Category Archives: strategy

You don’t charge enough

Nearly every business leader I meet is keen to tell me how good they are at what they do, and how much their customers value them. That’s great, but often that value is not reflected in the financial results for the business for one simple reason.

You don’t charge enough

In the speaking world, I advised a speaker to charge almost 3 times as much for an event as some of my colleagues thought she should. Her message to me was “I went for it. But only because you gave me the confidence to do so”

If you don’t ask for it, you won’t get it

It’s probably obvious that if you are a speaker or a business advisor what you charge is fundamental to how much you take home.

In every business, pricing can make a really significant difference to the bottom line. Imagine a high volume, low margin distribution business that has a turnover of £10m and a net profit of £1m. (I am keeping the numbers easy!)

If that business could increase its prices by 10% their profits would increase by £1m. Their profits would double.
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You may be saying “I can’t put my prices up by 10%, I’d lose too much business” but I’d encourage you to think carefully about that and take a look at your model.

If my distribution business is making a 20% gross profit now, that means every £1 of sales generates just 20p in gross profit. When they put their prices up, the 20p becomes 30p so you would have to lose an awful lot of business to be worse off

If 10% is too much for you to risk, how about 2%? Increase your prices by 2% every year and the effect on profitability is amazing in a very short period of time.

It’s not about Fred

Is there a bit of your business that you hate, yet it seems to come around more and more often? Is it the same problem in a different guise?

I often see businesses that have become reliant upon an individual’s knowledge, yet that knowledge is being applied to the relatively mundane. It’s being used to resolve problems and issues that quite frankly should not need that level of attention. They keep reappearing and take valuable time and resource.

People are like water and tend to take the path of least resistance. You know that Fred has the knowledge to solve the problem, so the easiest thing is to go and ask Fred. He obliges, you solve the problem and the world goes on.

Then comes the day when Fred is not available. Perhaps he is on holiday – or perhaps he has retired. All that knowledge and know-how has left the business.

If you had taken the slightly harder path and worked with Fred to create a process to deal with the problem, you can still deal with the problem when Fred isn’t there. Yes, it takes a bit longer the first time but the benefit can be significant. You are spreading the knowledge, probably training others, and giving them a more interesting job all at the same time.

Fred finds he has time to apply his knowledge to something other than problem-solving. He will feel less pressured and more valued – and he will be contributing at a different level.

Making things part of a process or procedure is not about compliance or about forcing individuals to follow rules; it’s about best practice and continually improving your business.

You might even find that Fred’s way isn’t the only way. Once the process is set out, others can see the path, and perhaps they will improve on it as well.

Are you living up to your promises?

Dig out your mission & vision statements and re-read them, would you?

They are promises you made to yourself and the team.

Are you following the dream, or doing just enough to get by?

It’s all too easy to get dragged into the trenches of dealing with the day to day hassle and that can easily take you way from the path you set out to follow. That happens to all of us!

Getting back on track starts with the recognition that you were off track to begin with. Review your plan / budget against the mission and vision – are your actions in the short term taking you towards the long-term goal, just holding your ground or at worst taking you away from your goal?

I’m a great fan of a rolling four quarterly plan and budget.

It’s a methodology that requires you to review the plan at least once a quarter and update it – so you can’t create the annual plan and just leave it in the drawer until the year is done!

It prevents you from saying “Oh well, that was our estimate 9 months ago so it doesn’t matter” as you have reviewed an updated that forecast at least 3 times.

It avoids the cliff, where something is happening just after year end. The annual plan finishes at year end; this event is a moth or so later but it’s not in the plan – and won’t be recognised until the new planning cycle kicks off.  One business I worked with had a royalty payment due in the January; the plans and forecasts finished in Dec and it was not until we started the plan for the new year that it became apparent our cashflow was insufficient!

It avoids a massive planning session that everyone hates. You are planning once a quarter – updating the next 9 months and adding on another 3 – so that it becomes routine.

In the quarterly review sessions, have the mission & vision to hand. That will help keep them in mind and make sure you are staying on track.

Why hire an expert if you are going to ignore them?

I have seen many businesses engage with an expert who undertakes some form of analysis and tells the business how they can improve in the expert’s particular area and skillset.

Very often, the business will take the recommendations from the expert and add it to the “to-do” list. What is very rare is for the business to fully engage with the expert and seek their help implementing the recommendations.

There are circumstances where not continuing with the expert is appropriate, but I’m not sure that is really what is going on.

