Business Owners Toolbox Blog Discussions and articles to help the small business owner solve the challenges they face as they grow their business.

February 14, 2012

What’s a Typical Growth Rate?

From a question asked at my plan workshop

MC. “What’s a typical rate of growth?”

MVH. There’s no typical rate.  It is better to ask what growth rate could you handle? Also, what is the right size for you to grow to? How big do you want to grow and why?
Your rate of growth will depend on several factors:
• How you finance–self, bank, investors
• How scalable your business concept is
• Quality of your top people. Your growth team
• Your systems. Can your systems be easily scaled up?
• Ease of bringing in new customers
• Your ability to manage growth or to hire managers who can do so for you
• Outside variables. Economic climate. Amount of competition. Laws and regulations that impact you.

I would be glad to help you assess these things for yourself. This is an issue we work with all the time in our Business Groups.

February 3, 2012

Zuckerberg’s Lessons for Entrepreneurs

Filed under: Entrepreneurship,Innovation — Tags: , , , , — Mike Van Horn @ 1:57 pm

In his IPO letter to potential investors, Zuckerberg stated 5 principles that have guided Facebook. These apply to any entrepreneurial business. I suggest you read these and ask how you can apply them to your own business.

The two that the most small business owners neglect are “Move fast” and “Be bold.” Too often we limit ourselves to growing organically, perhaps for fear of going into debt, and thus move slowly and timidly. Then we watch others pass us by.

Focus on Impact

If we want to have the biggest impact, the best way to do this is to make sure we always focus on solving the most important problems. It sounds simple, but we think most companies do this poorly and waste a lot of time. We expect everyone at Facebook to be good at finding the biggest problems to work on.

Move Fast

Moving fast enables us to build more things and learn faster. However, as most companies grow, they slow down too much because they’re more afraid of making mistakes than they are of losing opportunities by moving too slowly. We have a saying: “Move fast and break things.” The idea is that if you never break anything, you’re probably not moving fast enough.

Be Bold

Building great things means taking risks. This can be scary and prevents most companies from doing the bold things they should. However, in a world that’s changing so quickly, you’re guaranteed to fail if you don’t take any risks. We have another saying: “The riskiest thing is to take no risks.” We encourage everyone to make bold decisions, even if that means being wrong some of the time.

Be Open

We believe that a more open world is a better world because people with more information can make better decisions and have a greater impact. That goes for running our company as well. We work hard to make sure everyone at Facebook has access to as much information as possible about every part of the company so they can make the best decisions and have the greatest impact.

Build Social Value

Once again, Facebook exists to make the world more open and connected, and not just to build a company. We expect everyone at Facebook to focus every day on how to build real value for the world in everything they do.

January 9, 2012

Are There “Meaningless Innovations?”

My answer to LinkedIn question by Terrell L. McTyer

If you are a small player, say a consultant or other solopreneur, you’d better steer clear of “meaningless innovations,” because they could pull you under.

I’ve done a talk to consultants’ groups called “Innovate or Die,” where I stress how important it is to make sure that your efforts at innovation are well-targeted, and that you know how to market them once created. Not all of us can afford to bet the farm on a potential “disruptive innovation” that turns “meaningless” when nobody buys it.

TMcT: “But don’t you have to take risks to make it big?”

Yes, you have to take risks, but how big and with whose money? Entrepreneurs take PRUDENT risks. Two things:

— There’s a risk/reward calculation. The bigger the potential reward, the greater risk is justified. BUT it’s easy to fool yourself. “This is foolproof. We have no competitors.” I just lost $25k investing in one of these.

— OPM. This is why we have VCs and angels. They can afford to lose your investment. Of course, their price is high.

— There’s an absolute ceiling on risk you should take. Despite the image of the “all in” player, are you going to bet your own house? Your kids’ college funds?

Maybe you will. I know many who have. Some lost, and they started over. Or the wife went back to work. (Why is it that men are more likely to bet the farm than are women entrepreneurs?)

I guess the biggest error is not going for it due to fear of the above. You regret it forever.

The second biggest error is going for it, but NOT going in big and fast. Prudent, organic investment in innovation, then your better capitalized competitors whiz past you, leaving you stunted. This has happened to me.

