Jun 242017
 
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How To Encourage Enthusiastic Word Of Mouth Marketing

First, as an entrepreneur, why should you care about encouraging word of mouth marketing and advertising of your business?

The reason is simple: it works!

Numerous studies (for example, see this Nielsen survey) and common sense (think of your own experience) tell us that referrals from friends are the most credible recommendations we can get.

The reasons for this are both obvious and subtle. The obvious reason is that if someone we know is recommending a person or company to provide a service to meet our needs, we trust that recommendation more than if a stranger were providing it, or worse yet, the company itself were telling us how great it is. The more subtle reason is that we are drowning in information and sensory overload these days, and as the Internet and our online existence continue to expand, that situation will only worsen.

That, coupled with the fact that we are busier and busier as time goes on, means that we need a shortcut to find product and service providers to meet our needs.

Word of mouth marketing is that shortcut.

So, if you take it as a given that word of mouth marketing and advertising are extremely important to the success of your business, what can you do to stimulate such activity as much as possible?

First and foremost, you must provide consistently valuable service! Word of mouth marketing can cut both ways! So, if your service is not consistently good and valuable, that word will also travel. And if it’s bad news, it will usually travel faster than if it’s good news. Provide a good customer experience, and when things don’t go exactly as planned, which is bound to happen, make sure that you have trained yourself and your employees to “make it right”.

Create a mindset in your business that customer experience is paramount and that any time there is feedback, positive or negative, that can help improve that experience, it must be taken seriously. Just as communication between customers and potential customers is the essence of word of mouth marketing, effective two-way communication between your company and customers is the foundation of building a great customer experience.

Second, make sure your business is active on social media. These days, a lot of what used to happen on the phone and in person, at least in part, happens online. Make sure that you and your team actively monitor social media, including review sites (Yelp, TripAdvisor, etc. – whatever is relevant to your business), and actively engage in the conversation that takes place about your business and the services it provides. Be prepared that not all feedback will be positive, but most importantly, those who have used and are considering using your products and services must know that you and your company take customer feedback seriously. In order for word of mouth marketing to take place as positively and effectively as possible, customers and prospective customers must know that you care and are doing everything possible, within reason, to always work toward improving the customer experience.

Third, be honest. Beyond it being a requirement legally (Google FTC requirements for customer reviews), it’s good business to do what you can to ensure that the feedback that is provided online (and offline), both positive and negative, is valid and truthful. You may have noticed, for example, that Amazon and others will include “Verified Purchase” where possible, to show that the feedback being provided is coming from someone who actually purchased the product. There are strict legal limitations on what you as a business owner can do to encourage people to provide reviews of your products and services. These limitations relate to payments to the reviewers, among other things. Before pursuing any kind of word of mouth marketing strategy, I encourage you to familiarize yourself and your team with these limitations, so you don’t run afoul of the law.

Fourth, be creative. Don’t limit the picture of your company to boring, relatively uninformative one or two line reviews of your products and services. While these are helpful to some degree, and in large numbers, of course, they are a strong signal to the market that your products and services are worth purchasing, it is also very persuasive to see longer stories about the use of your products. Put together (truthful and factual, of course) case studies of real customers using the products and services you provide and don’t be afraid to share these, both online and in-person when you are marketing and selling.

Finally, embrace marketing with stories. This is related to the use of case studies, but it takes it to the next level. Marketing with stories involves developing a mindset that understands and values the reality that humans love a good story. Who didn’t enjoy a bedtime story when they were growing up? Who has not learned extensively from stories told to us by our elders? As humans, we are programmed to respond to and learn from stories. We connect with stories both logically and emotionally. They reach us on a level that few other forms of communication can. This is true especially when they’re inherently visual (think video), but also when they’re simply told cleverly with words. So, if you want to stimulate even more word of mouth marketing of your company and its products and services, teach and encourage yourself and your team to tell good stories. When the story is good, we as humans are likely to repeat it. See this article for some good examples of marketing/advertising with stories.

So, by now, I hope you’re convinced that encouraging enthusiastic word of mouth marketing is worth the effort. To get the job done, first make sure that you are providing a valuable product or service, and make sure you create a company culture that focuses on improving the customer experience. Once you’ve done that, teach your team to be honest and creative in encouraging customers to share their experiences with others, letting them know, enthusiastically, how great it is to do business with you and your company.   The stories that your customers and your team tell will be what encourage others to give your company a try.

I look forward to your thoughts and comments.

 

Paul Morin

paul@companyfounder.com

www.companyfounder.com

 

 

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Jun 212017
 
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How To Understand The Basics Of The Cash Flow Statement

I have good news for you – it is not too difficult to understand the basics of the Cash Flow Statement – even if you don’t consider yourself a “numbers person”!

Although many entrepreneurs cringe and may even feel a bit of trepidation when they hear the words financial statements, in reality, once you understand a couple of basic concepts, they are quite straightforward.

Here we will focus on understanding the basics of the Cash Flow Statement.

First, let’s review the basics of financial statements in general.

There are three main financial statements with which you need to be concerned as a startup or small company entrepreneur. Those financial statements are:

The Income Statement (a/k/a “Profit And Loss Statement,” or simply “P&L”)

The Income Statement gives you a picture of your Revenues and Expenses over a period of time, most frequently monthly, quarterly or annually, but it can be over any period of time. When you subtract your Expenses from your Revenues, you get your Profit (or “Income,” “Operating Income,” or “Net Income,” depending which expenses you include in the calculation).

