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Use Testimonials to Increase Business

August 13, 2010 by Frank Goley, Business Consultant

If you are a customer centric company and have satisfied customers, then getting testimonials shouldn’t be hard. In fact, it should be an automatic thing to ask a customer to make a testimonial for you when you complete a service for them, sell them a product or solution, or simply help them in some form. Here is the why and how on how to use Customer Testimonials to really boost your company profits.

Why Use Testimonials

Testimonials bring trust and credibility, two major factors in a prospect’s buying decision. When posted on your website, testimonials help sell a prospect with out your involvement. What an incredible automatic sales tool. Testimonials clearly show that you deliver, which at the end of the day, is why people buy from you.

Tips on Using Testimonials

§  Any Time You Have a Positive Interaction with a Customer: If someone says great things about your website or blog, ask them for a testimonial. If you send them a Free E-Book ask for their feedback and if positive, ask for a testimonial. If you went out the way for a customer and they appreciated all the effort, get a testimonial. Testimonials aren’t just about a successful sale, it is also about the way you successfully interact with you customers. 

§  Make Sure They are Genuine: The Customer may ask for your input on the testimonial but make sure the testimonial is genuine and comes from the customer. If they are contrived, it is evident. Understand they may be checked on.  

§  Place Them Everywhere: Good places to put and use testimonials include your Blog, Website, Sales Pages, Brochures, a Press Release, Direct Mail Letters, Solicitations and Referral Sources. Use Twitter, Facebook and the other Social Networks to spread the word when someone writes you a nice testimonial. It also raises awareness toward the person writing the testimonial, a nice thank you! 

§  Written and Video: Using both forms of testimonials works great. Video connects with visual and emotional people and written with others. Also, some prospects may be viewing from an office where they don’t want to have the audio on so have a mix of both. If video, include it on your YouTube Channel under a Testimonial section. This is a great way to spread the news about your company! 

§  Doesn’t Need to be a Customer: Having a strong partner write a testimonial really can say a lot about a company’s reputation. Think of your strategic partners, alliances, joint ventures, suppliers, vendors- all those you do business with. If they are favorable toward you and your business, it means you have a good business reputation which says a lot. It helps you close those bigger customers and build new business relationships.  

Today’s Video is on Using Twitter to Get Testimonials

Posted in Business Growth Strategies. 2 Comments

Smart Start Ups

July 16, 2010 by Frank Goley, Business Consultant

Are you thinking of going into business during this recession? Business success is still being met in this economy, but you want to think through what will work now and going forward into what many are calling a new economy and new customer. Successful start ups are very customer centric right now and will continue to be going into what many predict will be a lackluster economic recovery. Also many successful businesses are very niche oriented right now, serving the needs of very specific customer groups very closely with a customized or highly matched type of product or service offering.

Here are a couple of examples which can get you brainstorming about your business and whether you are on the right track for sustained success not just in this recessionary market but the uncertain economy to come.

Save People Money

A successful start up right now is BillShrink. I would think it will continue to be successful going forward because customers are much more price conscious for the features of the product or service they buy. BillShrink matches the features you need and the price savings of other cell phone plans, TV packages, credit cards, savings rates, gas and so forth. The service shrinks budgets and gets customers exactly what they need. It puts the customer in firm control.

Key Success Attributes: Timely, Customer Centric, Gives the Customer Power, and Highly Customized to the Customer.

Serve a Strong Niche

Florence Henderson has come up with a sure winner in the FloH Club. It is phone support for seniors to help them get through the complicated world of computers and the internet. This strong customer service business helps seniors navigate the web, find things on the web, pay for things on the web, bank on the web, set up their computer, troubleshoot computer problems, set up a computer network, set up email, learn about Facebook and more. Available 24 hours a day, every day of the week.

Key Success Attributes: Targeted Niche, Customer Centric, Empowers Customers, and Highly Customized Services.

Apply to Your Business

Successful businesses going forward are highly niche and customer centered. Providing customers great value for a highly customized service is a theme that is taking hold for successful businesses in this current recession and predicted to do well going forward. Whether you are a start up or not, the principles can be applied to any business to keep your competitive edge.

Video Resource: A Successful Recession Start Up

Posted in Business Growth Strategies. Comment

Small Business Innovation – Stay Competitive

May 7, 2010 by Frank Goley, Business Consultant

In order for Small Businesses to compete in the Global Competitive Business Marketplace, Innovation is imperative.  One factor affecting Innovation is Pressure.  Pressure from the Competition urges Small Businesses to successfully innovate and adapt.  Also, innovation can be encouraged from within a company as employees need a certain amount of pressure to jump start the creative process.  Positive and constructive pressure from the top of a company stimulates your people to creatively think outside the box.

