A whistle blows to mark the end of the four minutes allocated for each introduction and there is a scramble to find a new contact and sell yourself all over again.
It’s a format that will be familiar to anyone who has signed up for speed dating. This, however, is about a different kind of relationship.
With speed dating, the evening guarantees a large of introductions in a short space of time. It is one of the newest ways to meet a partner and has revolutionised the dating game.
However, at an exclusive club in Liverpool, it is not romance that nearly 30 participants are looking for, but developing valuable business contacts. And the organisers believe that speed networking for business will become as big as the speed dating idea that spawned it.
After being invited to see it for myself in the bar of the Racquets Club in Liverpool, beforehand a few people introduced themselves. Some had been before and acknowledged old acquaintances, but for many it was a step into the unknown.
In a large, upstairs room, everyone was seated while the master of ceremonies made the introductions.
Then, with the simple rules clearly outlined – find someone to talk to on the blast of the whistle; four minutes later, when another whistle blows, stop talking and meet someone new – it was off to do a bit of rapid networking.
The idea is not to hard-sell, but that didn’t stop one of my contacts from trying to flog me a deal to cut the price of my phone and utility bills. He was, however, the exception.
Overall, the evening is not about selling, but more about cultivating business contacts, though there are always a few who try.
To be fair, it was not a one-way street. Many were genuinely interested in what I did and were happy to talk about their own business. Four minutes is just enough to make the most cursory summary of each other, but everyone carried business cards to hand out after each session.
It was a fairly intense event, and a good idea in principle, although there were too many ‘suppliers’ eager to sell their products to other networkers who were not ‘buyers’ – an equal mix of buyers to sellers would have been ideal.
This brand of networking came about when Glenn Robertson was talking to a friend who had been on a speed dating evening. They realised the technique could be adapted, and 18 months ago the idea was born.
Unfortunately for them, with any innovative idea, it is not long before others catch on. They hold evenings once a month in both Liverpool and Chester, but similar events are being held nationwide as others follow the lead.
The speed networking is incorporated into a membership package offering online networking lead generation, which lets members know quickly about suitable business opportunities.
If somebody types in their business needs, then they are put in touch with providers via email and text messages. It has cost tens of thousands pounds to get the technology up and running, but it can be seen as a useful way forward for businesses.
Wednesday 10 December 2008
Friday 28 November 2008
How To Use Word Of Mouth Advertising
Recently I flew with the Dutch airline KLM, and I had the worst flight I’ve ever had.
Halfway through the flight it came to light that behind us was sitting three Interpol agents who were extraditing a felon back to Ecuador. I cannot begin to tell you want is wrong with this scenario – especially when they gave him metal cutlery with his in-flight meal!
This was one in a long line of shortcomings which I haven’t got enough time to go into here.
Why am I telling you all this? Because this is a lesson that all firms – including KLM – should learn: that good old word of mouth advertising is still the best advertisement any business can generate even in this day of high technology.
Literally billions of pounds are spent by the huge corporations getting brands established in the public eye. Yet when all is said and done, a simple recommendation from a good friend or acquaintance will count for far more than any glitzy advertising campaign ever will.
Put simply, word of mouth advertising is the most powerful advertising medium any business can harness. In a world full of advertising noise and hype we become quite immune to the continual bombardment of the senses by the big spending companies and mostly ignore the message they are delivering.
This is why so much money is thrown at advertising by all business just to get themselves heard.
Did you know a full 80 to 90 percent of many company start-up budgets are directed into advertising? Spectacular failures have been witnessed in recent times as many Dotcom companies have failed to live up to the hype and glamour projected by the advertising agencies.
Often the collapse occurred after many millions of unwitting shareholders’ money was wasted.
In a conventional system of manufacturing and retailing the company produces the product for a known figure. Say the company is a vehicle manufacturer and a car they sell through a dealer is sold for (not worth) £10,000.
The manufacturer of that car would produce it for around £4,000 net cost which would include them making a profit from the car when sold to a dealer.
However this is just the start of the costs. To establish a strong position in the market place they then allocate perhaps 50% of the cost of manufacturing the car to advertising. So they have to make £6,000 to break even. On top of this they also have many hidden costs of running and maintaining expensive machinery and research and development projects.
This is all before the car even leaves the factory floor. So by the time the car is shipped to a dealer the actual price has been increased by a staggering 100 percent.
Then to top it all off, the dealer does their advertising so they can compete with all the other dealers vying for the customer. In all, 60 percent or more of the retail price of a car can be eaten up in distribution and marketing costs.
How much do you think a can of Coke would cost to manufacture? If you answered 5p or less you are close to the mark. It is somewhere under 5p to produce.
Yet that same can of coke after everyone has had a slice of the profits is sold to the public for about a pound. Now if someone tells someone else about this “great drink” do they get paid for it? Not on your life!!! The advertising agencies account for a great slice of the profit and the retailer makes the rest.
To harness the power of word of mouth is really the key for success in business nowadays, considering that consumers believe more about what other consumers advise than anything else.
Halfway through the flight it came to light that behind us was sitting three Interpol agents who were extraditing a felon back to Ecuador. I cannot begin to tell you want is wrong with this scenario – especially when they gave him metal cutlery with his in-flight meal!
This was one in a long line of shortcomings which I haven’t got enough time to go into here.
Why am I telling you all this? Because this is a lesson that all firms – including KLM – should learn: that good old word of mouth advertising is still the best advertisement any business can generate even in this day of high technology.
Literally billions of pounds are spent by the huge corporations getting brands established in the public eye. Yet when all is said and done, a simple recommendation from a good friend or acquaintance will count for far more than any glitzy advertising campaign ever will.
Put simply, word of mouth advertising is the most powerful advertising medium any business can harness. In a world full of advertising noise and hype we become quite immune to the continual bombardment of the senses by the big spending companies and mostly ignore the message they are delivering.
This is why so much money is thrown at advertising by all business just to get themselves heard.
Did you know a full 80 to 90 percent of many company start-up budgets are directed into advertising? Spectacular failures have been witnessed in recent times as many Dotcom companies have failed to live up to the hype and glamour projected by the advertising agencies.
Often the collapse occurred after many millions of unwitting shareholders’ money was wasted.
In a conventional system of manufacturing and retailing the company produces the product for a known figure. Say the company is a vehicle manufacturer and a car they sell through a dealer is sold for (not worth) £10,000.
The manufacturer of that car would produce it for around £4,000 net cost which would include them making a profit from the car when sold to a dealer.
However this is just the start of the costs. To establish a strong position in the market place they then allocate perhaps 50% of the cost of manufacturing the car to advertising. So they have to make £6,000 to break even. On top of this they also have many hidden costs of running and maintaining expensive machinery and research and development projects.
This is all before the car even leaves the factory floor. So by the time the car is shipped to a dealer the actual price has been increased by a staggering 100 percent.
Then to top it all off, the dealer does their advertising so they can compete with all the other dealers vying for the customer. In all, 60 percent or more of the retail price of a car can be eaten up in distribution and marketing costs.
How much do you think a can of Coke would cost to manufacture? If you answered 5p or less you are close to the mark. It is somewhere under 5p to produce.
Yet that same can of coke after everyone has had a slice of the profits is sold to the public for about a pound. Now if someone tells someone else about this “great drink” do they get paid for it? Not on your life!!! The advertising agencies account for a great slice of the profit and the retailer makes the rest.
To harness the power of word of mouth is really the key for success in business nowadays, considering that consumers believe more about what other consumers advise than anything else.
Saturday 15 November 2008
How To Turn Business Goodwill Into Cash
Setting-up a company is usually a relatively easy process; but now closing it down again is likely to prove much more troublesome and expensive.
First there is the administration. You have to notify suppliers and customers. Apart from that there are the tax challenges: in short, there are tax reliefs available that ease the way for the self-employed to incorporate, but there are no comparable tax reliefs to assist disincorporation.
Instead, there are additional potential tax liabilities that may be generated as a result of the merry-go-round of setting up and closing down a company.
The most costly of these is the possible treatment of business goodwill. For example, say you have a fairly typical small firm, which might be regarded as having goodwill worth £50,000.
The ‘goodwill value’, which will often need to be agreed with the Inland Revenue, is generally calculated on the basis of a multiple of prior years’ profits (three years in many sectors).
As part of the assistance provided to incorporation, a ‘tax election’ can be made by the sole trader under which no tax is paid on the gift of the transfer of goodwill, which would otherwise be deemed as transferred at market value.
But the situation is horribly different on disincorporation. The business’s goodwill might by now have increased to £60,000, but there is no equivalent tax election available for the company. This means that tax is payable, at 19 per cent, on the full £60,000 transferred goodwill.
Additionally, the individual would be treated as if they were paid a dividend of the £60,000 – generating personal tax on the entire sum.
And any property transferred to a company on incorporation could generate a similar tax penalty of that of goodwill on disincorporation. The situation is less clear with IT equipment and cars given to a company, where the tax treatment will depend on circumstance.
If all this sounds complicated, that’s because it is. Indeed, it is doubtful many businesses would become incorporated if they knew all of the complicated hassle involved should they decide to shut up shop.
This in turn leads to the situation where many one-person companies are likely to opt to quietly ditch the company, unaware of the risks involved. Some may omit to close the company bank account or continue to use company stationery, making it difficult to claim that they are not still trading as a company.
People who are trading on the basis of their own name might be regarded as having, de facto, taken the goodwill out of the company, generating the type of tax bill which I’ve outlined above.
It will be very easy for the Revenue to ask questions about what has happened to the company, aware of the likely tax liability arising from the goodwill treatment. If many small businesses opt to disincorporate, the tax generated for the Revenue could be significant.
There may be a slight glimmer of hope for some businesses recently incorporated, and which now want to disincorporate. Recent asset transfers may not have yet been assessed by the Inland Revenue and there could be scope for negotiation on the goodwill valuation.
Many sole traders who have converted into companies will find their best option is accepting that disincorporation has more penalties than benefits.
But it is important to put the issue of goodwill into perspective. Many companies will have valued goodwill when they incorporated, and will indeed need to be careful if they wish to disincorporate.
Companies which exist to market one person’s services, however, will often own no goodwill, because what goodwill there is attaches to the director personally: so for many of the very small companies that will now wish to return to unincorporated status, there should be no goodwill problem.
For the rest of us, however, less of minefield in this area would be greatly appreciated.
First there is the administration. You have to notify suppliers and customers. Apart from that there are the tax challenges: in short, there are tax reliefs available that ease the way for the self-employed to incorporate, but there are no comparable tax reliefs to assist disincorporation.
Instead, there are additional potential tax liabilities that may be generated as a result of the merry-go-round of setting up and closing down a company.
The most costly of these is the possible treatment of business goodwill. For example, say you have a fairly typical small firm, which might be regarded as having goodwill worth £50,000.
The ‘goodwill value’, which will often need to be agreed with the Inland Revenue, is generally calculated on the basis of a multiple of prior years’ profits (three years in many sectors).
As part of the assistance provided to incorporation, a ‘tax election’ can be made by the sole trader under which no tax is paid on the gift of the transfer of goodwill, which would otherwise be deemed as transferred at market value.
But the situation is horribly different on disincorporation. The business’s goodwill might by now have increased to £60,000, but there is no equivalent tax election available for the company. This means that tax is payable, at 19 per cent, on the full £60,000 transferred goodwill.
Additionally, the individual would be treated as if they were paid a dividend of the £60,000 – generating personal tax on the entire sum.
And any property transferred to a company on incorporation could generate a similar tax penalty of that of goodwill on disincorporation. The situation is less clear with IT equipment and cars given to a company, where the tax treatment will depend on circumstance.
If all this sounds complicated, that’s because it is. Indeed, it is doubtful many businesses would become incorporated if they knew all of the complicated hassle involved should they decide to shut up shop.
This in turn leads to the situation where many one-person companies are likely to opt to quietly ditch the company, unaware of the risks involved. Some may omit to close the company bank account or continue to use company stationery, making it difficult to claim that they are not still trading as a company.
People who are trading on the basis of their own name might be regarded as having, de facto, taken the goodwill out of the company, generating the type of tax bill which I’ve outlined above.
It will be very easy for the Revenue to ask questions about what has happened to the company, aware of the likely tax liability arising from the goodwill treatment. If many small businesses opt to disincorporate, the tax generated for the Revenue could be significant.
There may be a slight glimmer of hope for some businesses recently incorporated, and which now want to disincorporate. Recent asset transfers may not have yet been assessed by the Inland Revenue and there could be scope for negotiation on the goodwill valuation.
Many sole traders who have converted into companies will find their best option is accepting that disincorporation has more penalties than benefits.
But it is important to put the issue of goodwill into perspective. Many companies will have valued goodwill when they incorporated, and will indeed need to be careful if they wish to disincorporate.
Companies which exist to market one person’s services, however, will often own no goodwill, because what goodwill there is attaches to the director personally: so for many of the very small companies that will now wish to return to unincorporated status, there should be no goodwill problem.
For the rest of us, however, less of minefield in this area would be greatly appreciated.
Friday 31 October 2008
How To Start Trading Online
For many businesses technology means cutting costs, improving process efficiency and getting close to your customers and suppliers.
The internet has without doubt helped in achieving these goals, whether through online trading or extranets and intranets.
It is no longer a question of “can I afford to use technology?” Now, it is “can I afford not to?” It is not simply online access, which offers small businesses significant new revenue and cost saving benefits, but also integrating technology throughout the business.
So, assuming you want to embark upon implementing a technology strategy (if you have not done so already) where do you start?... how do you start?... how much will it cost?... what legal and security issues are involved?... how do you integrate it with the rest of your marketing and business strategy?
But not every business necessarily needs to trade online to remain competitive: however, presence on the worldwide web is becoming increasingly important.
Those companies who keep their heads in the sand and say: “I’ve been fine until now without the web, so why change?” forget the fact that, with every day that passes, their web-wise competitors will be eating away at their market share. There is no such thing as a local or regional market anymore.
You can buy whatever you want on the internet from businesses at the other end of the country, or even overseas. In addition the resulting cost reductions and improved partner and customer satisfaction which results form a successful e-business solution is immeasurable.
Before setting up your website, you need to establish what your objectives are for having a site, how it will fit in with your overall business objectives and how it will work as an integrated part of your business plan. You also need to ensure you have sufficient resources to meet any new demand you generate from your customers or suppliers.
There is no one way to put a website together. Many are simple ‘brochureware’ sites, where companies have simply scanned in their corporate brochure to give them a presence on the web. Some go a stage further. These are more dynamic, perhaps with some interesting graphics. There is a menu bar showing how you can get more information on the company’s history, products and services and the company goes to the trouble of updating the site regularly.
Then, there are sites which really mean business and allow you to buy goods and services online. The most sophisticated ones may even have a ‘virtual’ salesperson who will answer frequently-asked questions (called FAQs) or connect you through to a real salesperson.
Which one is right for you? That depends entirely on what you want to achieve with your website, your budget (of course) and how the website fits in with your overall business and marketing strategies.
