The Business Edge Blog

February 5, 2013

Every Business – 5 Key Parts

5 parts of a business“A business is a repeatable process that makes money.  Everything else is a hobby.” – Paul Freet

Josh Kaufman in The Personal MBA provides the following definition of a business.  It is a repeatable process that:

1.  Creates and delivers something of value…
2.  That other people want or need…
3.  At a price they’re willing to pay…
4.  In a way that satisfies the customer’s needs and expectations…
5.  So that the business brings in enough profit to make it worthwhile for the owners to continue operation.

At the core, every business is fundamentally a collection of five interdependent processes, each of which flows into the next:

1.  Value creation – discovering what people need or want, then creating it.
2.  Marketing – attracting attention and building demand for what you’ve created.
3.  Sales – turning prospective customers into paying customers.
4.  Value Delivery – giving your customers what you’ve promised and ensuring that they’re satisfied.
5.  Finance – bringing in enough money to keep going and make your effort worthwhile.

If you take away any one of these five parts, it’s not a valid business any longer.

When planning a new business or analyzing an existing venture, always begin with a review of the five parts – they will help you discover any major issues or gaps quickly.

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If you can master the concept of these processes, you’ll be well on your way to being ready to present your business to potential investors, bankers, mentors or your board of directors.

Questions for Consideration:

Think about the business you’re in:

  • What are the five core processes?
  • Can you describe or diagram them in detail?
  • How do they fit together?
  • Where do you need help?

Please share the five core processes in your business using the Comments section below. I look forward to hearing from you.

Until next time – Remember to mind your business!

December 6, 2012

#1 Critical Ingredient for Sustainable Growth

growing plantSustainable Growth

There is an almost magical component to sustainable business growth, but it’s not obvious, and most business owners are not spending the time on it to reap the greatest rewards.  The key word is “sustainable” – you can have growth without this component, but it won’t be easy.

When you think of business growth…what comes to mind?

Great marketing?   Really effective sales?  New products?  Super flashy advertising?  Signing a huge new client?

All of these contribute to business growth, but there’s a more fundamental attribute found in sustainable, successful businesses. It can make the difference when it comes to taking your business beyond the brute force stage (where you’re putting in a lot more than you’re getting out).

That secret ingredient is Systems!

What are Systems? Simply put, effective Systems are a combination of written processes, tools, automation and applications that allow you, the business owner, to get things done the right way without actually doing it yourself.  A successful business is made up of a whole series of systems that work together in a seamless way, generally without any direct input or oversight from the owner.

Want to get a quick read on how well you’re doing when it comes to Systems in your business?  Here’s a short quiz you can use to judge your progress in Systems.  Score yourself from 1 to 10 on each statement…10 if you are in alignment with the statement, 1 if you aren’t even close.

#1 – As the owner of the business, I fully understand that my primary role is to ensure that the business is run by systems (step-by-step processes and procedures).  Score _____ 1 to 10.

#2 – All of the functions necessary to successfully run my company have been clearly identified and documented in a company operations manual.  Score _____ 1 to 10.

#3 – We regularly consider outsourcing options to reduce expenses and increase efficiencies.  Score _____ 1 to 10.

#4 – We regularly review our systems to ensure they are as efficient and effective as practical in delivering the desired outcome.  Score _____ 1 to 10.

#5 – I’m confident that my employees would know what to do if the leadership team or I were not present for an extended period of time.  Score _____ 1 to 10.

What’s your score?

How did you do?  This quick quiz certainly isn’t comprehensive, but it will give you a pretty good idea of where you and your business stand from a Systems perspective.  There are several key ideas represented here:

  • Do you view your primary role – where you spend the most time (as the business owner) as purposely building your business…and the systems that run your business?
  • Are you documenting everything down to a level that a new employee could jump right in?
  • Are you and your team consistently looking for ways to improve?

So how did you score?  If you scored above 40…then you’re in pretty good shape…keep up the good work!

If you scored between 30 and 40, then there are some things to work on, but at least you’re headed in the right direction.

If scored between 20 and 30, you at least understand it’s important, but you have some work to do.

If you scored less than 20, then it’s a good bet that you feel that you don’t have time to read this post and you are working really, really hard all the time…and your business is at risk!

When you’re ready to unleash some magic and start building systems into your business, the best bet is to carve out some time – schedule it – and identify the big components of your business (where your business comes from, how you close business, how you fulfill your sales, and how you collect business income from sales).  Once you’ve got this defined, in writing, then you can start digging into the details of each over time.

Make sure you get your employees involved…they probably know the details in a lot of areas better than you do and they’re going to have to live with whatever system or process is developed – so include them in the solution.

