Over the next 8 blogs I’m going to share my 8 keys (from my own experience and from observations gleaned by interviewing a myriad of successful entrepreneurs) to a bigger, better business and I’m going to invite you to think about each key, with an exercise to complete before the next key appears.
Key number one: Be in business for the right reasons
If you are going to sink your heart, soul, time and money into a business that will most certainly take over your world for a fairly significant period of time, you better be sure you know why you are doing it.
In my view, there are only 2 reasons to be in business:
To make money and to make a difference
Business is a financial game, it needs to make money in order to thrive. And it is not shameful in any way to want to generate profits in order to build a valuable business. If you are going to grow a bigger, better business you must have a good understanding of how this business will make money and how it will grow profits over time. A business that does not care about growing profitability is more of a hobby or a cause than an actual business. This was a discipline I really had to learn from scratch – I had no business or financial skills when I set out. But I hired in the help I needed early on – including getting two external directors – to make sure my business had a strong financial backbone.
However a business that cares only about the money is a business without soul. The desire to make a difference is critical because if you can find a way to solve problems for people, to give them something that answers their needs in a positive way, you will always have customers. And you will have a positive impact on the world, which in turn will make you feel good about yourself. There’s a wonderful karmic attraction that happens when you put your focus onto making a difference – the more people you attract and the more money you make.
So when I work with business owners, we explore their reasons for being in business and we ensure it is a business that makes both money and a difference.
Think about how your business is making a difference. Who is it making a difference to? What is the problem you are solving and for who? Why is this different and better to other solutions out there? See if you can articulate the difference you are making in one or two sentences. Remember the more people you make a difference to, the more people will come… so think scale, think big…
Let me know how you get on. Feel free to email me any time at email@example.com … I’ll be happy to help your work out what your ‘make a difference’ mantra could be!
‘Successful and unsuccessful people do not vary greatly in their abilities. They vary in their desires to reach their potential.’ John Maxwell
One of the first questions I ask when I present to business groups is: ‘Why are you here? Why are you in business? Why on earth have you left the security of a job with regular pay to start your own business, with all the uncertainty this holds?’
I always get similar answers.
Mostly, people say they don’t want to work for someone else. They don’t want someone else’s culture.They don’t want to be told how the way it should be done. They want to be in control. They want flexible hours and to spend time with their children. They want to be able to go on holiday when they want. They don’t want someone telling them how many weeks’ holiday they can have a year. They want to do something they really love. These are all honourable reasons for starting a business.
But, ironically, many business owner-operators end up with the complete opposite. They find themselves with little control. They discover their clients have the control and will often demand they work longer hours than they ever did when working for someone else. Most small business owners pay themselves less than they would be paid working for another company.
Crazy, I know, but it’s true. You go into business for freedom and control and end up working longer hours and earning less. Sound familiar?
Many business owner-operators don’t take holidays. They start their business believing they will be in charge of their own holidays, but they find they don’t go on holiday at all. I met a woman who owned a chain of motels with her husband. They hadn’t been on holiday for five years. When I asked her why she got into the motel business in the first place, she told me it was for the lifestyle. Go figure!
If you pay yourself too little, work long hours, and don’t take decent holidays, you can feel resentful. Worse, you can fall sick and be unable to carry on. A high percentage of businesses fail (and by fail I mean they stop; the owner gives up) within five years of start-up. Disillusionment gets the better of them. They go into business to set themselves free and find themselves with a virtual chain around their ankle. Not surprisingly, they decide they don’t want to do it anymore. But that’s not going to be you, is it? Most people who fail to achieve financial freedom through their business do not have the right mindset. Let’s just take a look at a true story for a moment to illustrate my point:
The story of Julie and Fliss
I was having coffee with an old friend one day. Julie is an amazing lady who had started her first business and built it over 20 years until it was bought by a huge multinational group. She became wealthy and continues to build her wealth through angel investing and mentoring start-up businesses. She has a wonderful life. We discussed how special it was to be able to spend quality time with our kids after school each day and how we enjoyed helping other people learn to build a quality life through business. We got to talking about a woman we both knew. I’ll call her Fliss, for the purposes of this story. Fliss opened a business at the same time as Julie. She is a dress designer and opened up a little retail store in the town where she lived.
