By Brian James
I’m going to start very quickly by asking you all a question: most of you are business owners, why did you get into business? What was the core reason that you went into business?
Delegates give reasons
Forced situations, to gain some improved lifestyle, to gain more financial independence those sorts of Reasons? To gain more control over your destiny and your time. Better quality of life, the link into lifestyle again. In my experience the key reasons, apart from forced situations, the key drivers are wanting financial independence, wanting control and also wanting some fulfilment that is not being achieved already through what you are already doing.
Also in my experience, order to achieve those passions and visions of what you want to achieve for the future – that better lifestyle, that more control – then you and your business need to be working for you rather than you working for it. What I want to do in this session is focus on understanding all the dimensions within a business both from an external perspective as well as an internal perspective. Most business owners just get caught up with the internal matters, getting the production of the business working, getting customer acquisition working and getting the actual business done, the technical work.
However, not so much time is spent focussing on the other core elements. So, what I would like to do is to share with you a number of principles that will enable you to separate these different dimensions and understand them more clearly. It will give you ways, I’m sure; of helping you to create new customers but also maximising the return that you are getting from your existing customer base.
In addition to that, I am a passionate believer in systematisation within a business and I’ll explain what I mean by that, and finally there are important people issues (that we have already discovered today) that impacts dramatically on the effectiveness of your business.
There are certain elements that the business experts have identified as survival requirements for business. There are two key factors – Firstly the business needs to produce results for customers. Throughout this I am referring to everyone as customers but you may refer to them depending on whether you provide a product service or treatments, clients or patients. But I am referring to everybody as customers.
The key is that word ‘result’. An analogy here, if you were to go and buy a pot of paint, the result is not just buying the pot of paint and happily going home with it and storing it in a cupboard that is not the result. The result is obtained once you actually apply the paint, put it on the walls and you then see the benefit. So that’s what I mean by achieving results.
In my view, once you have actually demonstrated to the market place that you can achieve results for customers, then in theory at least (and it should be in practise), your business should be sustainable because you’ve demonstrated that you are able to add value to the market place.
Secondly you also need to make a profit if the business is to survive. Of course, all the other issues that we have looked at today, hygiene factors such as, requirements for legislation, compliance, and integrity within the business, all those things apply as well of course. Making a profit and producing results for customers are the key survival factors. If they are the survival factors, what are the success factors to contrast this?
Again, I suggest that there are two key factors. One is how you promote your business, the marketing of it. The other is how you find unique solutions to people’s problems, innovation. As we go through, what I want to do is provide some tips, suggestions and ideas that can be used in those two areas to really grow your business.
What I would like to do now before we go on further, is just identify three other key elements. Then there is an exercise I’d like you to do. I see a business as a living organism it’s a bit like a representation of the living world, in a smaller form.
What typically happens is that most business owner’s focus on today, they focus on the problems and solutions of today and are entwined in the business. In order to complete the circle and understand the full dynamics of a business and to make it work like a Formula 1 car rather than an old model T Ford, it is important to realise that, just like life and just like the world, there is also a past and there is also a future which are all equally as important as the present.
So a quick exercise now. What I would like you to do is to close your eyes and open your mind and just think about some of those reasons you mentioned earlier about wanting to get into business, but actually put yourself in the picture of what your life will be like in 2-5 years time on the assumption that you will achieve the business success that you want.
So, how are you feeling? What people are around you, what size of organisation do you have? How fulfilled do you feel? How financially independent are you? Imagine all of the wonderful things that you are driving towards. What I want you to do is just momentarily, put yourself into that picture and imagine that situation. So if you would like to close your eyes just for a moment and open your mind and put yourself where you really want to be.
Music plays in background…..
So if you would open your eyes again, what I would like to do now is very quickly with the person next to you share what that vision looks like. Share what it is you want for yourself and for your business.
The second thing I would like you to do is to share the one thing that would make the biggest difference to your success. What one thing do you need to do? So, what is it you want and what’s the one main thing you need to do to achieve it. Just quickly share that with each other please.
