I believe they are the three elements of a process required to build long-term valuable customer relationships. Which is the primary value proposition of most businesses. (Buy once and goodbye forever is not a business model that works for anybody. If you can find one, please let me know.)
The three elements defined:
Marketing - to build awareness, interest, attraction and generate customer initiated action in your direction.
Sales - converting interested prospects into qualified, buying customers.
Customer service - ensuring that each customer is a satisfied, repeat customer.
Each step has to be done consistently well for the results to be achieved. But a choice still has to be made - which element are you going to be best at? Will you win from competitors on marketing, sales, or customer service? You cannot be best at all three.
From my experience as a second tier OEM brand name in computer hardware, we knew that we couldn't possibly out-spend or out-market the multinationals, but we could out-sell them -one customer at a time.
Winning on customer service was also a challenge - it's expensive to compete on warranty terms and technical support. So we went back to salesmanship in the service department - coaching staff on persuading the customer to be reasonable, patient, and give us another order, please!
So take a look at your own performance in marketing, sales and customer service - then choose, focus and build one of them into your competitive weapon.
Seth Godin has to be the best at capturing concepts and then communicating them creatively.
You may know him best from his books, if you've heard of "The Purple Cow", "Survival is not Enough", "Meatball Sundae", "The Big Red Fez" or his original claim to fame -"Permission Marketing". His Blog is also recommended reading for thoughtful inspiration on marketing and communications in general. (Click on the Blog link in the right margin.)
But even Seth Godin doesn't get it right all the time. And he admits it as he has re-issued his book "All Marketers are Liars" under the new title, (same contents) "All Marketers Tell Stories".
As he discovered, it may be a catchy title, but it is insulting and unappealing to the intended audience. Another lesson learned.
Maclean's magazine arrived in the mail today and it's hard not to notice the four catchy headlines for articles in this issue. Starting with:
"THE FLU SHOT SCREW-UP Can we fix the vaccination plan before it's too late "
And across the top banner:
WHY CANADA NEEDS THE MONARCHY (Even if it's these two)
Amiel: GOD HELP DOGS
INTERVIEW: CANADA VS. GARY BETTMAN
Now that's an issue that will get read today.
Are your marketing communications that catchy? Maybe too much sensational yellow journalism for you? (No coincidence this issue had a yellow cover?)
Still it's a key principle of marketing that images and colours may catch the eye, but headlines capture attention. If you can also qualify the reader and get their interest, then you've really got it right this time.
Something ironic about going to a networking meeting to learn about all the online networking choices.
Talking about Facebook, LinkedIn, Twitter and all the other social media opportunities for virtual networking without any face-to-face contact. But what about the breakfast meetings and seminars where you can meet real people and not their polished Web personalities? Two-way conversation face-to-face seems to me a much better way to present yourself or to meet others when you are offering professional services.
If the key factors to evaluate are credibility and integrity it is much easier to fake it on the Web than in person.
I'm not suggesting that online media cannot be helpful, but they should be complementary to other real-life expressions of your individuality and unique skill set. In particular, make your online presentation more real and personal by adding original content in your own words and include audio or video to complete the picture.
It all takes time and effort, so it's important not to waste time on unproductive networking opportunities or to participate ineffectively.
Our PSN Breakfast Series on October 15th went well with three speakers on "Entrepreneurial Challenges" including my own presentation on "The Seven Biggest Mistakes that Enrepreneurs Make". (Lots of nodding heads and smiles of recognition from the audience even if no one wanted to admit to having made all seven!)
If you would like to review the PowerPoint slides, including Chris Murray's "Success Strategies for Internet Marketing" and Margot Uson's "Winning the War for Talent", they are available at PSNetwork.ca
The Seven Biggest Mistakes that Entrepreneurs Make
Which ones are you making? How can you avoid them?
I was recently asked to do a presentation with my associates at a breakfast seminar for business clients. We had arrived at the title “Seven Biggest Mistakes that Entrepreneurs Make” before I had the list prepared, so I decided to do a survey of entrepreneurs and their advisors to complement my own ideas. The feedback was enlightening.
Here are some of the suggested “Biggest Mistakes” from the survey: “Cash flow, cash flow, cash flow”, “Afraid of Marketing and Sales, “Reactive, not strategic”, “Not delegating”, “Hiring too fast, Firing too slow”, “Not focused”, “Communicating too much, or too little”, “Not using consultants” (That last one was from the consultants, not their clients!)
