix aims to help people focus their attention on what really needs to be done.  We’ve included a copy of the matrix that you can easily reproduce and use yourself.  Starting at the top left is the quadrant for activities that are both urgent and important.  Top right is the important but not urgent activities.  Bottom left is urgent but not important.  Finally, bottom right is the quadrant for activities that are neither urgent nor important.

As a business owner, you want to focus your attention on items that fall into the top left quadrant.  These activities are both important and urgent, so they should be the items you work on first each day.  You may even have these activities ordered by importance or urgency to give you additional structure.  An example of an activity that would fit within this quadrant is returning an enquiry from a potential customer.  

Your aim should be to get through all of the important and urgent activities each day before you do anything else. It depends on your circumstances, but we know some business owners who have a goal of having this all done by lunch each day.  That frees you up to move across to the activities that are important but not urgent.  This is where professional and business improvement happens.  Things like updating the website or making a phone call to introduce yourself to a potential new client.  Some unavoidable things like paying invoices can also live in this quadrant. Unless you leave them to the last minute, in which case they will move themselves over to the urgent and important category where they will take time away from the beneficial activities that should dominate the top left of the matrix.

In the bottom left you have activities that are urgent but not important.  At worst they might create an inconvenience if they are not done but they are generally time dependent to some extent. For example, buying more milk for the office fridge or taking the outgoing mail to the mailbox to be collected by Australia Post that afternoon.  These activities can almost always be postponed if you still have important activities to complete and can, and should, almost always be delegated to someone else.

Finally, in the bottom right is the quadrant for activities that are neither important nor urgent.  Anything that is left over goes into this quadrant and in the vast majority of cases can be eliminated entirely.  This is where things like meetings without agendas, office gossip, discussing whether jeans are suitable for casual dress days and participating in arguments on Facebook go.  

The Three Vantage Points Every New Business Owner Needs to Know

 One question we received recently was from a new business owner who was curious whether the way business owners need to spend their time changes as a business grows and matures.  They wanted to know if there are specific time management strategies for owners of new business start-ups.   The answer is yes, and we are going to look at one today.  

If you are in the early stages of setting up a new business, one of the best habits you can develop is to divide your time up to allow you to look at your new business from three specific and unique vantage points.  These vantage points help to facilitate a journey through your business from a macro view down to a micro view.

The first vantage point we will call the entrepreneur’s vantage point.   When looking at your business from this vantage point you are aiming to see the big picture.  This big picture includes your business from the macro level and also the wider competitive environment.  You are thinking about things like what the market you are competing in looks like, how you want your business to look and feel, why you are different from competitors and what is unique about your business.  All the major decisions about big picture topics should have been made before you launched the business, however, it is necessary to regularly make time to look at your business from the entrepreneur’s vantage point to make sure you are still on plan and to make sure nothing important in your competitive environment has changed.

The second vantage point takes us into the business and closer to the action.  We’ll call this the manager’s vantage point.  From this vantage point you can think about how the business delivers its products and services.  This means equipment, systems, processes and maybe people.  These need to be established at least rudimentarily early on in a new business and need to be revisited and revised as the business grows and adapts, or as the competitive environment changes.

The final vantage point is the practitioner’s vantage point. This is the vantage point from the coal face.  At this level you can focus on exactly what needs to be happening operationally within the business. This vantage point is concerned with details and the more specific the better.  This includes thinking about things like what stock is on hand, how many new orders have come in this morning, how many orders need to be filled today, what phone calls need to be returned in the next hour.   

If we put all of this together; from the entrepreneur’s vantage point you may be looking at competitors’ current speeds of delivery because your new business has a strategy to deliver customer’s orders faster than any of your competitors.  This prompts you to conduct an examination of your processes from the manager’s vantage point to remove any activities that have been added which are causing delays. Then, taking the practitioner’s vantage point to look at the current orders that need to be filled today so you can come up with a plan to get them out the door and into the hands of customers as quickly as possible.  

Obviously, you won’t keep cycling through each stage in order and the amount of time you spend working from each vantage point will change day to day depending on what is happening.  In the very early days, you might find you spend a lot more time taking the entrepreneur’s vantage point because there are a lot of big picture decisions that need to be made and changed early on, however once your business starts getting traction and you start attracting customers, a lot of time might be spent looking at the business from the practitioner’s vantage point.  Once you have some direct experience with your customers, you then may find you need to devote more time to the manager’s vantage point so you can use that experience to select systems and create processes. Or perhaps you may find you need to devote a considerable amount of time to the entrepreneur’s vantage point again because you made some big assumptions about the customers that you now know to be wrong!  Every business is different, but if you are running a new start-up, you should deliberately plan to spend considerable time moving around between these three vantage points.  

What is a Landing Page?

A client recently said they had been watching YouTube videos about advertising online and some of the videos mentioned landing pages.  They want to know if a landing page is the same as a webpage and if not, what are they used for.

The simple answer is that a landing page is a very specific type of webpage. The best way to describe a landing page is that it is a page on your website that you set up to direct specific visitors to, for a specific purpose.  We can explain this more clearly by looking at two examples of very different businesses.  

First, let’s imagine we run a business that sells lawn mowing services.  If we run a Facebook or a Google ad targeting people who want to have their lawn mowed, we can fairly safely, although not ideally, direct people who click on our ad to our homepage, which is the main page, or front page, on the website.  Lawn mowing is a straightforward product that everyone understands, and they may be able to get all the information they need from the home page or can easily click through to another page for pricing or to make a booking if necessary. While it’s not what we would advise, in this case the homepage could be the landing page and it is likely to be the approach most competitors are using too.

However, imagine if instead of a mowing business we sold something far more unique and expensive, like classic cars. If we had a 1966 AC Cobra Series 1 Manual and were offering it for sale for somewhere around $2m, we would have to take a very different approach than we did with lawn mowing services.

When someone doing a Google search looking for a Cobra to buy found our ad, we would want to handle them very carefully to maximize our chances of generating an enquiry because unlike lawn mowing, selling classic cars cannot be reduced to a simple numbers game. There might be less than a handful of buyers in the whole country for the car and if one clicks on our ad we don’t want to lose them!

To maximize our chances of turning that click into an enquiry and ultimately a sale, we want to start giving our potential buyer more information to grow their interest as quickly and simply as possible. With this in mind, we wouldn’t deliver them to a homepage where they would have to go searching for the car mentioned in the ad that caught their interest all over again. Instead, we would deliver them to a specific page that was devoted just to the car mentioned in the ad. From experience in this area we can say in an ideal world the process would be:

• A person searches for something like, ‘Shelby Cobra to buy’. 

• The person sees our ad offering a Cobra for sale. 

• The person clicks on our ad. 

• They are taken directly to a web page telling them all about the fantastic Cobra we have for sale, complete with excellent

photos. This is our landing page for this specific ad.

• By the time they reach the bottom of the landing page the text and photos they have encountered should have them so interested in the car they can’t resist filling in the online form and submitting their details to get a call back. 

• A salesperson then calls them back to answer questions, organise a test drive and ultimately sell them the car.

Obviously, lawn mowing services and classic cars selling for millions of dollars are almost opposites in some ways. Most products and services will not be at either extreme and most products and services will probably lean towards the lower cost, higher volume, side. However, many businesses will benefit from a mix of approaches when it comes to directing customers to homepages or landing pages. In some cases, you want people to click around your website looking at different categories of products and at other times you want to lead someone who knows precisely what product and brand they are interested in, to a page that moves them along the sales funnel from search to purchase as seamlessly and quickly as possible.

How Do I Write an Ad?

We previously published an article about landing pages and the importance of creating a landing page that related in a very direct and meaningful way to the ad that delivered the potential customer to that landing page.  This led to some people asking, how do I actually create an ad?

This is not a simple question that can be answered in less than 1000 words.  Many books and even whole courses have been written to try and answer this question. However, we can give small business owners some pointers to get you started.

If we simplify what an ad is, it is a piece of content that you pay to place in front of a particular audience that is designed to grab their attention, increase their curiosity, offer a solution to a problem or fill a need, and encourage them to make a buying decision.  

The first element, grabbing their attention, comes down to a combination of the headline and the image.  You may have less than three seconds to capture a potential customer’s attention, so your headline has to be succinct and relevant to your target customer.  Often the best way to do this is by asking a question.  For example, if you are a physiotherapist, you could run a Facebook ad with the headline: “Want to fix back pain FAST?” When you have the option of adding an image, you also have to make sure the image is relevant, high quality and will command attention.

Once you have the potential customer’s attention and they have clicked on your ad, you will be able to hold their attention for somewhere between eight and 15 seconds, depending on who you believe.  This means that often less content is more.   In digital advertising, this is where a quality landing page is key.

The content on your landing page has to quickly connect with the reader’s problem or need.  In as few words as possible you have to clearly communicate how your product or service solves the problem or fills the need and you have to give them enough confidence in your business for them to take the next and final step.  Depending on the situation, this confidence can be improved with phrases like, ‘no obligation’, ‘risk free’, or ‘money back guarantee’.

The final step is often called a ‘call to action’.  You have to tell the customer what to do at this stage.  This call to action will depend on the circumstances.  It may be as simple as a, ‘Buy Now’, button.  It could also include a link to download an app on the App Store or an enquiry form to complete.   Whatever the call to action, it is important to make it clear what you want your potential customer to do and to make it as simple as possible for them to do it.

Once you have written an ad you are happy with, it’s often worth going back to the start and creating several versions of it, which is likely to also mean several landing pages.  Try different combinations of headlines, photos and text. What you are looking to identify is what combination works best.  

In order to identify the best combination, you need to be able to measure performance.  Lots of tools will help you with this and platforms like Facebook and Google have built in metrics that are automatically updated as your ads are shown and clicked on.  If you have Google Analytics connected to your website, this will generate a lot of information too.   Ultimately though, what you really want to know is how much each version of an ad is costing you for each sale it generates.  All things being equal, you want to allocate your advertising budget to the version of the ad that is producing the highest return on investment (ROI) as soon as you can.  Then you need to continue to monitor its performance to ensure the ROI remains acceptable.   

Do I need a business plan?

We received a question from an aspiring new small business owner who wanted to know if we thought they should jump in and start selling their product or wait until they had a complete business plan drawn up to guide them.  Conventional wisdom says you must have a business plan.  Saying otherwise is considered a heresy in some circles. However, not all heresies are wrong when you take a close look at them, so we wanted to spend some time on this question.    