The real conundrum is converting the creative ideas into a business practice.  This is when and where your employees need the most encouragement and positive reinforcement. As CEO you must demonstrate as much interest and commitment in new product development as you are in existing product lines.  Innovation isn’t only producing new ideas but adapting new product versions from your inventory of developed creative ideas.  We must foster environments which applies creative imagination to problems and then finding excellent solutions to those problems. 

As CEO you can foster innovation  in your Company by:

1.     Reorganizing Individual Contribution

2.     Providing a Bonus Incentive Program to reward Individual and Group innovation contribution

Innovation is mastered by being an Expert in your particular field.  Technology leadership or a commitment to know more about your field than any other company is very important toward closing the Innovation Gap.  Joint Ventures, Strategic Alliances or Partnerships can’t close the gap on their own.  It is your core competency, with the added synergism of a JV, Strategic Alliance or Partnership, which makes Innovation truly successful.  The best way to beat the competition is to sell products with technology they can’t match.  It is only through innovation and successful implementation of that innovation which allows a company to achieve true competitive advantage in the global market place.  However, this innovative product must be:

1.     Cost effective enough to earn Big Margins of 50% or more

2.     Beat the heck out of your competition

3.     Save your customers significant money

This Profit Margin must be big enough to allow for product investments to sustain your competitive advantage.  You need to be continually reinventing yourself in order to produce innovative products which are fundamentally better- you need to effectively obsolete your existing products to truly compete.

Innovation takes years to develop, yet you must bring products quickly to market to compete.  Therefore, stream lined corporate systems must be in place, so as your company structure grows, and you don’t lose the ability to innovate and subsequently market the product in a market leading fashion.  Then once in the market, you must aggressively protect the proprietary nature of that “edge” product by making aggressive utilization of Trade Marks and Intellectual Property Rights.

Posted in Business Growth Strategies. Comment

Managing Growth and Mature Stage Small Businesses

May 3, 2010 by Frank Goley, Business Consultant

As a company grows and matures, other factors in its successful management and growth become important. I will analyze a company’s Growth Stages and identify common issues, success factors and problems for each particular stage; identify Management Considerations and Challenges as the company grows and matures; and consider Future Planning Requirements.  As a Company grows and matures, it is important the organization understands how to plan effectively for new challenges, issues, markets and problems.

Small Business Growth Stages

– Basic Existence Stage

- Main Issues and Characteristics

1.     Obtaining Customers

2.     Delivering the product and service

3.     Viable Services

4.     Expand from key customers to broader sales base

5.     Have enough Cash on Hand to cover Cash Flow demands

6.     Owner performs all Management functions

7.     Often a lack of Planning & Systems

8.     Business just trying to remain viable

9.     Have yet to stabilize production or product quality

10.  Trying to gain sufficient customer acceptance

11.  Business has strong demand on the Owner’s time, cash and energy

– Survival Mode Stage

- Main Issues and Characteristics

1.     Business demonstrates viability as business entity

2.     Satisfies a base of customers

3.     Focus shifts from existence to managing Cash Flow

4.     Generate enough Cash Flow to break even, stay in business and finance growth

5.     Focus on Market Niche exploitation

6.     Simple organization and the owner begins to delegate to a manger.  However, strong direction and control still rests with the Owner.

7.     Planning concentrates on Cash Flow Forecasting

8.     Systems development & implementation in early stages.

– Obtaining Success Stage

- Main Issues and Characteristics

1.     Exploits its Market Niche

2.     Obtain Strategic goals

3.     Expansions is important but stability, control and profitability are key as well

4.     Owner’s Options:

a.     Expand and Grow the business

b.    Maintain Stability as a means of support to the owner

c.     Owner considers disengagement from the business

5.     Market penetration

6.     Competitive Edge

7.     Functional Management & Owner Delegation

8.     Management & Key Employee Competence

9.     Generating sufficient Cash Flow

10.  Planning for rough patches

11.  Professional Staff:  i.e. Controller, CFO, CEO

12.  Production/ Service, Marketing, Strategic and Financial Systems established

13.  Operational Budget Management

14.  Growth Strategy Options

a.     Consolidate Company, develop efficiencies and marshal resources

b.    Use Retained Earnings and Cash Flow, leveraged with Finance, to grow the Company

c.     Cash Flow Management & Profitability are key concerns to finance growth goals

d.    Develop Key people and management

e.     Strong Operational and Strategic Planning

f.     Growth requires the owner’s deep involvement (verses disengagement)

– Rapid Growth Stage

- Main Issues and Characteristics

1.     Committed to a Growth Strategy

2.     Concerned with adequately financing the growth stage

3.     Need good ownership delegation to improve managerial effectiveness.

4.     Enterprise develops complexity.  Performance Control Systems are important

5.     Established Expense and Budget Controls to maintain strong Cash Flow.

6.     Profitability Planning Systems are critically important

7.     Effective Financial Planning, Forecasting, Modeling and Strategy

8.     Very skilled, experienced and competent Management Structure

9.     Company systems are tested, adapted and highly delegated, but there is strong Strategic Leadership from Top Management