The Balance Sheet

The Balance Sheet gives you a snapshot at a point in time (not over a period of time) of your Assets, Liabilities, and Equity. Assets minus Liabilities equal Equity (or “Net Worth”).

The Cash Flow Statement (a/k/a “Statement Of Cash Flows”)

The Cash Flow Statement, as calculated in this article, pulls information from both the Income Statement and the Balance Sheet, to give you a picture of changes in your cash position over a period of time.

The Cash Flow Statement begins with the cash balance at the beginning of the period you are looking at, and ends with the cash balance at the end of the period you are looking at.

Three Parts Of The Cash Flow Statement

The Cash Flow Statement has three parts that you must consider in order to calculate the change in cash balance during the period in question. Those parts are:

Cash Flow From Operations (CFO)

This part starts with the Net Income (from the Income Statement) generated by your business, then adjusts that Net Income up or down for the non-cash effects of operating income. We’ll touch on this in more detail in the example below.

Cash Flow From Investing Activities (CFI)

This part makes adjustments to the cash balance based on cash generated or used by investing activities. Such activities could include the sale of long-term assets, capital expenditures on equipment, and the sale or purchase of other assets, among other investing activities.

Cash Flow From Financing (CFF)

This final part of the cash flow statement accounts for changes in the cash balance that result from financing activities, such as taking out or paying off loans, selling stock, and paying dividends.

Here is a very basic example to illustrate the three sections of the Cash Flow Statement and walk you through some of the calculations you will have to consider in creating your own Statement of Cash Flows.

This sample Cash Flow Statement of John’s Retail Store showing cash flows for the period January 1, 2016 to December 31, 2016 will allow us to talk through some of the concepts described above.

The Cash Flow Statement starts with Cash Flow From Operations (CFO), with the first element of CFO being Net Income.

The Net Income figure would be taken from John’s Retail Store’s Income Statement for the same period of time.

The Net Income is then adjusted for non-cash items that occurred during the same period. The basic concept here is that whatever is shown on the Income Statement as Net Income results from subtracting Expenses from Revenues for the period. Usually though, not all the Revenues are received in cash, and not all the Expenses are paid in cash.

So, in order to understand the cash impact of these Revenue and Expense transactions during the period, you need to look at the change in relevant Balance Sheet accounts during the same period. For example, you’ll see in the illustration above that there was a change in Accounts Receivable (A/R) during the period that had a net positive effect on cash of $5,000. In the world of accrual accounting, this would mean that A/R (on the Balance Sheet) went down $5,000 during the period.

I realize that this may be a bit confusing. Think about the opposite example, which may help to clarify it in your mind. That is, if A/R went up $5,000 during the period, that would have a net negative effect on Cash Flow of $5,000 during the same period. Why is that? Remember the adjustment here is to Net Income. If $5,000 of Revenues came in, but were not collected, that would be a $5,000 increase in A/R relative to the Net Income that was reported during the same period. In other words, $5,000 that is part of the Net Income is not part of cash during that same period, so it would need to be netted out (subtracted) in the CFO section on the Cash Flow Statement.

Let’s take another example in the Cash Flow From Operations section on John’s Retail Store’s sample Cash Flow Statement. You can see that the change in Accounts Payable (A/P) had a negative $8,000 effect on cash flows. What would this mean? Similar to above, but actually opposite, since it’s A/P instead of A/R, if A/P went up on the Balance Sheet, it would have a positive effect on cash flow for the period. If, on the other hand, as occurred in the case of the John’s Retail example above, A/P went down, it would be a use of cash during the period. In this case, A/P on John’s balance sheet was paid down, using cash, by $8,000 during the period.

I won’t go into details here on the Depreciation and Prepaid Expenses entries in the sample Cash Flow Statement above, but if you have questions, don’t hesitate to ask.

Let’s move on to Cash Flow From Investing Activities.

This section is quite straightforward, as it doesn’t involve adjustments to the Net Income. Rather, Cash Flow From Investing Activities describes changes in cash during the period that result from, you guessed it, “investing activities”. In the case of the Cash Flow Statement, these investing activities include such things as buying and selling assets and investments, including capital expenditures on equipment needed to run the business. In the John’s Retail example above, investing activities has a net positive effect on cash of $85,000 during the period.

Finally, let’s talk about the third section of the Cash Flow Statement, which is Cash Flow From Financing Activities. As with the other sections, these flows can be positive or negative, depending on whether you are receiving the proceeds of financing activities, or paying off financing during the period. As you can see above financing activities in this context include such things as debt (loans), stock issuance, and payment of dividends. In the case of John’s Retail during the period, investing activities had a net positive effect on cash of $25,000.

The final step on the Cash Flow Statement involves adding to, or subtracting from, as the case may be, the net result of the above three sections, the beginning cash balance for the period, to arrive at the ending cash balance for the period.

It’s pretty straightforward:

Beginning Cash Balance

Plus: Net Effect of CFO, CFI, and CFF during the period

Equals Ending Cash Balance.

As you can see from the above example, although the calculations are slightly nuanced, given the peculiarities of Accrual Accounting (i.e. not all transactions are on a cash basis, so adjustments need to be made to the Net Income), the overall idea of the Cash Flow Statement is not too complicated.

As with the other two main financial statements, the Income Statement and Balance Sheet, it’s important that you understand the basics of the Cash Flow Statement, as it will help you run your business better and it will help you more confidently manage financial conversations with important constituencies, such as employees, accountants, lenders, and other potential sources of financing or liquidity.