To begin with, let’s look at who generally says you need a business plan and why they might be a little biased.  Business schools will say you do, but they sell students MBA course units for thousands of dollars on creating a business plan.  Accountants and consultants will say you do, but they make a lot of money helping clients create detailed business plans.  Banks will say you do, but the explanation when challenged is that it’s just one of the boxes on a business loan application that needs to be ticked.  Some investors will say you do, but when you ask them why, the answer tends to be because it feels like the right sort of thing to ask for.

 So, bias aside, are there problems with creating a detailed business plan before you launch?  The

answer is often, yes. It’s important to appreciate that no matter how detailed your business plan, it will probably not survive first contact with the marketplace.  The marketplace doesn’t care about your business plan; it wants what it wants, and it wants it delivered how it wants it delivered.  By far the best way to understand the demands of the marketplace is to get out there and offer it something!

Once you launch and you start getting real time feedback from the market, you may find your business has to adapt considerably to meet the realities of that market.  It’s not unusual for people to launch one business but end up running something very different than they intended.  For example, we have known business owners who:

• Planned to operate an Italian restaurant but ended up specialising in Italian desserts and coffee.

• Began doing interior design and found they had a lot more work available doing boutique shop fit-outs instead.

• Wanted to build houses and accidentally fell into a niche just building staircases for other builders.

• Started a small bicycle repair business which grew into a large bicycle and bicycle accessory store that outsourced the repair work to another business.   

The need to get real time feedback from the market about your business idea as quickly as possible suggests you should skip the lengthy business plan and launch as soon as you have what is called in consulting speak a ‘minimum viable product’.  In simple terms this means a product, or service, that you believe offers enough value that people will buy it as is.  

However, this doesn’t mean you should launch with no preparation at all.  You should aim to move rapidly towards launching as soon as you can answer these questions in a sentence or two each:

• What are you going to sell (product)?

• Who are you going to sell it to (target market)?

• Why should they buy it (unique selling proposition)?

• How are you going to make them aware you exist (advertising channels)?

What is a Unique Selling Proposition?

We often say that it is ok to start a small business without a business plan and we suggest skipping this long, detailed, document and instead launching when you can answer briefly the following four questions:

• What are you going to sell (product)?

• Who are you going to sell it to (target market)?

• Why should they buy it (unique selling proposition)?

• How are you going to make them aware you exist (advertising channels)?

 That leads to people asking for a more detailed explanation of what a unique selling proposition (USP) actually is.  This is a great question and getting the USP right is so fundamental to the long-term planning and success of any start-up that it is worth spending some time on.

 As we noted, the USP is traditionally defined as the reason why a consumer should buy your product or your service.  However, this is an oversimplification and thinking in terms of just uniqueness can lead you down the wrong path.  A better way to understand your USP is that it is, the thing your product or service does for customers that fills a need or solves a problem they care about in a way that is different to how your competitors do this.

 If we break that down, the first thing we can see is that your USP must fill a need or solve a problem for customers.  Fundamentally, these are the only two reasons that people will exchange money for what you are offering.  It is worth noting that if you can mentally move your point of view around a bit you will realise that filling a need or solving a problem is the same thing, the difference comes down to the customer’s perspective and how you frame your communication with the customer. For example, “I want to lose weight to look better (fill a need),” and “I need to lose weight, or I’ll have a heart attack by the time I’m 50 (solve a problem),” both lead the potential customer to buy your diet shake product.  So, ideally you will be able to present your product or service in a way that convinces customers that it will do both, but you need to tick at least one of these boxes convincingly.

 The second criterion for a solid USP is that the need you are filling or problem you are solving is something your potential customer seriously cares about.  You can build the best mousetrap in the world, but someone who doesn’t have a mouse problem won’t ever buy it.  

 The third criterion is that you must be filling a need or solving a problem in a way that is different to your competitors.  This is where the uniqueness really comes in.   Just because the customer has a need or a problem and it’s important to them doesn’t mean they will buy from you.  And why should they when there is a world of competing products and services out there that will deliver what they need?  Your challenge is to demonstrate that your product or service delivers in a way that none of your competitors do, AND this difference makes what you deliver to the customer a better option than what your competitors deliver.  

 As you think about what your USP could be, remember that uniqueness in and of itself is not actually the basis of a successful USP.  For example, most cars have four wheels, but you want to manufacture a three wheeled car.  It’s certainly unique, but anyone who has driven a three wheeled car will tell you they are both impractical and dangerous so your uniqueness will not translate into a valuable USP from a customer’s perspective.  

Give a Llittle to Get them Coming Back

A question that comes up a lot from business owners is how much should they spend on advertising to attract new customers.  This is not a bad question, but it does highlight an equally important question that many business owners never ask, how much should you spend to keep existing customers coming back?  So, we decided we would provide some thoughts around that topic today.

There is an old business rule of thumb that gets printed from time to time that says that it costs five times more to acquire a new customer than to keep an existing customer.  It’s probably not true in any real sense and the actual ratio is likely to depend on not only the industry but also the individual company.  It also misses a key point, the value of future cash flows from a customer can quickly become far more important than the acquisition cost of a customer.  This point could be the topic of an entire chapter of a book; however, it is important to understand the acquisition cost is one off and finite while the future cash flows are, at least in theory, ongoing and unlimited.  

If we accept then that there is potentially more value in every dollar spent retaining customers than attracting new customers, even if it’s hard to quantify, this brings us back to the original question, how much should you spend retaining customers?  Once again, the answer to this will probably depend on the industry and even the individual company.  However, we can come to some firm conclusions about the best approach to retaining existing customers.

There are two main approaches that are employed by businesses, offering discounts and giving away free products or services.  While the word ‘free’ is very powerful in advertising designed to attract new customers, discounts are the way to go when seeking to retain existing customers.  The reason for this becomes very clear when you look at an example.  

Imagine you operate a cafe.  If you have a core group of customers who buy coffee every morning you can extend them a discount and they are likely to keep coming back each morning for their coffee because the discount is both valued and predictable.  While not quite addicted to the discount, the customers are certainly conditioned to buy from you because of it.  

What if instead of a discount you were to occasionally give loyal customers a free gift, like a caramel slice, instead?  Would it be valued?  Sure.  But it would not be predictable. Customers would never know when they were going to get a free gift, or even if they would get a free gift again.  This means their loyalty would not be guaranteed by the free gift for very long.  What’s worse, once a customer has received a free gift a number of times, they may come to expect it and start to feel unappreciated and even resentful if too much time has elapsed since the last free gift!  

While there is no one size fits all solution that will work for every business, it is clear that you should allocate money to generating repeat sales from existing customers if your business allows for it.  The best way to generate these ongoing repeat sales from existing customers is with discounts that are both valued by customers and are predictable.    

What's new always sells

Previously we have talked about enticing customers back through the power of special offers, particularly discounts, for loyal customers.  This works very well in some businesses, but invites the inevitable question, what do you do to drive repeat sales if you don’t sell a product that customers regularly buy?  In short, what you do if you sell carpentry services and not coffee?

The answer to this question can best be demonstrated by the ubiquitous iPhone.  Smartphones are everywhere.  While some people with a heightened sense of brand loyalty will froth at the mouth at the very suggestion; smartphones all do more or less the same thing in the same way and have done so for quite some time now.  So, this raises a question, why are there lines starting at Apple Stores and running through shopping centres and into the car park every time a major new model of iPhone is released?

The answer to this is that humans are hardwired to be attracted to new things.  Sometimes this makes sense.  For example, being attracted to a car over a horse and buggy is easy to understand.  However, often the change doesn’t have to be particularly great to elicit a buying reaction from people.  A cynic might even say the change doesn’t have to be real in any substantive way at all!  Take for example a regularly available pair of Doc Martens in a new limited-edition colour.  If you want to get a feel for this, google ‘new limited edition’, select shopping, and look at the products that come up. You’ll be surprised by how many of them don’t really seem that new or limited edition at all.  

This natural fascination people have with new and shiny things means the challenge for business owners is to regularly find ways to introduce new products or services.  When that is not possible, it becomes necessary to find ways to reinvent your product or service as something new, or to focus the attention of previous customers on an existing feature or benefit of your product or service that you have not previously highlighted.  This will look different for each business, but often a great place to start is to ask current and previous customers what else they would like you to provide.  The answers to that question can help you decide what new product or service to create, or if you are lucky, what existing product or service to advertise better!

As a brief example, we mentioned carpentry services above.  We are aware of one company that went down this road.  They started off offering traditional carpentry services.  Feedback from customers led them to offer more services and eventually they evolved to become a builder of residential homes.  From there they added commercial building services.  Now they even have a business arm that builds investment units and houses for landowners.   

How to sell just a little bit more

In the articles above we have talked a bit about generating repeat business.  We have focused on selling the same products or services to the same customers regularly, or new products or services to previous customers.  While both of these strategies are valuable and worthwhile implementing in your business, there are two strategies that are closely related to each other that every business should consider.  While these strategies typically generate smaller additional cash flow, they generate it much quicker than the previous strategies we looked at.  

The first of these strategies that we will look at today is the up-sell.  An up-sell in its simplest form involves successfully inviting a customer to purchase an enhanced version of a product or service they have already decided to purchase for an increase in cost.  Up-sells are particularly effective because the customer has already decided the product meets a need or satisfies a want in the form that is being offered to them, at a cost that represents acceptable value to them.  This means more than half the sales battle is already won!  

While the up-sell invitation can be presented in a number of ways, when designing your offer it is vitally important to remember that an up-sell is only successful if the customer becomes convinced that the increase in value being offered is worth as much as, and ideally more than, the increase in price.  This means the increase in price does not need to be small, but the larger the increase in price the more compelling the increase in value being offered needs to appear to be from the customer’s perspective.  

We can see how this works in practice by looking at two examples.  The first example is one that almost everyone will be familiar with, the fast-food meal up-size. In fact, it doesn’t even have to be a whole meal.  Consider McDonald’s fries.  A medium fries at McDonald’s normally costs on average around $3.10 and a large fries costs around $3.35.  If someone has already committed to purchasing a medium fries, simply asking them if they would like to “upsize to a large fries for just 25 cents,” may yield a result because the perceived value of the extra food is likely to be estimated at more than 25 cents.  The fact that McDonald’s have been doing this for decades suggests at least enough customers say yes to make it worthwhile asking.  

If you are selling a more expensive product, the same basic logic applies.  A customer who has committed to purchasing an economy flight for $300 might consider upgrading to premium economy for $450 if the extra wide seat, extra leg room, better meal and a wider selection of snacks equates to more than $150 of value to them.  However, we can see in this case that because we are talking about higher dollar amounts than in the first example, we need to include more elements in our offer to justify the increase in cost.    