The feedback also reinforced my own experience that it is OK to fail and make mistakes, as long as they are small, frequent, and early. It’s all part of the learning experience to get better. But big mistakes can kill your business.
Here is my final list of the Seven Biggest Mistakes that Entrepreneurs Make.
#1 Too Entrepreneurial Certain characteristics of entrepreneurs are necessary for them to be successful. But if over-indulged they can lead to big mistakes. These include the tendency to be too opportunistic and not be sufficiently selective and focused; to be too optimistic and miss or ignore the warning signs; to be too impatient and expect too much too soon.
Entrepreneurs usually have great confidence in their instincts and consequently rely on “gut feel”. The mistake is to neglect or ignore market feedback and analysis of the facts. Being action-oriented, the tendency is to react and “fire” before the “ready, aim” stages are complete. Painful surprises can result.
Many successful entrepreneurs have achieved a lot based on their energy, charm, charisma, and persuasiveness, but then get caught by selling on personality, not on performance. Clients start to notice that expectations are not being met.
Entrepreneurs are expected to be decisive and demonstrate “leadership”. Both can be overdone – deciding too quickly and providing too much direction so that input, initiative and creativity are stifled.
“Doing it my way” often means improvising and learning on the fly, or sticking with what works, until it stops working. The mistake is in neglecting to evolve and grow by optimizing systems and installing best practices and latest technologies.
All these mistakes can lead to serious consequences, as a result of being “too entrepreneurial”.
#2 Lack of Strategic Direction
Another consequence of the action-oriented entrepreneurial approach is the tendency to get lost in the daily details and completely neglect the original strategic plan and objectives. The owner-manager soon becomes pre-occupied by operating decisions and all the demands on his time from customers, employees and the constant fire-fighting. It leaves little time for fire prevention.
This situation is worsened as the entrepreneur concludes that the best solution is “do-it-myself”. Not delegating to staff or using external expertise may seem like the least-cost solution, but probably undervalues the owner’s own time and expertise and does not lead to long-term solutions.
The entrepreneur may have good awareness of long-term strategic issues and had them in mind when the business was launched. But they are now neglected, and the original Business Plan (if there was one) is not documented, updated or shared.
Lack of strategic direction is listed here as #2, but may be the Biggest Mistake that Entrepreneurs Make.
#3 “That was Easy, Let’s Do It Again!”
Another common mistake that can have devastating consequences on the business is the over-confident entrepreneur who concludes, “That was easy, let’s do it again!” So he or she leaps into new markets, new product lines, or even a new business or investment opportunity. It’s important to remember: Making money doesn’t make you smart.
Do you really know what you did to succeed? Or what mistakes and risks you avoided? Is now a good time to start something new? How much will the current business be impacted by new initiatives? Is your success really transferable?
Many successful entrepreneurs have made the mistake of jumping into a new venture – merger, acquisition, restaurant franchise or real estate investment – and blowing away the equity value they generated in their original business. Another big mistake to avoid.
#4 Focused on Profit
Being focused on profit doesn’t seem like a mistake. After all, isn’t that the whole purpose of running a business? No, actually. As I explain to students in their first Finance class, the primary financial objective of any business is “to enhance long-term shareholder value”. Many short-term profit-oriented decisions can hurt long-term value. Examples are many: cutting staff, maintenance or marketing expense; not upgrading systems and technology; accepting high credit risk or low margin customers; avoiding taxes, environmental or quality issues.
Most entrepreneurs are very focused on managing the bottom line by monitoring sales, gross margin and expenses. They always know those numbers.
But they are usually ignoring asset management, especially cash flow. The business may appear very profitable, but have constant cash flow challenges because management is neglecting inventory and receivables, in particular. And unfortunately it is not as simple as: Collect fast, Pay slow. Customer and supplier relationships can be at risk if cash flow issues force you to take that approach.
Managing the Balance Sheet also requires good management of debt and balancing short-term and long-term needs with short and long-term sources of funds. And the Most Undervalued Asset doesn’t usually even appear on the Balance Sheet: Human Resources. That leads to Biggest Mistake #5.