Get an outside perspective – consider hiring a business coach or joining some kind of advisory board like The Boardroom to help you focus and get some insight that might be hard to come by on your own.

What is your experience with developing business Systems?  I look forward to reading your thoughts in the comment section below.

May 17, 2011

Business Tip #7 – Am I Networking?

Business Tip #7 –

As a business coach, I run into business owners and sales people who tell me they network all the time.  Some don’t feel they get the results they hoped to get in the groups where they network.  If this sounds like someone you know, please do me a favor and ask them a question.  “Are you really networking?”  I anticipate their response will be much the same as the response I get when I ask the same question.

Let’s start with a definition of Networking, at least for this blog:  The act of meeting NEW people in a business or social context.

So if you attend “networking” events and spend all your time talking to people you know, are you networking according to the definition above?  Nope.  I call that “socializing”, not networking.  You’ll notice that “social” is in the definition above, but is not the act of networking.

Consider the networking event you attended most recently.  How many new people did you meet?  Did you treat them as a potential new customer and follow up after the event?  (More about follow-up in a future blog.)

I’m not saying you should ignore your friends at these events.  Incorporate them in your networking – it’s easier than doing it alone.  Let’s say you are talking to someone you already know and have caught up on the critical things you needed to share.  Now get to work networking.  Look for someone who has not yet found someone to talk to.  Perhaps they have that look of loneliness on their face, or they are hanging out near the food table.  Approach this person together.  Introduce yourselves.  Be interested in what the new person has to say.  Exchange business cards.  Introduce them to someone else in the room that you know could help them in their business.  When their conversation is going well, excuse yourself and move on to someone else new.

You can do this!  You can network:  The act of meeting NEW people in a business or social context.

Try real networking at the next event you attend.  Share your results in the comments below or send me an email if you need a bit more encouragement.                                   Holly Hanson

December 7, 2010

1 Hour to Better Clarity

What can you accomplish in an hour?  Clarity! 

I met with a prospective client over her lunch hour.  She’s working for someone else at a “regular job” while striving to get her small business to become big enough so that she can exit her employment situation.  She has had her small business for a number of years, but it just never seems to get off the ground enough to allow her to make it her full time business.  Sound familiar?  I meet with a lot of people who are in a similar situation.

So we talked.  I asked a lot of questions and she had good answers for many of them.  She really does have a passion for what her own business is and it showed.  In the meantime the “job” pays the mortgage.  I asked her what dollar value of business she would need to book in her own business to feel comfortable leaving her employer.  She thought a while then answered the question.  It’s a little over 75% of what her current pay is.  So, she has a measurable goal.  Great!  Clarity discovered!

I asked who her competition is.  She knew the local competition, and knew how she differs from them.  She has scoped out competitors in the surrounding area and knows what she needs to do to be different from them, and has checked out their websites to know what they charge.  She’s been doing her research.

She knows roughly how much she can make with each project.  It’s a big range from helping out for a day all the way to being involved for months, and her income can be 5 times as much.  So she has a start on developing packages.  People like to have options, and developing packages helps them to quickly determine what you have that fits their needs. 

She has done some marketing – having a booth in trade shows.  She has some materials for those shows – brochures and giveaways.  What I gleaned is that there is nothing that makes her booth stand out from any other booth at the show.  Need work here.  She has gathered names and needs at these trade shows.  What has happened to them?  Follow-up is the issue, and doing so without feeling “salesey”.  We talked about how she can ask permission to check back in with her prospects and not feel like a used car salesperson.

She has a website, but no blog.  Having a website without attracting people to it is not the most effective use of that resource.  Need some work here.  She agreed to find something in her professional experience that would help her prospective clients even if they did not choose to work with her.  She agreed to find a Top 10 list to share – for free- with anyone who visited her website.

I noticed it was almost time to end the meeting.  She needed to get back to her job.  I asked her what the top 3 things were that would help her to move forward in her business and what she would commit to do in each of the areas.  She named the areas; a follow-up system to deal with the names and information she collects at trade shows, improving the look of her trade show booth so that people would be attracted to her booth and the visit would be memorable, and developing strategic alliances with other professionals who serve the same clients.  She stated her commitments; develop a spreadsheet to track the information from the trade shows, improve the look of the booth with the ideas we talked about and commit to being in a trade show with the new look by year end, and meeting wtih 8 strategic alliance partners before the trade show where they might also be.  We talked about cross-marketing with those alliances at the show – they have her card in their booth and she has theirs in hers to show that they work well together as a team.

Whew!  That’s what we accomplished in the first hour.  And, the first hour is complimentary.  She was kind enough to pay for my lunch.  Thank you.

I asked her if she found value in our meeting.  What do you think she said?  And at our next meeting as a paying client we’ll work on her 2011 Marketing Calendar! 

