What makes you different?

We have a pretty intense 13-week consulting program that we offer to clients. The program is designed for clients who need to re-focus their efforts and start managing their business as an investment rather than a 70-hour per week job. The first thing we focus on is vision. Without a clear vision of where the business is going owners flounder without priorities.

After the vision is established we force business owners to explain their place in the market. In other words, we need to know what makes them different. Here's a series of questions you should be able to answer about your business.

• If someone had a business next door to mine that offered the same product why would people choose me?


• Do I look different from my competitors? How so?


• Am I priced differently?


• Is my post purchase experience different?


• Is my pre-purchase experience different?


• Do my customers physically look different than customers of my competitors?


• Do my customers have a different attitude?


• Would my customers buy from this business if I weren't here?


• Has my typical customer changed in the last one year, three years, five years?


• Where are my competitors?


• Does my store or office look different from theirs?


• Do I communicate with my customers differently?

This list is by no means exhaustive but it will get you started down the road of understanding what sets you apart from the competition. And make no mistake, unless you are different (in a good way) you won't be around for long. As you put together your list of differentiating factors keep the following in mind.

1. This list is for you. It should be indicative of the ACTIONS and things you are DOING to make yourself stand out. There's no value in lying to yourself about the way you WANT to be different. Be brutally honest.


2. In line with being honest, don't rely on yourself, your staff, or your current customers to give you an honest opinion. As individuals we are great at deluding ourselves. Employees often tell the boss what they think she wants to hear. Customers are reluctant to offend you. Find someone, your attorney, your CPA, a straight shooting family member or best of all, a friend who is also a business owner. You need honest answers and feedback, even if it hurts.


3. Talk is cheap. If you say something like "I really service my customers. I really value customer service. I take care of my customers like family" STOP! I've heard this so many times at Chamber functions and business networking events that it makes me sick to my stomach. If that's all you've got then go do something else. HOW do you service your customers? HOW do you value customer service? HOW do you treat them like family? When I've had the guts to ask someone these "in-your-face" questions all I get back is a blank stare. The fact is very few businesses differentiate themselves on the basis of service. It's expensive, it's tedious, and it requires better management than most small businesses will commit to.


4. Be wary of someone who says "We really don't have any competition." This is a business that is going nowhere. One year after it's release the iPod commanded greater than 90% market share. It was a product that had no equal and some would say no rivals. Yet in the past seven years Apple has released 14 additional iPod models. That's one every six months on average. How many business do you know that compete with themselves by releasing a new product every six months. The best businesses, especially the best small businesses, have a keen awareness of who their competition is, where their competition is going and what they need to be doing to lead rather than follow those competitors. Very few small businesses take their competitors seriously enough.

Finally, remember that the object of understanding what makes you different is to guide future ACTIONS. Talk, planning and strategizing are of little use unless you DO something. Make a commitment today to understand what makes you different and to do something with the results you find. If you need some help either getting started or taking action call us or someone else that can guide you. This market is turning out to be brutal for businesses who don't understand their place. For those that know where they stand, how they're different and what they have to offer there are tremendous opportunities to capture market share!

Why weekly matters

The first thing we do when researching a new client is find out how often they review financial information. Many are accustomed to sitting down with financial statements quarterly. About the same number only look at financials annually (with their tax return). A very small group review monthly numbers. A fraction of a fraction review summarized financials and key performance indicators weekly. I believe weekly reviews are important for a few reasons.

First, employees don't operate on a monthly schedule, they operate on a weekly one. When was the last time you woke up and said, "Thank goodness it's the 30th!"? It doesn't happen. But every week without fail your mood changes based on how close (or far away) you are from the weekend. You plan your community events on a weekly basis (2nd Tuesday, 3rd Wednesday, etc), your social calendar is on a weekly rotation, you go to church weekly, you mow the grass weekly...but you work monthly. It doesn't make any sense. Our world is wired in a weekly format.