Your site is your shop window - not just to the people who pass by your premises every day, but to the entire world. Think hard about the words you use: consider how you would normally talk to your customer base and adopt that tone of voice. For some businesses, this will be professional, even formal, whereas other businesses can afford to be more relaxed - even casual.
Do not use too many words as no one really wants to spend hours wading through text. So keep it brief and to the point. If you do have something which really needs lots of words, such as your corporate brochure it is best to make it available as a downloadable facility.
As the saying goes, pictures say more than a thousand words, but too many will take ages to download. Internet users are impatient people and quickly give up. Therefore, pictures should be very small in the digital sense of the word, making them fast to download whatever the connection speed.
If you have overseas customers, or are looking to expand your overseas business, you need to make sure that you are fully prepared for handling this. There are many international implications to bear in mind, including dealing in foreign currencies, local customs, foreign trade laws and cultural differences.
Also, depending on how many customers you have in each country and the importance of the country in your overall business strategy and objectives, you may want to consider making some or all of the pages available in different languages.
Ensure your site is easy to navigate, with a clear menu bar on the side of each page taking you to any part of the site at any time and with high-visibility contact details. Complicated sites, which take ages to get to the information wanted, can exasperate users and make them give up.
Make sure your homepage - the first one people see - really works for you. Big, well-known companies can perhaps afford to just have their name and a click-to-enter icon. But anyone trawling through a series of websites, looking for a specific product or service, wants to know quickly what you do or do not sell.
The internet has without doubt helped in achieving these goals, whether through online trading or extranets and intranets.
It is no longer a question of “can I afford to use technology?” Now, it is “can I afford not to?” It is not simply online access, which offers small businesses significant new revenue and cost saving benefits, but also integrating technology throughout the business.
So, assuming you want to embark upon implementing a technology strategy (if you have not done so already) where do you start?... how do you start?... how much will it cost?... what legal and security issues are involved?... how do you integrate it with the rest of your marketing and business strategy?
But not every business necessarily needs to trade online to remain competitive: however, presence on the worldwide web is becoming increasingly important.
Those companies who keep their heads in the sand and say: “I’ve been fine until now without the web, so why change?” forget the fact that, with every day that passes, their web-wise competitors will be eating away at their market share. There is no such thing as a local or regional market anymore.
You can buy whatever you want on the internet from businesses at the other end of the country, or even overseas. In addition the resulting cost reductions and improved partner and customer satisfaction which results form a successful e-business solution is immeasurable.
Before setting up your website, you need to establish what your objectives are for having a site, how it will fit in with your overall business objectives and how it will work as an integrated part of your business plan. You also need to ensure you have sufficient resources to meet any new demand you generate from your customers or suppliers.
There is no one way to put a website together. Many are simple ‘brochureware’ sites, where companies have simply scanned in their corporate brochure to give them a presence on the web. Some go a stage further. These are more dynamic, perhaps with some interesting graphics. There is a menu bar showing how you can get more information on the company’s history, products and services and the company goes to the trouble of updating the site regularly.
Then, there are sites which really mean business and allow you to buy goods and services online. The most sophisticated ones may even have a ‘virtual’ salesperson who will answer frequently-asked questions (called FAQs) or connect you through to a real salesperson.
Which one is right for you? That depends entirely on what you want to achieve with your website, your budget (of course) and how the website fits in with your overall business and marketing strategies.
Your site is your shop window - not just to the people who pass by your premises every day, but to the entire world. Think hard about the words you use: consider how you would normally talk to your customer base and adopt that tone of voice. For some businesses, this will be professional, even formal, whereas other businesses can afford to be more relaxed - even casual.
Do not use too many words as no one really wants to spend hours wading through text. So keep it brief and to the point. If you do have something which really needs lots of words, such as your corporate brochure it is best to make it available as a downloadable facility.
As the saying goes, pictures say more than a thousand words, but too many will take ages to download. Internet users are impatient people and quickly give up. Therefore, pictures should be very small in the digital sense of the word, making them fast to download whatever the connection speed.
If you have overseas customers, or are looking to expand your overseas business, you need to make sure that you are fully prepared for handling this. There are many international implications to bear in mind, including dealing in foreign currencies, local customs, foreign trade laws and cultural differences.
Also, depending on how many customers you have in each country and the importance of the country in your overall business strategy and objectives, you may want to consider making some or all of the pages available in different languages.
Ensure your site is easy to navigate, with a clear menu bar on the side of each page taking you to any part of the site at any time and with high-visibility contact details. Complicated sites, which take ages to get to the information wanted, can exasperate users and make them give up.
Make sure your homepage - the first one people see - really works for you. Big, well-known companies can perhaps afford to just have their name and a click-to-enter icon. But anyone trawling through a series of websites, looking for a specific product or service, wants to know quickly what you do or do not sell.
Thursday 16 October 2008
The Importance Of Rebranding Your Business
The vagaries of public taste can be the curse of many small businesses but one company has shown that a little marketing savvy can go a long way and help turn an out-of-fashion product into a desirable consumer foodstuff. Forget the humble pilchard. In its place is now the Cornish sardine.
Now down in the west of England they know full well that the pilchard and the sardine are one and the same. However, to the average consumer the idea of a pilchard conjures up images of ring-pull tins and tomato sauce. The sardine on the other hand evokes memories of Spanish and Portuguese holidays and barbeques in the sun.
How the pilchard came to be transformed into the Cornish sardine and its subsequent pride of place on supermarket fresh fish counters owes something to a bit of luck, allied to a slice of ingenuity. It also provides a classic example for SMEs everywhere of how marketing can make a huge difference to a company's fortunes. Though, in fairness, the success of the Newlyn-based Pilchard Works is exceptional by anyone's standards.
Big budgets can turn around products. Marketing gurus point to the success of Burberry in turning a staid tartan fabric into a must-have fashion accessory and television watchers everywhere will have been amused by the adverts for Skoda cars and how they have been transformed from cheap and nasty to rather desirable.
However, throwing large sums at rebranding exercises can often backfire. The launches of Consignia and the torch-carrying logo of BT swallowed up millions of pounds and were deemed failures.
The success of Pilchard Works offers a valuable example to other SMEs. I consider marketing to be delivering value to the customer. Often the publicity around rebranding doesn’t help. The idea of the Cornish sardines is a lovely story, and it shows how a small company has identified a gap between what is being delivered and what the customer wants.
The pilchard conjures up a negative image in people's minds, while the sardine is associated with sunshine, heat and happy times on holidays. Small business can take heart from this example. It is about being close to the customer and identifying what value can be delivered. And that can pretty much apply to anything.
A simple gap exercise to look at what a company is offering and what the customer wants, and how great or otherwise is the gulf between the two, is a valuable one for any SME and doesn’t need to be linked to rebranding.
The Pilchard Works experience highlights some of the key rules SMEs need to adhere to when promoting their products. It also, of course, shows the massive impact a successful strategy can have on the sales of a small company. Too many smaller companies tend to be similar to other companies within their areas rather than standing out.
SMEs can sometimes have an advantage over larger companies with bigger budgets. They can be more flexible and concentrate on one product and a niche customer market, while larger rivals may have a range of products and a varied customer base.
What the pilchard producer has done is understand a target group of customers and aim their product so that it appeals. And that is a valuable lesson whether selling sardines or whatever. They have used a rebranding exercise, but there are other ways of getting a message across, such as redesigning the packaging or using a particular distribution partner.
An example is a drink producer called Innocent Drinks. They produce an expensive, yoghurt-based smooth drink and have identified a niche, premium market. The drink is seen as healthy and organic and has appealed to the snack lunchtime market. A tie up with Starbucks that has got it onto the shelves of the coffee house has been a further boost.
Whether a yoghurt drink or a sardine, the rules are the same: you can change your image without access to a large PR campaign.
Now down in the west of England they know full well that the pilchard and the sardine are one and the same. However, to the average consumer the idea of a pilchard conjures up images of ring-pull tins and tomato sauce. The sardine on the other hand evokes memories of Spanish and Portuguese holidays and barbeques in the sun.
How the pilchard came to be transformed into the Cornish sardine and its subsequent pride of place on supermarket fresh fish counters owes something to a bit of luck, allied to a slice of ingenuity. It also provides a classic example for SMEs everywhere of how marketing can make a huge difference to a company's fortunes. Though, in fairness, the success of the Newlyn-based Pilchard Works is exceptional by anyone's standards.
Big budgets can turn around products. Marketing gurus point to the success of Burberry in turning a staid tartan fabric into a must-have fashion accessory and television watchers everywhere will have been amused by the adverts for Skoda cars and how they have been transformed from cheap and nasty to rather desirable.
However, throwing large sums at rebranding exercises can often backfire. The launches of Consignia and the torch-carrying logo of BT swallowed up millions of pounds and were deemed failures.
The success of Pilchard Works offers a valuable example to other SMEs. I consider marketing to be delivering value to the customer. Often the publicity around rebranding doesn’t help. The idea of the Cornish sardines is a lovely story, and it shows how a small company has identified a gap between what is being delivered and what the customer wants.
The pilchard conjures up a negative image in people's minds, while the sardine is associated with sunshine, heat and happy times on holidays. Small business can take heart from this example. It is about being close to the customer and identifying what value can be delivered. And that can pretty much apply to anything.
A simple gap exercise to look at what a company is offering and what the customer wants, and how great or otherwise is the gulf between the two, is a valuable one for any SME and doesn’t need to be linked to rebranding.
The Pilchard Works experience highlights some of the key rules SMEs need to adhere to when promoting their products. It also, of course, shows the massive impact a successful strategy can have on the sales of a small company. Too many smaller companies tend to be similar to other companies within their areas rather than standing out.
SMEs can sometimes have an advantage over larger companies with bigger budgets. They can be more flexible and concentrate on one product and a niche customer market, while larger rivals may have a range of products and a varied customer base.
What the pilchard producer has done is understand a target group of customers and aim their product so that it appeals. And that is a valuable lesson whether selling sardines or whatever. They have used a rebranding exercise, but there are other ways of getting a message across, such as redesigning the packaging or using a particular distribution partner.
An example is a drink producer called Innocent Drinks. They produce an expensive, yoghurt-based smooth drink and have identified a niche, premium market. The drink is seen as healthy and organic and has appealed to the snack lunchtime market. A tie up with Starbucks that has got it onto the shelves of the coffee house has been a further boost.
Whether a yoghurt drink or a sardine, the rules are the same: you can change your image without access to a large PR campaign.
Wednesday 17 September 2008
How To Devise Your Business Strategy
It is widely accepted that after their defeat in World War II, the Japanese were the first to embrace the ideal of ‘business is war’. This means that business uses the ideas of the battlefield and applies them to the world of business.
And it certainly worked for Japan: today, Japan is a major or dominant power in almost every world strategic industry including finance, communications, mass-transit, semi-conductors, motor vehicles, and popular entertainment.
The world’s largest banks are all Japanese. The largest record company in America is Japanese, and two of the three biggest movie / entertainment companies in America are Japanese. Many big companies in the US like Loews Theatres, Firestone Tires and 7/11 stores are also Japanese. In fact, 7 of the 10 largest companies in the world are Japanese.
Furthermore, Japan today is the world’s biggest manufacturer of cars, having surpassed the United States in the mid 1980’s. These all used to be American dominated industries 25 years ago.
Believe it or not, this phenomenal success can be traced back to ancient China, in particular a great military general named Sun Tzu. It is reckoned that he lived from around 544 BC to 496 BC in the ancient state of Ch’i.
Sun Tzu wrote the earliest – and still the most revered – military strategy book in the world. This masterpiece is best known to most of us as ‘The Art of War’ and can be found on the shelves of most good bookshops. Since naming a written work after its author was customary in ancient China, the text was originally referred to as simply ‘Sun Tzu’.
Considering the countless texts lost or destroyed throughout China’s history, the remarkable survival and relevancy of Sun Tzu’s ‘The Art of War’ to this very day attest to its immeasurable value.
This fact was not lost on the Japanese. Sun Tzu was first introduced to Japan as early as 400 A.D. Japan’s leaders earnestly applied Sun Tzu to warfare: the samurai would peruse its contents before each battle. They were among the most diligent practitioners of the book’s concepts, and came up with their own term to encapsulate its meaning: Sonshi.
I’m sure your business would like to one day be the same size as your average keiretsu (almost all the significant companies in Japan are aligned into one of about 6 keiretsu or business ‘groupings’. These are loosely linked ‘super-corporations’ for lack of a better term. Most of the Japanese companies whose brands we know and love are in these keiretsus. Several of these keiretsus have been around a very long time (before WWII) dating back to feudal-like family-run trading houses. Mitsubishi and Mitsui are two of the more famous ones. Famous companies like Nissan, Toshiba, and Sumitomo Bank are all in keiretsus). If you want to win your own war, then you need to look at your business strategy.
The word ‘strategy’ is used a lot and when there is a particularly big problem, then organisations will say that they are drawing up a ‘detailed strategy’ in order to deal with it. In reality, however, strategies should never be detailed: a strategy should be simple, it’s the way that the objectives of the strategy are achieved – the tactics – that are usually the complicated and imaginative part.
Strategy is almost always long-term planning. It involves all those things which you’ll need to worry about for a long time. Formulating your strategy must have as its final goal your total and unquestionable ‘victory’. If not, then the strategy is incomplete.
With this ultimate goal in mind, you must ask yourself the question: “What stands in my way?”
From this, your plan should be simple and flexible enough to encompass most probable outcomes (possible alliances, definite enemies, highly contested and less contested territories, etc) and lead you to victory. This plan, in brief, is your strategy.
And it certainly worked for Japan: today, Japan is a major or dominant power in almost every world strategic industry including finance, communications, mass-transit, semi-conductors, motor vehicles, and popular entertainment.
The world’s largest banks are all Japanese. The largest record company in America is Japanese, and two of the three biggest movie / entertainment companies in America are Japanese. Many big companies in the US like Loews Theatres, Firestone Tires and 7/11 stores are also Japanese. In fact, 7 of the 10 largest companies in the world are Japanese.
Furthermore, Japan today is the world’s biggest manufacturer of cars, having surpassed the United States in the mid 1980’s. These all used to be American dominated industries 25 years ago.
Believe it or not, this phenomenal success can be traced back to ancient China, in particular a great military general named Sun Tzu. It is reckoned that he lived from around 544 BC to 496 BC in the ancient state of Ch’i.
Sun Tzu wrote the earliest – and still the most revered – military strategy book in the world. This masterpiece is best known to most of us as ‘The Art of War’ and can be found on the shelves of most good bookshops. Since naming a written work after its author was customary in ancient China, the text was originally referred to as simply ‘Sun Tzu’.
Considering the countless texts lost or destroyed throughout China’s history, the remarkable survival and relevancy of Sun Tzu’s ‘The Art of War’ to this very day attest to its immeasurable value.