And, as the saying goes, “cash is king”!

I look forward to your questions and comments.

 

Paul Morin

paul@companyfounder.com

www.companyfounder.com

 

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Jun 162017
 
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The Urgent Need To Create Urgency In Your Business

If you don’t create a sense of urgency, it’s likely that not much will change.

Humans are programmed to get into a comfort zone, and once they’re there, it’s hard to get them out. That is the basic reason why incumbents (politicians, ideas, approaches, etc.) usually prevail.

Change makes people nervous. It creates uncertainty and a perception of increased risk. Most people, therefore, would like to see things stay as they are.

So, what’s the big deal? What’s the problem with things staying as they are?

Well, in a small business, particularly in an early-stage or even startup business, there is bound to be a lot of change!

And the reality is, that if you and your team are not comfortable with change and tend to cling to the status quo, more likely than not, you will be run over by the very change you seek to avoid.

One of the ways to help people push themselves out of their comfort zone and into taking action is to create a sense of urgency. When there is urgency, usually you will see people at least a bit more willing to take risks, even if it’s just in an effort to make that urgency go away, so they can return to the status quo!

An example of this would be that you and your team have identified another market niche that you should pursue. You’ve determined that, based on the characteristics of that niche, it’s likely to be very profitable for your company. The challenge is that everyone on your team is already busy serving the current niches, and furthermore, no one is putting their hand up to take the lead and thus take the risk of being the leader of an initiative that may fail. Change is scary!

So, what can you do to encourage your team (and yourself) to be willing to step out of their comfort zone and help your business go after the promising new market niche you identified?

The answer, of course, is to create a sense of urgency! Here are six ideas on how to create a sense of urgency.

Ways To Create Urgency

1. Create unrealistic deadlines

A quick way to take the focus off the challenges and concerns and put them on how to get the job done is to put an unrealistic deadline on the table. When you do so, you tend to galvanize the effort and resources of your team in the direction of solving the issue, rather than of thinking of ways this “won’t work”. Be careful not to overuse this, though, as if you do, it tends to become like “the boy who cried wolf” and it loses all its magic.

2. Set important goals

Setting goals is not enough. You need to set goals that matter to you and to your team. If they are not important to you, then they will not get done, or at least not get done expeditiously. Set goals “correctly,” of course, but if you’re going to go through the trouble of setting them, make sure they get your juices flowing.

3. Offer incentives for meeting or exceeding deadlines

You want to hit the tough deadlines you put in place? Offer incentives to your team to get it done right and on time. Treat yourself as well if you hit the difficult deadlines you put in place. What good is success if it’s not enjoyed? That said, don’t go overboard on this, as you’ll want to keep the momentum going. So, take and/or give a quick reward, then keep the ball rolling forward.

4. Have regular updates on what competitors are doing

Get your competitive juices and those of your team flowing. If you and your team keep close track of what your competitors are doing and you get the sense that they are catching up to you or moving ahead of you, that is likely to ignite the competitive fire of many, which will create its own sense of urgency. By the way, you should be keeping close track of what your competitors are doing in any case!

5. Fight a common enemy

If there’s not a common enemy, then create one. This has been a strategy of leaders throughout the ages. History has proved that groups of people tend join forces and move better together in the desired direction if that direction can be tied to conquering a common enemy. That “enemy” may be your competition, it may be a particular problem your customers are facing, it may be the government, or it may be some combination of all of the above and more. Whatever the common enemy is, use it to get yourself and your team more motivated and moving with more urgency.

6. Reward (or at least don’t punish) failure that is well-intentioned

You’d be crazy for rewarding people for failing, right? That is not necessarily the case! I’m not saying that you want to reward people financially necessarily, but I am saying that you need to give yourself and your team some latitude to fail. If you don’t, how can you expect people to buy into trying to conquer challenging problems and helping the company grow? How can you expect them to work with a sense of urgency if all they can think about in the back of their minds is the downside of “failing”?

So, there are some ideas to help you use urgency to your advantage in your business.

Do you have other ideas or thoughts on the importance of urgency and how to create it, based on your experiences?

I look forward to your thoughts and questions.

 

Paul Morin

paul@companyfounder.com

www.companyfounder.com

 

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Jun 152017
 
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Startup Growth – What Is The Network Effect?

If you’ve been in the startup game for a while, I assume you’ve heard the term “Network Effect,” but what is it? And does it apply to your startup and your company’s offering(s)?

Simply put, the term Network Effect is typically used to refer to a product or service that becomes more valuable as more people use it.

Note that the Network Effect is not the same as “viral growth,” which occurs when the rate of adoption (product or service adoption) increases with each additional user. Both can lead to increases in the value of the company and the product or service, and they can both be present at the same company, even for the same offering, but they are not the same thing.

Examples of the Network Effect (and sometimes viral growth as well) are numerous and include:

  • Telephones
  • Email
  • Internet
  • Instant messaging

This list, as you can see, could go on an on.

Realize too, that in some cases, there can be negative Network Effects if, for example, there are too many users for the system to handle. In such a case, the system may experience congestion, which would slow it down and make the experience for each user – and the value to each user – worse, instead of better.

Social networks are another classic example of the Network Effect. If you’re on a social network and only a few other people are using it, then typically it will have less value to you than if a large number of people are using it. The same can be said of the negative Network Effect mentioned above, though; if too many people are using it, it may become congested and slow down or just overwhelm the user with the number of potential interactions with other users.

So, the Network Effect can cut both ways.