Not using the expert is appropriate:
1. If the recommendations are not going to result in sufficient reward
2. If you don’t trust the expert and/or don’t think they really are an expert.
3. If you have the skills in-house to implement the recommendations yourself in a timely manner

I believe many business leaders justify the decision not to continue the experts’ engagement based upon the 3rd reason, but actually. they are kidding themselves.

You almost certainly don’t have the skills in-house. If you do, why did you engage the expert in the first place?

You almost certainly don’t have the time to follow through.
Let’s say that you have some of the skills required, but there will be a learning curve. It will take you and your team much longer to implement than it would the expert.

What’s really going on is that both the expert and the business are missing an opportunity. The expert, when they “pitch” for the first piece of work, are really clear and specific on the costs and the benefits the business will receive.

The business engages the expert on this basis, without thinking of the follow-up work that might be required. The expert doesn’t mention it – they are trying to make the buying decision really easy for the prospect. Talking about follow-up work might put the prospect off.

When you do get to talk about the follow-up, the business only sees the costs. There’s no investment analysis going on. The expert is thinking. “Well, I’ve shown them all the things they need to so – I’m sure they’ll need my help” without recognising that the follow-up needs to go through another round of investment appraisal.

Next time you engage with an expert, make sure you undertake a cost-benefit analysis for each stage of engagement.

What’s your key strength?

There’s a fascinating case of a business transformation, following and adapting to changing market conditions, in the history of Whitbread.

I grew up knowing Whitbread as a traditional brewer and pub operator, back in the days when almost every street had a local public house. The company had been in brewing since 1742.

That business model was one of vertical integration. The company made its own products – in this case, beer – and then sold them through its own outlets – the pubs. The great benefit of such a model is that all the margin from the end user sale right back to the manufacture flows to the business.

Whitbread were faced with intense competition in the brewing market and decided to sell that part of the business. The market forces that drove the sale of the brewing business left in question the operation of the pubs and they too were sold a couple of years later.

At that point, Whitbread recognised their strength was in the hospitality industry. It wasn’t really anything to do with beer!

They’ve leveraged that strength with two brands that you will know today in Costa Coffee and Premier Inn (the name of the latter is undoubtedly a nod to the history of its owner) and the business is going from strength to strength.

Both Costa and Premier were businesses acquired as part of the transformation strategy, but the key word is strategy. The acquired businesses were elements of the overall plan, tools to enable the company to deliver the hospitality services it had identified as a key strength.

In a different world, St Ives Press was a very successful commercial printing business that invested in new print technology. The business moved into publishing services and acquired a book printing company. The key acquisitions were direct response printing companies – producing flyers and direct mail pieces. St Ives is now a digital marketing services company – oh, and they still do print things!

St Ives recognised that they were in the communications business, and specifically in helping their customers communicate their messages.

What’s your key strength? What is it that you do for your customers?

Bad Weather shouldn’t stop you

They say there’s no such thing as bad weather only inadequate clothing.

I walked the dog one morning in a howling gale and with heavy rain driven on the wind, but I was wrapped up warm with hat, boots and gloves.

In your business if you are properly prepared for whatever events are coming your way then coping with those events is easy.

What if events catch you unaware on the other hand?

That would be like going out in that howling gale in a t shirt, shorts and flip flops. Some people might enjoy it, but most of us would not (the dog wouldn’t care either way as long as she got her walk!)

What events might catch you out and what can you do to prepare for them?

Markets
If the market you serve – or the market your customers serve – is going through a down-turn, or seems likely to do so, does your business plan reflect that? It’s all very well taking last year’s numbers and adding a bit, but if in the meantime the market has taken a turn for the worse your plan is probably unrealistic.

If the market is picking up and there is more business out there, does your plan (and do your sales targets) reflect that or are the sales team getting an easy ride?

Forex

If you do business in multiple currencies, do you have a plan for exchange rate movements or are you just hoping for the best? At the very least you should be hedging your exposure but I’ve always preferred natural hedging, where your income and expenditure are matched by currency, whenever possible.

Customers and Suppliers

If your business is dependent upon any one customer or any one supplier, you should have a plan to secure your position, but also a plan to minimise your risks.

Throughout your business think of the external risks, seek to minimise them and develop a plan to cope should the worst happen.

People do business with people

 

I was at a funding event recently where one speaker talked about how investors decide to invest – or not to invest.

It has very little to do with the financial forecasts, or the potential return.

It has everything to do with the people. Investors will not invest in businesses if they don’t like the people involved.

Many years ago I worked with a venture capitalist who told me they would rather invest in a great team than a great product. The great team will fix the poor product and the poor team will break the good product.

