JUNE 2006 Newsletter
In this issue of our Essential Business newsletter:
- Julie reviews Go It Alone by Geoff Burch
- Jane revisits Business Spotlight Peter Parker to see how things are
- We ask are you keeping on top of your business?
Julie laughs... and remembers
It's not often I read a business book that makes me laugh. This book did just that. It also made me wince as I recognised some of the mixed up ideas I had when I started out…
BOOK » Go It Alone — the streetwise secrets of self-employment,
by Geoff Burch.
Starting a business is challenging and many people start out thinking that just because they really, really want it to work, then will work. Sadly, the statistics tell a different story.
In Go It Alone, Geoff Burch tells it how it is. He has the reputation of being the 'bad boy' of business, mainly because he tells you the things you need to hear before investing your precious time and money into a business.
When I started my first business it took me ages to learn that being skilled in my work was only part of the story. Geoff says, ''There's more to this lark than just the core skills. You have to take the kernel skill and surround it with the succulent fruit that is the show, the sale, the surrounding magic... You will have to learn to sell to survive.'' Then he goes on to explain, clearly and with great humour, the art of selling.
There's no question that many of us resist selling at all costs. We'll do our accounts work, the filing, answering emails, busy work of any type -- anything rather than make the call, make the appointment, or make the visit.
This book walks you painlessly through the best ways of doing all of those things and explains why it is so crucial that you learn to do them well.
The book is packed with tips and sage advice about selling your product or service to your customers. When Jane and I go to visit a potential client, she reminds me not to sit down in reception and not to accept a drink. Geoff agrees: ''As you squat on a black vinyl seat that is a foot from the floor so you have no hope of rising with dignity, and browse nonchalantly through a 10-year-old copy of Sewage Handling Technology magazine, you will be offered a drink. Do not accept, because you will receive a thin plastic cup of boiling mud. ... There we are then, knees around our ears, the drink in one hand while we balance the magazine and act casual. Our potential customer explodes out of a door somewhere and thrusts out a hand. 'Name's Roberts. What have you got do show me?' The battle is already lost as you struggle to get up like on overturned woodlouse, all legs and a crotch full of boiling mud...;''
Each chapter of this great book covers the process of selling your product or service and keeping your customers happy. At the end of each chapter, having clearly explained the subject, he brings it all together with 'Points to Ponder'. From the chapter entitled 'OK, so now you're in, then what?' he says:
Don't show and tell. You're there to sell. You've got in front of your client, now for Pete's sake, understand what you are there for.
If you know your product is inferior, don't bother calling until it isn't.
Develop the gift of the earhole, not the gift of the gab.
Don't be afraid to measure your progress. After all, you need to know where you are to be sure of where you're going.
Understand the difference between a major sale and a minor sale. If iit is a major sale, take it one step at a time.
- Just because your target customer’s current supplier is totally awful, it doesn't mean that they will change from them.
...and so on.
This book tells you truth about starting up in business. I heartily recommend it.
Peter Parker: Business Spotlight one year on
Remember Peter Parker? The medics wrote him off as a ‘vegetable’ after a fall that left him with multiple fractures, but he proved them wrong, made a full recovery, and now runs his own outdoor pursuits business.
We interviewed him last year, as one of our Business Spotlights in The Essential Business Guide. At that time, Moorland Adventure was thriving, with government-sponsored contracts for outdoor courses for the unemployed, a lot of school trips and company team-building events, as well as plenty of ‘rope access’ work, abseiling down quarry faces to dislodge unstable rocks after quarrying.
One year on, we decided to catch up with Peter, to see what had happened over the year. According to Peter, our call made him think, and to face some uncomfortable truths…
“I realised that I hadn’t heeded the advice I had given in my Business Spotlight, as my top tip for new businesses. I told them to use their networks well, and keep building them, but I didn’t do so myself.”
“There were reasons why I didn’t do so, but I realise now that they weren’t very good reasons. The result has been some scary moments during the year, and some times when I have wondered whether I really ought to be running my own business.”
Peter had run forty Learning Skills Council (ie: Government) funded courses over the previous year, for unemployed people. About the time of our interview he had just been offered another contract, this time to run sixty three-day courses. These would have given him two courses a week, guaranteed, through much of the year.