December 19, 2011

The Business Owner’s Greatest Fear

Filed under: Employees and Human Resources — Tags: , — Mike Van Horn @ 6:47 pm

My response to article by Jeff Haden

Two partners joined one of our business owner groups a while back. Their big issue was how to get rid of this one problem manager. They were afraid to fire her. Every month they’d come to the meeting, and the other business owners would ask, “Did you fire her yet?” “No, we didn’t do it this month.” Months dragged on, same question from the group, same response. Got to be a joke.
Then one meeting they came in and announced excitedly, “Guess what! She’s gone!”
“Oh great,” the group responded. “So you finally fired her?”
“No. She quit.”
So my hat’s off to Jeff Haden. This is definitely the entrepreneur’s bugaboo.

 

How to Start a Business

Filed under: Entrepreneurship — Tags: , , — Mike Van Horn @ 5:22 pm

My answer to a question by Brent Russell

Anybody can start a business. It’s pretty easy. Having a profitable business? That’s harder!

First, have something that someone else wants to buy.
Sell it to them for more than it costs you.
Sell enough of it so that the surplus between cost and revenue (i.e., the Gross Profit) is enough to:
— cover your other business costs, like marketing and admin, and
— make you a living.

After you’re sure you’ve got this part down, then start the business officially. Get your business license, tax ID, insurance, rent an office, etc. But spend no overhead before you have to.

When to hire help. To justify hiring, the employee must help the business bring in enough additional revenue so that his/her wages (including payroll taxes) are covered by the Gross Profit from the additional sales. Your employee can do this in several ways:
— Sell more of your products or services
— Do billable work for your customers
— Free you up from admin stuff so that you can sell more
— Bring an essential skill to the team so that everybody’s productivity is raised

Where to get start up or growth capital. First, where you won’t get it from: VCs, bank loan, the government.

Most small business start up capital comes from
— your savings
— personal loan, or 2nd mortgage
— family or friends (very risky)
— initial contract that pays some money up front (very savvy if possible)
— charge it on your credit card (very stupid)

Where your initial sales come from. Knowing you have potential sales out there is the reason to start a business. So if you don’t know the answer to this question, you shouldn’t be starting a business.

 

December 12, 2011

How to Get it All Done This Holiday Season

Filed under: Growth Management,Planning — Tags: , , — Mike Van Horn @ 9:28 pm

“We’re trying hard to balance our busiest work time with the never-ending to-do list. How to stay balanced and sane.” Amy Graver, question on LinkedIn.

My answer. Two levels, Amy.

1. Right now. Hire a personal assistant, someone like a concierge, who will handle all small issues for you with competence and aplomb–both business and personal. If you’re busy doing year-end billable work for your best clients, and you have someone else running around for you, picking up your cleaning, writing addresses for all your holiday cards, replacing the color toner cartridges, dealing with the caterer, getting your invoices out, you will be so-o-o happy. Plus rested and better off financially.

2. Planning ahead. All my clients do an action plan for the coming year. Goals, strategies, and action items. The action items are spread out over a year calendar. But first I have them write in their busy times, vacation times, etc. If holiday season is a crunch time, then they make sure they don’t pile extra things into that period.

The first things to enter are your personal “have a life” things. Why? Because the reason you are in business is to get to do the things you most want in life, including “have a life.” If you don’t do this, you might as well have a J-O-B!

Happy holidays! And may the new year bring you health, prosperity, and relaxation!

The Best Marketing is Keeping Your Current Customers

Filed under: Marketing — Tags: , , — Mike Van Horn @ 3:33 pm

“Your monthly invoices are so high, I think we need to switch to somebody else.” “We liked our old rep. We don’t like this new girl.” “Maybe we’ll bring this in-house. I think my brother-in-law could do this for us.”

Bookkeepers, graphic designers, marketing advisers, etc., all hear this from clients sometimes. And you know they’ll go to so-and-so, who won’t give nearly as good customer service.

Customers come to take you for granted. You do your job so well that you become invisible to them. They lose sight of the value you provide. What to do?

You need to find a way to remind your clients of the value you provide. Re-sell your services without sounding salesy. What sets you apart from the others in the market? What are the special things you’ve done for them over the last month or so? Perhaps note this in your invoice to them.

When’s the last time you talked with them—face to face or by phone—about what other things they may need to have done, things you see that would help them, how they think your service might be improved? What else could you do for them that would be seen as special?

We often come to take our best clients for granted, also. Then we’re shocked when one leaves because they don’t feel their needs are being attended to.

As owner, this customer contact is a key part of your job. But your customer contact people must also do this. You need to motivate and train your people to do this, which they may neglect. I recommend devoting a staff meeting to this issue. Get a discussion going by asking questions like these:

“How can we reinforce our message and our value to our customers?”

“How are we taking clients for granted?”

“What little things would mean a lot to clients? Let’s share some examples of what you’ve done.”