10.  Capacity to become a big business

11.  Strong Potential for Business Sale Premium

12.  Effective Delegation and reliance on talented Managers and Key Employees are keys to success

13.  Founding Entrepreneur(s) can opt out of business and have a more advisory role

– Maturity Stage

- Main Interests and Characteristics

1.     Consolidate and Control profits

2.     Retain advantage of relative small size, nimbleness and flexibility

3.     Quick market change response time

4.     Still retains the entrepreneurial spirit

5.     Growth causes inefficiencies so must ensure the Management Structure continues to grow and evolve.  Strong Managerial Talent

6.     Strong Budget, Operational and Strategic Planning capability and focus

7.     MBO System (Management by Objectives)

8.     Cost Systems

9.     Extensive & well developed company systems and Management Structure

10.  Strong Financial Resources

11.  Convert Entrepreneurial spirit to a Formidable Market Force

12.  Strong Market Niches and Competitive Edge

13.  Exceptional Risk Management

14.  Profitability boosted by successful Innovation

15.  Strength in Market Branding and Recognition

16.  Maintain Competitive Edge by anticipating Market changes and adapting better and faster than competitors

Management Considerations and Challenges

– Key Management Factors and Areas:  The following are areas which change in importance as a company develops and grows, which often determines the success or failure of the enterprise:

1.     Financial Strategy:  Cash Flow and Finance

2.     Personnel Planning:  Amount, Depth, Structure and Quality of Key People and Management

3.     System Integration:  Product Development, Production Management, Cost Controls, Budgeting Systems, Marketing Systems, Quality Management, Customer Relations, Strategic Planning, Cash Flow Management, Profitability Analysis, Asset Management, and so forth.

4.     Business Resources:  Customer Service, Market Share, Market Growth, Market Penetration, Market Trends, Supplier Relations, Manufacturing Processes, Facility Efficiencies & Expansions, Distribution Systems, Sales Management, Innovation, Technology, Industry & Market Positioning and Business Reputation.

5.     Company Goals and Objectives

6.     Operational Planning and Abilities

7.     Supply Chain Management

8.     Owners Willingness and Ability to Delegate

9.     Strategic Long-Term Outlook and Management

– The Role of Business Planning:  A good Business Planning Structure will look at the mentioned factors (among others) and effectively plan, develop, install and implement systems and processes to manage and anticipate these challenges throughout the business enterprise.  A company can grow, or for that matter, collapse, so quickly that it is very important to have Planning and Control Systems in place to manage all the numerous variables which a business encounters and considers.  Therefore, as the business grows and changes, and as the markets and competitors change, the small business has established systems and resources in place to successfully handle and manage these changing forces and factors.

Resource:  For more information on Business Planning Formats, Development, Implementation, Systems and Processes, please consider my Comprehensive Step by Step Business Planning Guide and Workbook.

Future Planning

– Growth Considerations

1.     Does the business have the quality and diversity of experience and talent needed to effectively manage a growing company?

2.     Does the business have systems in place and in development to effectively handle the needs and demands of an expanding, diversifying enterprise?

3.     Do the entrepreneur/ owner/ founder(s) have the foresight, inclination and ability to delegate decision making to management?

4.     Does the business have the Cash and Finance structure, along with an understanding of the Risk Factors, to aggressively pursue rapid growth?

Application

In managing a growing, expanding and maturing Small Business, we presented a model by which to evaluate and plan for the current business situation and future concerns and challenges.  By understanding the particular Growth Stage Characteristics and Issues, Management Considerations and Challenges, as well as, Future Growth Planning Considerations, a business can apply this planning format and model to anticipate problems and successfully sustain growth.  This model should be an integral part of a Company’s Business Planning, Market Planning, Product Development Planning, Strategic Planning, Sales Planning and Financial Planning and Forecasting.

Resource:  Turnkey and established Successful Systems are very attractive to entrepreneurs since Franchisers provide pre-set and pre-determined Marketing Plans, Control Systems, Standardized Operating Systems, Promotion, Branding, Start-Up Support, Site Location Services, Financing and so on.  This eliminates a lot of but not all of; the planning and modeling a Company must perform to increase its chances of success.  Please see my Article,  Is Franchising Right for You?,  for a comprehensive analysis and vetting of Franchise Opportunities and Systems.

Conclusion

An imbalance of management factors and challenges can create serious problems for the entrepreneur and his/her growing enterprise.  We illustrated how the problems faced and the respective skills necessary to effectively deal with challenges change and evolve as a company grows, expands, and seeks success.  Therefore, it is vitally important for business owners to anticipate and strategically manage these factors as they become influential and important to the enterprise.