Effective up-sell offers can obviously allow you to capture a higher amount of sales revenue from a percentage of your customers which in turn will increase your average sales revenue per customer across all your customers.  Depending on your circumstances it is also possible that effective up-sell offers can also increase your average net profit per customer across all your customers too.  If we look at the McDonald’s example again, the increase in amount paid by the customer was about 8%.  For a business like McDonald’s, most of their costs are actually fixed and indirect costs, so the cost to McDonald’s of providing a large fries instead of a medium fries may even be less than 8%, giving the business two wins for the one up-sell!

How to Sell Just a Little Bit More Part Two

We have been talking about generating repeat business.  So far we have looked at selling the same products or services to the same customers regularly and new products or services to previous customers.  We also looked at generating a smaller amount of additional cash flow much more quickly by offering customers the chance to purchase a product that is in some way enhanced for a higher price at the point of sale through an up-sell strategy.   Rounding out these strategies, today we are going to look at a final strategy that merges the possibility of higher cash flows that comes from selling a new product to a previous customer with the faster cash acquisition time of an up-sell.  This strategy is a cross-sell.  

We talked about how an up-sell in its simplest form involves inviting a customer to purchase an enhanced version of a product or service they have already decided to purchase for an increase in cost and noted that up-sells are particularly effective because the customer has already decided the product meets a need or satisfies a want at a cost that represents acceptable value to them.  Building on this idea, a well designed cross-sell will offer the customer the opportunity to purchase another product or service that augments the product or service they have already decided to buy.  To put it another way, because they are buying product A, it makes perfect sense to also buy product B.

In order for a cross-sell to be effective, there must be a clear nexus between the products or services that are being offered together.  Just because someone has decided to buy a toaster doesn’t mean they will want to bundle in a pair of new shoes at the same time or in the same transaction.  Likewise, the value of the bundled items in the cross-sell must at least be accumulative, and if possible, exponential. This means ideally both items together will deliver the customer more value than simply the sum total of the value of each.  There is a clear nexus between a pedestal fan and a portable air conditioner, but buying the two together isn’t likely to add much value to either and possibly reduces the value of both items to the customer.  

How this works in practice can be demonstrated with a couple of examples.  Imagine you are running a gym and as part of your sales presentation to people who are interested in joining you gather information about their motivation for wanting to join a gym and their goals.  They may say they want to lose weight, gain strength, or slow down the effects of aging, for example.  Armed with this information, you could cross-sell a personalised training program put together and overseen by a personal trainer that will help them to use the gym equipment in a way that will increase the likelihood of them reaching their goals.  There is a clear nexus between a gym membership and a personalised training plan.  The value of access to gym equipment and a personalised plan to help them reach their goals, when cross-sold together, is also likely to be perceived as more than the simple sum total of the value of both of these purchases.   This is a classic example of the value of the whole being greater than the sum of its parts which is the perception we are trying to create.

This also applies to more expensive products and services.  As the prices increase, the degree of nexus doesn’t necessarily need to increase, however the perceived value of the bundle when compared with the value of the individual products or services separately does.   An area where this can be done well is new home construction.  If someone is already paying $400k to build a new house, cross selling a pool for an additional $30k to make the new house the perfect family home can be a very attractive offer.

Our pool example also highlights another important point.  As we said above, an effective cross-sell must involve an obvious nexus and accumulative value.  However, often the best cross-sell offer will involve a clearly stated discount across the bundled products or services.  For example, if the price of the new house construction and pool totaled $430k when added together, the cross-sell would be even more effective if the bundle was offered for something like $415k.   

One word of caution about creating cross-selling offers.  You need to be aware of an illegal business practice called third line forcing. The Australian Competition and Consumer Commission defines this as, ‘when a business will only supply goods or services, or give a particular price or discount on the condition that the purchaser buys goods or services from a particular third party’.  This is a complex topic and if you think you might be stepping into gray areas with your cross-sell offers you should seek legal advice.

Increasing Profits Through Reducing Costs

One of the most common themes that owners of established businesses ask questions about is how to increase profits.  Often there is an expectation that the most effective strategies to increase profits are built around increasing sales and justifying higher sales prices.  While strategies to accomplish both of these goals are useful, often the lowest hanging fruit can be found by looking elsewhere in your business.

Profits are made up of two components, how much you sell a product or service for, and the costs you incur in providing the product or service.  The costs are further divided into fixed and variable costs, and direct and indirect costs.  All businesses have a combination of these costs.  For example, a cafe has a range of costs including the price it pays for coffee beans, milk, disposable cups, electricity, wages, insurance, etc.  Some of these costs, like the cost of a disposable cup, can easily be subtracted from the sale price of a cup of coffee when working out profit.  Other costs, like a yearly insurance premium has to be subtracted from the total sales over the year when working out profit.

Regardless of what sort of costs your business has, reducing any costs improves your business’ overall profit.  So, often the best place to start if you want to increase profits is to actually look at what costs you can reduce.   Every business has different costs in different proportions and there is a myriad of strategies you can employ to reduce costs, but some ideas to get you started include:

l Improving the accuracy of your quotes so you don’t end up purchasing extra material that you don’t need and can’t invoice the client for because you didn’t use it.

• l Negotiating better rates with suppliers.  How long has it been since you called your electricity supplier and asked for a discount?

• l Regularly getting new quotes for goods and services your business periodically consumes.  Just because you have always had your vehicles serviced at one mechanic doesn’t mean you can’t ask other mechanics in the area if they can provide the same services at a better price.  

• l Purchasing less when there is no discount for purchasing more.  Do you really need to have $1000 worth of money tied up in promotional materials when you only use $200 worth a year and the information on the material may be obsolete in 3 years?

• l Purchasing in bulk where there is a discount for doing so.  If you own a mobile dog wash you are going to use a lot of dog shampoo. A supplier may give you a sizable discount if you place a large order and the reality is shampoo is not going to spoil and you are definitely going to use it.

• Reducing waste.  Do the office lights, computers and printers really need to be left turned on all night?

If you are struggling to figure out where to start, often the best place is your accounting system, which will generate a profit and loss statement.  This will show you where your business is spending money, and it’s easy to start working through line by line thinking about possible options to cut costs.  

Business Metrics you should track

Running a business can be overwhelming.  There is so much to do and somehow everything you do creates even more things to do!  Some long-term business owners liken running a thriving business to riding a bike that’s on fire while juggling balls that are on fire across a tightrope that is also, on fire.  As far as analogies go, this is probably not too far off the mark sometimes.  This leads to many owners and managers of businesses that have grown beyond the small start-up phase to ask where they should focus their attention. For an established business with staff, assets and solid turnover, the answer in a general sense is business metrics, and this is what we are going to talk about.

There are lots of different ways to categorise metrics, but we are going to split them into four; financial, marketing, sales and stock, and drill down through these.  Financial metrics can (and should) be looked at over a variety of periods and often give the clearest view of the overall health of the business.  Some of the more common metrics you should track include:

• How much the business is bringing in as income.

• How much the business is paying out as expenses.

• Based on the income and expenses, how much profit the business is generating.

• How much cash the business has on hand.

• How much income the business needs to be generating to break even.

One of the key drivers of both income and expenses for most businesses is marketing.  We can be even more specific here and talk about advertising.  Businesses need to incur advertising expenses in order to ultimately generate profits.  Some of the things you might consider measuring are:

• How much you are spending on advertising.

• How much you spend on each ad.

• How many leads/enquiries each ad generates.

• How much each lead/enquiry costs to generate.

• How many sales each ad generates.

• How much advertising expense each sale costs to generate.

• Return on Investment for each ad (be particularly aware of any ads generating a negative ROI).

 The purpose of advertising is to ultimately drive sales, or at least sales opportunities.  Consequently, there will always be some cross over and even grey areas concerning marketing and sales metrics.  However, some useful sales metrics to be aware of over a variety of periods are:

• Total number of sales.

• Total number of sales relative to other periods.

• Total number of sales enquiries.

• Total number of sales enquiries that resulted in sales.

• Based on the number of sales enquiries and number of sales enquiries that resulted in sales, the closing percentage.

• Number of sales enquiries by product.

• Number of sales by product.

 In order to makes sales, you need to have the right amount of the right stock on hand.  So, using some of the sales metrics, you can also generate some useful stock metrics over whatever period you think is appropriate for your business, including:

• Number of units sold for each specific product (you have to decide how granular you want to be, you could stop at Acme Max-Burn Double Bread Toasters, or you could go further and break these down into colours).

• Total sales by product grouping (for example all toasters).

• How long you have a specific unit of stock in storage before it is sold.

• Based on the above metrics, how many days’ worth of stock for each specific product you have on hand.

• The number of days elapsed between ordering stock and the stock arriving.

 There are many more metrics you can create and there are many ways to use the data generated by metrics, or combine the data generated by metrics, to help you understand your business and plan for the future. We have provided some examples of this, and it raises a final important distinction to be aware of.  Some metrics clearly show you where your business has been, and others only predict where your business is going.  For example, number of units of a specific product sold provide you with a solid historical measure.  However, how many days’ worth of stock for each specific product you have on hand is a prediction about the future.  One metric shows you what has happened, the other uses what has happened to show you what might happen.  

How to ask for Referrals 

Cost reduction is a topic that businesses return to again and again because of the impact cost reductions have on business profits.  It’s perhaps not surprising then, that many business owners regularly think about how to drive more sales while spending less money doing so. When the question is looked at through the lens of traditional advertising alone, once you have optimised your advertising, there is not a lot of room left to move here.  While it is possible to reduce the cost per sale, driving more sales through advertising does involve spending more money.  This is true for most business expenses, and it is why it’s important to think outside the box.  

When it comes to thinking outside the box for ways to drive more sales without increasing costs, one of the best strategies available to businesses is referrals.  While referral strategies can and do get complicated (often needlessly so), at its core a referral is simply a potential customer directed to you by a current or former customer.  They may tell the potential customer to contact you, or they may give you the details so you can contact the potential customer yourself.  

You should see referrals as very attractive for several reasons:

• They often represent new sales or customers with zero customer acquisition cost.

• The person doing the referring has already vouched for you implicitly or explicitly so the potential customer is ‘warm’, which means you start off with a higher degree of trust than you would with a ‘cold’ customer.

• Often the people most likely to buy from you look (i.e., behave, want, need, use) like other people who have already bought from you.  It is also likely that someone that is referred will look in some way like the customer that referred them, meaning they are more likely to become a customer themselves.    