This fact was not lost on the Japanese. Sun Tzu was first introduced to Japan as early as 400 A.D. Japan’s leaders earnestly applied Sun Tzu to warfare: the samurai would peruse its contents before each battle. They were among the most diligent practitioners of the book’s concepts, and came up with their own term to encapsulate its meaning: Sonshi.
I’m sure your business would like to one day be the same size as your average keiretsu (almost all the significant companies in Japan are aligned into one of about 6 keiretsu or business ‘groupings’. These are loosely linked ‘super-corporations’ for lack of a better term. Most of the Japanese companies whose brands we know and love are in these keiretsus. Several of these keiretsus have been around a very long time (before WWII) dating back to feudal-like family-run trading houses. Mitsubishi and Mitsui are two of the more famous ones. Famous companies like Nissan, Toshiba, and Sumitomo Bank are all in keiretsus). If you want to win your own war, then you need to look at your business strategy.
The word ‘strategy’ is used a lot and when there is a particularly big problem, then organisations will say that they are drawing up a ‘detailed strategy’ in order to deal with it. In reality, however, strategies should never be detailed: a strategy should be simple, it’s the way that the objectives of the strategy are achieved – the tactics – that are usually the complicated and imaginative part.
Strategy is almost always long-term planning. It involves all those things which you’ll need to worry about for a long time. Formulating your strategy must have as its final goal your total and unquestionable ‘victory’. If not, then the strategy is incomplete.
With this ultimate goal in mind, you must ask yourself the question: “What stands in my way?”
From this, your plan should be simple and flexible enough to encompass most probable outcomes (possible alliances, definite enemies, highly contested and less contested territories, etc) and lead you to victory. This plan, in brief, is your strategy.
Thursday 4 September 2008
How To Set The Business Agenda
We often hear the phrase bandied about to ‘set the agenda’ for certain issues. These are usually issues that you what you want to be debated, a debate which, as an authority figure, you can lead!
If you can be seen as an authority figure on certain issues, then the ability to set an agenda can be a powerful business tool.
The term ‘agenda-setting’ was first used in a study by Maxwell E. McCombs and Donald L. Shaw published in 1972. In the study, the researchers interviewed 100 undecided voters in Chapel Hill, North Carolina and asked them what issues they were most concerned about in the coming (1968) election.
After determining the five issues the voters deemed most important, the researchers evaluated the media serving Chapel Hill (both print and broadcast) for the content of their stories. McCombs and Shaw found an almost perfect correlation between the types of stories that were covered most often and the voters’ concern for the same issues.
McCombs and Shaw’s research into agenda-setting was not the first foray into the subject (although it was the first to coin the term ‘agenda setting’), and it would not be the last. Several studies are done each year within the various disciplines of agenda-setting research.
Generally, the studies seem mostly to confirm that agenda-setting does in fact take place, and that media attention toward stories is the most important factor involved in shaping the public’s view of the stories’ relative importance.
In fact, studies have shown that the mere number of times a story is repeated in the news will affect peoples’ perception of the story’s importance, regardless of what is said about the topic.
There are three types of agenda: the media agenda (print and broadcast), the public agenda (what the ‘word on the street’ is), and the policy agenda (usually to do with government policies). Each one tends to affect the other, but the media agenda undoubtedly wields the most power when trying to drum up a debate.
But if you think agenda-setting is achieved simply by getting stories in the media, then, I’m afraid, you’ll have to think again, and this is due in no small part to the US Presidential Election of 1940. This is when the academics Lazarsfeld, Berelson and Gaudet conducted the first full-scale investigation of the effects of political mass communication.
Their research was originally based on the simplistic ‘hypodermic needle’ model of media influence, where it was assumed that a message would be transmitted from the mass media to a ‘mass audience’, who would absorb the message, like an arm would absorb whatever was pumped into it by a hypodermic needle.
However, their investigations suggested that media effects were minimal, that the idea of a ‘mass audience’ was inadequate and misguided because social influences had a major effect on the process of opinion formation and sharply limited the media’s effect.
The study concluded that only 5% of people changed their voting behaviour as a result of media messages! Their exposure to election broadcasts turned out to be a relatively poor predictor of their voting behaviour, particularly when compared with other factors such as their communication with friends, union members, business colleagues and the political tradition they had grown up in.
No ‘opinion leader’ is an opinion leader in all aspects of life. For example, the car mechanic in your local pub may not use the media much at all because he’s always working late. Nevertheless, he knows a lot about cars and so what the rest of those in the pub ‘know’ from the media about different makes of car will be influenced by his views.
This was recognized by the Nazi party in its gradual rise to power during the 1920s and 1930s. Nazi agitation and propaganda became increasingly successful at forcing themselves onto the front pages of newspapers, thus becoming an everyday topic of conversation. They were particularly keen to capitalise on that attention, directing it in the right direction through influencing the leading members of the various small associations which were spread throughout German communities.
Where local leaders, enjoying respectability and influence, were won over, further converts often rapidly followed. In the relatively homogeneous villages in Schleswig-Holstein, where feelings about the ‘Weimar system’ were running high on account of the agrarian crisis, the push from one or two farmers’ leaders could result in a local landslide to the Nazi Party.
You should never underestimate the importance of gaining credible, heavyweight endorsement from opinion leaders, and getting them to add their weight to media agenda-setting.
If you can be seen as an authority figure on certain issues, then the ability to set an agenda can be a powerful business tool.
The term ‘agenda-setting’ was first used in a study by Maxwell E. McCombs and Donald L. Shaw published in 1972. In the study, the researchers interviewed 100 undecided voters in Chapel Hill, North Carolina and asked them what issues they were most concerned about in the coming (1968) election.
After determining the five issues the voters deemed most important, the researchers evaluated the media serving Chapel Hill (both print and broadcast) for the content of their stories. McCombs and Shaw found an almost perfect correlation between the types of stories that were covered most often and the voters’ concern for the same issues.
McCombs and Shaw’s research into agenda-setting was not the first foray into the subject (although it was the first to coin the term ‘agenda setting’), and it would not be the last. Several studies are done each year within the various disciplines of agenda-setting research.
Generally, the studies seem mostly to confirm that agenda-setting does in fact take place, and that media attention toward stories is the most important factor involved in shaping the public’s view of the stories’ relative importance.
In fact, studies have shown that the mere number of times a story is repeated in the news will affect peoples’ perception of the story’s importance, regardless of what is said about the topic.
There are three types of agenda: the media agenda (print and broadcast), the public agenda (what the ‘word on the street’ is), and the policy agenda (usually to do with government policies). Each one tends to affect the other, but the media agenda undoubtedly wields the most power when trying to drum up a debate.
But if you think agenda-setting is achieved simply by getting stories in the media, then, I’m afraid, you’ll have to think again, and this is due in no small part to the US Presidential Election of 1940. This is when the academics Lazarsfeld, Berelson and Gaudet conducted the first full-scale investigation of the effects of political mass communication.
Their research was originally based on the simplistic ‘hypodermic needle’ model of media influence, where it was assumed that a message would be transmitted from the mass media to a ‘mass audience’, who would absorb the message, like an arm would absorb whatever was pumped into it by a hypodermic needle.
However, their investigations suggested that media effects were minimal, that the idea of a ‘mass audience’ was inadequate and misguided because social influences had a major effect on the process of opinion formation and sharply limited the media’s effect.
The study concluded that only 5% of people changed their voting behaviour as a result of media messages! Their exposure to election broadcasts turned out to be a relatively poor predictor of their voting behaviour, particularly when compared with other factors such as their communication with friends, union members, business colleagues and the political tradition they had grown up in.
No ‘opinion leader’ is an opinion leader in all aspects of life. For example, the car mechanic in your local pub may not use the media much at all because he’s always working late. Nevertheless, he knows a lot about cars and so what the rest of those in the pub ‘know’ from the media about different makes of car will be influenced by his views.
This was recognized by the Nazi party in its gradual rise to power during the 1920s and 1930s. Nazi agitation and propaganda became increasingly successful at forcing themselves onto the front pages of newspapers, thus becoming an everyday topic of conversation. They were particularly keen to capitalise on that attention, directing it in the right direction through influencing the leading members of the various small associations which were spread throughout German communities.
Where local leaders, enjoying respectability and influence, were won over, further converts often rapidly followed. In the relatively homogeneous villages in Schleswig-Holstein, where feelings about the ‘Weimar system’ were running high on account of the agrarian crisis, the push from one or two farmers’ leaders could result in a local landslide to the Nazi Party.
You should never underestimate the importance of gaining credible, heavyweight endorsement from opinion leaders, and getting them to add their weight to media agenda-setting.
Thursday 21 August 2008
How To Make The Best Use Of Ecommerce
Recently, two entrepreneurs started up an Internet business. Their idea was big. They were going to change the utilities market for the little guys - for small businesses and for consumers.
Their idea was quite simple: create a shop where customers could compare water, power and telecom packages and then buy the one that best suited their needs (if you’ve ever tried to compare these kinds of packages you’ll know how hard this is!).
Great idea. And originally the two entrepreneurs had drafted a phenomenal list of functions and buttons that would appear on the website. But, after just a few days of thinking and planning, they came to realise that the principal driver behind the success of this site was going to be a combination of personal service and comprehensive supplier knowledge. The website was merely to be a means of delivering that service. This may well be the case with your business, too.
A business is not viable merely because it trades on the Internet. The net is a medium, nothing more, nothing less - like the phone or the radio - so let’s not get dazzled by its special features. Why, then, does every daily newspaper contain a business section on the net? Why does every billboard advert and every TV commercial carry a web address? Why do the European and American technology stock listings Easdaq and Nasdaq even exist?
Still today, senior business figures, political leaders and many entrepreneurs focus on the ‘e’ - the medium. Because it’s growing fast. It’s visible. It’s different from other media. But more important, much more important than the ‘e’, is the ‘Commerce’.
The days of the overvalued dotcom companies are largely gone. Good thing, too. The inflated price of technology-based companies in the stock market has been responsible for gold-rush fever. But seven in ten Internet start-ups fail. Of course, we read only about the success stories. Nobody brags about his or her incompetence.
Yet many entrepreneurs (and many non-entrepreneurs!) in the last few years have run before they could walk; rushed at initial flotation before they could genuinely offer investor value; thrown good money after bad; started sites that have failed badly.
Happily, we have reached a first-stage maturity in net software, and technology is no longer the battleground - value is. Value is king now. And how familiar that feels! We spent the last two decades in business driving up value - cutting costs, innovating, marketing, building quality and listening to customers. Your business probably participated in these development programmes. So you’re probably comfortable with value already. That’s a nice starting point, isn’t it?
The mantra from the late nineties’ net gurus was ‘digitise or die’. Microsoft proudly proclaimed, “If you’re not online you’re lunch”. The informed forecast was hyperbolic growth of e-Commerce and the resulting extinction of the offline business. That means your business!
Hmm. You’re still here? You’re still trading? Sure, maybe you could do grow faster, trade more profitably - but you’re hardly bankrupt, are you? Even if you have an e-Commerce site, your business is probably largely offline even now. Lunched on or even outperformed by superdigital net-only businesses? Doubt it. So where did the forecast screw up?
The netheads focused on technology. It’s worth pointing out that many of them were technology suppliers themselves and so had a vested interest in your believing their shrieks. To focus on technology is to focus on the means, not the ends, of business.
And other means include telephone, newspapers, TV, radio and direct mail. When these media were first adopted by businesses, the in-media experts also forecast a revolution in business methods. “Running a radio campaign is like turning a sales tap on,” said many (delighted) first-time advertisers.
But did a new breed of post-apocalyptic business survivors emerge? Hardly. More like normal companies with new telesales teams, to deal with the spikes in demand caused by national advertising. Sure, they traded a little differently. Their strategies altered. And eventually their methods and structures changed as the volume of their new-media sales rose. But this was evolution, not revolution. And, without doubt, the ends topped out over the means as the key drivers of these changes.
Today, as ever, the end in any business transaction is value. And value starts with the customer. So as always, the key to a successful business is developing value for your customers. That hasn’t changed, and never will.
Their idea was quite simple: create a shop where customers could compare water, power and telecom packages and then buy the one that best suited their needs (if you’ve ever tried to compare these kinds of packages you’ll know how hard this is!).
Great idea. And originally the two entrepreneurs had drafted a phenomenal list of functions and buttons that would appear on the website. But, after just a few days of thinking and planning, they came to realise that the principal driver behind the success of this site was going to be a combination of personal service and comprehensive supplier knowledge. The website was merely to be a means of delivering that service. This may well be the case with your business, too.
A business is not viable merely because it trades on the Internet. The net is a medium, nothing more, nothing less - like the phone or the radio - so let’s not get dazzled by its special features. Why, then, does every daily newspaper contain a business section on the net? Why does every billboard advert and every TV commercial carry a web address? Why do the European and American technology stock listings Easdaq and Nasdaq even exist?
Still today, senior business figures, political leaders and many entrepreneurs focus on the ‘e’ - the medium. Because it’s growing fast. It’s visible. It’s different from other media. But more important, much more important than the ‘e’, is the ‘Commerce’.
The days of the overvalued dotcom companies are largely gone. Good thing, too. The inflated price of technology-based companies in the stock market has been responsible for gold-rush fever. But seven in ten Internet start-ups fail. Of course, we read only about the success stories. Nobody brags about his or her incompetence.
Yet many entrepreneurs (and many non-entrepreneurs!) in the last few years have run before they could walk; rushed at initial flotation before they could genuinely offer investor value; thrown good money after bad; started sites that have failed badly.
Happily, we have reached a first-stage maturity in net software, and technology is no longer the battleground - value is. Value is king now. And how familiar that feels! We spent the last two decades in business driving up value - cutting costs, innovating, marketing, building quality and listening to customers. Your business probably participated in these development programmes. So you’re probably comfortable with value already. That’s a nice starting point, isn’t it?
The mantra from the late nineties’ net gurus was ‘digitise or die’. Microsoft proudly proclaimed, “If you’re not online you’re lunch”. The informed forecast was hyperbolic growth of e-Commerce and the resulting extinction of the offline business. That means your business!
Hmm. You’re still here? You’re still trading? Sure, maybe you could do grow faster, trade more profitably - but you’re hardly bankrupt, are you? Even if you have an e-Commerce site, your business is probably largely offline even now. Lunched on or even outperformed by superdigital net-only businesses? Doubt it. So where did the forecast screw up?
The netheads focused on technology. It’s worth pointing out that many of them were technology suppliers themselves and so had a vested interest in your believing their shrieks. To focus on technology is to focus on the means, not the ends, of business.
And other means include telephone, newspapers, TV, radio and direct mail. When these media were first adopted by businesses, the in-media experts also forecast a revolution in business methods. “Running a radio campaign is like turning a sales tap on,” said many (delighted) first-time advertisers.
But did a new breed of post-apocalyptic business survivors emerge? Hardly. More like normal companies with new telesales teams, to deal with the spikes in demand caused by national advertising. Sure, they traded a little differently. Their strategies altered. And eventually their methods and structures changed as the volume of their new-media sales rose. But this was evolution, not revolution. And, without doubt, the ends topped out over the means as the key drivers of these changes.