Twenty years later she still had that small shop and she was still making the dresses. Fliss was no better off financially and she still had to keep designing and making the dresses to sell in her shop. Of course, there’s nothing wrong with that as a life choice and as far as I know, Fliss is content in her life. I don’t want to appear scornful of someone doing something they love. If you’ve got a talent for design and you’re happy with a small retail shop in a small town, there’s nothing wrong with that – as long as you are aware that this is where you are at.
But what worries me with the owner-operator mindset is that Fliss, like so many other owner-operators, will wake up one day and won’t want to do it anymore. As much as she loves designing dresses, something will happen that changes her ability to live off its income, for health reasons or, more likely, because she’s lost the passion for it. The danger of not having a plan to sell is that she can end up with a business worth nothing to anyone else, meaning she’s stuck with it. What will she do for income when her desire or ability to make dresses is no longer there?
The freedom mindset
Let’s look at situations of these two friends. Why did Julie go one route and Fliss go another? The key difference was the mindset.
One knew she wanted a business she could sell and create a lifestyle where she never had to worry about money again. The other wanted to make pretty clothes. They both made their choice; probably without even realising they had done so. Fliss chose to employ herself in a job she enjoyed. She did not choose to build a business.
We make choices every day. The most important choice is one you may not have given much thought to – until now. Are you choosing to build a business that will pay you back or are you choosing to work for a living?
My book Liber8 your Business explores this question at length and gives you a practical 8 step process to follow if you decide that financial freedom in the future is something worth working for.
My mantra for small business owners is simple: Don’t create a job, build yourself an asset. When you own a business you have the opportunity right there in your hands to build something that can create financial security for you in the future. You are going to work hard anyway, why waste this valuable time just paying yourself to do a job when you could be setting yourself up forever?
If you are serious (as I believe you should be) about building a saleable business, here are 5 success factors you can be thinking about right now:
1. Set your end goal. Decide how much you want to sell it for and by when, and work backwards. In my book Liber8 your Business, I show a simple formula for working out your potential end value, with a link to the online calculator.
2. Name your buyer. It’s important to have a good idea who might want to buy your business in your early planning. Imagine spending ten years building a business you intend to sell only to realize you have created something nobody wants to buy. If you build a business with a buyer in mind, you have a much better chance of building something they really want.
A potential buyer could be a larger player in your industry looking to grow through acquisition. This growth might be regional – they want a presence in your city or town and it’s easier to buy you than start from scratch. It might be strategic – you have a smart product or service they could add to their existing infrastructure to create additional revenue streams. An example of this might be a large accounting firm buying a small book-keeping firm to add value to their client base. Your service or product could become a ‘nuisance’ to a competitor (read more on a strategy called ‘kicking sand in the gorilla’s face’ in my book, Liber8 your Business) and they buy your company to prevent it competing or to regain lost revenues. It could be a management buy-out, when senior employees raise the funds to buy you out. It could be a competitor of a similar size wanting to grow and willing to invest to gain rapid growth through acquisition. I’ve sold businesses to two types of buyer. A multinational bought my advertising agency and a local competitor bought my pet care company. My father’s photocopier business sold to his senior management team. A good friend has built three recruitment agencies. The first sold to one of the original partners, who bought out the other partners. The second sold to a multinational looking for regional representation in her city. The third is in its early days of growth and I’ll watch with interest who buys it (I have no doubt it will sell because I know the founders expect this and will build with this in mind). Another type of buyer could be a private equity group or even an individual who sees great potential in what you’ve built.
So who might want to buy your business? What are you building that could add huge value to someone’s offering? Now is the time to start thinking about these things.
3. Remove the dependence on you. To make your business attractive to your future buyer, it cannot be dependent on you. That’s a key message I want you to learn from this article:
No one will outright buy a business that’s dependent on its owner.
If the buyer takes you out of the picture and no business remains, they will either insist you stay in the business or they will walk away. So whatever your strategy is, whatever your end goal, whatever your vision for the future … it needs to not have you in it. I did that at my agency by making sure the clients loved the business but weren’t dependent on me. In the last few years, I hired two senior guys and put them in charge of our biggest clients, so my buyer could see the clients were not reliant on me.