Despite all the positives associated with referrals, many businesses don’t take advantage of this source of customers because they are unaware of the one big secret to unlocking referrals.  That secret is, you have to ask for them!  You have to ask proactively and confidently. If you rely on customers to think of referring you to others, outside of the occasional recommendation they might give if asked, they probably won’t.  And if you try and avoid the awkward conversation by putting a little, ‘Please tell your friends about us’, line at the bottom of their receipt this will likely get ignored.    

So how do you successfully ask for referrals?  This depends on your business, but here are some rules to get you started:  

• If your business requires you to have a longer-term relationship with your clients, for example selling their house, you should tell them early on when you are mapping out the journey that you will be on together that you will be asking for referrals.  In the case of a Real Estate Agent, you would normally be mapping out the process and steps from listing the property to settlement.  During this conversation you should make them aware that somewhere between the contract going unconditional and settlement you will be asking them to introduce you to other people who may be interested in selling or even just getting their property valued because there will be a pool of buyers who have just missed out and will still be keen to look at properties they can buy.

• Have a compelling reason why they should refer people to you, beyond the fact you simply want more customers.  In the example above it was so that you can help buyers who just missed out and also help the person they are referring to sell quickly to an eager buyer.

• Don’t wait until the relationship has ended to ask for referrals.  By that stage it is too late.  Start asking for referrals as soon as you feel you have added enough value to have earned a referral.  In the example above, that was when a contract on a house sale went unconditional.  It could be when three quarters of a landscaping job is completed and the results are above expectations, when a physiotherapy patient has reported improvements in their mobility or when a photography customer selects the wedding photos they want printed.  

• Ideally have the referrer give you the potential customer’s contact details, tell the potential customer you will be calling and give them a piece of advertising material produced for just that purpose.  If you can’t get all three, aim for two.  If you can’t get two, aim for one.  The most valuable outcome if you have to settle for just one is to get the contact details because that way you can still maintain some sort of control.  If you are relying on someone else to do something, there is a good chance it won’t happen.  

Your referral strategies don’t have to be complicated.  You just have to demonstrate value first, explain why its beneficial to the potential customer and most importantly you have to actually ask for a referral. People may say no, but you miss every referral you don’t ask for!

Should I create systems?

One of the many definitions of a business is that a business is a set of systems that are managed by people to produce a result.  This definition certainly applies to large and complex businesses.  However, a lot of doubt and disagreement exists around whether smaller businesses, and particularly sole trader businesses, need to have formal systems.  There is even a line of thought that suggests that creating systems will reduce the agility of a small business and deprive it of what is its most obvious advantage when competing against larger businesses.  

Our position can be summed up simply as: a little from column A, a little from column B.  We believe all businesses regardless of size need to have formal systems in place. However, all businesses regardless of size also need to recognise that sometimes following the system is a mistake.  You should have systems for you or your staff to follow, but don’t be afraid to deviate from your systems or empower your staff to do so when necessary.  This allows businesses to be agile and to maintain that agility as they grow while capturing the benefits of systemisation.  

So what are the benefits of systems?  We’d suggest some of the benefits include:

• They lead to repeatable and predictable outcomes.

• They reduce waste and errors.

• They allow you to examine what you are doing in detail, which helps you to find new efficiencies.

• They allow tasks to be handed over to others and new roles to be created as the business grows.

• They make training new staff much easier.

• They help you identify the physical resources your business really needs to invest capital in.

• They help you identify the operational costs your business really needs to incur.

• They form the foundation of an asset that can be sold if you decide to sell the business in the future.

• They give you something to show to potential investors if you want to raise capital.

It’s worth noting that many of these benefits apply regardless of the size of the business.  Equally, many of these benefits are necessary to obtain from systems in order to actually grow a business well.

To create systems, you might like to think about working through the following steps:

• Creating a list of outcomes your business needs to produce (products placed on shelves, invoices sent, potential customers called, etc.).

• For each outcome, map out on paper each of the steps you go through to reach that outcome, noting any resources and equipment you use.

• Look for efficiencies to be had, for example steps that can be removed or groups of steps that can be replaced with fewer steps.

• Look for any inputs to the process that are not recorded anywhere and are instead living in your head or someone else’s head.  When you identify these, those inputs must be reduced to writing and stored somewhere.

• Document the completed process, including instructions for where other necessary information not in the process can be found.  

• Give the documented process to someone else to test.  If they can follow it from beginning to end and produce the desired output without any assistance your process works.  If they get stuck at any point in the process or the process leads them to produce the wrong output, go back, make the changes you think are necessary and test the process again.

The best way to document most processes is with a simple flow chart. However, you might also like to consider creating a formal template that you use to document all processes.  This will allow you to create a Quality Manual which can form part of a Quality Management System for your business.  You might like to also consider creating photos or even videos to assist in following the processes where appropriate.     

What should I automate

Previously we talked about creating systems.  That naturally leads to questions about automation.  Business owners have reached out with questions about whether they should try to automate parts of their businesses, what they should automate and how they should go about doing it.   

We’ll start with the question, should you automate things? Then talk a little about where you can find opportunities for automation.  The old adage, and the sales pitch often used by companies selling automation services, is that if you have to do something more than once you should automate it.  In practice it’s a little more complicated than that though.  What you actually need to do is a cost/benefit analysis.

As an example, let’s say hypothetically that at the start of each day you need to check the Australian Dollar / US Dollar exchange rate and record that in a spreadsheet.  You estimate that it takes you 1 minute to do this, and you estimate the value of an hour of your time at $80.  That means that this task costs you about $1.33 in time.  If you were to hire an external expert to create a custom program to read the exchange rate into the spreadsheet automatically each day and they charged you $1500 to write and implement it, that means it would take a little over 1127 days to break even. You would probably conclude this automation project does not represent good value for money!

However, let’s say you have a good working knowledge of Excel and know that Excel can actually read that data in automatically itself if you enter the right formula.  You estimate doing this will take you 15 minutes to setup and test.  This project now costs you about $20 and the payback period is about 15 days.  This suddenly sounds like a task that is perfect for automation!

While each business is different, if you are looking for the best place to start implementing automation you will probably find the easiest tasks to automate with the best cost/benefit ratio are digital.  Some examples that apply to most businesses that have very low cost/benefit ratios are:

• Running general email campaigns

• Automatically recording information from online enquiry forms to a database

• Scheduling social media posts

• Implementing chatbots

• Setting up automatic reply emails to let people making inquiries know when to expect a response

• Sending SMS marketing messages

• Creating automated email reminders to staff, for example reminders about meetings or submitting time sheets

In almost every case free and easy to use tools exist to automate these processes. In many cases the tools are already built in to the platform you will already be using.  For example, Facebook has post scheduling tools and chatbot tools built in and ready to be used for free.  

If you are looking for slightly more advanced opportunities to implement further automation, the next processes that apply to most businesses and provide good opportunities for automation include:

• Linking sales systems to purchasing systems via inventory systems

• Scheduling automatic stock orders based on stock levels

• Setting up automatic email reminders to customers with abandoned items in online shopping carts

• Setting up automatic emails to customers to help them track the status of a purchase

• Setting up automatic emails to customers asking them to leave a review after purchase

• Setting up automatic emails to customers informing them when new products they might like are in stock

  
  

While considering automation, it’s also worth considering its close cousin, outsourcing.  Sometimes you don’t have to automate a task, you just need to pass it on to someone else who can do it more efficiently.  The classic example most business owners are familiar with is outsourcing the bookkeeping to a bookkeeper.  But many other opportunities exist, for example outsourcing your warehousing and logistics tasks by moving to a drop shipping model.  

When you start looking at the tasks you and others do in your business each day, you are likely to find many repetitive tasks that can be automated cost effectively.  And remember to go back and reassess often as your business grows because new repetitive tasks appear, and the volume of repetition can increase to the point where a task that wasn’t cost effective to automate previously can suddenly become cost effective to automate.

What should I post on Facebook?

We previously talked about tasks and processes in your business that you can automate.  One of the tasks that is very easy to automate is social media posts.  Many business owners clearly like the idea of automating these posts, but struggle with what to post.  This question comes up so often in almost every business that doesn’t have a dedicated marketing team that it is worth exploring.

While there are a growing number of social media Platforms, Facebook is the platform most often asked about and it has between 11 and 12 million users in Australia alone.  Among both younger and older Australians, it is still the platform with the most Australian users, so we are going to concentrate on this platform.  However, be aware that the discussion below relates to Facebook content only.  Other platforms require different types of content.

With that being said, Facebook originally began as an online directory of students and grew into a site for students, and then others, to share information about themselves.  This history can still be seen in the way people use Facebook and the types of content that is popular.  In fact, the clue to the type of content that attracts the most views is hidden right in the site’s name.  Photos of people attract far more views than any other type of content on Facebook.

This means businesses need to find ways to incorporate photos of people into posts wherever possible.  The three categories of people that are easiest for most businesses to include in posts are:

• Employees

• Customers

• Employees of suppliers

Often businesses ask if they can put product photos on Facebook.  The answer is of course yes.  However, unless you are an online store using Facebook as your shopfront, the same rule applies, you should try and include people in your photos.  This means:

• Photos of customers taking delivery of products

• Photos of customers holding products

• Photos of customers testing products

• Photos of customers tasting products

• Photos of customers using a product they have purchased

• Photos of employees holding products

• Photos of employees making products

• Photos of employees of suppliers delivering components or ingredients 

The best category of people to include photos of in your posts are customers.  There are two main reasons for this.  The first is that people feel more comfortable with a business or product if they can see other people using it.  Marketing people, who like to have a name for everything, call this ‘social proof’.  The second is that most customers will have their own Facebook account and will be more than happy to let you tag them in your post.  This means all their connections will be made aware of, and most likely look at, your post and by extension become aware of your business. 

Once you have some posts on your business’ Facebook page, you can really zone in on what types of posts work for your business.  To do this it’s important to be aware of the data that Facebook will make available to you about your posts.  Under the Professional Tools menu, you will see an option for Insights.  This will take you to a page that will let you see how each of your posts has performed in terms of views and engagement, as well as other information like a demographic breakdown of views.  By comparing different posts against one another, you will be able to learn what content most appeals to viewers of your page so you can prioritise this content in posts.

Don’t Waste Time with Meetings

When we survey staff in any type of organisation about what annoys them, the most common response is always the same; time wasted in meetings.  The number one gripe of most people is time lost to unnecessary meetings, or meetings that run far longer than they need to.  It’s also interesting to note that paradoxically most staff resent managers making them attend meetings they feel aren’t necessary, while many managers complain that staff are wasting time by having unnecessary meetings or letting meetings turn into ‘casual chats’.  

If you start to seriously quantify how much time is spent in meetings and then attempt to understand how much value meetings add to the organisation’s bottom line, it quickly becomes clear that for many organisations meetings are the single biggest driver of unnecessary costs and often their hidden negative impact on the profit and loss statement is staggering!