How then is the Network Effect relevant to your startup or to products or services that you sell, or wish to sell, to your client base?

It will only be relevant if what you sell, like the examples mentioned above, becomes more valuable to each user as more users come online.

If it does become more valuable to each user as more people use it, and the negative Network Effects are not significant, then as you gain more users, you will likely see a jump in the value of your offering, and usually correspondingly, of your business.

This article is meant to be an introduction to the concept, rather than an exhaustive treatment of the Network Effect, but if you’d like to dig into the math and other related details further, do a quick web search on the Network Effect, Metcalfe’s Law, Sarnoff’s Law, and Reed’s Law. Suffice it to say that the growth can be very impressive, especially when both the Network Effect and viral growth are present, as they were with the likes (pun intended) of Facebook, Twitter and YouTube.

What can you do to try to take advantage of the Network Effect?

First, you need to determine if your product or service becomes (or can become) more valuable to each user as more users are added.

If the answer is yes, then you need to experiment with ways to get more users as quickly as possible, while maintaining the quality of the customer/user experience. You’re trying to get to “critical mass,” which is a term used to describe the point at which you have enough users for the Network Effect to really kick into gear.

There is not a set number of users for “critical mass,” but it’s likely to be accompanied by users using the product or service more (usage time) and more consistently (frequency), commenting more positively on it, and if you’re lucky, kicking viral growth into action as well, by inviting more and more of their friends to join/buy in.

You will want to use every method you can think of to get users to engage more with your product and service, stay engaged, and invite their friends and peers to do the same, knowing that if there truly is a Network Effect associated with your offering, users will get more and more (to some natural limit) value out of it as the user base grows. The increased value in the user experience will then tend to continue to feed the growth.

Does your product or service offering have a potential Network Effect?

If yes, let this article serve as an introduction, but by all means scour the web and all other sources you can find to get yourself as informed as possible about the Network Effect.

If possible, do this as early as you can in the process of designing your offering, as the initial (and evolving) design can have a major effect on the probability that you will reach “critical mass” and enjoy the benefits of the Network Effect.

I look forward to your thoughts and questions.

 

Paul Morin

paul@companyfounder.com

www.companyfounder.com

 

 

 

 

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Jun 142017
 
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People Will Never Forget How You Make Them Feel

As an entrepreneur, it’s important to remember that people will never forget how you make them feel.

The Maya Angelou quote goes like this: People will forget what you said. People will forget what you did. But people will never forget how you made them feel.

Apparently, the quote attributed to Maya Angelou is a close paraphrase of a quote attributed to Carl Beuhner many years earlier: They may forget what you said – but they will never forget how you made them feel.

Source: Wikiquote – https://en.wikiquote.org/wiki/Maya_Angelou

Regardless of which quote you want to look at and who said it, though, I think the idea is 100% on-point. People can forget a lot of things, but they cannot and will not forget how you make them feel.

So, how is this relevant as an entrepreneur?

Though the relevance of this idea extends to ALL people with whom you interact, here we will focus on how it impacts your relationship with the source of your revenues – your prospects and your customers.

Remember, humans typically make a purchase decision based on emotion and feelings, then later try to justify that decision with logic. So, how you make prospects feel has an impact right away, from the first time you interact with them. That initial interaction may be through an ad you place, the prospect coming into your place of business, or any of innumerable other potential interactions.

How do you make your prospective customers feel? What is the messaging that you put out on a consistent basis, or inconsistent basis, as the case may be? How do you want your business to be perceived by people who are thinking about doing business with you?

As discussed in another article, your marketing and sales efforts have to be focused on the needs of your clients, not on your needs or those of your business. Focus on the benefits, not the attributes of your product or service. Key in on how those benefits will make your prospect feel, should they decide to purchase from your company.

At the end of the day, it’s not even the benefits that are driving your prospects’ purchase decision; rather, it’s the prospects’ expectations about the feelings they will get from the benefits of what you offer.

Let’s look at a simple example.

You decide you want to buy a bicycle, so you head down to the local bike store. The salesperson is happy to help, of course, and proceeds to show you several bikes, priced from $250 to $1,100. The salesperson goes through all the features of the bikes, and if they’re smart, they also go through the benefits you’ll derive from each of the features mentioned. For example, this one has this type of better, lighter rims [feature], which means that with less effort, you’ll be able to go faster [benefit] than on this other, less expensive model.

The whole time the salesperson is speaking, what are you, the prospective customer, thinking?

Are you focused on all the great features and benefits of the bike models you’re hearing about? Probably not. Instead, you’re figuring out how this salesperson is making you feel. Does he or she really understand what you’re looking for? Do they care to provide you with what you’ve indicated you need, or are they just trying to figure out a way to sell you a more expensive bike? Will the cheaper bike they mentioned get the job done to get you the feelings you’re looking to achieve from your purchase – freedom away from thinking about the issues of your life, the joy of time doing something healthy with your family, exercise that will make you feel better, etc.?

You see, the whole internal dialogue you have during the sales presentation is all about feelings, not about features and benefits.

It is only after you’ve come up with satisfactory answers to these emotional questions in your mind that you will pull out your credit card and make a purchase from that salesperson at that bike store, for a particular model of bike that you think will get the job (creating the correct feelings) done.

The same idea applies not just to prospective customers, but also to existing customers. How they feel while at your establishment or otherwise doing business with you will have a major impact on whether they will become repeat customers, or will just be a one-time sale.

In other words, they will never forget how you make them feel.