4. Start building a team as soon as you can. I couldn’t afford to bring in those big guns until later in my business growth. I started by hiring people I could afford, with a couple of youngsters straight from college. I trained them to do things exactly the way I wanted. I call it ‘training your clones’ – teaching people to follow your example and do things your way. I kept building my team that way until we could afford to hire more senior people. And then we had to make sure we had a really strong culture to manage senior people.
5. Secure future earnings. Getting all our key clients on fixed-term contracts was another critical strategy that worked. They all had two or three year contracts so when the buyer looked at my business they saw a high level of spend committed for the next three years. This was an important lesson I learned from my businessman father. Remember I told you about his photocopier business and how he sold it and retired soon after his fiftieth birthday? One of the best secrets to success he shared with me was, ‘you’ve got to have a back end.’ To explain, he gave the example of his own business. While the sale or lease of each copier was worth a lot of money (especially in the 1970s when these huge machines were a relatively new addition to business productivity) the real value came from the additional contract that went with each machine. This locked the customer into buying all their ink, toner and paper for the life of the machine, as well as regular paid servicing – which meant that, for every machine sold, my father had income guaranteed for the next 10 years, enabling him to predict with complete accuracy his future income. You can see why this made by father’s business attractive for a buyer. They could see a guaranteed return on their investment. It made sense to me when I started my own business, and I hope it does to you too. It will get you a higher price when you come to sell!
A business with committed future revenue that is not dependent on its owner to deliver that revenue is a business worth investing in.
I’ve interviewed many wealthy entrepreneurs as part of my mentoring programmes, always seeking to find out what makes them so successful. How do they build businesses that achieve such growth and generate such great financial returns? The number one trait that comes through without exception is their ability to look into the future and see what their business looks like five, ten or fifteen years out. Successful business people have a really clear picture of their business when it’s ‘complete’, they can see where it is all heading. Rarely do they start a business without a clear idea of where they will take it. They do not randomly wander into business, nor randomly wander out or give up when it gets too hard or they run out of money. Successful entrepreneurs know where they are going.
One of the first things a successful entrepreneur will do is create a vision for their business that is set firmly in the future. They are very clear that the business is separate from them and as such it must have a reason for being that is bigger and more inspirational than the owner/s of the business. When I started my advertising agency I knew it needed a higher purpose, something clearly articulated that would attract clients and talented staff and give us something to strive for. We set out to ‘change the face of our industry by setting a new benchmark for agency service and quality of results’. This vision for our future kept us focused and ultimately created the success that attracted a multi-national company to want to buy us.
What is your vision for the future of your business?
A successful angel investor friend explained to me the concept of exit strategy like this:
To achieve a successful exit, it helps to view your business as a product. A good business person empathises with their customer and understands their reasons for buying your product. You know what need your product fulfils in the market and who will want to buy it. You use your expertise and experience to create the best possible product to meet this need. You build a relationship with potential customers with a view to making sales.
Now, step back and look at your business as a product. Why would someone want to buy your business in the future? Which companies could take your business and create more value with it? What needs do they have that your business could fulfil? How could you build your business to make it easy for them to acquire and integrate it with theirs? This is your market and selling proposition. And just as it takes time to build a customer base for your product, it takes time to build a relationship with your potential buyer. So start now.
It’s that time of year when you should be working on your business plan for the next financial year. Please, please, please tell me you do a plan each year? You simply cannot succeed in business unless you take it seriously and understand the game of business itself.
I encourage my clients and readers to observe and learn from successful big businesses. Having been on the Board of an organisation with close to $1 billion turnover, I learned first hand how disciplined larger companies are. They do not fly by the seat of their pants, nor stumble hopefully from one year to the next. They set clear growth targets every year, put clear strategies in place and hold individuals and teams accountable for the delivery of those targets. The CEO must inspire, motivate and direct his people towards this delivery and has overall accountability. His/her senior management team must set targets for their own department and are held accountable for the delivery of these. Within the teams, team leaders have responsibility for the successful (on time, to budget) delivery of their projects.