Today, as ever, the end in any business transaction is value. And value starts with the customer. So as always, the key to a successful business is developing value for your customers. That hasn’t changed, and never will.
Friday 8 August 2008
How To Get The Best Price For Your Business
Selling your business at the tight time, and for the right price, can be a very difficult thing to get right.
Too many small business owners make the mistake of going on for too long, only to find their business loses value because they no longer have the energy to drive it forward.
Others are forced into selling suddenly because of personal reasons and are, therefore, not in a position to secure the best price.
For most, it is the single most important business decision they must get right. Many firms just eke out a living for their owners – and only when they sell do they make the sort of ‘real’ money that makes the whole process worthwhile.
The first two to four years are usually all about set-up and start-up costs, the next four to seven making a little money and paying back those costs. It is only in the last period that any real money is made, when the business is sold.
Most business experts agree that preparation is the key to achieving a successful sale and this can begin a year or more before you intend to sell. It might be that you have fantastic revenues from clients but have no contracts with them. You may have staff but they are all somehow self-employed. You need to make everything legal and above board because otherwise it won’t stand up to the test of due diligence. You should also look at cutting your unnecessary costs to make the figures look good.
Many small business owners worry that the process of putting up a business for sale could undermine confidence among customers, suppliers and employees. They are also worried about competitors, who are notorious for posing as buyers to find out commercial information.
Sometimes, one of the best ways of selling your business is to make direct approaches to people who you think might have an interest.
Another option is to hire a business sales agent, of which there are many, some specialising in particular sectors. These use advertising and approaches to contacts in order to achieve a sale.
However, some try to persuade you to hire them by talking up the sale price they might achieve.
Where the anticipated sale price is £2 million or more, it may be worthwhile to approach a corporate finance specialist firm. These will tend to produce a sales document and identify potential buyers for you, making approaches on your behalf. Interested parties will usually need to sign confidentiality agreements.
Yet many sellers are so delighted to have potential buyers they become nervous about asking them searching questions. You really need to do your homework on them. A simple thing to do would be to credit reference them. It may only cost you £50 and it would be money well spent. Find our just how they intend to pay for your businesses.
If it is by a bank loan, get them to show you the offer letter from the bank. Serious buyers will not be put off by these questions.
Selling does not always have to be a one-off event: it can be done over a period of time. You could sell some of the equity and work with the new shareholders over a period of time so there is a minimum of disruption.
Whatever route you choose, however, try to make sure the sales process does not cause any interruption to the business, because this may undermine its value.
Too many small business owners make the mistake of going on for too long, only to find their business loses value because they no longer have the energy to drive it forward.
Others are forced into selling suddenly because of personal reasons and are, therefore, not in a position to secure the best price.
For most, it is the single most important business decision they must get right. Many firms just eke out a living for their owners – and only when they sell do they make the sort of ‘real’ money that makes the whole process worthwhile.
The first two to four years are usually all about set-up and start-up costs, the next four to seven making a little money and paying back those costs. It is only in the last period that any real money is made, when the business is sold.
Most business experts agree that preparation is the key to achieving a successful sale and this can begin a year or more before you intend to sell. It might be that you have fantastic revenues from clients but have no contracts with them. You may have staff but they are all somehow self-employed. You need to make everything legal and above board because otherwise it won’t stand up to the test of due diligence. You should also look at cutting your unnecessary costs to make the figures look good.
Many small business owners worry that the process of putting up a business for sale could undermine confidence among customers, suppliers and employees. They are also worried about competitors, who are notorious for posing as buyers to find out commercial information.
Sometimes, one of the best ways of selling your business is to make direct approaches to people who you think might have an interest.
Another option is to hire a business sales agent, of which there are many, some specialising in particular sectors. These use advertising and approaches to contacts in order to achieve a sale.
However, some try to persuade you to hire them by talking up the sale price they might achieve.
Where the anticipated sale price is £2 million or more, it may be worthwhile to approach a corporate finance specialist firm. These will tend to produce a sales document and identify potential buyers for you, making approaches on your behalf. Interested parties will usually need to sign confidentiality agreements.
Yet many sellers are so delighted to have potential buyers they become nervous about asking them searching questions. You really need to do your homework on them. A simple thing to do would be to credit reference them. It may only cost you £50 and it would be money well spent. Find our just how they intend to pay for your businesses.
If it is by a bank loan, get them to show you the offer letter from the bank. Serious buyers will not be put off by these questions.
Selling does not always have to be a one-off event: it can be done over a period of time. You could sell some of the equity and work with the new shareholders over a period of time so there is a minimum of disruption.
Whatever route you choose, however, try to make sure the sales process does not cause any interruption to the business, because this may undermine its value.
Sunday 27 July 2008
The Secrets Of Marketing Your Business
The common misconception seems to be that marketing works as a ‘bolt-on’ and if sales are a little slack you can ‘do’ a bit of marketing to generate some new business.
That is one way to do marketing, but it will contribute little to developing your business over the longer term if its application is limited solely to lead generation exercises.
As with all business investment, there should be a rigorous evaluation procedure before committing to any expenditure. And yes, marketing should be thought of as an investment.
This means that the potential returns need to be carefully analysed and the marketing programme should be developed with a view to maximising those returns over time. Would you spend £5,000 on computer equipment without first understanding the payback? Marketing should be given the same scrutiny.
Before starting on a marketing campaign you need to ask all sorts of questions about the business, many of which might at first appear irrelevant. However, only when there is a thorough understanding of the business can there be sufficient context to produce an effective campaign.
The starting point is establishing the overall vision and underpinning values of the company together with its specific objectives over the shorter term.
This then forms the basis of integrated marketing, the objective of which is to maximise marketing Return On Investment (ROI) by being consistent in three ways:
1. Consistent with the values and image of the company;
2. Consistent with other marketing related activities e.g. brochures, premises design etc.;
3. Applied consistently over time.
All companies have an image. Many businesses decide they want to update their image by, for example, redesigning their logo or repositioning their products. But the identity is actually owned by their customers who ascribe the business with a certain set of characteristics.
So the priority is to understand how customers view your company and ensure that this is in line with your own perceptions and values. If your values are based around providing a friendly, open and honest service but your customers actually find you hard to deal with as they think your procedures are too rigid, there is clearly a mismatch.
This needs to be resolved if you are to avoid your marketing becoming an expense rather than an investment. If your marketing is at variance with people’s expectations from your business, they are likely to be considerably less receptive to your communications.
Planning really is the key to successful integrated marketing. All the different elements need to be thought through and developed to work together in harmony: advertising, brochures, promotions, direct mail, telesales, pricing policy, discounts, PR, websites, email, packaging, design, customer service etc. etc.
This is where understanding the values becomes so important (and most business owners take this for granted, so they are not written down – they need to be). Integrated marketing starts with how you answer the phone; having an appropriate identity for your business which is reflected in stationery, premises signage, branding etc.; the quality and style of your printed materials; and how you deal with customer complaints.
All these elements should reinforce the message of what the company stands for. When this happens, advertising works. It works because it is consistent with the customer’s expectations and experiences of your company.
You also need to consider how you will handle response once your campaign breaks. This is where there has been a backlash against offshore call centres. Too often people phone in and find that no-one knows about the offer. The result: the advertising has actually damaged the brand. Do not be complacent, though. Similar things have happened in the UK, even without using call centres.
An essential part of integrated marketing, therefore, is internal communications: making sure that everyone in the business knows what is happening and how they are expected to respond.
This also has implications beyond reception and customer service. Was production involved in the early discussions to make sure that they are geared up to meet expected demand? Did you check with buying that they could get supplies of the bigger tubes needed for your 50% extra free offer?
Finally, once you have put all that effort into developing an effective integrated marketing campaign, get the most out of it by applying it consistently over time. Think of new and innovative ways of reaching your customers and prospects, but always keep it relevant both to their needs and to their previous experiences of your marketing.
That is one way to do marketing, but it will contribute little to developing your business over the longer term if its application is limited solely to lead generation exercises.
As with all business investment, there should be a rigorous evaluation procedure before committing to any expenditure. And yes, marketing should be thought of as an investment.
This means that the potential returns need to be carefully analysed and the marketing programme should be developed with a view to maximising those returns over time. Would you spend £5,000 on computer equipment without first understanding the payback? Marketing should be given the same scrutiny.
Before starting on a marketing campaign you need to ask all sorts of questions about the business, many of which might at first appear irrelevant. However, only when there is a thorough understanding of the business can there be sufficient context to produce an effective campaign.
The starting point is establishing the overall vision and underpinning values of the company together with its specific objectives over the shorter term.
This then forms the basis of integrated marketing, the objective of which is to maximise marketing Return On Investment (ROI) by being consistent in three ways:
1. Consistent with the values and image of the company;
2. Consistent with other marketing related activities e.g. brochures, premises design etc.;
3. Applied consistently over time.
All companies have an image. Many businesses decide they want to update their image by, for example, redesigning their logo or repositioning their products. But the identity is actually owned by their customers who ascribe the business with a certain set of characteristics.
So the priority is to understand how customers view your company and ensure that this is in line with your own perceptions and values. If your values are based around providing a friendly, open and honest service but your customers actually find you hard to deal with as they think your procedures are too rigid, there is clearly a mismatch.
This needs to be resolved if you are to avoid your marketing becoming an expense rather than an investment. If your marketing is at variance with people’s expectations from your business, they are likely to be considerably less receptive to your communications.
Planning really is the key to successful integrated marketing. All the different elements need to be thought through and developed to work together in harmony: advertising, brochures, promotions, direct mail, telesales, pricing policy, discounts, PR, websites, email, packaging, design, customer service etc. etc.
This is where understanding the values becomes so important (and most business owners take this for granted, so they are not written down – they need to be). Integrated marketing starts with how you answer the phone; having an appropriate identity for your business which is reflected in stationery, premises signage, branding etc.; the quality and style of your printed materials; and how you deal with customer complaints.
All these elements should reinforce the message of what the company stands for. When this happens, advertising works. It works because it is consistent with the customer’s expectations and experiences of your company.
You also need to consider how you will handle response once your campaign breaks. This is where there has been a backlash against offshore call centres. Too often people phone in and find that no-one knows about the offer. The result: the advertising has actually damaged the brand. Do not be complacent, though. Similar things have happened in the UK, even without using call centres.
An essential part of integrated marketing, therefore, is internal communications: making sure that everyone in the business knows what is happening and how they are expected to respond.
This also has implications beyond reception and customer service. Was production involved in the early discussions to make sure that they are geared up to meet expected demand? Did you check with buying that they could get supplies of the bigger tubes needed for your 50% extra free offer?
Finally, once you have put all that effort into developing an effective integrated marketing campaign, get the most out of it by applying it consistently over time. Think of new and innovative ways of reaching your customers and prospects, but always keep it relevant both to their needs and to their previous experiences of your marketing.
Friday 11 July 2008
How To Package Your Business
On a trip shopping in town recently, it struck me how we buy everything packaged.
The weekend Do It Ourself begins by picking it ourself, packing it ourself and pushing it ourself.
Cars are now available from supermarkets with no test drive. Video recorders and DVDs are sold in sealed boxes and only refunded if faulty. Delivery is always extra. The internet – the next ‘big thing’ in retail – works on looking, but not touching. Lap dancing (male or female) seems to be the nearest we can get to personal service.
The average salary in the United Kingdom is £23,000 a year. Don’t ask why you don’t get that – but it’s true. The average worker is gainfully employed for 2,000 hours or less. The average wage is £11 an hour – forget the governmental confidence trick of minimum wages, only burger joints and cleaners go that low.
The average call-out charge for artisans – plumbers, drain cleaners, electricians – is £65 per hour. They can buy a new DVD hard drive recorder for two hours’ work. A bottle of whisky for ten minutes effort.
The connection between all of the above ramble? Products are cheap, people are not.
Which is why it is so difficult for those in business to figure out how much they should be charging for their services. Here is a simple approach.
As we’ve said, the average hourly rate is around £11. Starting your own business is riskier than employment so pick a rate of twice the average. The minimum return for any labour you bring to your business should be £25 per hour, or around £56,000 per year.
‘They’ll never pay that. No one can ask £25 per hour for cleaning or caring.’ So don’t give a price per hour – give a price for the total job: ‘To clean this room weekly to our gold quality hygiene standard will be £25.’
You now have a target income projection for your business. Will whatever I sell or do provide an income of £25 per hour? Do I need to sell 20 burgers at £2.50 to provide that amount? How many boilers must I service to produce £25 return for my labour?
Now on top of this add an amount to cover your costs and expenses, the amount of profit you require and also some return on your capital employed.
Add all the yearly insurances, rentals, leases, stationery, vehicle expenses, repairs and advertising. Add anything you spend on running the business. Divide this by the number of items or services you anticipate selling. ‘I service 800 boilers each year, and my expenses are £8,000 – so each job carries a premium of £10.’
A business is not buying a job. A business is an investment made with your funds and in view of the risk demands a return. Be generous and stick on an extra 15 per cent return on any capital you yourself have put into the businesses. ‘I have invested £25,000 and I want 15 per cent return per year, which equals £15 per week.’
‘I will charge £25 for one hour, plus £10 fixed costs for my expenses, plus a 15 per cent return on my capital of £4 per hour means I want £39 per hour. Let’s say £40 for cash! So if it comes down to twiddling my thumbs for 60 minutes or working for just my expenses – what do I do?’
Simple – work for just your expenses, because you are spreading the costs over a wider base.
You have now realised the first principle of ‘No Jet’ economy airlines. Fill the craft with passengers at any price. As long as the plane is full, the profit will come. Maybe only a few quid per flight – but any profit is a good profit.
The weekend Do It Ourself begins by picking it ourself, packing it ourself and pushing it ourself.
Cars are now available from supermarkets with no test drive. Video recorders and DVDs are sold in sealed boxes and only refunded if faulty. Delivery is always extra. The internet – the next ‘big thing’ in retail – works on looking, but not touching. Lap dancing (male or female) seems to be the nearest we can get to personal service.
The average salary in the United Kingdom is £23,000 a year. Don’t ask why you don’t get that – but it’s true. The average worker is gainfully employed for 2,000 hours or less. The average wage is £11 an hour – forget the governmental confidence trick of minimum wages, only burger joints and cleaners go that low.
The average call-out charge for artisans – plumbers, drain cleaners, electricians – is £65 per hour. They can buy a new DVD hard drive recorder for two hours’ work. A bottle of whisky for ten minutes effort.
The connection between all of the above ramble? Products are cheap, people are not.
Which is why it is so difficult for those in business to figure out how much they should be charging for their services. Here is a simple approach.
As we’ve said, the average hourly rate is around £11. Starting your own business is riskier than employment so pick a rate of twice the average. The minimum return for any labour you bring to your business should be £25 per hour, or around £56,000 per year.
‘They’ll never pay that. No one can ask £25 per hour for cleaning or caring.’ So don’t give a price per hour – give a price for the total job: ‘To clean this room weekly to our gold quality hygiene standard will be £25.’
