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  • Aspire » Small Business Strategy

    16 Mar
    Picture from Raneko via Flickr

    Picture from Raneko via Flickr

    Peter Thiel makes a lot of excellent points in his book Zero to One – the overall theme of the book is a study of what successful innovation looks like (based primarily on tech start-ups). One of the main ideas in the book – that most of the really successful businesses have started by dominating a very specific and limited niche market.

    Want some examples?

    Tesla has a long way to go to be considered a historical success, but they are certainly well on their way…and although their story is one of innovative green technology for the automotive sector, their initial launch was very tightly focused on premium sports cars. They weren’t building a green car that looked sporty…the Roadster is a world class sports car that happens to use green technology.  This sharp focus allowed them to learn, adapt and innovate to a very specific audience and build a focused brand that could expand over time – now they’re starting to dominate the premium sedan market (not just the premium electric sedan market…but overall).

    Southwest Airlines – everyone’s favorite business case study validates this idea as well. Despite having a grand purpose to bring affordable air travel to the masses, their initial launch was with a few markets in the state of Texas. Not only did this allow them to (relatively) bootstrap the business but it gave them the opportunity to modify and perfect their business model on a small scale before expanding to the rest of the US.

    Mark Zuckerberg started Facebook initially as a platform that was only available for students at Harvard – imagine if he had attempted to launch to the world (which is his market now). He dominated the Harvard online social media market, moved on to other colleges after that before going much broader.

    iTunes was initially only available to the Apple / Mac community – only becoming available to the much, much larger PC / Windows based world after version 4.0 or so.

    In all of these cases (and there are many more) the initial focus was purposely very narrow with the idea that you need to figure out how to dominate in a narrow niche and then find a way to expand from a position of strength.

    How does this apply to the rest of us?

    You may not have grand plans to create the next Facebook, Tesla or Southwest Airlines – most of us don’t…which is okay. Nothing works if we try to pursue other people’s dreams and there’s a lot to be said for wanting to be great rather than wanting to be big.

    However – that doesn’t mean the idea of dominating a niche doesn’t equally apply to you on your journey towards building a great company.

    If your business is fairly new then you still have the opportunity to identify a niche…a focused target market that you believe will hit your sweet spot in terms of what you know, who you know and how you would like to operate.

    If you have an existing business, it’s likely that you currently serve a broader audience – probably because you believed that gave you the best chance of success. I can’t tell you how many people I’ve heard explain that they will work with anyone who has a pulse or can fog a mirror. Just so you know…excluding dead people isn’t really focusing on a niche. However…if you look at all the people you do currently work with, it’s likely there is some kind of logical subset of your best clients. Here are some possibilities to consider:

    Geographic – do you serve a particular physical area better than others?

    Product Focus – is there one product or service that you’re much better at delivering (and enjoy more)?

    Customer Focus – what kind of clients / customers do you enjoy and help the most? Is there a logical connection (i.e. they all have kids that play soccer…or they love music…or they like to travel, eat out at fine dining…etc.).

    The hardest part about picking a niche is having to say ‘No’ to other kinds of work. As an entrepreneur you’re inherently wired to say you can do pretty much anything. It’s counter-intuitive but the best way to grow is to say ‘No’ to things that aren’t in your niche – that’s the only way you will be able to dominate.

    You can expand later…but do it from a position of strength when you have a highly profitable niche that you are dominating and has enabled you to build a great reputation and brand.

    What would it take for you to focus your efforts? Have you identified where you’re strongest? Where you already have an advantage? Can you make the leap to saying ‘No’ to opportunities that aren’t in your niche? We’d love to hear your thoughts – does this make sense in your world?

    Shawn Kinkade   Kansas City Business Coach

    08 Dec

    Prefer to listen to the article? Hit the play button below – and leave us a comment on the blog to tell us what you thought.


    Getting a Christmas Present

    picture from William Warby via Flickr

    Every year the Holiday seasons tends to start earlier.   Though it is getting spread over a longer period, the month of December still seems to stretch our schedules and the available hours more than ever.  For business owners this can be an especially busy time of year.  If your business is seasonal, and December is a busy season, it can be overwhelming.

    Relax.  Help is on the way…besides taking some deep breathes here are 4 relatively easy tasks every business owner can (and should) complete before the end of the year.

