Tuesday, 29 June 2010

Is business growth optional?

An acquaintance and business owner emailed me:  "...I've never understood why business people are so obsessed with [growth], it just seems like an option to me...".  He is not alone - a significant proportion of owner-managers with whom I work or who come to my business seminars are averse to growing their business.  Often the reasons put forward are lifestyle choice, reluctance to employ more staff or fear that quality will suffer.

Now some of these are sole-traders or single consultants for which the term self-employed is more appropriate.  The comments below refer to business owners, by which I mean people who employ and organise staff.

Here are my reasons, in no particular order, for suggesting that growth is necessary for an owner-managed business:

1.  To be compelling for staff an organisation has to have a vision of something bigger than just the people involved.  They want to be on a meaningful journey;
2.  An organisation has to adapt, evolve and learn in order to survive in a changing environment.  Whilst a smaller organisation may be more agile, often developing additional capabilities and skills requires new people and to do it well and consistently requires the size to cover the costs of developmental resources (that is, resources not completely utilised in production);
3.  The bigger members of a species generally get the most food and their pick of mates.  Business is an ecosystem and, all other things being equal, you will lose to your bigger competitors in the long run as they improve margins through economies of scale and spend more on marketing, product development and so forth;
4.  There are economies of scale at all levels within an industry (so even small companies should operate more efficiently than their still smaller competitors);
5.  Even if you have a unique advantage over your competition it is advisable to sell more, invest in developing that advantage and so exclude competition from that space - or risk losing the advantage.  In this way a behaviour aimed at survival leads to growth;
6.  Investment (whether angel, pension funds or bank loans) will follow the best returns.  Whilst a private company does not have the exposure of a plc, in the long run growth means better returns and so easier access to funds.  Even if a business owner is not seeking external funding, he or she takes the decision to invest more in their business every day.  Rational behaviour is surely to seek increasingly good returns from that investment.

So growth may or may not be an end in itself but it is always a by-product for businesses that are fit to survive and in turn makes businesses more likely to survive.   Business owners who decline to take on the very real challenges of making growth happen are not only unlikely to achieve the latent value in their business but also run the risk that they will not be one of the fittest that survive.

So...is business growth optional?  Of course.  So is learning to swim.

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Monday, 21 June 2010

Competitive Intelligence

What is competitive intelligence?

- In order to compete with and beat your competitors you need to know and understand them
- Large companies take a very methodical approach to this and may use specialist CI providers
- Lots of different pieces of information are put together to produce a picture of the competitors strengths, weaknesses, performance and intentions
- The principles can be simplified and used by small businesses

Why do you need competitive intelligence?
- To pick up new products and trends in your market
- To identify new markets
- To improve your understanding of what is important to your customers
- To adjust your proposition and positioning to make the most of relative strengths and weaknesses
- To take advantage of opportunities such as competitor failure

How do you gather competitive intelligence?

o Their website
o Social media sites
o Newspapers
o Filings (Companies House)
o Job ads
o Press releases

o Their marketing materials, brochures, pricelists
o Trade shows
o Suppliers/partners/sub-contractors
o Their customers, your customer surveys
o Trade press

How should you do this in a small business?
- Keep a simple file of information you pick up about your key competitors
- Periodically, plan time to do a few hours research on them
- Periodically, plan time to review your proposition and positioning against this information using Competitor Analysis
- Adjust your proposition and look at the new opportunities suggested

For more business advice for business owners go here

Want to know how much your company is worth (and why)?  Go here

PS Carli Adby, of Carli-Art Photography, attended my last seminar and "Really enjoyed your seminar so again, many thanks for the invite as I found it extremely useful..." 