Second, customers operate on a weekly schedule. If you don't believe me look at any retail business. Their busiest days are typically on weekends. When customers spot five weekends in a month they don't think to themselves "Wow, we better reduce our spending by 25% for the first four weekends so we can spend the same amount as usual on the fifth weekend." That's ridiculous.

Third, speed is critical. A business that reviews it's numbers weekly has four times as many opportunities to make corrections and head off bad decisions as a business that only reviews it's numbers monthly. When we push owners to adopt a weekly reporting schedule they usually tell us they can't get good information that fast. The truth is you don't need perfect information. A business that waits for 100% of the information on a monthly basis is ALWAYS going to be beaten by the business that uses 80% of the available information to make decisions four times as quickly. We can put processes and procedures in place to automate much of the weekly closing work by using estimates and other shortcuts. These numbers get "trued up" at month end but in the mean time owners have vital feedback on sales, product costs, overhead and leading indicators that put them light years ahead of their competitors.

Finally, weekly reviews FORCE owners to think strategically, and they get everyone in the HABIT of thinking about the business as a whole. Most business owners spend the day putting out fires and jumping from one crisis to the next. Once you've been through a quarter where you have reviewed financial statements 13 times in three months you'll never go back to monthly reviews. You won't be able to. You and the people around you will crave the information and feedback that comes from weekly analysis. It's a different way to manage your business, but there are some ground rules.

1. Make it simple. Weekly financials should be summarized, one-page documents.



2. Delegate it. Owners should not prepare the financials. Otherwise you are only one crisis away from missing your weekly review. Put it in a capable employee's hands and hold them accountable to the weekly schedule.



3. Involve the team. An owner sitting alone once a week looking at financial statements is only a little more useful than one looking at monthly statements. A whole team going over numbers once a week is a recipe for success.



4. Look forward. The analysis should include a handful of non-financial measures that can be used to predict next week's activity. Order backlog, next week's numbers from last year, marketing campaigns in play, proposals in the field...all of these can be used as predictors.
   

If you need help getting started on this path just ask. Your CPA should be able to craft a simplified reporting statement and configure your accounting software to produce much of what you need at the push of a button. Identifying KPI's is a little more involved but a little financial analysis will often go a long way in determining which non-financial numbers you should be paying attention to.

The most important process

Businesses need processes, otherwise they are just jobs for the owner. Without a process the owner gets stuck doing even the most routine jobs. With a set of good processes in place the business owner doesn't have to be there for work to get done. So if you're new to the process bandwagon where should you start? There are all kinds of process to worry about... back-end accounting processes, processes for making sure your location is clean and orderly, processes for reviewing employee performance, processes for getting the work itself done. But in my mind the most important process is the one that kicks into gear when you get a new customer.

Customers are the vital ingredient needed by all businesses. They're like water, you can survive without them for a while but in the end a lack of customers means death for a business. That's why you need to consider what happens when you get a new customer very carefully. Don't get scared. All we're talking about is bringing some focused attention to the customer's first experience as your new client. Here are some questions to get you started?

1. What do you want the customer to experience?


2. How do you want the customer to feel before, during and after the transaction?


3. What things need to happen EVERY time you get a new customer?


4. Who is responsible for making sure these things get done?


5. How long should the process take?


6. What do you need to know about your customer before the transaction is over


7. What does your customer need to know about you?


8. Is it easy for your customer to come back and do business with you again?

Answering these questions helps you think pro-actively about your customer sign-up experience. And that sets you apart from 90% of other business owners. The fact is most businesses are concerned about two things 1)Delivering the product or service and 2)Collecting payment. This is a "drive-thru" service mentality. It's great if the only things that matter are speed and price, but there's a limited number of opportunities to build a robust business this way. Most customers want more than speed and price and if you don't know what else they want they'll shop your competitors until they find it.