Your job, therefore, from the time they are prospects to when they’ve already been customers for a period of time, is to have them walk away from all interactions with your company feeling good about how it went down.

They may not always agree with you or your company on everything, and from time to time, they’re bound to have experiences with your company that are sub-optimal, but they must always feel that you understand them, respect them, and are striving to serve their needs, not just optimize your profits.

Keep this in mind when you are creating your business, planning your products and services, developing your marketing strategy, selling to your prospects, and interacting with your existing customers:

They will never forget how you make them feel!

Use this to your advantage, by showing them that your focus is on their needs and have them walk away from each interaction with your company feeling like they’ve been treated well. It won’t always be perfect, but they must believe you’re trying to give them the feeling(s) they seek by doing business with you and your company.

I look forward to your thoughts and questions.

 

Paul Morin

paul@companyfounder.com

www.companyfounder.com

 

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Jun 132017
 
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What Is Your Unique Selling Proposition (USP)?

You may have heard the term USP or Unique Selling Proposition thrown around in the context of marketing and startups. What is it, and what is your USP?

Simply put, your Unique Selling Proposition is a description of what makes you, your company and your product and service offering unique in the market.

So, what is your USP?

Are there aspects of your business and your offering(s) that make them unique in the marketplace?

In case you’re having trouble answering this question, let me ask it in a different way. What are you known for, or if you’re a startup, what do you want to be known for, by clients and prospective clients in the marketplace?

In other words, what is your “promise” to the market?

The question then becomes whether you can consistently deliver on that promise.

Let’s look at some examples, good and not-so-good, to clarify what we’re talking about when we look at the Unique Selling Proposition in terms of your “promise” to the market.

We’ll look at FedEx, Your Local Drycleaner, Enterprise Rent-A-Car, and Grammarly (couldn’t resist, as it popped up in my email as an excellent example, as I was writing this article)!

FedEx

When I say FedEx, what’s the first thing you think of? For me, it’s reliability. In my opinion, their promise to the market is that they will get your package where it needs to go, by the time they say it will get there. They give you online tools to monitor and verify that the package will arrive on time, and they give you alerts when they think there’s something, such as weather, that would interfere with fulfilling their promise. They know that’s the “golden goose,” so to speak, and they will do everything possible to protect it.

Your Local Drycleaner

I don’t know the name of your local drycleaner, but I can give you an educated guess of their USP in terms of their promise to you, the customer. Their promise is that they will give you back your clothing clean, pressed, and undamaged, on time, every time. While it’s not necessarily “unique” in the traditional sense of the word, they can differentiate themselves through consistency and through offering you a pleasant and friendly transaction each time you drop and pick up your clothing. Today, there is not much that is truly “unique” in this world, so in many markets, in order to avoid commoditization and its undesirable effect on pricing, you must deliver on your “promise” of consistent quality, delivered in as human a way as possible.

Enterprise Rent-A-Car

If you watch TV, when I say Enterprise Rent-A-Car, the first thing that probably pops into your mind is, “We’ll pick you up”. It’s been their catchphrase for a while. How many other rental car companies do you know that will pick you up to bring you to their rental counter so you can rent their cars? There may be others, but none come immediately to mind. So, it is actually unique, which is somewhat miraculous in such a mature market. I know from experience that they also deliver on this promise. Perhaps more importantly, though, is what “We’ll pick you up” conveys to current and prospective customers. When I hear this phrase from a rental car company, it surprises me. Really, they’ll pick me up? If they’re willing to go to that length to help me, then I’m going to assume (they’ll then have to prove it, of course) that they are really focused on and concerned with the needs of their customers.

Grammarly

Ok, I had no intention of using Grammarly as an example here, but as I was writing this, I received a marketing email from them that I think really illustrates the idea of the Unique Selling Proposition! It’s quite brilliant, actually. Here’s how it looks, with my commentary on the key sections of the graphic included in the email:

I guess I should’ve realized it, but it didn’t really occur to me that Grammarly was tracking and helping me improve my writing on an aggregate basis. I just assumed it was for each one-off piece I wrote. So, I see this email about my writing for the week of June 5 to June 11 and it piques my interest.

My main reaction to the above was, “wow, that is a lot of words – I had no idea”. And I couldn’t help but think, I’m glad Grammarly helped me check all those words.

This made me think, “man, I know I can do better than that,” but then I rationalized it saying, “but almost all my writing that Grammarly sees is stream of consciousness, before I’ve gone back to check and edit it”. It’s good I know how to use the word “rationalization”.

My thought, “nice, I used quite a few unique words – I’m not sure that means I have a big vocabulary – but I’ll take it”. Thanks, Grammarly. Maybe we can have a beer sometime. It sounds like we have a lot in common.

And finally, the kicker…

My thought on this one is, “wait, I thought I had a good vocabulary; ok, I suppose that doesn’t mean that I don’t still make plenty of mistakes”. Ok, I feel you, Grammarly, maybe I’ll buy the first beer.

So, I have to give it to Grammarly here. This is quite clever. It’s an excellent sequence of emotions they take me through there, before trying to close the sale for an upgrade. I really like the approach.

More germane to this article, though, this approach also very cleverly illustrates their Unique Selling Proposition: we will help you write better, period. We’ll do it for free, to a certain point, but if you want the advanced stuff, you’ll need to pay. And by the way, we’re in a unique position to deliver on our promise, and more, as given how much you’ve allowed us (and no one else, presumably) to help you with your writing, we have a tremendously informed perspective on how to help you further. Brilliant.