In practice we have found that what often happens is that someone gets promoted and in the absence of proper management or leadership training they start asking themselves what managers do. The answer they come up with involves having staff meetings.  This leads to a regular staff meeting being scheduled.  However, there is often no real reason for the meeting, so the new manager starts looking for things to fill the time with.  Shortly thereafter the entire team is losing an hour out of their week to a personality test or a business book report.  Sound familiar?

With this in mind, before scheduling a meeting you should ask one very simple question, do you really need a meeting?   Or to put this another way, does a conversation need to take place?  If the communication is going to be unidirectional, meaning one or more people are going to speak at and present information to a group, this very rarely needs to be a meeting.  As the common observation goes, ‘that meeting should be an email’.  

If the meeting does need to happen though, the next question is how long does it need to be?  In our example above we mentioned the entire team losing an hour out of their day.  That was not a random amount of time.  Most people select meeting lengths based on the unit of time their particular calendar application uses.  Generally, these will be 30 minute blocks so a quick meeting becomes 30 minutes and if that doesn’t seem long enough it becomes an hour.  However, there is nothing wrong with going off the script here and scheduling the time you actually think you need for the meeting.  If the meeting should only take 15 minutes, schedule it for 15 minutes!

We also mentioned the entire team in our example above, and this is another consideration.  Before sending out meeting invites, actually stop and ask who needs to be there.  There is no reason to invite an entire 15-person team when only five people need to be part of the conversation.  The other 10 can be updated by email later on.  

While on the subject of who’s in the room, not everyone needs to have a say on every item either.  Just because someone is in attendance because they need to be part of the conversation for some agenda items, does not mean they should get to express an opinion on every agenda item.  Which also highlights the importance of an agenda.  Every meeting should have an agenda.  That agenda should be circulated before the meeting and it should clearly outline what will be discussed, who will be involved in the conversation about each agenda item and how long the conversation will be.

Ultimately meetings exist to add value to the organisation.  This means legitimate meetings need to result in something happening.  So, after each agenda item is discussed, a decision should be made for someone, to do something, within a certain time frame.  Each decision should be documented so the person or people responsible for moving a decision forward can be held accountable.  Remember, a meeting without actionable outcomes is really just a glorified chat.

Now at this point there will be a small chorus of managers saying under their breath, “but what about team building?”  This may be difficult to hear, but the truth is staff probably don’t enjoy your weekly meeting where you talk at them and if you are really getting it wrong, complain at them either as a group or even worse, individually!  If anything, they probably resent the fact they are now going to have to skip lunch or stay back later to make up the work they didn’t get done in the time you wasted.  If you really want to engage in team building, skip the weekly meeting that should just be an email and pay for a team lunch once a month instead!   

What should I outsource?

Every new business owner soon realises that being self employed is anything but a sure path to extra free time.  In fact, most small business owners end up working more hours than anyone else in the business and still never seem to have enough time to get everything done.  It’s not surprising then, that most small business owners have questions about outsourcing some of their responsibilities to external people or businesses.  We are going to look at outsourcing based on three distinct categories, things you shouldn’t outsource, things you have to outsource and things you might want to explore outsourcing.

Things that you shouldn’t outsource are functions that are closely related to your business’ reason for existing.  For example, if you own a hairdressing salon, you can’t outsource hairdressing, otherwise your business’ whole reason for being ceases to exist. However, to really appreciate this point, you need to be clear about what sort of business you are really running, and some business owners actually aren’t!  If your salon is staffed with independent contractors who you pay through ABNs, you are not running a hair salon, you are running something closer to a labour hire company.  Likewise, if people with ABNs are paying you to cut hair in your salon, you are really running a business that sells serviced salon space.  This reasoning applies to all personal service businesses in particular.  If people are paying you to perform a service, you can’t outsource that service without changing what business you are in. 

You also can’t outsource anything related to your unique selling point (USP).  You might remember that previously we defined a USP as: the thing your product or service does for customers that fills a need or solves a problem they care about in a way that is different to how your competitors do this.  If your USP is that you manufacture portable gazebos that are so sturdy they are the only portable gazebo that comes with a lifetime warranty, you can’t outsource the manufacturing to any other company that manufactures to a lower standard, or you will lose your USP.  As noted above, at that point you also transition into a different type of business; you move from being a manufacturer to just a wholesaler or retailer.  

The second category of tasks are those that you have to outsource.  These are tasks and processes that you simply can’t do well enough yourself.  They can be further broken down into things that have to be done once and things that have to be done regularly.  New start-ups encounter many tasks that have to be done once and have to be outsourced.  For example, unless you are a graphic designer, you will need to (or should) outsource the creation of your logo.  Likewise, unless you are a web designer, you will need to outsource the creation of your webpage.   Once a business is running, it will generate many ongoing tasks that need to be outsourced because they require skills and experience that are not viable, or worthwhile, to maintain in the business. Obvious examples are performing routine maintenance on just about anything from office air conditioners to company cars.  Unless your business is built around one of these trades, you will need to outsource this work.

The final category is business functions that you may want to consider outsourcing.  This is where grey areas exist because many things in this category are not strongly related to the business’ reason for existing or USP, but may not require skills and experience that can’t be maintained in the business.  This means the question for each task in this category is, will my business be improved if I outsource it? Often the best way to answer this question is to ask another two questions:

·        Can someone else do it better than me?

·        Can someone else do it cheaper than me?

Let’s look at a simple example of a small property management company that is registered for GST.  The owner of this business is required to maintain financial statements and submit business activity statements.  We assume the owner of this business values their time at $80 an hour and likewise an external bookkeeper cost $80 an hour.  The difference is the bookkeeper is better at bookkeeping than a property manager because they have far more experience doing this task.  As a result, the bookkeeper can do in 60 minutes what the owner of the property management company takes 90 minutes to do.  This means outsourcing the bookkeeping will save the business owner $40, or more correctly, free up productive time that can be used to earn an additional $40 of revenue, giving the business a net gain of $40 by allowing the property manager to do what they do best.       

Ultimately each business has to decide what it wants to do and what it can do internally.  While some things shouldn’t be outsourced, many business activities can be outsourced, and the challenge is figuring out the net impact on profit of each outsourcing decision.

There are no overqualified staff, only underutilised skills

Many business owners realise the fundamental truth in the old adage, a business’ most important asset is its people.  However, many business owners struggle to apply this thinking when hiring and agreeing to staff training requests.  This shows up in phrases like, ‘overqualified’, ‘unnecessary training’ and ‘irrelevant experience’.   What is usually lacking is a clear understanding of how to apply unexpected qualifications, training and experience to a particular job role or workplace.   When done right though, the benefits of thinking laterally about how to view and utilise atypical skillsets in roles can pay large dividends in a business.  

To demonstrate what this lateral thinking can look like, we are going to use the example of the ‘Big Three’ qualifications that we as an organisation get excited about when we see on a resume for any role, and recommend clients look out for too.

The big three that we look for and the reasons why we look for staff with these qualifications are as follows:

 Training and Assessment

Training is a skill and like any other it needs to be learnt and practiced.  However, many businesses assume that just because someone can perform tasks well that they can teach others.  Nothing could be further from the truth; just because someone can do something well does not mean they can teach others to do it.  For this reason, it is valuable for anyone in a role where they may be training and mentoring other staff, even informally, to have proper training and skills in this area.  And this is imperative for anyone in leadership roles because a core function of all leaders is to develop the people they lead, which means delivering training.  Our preference is for any staff who may mentor or train others, and for all staff in a leadership position, to have a Cert IV in Training and Assessment. 

Work Health and Safety

As Work Health and Safety Officers often get exasperated from saying, Work Health and Safety (WHS) is everyone’s responsibility.  This is both legally and morally true and is the reason why we look very favourably upon all staff in all roles having formal training in WHS.  We also advocate for formal WHS training to be a requirement for everyone in a leadership position.    Our experience has been that completing a formal qualification in WHS makes people far more observant of, and likely to address, risks in their workplace.  The more staff in a workplace that are risk aware, the safer the workplace becomes.  Our preference is for as many staff as possible, and all staff in leadership positions, to have a Cert IV in WHS. 

Project Management

Our business treats every client consulting engagement as a project, complete with project scope, project budget and project management tools. For this reason, it is an internal requirement that every client engagement is overseen by someone with at least a Diploma in Project Management.  This approach is not typical of how most businesses function; however, we suggest that where feasible all staff in leadership and management positions should have a formal qualification in project management at the Diploma level regardless of what your business does.  The reason for this is that most things that happen in businesses can be structured as mini projects, and often benefit from being structured that way.  Additionally, people with formal training in project management will have some training in how to manage budgets and resources which is helpful in any role. 

These are just three examples of how thinking laterally when assessing skillsets can improve your business. There are many other examples of additional qualifications, training, and experience that will show up on applicants’ resumes.  It is worth hiring these additional skillsets in where you can, even if you don’t know precisely what you will use them for yet, because in a business there are no overqualified employees, only underutilised skills!

Do I Need a Company?

A question that comes up quite often for new business start-ups is, “do I need to register something?”  The answer to this is yes, you need to register a number of things.  However, what this question often means is, do I need to setup a company?  There is not a simple right or wrong answer to this question and the best option depends very much on the specifics involved.  Overtime a business’ needs and therefore the preferred structure is also likely to change.  However, it can be helpful to understand in simple terms the options available and the associated advantages and disadvantage.  Before we begin though, it is important to recognise that this is a complex area and if you are facing this decision, it is imperative you get expert advice.

There are many possible structures a business can operate under but the three main options to be aware of are a sole trader, a Private or Proprietary Limited Company (Pty Ltd) and a partnership.  If we start with a sole trader, this is exactly what it sounds like, an individual carrying on a business by themselves.  In a legal sense they are the business. The Australian Business Number (ABN) belongs to them, they use their own Tax File Number (TFN), they own the business’ assets personally and they are personally responsible for all debts and other liabilities.  However, they may own a trading name which is what they present to the public.

In contrast, a Proprietary Limited Company is its own entity.  It has its own ABN, its own TFN, and it owns the business’ assets.  In theory, it’s also responsible for its own debts and liabilities.  A Proprietary Limited company is owned by shareholders, managed by directors who are appointed by the shareholders and tends to operate through the actions of employees. 

A partnership is also more or less exactly what it sounds like.  It is just two or more people or other entities forming a new entity to conduct a business.  It can be made up of individual sole traders, companies, or even other partnerships.   So, for our purposes, the real focus is on the choice between sole trader and Proprietary Limited Company.