“What do they ask for? How do you respond? Are there things we say ‘no’ to that we should be doing?”

Just having this discussion will energize your committed people. (And why would you keep those who aren’t committed and energized?) They know what you provide is valuable. They know that keeping customers happy keeps your business healthy, and their jobs secure and well-paid.

Reinforce this during subsequent staff meetings. Ask your people to talk about special things they’ve done for customers. One of my clients tracked these reports on a wall chart using “customer happy faces.”

Don’t take this all on yourself (unless you’re a one-person business). It’s essential to involve all your people in demonstrating, by word and deed, your value to customers.

And ask these happy, well-treated customers for referrals to others like themselves.

Would a Free Marketing Plan Help Your Business?

Filed under: Marketing,Planning — Tags: , — Mike Van Horn @ 2:28 pm

My answer to a LinkedIn question by Travis Holt

Whenever I see a “free” offer of something I know is costly, I suspect it’s just an introductory come-on to lead me to purchase something later on. Nothing wrong with that, UNLESS I know it’s something that is too good to be free. Like a marketing plan. I also offer people a free marketing plan*, but it’s something they complete for themselves. If they need my help to complete it, and to come up with a useful guide to their own activities, that’s too much for me to give away.

I think people know this. They want “free” but if you offer too much for free, they are suspicious.

Also, in my experience, people who always want “free” don’t make good customers. I would prefer somebody who said, “You know, I tried to use that free marketing plan, but it just didn’t do it for me. I realize I need to hire somebody to help me think this through. After all, this is the future of my business I’m working on!”

But here’s a fundamental rule, and this may be what you are doing:
“Tell ’em how to do it for themselves, so that they will hire you to do it for ’em.”

*Mine is called “Shortcut to Cash Flow Marketing Plan.” Two pages, 11 questions. Ask me for it, with your name, company name, and email.

 

November 29, 2011

How to market on a tight budget

Filed under: Marketing,Not yet categorized — Tags: , — Mike Van Horn @ 9:16 pm

My answer to a LinkedIn question from Leanne Smith

Short on money? Substitute time. For most  of us small-biz types, marketing is time intensive. So you’d better have a time budget plus a money budget.

Where do you get the biggest bang for your buck? or for your hour? List all the things you do for marketing down one column. Ads, press releases, networking lunches, social media, taking a prospect for coffee, etc. Whatever you spend money or time on related to marketing.
In other columns, list for each of these things:
— How much money you spend on this in a year
— How much time you spend on this in a year (Multiply by what an hour of your time is worth.)
— What results you’ve gotten: contacts, prospects, customers, nibbles, “laters”, etc.
— How much revenue this has brought in over the past year

Now you rate all these things you do, and compare them. What’s paying off? What isn’t? How could you improve the payback from any of these?

I hereby give you permission to STOP DOING THE THINGS THAT DON’T WORK! Networking groups? Yellow page ads? Online directories? Feh.

Do more of what works, and tweak it so it works better.

If your marketing pays off, brings in customers, and boosts your revenue and profit, then you won’t be on such a tight budget.

But beware! Marketing is like a yacht. If you’re around boats, you’ve probably heard people say, “A yacht is a hole in the water that you throw money into!” Marketing is the same way. There’s no end of ways you can spend money on marketing, and most of them don’t pay off.

Business growth dilemma #3: Grow profit while you keep personal touch

Many businesses lose their personal touch as they grow. This is the classic struggle between “corporate bean counters”—profitable and impersonal, and “mom and pop”–small and happy but poor and hard working.

We know that growth and profitability spring from good systems and procedures. The things you used to make up as you go along, you must now do by the book. Everything you do must make the numbers. Alas, the personal touch that customers love seems threatened.

So how can you retain your personal touch while improving efficiency, productivity—and profitability?

It requires a shift in attitude.

The owner of a retail store said to me, “My employees—and me also—used to resist all these systems and procedures. We wanted to serve each customer in our individual way. But we found that systematizing the routine things allowed us to be more creative and personal with customers. And customers loved the consistency and predictability in our operations.”

Another owner said, “My business is an expression of my soul. So if I wasn’t there all the time, the business suffered. So I was chained to the business. To launch a second location, I had to find a way to ‘bottle my soul’ and train others to run things by my values and standards. And they still have to make their numbers!”

You must turn your viewpoint around, and view systems and procedures as a way to maintain your personal touch rather than overwhelming it.

This is a major theme in my “Top 3 Barriers to Small Business Growth—and how to overcome them” program.

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