As I explained in this article on Small Business Growth Management Strategies, a company’s stage of development determines the managerial factors which are necessary and important.  A Company’s Planning Structure is vitally crucial in determining which factors and issues must be faced and dealt with.  Knowing its keys to success, development stage model and future planning needs, a company’s managers, entrepreneur, founders, executives, investors, advisors and consultants can make much more informed strategic decisions and plan for future challenges. 

The Case for a Business Consultant

When an entrepreneur is starting and growing a company, it becomes vitally important from the outset to seek and obtain objective advice from experts.  The Company Principals need expert advisors on their team to discuss decisions and obtain objective advice; challenge the founders’ venture needs appraisal; provide an honest appraisal of strengths and weaknesses; review decision making processes; identify survival tactics and needs; develop and implement a business plan, marketing plan, strategic plan, sales plan, and financial strategy; build market focus and niches; anticipate market trends; establish and sustain competitive edge; provide financial foresight and planning; focus on cost controls, budgeting procedures, cash flow management and maximizing profitability; along with obtaining the appropriate Financial Resources to augment self-investment and achieve growth goals and opportunities.  In short, a Business Consultant, with an experienced track record, can fill this long requirement list, helping the entrepreneur and his or her advisory and management teams to successfully start, structure, plan, expand and profitably grow the enterprise.

Posted in Business Growth Strategies. Comment

Managing a Young and Growing Small Business

April 30, 2010 by Frank Goley, Business Consultant

A young business is characterized as being a “venture” and entrepreneurial” in nature.  To take a viable venture and make it a growing concern, the entrepreneur must employ effective management strategies.  Without effective management, a young business venture cannot become a successful early stage company no matter how exceptional the entrepreneurial concept, how much funding in its coffers, how exceptional its products/ services or how great the market demand is for them.  It takes effective Strategic Management for a company to become successful and grow.  In this article I will provide some strategies to employ in order to increase your small business’s success, whether it is a fledgling venture or a growing young business.  In my opinion, this is the foundation to successful Strategic Management and should be part of any small business operation, no matter its growth stage.

Market Driven

Ø  By not being completely focused on a defined market, market segments and market niches, a young venture opens the door for competitors to invade its market and take share. 

Ø  Competitive Edge can only be maintained if you understand the trends happening in your market on the customer level.  What many young companies commonly mistake is the concept that a product and service is defined by the customer, not the Company.  Product Development and Marketing should be customer-centric.

Ø  The function of a Marketing Plan is to perform in depth analysis of the market to determine what customers need and want.  A venture may have an idea how to market its products and services but after performing in depth, customer level market analysis, it often finds different markets, different used and requirements then originally envisioned.  A good Marketing Plan has a system to define and examine market segments and niches so an entrepreneur’s “assumptions” can be verified and, most importantly, challenged.

Ø  It is not unusual for a venture to determine that it needs changes to its products and services because its Market Analysis found its assumptions unsustainable or uncompetitive, as well as, identifying other market niches not originally planned for. 

Ø  However, market focus does not stop there.  In fact, it is just beginning because a venture must be continually analyzing market trends and be carefully listening to its customers, so it can anticipate changes in the market in time to adapt and keep its competitive edge.  A new venture should spend a lot of time out in its market place, with its salespeople and customers, to understand future market trends.  This is what good Market Planning and Strategic Marketing accomplishes.

Resource:  For a Step by Step Guide & Workbook on creating an Effective Marketing Plan, please consider my E-book:  The Comprehensive Business Planning Workbook- A Step by Step Guide to Effective Business Planning.

Accurate Financial Forecasting

Ø  For a fast growing, young, small business, inadequate financial focus, analysis, planning and policies are a kiss of death.  Many young companies focus primarily on Profits when they should be concerned with Cash Flow, Capital Management and Budget Control Systems.  Without these three components, profit and loss projections are baseless as over time issues compound within these neglected areas, causing profits to ultimately decline.

Ø  Cash Flow

As I pointed out in my article on Cash Flow Management, sustainable profits come from good Cash Flow Analysis, Cash Flow Budgeting and Forecasting, and Cash Flow Management.

ü  At any point in time a growing company should know 12 months in advance how much cash is required to sustain its Business Plan.  This gives a growth company time to generate cash, as well as, raise the necessary capital to sustain growth and profits. 

ü  A growing venture needs to generate contingency cash in its Cash Flow Budget, along with retaining consistent earnings over time and having credit facilities available to seize market opportunities as they present.

Ø  Capital Management

The well known business guru, Peter Drucker, maintains a new venture outgrows its capital structure in every 40-50% sales increase, necessitating changes to its Capital and Finance Strategy.

ü  As a company projects its Cash Flow Budget forward 12 months, one of the important components of this process is determining how much cash the Company will have on hand at the end of the period, what finance facility is in place to make up the necessary deficit in cash needs and ask the question of whether a different capital facility is necessary to continue.

ü  A Company’s Financial Strategy is intractably linked to its Cash Flow Management and completely necessary to define in order to sustain growth from one period to the next.