#5 Neglecting Key Relationships
The key relationship for any business is the one between its owners and the staff. Management and employee communications are essential to business performance and often not managed very well. Key employees need to be recognized and engaged. Mistakes made with key employees can jeopardize the whole business.
Similarly, don’t make the mistake of being distracted by the most annoying and persistent customer. Your biggest customers are not likely the “squeakiest”, just the most important. Don’t make the mistake of letting them be neglected.
Do you need to squeak more yourself? Do your suppliers appreciate you enough? Fast growth and profitability may be coming from one or two key customers or suppliers which can lead to over-dependence on their business. And your success may be convincing them that they don’t need you in the middle any more. Be wary.
Another key relationship not to be neglected: Is your bank a welcome and willing partner in your business? Remember “friends in need” have to be developed in advance.
#6 Poor Marketing & Sales
You know there is a problem brewing when you hear the entrepreneur explaining that “The product sells itself”, or “Price is all that matters”, or “Our Sales Reps need to do a better job”. These are signs of poor marketing and sales results. Usually the company is failing at both the strategic marketing level and at the execution of effective marketing and sales activities.
Not only are opportunities for profitable growth being missed, but the company may be on the downward slide to “out of business” without a well-conceived marketing plan and effective sales strategies.
#7 Distracted by Personal Issues
And finally #7 – Personal Issues that distract attention from good management of the business. Personalities and their issues can seriously affect business performance regardless of whether they are owner, management or staff issues. Sometimes they are simply ignored until they become a problem. Sometimes they are a result of too much success and behaving like a rock star.
Family businesses in particular run the risk of favouritism and having family matters interfere with business success. Managing personalities and corporate culture are a particular challenge in family businesses.
In Summary, the Seven Biggest Mistakes that Entrepreneurs Make:
Too Entrepreneurial
Lack of Strategic Direction
“Let’s do it again!”
Focused on Profit
Neglecting Key Relationships
Poor Marketing and Sales
Personal Distractions
Now the obvious question is: How to Avoid Them?
The answer is: Balance!
Each of these Big Mistakes is a result of the entrepreneur failing to achieve balance between opposing approaches and decision making processes. Avoiding these mistakes requires the entrepreneur and business owner to:
Balance the Entrepreneurial Approach with Analytical Input
Balance Strategic Vision with Operational Detail
Add the Head and the Heart to the “Gut Feel”
Manage for Long-term Value not just Short-term Profit
Keep Personal Priorities in your Plan but Out of your Business
I hope that helps you to grow and prosper in your own business and avoid the Seven Biggest Mistakes that Entrepreneurs Make.
I need your suggestions. I'm working on a presentation titled "The Seven Biggest Mistakes Entrepreneurs Make" and so far I have only my top four.
Most of them I've made myself and I'm sure I can complete the list, but it would help to have some consensus from other entrepreneurs and their consultants/advisors.
From your experience what are the most common mistakes and what do you recommend to avoid or fix them? I would appreciate your input.
For some hints, but here’s my list to date:
1. Neglecting strategic vision, too entrepreneurial/opportunistic/reactive/intuitive 2. Not knowing and managing your numbers 3. Neglecting key strategic relationships 4. Letting the product sell itself, poor marketing and sales support
Others have already offered:
5. Hiring too fast, firing too slow 6. Poor communication with employees 7. Under capitalisation 8. Poor research and planning 9. Neglecting to manage cash 10. Too corporate, no personality
I introduced myself to a new corporate finance class yesterday and was reminded that, although much has changed in business and the economy since the 1970's when I first taught the course, the same basic principles of financial management still apply.
Not to be confused by current economic circumstances or the impacts of globalization, green themes or new technologies, the basic principles are worth remembering.
A quick summary may help you get back to basics too:
The primary objective of financial management is to increase long-term shareholder value, not short-term profits.
Long-term value requires ethical consideration of other stakeholders - employees, customers, suppliers, government - and respect for corporate social responsibilities.
Every financial decision needs to deliver an economic benefit that adds to shareholder value.
Risk and return are inevitably linked - expectations of higher return will necessarily involve acceptance of higher risks associated with volatality and uncertainty of results.
Continuous monitoring and improvement of financial performance requires analysis and benchmarking against prior years and the indices of top performers in the industry.