You now have a target income projection for your business. Will whatever I sell or do provide an income of £25 per hour? Do I need to sell 20 burgers at £2.50 to provide that amount? How many boilers must I service to produce £25 return for my labour?
Now on top of this add an amount to cover your costs and expenses, the amount of profit you require and also some return on your capital employed.
Add all the yearly insurances, rentals, leases, stationery, vehicle expenses, repairs and advertising. Add anything you spend on running the business. Divide this by the number of items or services you anticipate selling. ‘I service 800 boilers each year, and my expenses are £8,000 – so each job carries a premium of £10.’
A business is not buying a job. A business is an investment made with your funds and in view of the risk demands a return. Be generous and stick on an extra 15 per cent return on any capital you yourself have put into the businesses. ‘I have invested £25,000 and I want 15 per cent return per year, which equals £15 per week.’
‘I will charge £25 for one hour, plus £10 fixed costs for my expenses, plus a 15 per cent return on my capital of £4 per hour means I want £39 per hour. Let’s say £40 for cash! So if it comes down to twiddling my thumbs for 60 minutes or working for just my expenses – what do I do?’
Simple – work for just your expenses, because you are spreading the costs over a wider base.
You have now realised the first principle of ‘No Jet’ economy airlines. Fill the craft with passengers at any price. As long as the plane is full, the profit will come. Maybe only a few quid per flight – but any profit is a good profit.
Friday 27 June 2008
How To Tap Into Mobile Marketing
Although ‘mobile marketing’ is very much in its infancy, and may seem way beyond the reach of most SMEs, it can be one of the most cost effective ways to engage with your customer-base and can even provide new revenue opportunities.
‘Mobile marketing’, as the name suggests, is simply using the outlet of the 50 million mobile phones in the UK to market your products or services.
The primary drivers behind mobile marketing are typically to build up a better profile of your customer base and establish tools to encourage regular communication on an ongoing base.
The first stage is always building up a database of contact details, and in this case means getting clients to give you their mobile phone numbers. Although people are famously protective about giving out contact information, they are much more likely to participate if they have a chance to win a prize, and people’s propensity to send text messages makes this the ideal medium.
Such promotions, typically referred to as ‘Text 2 Win’, are well within the marketing of most consumer-facing SMEs. Details of the competition are distributed together with usual print materials or packaging, and customers are requested to text in to win a prize.
The prize can be a product discount, tickets to a sports event, or free ringtones or wallpapers for their phones.
The key asset that you need to be able to bring to the party is regular communication with your customers through print media. If your primary business is through the web, then mobile marketing is not effective, as web-savvy customers tend not to sign up for mobile services.
Larger firms will normally engage a specialist agency to run their mobile marketing campaign, but for many SMEs, it’s likely to be more effective to run the competition in-house.
Companies can provide very low cost SMS services that can be operated over a website with little mobile expertise, and for a few hundred pounds will set-up a ‘shortcode’ and provide you with a simple web interface to process the messages.
Of course, if you are expecting millions of different entries, you may want to consider a slightly more automated system, but millions of entries would be a very good problem for most SMEs to have.
The usual format of the competition is for people to text in the answer to a multiple-choice question together with their name, house number, and postcode. In choosing a winner, you only need to pick someone who has the right answer, and you can process the SMSs to build a customer database that can be used for direct marketing.
The usual data protection issues apply with regard to opt-out for direct mailing, but you may want to be more careful with regard to sending unsolicited text messages.
ICSTIS, the UK regulator (www.icstis.org.uk) provides comprehensive advice for anyone looking to launch SMS services and you should be careful as unsolicited messages are treated as ‘spam’ by your customers and network operators.
In addition to building customer databases, mobile lends itself very well to viral marketing, and this can even present a revenue opportunity to many SMEs. If your business has strong appeal to young people, humorous ringtones, wallpapers, or text messages can fly around very quickly, and if sufficiently compelling, people will be willing to pay for them.
When effective, this type of campaign can contribute to significant brand awareness and loyalty to a young demographic and for many consumer-facing SMEs this could provide a significant amount of revenue for very little work, much in same way as white-label credit cards did in the 1990s.
For the more ambitious, a specialist ringtone or wallpaper associated with your firm’s brand can spread awareness as well as providing additional revenue. If it’s going to be effective it needs to either be funny or ‘cool’ to the youth audience and your ability to generate compelling creative will be critical to your success.
Thursday 12 June 2008
How To Harness The Power Of Brand Management
Although it is possible to dress it up in different subtle words such as the ‘drive for shareholder value’, at this moment in time, many businesses of all sizes are simply struggling to make money. Many are cutting back on costs, some are reviewing product investment, and most are slugging it out to win the very few sales that are around.
In some parts of industry, however, business leaders are also taking a closer look at a well-proven method of creating value: brand management.It is surprising that brand management is not more generally recognised to be the powerful tool that it is. It certainly has more impact than many things attempted over the past 20 years by different management teams.
During that time companies have not hesitated in reaching for passing management fashions such as ‘total quality management’, ‘process re-engineering’ or dot.coms as a means to create profit. These fads, sponsored by pundits, gurus, or the City, have come and gone, with dubious impact on organisations and their profits. But by contrast, a number of companies have managed brands, with their associated price premium, in different markets over many decades. They have shown that it is possible to create an entity which appeals to a group of customers and, over time, becomes a very valuable asset.
This flies in the face of much recent management thinking (that everything is changing fast and that price is constantly under pressure) but it is, nonetheless, true. It is astonishing that more companies have not invested extra resources and attention into what is a proven technique. Unfortunately, brand work tends to involve a wide spectrum of activities. At one end, creative companies help to design new images such as the international tail fins for British Airways or new names such as Consignia. These projects attract public attention and sometimes criticism or even ridicule.
At the other end, journalists have challenged the ethics and integrity behind brand building, suggesting that brands exploit consumers, causing them to pay more than they should for the goods on offer.
The range of experts operating in the field of brand management proliferates by the day. In addition to professional brand managers in large corporations, there are strategists, design consultants and valuation specialists. Yet it is still hard to define exactly what a brand is and as a result, many companies have ignored, to their detriment, the precious role that brands can play in the life of both companies and customers. It is therefore possible that industry might miss a very powerful, proven source of profit.
Despite the disparity of work, it is beyond dispute that a carefully designed image rests in the memory of customers and helps them to buy. We also know that numerous firms have proved that, by managing that image carefully, a product or a service will appeal time and time again to a group of interested customers. It becomes a familiar part of their life, giving them consistent benefits in their day-to-day life. As a result, they will pay a premium for this offer and develop a loyalty towards it. But this does not mean that this incremental cost is not valuable to them. Quite the opposite. Over time, they become fond of these entities and, if they think about it, regard them as part of the landscape of their life.
What starts as simple reassurance about quality or consistency becomes, on a deeper but harder to measure level, an emotional bond in a hectic modern lifestyle of constant pressure and change.
As a result there are people who feel warmth towards a tin of paint, a sugar-filled drink or sports shoes. In fact these items mean so much to them that they can be as upset and unforgiving if they think a favourite brand has been damaged, as when a favourite soap character is killed off.So why hasn’t this marvellous technique been more fully adopted by all businesses? The answer lies in the fact that truly adopting brand management often involves major changes to an organisation. The company must become market, rather than supply-driven. Customer segments need to be clearly defined and their needs understood in detail.
Branded propositions then need to be created, giving direction to sales, service and operating functions. Large firms do not typically have the political commitment to radically alter the balance of power in their internal operations in order to achieve this longer term benefit. They have to be driven there by relentless market forces, often going through traumatic management change en route. Smaller companies, on the other hand, can be daunted by the world-class power of better known brands like Coca-Cola or Nike. They forget that many successful brands, such as Uniliver, Virgin or Body Shop, were built from scratch by business leaders with very modest initial resources.
However, whether brand success has resulted from vision as with Mars or luck in terms of Virgin or the ravages of the market as has happened with the motor industry, the steps needed to succeed are well-known.
It is possible for any sized firm to create a brand which customers prefer and pay a premium for over many years. But first they must first understand the key customer groups; second, understand their rational and emotional needs; third, design a clear, unique proposition; and fourth, deliver consistent, reliable benefits over time.In order to thrive, companies of all sizes need to take a hard-headed look at brand management. This has been shown in different sectors of the world to produce real value over time and guard against the ravages of the market.
Thursday 29 May 2008
How To Plan Your New Business
The best business idea will, without a solid business plan that helps to secure finance, remain just that – an idea.
So, if you want to get that idea off the ground and start a new business or to grow your existing business further, what do you need to consider?
The first step is to qualify your idea, consider whether it will appeal to consumers and if it is a viable commercial proposition. This should include researching your potential market to analyse the demand for the service/product, the overall size of the market and your competitors.
Third-party advice will help you to evaluate your business idea – friends, family or professional advisers should be sought to provide you with a sounding board.
Once you've determined that your idea is commercially viable, you'll need to work out the vision for your business. Do you know what you want your business to achieve?
You need to be clear on where you want to go and how you are going to get there. Set yourself definable objectives in accordance with this and have your assumptions challenged to get an alternative perspective.
It is only once you've qualified your idea and considered what you want your business to achieve that you are in a position to write a business plan that will outline how you’re going to get there.
A business plan is the key to obtaining the much-needed cash to finance your business idea. Whilst a business plan must be written and owned by you, advice at this stage is crucial.
A huge percentage of enterprises fail to obtain financing because they write a poor business plan or approach the wrong people.
When drafting your business plan, it is important to remember that it should be written and owned by you reflecting your character because it will be you that will be answering the questions from the finance providers.
You must be clear about how much and what type of finance you need and who you should approach. Make sure you give them what they want to see, not what you want to write.
For example, whilst lenders want to see immediate success in order to meet quarterly interest payments, they generally seek a return on their investment over a long period of time.
When considering providing finance to a business, both lenders and investors will primarily look at three aspects: its management, its management and its management. A business stands or falls by the strength of its management and they will be looking for this to be communicated in the business plan.
Alongside demonstration of management strength, lenders and investors require a business plan that provides a detailed description of what the business does, what competitors in the market are doing and what makes this business better than its competitors. Investors and lenders both want to understand how and why it will succeed.
The key to any investor or lender's decision will be the financial projections for the business, both in terms of borrowings and in terms of earnings for the business.
Whilst a lender will also want to understand the projected cash flow and estimated sales and profits over the next three years, the investor will be looking more closely at the prospects for growth for the business.
Lenders and investors have to take a calculated risk when providing finance to a business, so it is only natural that they will want to consider the downside. When drafting your business plan aid this process by providing financial assumptions.
Draft two projections, including a worst-case scenario that at least shows the business being able to service the required funding. If you need maximum sales from day one, with money being paid exactly in line with your terms of trade to succeed – ie: no latitude for error – getting the money may prove very difficult. Halving the income and doubling the costs in the early days of a new business venture is a very useful piece of advice.
Never include complicated spreadsheets in the body of the plan and rely on the reader to make sense of them. Include a simple matrix of key information and set out in the text your key assumptions on which these figures are based. If necessary, include them in the appendices and invite the reader to refer to them if they so choose.
By raising as much money as you can from your own resources, friends and family you demonstrate to any investor or lender that you are "putting your money where your mouth is" and sharing the financial risk. There is no better way to demonstrate you truly believe that this enterprise will succeed.
It is also worth remembering that lenders will want to see that the predicted borrowings will be amply protected by security should the business not be the success everyone, including the lender, hopes it will be.
Consider the types of questions you might be asked about your plan and prepare responses to them. Finally, prepare and practice your presentation prior to the event.
The general rule of thumb is that you should spend three times as long practicing your presentation as it will take to actually present it. That should ensure your presentation is as polished as the plan itself.
Last, but not least, good luck! But don't forget that luck is when good preparation meets opportunity...
So, if you want to get that idea off the ground and start a new business or to grow your existing business further, what do you need to consider?
The first step is to qualify your idea, consider whether it will appeal to consumers and if it is a viable commercial proposition. This should include researching your potential market to analyse the demand for the service/product, the overall size of the market and your competitors.
Third-party advice will help you to evaluate your business idea – friends, family or professional advisers should be sought to provide you with a sounding board.
Once you've determined that your idea is commercially viable, you'll need to work out the vision for your business. Do you know what you want your business to achieve?
You need to be clear on where you want to go and how you are going to get there. Set yourself definable objectives in accordance with this and have your assumptions challenged to get an alternative perspective.
It is only once you've qualified your idea and considered what you want your business to achieve that you are in a position to write a business plan that will outline how you’re going to get there.
A business plan is the key to obtaining the much-needed cash to finance your business idea. Whilst a business plan must be written and owned by you, advice at this stage is crucial.
A huge percentage of enterprises fail to obtain financing because they write a poor business plan or approach the wrong people.
When drafting your business plan, it is important to remember that it should be written and owned by you reflecting your character because it will be you that will be answering the questions from the finance providers.
You must be clear about how much and what type of finance you need and who you should approach. Make sure you give them what they want to see, not what you want to write.
For example, whilst lenders want to see immediate success in order to meet quarterly interest payments, they generally seek a return on their investment over a long period of time.
When considering providing finance to a business, both lenders and investors will primarily look at three aspects: its management, its management and its management. A business stands or falls by the strength of its management and they will be looking for this to be communicated in the business plan.
Alongside demonstration of management strength, lenders and investors require a business plan that provides a detailed description of what the business does, what competitors in the market are doing and what makes this business better than its competitors. Investors and lenders both want to understand how and why it will succeed.
The key to any investor or lender's decision will be the financial projections for the business, both in terms of borrowings and in terms of earnings for the business.
Whilst a lender will also want to understand the projected cash flow and estimated sales and profits over the next three years, the investor will be looking more closely at the prospects for growth for the business.
Lenders and investors have to take a calculated risk when providing finance to a business, so it is only natural that they will want to consider the downside. When drafting your business plan aid this process by providing financial assumptions.
Draft two projections, including a worst-case scenario that at least shows the business being able to service the required funding. If you need maximum sales from day one, with money being paid exactly in line with your terms of trade to succeed – ie: no latitude for error – getting the money may prove very difficult. Halving the income and doubling the costs in the early days of a new business venture is a very useful piece of advice.
Never include complicated spreadsheets in the body of the plan and rely on the reader to make sense of them. Include a simple matrix of key information and set out in the text your key assumptions on which these figures are based. If necessary, include them in the appendices and invite the reader to refer to them if they so choose.
By raising as much money as you can from your own resources, friends and family you demonstrate to any investor or lender that you are "putting your money where your mouth is" and sharing the financial risk. There is no better way to demonstrate you truly believe that this enterprise will succeed.
It is also worth remembering that lenders will want to see that the predicted borrowings will be amply protected by security should the business not be the success everyone, including the lender, hopes it will be.
Consider the types of questions you might be asked about your plan and prepare responses to them. Finally, prepare and practice your presentation prior to the event.