With this lucrative contract as good as signed, Peter made the classic mistake of counting his chickens before they had hatched (or in this case, signed on the dotted line), and not chasing new work, even though he could have coped with much more by using his pool of freelance instructors. He was getting repeat business from the schools and companies that had used his services before, and was fairly certain that the rope access work would provide steady work through the quieter winter months.
Peter admits that his strength is running outdoor activities, not running a business, and when he was not doing paid work, he tended to take his dog for a walk in the hills rather than chase future work. In short, he relaxed.
Unfortunately, the funding never materialised for the sixty courses, and by mid-year Peter realised that he had a problem. He had set aside time for work that was not now going to happen, and his bookings for summer 2005 were looking very thin.
“For this kind of work you can’t just find replacement bookings at short notice, it takes months” observes Peter. “I had put too many eggs in that particular basket, and was faced with a very lean time during the rest of the year. I won’t be making that mistake again.”
Fortunately, things have picked up again, and the business is growing rapidly. We ask Peter what he did to make the new bookings come in, and he looks a bit sheepish:
“I know that I still haven’t been active enough in actually chasing work. Most of the new work has come through word of mouth, from satisfied customers and their contacts. Some has resulted from personal contact with people, mostly through my volunteer Mountain Rescue work.”
“I did try some flyers to schools, colleges and government-funded providers, but that didn’t really work. I’m improving the website now, and trying to link up with other outdoor activity businesses, but there is still plenty more I could do, I’m sure.”
Counting the costs
Whilst work was slow, Peter realised that he should have paid more attention to his costs. With time on his hands and his mind focused on a cash shortage, he has been able to reduce waste and improve his business administration.
Peter explains: “For instance, I spent a bit of time shopping around for insurance quotes, which I hadn’t bothered to do whilst the work was flowing in. I managed to find a quote for less than half of the previous year’s premium, and it actually gives me more cover! I also know now which of my work is profitable, and when I should turn work down because it won’t make any money.”
Peter and his instructors are excited by a new opportunity that has come their way, again, he admits honestly, without much active effort on his part. He has ideas for new ventures, offering ‘packages’ and ‘challenge events’, but these ideas need more development before he offers them to customers, and he is not keen to discuss them with us at this stage.
Peter feels that he has learnt a lot from the past year. He has made mistakes that he is sure he will not make again, and recognised weaknesses in himself that need to be put right if his business is to continue growing.
There have been low times this year, but right now he is busy preparing an exciting swimming-based weekend in the Lake District for thirty triathletes, so he is doing all the things he likes best, and is sure that the good times are just around the corner!
Is Peter right to feel that his business prospects are improving?
Our marketing expert Jane Priddis assesses the prospects for Moorland Adventure:
Peter is right that he has made some mistakes during the year, but I feel he is being a bit hard on himself, as many small businesses make the same mistake of not chasing new work when times are good.
The key to solving this problem is planning, and Peter needs to review his business plan and add a much more detailed marketing plan to make sure he is focusing his efforts in the best direction.
An important point to make here is to remind yourself from time to time why you went into business for yourself: Was it not so you would be doing something you enjoy doing?
An adviser recently suggested to Peter that he should pay someone else to run his outdoor activities, so he would have time to manage the business better. Peter’s reply was that he would rather pay someone to run the business, as the outdoor activities were his main skill and source of enjoyment.
This is something he needs to explore, and I have advised him to draw up a list of the things he wants to learn to do for himself, and the things that hold no interest for him, and that he could pay someone to do.
As a starting point for planning, Peter would do well to look at his costs in even more detail, not just which types of work make him the most profit when he does them, but also what it costs him to win each type of work. He will need to cost into the calculation his own time and energy in winning the work, as well as the obvious costs such as advertising and promotion.
Once he has done this, he needs to look at the combinations of types of work and customers that work best throughout the year. The most obvious point here is that the rope access work is ideal for winter, when most outdoor activity work is scarce, but that he would not want to take too many bookings for this during the summer, when other, more profitable and more pleasurable work is available.