Some of the advantages of being a sole trader may include:

• Very simple to establish and low start-up costs.

• Lower cost to maintain.

• Fewer reporting requirements.

• No requirements for tax reporting beyond the individual’s pre-existing obligations.

• Full control of the business vesting in the individual.

Some of the disadvantages of being a sole trader may include:

• The individual is personally responsible for all debts and liabilities of the business.

• Potential for higher taxes if the individual’s personal tax rate is higher than the corporate tax rate (it’s worth doing the calculations to reach an understanding of this).

• Difficulty in selling or passing the business on to others, particularly if the sole trader passes away.

• More difficulty in obtaining loans.

Some of the advantages of setting up a Proprietary Limited Company may include:

• The company is liable for its own debts and liabilities and the owners are theoretically not personally liable.

• The company tax rate is currently lower than some personal tax rates which creates opportunities to more effectively plan how and when profits are used for the benefit of the company and the owners.

• Companies can be easier to sell and are easier for others to assume ownership of.

• It is often easier for companies to obtain loans and they may have additional options for raising equity.

Some of the disadvantages of setting up a Proprietary Limited Company may include:

• More complex and expensive to establish.

• Higher cost to maintain.

• More reporting requirements.

• Control of the business can be reduced with the addition of more shareholders.

• Control of the business can be reduced through the need to comply with the company’s constitution (or model constitution that is contained in legislation).

Looking through the list of advantages and disadvantages, one option or the other may clearly seem more appropriate for you and your business.  However, in most cases both options will have attractive and unattractive features and you will have to make some trade-offs and choose the best, or even least bad, alternative.   To repeat the warning above, it is important to recognise that this is a complex area and if you are facing this decision, it is imperative you get expert advice.

How do you know that?

One question that comes up regularly from business owners is, “I don’t understand how we ended up here?” Inevitably they will be trying to understand why their business is in a market that isn’t profitable, selling a new product no one wants, has more staff than it needs, is located in the wrong place or perhaps is structured in a way that makes no sense.

This always reminds me of navigation.  Over the years I’ve navigated people across land and aircraft through the air.  Truth be told, I’ve often done this with mixed success, sometimes getting where I was meant to be when I was meant to be there and other times taking more of a scenic route.  One thing this experience has taught me is small mistakes at the start lead to big problems later on.  If you are off course by a small margin at the start of a journey, once you have gone a reasonable distance you could be a long way off course.  If this goes on long enough, eventually you will have no idea what your position is or how you got there.

This navigation problem parallels a problem that occurs in many organisations and seems to ultimately lead to, “I don’t understand how we ended up here?”  If you look at the chain of events and apply the logic we talked about above, I’m convinced you will often find the equivalent of a small navigational error at the beginning that has magnified over time resulting in an organisation ending up in a position it didn’t want or expect to be in.

I’m going to call this organisational equivalent of a small navigational error the ‘unchallenged fact’, and that is exactly what it is.  If you start listening for it, you will find that every day you are bombarded by statements that people put out there as facts without the slightest substantiation.  Most of the time this is harmless and to be frank, conversation would become impossible if people were required to substantiate every apparently factual statement they made.  However, problems occur when someone makes one of these statements and it becomes the basis of decisions and actions that have long term consequences.    

There is an approach that I have found to be both incredibly simple and very effective in catching these errors relating to ‘unchallenged facts’, before they grow into big problems.  As you may have guessed from the title, this approach is based on asking one question, “how do you know that?”

What you are looking for is evidence that what is being presented as a fact, is indeed a verifiable fact.  Sometimes this is straight forward. If someone says there will be a public holiday in December for Christmas, this speaks for itself.  However, what if someone was to say to you that your company should venture into a new market because there is growing demand in that market for your product?  I’d be inclined to want to see data that substantiated that ‘fact’ before I took a company off on that particular course.

If the decision looks important, before you head off in any direction, you have to ask the question and keep digging until you get to a point where you are presented with enough evidence that you are confident you are making a decision based on fact, or alternatively you are sure that you were being asked to take a leap of faith.  By the way, there is nothing wrong with taking a leap of faith sometimes, as long as you actually know that is what you are doing!

Let me sound a final note of caution, though.  I would suggest you do this sparingly.  Whilst being a very effective way to avoid setting off on journeys to destinations you don’t want your organisation to visit, doing this won’t make you popular.  Most people are preconditioned to think of opinions and facts as synonymous for all practical day to day purposes.  So, most people will not appreciate being asked to substantiate everything they say; with the implication that their opinions are unimportant. 

So, give this a go. You may even avoid a costly mistake by asking this simple question, but please pick your battles.  If someone was to say, “we should get a bowl of fruit delivered to the office every week because that will be great for morale”, that statement is purporting to be one of fact. Without challenging it though, I really have no idea if there is a correlation or causal link between fruit delivery and morale.  The thing is though, I don’t care.  However, if someone were to say to me, “we should move to an open plan office because that will make everyone more productive,” you can bet the first thing I will ask is, “how do you know that?”

What is your Generic Business Strategy

Michael Porter devised and published his ground-breaking insight into the possible overarching strategies a business can select from way back in 1985.  He called these ‘generic business strategies’ and at the time he suggested there were three strategies a business must choose from, although he divided one of these into a further two strategies to create a total of four in practice.  However, despite the fact this idea has been around and discussed for well over 30 years, many business owners cannot tell you what their generic business strategy is.  This is a problem because if you are not clear about this point, you cannot be clear about your business’ identity.

Porter believed the three generic strategies all businesses had to choose between were:

• Cost Leadership - simple and cheap.

• Differentiation – a unique product or service.

• Focus – a specialised product or service for a niche market.  He then divided this strategy into focus combined with cost leadership and focus combined with differentiation. 

Porter maintained that unless a business picks one of these generic strategies and uses it to guide everything the business says, does, and how it does it, customers will not be able to understand if the business offers what they need and this will impact on the business’ ability to connect with and attract customers. 

History has clearly shown that Porter was right. Businesses that try and be everything to everyone have a habit of not really resonating with anyone and eventually collapsing.  As an example, think of a certain large Australian department store, who rolled out a strategy to ‘focus on new high value customers’, and simultaneously ‘shifting focus back to traditional shoppers’.  While doing this they decided to pursue an online strategy to ‘compete with new online stores’ while also talking about concentrating their efforts on ‘customers who wanted to shop in a department store’.  Ultimately, they settled on a strategy build on, ‘product, price and customer’, or to put it another way, differentiation, cost leadership and focus at the same time.  They then proceeded to lose hundreds of millions of dollars year after year.     

We can look at how a business might operate if they select a generic business strategy instead, and use it to guide everything they do by considering three fictional airlines:

• Airline A guarantees the lowest cost flights between major Australian cities.  They charge extra for anything except hand luggage. There is no ability to cancel or alter flights after you have booked.  Any inflight food or drink costs extra. The seats on the aircraft are small and uncomfortable. They only offer customer service through a call centre that is located offshore. 

• Airline B offers flights that are often among the most expensive available.  They provide a generous baggage allowance that is more than any of their competitors.  Customers can cancel or change their booking at no cost up to 48 hours before their scheduled departure time.  All inflight food and drink is included in the ticket price.  The seats are large and comfortable with plenty of leg room.  They have an Australian call centre and pride themselves on answering every call in less than one minute and resolving 90% of customer issues on the first phone call.

• Airline C specialises in providing charter flights to mines and other cities with large industrial plants that need to regularly fly skilled workers in and out.  They are highly responsive to the needs of businesses and are known for being able to get any number of people into any area in a short period of time with limited notice. 

What is clear is that each of these airlines provides the same fundamental service.  They move people from one location to another.  They also do it in more or less the same way, by air.  However, the details they concentrate on and how they appear to the public is very different.  Airline A competes on Cost Leadership and is the clear choice for price conscious customers.  Airline B has selected Differentiation and everything it does is designed to make it stand out from competitors and resonate with customers who want the highest quality, most stress free and flexible option available.  Airline C is using a Focus strategy and is targeting commercial travel for companies needing to move staff to regional and remote areas for work in a responsive way.

What should be clear from this is there is no right or wrong generic business strategy, you can go through whichever door you choose. However, you need to be very clear about what your strategy is so that you can formulate and plainly communicate what you are offering to the right customers for you.

Improving Cashflow

Most small business owners will tell you times are tough.  Customers are tightening their belts and costs are going up.  This is having a ripple effect through the small business community with many small business owners asking for guidance to improve their cash flow, or reduce their aged receivables, which is often business speak for help to get paid!  As business and residential customers downstream spend less or pay late, this has a knock-on effect through entire small business supply chains and ecosystems.   While there is no way to squeeze blood out of stones, there are a few strategies you can employ to ensure more prompt payment from debtors who do have the ability to pay and we are going to look at some of these.  

The first is to make it as easy as possible for customers to pay you.  If you have the sort of business where people consume your product or service regularly and predictably, like a gym, swim school or app, consider requiring customers to sign up to a direct debit agreement.  You will sacrifice a small amount of profit for each customer because of the cost of outsourcing to the direct debit provider, but often this is more than made up for by the decrease in late payments or non-payments. 

If your business does not lend itself to direct debit agreements, then make sure you are issuing invoices that clearly tell the customer how much to pay, when they must pay, and how to pay.  A confusing invoice may be put in the too hard basket and stay there for as long as the customer can avoid thinking about it.  Also, give customers as many options to pay as possible, don’t be picky.  Give them BPAY details, give them direct debit details, give them PayPal details, tell them they can turn up at your office with cash.  The easier you make it for a customer to give you money the more likely they are to pay quickly.

However, some customers need additional motivation to pay on time.  This is where you need to think about carrots and sticks.  Everyone likes a discount, so offering a discount for early payment can be a powerful motivator.  Likewise, you can also charge reasonable interest on an overdue invoice as an incentive to pay on time.  Courts have ruled that about 10% per annum charged monthly is generally a reasonable interest rate.  However, you do have to make sure this is a term contained in the contract you have with the customer, and you need to be aware that charging interest on a late invoice may damage your ongoing relationship with the customer so if a good customer pays one invoice late you might want to consider waving this interest for them. 

If a customer doesn’t pay by the due date, you will have to send them an overdue invoice, and perhaps make a polite phone call to ensure they received the invoice and discuss the overdue amount.  Often that can be enough because sometimes invoices get lost or things get forgotten.   However, if this doesn’t work, you will have to consider a letter of demand that will include the threat to take some sort of action to recover the amount.