Resource:  Please visit my Business Finance Articles for comprehensive information on Capital Planning, Management, Strategies and Acquisition.

Ø  Control Systems

With effective Cash Flow Forecasting, Budgeting and Management in place, along with an established Capital Management Plan, a growing company needs excellent Control Systems in place to manage costs is an important element in Cash Flow Budgeting.  This Control System is also a part of a Company’s Profit Analysis when “controlling” and examining certain expense areas, such as, payables, inventory, production, administration, service and distribution.  Profit Analysis & Cash Flow Analysis should be linked, understanding the relationships between cash generation, profits and expenses.

ü  As a Company grows, it is important the Control Systems grow with it, making changes as needed, just like with the needed changes in the Capital Strategy (as previously discussed).

ü  It is critical to prioritize essential Control areas to the particular business.  Areas to consider and prioritize include Product Quality, Service, Receivables Management, Overhead, Inventory Planning, Production Costs, among others, depending on the type of business.

ü  Control Mechanisms need to be forward-looking as you can’t control past expenses and profit zones.  They can provide valuable clues but more important is focusing on Control features into the future.  As you plan advance Cash Flows, Control Planning should piggy back.

Ø  Market Planning & Strategic Planning

Accurate, realistic Financial Forecasting must come from good processes in Market Analysis, Marketing Strategies and Strategic Planning.

ü  An accurate Market Analysis with good realistic information on the market segments and niches paves the way toward successful, believable and realistic Financial Forecasts.

ü  Good market analysis produces an effective, forward-looking Marketing Strategy, which is implemented through a company’s Strategic Plan.

ü  A Company’s Strategic Plan does many things:

§  Implement Controls

§  Link Marketing information to Financial Forecasts

§  Establish clear Competitive Edge

§  Analyzes Risks & Threats

§  Produces Budgets and Sales Forecasts

In other words, the Strategic Plan is the essential process to effectively produce solid and accurate Cash Flow and Sales Forecasts, including Controls, which result in successful Cash Flow Management and Profitability.  The important point to understand, accurate Financial Forecasting, and all that it encompasses, is a relationship process and speaks to a Company’s Business Plan Development and Implementation Process, System and Structure.

Effective Management Structure & Resources

Ø  It is important to plan well in advance, what management needs to be in place as a company grows and succeeds.  When the company is young and small, it can be managed by a couple people.  However, as the company rapidly grows, it is very important to have a solid management team in place.  Otherwise, all that growth can cause severe problems if not managed effectively.

Ø  As a Business Consultant, when I work with a small company in developing their Business Plan, I put a lot of emphasis on identifying management gaps and analyzing future staffing needs.  In fact, there are two sections of the Business Plan format I recommend which emphasizes this key success factor:  the Company and Management/ Operations sections.  You may have great products and services, along with a well-defined market niche; however, without the right people in place to carry out the Company’s Strategic Plan, then sustained growth, expansion and profitability become impossible to obtain, as well as, maintain.

Ø  It is important to note that Management is a two-prong concern for young companies:

ü  Management Structure:  A company needs a well designed and implemented structure in advance of high growth potential, so a company can properly manage its assets, products, quality assurance, customers, sales people, financial planning, market trends and all the other numerous variables which need attention for sustained growth and profitability.  The Management Structure needs to include both Upper Level Management Planning, as well as, Mid-Level Management.  It is vital there is clear Strategic Direction and Communication Top-Down and Bottom-Up throughout the organization in order to successfully grow and sustain an enterprise’s success.

ü  Management Resources:  Having the right people in a company is the second prong in the Management equation.  Recruiting and retaining the right experience and talent for a Company’s future growth plans and present sustainability is the single most important planning element for a company.  Experience is absolutely vital when a young company is growing rapidly, by leaps and bounds, to ensure the success is not short-lived and to manage the growing assets of the company.  Just as a growing company needs competent Management, it is Management’s responsibility to ensure the Company recruits skilled labor and has effective training programs in place.

Ø  I can’t stress enough, as a Business Consultant and Entrepreneur for more than 20 years, that the Management Equation or Factor for a Company needs to be developed and implemented through its Comprehensive Business Plan.  Without the right people in Management, a company cannot effectively plan and implement Product Development, Quality Assurance and Competitive Analysis; Market Analysis, Research, Planning and Strategy; Strategic Planning and Sales Programs; and Financial Analysis, Modeling, Forecasting and Strategies.  It is a cause and effect relationship, which can quickly implode (or explode) without proper leadership and management.  This is why the first two sections of the Business Plan Format I recommend to clients are the sections on the Company and Management / Operations.  With these two sections planned for and put in place, the subsequent planning and execution of the Market Analysis and Marketing Plan, Strategic & Sales Plan and the Financial Analysis, Forecasting and Strategy can be successfully implemented and subsequent profitability maintained. 

