You get what you measure for

 

Illustration of a vernier caliper

Illustration of a vernier caliper (Photo credit: Wikipedia)

I was taught that saying many years ago.  You get what you measure for.  If you measure only for profit, you may have fewer but profitable sales.  If you measure for sales volume, you may not get the profit you want. If you measure everything, you will run out of time!

Choosing what you measure is critical to long term success.  Just as critical is to make sure you re-evaluate those measurement targets to make sure you are measuring what is relevant at that time.

In a startup business, number of users / customers and cash flow break even are two critical measurements.  In a more mature company you probably want to measure profitability and return on invested capital. Deciding what to measure when is the key.

  • Measure those things that sustain you.  Revenue, gross margin, profit.
  • Measure those people who sustain you.  Customer renewals and satisfaction.
  • Measure those who enable you. Vendor or partner satisfaction, employee productivity.
  • Measure those things that create growth in your business, new customers, new product success.

You need to find a balance of enough relelvant measurements without overloading. You also need to spread out the job of measuring to everyone on your team.  The act of measuring the business will hopefully more fully engage team members in what is important.

 

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What your business culture says about your business

Vector handshakeOk, restaurants again.  As you can tell, I eat out – alot.

I was at the local Applebees in Ankeny the other evening.  It is a favorite place of mine.  The food is good but not the reason I go there.  I go there because of the staff.  The staff they have stays long term because of the culture.  The general manager is one of the hardest working people in the place.  He never stops moving.  He is the first to wipe down a table or sweep up the floor.  He treats his employees as equals.

I see a similar attitude in the staff of HyVee.  I recently was checked out by a manager at my local HyVee because her staff were already helping others.  She opened a lane and checked me out. I did not have to ask or encourage her.  You could tell that it is just the way they do business.

The actions of you and your staff are what we customers use in understanding your culture.  If you own a restaurant where the tables are filthy and the manager is leaning against the bar talking to the hostess, I know your culture.

I personally do not like spending a lot of time talking to my teams about culture.  I believe you simply model the behavior you expect of everyone else.  Those who can emulate your model are the ones you keep and reward. Those who do not need to leave.

Make sure you are modeling the culture you expect from your employees at all times.  It is the strongest form of communications you possess.

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New owners are at a disadvantage…don’t make it worse

U.S. Division-North Sustainment HeroIt is truly a disadvantage to be a new business owner. To start with, you are an unknown to most potential customers.  You probably do not have a long list of referral accounts or a line of customers out your door. So how do you make up for this disadvantage?

There is one thing you can do that will make up for most of the “new business owner” challenges.  Professionalism.  It is a big word both in number of letters and in fulfilling the attribute.  Professionalism is not accomplished through a single action or method.  It is a constant state of being.  Here are a few examples.  See if you can spot the professional.

You make an appointment over the phone with an auto repair facility.  At the end of the call, the person on the other end says:
a) G’bye
b) See you then
c) Repeats back to you the time, date and expected work to be accomplished.

You walk into a retail store. The clerk is at the back of the store is talking to another person. The clerk:
a) Keeps talking to the other person
b) Makes eye contact but does not engage you
c) Greets you and tells you s/he will be right with you

You are working with a consultant. You ask for a proposal for the cost of doing some work you have been discussing. The consultant respond with:
a) A verbal cost
b) An email with a “Thank you for the opportunity” and a price
c) A written proposal including all terms, conditions, scope, price, payment terms etc.

Being professional will set you apart from the crowd.  If you have employees, make sure they understand the same concept and are professional at all times.

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The staircase approach to building a business

Teutonic's grand staricaseStand at the base of a set of stairs, 10 to 15 steps will do.  Now get ready and leap to the top!  That is what many entrepreneurs attempt to do when starting a business. Unfortunately most do not have the strength or skill to make it on the first leap.

It is easy to convince yourself that you must have everything done the day you begin. Take the marketing for a new business.  While you may want to have all of your marketing in place before you begin, many of your best marketing ideas will come from the first few customers you serve.  Start with a simple approach of what you offer to the market.  Stick with the problem you solve and the value you provide.

That can be your first step.

As you gain a couple clients, ask for a testimonial to use in future marketing, perhaps on your website or on your ads.  That is good second step. As you move forward, ask your clients what made them choose you.  Revise your ads and promotional copy to bring in some of the new things your customers told you as an additional step. Next, start to look for other businesses that are complimentary to your business and ask them to work with you in marketing each others businesses through referrals or working together.  Another step.