In practice you have two avenues, and neither is great.  The first is to commence legal action in the Queensland Civil and Administrative Tribunal (or equivalent) which after a sometimes lengthy and complicated process may end in you obtaining a court order for a bailiff to cease the debtor’s property to be sold on your behalf.  Often matters are resolved before this point though.  The other is to place the debt in the hands of a debt collection agency, or to sell the debt to a debt collection agency.  In either case you are unlikely to recover the full amount because of fees or the need to sell the debt at less than its true value.

Cash flow issues caused by late payments and bad debts are a continuous problem for small businesses and it’s not likely to go away.  You can reduce the risk by getting paid up front if possible or using direct debit agreements.  You can also encourage people to pay early or on time by making it as easy as possible to pay and giving incentives to do so.  And you can create disincentives for paying late.  Ultimately you need to do everything you can do to avoid overdue invoices because while you can take steps to recover overdue debts the results are often mixed at best and both you and the debtor will end up losing after all the time and expenses are added up. 

What is Rapid Prototyping?

RP is a term used to describe a group of techniques that are used to quickly fabricate a product leveraging three-dimensional Computer Aided Design (CAD) and 3D printing.  The physical fabrication is now usually done using "additive layer manufacturing" technology. This is a complicated and ‘tech heavy’ topic, but if you are a manufacturer, or are interested in manufacturing, it is worth knowing something about this topic, so we will cover off some of the basics.

RP allows designers to quickly create physical models of their designs, which can then be used for a variety of purposes.  The most common purposes are:

●      Visualisation: RP models can be used to visualise a design and to get a better understanding of how it will look and function.  Many products that look good on paper just don’t look right in the real world. 

●      Functional testing: RP models can be used to test the functionality of a design. This can be done by testing the fit and function of individual parts, or by testing the overall performance of an assembly. Often once you give a design to a tester to experiment with the user experience, they will suggest modifications that can only be recommended after a hands-on trial.

●      Manufacturing validation: RP models can be used to validate the manufacturing process for a design. This can help to ensure that the design can be manufactured cost-effectively and to the desired quality standards. In reality some designs require a lot of costly manual assembly or are prone to defect occurring in the manufacturing process.

●      Marketing and sales: RP models can be used for marketing and sales purposes. They can be used to create product demonstrations, to show potential customers how a product will work, and to generate excitement about a new product.

Types of Rapid Prototyping

There are a variety of different rapid prototyping techniques, and each has its own advantages and disadvantages. Now this is where things get quite ‘techy’, but some of the most common techniques include:

●      Stereolithography (SLA): SLA is a 3D printing process that uses a laser to cure a liquid resin into a solid object. SLA is a good choice for creating high-resolution prototypes with smooth surfaces.

●      Selective laser sintering (SLS): SLS is a 3D printing process that uses a laser to sinter (fuse) powdered material into a solid object. SLS is a good choice for creating prototypes with complex geometries that require the use of strong and durable materials.

●      Fused deposition modelling (FDM): FDM is a 3D printing process that uses a heated nozzle to extrude molten plastic material onto a build platform. FDM is a good choice for creating prototypes that are relatively inexpensive and easy to produce.

●      Digital light processing (DLP): DLP is a 3D printing process that uses a projector to cure a liquid resin layer by layer. DLP is a good choice for creating high-speed prototypes with smooth surfaces.

●      Laminated object manufacturing (LOM): LOM is a 3D printing process that uses a laser to cut thin sheets of material and then stack them on top of each other to create a solid object. LOM is also good choice for creating prototypes with complex geometries that require the use of strong and durable materials.

The Rapid Prototyping Process

A typical rapid prototyping process will involve the following steps:

1. Design: The first step is to create a CAD model of the part or product to be prototyped. There are many CAD software programs available with different functionality and costs.

2. Data preparation: Once the CAD model is complete, it must be converted into a format that can be used by the rapid prototyping machine. It’s important to match the file type to the machine being used.

3. Prototyping: The next step is to create the prototype. This is done using the rapid prototyping machine of choice.

4. Post-processing: Once the prototype is created, it may need post-processing. Sometimes it’s necessary to remove supports, smooth rough surfaces, or add colour.

5. Evaluation: The final step is to evaluate the prototype. When done well this is likely to involve testing the functionality of the prototype, getting feedback from users, and then making modifications to the design.

Expect to iterate through each of these steps a number of times! 

If you own a manufacturing business that has to update the design of your products periodically or are exploring the option of manufacturing a new product, you need to be aware of how RP works.  Chances are that by combining RP methodology with the new CAD and physical printing technology that have emerged in the last decade you will be able to bring better products to the market, faster, and at a lower cost than would have previously been possible. 

What makes a good website

When you hear about a new business that might have products of interest to you, or you are considering purchasing a product from a business, think about the steps you take.  Chances are you search for the business on a search engine like Google and then you look at the business’ website.  If you are like most people, you may decide not to deal with the business if you can’t quickly find the website or you don’t like the look and feel of the pages.  For any business operating today, a quality website is clearly a requirement. That is why many business owners ask what makes a good website.  We are going to have a look at that question today. 

The best way to ensure your website is meeting the needs of potential customers is to look at it from three perspectives in the order that users will ordinarily assess it; is it easy to find, is it easy to navigate and is it easy to engage with.  

Easy to find

A website that can’t be quickly found by people is of no use.  You need your website to appear on the first page of Google’s search results when someone is searching for what you sell in the area that you sell it, and if a potential customer is searching for your business by name you should appear at the top of the search results.   

This means your website needs to be optimised for search engines. Search engine optimisation is not only a huge topic, it’s now a profession!  However, following a few simple steps can make a huge difference.  The first step is to make a list of the sorts of keywords you think people will be searching on when looking for your business, what you sell and where you sell it.  Obviously, your business’ name and location will be at the top of this list.  Once you have this list you want to make sure these words are included in headings, text and links throughout your website.  Don’t sacrifice the clarity of what you write to squeeze in extra keywords though. Ultimately what you write must be easy to read and make sense to people visiting your site. 

You should also include these words in meta tags on your website.  A meta tag is a section of hidden text that is not visible to people but is visible to search engines and helps them to categorise what your website is about based on keywords within this text. 

Easy to navigate

People have short attention spans and want things to be as simple as possible.  This means once someone has found your site, they want to be able to navigate around the site understanding what page they are on with little effort.  You can assist with this by having a well organised structure with clear links and headings.  Most people understand they will arrive at the home page.  From here if they want to know more about your business, they should be able to quickly identify a link to an about us page.  Likewise, if they want to contact you they should be able to find a link to a contact us page, which they will expect to see as the last option in any series of links.  They are also likely to want to see a products or services page.  Once they arrive at this page, if it makes sense, you should then have well titled links to subpages that provide more in-depth information on specific products or services.  These should be broken down in a way that is appropriate for your specific business.  For example, consider the following flow of progressively more specific links that an online clothing retailer may present to customers: products -> shoes -> running shoes-> children’s running shoes -> boy’s running shoes.    

Easy to engage with

Finally, once a visitor has chosen the product they want or found the information they were looking for, you want to make it very simple for them to take the next step.  This next step is likely to be either purchasing a product or contacting you to discuss their specific needs. 

This involves what is often described by website developers as a call to action.  The two most common calls to action are: ‘Purchase Now’ and ‘Contact Us’.  Once a user has been presented with the appropriate call to action, you want to help them reach the end result with as few clicks as possible.  Consider Amazon, if you have purchased with Amazon before and are logged in, you can complete a purchase in two clicks!  The first click is to put the product in your online shopping cart and the second click is to purchase.  The moment you click purchase; Amazon completes the transaction using the details they already hold (name, address, and credit card number) in your profile.   Similarly, ‘Contact Us’ should take the user to a contact form that has as few fields as possible and a simple submit button at the bottom. 

Quality websites are not complicated to make and by definition are not complicated to use.  If you think about the sort of keywords people will search on when looking for your business and add them to your website, you will greatly increase your chances of being found.  From there, giving visitors to your site a stress-free experience by creating a sensible structure with minimum unnecessary content and making the final step as simple as possible will greatly improve the odds that someone will decide to deal with you.

Do you need a refund policy?

A question that comes up often for new businesses, particularly businesses that are going to be ‘all clicks and no bricks’, is should there be a page on the website containing the businesses refund or returns policy.  Most people are familiar with these policies, but in brief they explain to customers how you will deal with requests for refunds or requests to return products that you have sold.  While most businesses default to having a refund policy either displayed or available for customers to read, the decision as to whether you have one should really depend on circumstances. 

If we take a step back, most of what you do when a customer asks for a refund or to return a product is out of your hands and is dictated by Consumer Protection Law.  The Australian Competition and Consumer Commission (ACCC) summarises the law as follows:

• When a business sells a product or service that doesn’t meet basic rights, known as consumer guarantees, it must offer the consumer a solution.

• Consumers can choose between a refund or replacement when a product has a major problem.

• Businesses must fix minor problems with products or services by at least giving a free repair.

• Consumers have a right to alter the agreement with a service provider when a service has a major problem.

• Businesses must not tell consumers to take the problem to the manufacturer or importer.

• Businesses have a right to have their costs of providing a solution to a consumer repaid by a manufacturer, where the problem is the manufacturer’s fault.

The consumer guarantees, mentioned above, require that products and services provided to consumers must:

• Be of acceptable quality.

• Be fit for a particular purpose.

• Match the description you gave of the product or service.

• Match the sample or demonstration model shown.

• Contain or conform to any extra promises you made.

• Be repairable using spare parts that are available.

• Come with title to the product, undisturbed possession, and have no hidden debts or charges.

• Be provided with due care and skill.

• Be provided within a reasonable time.

 Business owners should understand each of these guarantees, and the exceptions, in detail. A lot more information can be found on the ACCC website, but it is important to remember that it is against the law to try and mislead customers about their rights. Those ‘no refund’ signs you sometimes see are completely illegal. 

Once you understand what the customer is entitled to, you have to decide if you want to communicate this in a refund policy.  There is a strong argument to be made for not providing a refund policy if you are not going to provide the customer with anything beyond the protection they are already entitled to by law.  If customers are aware of their rights and your refund policy simply contains these same rights, your refund policy may be interpreted by customers to mean that you are going to do the bare minimum you have to for them and no more! 

In some circumstances just providing the remedies required by law is perfectly fine.  In other circumstances you may want to go beyond what the law provides though, and when you do this, you definitely want to communicate what you are guaranteeing to customers.  This is normally done to help customers decide to buy when they are hesitant. A classic example is an online clothing store.  While a customer may like the style and design of the clothing you offer, they may be hesitant to buy because they are not sure of the sizing or how a particular item will look on them.  If they make a purchase and it doesn’t look good on them, they are not entitled to a refund and this risk may stop them purchasing.  However, if you offer no questions asked refunds or exchanges (if the tags are still on the product and it hasn’t been damaged in any way), knowing this removes the risk from the customers and may help them overcome their reluctance to buying clothes they haven’t been able to try on.