I’m sure that, based on the above examples, you get the idea on what we’re getting at with the USP from the perspective of your “promise” to the market.

 

So, tell me, what is the Unique Selling Proposition for your business?

 

I look forward to your thoughts and questions.

 

Paul Morin

paul@companyfounder.com

www.companyfounder.com

 

 

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Jun 122017
 
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How To Start A Business Destined To Fail

No one in his or her right mind sets out with the intention to start a business that is destined to fail. Still, many people unknowingly make preventable mistakes when they start a business, many of which greatly increase the probability that their businesses will fail.

Let’s jump right into five of the common mistakes I see entrepreneurs make that put their startup behind the eight ball from day one.

Start A Business Fatal Mistake #1

The easiest way to start a business that has a high probability of failure is to pay no attention to what prospects in your target market need, want, and most importantly, are willing to pay for. This is the “if I build it, they will come (and buy)” mistake that is repeated frequently by startup entrepreneurs. Many entrepreneurs build something that they would want (and maybe would even pay for), rather than building something that their target market wants and will open their wallet to pay for.

Start A Business Fatal Mistake #2

Another quick road to failure in a startup business is to base the business on a product or service that cannot be delivered profitably.

This mistake usually results from a combination of lack of necessary analysis of estimated profitability and unrealistic expectations regarding pricing the market will accept and embrace.

There is never certainty regarding pricing that will work in the near- and long-term, but that is not an excuse to not do pre-venture, direct research with prospective customers, nor is it an excuse to skip relatively simple, but informative exercises such as calculating the estimated break-even point.

Start A Business Fatal Mistake #3

Starting a business with inadequate funding is another way to create a business that is destined to fail. Although it will always be just an estimate, as unexpected costs will come up and most everything in a startup takes longer and costs more than expected, you must go through the process of estimating the capital needs of your business, at least for the first three years.

You need to understand if you have enough capital to fund the business until it reaches break-even and starts generating cash. If not, you will need to raise capital, and it will be important that you don’t wait until you need the cash badly, or worse yet, until it’s too late.

Remember, not all businesses fail because there is a lack of demand for their products; some businesses fail because they experience initial success that puts a strain on their cash flow and they cannot then raise enough money to keep the company going. Given the variety of funding sources available these days, it’s not as common as it used to be, but it does still happen. Don’t let it happen to your business because you haven’t taken the time to understand the likely funding requirements to get your business to break-even and beyond.

Start A Business Fatal Mistake #4

Running a startup that grows into a successful small business is not a battle; it is a war. It takes commitment and perseverance to provide the energy necessary to nurture your startup business from infancy to adulthood, or even just to adolescence. Typically, it is not possible to infuse such energy into your business on an ongoing business unless you are 100% committed to that business.

You must, therefore, believe in your heart of hearts, before you start the business, that growing the business is something to which you are 100% committed.

As in most endeavors, in the startup game, “dabbling is a root cause of failure”. You cannot and must not allow your attention or energy to be diluted by the many potential distractions (“shiny objects”) in today’s world, if you expect your startup to grow into a successful small business and beyond.

Start A Business Fatal Mistake #5

It typically takes time, sometimes even years, for a startup to gain critical mass and momentum in sales. As mentioned above, you need to do your best to estimate the break-even point and the expected timing of reaching that milestone. That said, you must also understand that it will likely take longer and require more investment than you expect to reach the break-even stage and move into positive cash flow.

So, the mistake you have to avoid here is pulling the plug on a potentially successful venture too early, because you don’t see immediate or very rapid success. That’s not to say it’s always the wrong move to pull the plug on a startup that is going nowhere, but before doing so, you have to make sure your expectations for speed to success are realistic. If you are gaining critical mass in your customer base, but it’s just taking a bit longer than expected, that may not be sufficient reason to abandon ship and declare the venture a failure. Do so only after careful review of the situation.

What are other fatal mistakes you’ve seen committed, or committed yourself, in starting a venture?

 

I look forward to your thoughts and questions.

 

Paul Morin

paul@companyfounder.com

www.companyfounder.com

 

 

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Jun 112017
 
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To Make More Money, Solve Bigger Problems

What entrepreneur does not want to make more money? The question is how to do it.

While there are exceptions, of course, in my experience and observation, the amount of money you make is usually directly related to the size of the problem you are solving for your client or customer, the barriers to entry to getting into the business, and how many other people are willing and able to solve the problem you’re looking to solve for your prospective customers. These factors are particularly important when it comes to service businesses, which is what we’ll focus on here.

Let’s consider a few of many possible examples.

House cleaning

Undoubtedly, keeping one’s house clean is no small problem, particularly if you have kids and pets. That said, cleaning a house requires minimal specialized skills and there is a large number of people willing and able to provide this service. So, as a house cleaner, you’ll make OK money, but nothing that will knock your socks off. In order to make exceptional money in this business, you’d need to have a large customer base and a team of cleaners working for you. You’d still be making a relatively low profit margin, but on a much larger volume of sales than if you were doing all the cleaning yourself.

Mergers and Acquisitions Advisory

In the M&A advisory business, there is plenty of opportunity to make more money than in many other service businesses. This is true despite the fact that there is a large number of providers of these services. How is that possible? Well, in M&A advisory, whether you’re advising the buyer or seller of the business, typically there is a great deal of money at stake – anywhere from hundreds of thousands to tens of millions of dollars, or even more.