To give you an idea of how this works in real life let me tell you about a "customer creating" experience I had over the weekend. I went to a local hardware store with my son Saturday morning to pick up just two items for a home project. Upon walking in the door we were greeted politely and professionally by two clerks. I told them what we were looking for and I was escorted to the isle and items I needed (polyurethane and foam brushes). I was also asked if I needed sandpaper or rubber gloves. I already had both, but I hadn't thought about needing gloves. Most important was the attention given to my three year old as my helper. They kept him occupied while I figured out exactly what type of finish to use.

At first blush you might think that example is about customer service rather than signing up customers, but you're wrong. The fact is this business is great at signing up customers BEFORE they buy anything. Let me explain. In most retail scenarios the attitude is "Take a look around and let me know if I can help you buy anything." Here the attitude is always "You've come here to buy something, tell me what it is and then we'll go find it." They're assertive, they assume you've got money in your pocket or you wouldn't be there, and they're eager to help you spend it. They take it for granted that you're a paying customer before you walk in and they do it in a carefully orchestrated manner that doesn't come off as pushy.

Take an hour or so sometime this week and answer the questions above. Then design your customer sign-up process. Share it with your employees or better yet get them to help create it. Then write it down on paper and use it consistently. Your customers will be able to tell the difference between a process that is thought out and consistent over one that is haphazard and loosely followed. And if they know what to expect you're much more likely to get referrals and repeat business.





Why weaknesses don’t matter

People spend way too much time worrying about their weaknesses. There's a misguided notion that well rounded people don't have weaknesses. Even worse is the belief that well rounded people are the only ones who can be successful. I like sports so let's consider a few examples of athletes with weaknesses that didn't really matter.

Shaquille Oneal is regarded as one of the NBA's worst free throw shooters. He once missed 11 of 11 in one game. Yet Shaq's won four NBA championships, has been named to the all star team 14 times, has won an Olympic gold medal and a world championships gold medal.

Tiger Woods ranks 166th on the PGA Tour when it comes to driving accuracy yet he's widely considered to be the world's greatest golfer...ever.

Reggie Jackson leads major league baseball in career strikeouts yet he was a 14 time all star, won five World Series and was elected to the Hall of Fame the first time his name appeared on a ballot.

It's far better to make your weaknesses irrelevant. Shaq could spend days in the gym trying to improve his free throw percentage or he could master what he's best at. He's fourth for all-time points scored, fourth in rebounds and third in blocked shots. You get the feeling that Shaq's coaches could care less whether he improves his free throw shooting if it means these other strengths would suffer.

Tiger Woods may have trouble finding the fairway, but he leads the PGA in driving distance, approach shot accuracy and putting. The fact is when he misses the fairway he's often hit the ball so far that it doesn't matter.

Reggie Jackson could have certainly improved his strikeout percentage if he had waited on more pitches. But you can't hit doubles and home runs waiting on pitches, and Jackson was known as "Mr. October" for his ability to come up with clutch hits in the post-season.

So here's the question. What are you doing in your business to improve your weakness that you could just make irrelevant by focusing on your strengths? One friend of mine makes his living as a consultant. He's very insightful, and his strength is telling senior managers what they need to hear rather than what they want to hear. His weakness is writing. He's terrible at it. Misspelling, poor grammar, disconnected thoughts...it's all there. Rather than take a writing class or hire someone to train him (or even do it for him) he's decided he won't provide clients with a final written report. If the client wants a report the client is responsible for writing it. My friend will make himself available to answer questions and will even proof the report if the client wants to pay him for it, but under no circumstances will he write a report. The result? No one cares and he gets to spend an extra 10-20 hours per week actually doing the work he loves.

Another client dislikes answering the phone. Rather than fight it he just tells clients they need to send an email if they want to go over an issue or "discuss" a new project. The result? He's able to turn around projects much faster because clients are more likely to include the necessary details in an email that can be used to start the file immediately. His clients routinely refer him to their tech savvy friends who prefer the same method of communication.