The next stage is to consider, for each type of work, and for each type of customer, how much work he can expect to (and wants to) win. The best way to do this is to consider first what combination of work he wants to be doing in four or five years’ time, and then use each of the intervening years to work towards that eventual goal.
The final stage is to decide how he is going to achieve the combination of work he wants to do. What will he need to do in each of those years to win that amount of work from each of those customer groups? This only needs to be in general terms, with more detail in the form of an action plan for the first year.
This type of planning is just common sense. Once Peter has decided where to focus his efforts, he can spend his time on winning business in these areas, and not be distracted into taking some of the low-profit work he has been forced to chase in the past year. He might even have more time to walk his dog!
For more information on Moorland Adventure visit www.moorlandadventure.co.uk
Are you keeping on top of your business?
It's complicated running a business. No matter how much you try to keep on top of it, there's always something else to think about. We thought it might help if we offered this quick checklist of some of the more important things to think about…
1 Have you looked at your pricing recently?
In her marketing consultancy work Jane often meets people who aren't charging enough for their service or their product. This is usually because as startups business owners often lack self-confidence and do not undertand their markets well enough. They often calculate their prices by taking their costs, and adding on a margin that gives them a certain amount to live on. Others try to get a 'foot in the door' by selling at a lower price than the competition.
A better method of pricing is to decide first where there is a gap in the market, and design your product or service in such a way that it fills the gap. Design it with a particular group of people in mind, and you have a much better chance of meeting their exact needs. After that, it's a matter of finding out what it is worth to that group of people to have what you are offering. You can either charge them that price (as long as it's profitable to you to do so), or you could charge slightly less and make them feel they are getting a bargain, as long as they won't also doubt your quality. If your product of service will not make a profit at the price your target customer would be willing to pay, just don't do it. It won't be worth your while.
2 Are you keeping track of the effect of your marketing?
Many business people make the mistake of setting up their accounting and management systems so that they only record financial activity, when they could also incorporate the results of your marketing efforts. For instance, in our own business accounts software we separate our book sales so that we know whether they are being sold through bookshops, exhibitions, partners, our online shop, and so on. This helps us decide where to put our marketing effort and where to spend our marketing budget. This kind of information is crucial for your business.
3 Are you covering all your skill bases?
We speak to hundreds of small business owners. The thing that they struggle with the most is marketing and selling. There's no question that if you don't have these key areas of business covered, you need to get on to that quickly. Do you have something youcould offer in return for some help? Maybe consider offering a time/skill swap to a marketing specialist Thatcould be a cost-effective way of filling those skills gaps, but be careful that your ‘marketing specialist’ is skilled enough themselves to give you sound advice. Even free advice can prove very expensive if it’s wrong.
4 Have you set up a cashflow forecast?
If you haven't, then you should! Go to page 40 of the Essential Business Guide for help. You could try reading the excellent Finance on a Beermat or The Bottom Line for more help with managing your finances.
5 Have you written your Terms and Conditions?
This is so important! If you haven't done this already, we strongly suggest that you think about it and draw up formal Terms and Conditions of trading which apply to every sales contract. You may consider consulting with a solicitor for this. However you do it, it's important — and when you have the first client getting funny about paying you, you'll be so glad you have those T&Cs (as they are often called) to fall back on.
6 How's your credit control?
You need to maximise your cashflow and avoid bad debt in business and good credit control is vital for both. It's not just about chasing overdue invoices, it's about getting the whole process right. If you're not on top of your credit control then read page 46 of the Essential Business Guide and for free letters and forms to help you with credit control, visit Pay on Time by clicking the link at the bottom of this article. This website is an excellent resource.
7 Are you keeping an eye on your competitors?
A competitor is anyone who could take the portion of your potential customers' money that they might otherwise choose to spend with you. Think broadly about who or what is a competitive threat to your business then analyise each of your main competitors and work out how to present yourself as not only different, but better. Get to know their strengths and weaknesses to help you with your marketing. More about this on page 61 of the Essential Business Guide.
Want to read more?
Click to read our March 2006 newsletter
We hope to meet up with some of you soon...
Both Jane and Julie are doing lots of speaking engagements and workshops this month, so perhaps we'll see you at one of them. Come and say hello, and tell us about your business.