The general rule of thumb is that you should spend three times as long practicing your presentation as it will take to actually present it. That should ensure your presentation is as polished as the plan itself.
Last, but not least, good luck! But don't forget that luck is when good preparation meets opportunity...
Thursday 15 May 2008
What Makes An Entrepreneur Tick?
Sooner or later in everyone’s working life we pose the question “If I’m so good at what I do and produce good business and profits for my employer, why can’t I do this for myself?”
Then it becomes a question of confidence and – to a great degree – courage in taking your financial resources and laying them on the line, knowing that there is always the seed of doubt saying “What if I get it wrong?” But countering this, there is always the hope that you can create something which, if it is successful, can afford a better lifestyle for yourself and your family.
A small business is usually run by a few people who have to take on a number of roles, who often have a personal financial commitment in the business, and whose success depend on results, not just the time that is spent in work.
The personal bond between the owners and staff must be essentially a strong one. Without sounding trite, it must encompass mutual respect and the realisation that everyone is working towards a common goal.
There are no numbers in small businesses – names and individuals is what it is all about. And there is no room for the blinkered attitude found in large firms of “it’s not my job.”
In a small firm, staff must be flexible in their working arrangements and have a belief in the business, which cannot just be looked at as a “job”. There must be good relationships between the owner and staff, and working as a team is essential to achieve these objectives. All members of staff must be ready to take on responsibilities outside their usual functions.
And people who run small firms need to be multi-talented, flexible and very hard working. Staff loyalty is vital in small business. Customers expect a better and more personal service than they do from large organisations. Courtesy and a willingness to work are essential at all levels.
A small business owner must always be alert to market changes and be planning well ahead. Too much reliance on one large company to provide work can be very dangerous. Small businesses can adapt more quickly to the market as decision-making is not burdened by the hierarchy of a large business – this is particularly true in the leisure and tourism market place.
A small business has to value every customer. A large firm can afford to simply choose not to deal with certain customers. Conversely, a small amount of payment defaulters can much more seriously affect a small business, so care is required in that direction. The small business has to be constantly aware of market trends and anticipate demand, whereas to a large extent big firms can create demand.
The importance of the owner is paramount. Their workforce must have the confidence in his or her business skills and the ability to render decisions for the continued well-being of the firm. However, sometimes difficult or unpopular decisions have to be made - it goes with the territory. Honesty with oneself, the workforce and clients is of ultimate importance as is a well-developed sense of overall justice and an ability to laugh at oneself and be humble enough to admit mistakes.
If the owner does not make the business tick, then it will fail. The owner must know their market inside out and has to be a “jack of all trades”. The owner must have the ability to carry out an on-going assessment that what you are offering is what the market wants. Having the flexibility to change quickly, monitor customer reaction, take advice as required and keep tight financial control are also crucial elements.
The owner’s contribution and participation is vital to success. In the absence of a full, professional management team, the owner is required to take all-important decisions and is relied on to maintain morale. People-management skills are very important unless the business either involves very few participants, or has a large staff turnover and obviously the latter is undesirable.
Small is beautiful and the decisions small firms make are based on personal experience, access to market research, and advice from professional advisors.
They have the flexibility to change tack to meet changing or new market needs quickly. The decisions they make in the next 12 months will directly have a bearing on their profitability and will ultimately determine their ability to continue to trade. What better incentive do they need to get it right?
They have the advantage of freedom over large firms because they have no management team, board of directors, or shareholders to answer to. They can make instant decisions and these are final. That is not to say that every decision they make is the correct one, but there is much advantage in being able to make a major decision without having to spend time consulting with others. Basically if they spot a trend, they can respond instantly.
In contrast, big business employs people to carry out specific tasks and there is often little incentive to put in more than is required within a set working pattern or to carry out functions for which they are not paid. But one big problem in a small firm is that professional advice or particular expertise is not often available in-house and has to be brought in as required.
A small business uses all of the management skills required by big business, however it does not have the luxury of appointing a specialist for each task.
A small business, by virtue of the fact that it is small, does not usually have a large marketing budget so it is essential that the owner is highly astute and precise in identifying potential markets. Large business is more concerned with corporate image while a small firm is concerned with the image, which the individual and the workforce present, as well as the products it offers.
Then it becomes a question of confidence and – to a great degree – courage in taking your financial resources and laying them on the line, knowing that there is always the seed of doubt saying “What if I get it wrong?” But countering this, there is always the hope that you can create something which, if it is successful, can afford a better lifestyle for yourself and your family.
A small business is usually run by a few people who have to take on a number of roles, who often have a personal financial commitment in the business, and whose success depend on results, not just the time that is spent in work.
The personal bond between the owners and staff must be essentially a strong one. Without sounding trite, it must encompass mutual respect and the realisation that everyone is working towards a common goal.
There are no numbers in small businesses – names and individuals is what it is all about. And there is no room for the blinkered attitude found in large firms of “it’s not my job.”
In a small firm, staff must be flexible in their working arrangements and have a belief in the business, which cannot just be looked at as a “job”. There must be good relationships between the owner and staff, and working as a team is essential to achieve these objectives. All members of staff must be ready to take on responsibilities outside their usual functions.
And people who run small firms need to be multi-talented, flexible and very hard working. Staff loyalty is vital in small business. Customers expect a better and more personal service than they do from large organisations. Courtesy and a willingness to work are essential at all levels.
A small business owner must always be alert to market changes and be planning well ahead. Too much reliance on one large company to provide work can be very dangerous. Small businesses can adapt more quickly to the market as decision-making is not burdened by the hierarchy of a large business – this is particularly true in the leisure and tourism market place.
A small business has to value every customer. A large firm can afford to simply choose not to deal with certain customers. Conversely, a small amount of payment defaulters can much more seriously affect a small business, so care is required in that direction. The small business has to be constantly aware of market trends and anticipate demand, whereas to a large extent big firms can create demand.
The importance of the owner is paramount. Their workforce must have the confidence in his or her business skills and the ability to render decisions for the continued well-being of the firm. However, sometimes difficult or unpopular decisions have to be made - it goes with the territory. Honesty with oneself, the workforce and clients is of ultimate importance as is a well-developed sense of overall justice and an ability to laugh at oneself and be humble enough to admit mistakes.
If the owner does not make the business tick, then it will fail. The owner must know their market inside out and has to be a “jack of all trades”. The owner must have the ability to carry out an on-going assessment that what you are offering is what the market wants. Having the flexibility to change quickly, monitor customer reaction, take advice as required and keep tight financial control are also crucial elements.
The owner’s contribution and participation is vital to success. In the absence of a full, professional management team, the owner is required to take all-important decisions and is relied on to maintain morale. People-management skills are very important unless the business either involves very few participants, or has a large staff turnover and obviously the latter is undesirable.
Small is beautiful and the decisions small firms make are based on personal experience, access to market research, and advice from professional advisors.
They have the flexibility to change tack to meet changing or new market needs quickly. The decisions they make in the next 12 months will directly have a bearing on their profitability and will ultimately determine their ability to continue to trade. What better incentive do they need to get it right?
They have the advantage of freedom over large firms because they have no management team, board of directors, or shareholders to answer to. They can make instant decisions and these are final. That is not to say that every decision they make is the correct one, but there is much advantage in being able to make a major decision without having to spend time consulting with others. Basically if they spot a trend, they can respond instantly.
In contrast, big business employs people to carry out specific tasks and there is often little incentive to put in more than is required within a set working pattern or to carry out functions for which they are not paid. But one big problem in a small firm is that professional advice or particular expertise is not often available in-house and has to be brought in as required.
A small business uses all of the management skills required by big business, however it does not have the luxury of appointing a specialist for each task.
A small business, by virtue of the fact that it is small, does not usually have a large marketing budget so it is essential that the owner is highly astute and precise in identifying potential markets. Large business is more concerned with corporate image while a small firm is concerned with the image, which the individual and the workforce present, as well as the products it offers.
Thursday 1 May 2008
Is Your Business An 'Ugly Baby'?
If there is one table the UK economy consistently comes top of it is the business failure rates in Europe. But why does this happen?
If someone told you your baby was ugly, would you throw it away? And would you welcome the advice of anyone who told you to do so?
There is a link between these two ideas, and if you stick with me I’ll tell you what it is.
Businesses rarely fail from lack of sales. A more common failure is to judge the market potential inaccurately. Much as we all love the concept of conducting market research, we are not so in love with the conclusions. Market research will provide the figures and facts to support a business’s plan – but are these businesses prepared to believe the results?
Two people have what seems to be ‘a good idea’. In the way of the world, one of them ends up pregnant. For nine months she carries the concept around.
She (or both of you) chooses a name and a location. On a certain day with a lot of shouting and screaming the child is born. People ring up to congratulate the new arrival. It is extensively advertised in the local paper, and you both spend the rest of your life spending money to watch it grow.
Some nine months ago you thought of a business idea. You carry the concept around and choose a name and a location. On a certain day the business is launched with a lot of screaming and shouting. People ring up to congratulate you. It is extensively advertised in the local paper, and you both spend the rest of your life spending money to watch it grow.
I meet you pushing the pram. ‘May I look at your youngster? Thank you. Can I just say that my extensive research shows this child is without doubt the ugliest infant I have ever had the occasion to meet.’
Are you pleased at my comment? Do you thank me for telling you that your child is not worth the bother? Do you leave the infant on the roadside and sneak away? You have not gone through nine months of effort simply to pack it in on the opinion of a so-called expert.
Thus it is with a business. Even if research conclusively proves the infant business will not reach maturity – dare you pack it in and waste all your efforts? No way – it may be ugly, but it’s your baby!
The brave decision if you have any doubt after your market research is not to begin.
The poorest of businesses will normally last for three years. In the first year you notice nothing as you struggle to develop. The second year brings vague doubts. Finally in the third year the doubts become reality.
In the international Global Entrepreneurship Monitor (GEM) survey of entrepreneurial activity, the UK’s overall score of 5.4 is well below the average of 8.0 and far lower than the scores of countries such as the US (10.5) and New Zealand (14.0). We rank 23rd out of 37 countries.
However, surveys by the World Economic Forum and Anderson rank the UK as having one of the best regulatory regimes in the world for starting a business. This suggests that it may be other factors, notably our attitudes and culture, which are holding us back.
The GEM studies support this conclusion, showing that individuals in the UK are less inclined to self-employment than in other countries such as the US and Germany and less aware of entrepreneurial opportunities.
Less than half of our population believe they have the qualities to start up a business and more than a third say fear of failure would prevent them doing so.
Entrepreneur Secrets’ aspirations are high: we aim to have a major impact, bringing about a sea change in attitudes to enterprise.
Some people regard “culture” as an immovable constant or a mysterious undercurrent immune to intervention. Yet our national history is rich with examples of major changes in social attitudes that have been brought about through co-ordinated interventions, often in the form of coalition-based campaigns.
From the abolition of slavery through to votes for women, the provision of free education, protection of the environment, condemnation of drunk driving and innumerable other shifts in the public mood, there is hardly a change that has not been at least partly due to concerted attempts to influence people’s views.
But Entrepreneur Secrets needs to bring about change relatively quickly. The development of an enterprise culture is widely acknowledged to be hugely important for our economy, for the cohesion of our society and for helping to empower individuals.
If someone told you your baby was ugly, would you throw it away? And would you welcome the advice of anyone who told you to do so?
There is a link between these two ideas, and if you stick with me I’ll tell you what it is.
Businesses rarely fail from lack of sales. A more common failure is to judge the market potential inaccurately. Much as we all love the concept of conducting market research, we are not so in love with the conclusions. Market research will provide the figures and facts to support a business’s plan – but are these businesses prepared to believe the results?
Two people have what seems to be ‘a good idea’. In the way of the world, one of them ends up pregnant. For nine months she carries the concept around.
She (or both of you) chooses a name and a location. On a certain day with a lot of shouting and screaming the child is born. People ring up to congratulate the new arrival. It is extensively advertised in the local paper, and you both spend the rest of your life spending money to watch it grow.
Some nine months ago you thought of a business idea. You carry the concept around and choose a name and a location. On a certain day the business is launched with a lot of screaming and shouting. People ring up to congratulate you. It is extensively advertised in the local paper, and you both spend the rest of your life spending money to watch it grow.
I meet you pushing the pram. ‘May I look at your youngster? Thank you. Can I just say that my extensive research shows this child is without doubt the ugliest infant I have ever had the occasion to meet.’
Are you pleased at my comment? Do you thank me for telling you that your child is not worth the bother? Do you leave the infant on the roadside and sneak away? You have not gone through nine months of effort simply to pack it in on the opinion of a so-called expert.
Thus it is with a business. Even if research conclusively proves the infant business will not reach maturity – dare you pack it in and waste all your efforts? No way – it may be ugly, but it’s your baby!
The brave decision if you have any doubt after your market research is not to begin.
The poorest of businesses will normally last for three years. In the first year you notice nothing as you struggle to develop. The second year brings vague doubts. Finally in the third year the doubts become reality.
In the international Global Entrepreneurship Monitor (GEM) survey of entrepreneurial activity, the UK’s overall score of 5.4 is well below the average of 8.0 and far lower than the scores of countries such as the US (10.5) and New Zealand (14.0). We rank 23rd out of 37 countries.
However, surveys by the World Economic Forum and Anderson rank the UK as having one of the best regulatory regimes in the world for starting a business. This suggests that it may be other factors, notably our attitudes and culture, which are holding us back.
The GEM studies support this conclusion, showing that individuals in the UK are less inclined to self-employment than in other countries such as the US and Germany and less aware of entrepreneurial opportunities.
Less than half of our population believe they have the qualities to start up a business and more than a third say fear of failure would prevent them doing so.
Entrepreneur Secrets’ aspirations are high: we aim to have a major impact, bringing about a sea change in attitudes to enterprise.
Some people regard “culture” as an immovable constant or a mysterious undercurrent immune to intervention. Yet our national history is rich with examples of major changes in social attitudes that have been brought about through co-ordinated interventions, often in the form of coalition-based campaigns.
From the abolition of slavery through to votes for women, the provision of free education, protection of the environment, condemnation of drunk driving and innumerable other shifts in the public mood, there is hardly a change that has not been at least partly due to concerted attempts to influence people’s views.
But Entrepreneur Secrets needs to bring about change relatively quickly. The development of an enterprise culture is widely acknowledged to be hugely important for our economy, for the cohesion of our society and for helping to empower individuals.
Thursday 17 April 2008
How To Get Your Business Off The Ground
Okay, so far in this blog I’ve given you a lot of background about entrepreneurship and hopefully I’ve pointed out how important I believe entrepreneurial training to be. So now I’m going to focus on giving you information and advice which you should find really useful if you are thinking about starting a new business, or if you already have a business (you just need to adapt the following to your own personal circumstances).
This is absolutely gold-mine stuff, and is just a snapshot of exactly the type of information you will get when you sign up to Entrepreneur Secrets (don’t worry, I’m not giving anything away – all the really top-secret stuff is only available to subscribers). So, when looking at a business, either a functioning one or a would-be one, we need to look at it in the round – we need to do an audit.