For this to work there's one ingredient that is absolutely critical: HONESTY. You must be honest with yourself first about what you're good at and what you're not. Don't talk yourself into spending time on something you're not good at if it's not critical to the job at hand. You must also be honest with everyone else. Don't pretend to be something you're not. If you have a weakness and it's not worth your time to get better at it then admit it, tell your customer or client and then proceed to make it irrelevant with your stellar performance in other areas.

Sometimes your weakness is vital to your business. If that's the case you can do one of three things.

1. Hire someone who's good at your weakness.


2. Find something else to do


3. Be miserable and wish you had found something else to do

I, for one, hope you don't choose the latter. Life's too short and there are too many people willing to offer a helping hand for you to waste time pursuing something you don't like. Once you come to terms with your weakness you'll be free to tell the rest of the world what you're not good at. Then you can move on and focus on the things that make life worth living. Embrace your strengths and forget about your weaknesses.

Tackling overhead

There are generally two approaches to tackling overhead intelligently. There are a multitude of ways to do it wrong, but we won't go over all of those. The bottom line is that if you proceed deliberately rather than reactively you'll be much better off.

The first approach is to zero budget. This means you start from ground zero and question every expense. Zero based budgeting was created to combat the idiocy of incremental budgeting. Incremental budgeting is the lazy way out. It says "If we spent 'Y' amount last year we should expect to spend 'Y' amount times some percentage this year." Often the same percentage is applied across all categories. For instance, sales might be projecting a 5% increase in revenues so all overhead items are also increased 5%. There's no good logic for why overhead would increase 5%, but it's a lot easier than going through each category and trying to figure out how much overhead will be needed to support the expected increase in sales.

Zero budgeting requires that each dollar be justified, not just the increase. Take office supplies for instance. Rather than applying a blanket percentage increase zero budgeting requires the amount of needed office supplies to be estimated each year. One might review the organization chart or current and expected head count to get a sense for how many personnel will need to be supplied. Then price lists for the various vendors would be reviewed to determine if there are any changes that need to be incorporated. Next, alternatives for high volume supplies would be explored. The process continues until a budgeted figure for office supplies is arrived at.

The advantage to zero budgeting is that it takes nothing for granted. In this type of comprehensive exercise opportunities for savings almost always result. The downside is that it is time consuming and the benefit may not be worth the cost in terms of lost labor and production capacity while people are chasing down all the required elements to put together a budget. I usually save zero based budgeting for situations where budgets have never been done or for cases where operations have changed drastically. In these cases the process will not only result in savings but will also shed a lot of light on how things are being run.

The other "smart" budgeting method I like is what I call "responsibility" budgeting. In this system everyone is given responsibility for a particular area of overhead. It is that person's job to report back to the group the factors that affect their particular area of overhead, how these factors are expected to play out over the next year, and where cost savings can be expected. In his book The Great Game of Business Jack Stack talks about his company's efforts to build intelligent budgets. Everyone on the team was given an area to study. One guy drew toilet paper and spent the next several weeks learning everything he could about toilet paper. He found out for instance that during periods of slow production the company went through much more toilet paper than it did when there was a large backlog.

Toilet paper isn't the first place I'd look for massive savings, but the story illustrates the potential you can let loose in your organization if you give people the responsibility to go after money saving ideas. The other reason I like this method is that it tends to make everyone accountable for overhead costs. After all the information is gathered it becomes the team's responsibility to organize and prioritize the best opportunities for savings. Instead of one champion for cost savings you get an entire organization committed to saving money and eliminating waste.

Both methods take more time and effort than incremental budgeting which is why they're rarely used. They also require a leader or facilitator who has been through the process. Otherwise it's easy to get bogged down and loose momentum. It's also important to be realistic about how quickly this stuff will come together. Good budgets take time to plan and you shouldn't expect to throw one together overnight. Most successful companies spend from three to six months building their budgets. Our clients can usually do it in less, but two to three months of fairly intense activity should be expected.