When I am advising clients who are entering into corporate transactions – buying or selling businesses – I always stress the personal aspects. You won’t sell your business to someone you don’t like, or at least get along with. You certainly won’t buy a business unless you like the people involved.

When a customer buys from you they are making an investment. That’s partly financial – they exchange money for your goods and services – but more importantly it is an investment of trust. They trust you to provide goods / services that meet their needs.

That’s part of the reason why it is so much easier to sell to a past customer than it is to sell to a new prospect. The past customer, at some point, trusted you. With a prospect you have to establish that trust. With the past customer you have only to re-kindle the relationship.

Do you have a sales and marketing mix that helps create the trust that prospects need to move forward? Do you have the testimonials from people like them? Do you have relevant case studies?

Does your sales team focus on creating the relationship?

 

Get clear on your strategy

Over the last few weeks I have helped a number of clients get some more clarity over their business model and their strategy for the future.

This is such a fundamental area for business success. Without that clarity, you cannot determine what your organisation should look like in 3 or 4 years, you cannot determine where to allocate your resources or even how to approach your market.

We are all told we have to have an elevator pitch, so that when you are in the lift with your ideal prospect you can tell them what you do in the time it takes to travel between one floor and the next.

There’s a fundamental flaw in that thinking. Your prospect does not care what you do. Your prospect cares about the result you deliver for their business.

It really doesn’t matter that you write wonderful software, or that you sell the best engineered widgets. What matters is how that software helps your customer or client, what gain they get from deploying it and what pain you are taking away. It doesn’t matter that you manufacture the best widgets, what matters is that you help your customer produce his product that relies upon those widgets.

Take your current marketing information, from the elevator pitch through all your brochures, leaflets, proposals and your website and highlight every time you see the words “We or I” and change them to you. (It’s known as weeing all over the page when you have too many we’s)

Now look at those statements that have a “you” replacing the “we”

See if you can respond to the statement with “so what?”

See if you could put that statement on your competitor’s website and it would still be true.

You may find you have some work to do so that your customer or prospect cannot answer “so what?” and that may take you right back to the fundamental reason why your business exists!

 

What are the best ways to keep your customers?

It’s much easier to sell to an existing customer than it is to a new one, but many businesses don’t have a formal program to retain their customers.

When you measure all the effort that goes into winning a new customer, all the money and management time you spend acquiring those new customers, compare that to the amount of time, money and effort you devote to keeping your existing customers.

If there is no formal program or incentive, or if you are not measuring your customer retention, the chances are that no one is focused on it. What’s measured is managed.

If you compare that to the pay TV industry, businesses like Sky have separate departments devoted to customer retention. They don’t call them that – it would be a bit too obvious – but if you want to negotiate your contract and reduce your fees, tell Sky you are thinking of leaving and you will probably end up talking to the disconnection team. They have the authority to offer you special deals to keep your business!

Giving an existing customer a special deal is a great way of hanging on to them, but the special deal doesn’t have to be money!

You might offer early access to a new product or service (that’s a great way of testing something new as well, by the way) or perhaps you’ll invite them to join your dedicated knowledge area, where they can learn more about your business.

If you can foster a sense of community among your customers, that will help. People love to belong to a club.

Probably the most important part of keeping customers is communication. If you don’t keep your customer informed, you are saying that you don’t care about them. If all you do is transact with them, they will never be a fan or an advocate for your business.

Whatever else you do, communicate!

Stick to your kinitting

Stick to your knitting

That’s an old saying that my parents would have used – and perhaps their parents too!

In today’s world the one eyed man is no longer king – to borrow another phrase from the past – the specialist is the king.

My speaker colleagues from the US talk about Niches (rhymes with itches) to Riches.

Successful businesses focus on the one thing that they are really good at. That’s the area where they can compete and outdo everyone else.

Less successful businesses offer a range of services, where some of them are not as good as others.

Sometimes, they would be better off saying “No, we don’t do that but we know someone really good who can help you”

In practice I prefer to say “Yes but” in preference to No. Starting with a yes is much more likely to get a positive response than a no!

This isn’t just about delivery it is also about marketing your goods and / or services. Successful marketing campaigns are laser focused on the customer and the benefit that customer will receive.

In the speaking world great speakers are really clear on who the audience is and the take-away the speaker is going to provide.

What is it that you do? What’s the great benefit you give your customer? Put in into one sentence.

Now test that assertion by substituting your competitor’s name. If the sentence is still true, you haven’t found your unique selling proposition.

If you can’t find it, ask your customers. You might be surprised. When you have your USP put it at the heart of everything you do.