In other words, these are bigger problems to be solved for your customer. In such a situation, the buyer and seller are willing to pay significant dollars, often even a percentage of the deal value, in order to attract high-quality advisors. This business also requires specialized knowledge and credentials which act as a barrier to entry, so although there are a lot of M&A advisors, it’s a relatively small number compared to what you’d see in other service businesses where the knowledge and credential requirements are much lower, or non-existent.

Family Business Advisory

In terms of having bigger problems to solve, family businesses probably end up somewhere toward the top of the list. Running a family business is very challenging, with the challenges often growing with each successive generation of the family. In such a situation, where there’s a lot more than money at stake, and the money issues themselves can be quite large, the advisors tend to make more money than your average consultant or provider of other services.

Again, in order to provide advisory services to family businesses, specialized knowledge and experience is required, so there are significant barriers to entry in this business as well. Not dissimilar to M&A advisory, as described above, family business advisors are paid quite well, with daily rates ranging from a couple thousand dollars to well over ten thousand dollars. These advisory fees can be seen as a bargain by the family business client, though, as in many cases the survival and prosperity of the family business – the engine of wealth for the family – hangs in the balance.

Tree Removal Service

The tree removal business is quite different than the services mentioned above, as it involves extensive and dangerous physical labor, combined with planning and ingenuity. The specialized knowledge and equipment required for this business typically also take a significant investment of time and resources to acquire, which places sizable barriers to entry in place. This is particularly true for the tree removal businesses that are “legitimate,” rather than just a couple guys with a chainsaw and a pickup truck.

So, given the barriers to entry and the risk inherent in cutting trees near people’s houses and other structures, it’s not surprising that entrepreneurs in the business (“legitimately” in the business) make more money than other entrepreneurs in service businesses that solve “smaller” problems and have fewer barriers to entry. There is plenty of competition in this business, but there is also plenty of business to go around, given that ongoing tree maintenance is necessary and acute tree removal needs arise on a regular basis due to hurricanes, other windstorms, and fungus/other diseases in the trees.

We could look at an almost endless list of service businesses and press each of them against these factors of the size of the problem solved, barriers to entry and number of competitors in the business, but I’m sure you get the idea already.

When you are looking at starting a business or expanding your current business, carefully consider these factors. Such an exercise is likely to give you a solid understanding of how likely it is that you’ll make more money in the business you’re considering than in other businesses that may also be options on the table. That will allow you to make a more informed decision about where to invest your time, money and other resources as you take on your next entrepreneurial venture.

I look forward to your thoughts and questions.

 

Paul Morin

paul@companyfounder.com

www.companyfounder.com

 

 

 

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Jun 102017
 
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How To Sell Better If You’re Not A Salesperson

Most everyone in business would like to know how to sell better. If you don’t perceive yourself as a salesperson, but you still need to sell, it’s that much more important that you arm yourself with tips and tricks to get the job done.

Here we’ll go over several tricks (“hacks, tips) you can use to learn how to sell better, even when you don’t really want to be selling…

A Few Tips On How To Sell Better…

… even when you’d rather be doing almost anything besides selling:

 

How To Sell Better Tip #1

Realize that you don’t need to be an extrovert to be good at selling.

There is a common misconception that only backslapping, glad-handing people that say hello to everyone they see, can and should be salespeople. That mindset is outdated in a day and age where the world is much more complex and has many more channels for “selling” to prospects. Do these sorts of salespeople still exist? Of course they do. Do you need to take this approach to be effective at selling your products and services? Absolutely not.

 

How To Sell Better Tip #2

Work with an organization that appreciates different approaches.

If you want to be good at sales, and let’s be serious, everyone who’s an entrepreneur is selling to some degree, work with, or better yet, create an organization that appreciates that all selling doesn’t need to be of the stereotypical used car variety. A great deal of your success in selling as a non-salesperson will be a function of working with a team that appreciates non-salesy selling. If you’re being pushed to be pushy and that’s not what you’re all about, then you’re probably working with the wrong organization (even if you created it).  Change it, or move on.

 

How To Sell Better Tip #3

Change your definition of selling.

Rather than seeing selling as pushing something on someone who doesn’t want what you have, see it as a combination of education and helping others. Go into it knowing and acknowledging that your product or service may not be for everyone, but commit to using the process of educating your prospect, and educating yourself about the needs of your prospect, to only help those who are in need of what you offer.

 

How To Sell Better Tip #4

Become a thought leader in your field.

Use blogging and social media to develop a reputation as a thought leader in your field. You will then have people coming to you seeking your expertise, rather than you having to go to them asking for business. Once this dynamic changes, you will be amazed how much easier it becomes to make the sale. In fact, you likely won’t feel as if you’re selling much at all. If you truly become a thought leader, many people will arrive pre-sold.

 

How To Sell Better Tip #5

Make sure you are selling a product and/or service that you believe in 100%.

If you’re a thinker – and you probably are, or you wouldn’t be reading this to educate yourself – then you need to believe fully in what you’re selling, or it will likely be very obvious to your prospect(s) that even you are not completely sold on what you’re selling. In my experience, it’s hard for cerebral types – thinkers – to fake their enthusiasm for something they don’t believe in.

On the other hand, when thinkers fully believe in what they’re representing, their passion and sense of mission for getting it out there to the world is palpable and contagious.

Do you believe in what you’re selling? Be honest. If not, change it so you do believe in it 100%, or change what you’re selling.

 

How To Sell Better Tip #6

Put your big boy (or girl) pants on.