Moving step-by-step through your marketing or any other area of your business will allow you to use your your funds more efficiently and stay focused.  It will also keep you from falling down from trying to leap to the top step.

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“Let’s deal with it later…” No, let’s not.

Lightning bolt!A guy comes up with a business idea. It is a pretty good idea.  He starts working on it.  The idea takes hold. Others start encouraging him. Customers begin to say a tentative “yes” to his offer. The guy gets a friend to help him out. The guy tells the friend he cannot pay him but can share some equity and that they should discuss the amount and terms. The friend says no, don’t worry about it.  Let’s deal with it later.

Later happens. The discussion takes place. The friend is insulted by the percentage offer of equity.  The friend bails on the business idea. They are no longer friends.

The difference of opinion on equity percentages was probably a factor of 10. As sad a situation as this is, it is not as bad as many I see. Partners must discuss these types of arrangements up front.

Waiting until after the fact is terribly dangerous. Not only are feelings hurt, there are potential legal ownership issues to deal with. To top it all off, if the two parties cannot come to a break-up agreement, it becomes a “he said” vs. “he said” issue and resolution becomes extremely difficult.

Do not leave partnership or ownership issues for later. If someone is going to be in business with you, make sure they know going in what they are signing up for.

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What failure can teach you.

99c Store Going Out of BusinessImage by RodBegbie via Flickr

At the Technology Association of Iowa’s Pitch and Grow 5 gathering last week, I participated in a panel discussion on failure.  Any successful entrepreneur will tell you that failure is part of being an entrepreneur and part of finding success.  My fellow panelists included Christian Renaud of StartupCityDSM, Daniel Shipton of BitMethod, John Jackovin and Brian Thompson of Equity Dynamics.

Here is what I took away from the session:

  • Failure is a teacher if we recognize it as such.  Choose what you are going to do with what you learn from your failure(s).  That much is your choice.
  • It is challenging to recognize failure before it is terminal.  Make sure you have advisers that you are listening to and who are giving you honest feedback.
  • Failure can be tactical or strategic.  We fail every day.
  • Many first time entrepreneurs will not recognize the failure before it is critical.  It is only through failing hard (like a face plant in skiing) do we tend to learn to see a failure coming and have an opportunity to correct or preempt.
  • You may not be able to avert the failure but you can potentially soften the landing.

For those starting a business you need to plan on failing.  Do everything you can to make sure the failure is not terminal.  For those helping others in business, give honest, direct feedback.

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Make the customer’s life easier. Tell them the price!

Lincoln on U.S. one centPrice gets in the way of doing business. For those who have sold for a living, you could probably each write a book about getting around the price issue. Yet for most businesses this is a self-inflicted wound.

Today, the worst example of this is booking an airline trip. Try it. Try to get a complete final price for a trip. Unless you know exactly how many bags and their individual weight, it is impossible to get the final price.

In the on-line world, a recent change by on-line retailers is to provide free shipping as a standard offering. This is happening based on evidence that purchase rates increase for items with free shipping.  Evidence also exists that these customers tend to comparison shop less where free shipping is offered. I believe this is simply a case of making it easy for the customer to buy.

One key market that is just beginning to change pricing practices is the services area.  A good example of this change is in the practice of law.  Most people know that lawyers typically charge by the hour.  Many of us start off our discussion with a lawyer trying to figure out what the work we need done will cost us.  This is especially true if the client-lawyer relationship is new.

Recently, several firms in town have started providing some services at a fixed price.  In the area I work, mentoring start-up companies, this is a real change for the good.  When your cash balance is precious and there is little or no revenue coming in, it is hard to engage in an open-ended-fee relationship.  A good example of this change is Start-up Launchpad by Davis Brown Law.  For a set fee, the client receives a set of services that are typically needed by a new start-up company.  Even better, potential clients can sign up for access to the site for free and access valuable information without cost.

So think about the average start-up business person facing the long list of tasks to start a business.  Getting all of the legal work done is only one item on that long list.  Which do you think the entrepreneur will choose, the hourly rate with the unknown total cost, or the flat fee bundle of services?  The customer choice just became so much easier.

By providing a clear price for a product or service, you are taking away a roadblock to business.  Look at your business and find new ways to make the buying decision easier for your customer.  They will thank you.

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1% of 4% of 7 Billion. Who’s in your market?