Ø  The most important element for a young growing company to have in place is its Management Structure and Plan.  Well in advance of certain growth milestones, it is important to have the right management team in place with the right mix of experience and skills- what we call Management Resources.  Young Companies may face challenges in recruiting and retaining top management talent and key employees as initial cash flows in the early stages of growth may not support competitive salaries.  To this end, please see my article on Compensation Planning for ways to attract and retain talent without breaking the bank.

Ø  Where does the entrepreneur / founder fit in a growing company with an expanding management team?  The original entrepreneur(s) and founder(s) must analyze where they best fit in a growing, changing company, and how they can best contribute.  This is important to define and plan for in advance, just as Management Planning defines areas of responsibility.  The entrepreneur must learn to delegate responsibilities to his Management Team and learn to be catalyst for the Company’s Strategic Plan.  No more is the entrepreneur the Manager; rather, he is an executive, the CEO, responsible for the overall goals, objectives and growth of the enterprise, leaving the day to day management to his capable Management Team.  It is important that the Company’s Strategic Plan has clear communication channels established between the CEO and top management, who in turn, ensure mid-level managers and their employees carry out the Company’s Strategic & Sales Plan.  This does not mean the entrepreneur should be cut off from his people- just the opposite.  The CEO should frequently spend time with employees at all levels, motivating, encouraging and praising them.  Employees should know the CEO is genuinely concerned about their professional and personal happiness.  Leave the managing to the managers, giving the CEO the important roles of overall Strategic Direction and Employee Satisfaction.

Resources: for more information on Business Management and the CEO:

ü  Small Business Recession Tactics 

ü  Small Business Success & Failure

ü  Leadership Qualities of the CEO 

In my next blog post I will discuss Management Strategies for mature type companies.

Posted in Business Growth Strategies. Comment

Reasons Why Businesses Succeed

April 29, 2010 by Frank Goley, Business Consultant

In my previous blog post I discussed reasons why businesses fail. Wouldn’t it be nice to know why businesses succeed? Let’s get to it…

Characteristics of Successful Business Owners

There are certain qualities successful entrepreneurs share in common.  Some types of people are more suited than others to go into business for themselves, but I am a big believer that one who naturally doesn’t have the typical entrepreneurial characteristics doesn’t necessarily mean he or she won’t be a success.  However, knowing these entrepreneurial commonalities can give you an idea of your propensity to be a successful business owner:

1)     Desire Independence

2)     Strong Sense of Initiative

3)     Motivated to provide for family

4)     Expectation of Quick and Concrete Results

5)     Ready to act and react quickly

6)     Very dedicated to the business

7)     Entered the business as much by chance as design

The Entrepreneur Test

Below are 20 personality traits to gauge your potential as an entrepreneur.  On a scale of 0 to 7, with 7 the highest, rank each personality trait:

1)     Ability to Communicate

2)     Can Motivate Others

3)     Organized

4)     Accepts Responsibility

5)     Can adapt to Change

6)     Decision-Making Capability

7)     Have Energy & Drive

8 )     In Good Health

9)     Good Human Relations Skills

10)  Have Initiative

11)  People Person

12)  Good Judgment

13)  Open-minded

14)  Planning Ability

15)  Persistent

16)  Resourceful

17)  Self-Confident

18)  Self-Starter

19)  Good Listener

20)  Risk Taker

Scale:

110-140         Very Strong

85-109           Strong

55-84             Fair

54 and below  Weak

As an entrepreneur myself, I tend to be on the strong side of these traits.  But not every successful business owner is strong in every one of these areas.  This is why successful entrepreneurs’ recruit those who are strong in the areas they may be weak.  If you are a hard worker and have the drive to be on your own, then over time you can develop and work on improving these useful skills. 

Resource: See my article on CEO Leadership Skills for more details.We have discussed reasons why businesses fail and what are the common traits of successful small business owners. 

Wouldn’t it be nice to know some of the reasons why certain small businesses are successful?  It is important to know what not to do as it minimizes mistakes, but being proactive and knowing what to do can significantly increase your chances of success. 

What Leads to a Successful Small Business?

A Good Business Plan

Going off what I said in the previous blog post about business failure due to inadequate planning, it is absolutely essential to have a good Business Plan and good planning within your business.  What’s the distinction?  You can develop a good business plan, but if you don’t implement it and make it a part of the fabric of your business, then its usefulness is minimal.  However, to develop an effective Plan, you need to have a good business planning system to employ, and it is often very helpful to work with an experienced Business Consultant in its design, development and implementation. 

Resource: For a Comprehensive Business Planning Process, please consider my Business Planning Guide and Workbook.

An Adequate, Well Defined Market

Market Research is critical as it gives your planning a dimension of predictable results.  It links your Product Development with your Strategic Plan. 

Resources: For more information on developing an Effective Marketing Plan, please see my article on Market Analysis & Planning. For comprehensive Market Development advice, see my article on Small Business Marketing Strategies.