Tuesday, 15 June 2010

Product Portfolio Analysis and Small Businesses

What is product portfolio analysis?
  • This is a technique developed by the Boston Consulting Group to manage different products within a company's portfolio
  • It was designed for large corporates but can be useful for smaller businesses too

  • It evaluates products or services by their market share against their market growth using the below matrix known as the "Boston Box"

  • Why are these two factors important?
    • A growing market means individual suppliers can grow with it without fighting for share and so putting pressure on margins
    • A high market share means that prospects think of you first and so your sales cost less and growth is faster
How do you use this in a small business?
  • As a small business if you know your market size, growth and share already then you are probably in a niche and the BCG Box can be applied as shown
  • Most small local businesses do not know the size of the markets for their products. It makes little sense (and is not practical) for, say, a small plumbing and heating business to try to measure their national market or even the regional one

  • The approach should be to refine and filter the markets actually or potentially addressed until you have arrived at market and product definitions which allow you to use the Boston grid. At this point you will have define a market niche that is useful and allows you to
    • Be a significant player in that market – or know that you need to be
    • Have a clear marketing strategy, target and message
    • Identify the products or services on which you should be concentrating your efforts

  • Refining and filtering the markets does not have to be complicated:
    • What geography can you serve well and profitably?
    • What customer categories can you serve well and profitably?
    • What specific products or services do you supply or do you want to supply?
    • Would prospects in that market recognise the market as you define it?
  • As an example, our plumber could refine one of his markets as "Manufacturers within 10 miles of x town" and one of his services as "Energy efficient boilers".

And in future....?

  • Virtual Goods: the next big business model - de - Der Internet- und Marketingblog: » Blog Archive » Blogshow 20. Virtual Relay Earns Real Money For Cancer Research | Tekjuice. XBox PS3 Wii Second Life and You : [chrisbrogan.

Monday, 7 June 2010

Deciding a pricing strategy

Why have a pricing strategy?

- Pricing has a huge impact on your bottom-line. A slight increase in overall price can produce a large increase in net margin – while a slight decrease can mean you have to sell significantly more to make the same profit
- Without a pricing strategy providing sales discipline your margins may drift down
- General inflation (and in particular rises in your direct costs) will erode your margins over time even if you keep your prices steady

How do you decide on a pricing strategy?

- Increasing prices may drive down demand or reduce your conversion rate but whether it does this, and if so by how much, is a factor of your marketing and sales strategies

o Your choice of market and customer types
o Your positioning in that market
o Your proposition
o Your sales process

- If you get these right then your customers will be less sensitive to price and more focused on the benefits you provide
- Getting these right also means that even if you lose customers you increase gross margin overall (the increased margin more than makes up for reduced volume as shown in the example graph below)

  - Those customers who are really price-sensitive are probably not your most profitable customers and you may be able to afford to lose them
- Remember that no customer ever says that the price is too low!

What should you do?

- Find out where you are on the curve and adjust pricing to optimise overall margin
- Devise a marketing strategy that lifts the right-hand end of the demand line

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Tuesday, 1 June 2010


Why delegate?

- Most business need more staff as they grow. Delegation is an essential technique for successfully distributing the tasks that you perform currently to these new staff

- One day your business will have to run (and continue to grow) without you. Even if this day is not in your plans yet, a resilient well-run business cannot rely upon one person

- Development and growth are great motivators for most people – so you should be actively seeking to increase the responsibility you give to your staff

- Your objective should be to delegate everything you do

How do you delegate successfully?
- Evaluate what you could or should delegate – start with the assumption that everything could be delegated if you really wanted to - and choose someone who could do the job with your support
- When you have chosen someone, make sure that they want to do it - clarify expectations

o Timescale

o Definition of success

o Level and limits of authority and responsibility

- Give them time to come up with their own plan to achieve this – and then agree it together

- Communicate the change and the reasons to all staff (and externally as necessary)

- If necessary provide time management or other training

- Once you have delegated, plan and carry-out regular reviews

o Provide guidance so they stay on track

o Share your experience

o Give praise and feedback – make sure they are learning

o DON’T take it back at the first sign of trouble

When not to delegate:

- When you don’t understand the problem

- When it’s too late

- Key tasks that amount to “ownership”, such as setting strategy, values and culture

What stops you delegating?

- Fear

- Lack of trust in others

- Insecurity about your own role, capabilities and knowledge

It’s about LEADERSHIP.

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