Earth - IllustrationBig markets attract a lot of attention. After all, with that many potential customers you can see a path to huge revenues. The challenge is getting heard by that big market.  On the flip side, a small market does not have a huge number of customers so the revenue potential is not as large. However, it is much easier to make sure that small market knows about you and your product.

Here in Iowa we are 1% of 4% of 7 billion people.  While 3 million people in Iowa sounds like a big number, it is an incredibly small number compared to the earth’s population.  You have a choice when you start marketing your product or service. You can cast your marketing net wide and try to let as many people know as possible, or you can target your marketing on a small segment. Which is right?

It depends.

If you need to scale large just to break even, you must cast a wide net and gain as many customers as you can, as quickly as you can. That means you will be spending a very large amount of money on marketing and sales. You likely will spend far more on marketing and sales than you do on your product.

If you have a product or service that gets you to profitability quickly, you have the option of starting with a small marketing budget pointed at a very defined, narrow grouping of potential customers.  As you gain customers you can incrementally increase the size of the market to which you communicate.

Either way, you need to know who’s in your market and make sure you have the funds needed to reach them.

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The first 10 customers

Go 10It is inevitable that a new client will present his or her marketing plan, stating the market size and the percentage of the market they are going to gain.  The math may be good but the business plan is not.  Whether starting a new business or launching a new product in an existing business, know your first ten customers.  They are the key to your success:

  1. Identifying your first ten customers will help sharpen your focus on who your target market really is.
  2. Talking to your first ten customers before they buy will give you valuable feedback on your product or service offering.
  3. Landing the first ten customers will help you refine your pitch and value proposition.
  4. Delivering the product or service to the first ten customers will help you refine and prove your processes for executing you business plan and point out the weaknesses you must correct to grow.
  5. Following up with the first ten customers after the sale will provide additional insight on how to improve your offering.
  6. If you do the above well, the first ten customers will tell others about their experience.  In turn your customer base will grow along with your business.

Do not launch your business or your new product until you can identify the first ten customers by name. You may not land all ten but you will learn a great deal about your business plan.

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What would you tell your best friend?

A male Mandarin Duck at Slimbridge Wildfowl an...From time to time, many of my clients come to me with a difficult decision they need to make.  They have thought through all sides of the decision and are struggling with what to do.

They ask my advice.

  • Do I shut down my start-up and disappoint my employees and customers?  I don’t think I can make it.
  • Do I let my co-founder know she or he needs to leave? That the company has out grown them and they are limiting the company? She or he is part of what got us here.
  • Do I fire the motivated salesperson who is not performing? Everyone likes them.
  • Do I tell the customer no? We can’t meet his needs, but I desperately need the revenue.

Recognize any of these? Here is a good test. If your best friend came to you with the problem you are facing, what would you recommend? Would you take your own advice and:

  • Shut down your start-up and disappoint your customers and friends?
  • Tell my co-founder it is time they leave?
  • Fire the salesperson?
  • Tell the customer no and fine another?

Well, would you? Or do you continue to hide from the issue and pretend you can’t make the call. You own the business. You have to make the call.

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Too much on your plate?

Indecision

We all have a lot on our plates these days.  Everyone I talk to responds “Busy!” to the question, “How are you?” It is a good sign that people are busy. The economy is improving.  Business is picking up for almost everyone I know.  So what do you do when you are too busy? Start by looking in the mirror.

I am willing to bet that many of the things on your list of to-dos are there because of you. There are two general causes. The first is not taking the next step. One of the most popular books on self organization is “Getting Things Done” by David Allen. In his book, he discusses at length the idea of identifying and doing the next step. Get out your list. Focus on the items you seem to be struggling with. Identify the next step for each of these items and get on them!

Secondly, and probably the most problematic, is indecision. A while back, Mark Suster wrote a great post titled “Avoid Decision by Indecision.” It is a very accurate view of indecision as it relates to start-up companies and those who finance them. From one-person companies to major corporations, the challenge of indecision is immense.  You must identify the items on which you are procrastinating. I can guess the categories these items will fit into: employees, spending a lot of money, bad news and upset customers. These items are the cause of your full plate.

Each time you take something off the plate, one of these issues returns to your plate to fill the space. If you have a problem employee, deal with them. You know in your heart the issue will not go away on its own. Deliver bad news immediately. If you wait, others will spend too much time wondering why you withheld the news in the first place and not focus on going after the problem. Upset customers are a today problem. There is no tomorrow with an upset customer, unless you want them out there telling everyone else how bad you are.