Listen, if you don’t perceive yourself as a salesperson, that’s fine, but if you’re going to be effective as an entrepreneur, as already discussed, you’re going to be selling, in one form or another, a good portion of the time. So, suck it up! Stay mission focused. Realize that in order to accomplish your goals and dreams as an entrepreneur, selling is part of the deal! Learn to sell in a way in which you are comfortable and effective. Undoubtedly, particularly in the beginning, you will step out of your comfort zone plenty, but as time goes on, as an intelligent and adaptive entrepreneur you will come up with a selling approach that works for you. Embrace it and continue to grow in the important craft of selling.

 

How To Sell Better Tip #7

Learn to have fun will all aspects of selling.

Bottom line is that certain aspects of selling are not very pleasant. Being rejected is not something many people wake up in the morning actively seeking out. Over time, though, you can learn not to take yourself, or your prospects, too seriously. It’s highly unlikely that what you’re selling, particularly in a sale to a particular prospect, is life or death. Learn to focus on the big picture of your goals and dreams and rather than letting rejection or “failure” in a particular sale get you down, take it for what it’s worth – a learning opportunity – and move on. If you can learn to enjoy, rather than dread your interactions with prospects and other important constituencies of your business, your life will be that much more pleasant and your effectiveness in selling and beyond will likely reach levels you never thought were attainable.

 

What other tricks have you used to sell better as a non-salesperson?

 

I look forward to your thoughts and questions.

 

Paul Morin

paul@companyfounder.com

www.companyfounder.com

 

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Jun 092017
 
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Think Of A Startup As A Metaphor For Life

A startup is nothing if not a roller coaster, with highs and lows, running fast and slow, and everything in between. Does this not sound similar to life in general?

Perhaps if we think of running a startup as similar to running our lives, we can better deal with the phases and inevitable ups and downs that are inherent in being an entrepreneur.

So let’s have a little fun and get a little philosophical as we head into the weekend – let’s look at the phases of our lives and our startups.

Birth and Infancy

Our startup is born, just as we were. At birth, we know next to nothing and we are entirely dependent on others for our continued existence. Not all startup entrepreneurs know next to nothing, of course, but I’d argue that regardless of prior experience, their success in a particular startup typically is largely dependent on those around them. This is one reason that successful, seasoned entrepreneurs with strong networks are highly valued and sought after by early stage investors. They understand that the serial entrepreneur essentially has the advantage of being born again, in the form of a new startup, but this time with all the knowledge they’ve gleaned from mistakes made in previous startups.

Toddler Stage

As the saying goes, you need to crawl before you walk. Per above, if as a serial entrepreneur, you’ve already “learned to walk” in a previous startup, then you have a distinct advantage. If you’re new to the startup game, though, you will likely have to learn to crawl first, like most everyone else. This process will include falling down, bumping your head occasionally, and learning through the tried and true method of trial and error. If you are unable to learn from your mistakes, or are impatient and try to skip the toddler stage, there’s a good chance you will be stopped in your tracks and will not be able to move on to the next phase in your startup.

Early And Middle Childhood

For humans, this phase would be from roughly three to eleven years old. For a startup, it would likely be from roughly two to five years old, depending on many factors, including the rate of change in the relevant industry. This is the time during which you start to gain a better understanding of what’s going on, and if you’re keen to learn and you have good teachers (a good “support infrastructure” in general), you tend to progress faster than those around you. If you don’t have a good support infrastructure and/or are unwilling or unable to learn from and course-adjust based on trial and error, you’re in for a difficult few years. Further, if you do not learn and make adjustments during this phase as a startup, your odds diminish greatly for making it to the next phase.

Adolescence

It’s in this stage, in life and in your business, that you’re now likely to make improvements and/or mistakes that could be life changing. If you’ve been paying attention during the earlier phases, it’s during adolescence that you think you have it all figured out. Now, magically somehow, you no longer need or accept advice from those around you, including those who’ve made most, if not all, of the mistakes you’re about to make unnecessarily. This is a very dangerous phase, both in life and in business, where you usually don’t know enough to make great decisions, but you definitely know enough and are overconfident enough to do some serious damage. The hope is that, both in business and in life, you can swallow your pride enough to take counsel from your “elders” and navigate your way through adolescence.

Maturity, And With Luck, Old Age

Assuming you’re able to navigate and survive adolescence, you’ll likely come out the other side with increasing maturity. You will now gradually become what you didn’t trust – an elder – in your life and in your “startup” (which is now far beyond startup phase). As a mature adult, you can now decide how you want to spend your most productive years. In business, you’ll usually want to “stick to your knitting” and continue whatever momentum you’ve created in your core business, only moving into new markets and opportunities after the careful analysis and consideration you can perform with the knowledge you’ve accumulated over time. This is quite similar to life, in that once you’ve gotten your life on a track you’re happy with, you want to be very careful not “screw it up” as a result of shiny object syndrome.

In business, as in life, assuming you survive the various phases discussed above, you’ll reach “old age,” where hopefully, you’ll spend some time sailing into the sunset and enjoying the success you’ve created.

The main takeaway from thinking of a startup as a metaphor for life is that in both business and life, you will go through phases.

It’s natural. It happens. It’s not something to lament. Enjoy the phases as you pass through them. Learn as much as you can in each phase, so you can make the phases that follow that much better.

Realize that with startups, as with life, most phases don’t go exactly as planned. Be willing and ready to adapt to whatever is thrown your way. In our dynamic world, the ability to adapt is fundamental to success in business and in life.

 

Paul Morin

paul@companyfounder.com

www.companyfounder.com

 

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