Higher fixed costs in operations or from debt financing add to risk and raise the break even point for the business.
There is a time value of money that requires future cash flows to be discounted to Net Present Value.
Managing cash flow is as important as managing net income.
The simple principle of managing working capital by "Collect Fast, Pay Slow" needs to be balanced against the maintenance of good service relationships with customers and suppliers.
Asset management cannot be neglected and significantly affects liquidity, credit worthiness and the valuation of the business.
Friend and associate, Lynda Goldman has recently published an article on "Swine Flu: 7 Keys to Keep your Workforce Healthy"
It is based on a recent interview with Dr. Ashok Oommen, a respected specialist in preventive medicine. He offers practical and effective tips that can be applied immediately to protect your employees and your business.
We could all be even worse off, but let's hope it gets better from here. For most of us the impact on our businesses has been inconsistent and inconclusive.
What are the right management strategies and action plans to get through this economic turmoil with a more resilient and successful business?
Here are the lessons we have learned from clients, commentators and other experts, so far:
1. Do not rely on the headlines.
They are just trying to get your attention and a train wreck is more interesting than a success story. They will not provide either balanced or insightful input to your planning or decision making. You will have to dig deeper. Make sure your market data and competitor intelligence is current and accurate.
2. Communicate Communicate Communicate.
Keep employees and customers informed. They are worried, confused and need to be reassured that they can count on you. Unfortunately, you may not have good news for them, but it will be appreciated that they are hearing directly from you and are not left guessing what's next.
3. Keep on Selling.
Now is not the time to cut back on marketing and sales. Your efforts now will be more even conspicuous and effective as your competitors back out of the market and away from their customers. Be selective and very focused. Work on building stronger customer relationships by being relevant and responsive to the current economic circumstances. Avoid the “cry for help” advertising that only confirms “we’re desperate and need the sales”. Calmness, confidence and competence are much more appealing to those potential buyers who are still spending and want reliable, long term suppliers.
4. Do quickly what obviously needs to be done.
If it’s clear to you it's also clear to the people affected. They are waiting for you to act and will be more confident and proactive themselves if they see you taking action. Face the facts, don't fight the facts.
5. Adapt.
Remember Darwin's "survival of the fittest": those who adapt to their environment are most likely to survive; not the strongest or the biggest. This is not the time to be stubbornly persistent about your plans. Look around and be creative. Your destination may still be the same, but the route, the vehicle and the passengers may need to be changed.
6. Be confident, but cautious.
Recognize the difference between calculated risk and a state of uncertainty. Make a decision if the potential outcomes and the percentage probabilities are reasonably clear, but hold fire if they are not.
7. Show conspicuous leadership.
President Obama understands the concept of being the conspicuous spokesman for his plans and policies. No one can do it better than the one who is ultimately responsible. We may not all be as adept communicators as he is, but we can all speak with more sincerity than any spokesperson or intermediary on our concerns, our strategies and our plans.
Good management will be tested during these times, but good decisions now will mean a better business for the future. Keep at it. This too will pass.
Is it just my imagination or is the consensus shifting to a more optimistic view of the economy and financial markets?
Maybe the media has just decided to select more positive headlines before they plunge us back into doom and gloom. Could they be that smart?
Maybe it's just me being more selective about which news items and analyst's commentaries that I read. Or maybe it's because those bargain stocks I bought over the last six months are finally up 20%!
In any case, I've decided to stop worrying, be more optimistic and act accordingly. It feels better already. You should try it.
Sounds exciting, but it's actually a cruel lesson in mathematics.
The good news was that CitiGroup stock had jumped from $1.00 per share to $1.67. The bad news was that my average cost is still about $33.00 per share and the current value is still about 95% below cost. Starting from today's $1.67 the stock has to come back 1,976% for me to reach breakeven.
A sad but true fact of mathematics: as values decline the percent increase has to be much more than the percent that has been lost. Think about it - a stock that has lost 50% of it's value has to come back by 100% (double its price) before returning to the original value.
In the other direction this effect is a good justification for cashing our before you get too greedy. For example, if the stock has doubled from your original cost, it only has to slide by 25% to take back 50% of your gain.