Maybe in the networking session later we can continue sharing those thoughts.
But what I want to do now is accept that our businesses have a future based on what we want it to be, a past, based on what’s happened so far and a present. Lets just spend some time talking about that future for a moment.
It’s about thinking big isn’t it? It’s about opening the mind, removing some of the barriers. It’s about cans… they say that success comes in cans and not cannots. And it’s about putting specifics around our goals. So it’s all very well having a vision of what you want to achieve, but you also need to document past results. By having laser-like focus on our desires and the activities we put in on a daily basis we are able to move progressively towards our goals. You need to ensure that all of your goals are congruent with those outcomes that you want.
It’s about having SMART objectives. I am sure many of you would have heard that mnemonic before. That is Specific, Measurable, Achievable, Reasonable and Timed objectives - SMART objectives that are documented. If you are going to do one thing about getting nearer to what you really want from your business, I would recommend that is the best place to start. Document what you want. Don’t worry about how you are going to get there, that comes next, that’s another step.
We then need to focus on what’s happened up until now with our business or in our previous life if we are just starting out in business. We need to have management systems in place to monitor and track our business performance element by element.
This applies not just to the processes within the business; it applies to the people that are operating your business as well, your staff and other workers.
It is only by understanding the past and having records of the past that we can manage the refinement process to make the future more of what we want and to make it happen more quickly. Without a recording process in place we never know what we are moving towards and what we need to change. So that gives us guidance.
Another key experience that I have had is that some of the best businesses are extremely systematic. The obvious example that everyone always quotes is McDonalds. But it is very true. They’ve got 50,000 branches worldwide and whilst you might not believe that they produce the highest quality in cuisine, one of the things that make them successful is their systemisation, allowing them to achieve consistent results for customers.
When customers go along to McDonalds they know what to expect and that’s really the key to their success. I try to avoid fast food, but I have find myself using them because of that known expectation. I went off some time ago to the Bahamas and we were hungry and wanted something to eat.
There were many exotic restaurants around and in the distance we saw the familiar M sign and we headed there. Why? Because we knew what to expect, we were in a foreign place and unusual circumstances. Later on we investigated and explored all the local culture, but to begin with it was nice to find something where we knew what to expect. The pricing was very similar (in a different currency, but very similar), chips were still cold, but we managed to fill our tummies at least!
So the systemisation process is measuring all the operations within the business and documenting them. That makes the business much more systems reliant rather than people reliant. That’s not to say that people aren’t important they are, people are crucial to a business operation. People need to be recognised and valued, I’m all for that. Having said that, people work better and are more empowered if they have clear boundaries in which to operate and work from - a system. Making them accountable for that system is also a way of refining the process. Not a blaming culture, but a learning culture.
And just one quick example here, for this workshop today (this is a very simplified version), it seemed to me, and Jean may agree with me, it involved a lot more activity than just those listed here, but in a simplistic nature, systemisation is about listing in a logical order, the activities that need to take place.
Making people accountable for them, maybe even signing them off if they need to, and having them time bound as well is all important. So it’s a combination of those factors that makes the system work. It can be applied to any process. It doesn’t have to be IT based, it can just be written down on a list.
I’m very much a believer in having regular lists, linked to priorities. Again, because having laser like focus on your goals is also making sure you are putting in those activities at the right time, in the right way to actually make those goals come to fruition. So it is about having daily tasks that are priorities, its about having weekly tasks that are priorities, its about having monthly tasks that are priorities and ensuring that they are done at the appropriate time.
It’s also about recording how much of your time or the time within your business as a whole (this includes all of your employees where appropriate), what time is being spent doing what function? This is having understanding of what the business is actually doing and why, and then using that information as a learning and refining process for the future.
What I would like to do now is consider some practical marketing activities for new client acquisition. So that means a whole raft of things here and I am sure many of you are familiar if not operating some of these. So, these are all ways that you can go out and get clients and get new customers. The interesting thing about this process though is that the list is actually in a particular order.