Finally, if you are working on a spending money decision, try this process: Decide the time horizon for this decision. Does it need to be made this month, this quarter, when? Gather all the facts you have. List out the (reasonable) facts you do not have and when you will have them.

When is the key. Many times we put off large money decisions because we are waiting to know more. If the data is coming soon, great. If you have no idea when the facts will be available, you’re just delaying. You have to take on the decision with the facts you have.  Do not fall into the trap of waiting for facts that are not going to arrive!

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Bumper tag and business: how to not get customers

English: Outlaw Monster Truck. This is a pictu...

I was getting on the interstate the other day.  The intersection I was at had a dual left turn lane and a two-lane on-ramp. I am in the left lane with some cars behind me. Suddenly, a very large four wheel drive truck (when did Ford start making the F13500?) pulls up in the right lane. The truck is about 8 feet off the ground so all I can see is the sign on the door.  “X———-X Home Remodeling” the sign says and below that is a tagline about care and trust.

So the light turns green and I begin to turn left.  The large four wheel drive truck accelerates and starts to turn as well. The next thing I know, he has “merged” into the left lane, cutting me off and making me hit the brakes hard. The car behind me barely got stopped before hitting me.  Needless to say I was not thinking kind thoughts about the driver of the truck.

So let me ask you, do you think I will be calling “X———–X Home Remodeling” any time soon? Do you think I am buying his tag line about care and trust?

We hear people talking about being careful about what you say on Facebook and Twitter.  When you are in business, you need to be careful about all impressions you leave – your own front yard appearance, your personal hygiene, your appropriateness of dress and how you drive.

Who you are is judged by others based on your actions and appearances. Especially when you name is on a sign on your truck!

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Fewer words are better

Details of a strain-wave gearing - the elastic...I was recently part of a group speaking to a high level political figure.  All of us have a background in business and have negotiated deals and pitched ideas many, many times.  Our group met in advance and discussed our plan on who would need to say what, who would lead and who would wrap up.

We had our meeting and I was truly struck how well we did.  Each of us said fewer words than we normally do.  We stuck to our plan and came across as organized and thoughtful.

The key was how well the political figure got what we were pitching.  He had not met any of us save one.  He was not familiar with the concept beyond a brief high level understanding.  Given all that, we were able to gain his support in about 15 minutes.

This did not happen because of our charm or good looks (see my picture!).  It happened because we did not overload him with information.  We focused on the few key points we felt he cared about and worked to gain his trust that we knew what we were doing.  He was not giving support to the details.  He was giving his support to a concept that solved a problem he recognized and to a team he believed could do what they said.

 

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When insanity overtakes reality in the start-up world

Gasoline explosions, simulating bomb drops at ...Image via Wikipedia

There is a point when insanity or passion overtakes reality in a start-up.  Here are my top ten indicators this has happened:

10 – The entrepreneur completes their answer to each question with “then BOOM, it happens!”
9   – “I can’t tell you my idea, it is secret” is the answer to my question “what is your business idea?”
8   – “Your trying to steal my business” is the response to an offer of help from a fellow business person.
7   – “Everyone will want one” is the marketing plan.
6   – “If I build it, they will come” is the marketing plan.
5   – “You will have to sign an NDA before I can tell you anything.”
4   – “Can you help me find a mentor that will tell me what I want to hear.”
3   – “But I have a great flash animation on my website!”
2   – “I keep running the same ads but no one is buying!”
1   – “They just don’t understand why they need my product!”

What do you do for a reality check?

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Your IT person quit, he has all the passwords. Now What?

PasswordWow, what a place to be in.  One of my clients recently faced this dilemma as a long term employee suddenly quit and did not give the account and password information to the owners before leaving.  Beside the obvious “I’LL SUE!”, what do you do?  If you are in this position, it may be too late. Here are a few things you can do now to make sure you do not fall into this situation

  1. Make sure more than one person has the login credentials for all on-line accounts.  DO not be surprised if there are many more of these than you might first think
  2. Assure you have a complete inventory of systems, software and services you use to run your business.
  3. Consider hiring an outside consultant to audit your system for security and survivablity.  Besides making sure you have a good system that is recoverable, you have another resource available should your primary support person become unavailable.

Do not underestimate how digital your business is becoming.  From the web, to facebook, to ecommerce sites and financial systems, the list of systems we use every day is quickly expanding.

So what would you do if you started work one morning only to find you did not have access to any of your online systems?  BTW, crying is not an option!

 

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