Understand Industry and Market Trends

Understanding both where your industry and market are heading is important to staying competitive and continuing to meet your customer’s needs.  Never assume you have captured your market and can sit on your laurels.  Install Marketing Systems in your business to continually analyze and predict customer and market behaviors and needs.  Having consistent contact with your customers can help you produce better products, offer better suited services and grow along with your trending market. 

Obtaining and Using Accurate Information

Accuracy in planning market trends and business growth must be reliant on information that is accurate and realistic.  Then taking that accurate information and applying it to your present and future business capabilities is an important process.  You must be realistic as to whether you can effectively exploit the potential of the information with your given human, operational and financial resources.

A Good Capital Acquisition Strategy

It is important to come into a business with a strong equity position.  You can then leverage off that cash strength with competitive, appropriate financing.  A cohesive Financial Strategy, and implementation of it, is vitally important to a business’s success.  A business needs not just adequate capital, but the right type of capital for the business, its goals and objectives. 

Resource: Please refer to my Business Finance Articles for more assistance in developing and implementing a Successful Financial Strategy for your business.

Effective Recruiting and Strong Human Resources

Going into business with the right people and subsequently recruiting and retaining good people is vital for a business’s success.  Often a talented, experienced, highly-skilled employee will save you money in the long run and be very effective in a crisis; as compared to, scrimping on your labor costs, having to constantly train new people, relying on more people to get the job done and experiencing high-turnover and low employee morale. 

Resources: Please see my articles on Small Business Recession Tactics and Compensation Planning for more help on hiring and retaining the right talent for your Company.

Expertise and Experience

From the Company’s Founders and Principals to the employees in the field, a high level of experience and expertise is necessary to effectively compete in today’s markets.  The most successful entrepreneurs, bar none, are those that surround themselves not just with talent, expertise and experience, but have people on their team which fill the gaps in their personal experience base.  We are only as smart and talented as those we surround ourselves with.  Know your limitations and have the right people on board to fill the gaps. 

Understanding the Implications of Government Regulation in your Business, Market and Industry

Being surprised by changing regulations is not good.  Keep yourself well educated on Government Regulatory Trends through good government relations and active membership in Industry and Business Associations.  The efficacy of your product, service or market can change 360 degrees on the whims of government.  So be involved and cognizant of this significant element.

Effective Time Management

A small business owner is pulled multiple directions at the same time all day long, every day.  Your ability to multi-task is important, however, putting systems in place to effectively balance tasks and time is just as important.  Delegation and planning are essential in effective time management.  As pointed out previously, you must have good people around you to delegate responsibility, as well as, to assist you in managing your time as effectively as possible.  Effective Time Management is a function of good planning as one comes with the other. 

Hard Working for Long Hours

Last but certainly not least, Successful Business Owners must be willing to work very hard and spend many long days and weeks getting the job done for their customers.  The Entrepreneur is often the first one to arrive early in the day and the one who leaves late in the day or night.  Having a good Business Plan helps the successful business owner to work “smart”, but there is no way around good old fashioned hard work, particularly in the early stages of a company’s growth.  You must be willing to put in the long hours to reap the benefits of self employment.

Concluding Advice

If you are contemplating starting a new business, do something you really love to do and have a passion for.  The work is hard so you might as well enjoy it.  Providing a great product or service to your customers is a worthwhile experience and should be something you really believe in.  Passion is what carries you through the inevitable rough patches, no matter how well you plan and set up your Company.  Small Business is simple:  see a need and fill it.  Working hard will be replaced with working smart as you build your Company over the years, gaining invaluable firsthand knowledge.  You will find, though, as your Company matures, the real thrill for an Entrepreneur is the start-up phase, when you build something from scratch and do it successfully.  Good luck in your endeavors.

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Why so Many Businesses Fail

April 28, 2010 by Frank Goley, Business Consultant

Having been a entrepreneur, small business owner and consultant for twenty plus years, I had the opportunity to learn from my own mistakes, as well as, seeing the business failings of others.  I have learned that there are definitely reasons why a small business fails; why some are successful; and why certain types of people are more successful business owners and entrepreneurs.  The good news is most successful small business owners had many failings before achieving a level of success, and the object of this article is to identify their (and my) mistakes.

Lack of Capital

When starting a business, an entrepreneur needs to first bring sufficient cash to the venture.  I recommend a minimum 10% of the total funding amount to come from Owner’s Equity, with 20% being optimum.  Having a strong equity stake in the beginning of a Company’s life makes acquiring the additional capital much easier and less expensive.

Strong Owner’s Equity shouldn’t stop after a Company’s start up stage.  A Company’s strength in Retained Earnings is key to growing the Company, seizing on market opportunities and obtaining future finance.  If you lack owner’s equity capital, there is additional undue pressure on a Company’s cash flows, making it increasingly hard to obtain the appropriate funding.  For more information on Successful Business Funding Strategies, please see my Business Finance Articles.