    Meet with your Accountant.  Even if you think everything is in order, have a meeting to review the year.   Are there any time sensitive forms that need to be filed?  Do you have items on your account that need to be written off before the end of the year?  Are there any purchases or other expenses that need to be dated before Dec. 31st?  Review your financials; make sure you understand the financial condition of your business.    Not all accountants are proactive.  It is your business, take ownership in this aspect of it.

    Review Business Policies and Procedures.  If you have a management team, get them involved.  What is working in their departments?  What isn’t?   Challenge them to define and identify weak links in their own areas.  Often time employees, including management keep repeating the same mistakes when a minor change could result in a significant improvement.   When is the last time you had a professional review your HR Manual, if it hasn’t been looked at in the last 2 years, it is way overdue for an update.

    Business Insurance.  The world is changing. Business is changing.  Your business policy may not be up for renewal on Dec. 31st, but now is a great time to have your Business Insurance agent review your policy and make sure you aren’t unknowingly putting your company at risk.   Also, seeking a 2nd opinion on your coverages can be invaluable.  Do you do E-commerce?   Are you protected if someone feels like they were wrongfully terminated?   Are your limits of protection where they should be?  Are you sure?  A good agent will not charge you a dime to review your coverages.   Pick up the phone and schedule a review.

    Thank your employees and your customers.   One would think this is the no-brainer of the list, but reaching out to your customers this time of year and saying thanks should be part of every businesses year end protocol and often it isn’t.  Do all of your customers get some kind of acknowledgement at the end of the year?  It doesn’t have to be a personal meeting or phone call (though it is highly suggested with larger accounts) but, some form of a “Thank you” is in order.  For your employees and support team, whether or not you have a formal Christmas Party or other Holiday event isn’t the issue.  Most importantly, is just let them know you appreciated their contributions throughout the year.   You might be surprised how much “direct eye contact” combined with a sincere “thank you and hand shake” means to the people on your front line.

    The last month of the year is usually a blur, but it also a critical time of the year to get time sensitive tasks completed.    Depending on your company, there certainly could be additional tasks that are not listed above, but these are ones that are applicable for all businesses…even yours!  :-)

    If you have any additional suggestions that should be added to this Year End list, please feel free to share them, we always appreciate any comments or feedback.

    Chris Steinlage  Kansas City Business Coach

    01 Sep

    Grow Profits

    How do you make money in your business?

    I’m not talking about top line sales kind of money, I’m talking about the money that ends up all the way down at the bottom line – your net profits.

    This came up in a great discussion at last week’s Business Book Review on the book Ownership Thinking by Brad Hams. One of the keys to getting everyone in your company on the same page is educating them on how your business works…how you actually make money and ultimately how much money is actually made once everything is paid off and the dust settles. It turns out that many employees don’t know how profits are calculated or created and often confuse sales and revenue with what a business actually makes.

    The good news is that although many businesses may seem confusing, with a lot of moving parts and variables there are actually only 5 ways to impact your profits – and if you can get everyone to understand those 5 things and how they work at your company, then you’re well on the path to start improving your profitability.

    5 (and only 5) ways to impact your profits!

    1. Generating Leads (or Opportunities) from new customers, existing customers and past customers.

    Everything starts with someone raising their hand and indicating an interest in your solution. Often this is driven by marketing efforts – especially for ‘new’ customers but great customer service and a great experience in using your product or service will impact this as well – both in terms of referrals and repeat business.

    Ideas for improving your number of leads:

    • Improve your marketing message – identify your best target market and why they are buying what you’re selling. Are you clearly communicating those benefits?
    • Create ‘wow’ moments for your customers – something they will appreciate and value, but didn’t necessarily expect (and doesn’t cost much)
    • Stay in touch with everyone you’ve encountered – create a mailing list and consistently reach out to prospective, existing and past clients with something interesting and useful.

    There are  ton of other ideas on improving marketing and customer service – pick one or two that resonates with you and make it happen.

    2. Improve your Closing Ratio and your sales effectiveness

    The best marketing in the world doesn’t matter if you can’t convert that initial interest into a sale. Your closing ratio is defined as the number of leads that convert to an actual sale. If you talk to 100 people and 50 of them end up buying something from you, then you have a 50% closing ratio. Getting better at closing sales will increase that ratio and drive more revenue.

    Ideas for improving your closing ratio…or your sales effectiveness:

    • Implement a sales system – having a clear process on how sales works in your world will not only allow you to be more effective, but it will allow you to scale so someone else can take on that sales responsibility.
    • Get some training – selling is a skill and if you don’t work on it, you won’t get better at it.

