Value for professional services firms

Professional services are different from bushings, gaskets, or toy dolls. They are sold differently, marketed differently, managed differently, inventoried differently, produced differently and priced differently. For those who fail to recognize these differences the business of professional services is a frustrating, complicated and an often unsuccessful pursuit. You can't apply the same strategy, tactics and methods that worked in your retail business to your retail consulting firm, even though the knowledge you gained selling $50 t-shirts is the very thing people are willing to pay for.

What small firm operators must learn is that the business of professional services is very different from the content of professional services. The business of professional services demands that you deliver value, while the content of professional services is usually about information. This plays out in everyday life all the time. How valuable is a shoe shine when you are walking into your neighborhood coffee shop? Not very. But how valuable is a shoe shine when you are about to board a flight to an important business meeting? It's the exact same service, but in one instance it is providing value and in the other it's not. How many professional services firms do you know that have essentially setup a shoe shine stand in Dunkin Donuts? They're great shoe shiners, but they aren't offering any value.

Planning to fail: Three fatal capitalization mistakes for startups

When it comes to startups 99% need capital to get started. Businesses need money to get started. Offices need to be leased, products need to be bought, employees need to be paid. And usually all this has to happen BEFORE the first dollar of revenue hits the bank. Capitalization is so important, but it's usually given the least amount of attention. Not surprisingly this is what causes most to fail. When it comes to capitalization avoid these three mistakes.

1. Making decisions before you've got capitalization figured out. What's the number one thing most business founders do first, before they even think about anything else? They lease an office. Some will start manufacturing product or ordering inventory, but most will go out and sign a lease. This immediately paints the owner into a corner, and commits them to the single largest fixed cost they'll face during their first year in business. Soon, other decisions are being made based on this commitment. Insurance is obtained, furniture and warehouse racks are bought, renovations may be made. Pretty soon you're building a business around a lease (or an inventory purchase, or a manufacturing relationship). Here's the thing. Businesses must be built around customers. That means the business must be planned top to bottom to address customer needs. This type of planning takes time and effort, but until you do it you won't know where your dollars need to be spent.
   
   
   
   


2. Taking the wrong kind of money. When it comes to capitalizing a business there are many choices. Founders can use their own money; they can borrow money and lend it to the business; they can have the business borrow money from banks; they can find investors, private lenders or some combination of the two... The possibilities are numerous, but each carries with it a unique implication for how the business will be operated. Before you cash your brother-in-law's check make sure you know what kind of "investment" he thinks he's making. What you perceive as a loan may turn out to be your new 50/50 partner's capital contribution.
   
   
   
   


3. Substituting capital for revenue. Fred DeLuca, founder of Subway, has a great book all aspiring business owners should read. In Start Small Finish Big he devotes the first chapter to "Earn a Few Pennies." Startups need to figure out how to start making money from customers as quickly as possible. Sometimes the availability of deep pockets makes business founders sloppy. By far one of the biggest problems we see is UNDER capitalized startups, but OVER capitalization can be just as big a problem. The tendency to build infrastructure, retool products, tweak marketing, hire talent and spend, spend, spend derails many businesses who forget that if the customer doesn't like what you're selling all the money in the world won't matter. Get to market fast, test your idea, and make a few pennies before you start spending dollars.
   

Time to find a Blue Ocean?

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This book (Blue Ocean Strategy by Kim and Mauborgne) may be worth a revisit. When it was first published in 2005 most small businesses had no need for it. After all, money was falling from the sky like manna from heaven. Even if revenues were soft you could go out and borrow just about anything you needed.

Fast forward three and a half years. The world is full of Chicken Little's, the national news anchors are having a field day with roller coaster ups and downs on Wall Street, and banks are going out of business left and right. Businesses are in a race to the bottom, mostly driven by cutting costs in a desperate attempt at survival. A year ago I was giving a presentation called Surviving and Thriving in Tough Times that focused on sound business practices and planning. Now, I'm telling people to go back and read Blue Ocean Strategy. Here's why.

Kim and Mauborgne put forth the premise that there are red oceans and blue oceans. Red oceans are defined as the traditional market for your service or product. They are rife with competition. Blue oceans represent uncontested market space where there is no competition (yet). Companies find blue oceans by examining the factors that define their industry and then choosing to do one of the following:

1. Eliminate. If the market takes certain factors for granted they might be eliminated.


2. Reduce. If factors aren't producing value for the customer they can be reduced.


3. Raise. If customers are being forced to make compromises you can raise certain factors to eliminate that necessity.


4. Create. Find out what customers value and produce it.

I think the concept of blue ocean strategy is particularly relevant today because many firms are engaging in activities 1 and 2. They are reducing or eliminating features, products and services, but they are doing so from a cost containment stance rather than a strategic one. Change is a hard thing to embrace. The reality of the current market is that companies are being FORCED to change. Why not harness that momentum and make something great come out of it? This truly is a time of extraordinary opportunity for those who are paying attention.