Lack of Business Knowledge

Successful entrepreneurs are typically well read.  They are always striving for more knowledge and take advantage of the wealth of resources offered through business schools and, as importantly, read other successful entrepreneur’s books. A Business Degree or MBA is a helpful foundation but gaining knowledge from those who have found success is critically important to understanding why businesses fail, as well as, spawning new ideas and markets.

Inexperience

Inexperience ties in with Lack of Business Knowledge.  Business Knowledge can be acquired in school, through books and magazines, and via experienced business owners.  Business Experience is the critical and common link between successful entrepreneurs.  Inexperience costs money when mistakes are made. Make too many mistakes, and you are out of business.  Mistakes are a natural part of the business learning curve, however, minimizing them is very important to stay in business.  I highly recommend going into a business which you have experience and passion while seeking out those who have been in the same business for a time and reached a significant level of success.  Experience comes with time, but you can also learn from the mistakes others have made before you.  Cultivate business relationships, mentoring opportunities and networking events and forums.  I can’t tell you how many times spending time with an experienced entrepreneur has paid off in spades, in my business life in so much as, what not to do, as what to do.

Poor Management

This is a biggie.  If you can’t effectively manage people, learn how to and / or hire someone who can.  Some entrepreneurs are great at this vital skill and others don’t have the patience for it.  However, the bottom line is you can have a great idea, product and market, but poor management will cause business failure 9 times out of 10.  Poor management often evolves into poor employee morale and high employee turn-over, which significantly hampers a company’s ability to compete in the market.  Management doesn’t just entail employee management but also the ability to manage the Company.  Having a good Business Plan, excellent Profit Strategies, and effective Cash Flow Management are just some of the important management tools necessary to run a successful business.  Businesses often fail because they haven’t owned up to and analyzed their weaknesses, which often stems from poor management practices.

Inadequate Planning

The lack of a business plan or the poor implementation of a plan is typically the number one reason for business failure.  So why do small businesses neglect to plan?  Because it can be a very difficult process to do well; day to day business activities leave them little time to plan; they fear the weaknesses and problems’ planning reveals; they lack the knowledge on how to effectively plan; or they feel the future can’t be planned for. 

However, to be successful in a small business by relying solely on luck is a huge gamble and often meets failure.  You must know where you are going and how to get there.  A good Business Plan guides the entrepreneur on how to operate a business; interest investors and bankers on financing the business; provide direction and motivation to employees; and establish an environment which will attract and retain customers and talented employees.

I have seen many instances where a business has a business plan, but it lacks the operational and control features to successfully implement it and the strategic know-how to successfully link the marketing plan with effective financial modeling and forecasting.  Good planning is both Strategic, which is high-level, long range goal setting and meeting of objectives, and Operational, which implements the Strategic Plan, operates the business and sets the policies, methods and procedures to do so.

Planning actually means good business management.  Inadequate planning often translates into poor management functions.  It is a process which relates and inter-relates closely to Managerial Functions. Many business Owners don’t understand the extent of these vital relationships, thereby producing inadequate plans, which ultimately lead to business failure.

Understanding the components of the Planning Process makes it much easier to develop and implement a good Plan:

Ø  Planning:

ü  Organizational Objectives

ü  Establishing Programs, Policies and Strategies to achieve the Objectives

Ø  Organizing:

ü  What Resources and Actions are needed to meet Organizational Objectives

ü  Setting up Working Groups

ü  Assigning authority and responsibility

Ø  Staffing:

ü  Select, train, develop, place and orient employees

ü  Foster employee productivity

Ø  Leading:

ü  Effective Communication and Motivation

ü  Performance

ü  Goal Achievement

ü  Work Assignments and Direction

Ø  Controlling:

ü  Setting Standards

ü  Measuring Performance

ü  Corrective Action

The underlying reason why a small business fails often stems from poor Operational Planning.  Operational Planning is critical, since it helps business owners and entrepreneurs avoid costly mistakes, saves considerable time over the long term, and successfully bridges the gap between planning on paper and implementing the plan.  Three types of Planning, or Phases of planning, significantly improve a small business’s chance to achieve success:

Ø  Pre-Start Up Operational Business Planning

Ø  Ancillary Business Plans customized for Investors, Commercial Finance, Customers, Key Employees, Suppliers and the such

Ø  Post-Start Up and Growth Continuous Planning and Control

The point I am trying to drive home here is that inadequate Planning stems from the fact that most small business owners fail to fully understand all of Planning’s parts, and how to effectively harness and implement those parts into cohesive Operational and Strategic Plans, Goals and Objectives.

For more resources in this area and a detailed, step by step business planning process, please consider my book: The Comprehensive Business Plan Workbook – A Step by Step Guide to Effective Business Planning.

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