    Improving your closing ratio by even just a few percentage points can make a big difference – find some ideas that will help you be more effective at sales and put them into action.

     3. Increase your average sale amount

    Perhaps the fastest and easiest way to make more money is to increase the amount that existing customers are spending with you. You could sell them more on each transaction or you could raise your prices – the beauty of raising your prices is that the increase flows directly to your profits (note – you might reduce your sales volume with higher prices…but there’s often room for an increase).

    Ideas for improving your average sales amount:

    • Raise your prices – if it’s been a while since you’ve raised prices, you’re likely overdue and most small businesses tend to under price especially considering the value they generate.
    • Upsell or cross sell – what’s a natural addition, something of value that your clients should also be buying from you?

    4. Improve your Gross Profit Margin – reduce your variable expenses

    Depending on your business you may have expenses that are directly related to your product or service – these are expenses that are only incurred when you deliver to the customer. Your Gross Profit Margin is the difference between the selling price of your product or service less your ‘variable’ expenses (but before you take into account your fixed costs). Let’s say you sell a widget for $100 and it costs you $60 to produce it – your Gross Margin is $40 per unit. Every dollar you can cut from your variable costs will improve your gross margin (and your bottom line).

    Ideas for improving your gross margin:

    • Actively study and understand your variable costs – you can’t improve what you don’t know. Dig into your costs over time and make sure you understand your gross margin for all of your products.
    • Emphasize selling your higher margin products or services – what’s your most profitable product? What would it take to sell more of that?

    5. Reduce your overhead

    The last opportunity to impact your profitability is to reduce your fixed costs – those things that you pay for every month whether you sell or deliver anything or not. This is stuff like your office or retail space, leased equipment, utilities, phone, internet, etc. Every dollar you can save (that doesn’t impact your customers) goes directly to your profitability.

    Ideas for reducing overhead:

    • Identify your biggest monthly costs and see if you can put those up for bid or renegotiation.
    • Maximize your capacity utilization – if you’re paying for expensive equipment or space find a way to get more use out of it (i.e. run another shift or lease it out to someone else when you’re not using it).

    That’s it – 5 (and only 5) ways to impact your profitability. Have you looked at your business in this way? What your current net profit and what are some ideas you could implement to improve your situation? We’d love to hear your thoughts – share them in the comments below.

    Shawn Kinkade Kansas City Business Coach

    12 Nov
    Soup Nazi

    Seinfeld’s ‘Soup Nazi’ – No Soup For You

    Sometimes when you channel surf late at night you get lucky…and you run across a great Seinfeld rerun. Last night I happened to catch ‘The Soup Nazi’ episode – which if you happen to be one of the small number of people who hasn’t seen it, is about an amazing new soup restaurant that’s opened up and has started a soup craze in New York. However the brilliant chef that runs the place is seriously hardcore – if you don’t follow his rules to the letter…then it’s “No Soup For You!” and you’re immediately kicked out of the restaurant.

    It’s a great episode…definitely worth finding if you haven’t seen it. If you’re interested you can find highlights on Youtube. But this episode is more than just a piece of pop culture history – it also has some great business lessons to share.

    #1 Word of Mouth Requires more than just a great product

    Jerry, George and Elaine first hear about the ‘Soup Nazi’ from Kramer…but what makes the restaurant remarkable is more than just the great product (although that’s critical as well) it’s that the owner will yell at and ban anyone who doesn’t follow his ridiculously strict rules.

    It’s the combination of things that really set the ‘Soup Nazi’ up for successful Word of Mouth. According to the bestselling book Contagious – Why Things Catch On by Jonah Berger, the Soup Nazi phenomena covers multiple principles that makes things go viral.

    • The ‘Soup Nazi’ story has Social Currency (makes you feel like an ‘insider’ with cool information)
    • It has emotional resonance (drives particular strong feelings…fear? anger?)
    • It’s observable (in other words people can see the crowds out the door)
    • It’s a story – much more than just great soup…it’s the ‘Soup Nazi’ and banning customers for life

    How can this apply to your business?

    It’s probably not a great strategy to start being really rude and kicking your customers out, but it may be worthwhile to be selective…or to have a clear code of who you work with – and if you can make that into a great story…even better!