But this should be a different kind of stock-take! This needs to be an ‘intangible audit’ which allows you to see the big picture – the true picture. Only if you study the past, can you foretell the future! It will help you to understand why customers want, or do not want, your products or services, the motives underlying their purchases, what is affecting their behaviour, and why and how customers buy, and who influences their buying decisions.
Have you ever sat down and described your company and the industry it operates in, using both positive and negative perceptions and facts? What is the nature of your business? Where is it located? The size, market share, turnover, etc.? And what is the overall business opportunity or problem?
What is your product or service? What is it called? What does it do? How does it work? What percentage is it of the market and what is your market share? What competitors does it have? What are the Unique Selling Points? What are the distinguishing features of each product? Can you translate the features into benefits?
How about your customers? At all times, in your business cycle, you have three main target market groups: your present or existing customers – active and inactive; your past customers; and your prospective or new customers. They are the most important ingredients in your business strategy. As Anita Roddick of The Body Shop said: “Don’t sell to everybody, sell to somebody!”
What was/is the market opportunity that brought/will bring your product into existence? Has the original opportunity changed? If so, why? What external, unforeseen circumstances enhanced or retarded your marketing, campaigns, strategy and plans? What are the number of years and money spent on previous marketing strategies? Have you ever done any research on the success or failure of your current strategy? Is the research valid?
Does your creative approach to your business fit with your products, target market and corporate identity? What are your short- and long-term marketing objectives, and with what yardstick will you measure success or failure? What do you want your present / past / potential customer to do? What is your ‘offer’ strategy?
What other marketing / advertising is planned? What are your primary and secondary merchandising objectives? What are your distribution objectives? What is the distribution pattern and how is it done and by whom and what percentage of the costs or price is it? Is it effective and cost-effective?
Loyal employees create loyal customers. Employee loyalty increases business profitability, competitiveness and market share. What, how, when, where, why and to whom do your communicate? And how does it fit in with your overall plans?
Which industries, companies or products can be tied in with your products? Looking at your products and services now and the objectives to be met, do you know enough about the market, the target market and the competition? What existing research is available? What further research should be undertaken to help you plan your business strategy?
Who, what, why, when, where, how? It’s not easy doing an intangible audit! If you sell tables, you count how many you’ve made, how many you’ve sold, and how many are left in the store room. Although not always easy, it’s still pretty straightforward. But when doing an audit of concepts like ‘why do I have the customers I have and why don’t I have more’, things get a bit more tricky.
You could literally spend days if not weeks undertaking the kind of audit outlined above. Instead, what we need to do is build a simple profile of your business or business idea. What you need to do first is print off this article, then find one of those days of yore writing implements called a ‘pen’. Then circle the words below that apply to you. This is not an exact science, so circle the ones that apply the most to how you feel – but you must be brutal! You need to be as honest as you possibly can to build up an accurate picture. After all, you’ll be the only one looking at this anyway:
Your sector
Profile of market or sector: size, dynamics, trends
Circle the words in bold that apply to you:
Is your market big, medium-sized or small?
Is it a fast-changing or slow-changing market?
Is it a growing or static market?
Your organisation’s status and reputation
Circle the words in bold that apply to you:
Would you say your customers were loyal or opportunist?
Would you say your suppliers were loyal or opportunist?
Would you say your customers and suppliers saw you as a big or a small company?
Competitors’ status and reputation; role models
Circle the words in bold that apply to you:
Would you say your competitor’s customers were loyal or opportunist?
Would you say your competitor’s suppliers were loyal or opportunist?
Would you say your competitors were big or small companies?
Profile of customers / stakeholders in market or sector
Circle the words in bold that apply to you:
Would you say that, in the main, your customers were old, young, middle-aged, or a balance of all three?
Are they mostly male, female, or a balance?
Would you say they rich, poor, or reasonably well-off? (Use your own judgement here).
Characteristics – seasonal / regional
Circle the words in bold that apply to you:
Are your customers mostly local, regional, or national?
Do you sell more in the spring, summer, autumn or winter, or is it steady year-round?
Your organisation
Description of your business – what does it actually do?
Circle the words in bold that apply to you:
Do you provide a product or a service?
If a product, do you manufacture, wholesale, or retail, or if a service, do you provide directly or sub-contract?
Background and history
Circle the words in bold that apply to you:
Is your business under five years old, between five and 10 years old, over 10 years old?
Are you the founder of the business, or the successor in it?
Mission and values
Circle the words in bold that apply to you:
I have or I have not got a mission statement.
I have or I have not got the values of my business written down.
Objectives and goals
Circle the words in bold that apply to you:
I have or I have not got business objectives which are written down.
I have or I have not got marketing and sales objectives which are written down.
I have or I have not got product / service-specific objectives.
Unique selling points
Circle the words in bold that apply to you:
Are you acutely aware, quite aware, or vaguely aware of your product’s or service’s unique selling point(s)?
Do you see the unique selling point(s) of your product or service vital, useful, or relatively unimportant to your business? (And remember, be honest!).
Organisational / management structure
Circle the words in bold that apply to you:
I have or I have not got a management structure in place.
Are there formal or informal lines of reporting in place between different employees?
Where does your business want to be in 3/5 years?
Circle the words in bold that apply to you:
Do you want to grow significantly, grow gradually, or not grow at all over the next three to five years?
Do you want to be smaller than your main competitor, the same size as your main competitor, or bigger than your main competitor in five year’s time?
Are You Sitting Comfortably?
Okay, so now we have some simple background about your business. We’re starting to see what makes your business tick, and we will tell ourselves a little story about your business. Taking each of the words you circled in order, fill in the blanks in the following passage:
My business operates in a market that is ______, __________, and _______. My customers are __________, my suppliers are ___________, and they see me as a _______ company.
The age of my customers is mostly ___________, and their gender is mostly __________, and, as for their pockets, they are mostly __________. They are usually from __________ areas, and they mostly come out (in the) __________.
My business provides a ________ which I ____________________. It is a business which is __________ years old, and I am the _____________ of it.
________________ got a mission statement written down, and _______________ got the values of my business written down. _________________ got business objectives which are written down, _________________ got marketing and sales objectives which are written down, and _________________ got product / service-specific objectives.
I am __________________ of my product’s or service’s unique selling point(s), which I regard as ________________ to my business.
__________________ got a management structure in place, and there are _____________ lines of reporting in place between different employees. I want the business to ___________________ over the next three to five years, and, compared to my main competitor, I want to be ____________________.
And there you have it! A snapshot of your business, your customers, your reputation, and your aspirations. It all looks quite different written down doesn’t it? Don’t underestimate how useful this exercise has been: many small businesses, or even big ones for that matter, never get this far in taking a look at themselves!
Thursday 27 March 2008
Teaching Our Next Generation Of Entrepreneurs
The perception of entrepreneurial opportunities and the capacity to exploit them are strongly associated with social norms that encourage venturing, such as the availability of risk capital, access to developing technologies, a quality diverse entrepreneurship education system and a sound professional infrastructure. This has considerable implications for the UK entrepreneurial economy.
Entrepreneurship education, at all levels, could very effectively prepare and train students to start and manage new businesses. This type of education is strong and getting stronger in business schools across the country, but it needs to proliferate outside of the business domain. Very few students undertake business subjects, and not every business school student is required to or chooses to take up an entrepreneurship course. Thus the number of people exposed to higher-level entrepreneurship education is relatively small in the UK. It is critical therefore that entrepreneurship education is expanded.
Engineering and other technology graduates have the capability to generate innovations that may be the basis for high-growth companies. They need to learn techniques for discerning whether or not such innovations have commercial potential. As such, universities need to encourage the integration of their degree requirements between entrepreneurship/management and engineering/technology.
There are often many hurdles to such collaboration, however, including issues of funding; credit allocations; faculty teaching loads; scheduling conflicts, and the lack of available facilities. While a handful of schools are facing and overcoming these issues, there is a real need to see more active collaboration on university campuses.
There also needs to be a more concentrated effort to introduce entrepreneurship and basic economic principles at the primary and secondary levels. At the primary level, these concepts could be integrated throughout the curriculum. At the secondary level, entrepreneurship skills and basic economic principles could be offered as stand-alone courses. Many people enter the workforce without a college education and have no responsibility for exposure to entrepreneurship training.
While not every school graduate has the capacity or desire for higher education, almost everybody has the potential to start a new business. The average high school graduate may not start a fast-growth, high-technology company, but he or she can start a landscaping business, a retail business or some other venture that will employ other people and contribute to economic adaptation. As such, it is critical to provide at least the basic instruction to ensure that these future entrepreneurs have the understanding of and a certain level of proficiency in the skills necessary to implement and manage a business.
To avoid problems of duplication, various national experts recommend the establishment of a ‘clearinghouse’ for government programmes. A clearinghouse, perhaps web-based, could provide an efficient means for entrepreneurs to gain knowledge of specific programmes and to access those programmes.
In addition, there is also the need to simplify compliance pressures on entrepreneurial firms. Simplifying compliance requirements would improve entrepreneurial efficiency at the most critical times in the venture’s life. Many new ventures report having a difficult time staying on top of all the reporting requirements. Furthermore, reducing the required paperwork would reduce manpower constraints on new ventures, thereby increasing their chances of surviving the early years.
There is also a reported ‘Gap’ in Seed Stage Financing. If the gap exists, it may be more pronounced in different industries, different geographic regions, or for distinct groups of entrepreneurs. The substantial amount of funding provided through informal channels, orders of magnitude greater than that provided by formal venture capital investments and hitherto unknown and unappreciated, suggests some mechanisms for filling the gap may have developed without recognition.
There may not be a gap in the availability of such capital but, rather, in the entrepreneur’s knowledge of where it resides and how to tap it. Experts may be split over whether a gap exists in seed capital because of the fact that many entrepreneurs choose not to endure the time, cost and bureaucracy involved in the search and seizure of such capital.
Increasing the visibility of entrepreneurs by highlighting their story could prove to be an attractive method of encouraging others to pursue their own entrepreneurial opportunities. It reflects widespread acceptance of entrepreneurship as a career option in the UK.
In the absence of a more comprehensive, long-term research programme on the entrepreneurial process, government policies in the UK regarding new and growth companies will continue to fluctuate in reaction to political whims and pressures from special interest groups. It is essential, therefore, that an increased understanding of the principles underlying entrepreneurship is secured in order to ensure that a sustained growth in the entrepreneurial sector is secured.
Entrepreneurship education, at all levels, could very effectively prepare and train students to start and manage new businesses. This type of education is strong and getting stronger in business schools across the country, but it needs to proliferate outside of the business domain. Very few students undertake business subjects, and not every business school student is required to or chooses to take up an entrepreneurship course. Thus the number of people exposed to higher-level entrepreneurship education is relatively small in the UK. It is critical therefore that entrepreneurship education is expanded.
Engineering and other technology graduates have the capability to generate innovations that may be the basis for high-growth companies. They need to learn techniques for discerning whether or not such innovations have commercial potential. As such, universities need to encourage the integration of their degree requirements between entrepreneurship/management and engineering/technology.
There are often many hurdles to such collaboration, however, including issues of funding; credit allocations; faculty teaching loads; scheduling conflicts, and the lack of available facilities. While a handful of schools are facing and overcoming these issues, there is a real need to see more active collaboration on university campuses.
There also needs to be a more concentrated effort to introduce entrepreneurship and basic economic principles at the primary and secondary levels. At the primary level, these concepts could be integrated throughout the curriculum. At the secondary level, entrepreneurship skills and basic economic principles could be offered as stand-alone courses. Many people enter the workforce without a college education and have no responsibility for exposure to entrepreneurship training.
While not every school graduate has the capacity or desire for higher education, almost everybody has the potential to start a new business. The average high school graduate may not start a fast-growth, high-technology company, but he or she can start a landscaping business, a retail business or some other venture that will employ other people and contribute to economic adaptation. As such, it is critical to provide at least the basic instruction to ensure that these future entrepreneurs have the understanding of and a certain level of proficiency in the skills necessary to implement and manage a business.
To avoid problems of duplication, various national experts recommend the establishment of a ‘clearinghouse’ for government programmes. A clearinghouse, perhaps web-based, could provide an efficient means for entrepreneurs to gain knowledge of specific programmes and to access those programmes.
In addition, there is also the need to simplify compliance pressures on entrepreneurial firms. Simplifying compliance requirements would improve entrepreneurial efficiency at the most critical times in the venture’s life. Many new ventures report having a difficult time staying on top of all the reporting requirements. Furthermore, reducing the required paperwork would reduce manpower constraints on new ventures, thereby increasing their chances of surviving the early years.
There is also a reported ‘Gap’ in Seed Stage Financing. If the gap exists, it may be more pronounced in different industries, different geographic regions, or for distinct groups of entrepreneurs. The substantial amount of funding provided through informal channels, orders of magnitude greater than that provided by formal venture capital investments and hitherto unknown and unappreciated, suggests some mechanisms for filling the gap may have developed without recognition.
There may not be a gap in the availability of such capital but, rather, in the entrepreneur’s knowledge of where it resides and how to tap it. Experts may be split over whether a gap exists in seed capital because of the fact that many entrepreneurs choose not to endure the time, cost and bureaucracy involved in the search and seizure of such capital.
Increasing the visibility of entrepreneurs by highlighting their story could prove to be an attractive method of encouraging others to pursue their own entrepreneurial opportunities. It reflects widespread acceptance of entrepreneurship as a career option in the UK.
In the absence of a more comprehensive, long-term research programme on the entrepreneurial process, government policies in the UK regarding new and growth companies will continue to fluctuate in reaction to political whims and pressures from special interest groups. It is essential, therefore, that an increased understanding of the principles underlying entrepreneurship is secured in order to ensure that a sustained growth in the entrepreneurial sector is secured.
Friday 7 March 2008
The Importance Of Entrepreneurs
In the newly-elected New Labour Government which swept into power in 1997, the new mantra for economic renewal emanating from the then Iron Chancellor, Gordon Brown, was one of enterprise, enterprise and even more enterprise, to turn Britain into an economy driven by the entrepreneurial nature of its citizens well-versed in how to make money. In the government white paper, “Our Competitive Future: Building the Knowledge Driven Economy”, the economic aims of the new Labour administration were made absolutely clear: “Entrepreneurship and innovation are central to the creative process in the economy and to promoting growth, increasing productivity and creating jobs. Entrepreneurs sense opportunities and take risks in the face of uncertainty to open new markets, design products and develop innovative processes”.
Nowhere was this zeitgeist more clearly defined than in the advent of the dot.com revolution, with its young instant (New Labour-supporting) paper millionaires using technology to create the companies of tomorrow. The convergence of a new creative and innovative government, combined with the explosion in the possibilities for business and consumer use of the internet, was New Labour’s equivalent of Harold Wilson’s “White Heat of a second industrial revolution” thirty five years earlier. We had a Labour Administration introducing specific policy interventions to encourage enterprising behaviour, including programmes for spin-offs within the university sector, financial inducements for entrepreneurs to invest in smaller innovative ventures, and the encouragement of share ownership by employees within smaller firms. This overshadowed anything previously introduced under Howe, Lawson, Lamont or Clarke during the various Conservative budgets of the 1980s and 1990s.