Since we're looking at market values currently down about 40% from a year ago, they have to climb about 67% to recover their original value. Faint hope or sure thing? The historical comeback of 80% within two years of a recession suddenly doesn't sound quite so good. Unless you were lucky or smart enough to get out before the crash and are buying back in at today's values with all that available cash.
Guiding business, government and the economy through these difficult times will require strong, decisive and competent leadership from all three sectors.
Unfortunately we have been getting more rhetoric than meaningful leadership. President Obama has already been a disappointment. Aside from not being able to persuade either Washington politicians or American citizens to get with the program, he hasn't had good answers to the crisis.
Throwing more taxpayer money on the fire hasn't helped us yet and all the emphasis on dire consequences to persuade the non-believers has made us even more cautious and pessimistic that things will continue to get worse instead of better.
Real leadership means leading by example. Start getting things done differently and we'll start to follow. Artfully crafted speeches are simply not enough.
With some experience as a traveling sales rep I have learned to appreciate McDonald's egg McMuffin breakfast and Tim Horton's for coffee meetings. So I was intrigued by Tim Horton's newly announced breakfast sandwich.
An opportunity to try it come on a recent early morning flight to Toronto when I realized there would be no breakfast on Air Canada (or any other airline these days!). That's when I noticed a Tim Horton's with its new breakfast combo at only $5.06, tax included, for the egg and sausage sandwich, hash brown's and coffee. Great!
Clearly an imitation of the egg McMuffin, but Tim's version of the hash browns was even worse than McDonald's! A greasy patty of partially cooked potato and spices that looked disgusting and tasted worse. A good idea badly executed. Imitation may be the most sincere form of flattery, but it seems to me the strategy should be to improve on the original, not make the bad even worse. If you try it, skip the hash browns.
Some good business advice from a Canadian cabinet minister in the 1960's government of Prime Minister John Diefenbaker. Imagine that!
I'm reading "Renegade in Power" by Peter C. Newman and he is describing the colourful George Hees who was responsible for Trade and Commerce and was determined to push Canadian businesses toward new international opportunities. He often wore a tie clip (it was the 6o's) that consisted of the letters Y.C.D.B.S.O.Y.A. Visitors to his office couldn't help notice as he fidgeted with it until they finally asked what it meant.
He would obligingly exclaim "You Can't Do Business Sitting On Your Ass!" More direct than they were used to hearing form cabinet ministers, but they did remember the sentiment.
Just another reminder that we can learn from history.
Each January presents the opportunity to participate as a judge in the annual Concordia MBA International Case Competition. Thirty-two university teams of enthusiastic and ambitious young MBAs analysing, strategizing and recommending solutions to the corporate challenges that they are presented.
It does raise the question in my mind of encouraging the arrogance of MBAs to think they can solve corporate issues in a quick study without any relevant experience. Imagine - if they can solve these cases in two hours, what could they do in a couple of years as CEO! Brings me back to Henry Mintzberg and the admonition to focus on creating better managers not MBAs.
Relevant prior experience is the first requirement before embarking on the study of management. The case study is a gross oversimplification of business dynamics and trivializes the need for industry and functional knowledge and experience in addition to leadership and management skills. Perhaps it adds some realism to textbook theory and allows a more complete strategic view of the corporation, its stakeholders and its environment, but in the absence of relevant experience it will be a limited academic exercise.
At the recent Concordia MBA International Case Competition we had a presentation from Jet Aviation on their dilemma of whether or not to scale up their facilities to accommodate the interior design and build for a private Airbus A380 just purchased by Prince Al-Waheed of Saudi Arabia. He already has a private Boeing 747 and has decided to add another $300 million palace in the sky.
An interesting observation by executives during the presentation was that the "low end" private jet market was being affected by the financial downturn, but that the super rich were pretty much immune so far. The explanation was that aside from their continuing ability to afford these luxuries, their planning horizons at this level were also longer than the normal short-term period of an economic recession. Interesting.
Suggests we might all take a closer look at which customers or products are more or less vulnerable to these challenging times. Your Cadillacs and SUVs are in trouble, but maybe not the Bentleys and Ferraris?
Unfortunately the super rich market may be immune but it is not very large. The forecast market for private A380's is only about 8 - 10 over the next 15 years, with three potential competitors. And the other bad news is that the buyers tend to be tough negotiators, slow to pay and quick to sue!
High risk and huge investment. Not much attraction there for most of us.