    #2 Play to your strengths if you want to stand out

    Kramer describes the ‘Soup Nazi’ as a tortured genius…a true artisan when it comes to Soup. Imagine if the ‘Soup Nazi’ had instead opened a full service diner…and spent 2/3 of his time making burgers, sandwiches, breakfast, etc. The food would have probably been good, but not great. The soup might have still been great, but it would have been buried in a big menu and not stood out – plus the chef wouldn’t have the time to really innovate and create the best possible soup with all of the other dishes that would need to be made. In short it would have been an average diner, doomed to mediocrity.

    How can this apply to your business?

    You’ve got to narrow your focus down to what you’re really good at. It’s only at that point that you will be able to stand out as a genius. That’s when people will stand in line to work with you, that’s when they’ll pay a premium for what you do. Not when you’re trying to do everything…or working on your weaknesses.

    #3 You’ve got to figure out a way to scale

    They don’t cover this in the show, but clearly a major reason why the ‘Soup Nazi’ is unhappy is because he’s working really hard. He’s on the front line of the restaurant, serving the soup and enforcing the rules. It’s pretty obvious that if the ‘Soup Nazi’  calls in sick one day, the restaurant is just going to close. Imagine never having a day off, only being able to sell as much soup as you can make and dish out in a day…all in all, an exhausting business.

    How can this apply to your business?

    Are you constantly working really hard in your business? Is it all about you? If you’re on the top half of the matrix of Effort vs. Success, then you need to figure out how to automate, delegate and systematize what you do to get yourself off the front line. If you can’t figure that out, then you’re doomed to be unhappily slinging soup all day long without a break.

    What lessons can you learn from the ‘Soup Nazi’? We’d love to hear your thoughts – share them below.

    Shawn Kinkade   Kansas City Business Coach

    05 Nov
    Clock picture by eflon via flickr

    Clock picture by eflon via flickr

    Every business needs strategies in place to “fall back” on for the unexpected.  No company is 100% insulated from unexpected challenges that interrupt the normal operations of owning or managing a business…even yours.

    This past weekend was the annual “catch up on all the sleep you lost over the last year in one hour event” more commonly referred to the End of Daylight Savings Time.   We fall back and get to enjoy one extra hour of sleep without being late or having to hit the snooze button!  And you have probably been reminded by the media to change the batteries in your smoke alarms at least a dozen times in the past week!

    But what about your business?  This is also a great time of the year to review strategies your business has in place to “fall back” on when unexpected events interrupt daily operations. Determining what should be on this list to review and prioritizing it will vary depending on your company.   That said, below are some of the more common interrupters we see businesses expose themselves to without a good plan to fall back on and keep their business running as usual during times of turmoil.

    Data Backup:  This is one of the most obvious, though surveys still show that less than 50% of businesses are backing up all their data on a regular basis.  There are a lot of options out there.  Several of the on-line cloud storage companies offer 5 GB or more for free.  Just last week I learned of another local business that had a server crash and they did not have a backup of their data.  It is a painful process to go through.  Don’t be next.  Consult your IT professional; don’t be a victim.

    Passwords & Keys:  If your business uses password protection for sensitive information, electronic locking devices, business related websites, etc. you must have all those passwords in a secured location.  Do you have the passwords of your employees or administrative controls in place to gain access if needed?  What about duplicate keys or master keys for your vehicles and locks?

    Cross-Training:   If two of your key employees unexpectedly submit their resignations tomorrow and announce they are starting their own business the next day, do you have anyone trained to do their jobs?  Insufficient cross-training of employees can severely interrupt the daily operation of a business.  Everyone should have a “fall back” person who is capable of performing their role at a functioning level.  Not an expert, but at least business continues without a significant loss of productivity.

    Sales leads:  If you have a sales team, do you have a system in place assuring you have records of all pending deals?  If you use a CRM is your sales team’s data being backed up and synced regularly to a master database?   The day after your top sales person announces they are going to be leaving is not the best time to start trying to review all the business they have in their pipeline.

    Insurance:  When is the last time you reviewed your business insurance?  Your personal insurance? The changes in health care are top of mind right now, but don’t forget about protecting your business.  Finding out you are under-insured the day after filing a claim on a policy is never a good thing.  Schedule a meeting with your insurance professional.

    This is meant to be a starter list and hopefully it will help you jump start a detailed list, tailored just for your company.   Don’t forget to check the smoke alarms at your business too.  And while you’re at it, test your security system.   Our hope is that you never have to use any of these “Fall Backs” but being prepared in case they are ever needed will provide valuable peace of mind. Please feel free to share your thoughts and add any additional items you think should be included in the space below.

    Chris Steinlage Kansas City Business Coach