She is phyched!  The next few steps to reach her dream in her own business and eventually replace her current “job” are clearer.  Ah clarity!

Ready to move forward with your business?  Let’s talk!

August 17, 2010

What Businesses Ought to Know About Guarding Their Cash Stash

 

Yours may be one of the businesses that has run into cash flow issues during these tight economic times. Do not take this lightly since 82% of business failures are due to cash management problems according to a study by a US bank. Let’s look at important concepts of cash management.

First, your available cash doesn’t necessarily directly follow your sales. Income from sales does not always immediately hit your bank account. There is often a time lag to doing business; the more that you depend on sales to other businesses, the longer the time delay your business will experience between incurring the expense and being paid. When you invoice another business, you can not count on that cash until it arrives. Even if you work only with individuals, you have a percentage of clients who will be late in paying for your services.  If you bill insurance providers for payment, there is always a delay.

Secondly, if your business includes the sale of physical products, this will have a major impact on your cash flow. You will incur the expenses for development and production of that product, or acquisition of the product before you have any cash from sales. Inventory is an expensive element of doing business, but if planned carefully, can be very profitable.

Finally, it costs money to grow your business. Many entrepreneurs make the mistake of not investing any money in their business growth, but others try to grow too rapidly and lose track of the expenses that growth requires. Being able to strike a balance between growth and cash required is one of the traits of a successful entrepreneur.

Use the idea of working capital to monitor your business. Your working capital is the money in the bank that allows you to pay your bills, keep up with ongoing expenses, purchase inventory and generally stay in business in the time lag that you are waiting to be paid by your customers. Know what this amount needs to be and adapt your business practices in order to maintain it.

If you are ready to grow your business, let’s talk!  That’s one of many great times to hire a business coach!

August 2, 2010

Planning a Vacation but not Planning Your Business?

Some of my clients have been getting ready for vacation.  It’s amazing the amount of planning they put into the details; flights, hotels, sites to see, packing just the right things.  Some spend a whole day planning for a week away, and some spend that much time planning for just a long weekend.  One of my clients is involve in planning a wedding.  Don’t get me started on how much time they are putting into planning that one day event!

Why is it OK to plan for a vacation, or a wedding, but when I ask people about the amount of time they spending planning in their business, business owners give me such a negative reaction or laugh and say they have “no time” to plan?

Why is planning such a bad word in business?  Why don’t business owners spend more time, or for some, any time planning to make a profit in their business?

Instead of sitting back and mapping out a plan of attack, many business owners just shoot from the hip when it comes to making decisions, always trying to stay one step ahead of the fires.

The #1 problem I see in small business is the lack of creating and executing a plan.  I’ll call it a Profit Plan.  It’s called a Budget or Forecast by some.

Let’s get back to vacation planning.  If you spend 1 day of planning for each week of vacation, what would happen if a business owner spent one day a week planning?  How many business owners do you know who spend less than a day all year planning their business, much less a day a week?

I help business owners spend their planning time effectively.  We meet for 1-2 hours a week and they work for another couple of hours each week on things in their business.  More often than not we are working on strategic instead of tactical things.

Do you know any sports coaches who would agree to go into a game without having adequate time to prepare a game plan as well as some back up plans for when things go wrong – because they always do? 

The moral of this story is, don’t let planning be a dirty word in your business.  There is nothing more important to your company’s survival than the creation and execution of a Profit Plan.

How to Make a Profit – Part 2

It may sound silly, but many business owners forget that they are in business to make a profit.  That means making money! 

 In Part 1 of this two part series, I talked about what a Profit Plan is and why the time spent developing one is worthwhile.  If you want to re-read Part 1, click here…..

Once your Profit Plan is pulled together, the real fun starts.  As I said in Part 1, it’s critical to get others in your organization involved so they can help with the execution of the plan.

One of the most important areas for you to focus is the top line (projected sales).  What is everyone in your business doing to bring customers in?  A couple of ideas on how to keep yourself and your organization focused on driving sales into your business:

  1. Have a Clear (Written) Goal for the Number of New Customers:  You have a Profit Plan that shows the total sales in terms of dollars you’d like your organization to bring in.  Now let’s break it down into the number of customers required to reach that number.  If you are targeting $100,000 in new business this year, where will it come from?  From one customer, from 1,000 customers, or some other number?
  2. Break Marketing Activities Into Monthly & Weekly Buckets:  Marketing drives sales.  All you can manage is what you and your people do – activities.  You can not control who and when someone will actually buy your products and services.  Once you have the number of new customers identified to meet your sales goal, the BIG question is, “What marketing activities will put you in front of those prospective customers so you can reach your goal”?  Marketing activities fall into three categories:  i) Short-Term – referrals, cold calls, direct mail.  ii) Long-Term (networking, writing, strategic alliances, and iii) Passive – print advertising, web sites, promotional products.  Once you’ve identified the strategies that work best for your business, the next step is to put a weekly schedule into place to drive those activities.
  3. Meet Regularly to Track Progress:  With so much time and effort going into developing the Profit Plan, I’m amazed at how many people will put the plan in their desk drawer and not look at it again to measure their progress against the plan.  I recommend you and your marketing/sales team meet on a weekly basis to track the execution of the marketing plan.   Is everyone doing what they agreed to do?  Are things working as planned or do changes need to be made?  While it’s easy to justify skipping the meetings when you “get busy”, I strongly advise my clients to continue with the meetings to keep the momentum going.
  4. Adjust the Plan Sooner Than Later:  Things almost never go as planned.  The biggest benefit of having a Profit Plan is to ensure that all the right discussions are happening within your organization and that all your key team members know what needs to be done.  Once you and your team get used to having the Plan, you’ll find yourself constantly tweaking the execution of the plan by what happens throughout the year.  If you get a fabulous response to a promotion that you had planned to only run occasionally, why wouldn’t you want to increase the number of times you plan on running it?

 

This discussion provides a framework for how to drive the top line of your Profit Plan.  Understanding that a plan needs to be constantly tweaked and challenged during execution is key to making a profit in your business.

Assignment:  Establish your top line goal for projected sales.  How many new customers will it take to reach the new sales volume?  Define weekly and monthly marketing activities you’ll do to attract those new customers:  Short-term, Long-term, Passive and Active.

How to Make a Profit – Part 1

It may sound silly, but many business owners forget that they are in business to make a profit.  That means making money! 

 Most business owners don’t have a plan for how they are going to make a profit this year, this quarter or this month.  I often start learning about my new clients by asking them to describe where their money comes from.  I ask them to look at the different areas of their business and how much money each brings in.  Many have never stopped to look at their business in this way.  We then look at the profitability of each of the areas.  All of this is leading up to developing a Profit Plan for the next 12 months.  The Profit Plan is just what it sounds like: a plan for making profit.  Making a profit is what distinguishes a business from a hobby.

The Profit Plan is the answer to how to make money in your business.  If you can’t plan it out on paper, chances are you won’t be able to do it in real time with your hectic schedule.  What is a Profit Plan?  Bankers and Accountants would call it a Budget or Forecast.  It’s a financial projection of your revenue and expenses for the next 12 months.  Let’s call it a Profit Plan, because once you subtract all of your expenses from your revenue you should have a profit left over.  If not, you need to figure out how to increase your sales or reduce your expenses.

A Profit Plan covers the numbers as well as the underlying assumptions.  For each line item under revenue and expenses, you should have a written assumption that explains how you arrived at that figure.

Developing a Profit Plan provides the following benefits for your organization:

1.  It Pulls Everyone Together: Chances are you as the owner can not put together a full profit plan without input from key people.  You’ll need to have discussions with each one.  It gets all the key players in your organization focused on the future which is the only place you can make a difference.

2.  It Allows For Ownership: Everyone can be assigned responsibility for one or more line of the Profit Plan.  For example, you can proclaim someone as the Utility Czar and her job is to make sure that your actual Utility expenses come in below the projected figure.

3.  It Prevents Monday Morning Quarterbacking: For all of us who are sports challenged, that is the phrase used when people analyze football games the day after and second guess decisions made during the heat of the game.  Usually it is someone on the outside of the organization who plays this role.  If you have all the key people on your team involved in the planning process, they have to each sign off on the plan.  The fact that things are written down prevents them from going back and second guessing how figures were determined.

If you are just getting starting with the concept of developing a Profit Plan, I’ll share with you that the first year is always the hardest because you will be starting from scratch.  Each successive year gets easier because you build on the prior year’s experience.

In the next issue I’ll talk about what to do once your Profit Plan is pulled together, so stay tuned……

July 27, 2010

Why Do Business With You?

Filed under: Uncategorized — bizcoachholly @ 6:06 am
Tags: , , , , , , ,

I was working with a new business owner and asked him to give me his sales pitch – the same one he would give to a prospect.  He started listing “things he does”, comparing this to what the competition would do. 

As he was listing the differences it all made sense to him, but I would bet most of his prospects would quickly have tuned out.  What about pictures?  A picture is worth 1,000 words! 

I suggested he create a portfolio, including photos of his work next to photos of the competitor’s work.  In the future as he speaks to prospects he can flip through the portfolio of pictures focusing on HIS workmanship, and make brief reference to how it looked on a job XYZ company did.  With side by side photos the reason to choose to do business with him should be obvious.

Comment on how this might help you in your business…….

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