When it comes to online stores, it’s also important to realise that in some cases you may have no choice but to offer additional rights or guarantees to customers.  This often happens when you set up a store inside of an online marketplace, for example Amazon.  The owner of the marketplace will often require you to offer customers additional guarantees if you want to operate in their marketplace, or on their platform.

So, when deciding if you want to have a returns policy that you make visible to customers, the real decision is whether you are going to offer customers anything beyond what the law already requires you to do.  If you are not prepared to offer anything extra, maybe don’t communicate that to customers via a returns policy.  However, in some cases offering some additional guarantees to remove risk from the customer’s perspective can really help to drive sales and you should definitely communicate these to customers! 

Should you have a Physical Shopfront?

Anyone involved in retail will tell you that the retail landscape was changing rapidly before COVID and things have only gotten more unpredictable since. The rise of e-commerce had made it easier than ever for consumers to shop from home, and many traditional brick-and-mortar stores were already struggling to compete. However, physical storefronts still offer a number of advantages, and for some businesses, they remain essential, so we are going to have a look at some of the considerations for anyone trying to decide which way to go. 

The best place to start is the benefits of having a physical shopfront. There are a number and these include:

• Increased brand awareness and visibility: A physical storefront and with it a physical presence can help to increase brand awareness and visibility. This can be especially beneficial for new businesses that need to generate brand awareness from scratch, or businesses that are trying to expand into new markets.

• Improved customer experience: A physical storefront will normally provide a better customer experience than online shopping. Customers can see and touch the products before they buy them, and they can also get help from sales staff in real time if they need it.

• Increased sales: Some studies suggest that customers who visit a physical store are more likely to make a purchase than those who only view products online. This makes sense for two reasons; customers are more likely to trust and buy from a business that has a physical presence, and they are also more likely to impulse buy when they are in a store.

• Improved customer loyalty: Physical storefronts can help to improve customer loyalty by providing a place where customers can build relationships with sales staff and other customers.

• Support for the local community: Physical storefronts can be perceived as supporting the local community by providing jobs.  They can also be a valuable part of the local community, as they provide a place where people can come together to shop, socialise, and participate in community events.  This in turn can encourage people to support their local store in leu of shopping online. 

There are also some disadvantages to having a physical store including:

• High costs: The costs of running a physical storefront is normally higher than an e-commerce business and can be high, period! Costs include rent, utilities, staff costs, insurance, cleaning, and many others. These costs can be especially challenging for small businesses competing in a price sensitive market. 

• Limited reach: A physical storefront is limited to its physical location. This means that it can be difficult to reach customers who live outside of the local area.

• Long hours: Physical storefronts often require long hours of operation, which can be draining for owners, and adds additional complexity around recruiting and rostering.

• Security risks: Physical storefronts are at risk of theft, vandalism, and other crimes. In some areas this can be a costly and time-consuming problem for businesses to deal with.

Based on our experience, if you are considering opening a physical storefront, or you are already operating a physical store, there are several things you can do to tip the odds of success in your favour a little bit.  These include:

• Choose a good location: The location of your store is one of the most important factors in its success, particularly for impulse and discretionary products (think coffee for example). Choose a location that is high-traffic and convenient for your target customers.

• Create a welcoming and inviting atmosphere: Your store should be clean, well-organized, have the appropriate fitout and decor and just generally inviting. Make sure that your staff are both friendly and helpful.  If your staff look like they are just there to get a paycheck, customers are likely to feel your business is just there to get their money!  

• Offer a wide range of products and services to the extent that it makes sense: This is a balancing act. To attract and retain customers, you need to offer a wide enough range of products and services to give them what they are after and ideally several options. However, if you have too many products and services, or too many options, customers may not actually be able to find what they want or may not be able to make a decision. 

• Use technology to your advantage: Technology can help you to improve the customer experience and reduce your costs. For example, you can use a point-of-sale system to process payments and track inventory, which in turn allows you to support lean approaches like just in time inventory management. 

• Provide excellent customer service: Excellent customer service is essential for any business, but it is especially important for businesses with physical storefronts, and this is where you can really standout from your online competitors. Make sure that your staff are well-trained and that they are able to provide customers with the help and support they need.  Also, firmly in the category of things we shouldn’t have to say but know from experience we do, make sure your staff are getting the simple things right, like wearing shoes! 

Whether or not to have a physical storefront is a decision that depends on a number of factors, including the type of business you operate, your target customers, and your budget. However, there is no doubt that physical storefronts do offer several advantages, such as increased brand awareness, improved customer experience, and potentially increased sales.

How much should you spend on advertising?

A question that business owners, both new and seasoned, often ask is how much should we be spending on advertising?  This is another one of those areas where there are many opinions, many generalisations and only one really solid rule that can be readily applied to any business. 

The one solid rule is you must advertise: somewhere, somehow, sometimes. It doesn’t matter how good your product or service is, if people don’t know about it, they won’t buy it.   Even if they do know about it, if they aren’t exposed to your advertising regularly, they will start to transition to other products.  For example, there would be few people on the planet who haven’t drank, let alone know about Coke.  Yet Coke still has to advertise in order to maintain a consistent share of the market.

If you are not a multinational but are an established business, the conventional wisdom based on surveys of what businesses actually spend says the rough rule of thumb is that if you are selling to other businesses you should aim to spend the equivalent of between 2% and 5% of your total revenue on advertising.  If you are selling to consumers, the rule of thumb is you should aim for between 5% and 10%. The reason for the difference is that it is generally easier to effectively target business customers through a smaller number of more easily identified advertising channels.  In some cases, it can also be more difficult for business customers to change suppliers as quickly as consumers switch brand loyalties, so they need to be exposed to less advertising.   

However, these percentages are always considered rough guides and depend very much on industry and location.  In some industries there is far more aggressive competition than others.  For example, healthcare is a far more competitive landscape than construction when it comes to players seeking to increase market share.  Some industries are also experiencing more disruption, which drives up the need for advertising.  Likewise, some geographic areas experience more competition than others.  If you are one of two tax accountants in a small town you are not likely to face the same competitive landscape as tax accountants in a capital city.

Now that we have talked about the conventional wisdom, let’s disregard that completely and talk about what we actually tell our clients!   Remember you are in business to make money. While this is a drastic oversimplification, you are investing money to generate more money.  Commerce at its heart is risk in search of reward.  This means your principal metric in almost all areas of your business should come back to return on investment (ROI), and advertising is no exception. 

Hypothetically, if you could invest money and could generate a 100% ROI, would you like to invest $10k or $100k? Would you choose to invest even more if you didn’t need the money for anything else?  Now apply that logic to your advertising spend.  If you track how much you spend on advertising and the value of sales that advertising produces, which you should, and using this data you calculate that for every $1 you spend on advertising you are getting $2 back, what is the amount you would want to spend on advertising?  The answer is obviously not some arbitrary percentage of revenue based on the average of what other businesses who have answered a survey spend.  The answer is as much as you can until you reach a point where the ROI starts to decrease, and the spare cash can be used more profitably in other areas of your business.   What that amount is for your business will be unique to you. 

What is your Generic Business Strategy

Michael Porter devised and published his ground-breaking insight into the possible overarching strategies a business can select from way back in 1985.  He called these ‘generic business strategies’ and at the time he suggested there were three strategies a business must choose from, although he divided one of these into a further two strategies to create a total of four in practice.  However, despite the fact this idea has been around and discussed for well over 30 years, many business owners cannot tell you what their generic business strategy is.  This is a problem because if you are not clear about this point, you cannot be clear about your business’ identity.

Porter believed the three generic strategies all businesses had to choose between were:

• Cost Leadership - simple and cheap.

• Differentiation – a unique product or service.

• Focus – a specialised product or service for a niche market.  He then divided this strategy into focus combined with cost leadership and focus combined with differentiation. 

Porter maintained that unless a business picks one of these generic strategies and uses it to guide everything the business says, does, and how it does it, customers will not be able to understand if the business offers what they need and this will impact on the business’ ability to connect with and attract customers. 

History has clearly shown that Porter was right. Businesses that try and be everything to everyone have a habit of not really resonating with anyone and eventually collapsing.  As an example, think of a certain large Australian department store, who rolled out a strategy to ‘focus on new high value customers’, and simultaneously ‘shifting focus back to traditional shoppers’.  While doing this they decided to pursue an online strategy to ‘compete with new online stores’ while also talking about concentrating their efforts on ‘customers who wanted to shop in a department store’.  Ultimately, they settled on a strategy build on, ‘product, price and customer’, or to put it another way, differentiation, cost leadership and focus at the same time.  They then proceeded to lose hundreds of millions of dollars year after year.     

We can look at how a business might operate if they select a generic business strategy instead, and use it to guide everything they do by considering three fictional airlines:

• Airline A guarantees the lowest cost flights between major Australian cities.  They charge extra for anything except hand luggage. There is no ability to cancel or alter flights after you have booked.  Any inflight food or drink costs extra. The seats on the aircraft are small and uncomfortable. They only offer customer service through a call centre that is located offshore. 

• Airline B offers flights that are often among the most expensive available.  They provide a generous baggage allowance that is more than any of their competitors.  Customers can cancel or change their booking at no cost up to 48 hours before their scheduled departure time.  All inflight food and drink is included in the ticket price.  The seats are large and comfortable with plenty of leg room.  They have an Australian call centre and pride themselves on answering every call in less than one minute and resolving 90% of customer issues on the first phone call.

• Airline C specialises in providing charter flights to mines and other cities with large industrial plants that need to regularly fly skilled workers in and out.  They are highly responsive to the needs of businesses and are known for being able to get any number of people into any area in a short period of time with limited notice. 

What is clear is that each of these airlines provides the same fundamental service.  They move people from one location to another.  They also do it in more or less the same way, by air.  However, the details they concentrate on and how they appear to the public is very different.  Airline A competes on Cost Leadership and is the clear choice for price conscious customers.  Airline B has selected Differentiation and everything it does is designed to make it stand out from competitors and resonate with customers who want the highest quality, most stress free and flexible option available.  Airline C is using a Focus strategy and is targeting commercial travel for companies needing to move staff to regional and remote areas for work in a responsive way.

What should be clear from this is there is no right or wrong generic business strategy, you can go through whichever door you choose. However, you need to be very clear about what your strategy is so that you can formulate and plainly communicate what you are offering to the right customers for you.