What I have done is listed marketing activities in order of the resource to fulfil them. So from the top to the bottom, telesales for example takes little resource – one person and a telephone. In order to perform seminars and workshops however you require a bigger resource requirement. By resource I am talking about the three resources that we all have in our business. They are people resources, they are time resources and they are financial resources. So as we work down that list typically the resource requirement increases.
The other interesting factor is the level of influence we have in our market place. This requires us to have an understanding of the external and internal environments that we are operating in. For example, market trends, demographics and the size of the market.
As far as our activities are concerned, that is our internal environment and we can control that fully. I think the thing we need to recognise is that we have control over our own internal environment and the marketing activities that we actually perform. But interestingly, the more we go down that list the more they are able to influence potential customers to our business.
So therefore by inference they are all equally viable. OK, some may take more resource, some cost more, some take a lot more time, some a lot more planning, but they are more influential so they can attract more customers. So they are all equally viable, it’s just a question of which ones you choose and you have control of this fully.
I would like to do to demonstrate this point in action by taking 2 businesses I am working with today among others that I am working with. The situations have lots of similarities. They are both in wholesale distribution, one of them has 3 business owners and has been in business for about 8 years and it markets through a range of marketing activities to get new customers and to also maximise existing customer value which we’ll look at in a minute. But they are quite highly systematic, they have key performance indicators for the staff, they do have job descriptions, they do have clear roles for the people within the business and processes for them to follow.
Now the other business is also successful, both businesses are doing well, both are producing profits. The other business however is more established. It operates almost exclusively in the market of a field sales operation. They are good at it and they have refined it, however, it’s not particularly systematic because the individual sales people operate, apart from the territories they’ve been given, with a lot of autonomy, they don’t really have a systemised way of working. In addition to that they do some direct mail on a limited basis but they have very little systems.
OK so that’s just a general overview of the businesses.
Now let’s look at some of the financials. The first business has a 1 million turnover the second business has a 10 million turnover. Interestingly though, on first sight you might think business 1 may be turning over less but is more profitable. Look at the profit, 20% profitability, can’t be bad.
But the acid test, going back to what it is that you want to achieve from your business, is what the business owners are generating from this in absolute cash terms. Ultimately it is only cash that creates a better lifestyle for them to enjoy having more control over their time. Well business 2 produces over 3 times more cash than business 1. So I am working with business 1 to encourage them to operate other marketing methods outside the one they practice already. It will grow them faster and will still create profit and even though the profitability levels percentage wise may drop, the business owners will end up with more money in their pocket and that’s what it’s about at the end of the day. That’s what creates lifestyle, equity and capital.
Let’s spend a minute or two talking about getting value from your existing customers.
There are a number of techniques we can use here, a number of processes and a number of activities. I don’t intend to go into this in detail but I do when I’m working individually with clients. Firstly it requires recognising the ultimate value of your customers. A lot of businesses ignore this principle.
Just to give you an example, let’s say that each customer is worth £1,000 to you in a year, to keep things simple. Well the true recognition of the value of that customer is not just the £1,000 in that year. If they are a loyal customer then they are going to come back to you again and again to buy. Over say a five year period, if that’s how long you are likely to keep that customer, amount to £5,000.
It is only by understanding the real ultimate lifetime value that you are then prepared to invest in that customer to maximise their true potential longer term. The customer acquisition element is always more costly. Experts’ estimate it costs 8-10 times more in resource to get new customers as it does to manage existing ones. So it’s far more effective to maximise the value and return from our existing customers. We also acknowledge that we always need to continue to grow our customer base because of natural customer attrition.
In the longer term we can add profitable activities to our marketing, for example up selling. Up selling is simply having an add-on, possibly discounted sale along with the first purchase. It works extremely well in the retail market.
Cross selling is offering other products or services which align with the product or service that they are already buying. So it’s complementary purchase, and may include offerings that your business may not fulfil directly. Fulfilment may be through an alliance with another business.
Back end selling is generating more regular contact, more regular business over time. So from that £1,000 example in the first year, over five years it’s £2,000 in the second year and growing thereafter. That’s where the profit is, the profit is in the back end not in the customer acquisition activity...