Mint.com - because it’s all personal at some point

Here's a challenge I am facing trying to cater to business clients. At the end of the day it's all personal. We talk business strategy, corporate budgeting, tax planning, dashboards, scorecards, marketing, return on investment and all the other stuff that helps businesses become better businesses. But none of that stuff matters if the owner's personal financial life is left out. Too much financial stress leads to distraction and poor decision making. Too little can help explain a lack of motivation. Sooner or later we need to move off the corporate financial statements and into the personal checking account.

Personal finance 101 is called budgeting. And the first step toward proper budgeting is knowing where the money is going NOW. There is a great little tool that's been around the web for a while that is hands down one of the easiest and best personal financial widgets out there. It's called Mint.com. Here's what I like about it.

1. It's web based. This means free, no download required and always available.


2. It's easy. I set up our one primary personal checking account in less than five minutes


3. It pays off early. After setting up my account Mint downloaded the last three months of transactions enabling me to see exactly where the money has been going. I didn't have to wait a few months for it to obtain the data needed to show me results.


4. One stop shop. Mint pulls data from bank accounts, savings accounts, credit cards, mortgages, investment accounts...it all ends up in one place.


5. Easy to maintain. You don't have to DO anything to keep Mint going. It downloads your transactions every night. You can also set email alerts to notify you of strange transactions or balance updates.

There are two drawbacks some people may experience. First, if you are paranoid about giving your passwords to Mint you probably won't like it. In an age where most people are comfortable banking online this probably isn't an issue, but I'm sure some people shy away from it. Second, if you write a lot of checks Mint doesn't know how to classify them. For people who use debit cards or online bill pay it's great. If you're old school, not so much.

Life after the election: Ten rules to live by

Today I voted on the way to work. I hope you do the same. I don't know who is going to win the election. Those of you who read this blog know my sentiments regarding one particular candidate's tax policies, but that's not what this post is about. This is about life after November 4th. Before today is out our country will have elected a new President. That is pretty cool, I don't care whose sign you have in your front yard. So no matter who you vote for here are my ten tips for life after the election.

1. Pray for the President. It doesn't matter who is in office; it is a gargantuan responsibility. He's going to need help and you would be wise to ask God to lend him a hand.


2. Accept responsibility for yourself. Blaming someone's tax increase for your lack of success is as absurd as lamenting the absence of a social program to make your life easier. If you don't accept responsibility for your life you can't change it. And the "Change" you need has to come from the person in the mirror.


3. Be thankful. If your candidate wins the election be grateful that you were able to get him into office. If the other candidate wins the election be thankful that your neighbor was able to get him into office. I would much rather have a President elected by the guy across the street than one appointed by a council, commission or despot I never saw.


4. Don't wait for politicians. If you see something that you think needs to happen get creative and start the ball rolling. If you don't know what to do start asking people. There is nothing worse than someone who uses government inaction as the excuse to complain. If you're surprised that Uncle Sam doesn't move as fast as he needs to you're either VERY young or you haven't been paying attention.


5. Read a book. When the election returns are through turn off the TV. In fact, turn it off for the entire month of November. If you want to make a difference come inauguration day read a book written by or about the winning candidate. You'll be more respected and a lot more engaging in conversation if you do your own homework rather than regurgitate the views of Shane Matthews or Rush Limbaugh. Doing your own thinking starts with doing your own reading.


6. Be gracious. The 2000 election and it's aftermath was the most contentious political environment of my short life. I don't remember the way all my friends and associates voted, but I remember the ones who made asses out of themselves. Life is about relationships, not elections. If you can't partake in the democratic process and be civil to those you disagree with you're missing the whole point. It's a peaceful transfer of power, not a gloating or sulking one.


7. Be realistic. For as long as there have been elections there have been candidates promising doom and gloom if their opponent is elected. Four more years of Bush isn't going to send the country to hell in a hand basket and an Obama Presidency isn't going to turn the country into an EU surrogate. It's easy to imagine the worst in any situation because it requires you to do nothing. Imagining a world that's better off, even if things don't go your way means you have to work. Welcome to life.


8. Save. I don't care who you want for President you need to spend less than you make. It's simple math. Your choices are a life on your terms if you save or a life on the government's terms if you don't. No offense, but I don't want to depend on any politician for mine and my family's financial well being.


9. Give. It doesn't matter who you are; you can find someone worse off. Whether it's time, money, health, family, employment, knowledge, compassion or faith...you have something that someone else needs desperately. We are wired to give. There are many examples of people throughout history who reached the pinnacle of financial and material success only to find that giving provided the one true, lasting payoff. If you want to be rich financially, emotionally or spiritually, you must give. Don't wait until you've got a million dollars in the bank to learn such an important lesson.


10. Decide. The one thing you have complete and total control over is your decision to think, feel and act right now. Your decision NOT to be joyful, thankful and encouraging is the only thing standing in the way of a wonderful life. It's not a politician, it's you. It's your decision. You can literally change your life with a decision. That's exciting! I don't care who's on your ballot.