The last few years has seen entrepreneurial behaviour becoming increasingly acceptable within business life in the UK. Today, entrepreneurs are no longer relegated to the caricatures of Mike Baldwin, Arthur Daley and Del-Boy. In enterprising Britain, the majority of school children wish to become an owner-manager at some stage of their lives, dream of fortunes to be made from the Internet and name Richard Branson, the UK’s premier entrepreneurial personality, as the person to whom they aspire.
There was, as there always had been, a suspicion of the term ‘enterprise’, given the long history of exploitation by the entrepreneurs of the slate, iron and coal industries, the legacy of which still lived on in the hearts and minds of many of the population of industrial Britain. The mere association of the term ‘enterprise culture’ with the Thatcher era meant that entrepreneurs, and their development, were anathema to many policy-makers and politicians. However, led by the current Government’s love affair with entrepreneurs, a number of significant events have occurred that have begun to change the previously hostile attitudes towards enterprise.
There was the realisation that we could not continue with the policy of concentrating much of our industrial expenditure on attracting inward investment. It has not been the actual policy of inward investment which has been problematic, rather the lack of targeting which meant that new jobs were more important than any other strategic consideration, such as the type of employment created, the sectors attracted, and the future of those industries in a quickly globalising economy.
While our neighbours in Ireland were busy attracting internationally-traded services in the financial and software sectors, we were begging companies in the maturing (and highly competitive) sectors such as automotive and consumer electronics to bring branch plant jobs, then repeated the same mistakes with call-centres. Whilst individuals spinning off from companies such as Microsoft and Intel were creating a vibrant indigenous Irish software sector, assembly workers in the UK continued to, well, assemble. All this while highly skilled (and highly paid workers) within the financial and software sectors in Dublin were demanding better restaurants, shops and leisure facilities, creating countless opportunities for local entrepreneurs.
Although we have previously looked to inward investors as the main source of new jobs, in many other regions the main contribution of the small firm to their economies lies in the creation of new employment opportunities. This began with work by David Birch in the United States during the late 1970s, who demonstrated that large firms, despite their influence on the volume and nature of world trade, could not be regarded as the major source of new jobs. Instead, this role had now fallen to the small firm, with Birch estimating that firms with less than 20 employees had generated 66 per cent of net new jobs in the United States.
At the time, these findings were hard to believe for a number of reasons. They contradicted the assumptions of most businesses and governments during the 1960s and 1970s that healthy big business meant a healthy economy, predominantly because of the assumed efficiency of large firms through the use of economies of scale to keep down costs. As a result, doubts were raised about the policies (pursued by Western governments of all political persuasion) of encouraging mergers between companies to form large corporations, keeping afloat large companies in trouble, and attracting large firms to economically depressed areas, all of which were seen as possibly an expensive and inefficient way of creating employment (although clearly this did not stop such policies being implemented in the UK during the last twenty years).
It was mainly as a result of the Birch study that many governments regarded small firms during the 1980s as the panacea for high unemployment during times of recession. This was illustrated most clearly in the United States: although 34 million jobs were lost in the period 1980 to 1986, 44.7 million new jobs were created, with 32 million of these being generated from the birth of new businesses. During the recessionary period of 1980-82, small firms provided almost all of the new jobs in the US economy.
Similarly, in the European Community, large firms experienced employment loss in nearly every member state, whilst employment by small firms grew considerably. According to data from the European Observatory, SMEs accounted for 68 million jobs in the European Community in 1995, with large firms employing approximately 35 million people. Many of the smaller businesses were set up with the considerable support of governments, which had moved towards abandonment of expensive policies aimed at propping up large firms in industrially depressed areas. Instead, various incentives were being targeted at the small firm sector to encourage new firm formation as the more cost-effective antidote to the shedding of jobs by larger organisations.
Apart from the creation of employment, small firms play another important role by providing a productive outlet for enterprising and independent individuals, some of whom may be frustrated under-achievers in a larger, more controlled environment. Companies as diverse as the Ford Motor Company and Microsoft were started by creative individuals who perceived an opportunity in the market-place and, using a small company as a vehicle for their ideas, grew rapidly into international giants.
Small firms also have close symbiotic relationships with larger companies. Although large firms, through their economies of scale in production and distribution, contribute greatly to a thriving market economy, many of them could not survive without the existence of small companies. As well as selling most of the products made by large manufacturers direct to consumers, small firms provide large businesses with many of the services and supplies they require to run a competitive business. It is estimated that about 500 small suppliers and distributors and about 3000 retailers support each major manufacturing firm in the US. The largest industrial company in the world, General Motors, buys from more than 30,000 suppliers, most of which are small companies, and spends more than half of each sales dollar on purchases from small firm suppliers. One of the main factors in the remarkable success of Japanese industry over the last decade has been the contribution of small businesses, with the high degree of international competitiveness being achieved through the creation of a strong subcontracting system, which has combined the flexibility of small firms with the economies of scale and market power of larger organisations. Without the close relationship that exists between small subcontractors and the large industrial conglomerates, the Japanese economy would not have progressed to its powerful industrial position today.
Small firms have also become important for technological innovation within developed economies, with research demonstrating their valuable contribution to technological innovation within a number of high technology industrial sectors, usually those characterised by fast changing markets, low capital intensity and small dependence on economies of scale. Such markets are thus better suited to smaller firms, due to the entrepreneurial nature and lack of bureaucracy in decision-making within such organisations. For example, comprehensive research into the relationship between firm size and the level of innovation in the UK has revealed that small firms' share of innovations had increased by over 50 per cent since 1945 and now accounts for over a quarter of the total number of innovations in the UK.
Moreover, in certain sectors, such as computing services and scientific instruments, their contribution is highly significant, with small companies developing the majority of innovative products and processes. Indeed, within such ‘knowledge-intensive’ sectors of the economy, small firms have accounted for nearly all of the employment growth during the 1980s and 1990s. In addition, a number of studies show that technologically innovative SMEs in the UK have a higher-than-average growth in assets, retained profits and exports, lower closure rates than businesses in other sectors and have demonstrated high degrees of resilience, especially in times of recession.
Clearly, while small firms have been important in the past, this seems set to continue and grow in the future. For example, many of our business and consumer markets have changed to essentially reflect the strengths of smaller firms. In today’s business climate, economies of scale are no longer important as 20th Century standardisation has disappeared in favour of 21st century consumer sophistication and business specialisation. In many cases, small firms, with faster reaction times and closeness to the market-place, are perfectly placed to deal with an environment where businesses require specialist support and consumers demand customized products and services. Clearly, the age of Ford’s ‘any colour of car as long as it’s black’ has been consigned to the dustbin of industrial history as the small firm, whose decline was forecast only thirty years ago, drives forward today’s economies.
But the short-term nature of much of the funding for business support initiatives without co-ordinated dissemination of best practice, and the fragmentation of business support services with limited entrepreneurial content, means that the time is right for an overall national strategy for entrepreneurship. We sincerely hope that Entrepreneur Secrets will be at the forefront of this strategy.
Nowhere was this zeitgeist more clearly defined than in the advent of the dot.com revolution, with its young instant (New Labour-supporting) paper millionaires using technology to create the companies of tomorrow. The convergence of a new creative and innovative government, combined with the explosion in the possibilities for business and consumer use of the internet, was New Labour’s equivalent of Harold Wilson’s “White Heat of a second industrial revolution” thirty five years earlier. We had a Labour Administration introducing specific policy interventions to encourage enterprising behaviour, including programmes for spin-offs within the university sector, financial inducements for entrepreneurs to invest in smaller innovative ventures, and the encouragement of share ownership by employees within smaller firms. This overshadowed anything previously introduced under Howe, Lawson, Lamont or Clarke during the various Conservative budgets of the 1980s and 1990s.
The last few years has seen entrepreneurial behaviour becoming increasingly acceptable within business life in the UK. Today, entrepreneurs are no longer relegated to the caricatures of Mike Baldwin, Arthur Daley and Del-Boy. In enterprising Britain, the majority of school children wish to become an owner-manager at some stage of their lives, dream of fortunes to be made from the Internet and name Richard Branson, the UK’s premier entrepreneurial personality, as the person to whom they aspire.
There was, as there always had been, a suspicion of the term ‘enterprise’, given the long history of exploitation by the entrepreneurs of the slate, iron and coal industries, the legacy of which still lived on in the hearts and minds of many of the population of industrial Britain. The mere association of the term ‘enterprise culture’ with the Thatcher era meant that entrepreneurs, and their development, were anathema to many policy-makers and politicians. However, led by the current Government’s love affair with entrepreneurs, a number of significant events have occurred that have begun to change the previously hostile attitudes towards enterprise.
There was the realisation that we could not continue with the policy of concentrating much of our industrial expenditure on attracting inward investment. It has not been the actual policy of inward investment which has been problematic, rather the lack of targeting which meant that new jobs were more important than any other strategic consideration, such as the type of employment created, the sectors attracted, and the future of those industries in a quickly globalising economy.
While our neighbours in Ireland were busy attracting internationally-traded services in the financial and software sectors, we were begging companies in the maturing (and highly competitive) sectors such as automotive and consumer electronics to bring branch plant jobs, then repeated the same mistakes with call-centres. Whilst individuals spinning off from companies such as Microsoft and Intel were creating a vibrant indigenous Irish software sector, assembly workers in the UK continued to, well, assemble. All this while highly skilled (and highly paid workers) within the financial and software sectors in Dublin were demanding better restaurants, shops and leisure facilities, creating countless opportunities for local entrepreneurs.
Although we have previously looked to inward investors as the main source of new jobs, in many other regions the main contribution of the small firm to their economies lies in the creation of new employment opportunities. This began with work by David Birch in the United States during the late 1970s, who demonstrated that large firms, despite their influence on the volume and nature of world trade, could not be regarded as the major source of new jobs. Instead, this role had now fallen to the small firm, with Birch estimating that firms with less than 20 employees had generated 66 per cent of net new jobs in the United States.
At the time, these findings were hard to believe for a number of reasons. They contradicted the assumptions of most businesses and governments during the 1960s and 1970s that healthy big business meant a healthy economy, predominantly because of the assumed efficiency of large firms through the use of economies of scale to keep down costs. As a result, doubts were raised about the policies (pursued by Western governments of all political persuasion) of encouraging mergers between companies to form large corporations, keeping afloat large companies in trouble, and attracting large firms to economically depressed areas, all of which were seen as possibly an expensive and inefficient way of creating employment (although clearly this did not stop such policies being implemented in the UK during the last twenty years).
It was mainly as a result of the Birch study that many governments regarded small firms during the 1980s as the panacea for high unemployment during times of recession. This was illustrated most clearly in the United States: although 34 million jobs were lost in the period 1980 to 1986, 44.7 million new jobs were created, with 32 million of these being generated from the birth of new businesses. During the recessionary period of 1980-82, small firms provided almost all of the new jobs in the US economy.
Similarly, in the European Community, large firms experienced employment loss in nearly every member state, whilst employment by small firms grew considerably. According to data from the European Observatory, SMEs accounted for 68 million jobs in the European Community in 1995, with large firms employing approximately 35 million people. Many of the smaller businesses were set up with the considerable support of governments, which had moved towards abandonment of expensive policies aimed at propping up large firms in industrially depressed areas. Instead, various incentives were being targeted at the small firm sector to encourage new firm formation as the more cost-effective antidote to the shedding of jobs by larger organisations.
Apart from the creation of employment, small firms play another important role by providing a productive outlet for enterprising and independent individuals, some of whom may be frustrated under-achievers in a larger, more controlled environment. Companies as diverse as the Ford Motor Company and Microsoft were started by creative individuals who perceived an opportunity in the market-place and, using a small company as a vehicle for their ideas, grew rapidly into international giants.
Small firms also have close symbiotic relationships with larger companies. Although large firms, through their economies of scale in production and distribution, contribute greatly to a thriving market economy, many of them could not survive without the existence of small companies. As well as selling most of the products made by large manufacturers direct to consumers, small firms provide large businesses with many of the services and supplies they require to run a competitive business. It is estimated that about 500 small suppliers and distributors and about 3000 retailers support each major manufacturing firm in the US. The largest industrial company in the world, General Motors, buys from more than 30,000 suppliers, most of which are small companies, and spends more than half of each sales dollar on purchases from small firm suppliers. One of the main factors in the remarkable success of Japanese industry over the last decade has been the contribution of small businesses, with the high degree of international competitiveness being achieved through the creation of a strong subcontracting system, which has combined the flexibility of small firms with the economies of scale and market power of larger organisations. Without the close relationship that exists between small subcontractors and the large industrial conglomerates, the Japanese economy would not have progressed to its powerful industrial position today.
Small firms have also become important for technological innovation within developed economies, with research demonstrating their valuable contribution to technological innovation within a number of high technology industrial sectors, usually those characterised by fast changing markets, low capital intensity and small dependence on economies of scale. Such markets are thus better suited to smaller firms, due to the entrepreneurial nature and lack of bureaucracy in decision-making within such organisations. For example, comprehensive research into the relationship between firm size and the level of innovation in the UK has revealed that small firms' share of innovations had increased by over 50 per cent since 1945 and now accounts for over a quarter of the total number of innovations in the UK.
Moreover, in certain sectors, such as computing services and scientific instruments, their contribution is highly significant, with small companies developing the majority of innovative products and processes. Indeed, within such ‘knowledge-intensive’ sectors of the economy, small firms have accounted for nearly all of the employment growth during the 1980s and 1990s. In addition, a number of studies show that technologically innovative SMEs in the UK have a higher-than-average growth in assets, retained profits and exports, lower closure rates than businesses in other sectors and have demonstrated high degrees of resilience, especially in times of recession.
Clearly, while small firms have been important in the past, this seems set to continue and grow in the future. For example, many of our business and consumer markets have changed to essentially reflect the strengths of smaller firms. In today’s business climate, economies of scale are no longer important as 20th Century standardisation has disappeared in favour of 21st century consumer sophistication and business specialisation. In many cases, small firms, with faster reaction times and closeness to the market-place, are perfectly placed to deal with an environment where businesses require specialist support and consumers demand customized products and services. Clearly, the age of Ford’s ‘any colour of car as long as it’s black’ has been consigned to the dustbin of industrial history as the small firm, whose decline was forecast only thirty years ago, drives forward today’s economies.
But the short-term nature of much of the funding for business support initiatives without co-ordinated dissemination of best practice, and the fragmentation of business support services with limited entrepreneurial content, means that the time is right for an overall national strategy for entrepreneurship. We sincerely hope that Entrepreneur Secrets will be at the forefront of this strategy.
Subscribe to:
Posts (Atom)
