Category: business

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business

Tradeoffs Small Businesses Make – A Better Approach

As I have shown in the previous post (Tradeoffs Small Businesses Make Are Wrong) picking up “cheap”, “good” and then “fast” is wrong? I promised to elaborate on a better answer, so here goes.

If you have any kind significant small business experience – you probably already suspected that there is no right answer. At least there is no silver bullet. What you want to do is project a right image and get the best for your business. You wouldn’t buy a hot dog from a street vendor for any price if you don’t eat hot dogs or if you are not happy with cleanliness of the spot. In other words – you always go for quality first and you are willing the price if this price is justified. When you go to a fancy restaurant – you’re not questioning the portions, even though they are noticeably smaller than any of all-you-can-eat offerings. Why? Because of the quality!

If you are not doing the same for your business, you should. Or you should quit. Quality is, in most cases, the best competitive advantage you can come up with. Features will be duplicated. Prices will be brought down. But beating quality is a long and complicated road, so if you can offer a higher quality product from the start – you should. It works the other way too – you should ask for the highest quality you can buy for your money.

That means you should start buying before you even look at the first price offering. Think of how important the product or the service is for your business, what the impact, the benefit or justification would be to having this product or service. For example, if you want a new web site for your new product – think how big is the market you want to engage and if whole new web site along with it’s promotion is worth the return you will get.

Once you are done assessing the desired outcome, you should start shopping around. This way when you are in negotiations with service provider or sales person – you know exactly what you want and how much you are willing to spend. A lot of companies are willing to give you the most bang for your buck – as long as you know what bang you want. In many cases that is what we offer our clients – give us your budget and we will give you the best we can that those money can buy. So far this approach for clients worked better than anyone else. This way we know how much we are paid and client knows what to expect for that amount – and is happy with it.

To wrap it up – the so-called “right” answer to the problem of choice is to get the best quality for the money you are willing to spend. Each time you have that urge to say “I want the cheapest thing possible” always think that some people throw food into garbage and that food is the cheapest you can find. Would you eat  it? I’m sure you won’t.

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business

Tradeoffs Small Businesses Make Are Wrong

Tradeoff triangle - speed, price, quality - Small Business Blog The trade-offs that small businesses are making are wrong. Well, most of them are. Look at the picture on the left and it will get obvious that you can’t just tweak one of the parameters without compromising other two.

Here’s where it gets tricky. Sometimes, during negotiations, when clients ask me how much would something cost I say I can do cheap, good, fast – pick any two. What should come to no surprise to anyone is that clients almost always pick “cheap” first. Then they add “good”. Then, after some thinking, they say “and I don’t want it to drag into next year”. It’ not just that this is “crisis” and people are short on cash. It’s the way of thinking of small business owner. Guess what’s wrong with this picture?

You think nothing? Alright, read on.

First of all – once any business you’re dealing with (and we are talking about B2B here) hears you pick “cheap” first – they think you are cheap and rightly so. What you probably missing is the departure of their train of though. If you are cheap – they better off try their chances somewhere else where they can make more money. Oops. You just lost a valuable partner, future investor or a bunch of referrals.

Second – when they hear you pick “good” as a second, they immediately project this on your product or service. If “good” comes second for you when you are getting something for your business, it means you are not making goods or services good in the first place, you are making them cheap. And if they turn out to be good – it’s an added benefit. Oops again – you just did more damage to your image or brand than all your competition together.

Third – when they hear your projected time line is “sometime before next year” – they get a really good understanding of your take on schedules and deadlines. That is – if they are still listening at this point.

You can see that a natural response from most small business owners is damaging their reputation – in both short and long term. Even though there is no right answer to this question (strictly speaking), any business owner who want their business to grow should know how to answer that. How? Next post would elaborate on that.

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business

Small Business Issues – 7 Areas To Expect Most of The Trouble

While my fascination with Google Wave is settling I want to go back to what this blog is all about – small business. It’s no secret that most of small businesses concentrate on surviving and becoming profitable. News are full of glamorous stories about glorious start-ups. In real life there are thousands of less known ventures and businesses that are alive and kicking – every day. Success of a small business is, indeed, in moving from failure to failure. As long as each failure results in small business owner learning valuable lesson.

We have recently completed a company analysis for $1.5M business. Scratch that. Recently we have completed an analysis of 10-year old successful company that had just found out they are worth well over a million dollars. They though their worth was around $200K and they treated their business as such. Problems we have uncovered and presented to the owners are not uncommon. Even more so, I would dare to say that most small business’ problems are falling under one of seven main categories:

1. Business owner/Leadership issues. Business owner may lack vision, being stuck in a day to day routine. Business owner may, on the other hand, have too broad a vision, trying to compete in all areas at once. Either way business looses.

2. Human Resources issues. Speaking of small business owners it is always hard for the owner to find a person they can trust. Money are tight, there’s never enough time so the owner is convinced that any new person will not be a good fit for the company. Maybe some time later. Being able to delegate solving secondary problems is a virtue not many small business owners possess.

3. Innovation issues. Most of the businesses are shy of innovation because they shy of money. Or so they think and so they say. In some cases it might be true. However in most cases innovation (not necessarily technological – it could be just a different approach to sales) is the ultimate source of  company’s strategic growth. Just because it was working before – doesn’t mean it will work the same in the future. But even if it will – would you rather make the same money or double that?

4. Marketing and sales issues. Most people create their business because they know how to do something, not how to sell it. They think once they start offering their services people will come. People will, indeed, come – to those who can sell to them. Not knowing how to market themselves, small business owners fail to capture their strategic share of market. Around 75 to 80% of business owners cannot price their services or goods properly.

5. Operations and logistics issues. This area is so broad that I would probably have to create another post just for that. Most small businesses fail to understand the importance of the fine-tuned operations. Maybe you spend too much time going to suppliers when for little extra money you can have them deliver to you – while you be making much more money rather than putting your business on hold. Or maybe your people are doing the double work by filing documents in both paper and electronic forms. Or maybe there is something else. Time is the most scarce resource that you have, and operations issues are the biggest time waster.

6. Legal issues. This is a can of worms of its own. Do you have all the licenses you need to run your business? Are you covered in all states and counties you operate? Do you have insurance that will cover you in case something happens? Have you filed all your tax reports on time? You may be surprised at how tricky these things can be.

7. Financial issues. This is the item most of business owners would have put first, so I am deliberately putting it last. You think you have money problem? You might be right. The reason for that is that you are having some of the issues from the list above on your hands. Either way you are not collecting enough sales, or your expenses are too high, or both. Unless, of course, your business model is flawed, but that’s whole another story.

So what is the outcome of the analysis that any small business should do? Identify the most flawed areas and fix them – one by one. Don’t wait, don’t put major things off – the larger the company the harder is it to change things there. So start early, move fast. Today is a good day for change.