All of this is made possible by two things – a business plan and a team to deliver on it. This is the game of business at its most basic. As a small business owner operator, you may feel that you don’t need a business plan. You may not yet have a team big enough to deliver on it even if you did. Yes?
No matter what your size, even if it is just you, if you are serious about growing a business (rather than creating a low-paying, high stress job for yourself), you must have a plan. And part of this plan must be to grow a team to help you.
A big business will typically be divided into ‘departments’ with each responsible for delivery of objectives for the different areas of the business. These would typically be:
Sales & marketing
I recommend to my clients and readers that no matter how small your business right now, that you begin to implement the disciplines of a larger business. Imagine your business when it is fully grown – what departments does it have? Write them down and set objectives for each department. Then develop strategies for the delivery of these objectives. What developments need to happen and what resources are required? Tie your targets and any expenditure required into your annual budget (you do manage using a budget right? If not check out this article on preparing an annual budget) and start your financial year with a road map of monthly objectives and actions to make it happen.
Have you ever noticed how a small dog will take on a big dog, regardless of it’s size? It doesn’t know it’s small, it behaves as though it is big enough to tackle the world. This is the attitude you need to adopt with your business too. By all means, be nimble, be smart and take advantage of the benefits of being small. But learn the lessons from those companies who also started out small once (Apple, Virgin, The Body Shop to name but a few) and install some planning discipline into your business – sooner rather than later.
You cannot be shy and be in business. If you are going to build a business that someone will ultimately pay a large sum of money for, you cannot afford for your business to blend with the wallpaper. You have to put your business out there and make sure it is seen. You have to focus on your reputation. If you focus on the following two strategies from this moment onwards you will build your company’s reputation and grow its perceived value.
1. Be an expert
You know your business better than anyone and I’ll bet you know all there is to know about your industry too, right? When you talk to your clients/customers, you reassure them about the money they spend with you by giving them the confidence that they are buying the best. If you are a health professional, your clients think you are the best in your field – otherwise they wouldn’t come to you. If you are a retailer, your customers believe you have the best product on offer otherwise they wouldn’t buy from you. So if people think you are the best, why not prove them right? Become an expert and start telling the world what you know. Start writing articles and send them off to all the publications in your industry. Set up a blog and start blogging about your industry. Turn some of your ideas into a flyer, get it printed and distribute it to your customers. Or make it an ‘e’ version and email it to them, or promote it via your website or blog and get people to ask for it (thereby building an email database too). In terms of the subject matter, just write about what you know. It doesn’t have to be lengthy. Lists work really well, especially if you number them… eg. A chiropractor could write “The 9 things people don’t realise about their spine”. A fashion retailer could write “5 ways to wear boots this winter” or “11 tips to looking slimmer in dresses this summer” You get the idea – it’s about adding value to people and having them see you as the expert in your field.
If you are confident at public speaking you can also put yourself forward as a speaker in your area of expertise and let business networking groups know that you are available to give talks. You don’t need to charge for your time necessarily, just be aware you are building your reputation as an expert.
2. Win awards
I’ve always been a big fan of entering awards. I was runner up for Business Woman of the Year three times when I owned my advertising agency. Even though I didn’t win, I got masses of media coverage by being a runner up. And when we won Agency of the Year, our reputation really took off. The same year we entered our work for national effectiveness awards and ran off with a swagger of gold and silver gongs for our clients. It was that year that the multi-national agency group came knocking on my door… and yes, they paid a premium for my business. What put us on their radar was the media coverage that came with winning those awards.
Business magazines are always looking for good stories and everyone loves a winner. When our pet care company won Supreme Business Woman of the Year for our region we found ourselves on the front page of the business section in the daily newspaper, as well as on national TV. Not only did our sales see a marked spike from this coverage, we are also building our reputation as a company so prospective franchisees will pay a premium too.
There is no doubt about it, awards are impressive and when a buyer is looking for a business to buy, a business that has won numerous awards in its industry must be a good one, right?
From the desk of liber8yourbusiness. Business mentors and experts in small business exit strategies. Based in Wellington New Zealand.
Good marketing is about being very clear who it is you are trying to sell to. It’s about knowing your target audience well. If possible get inside their minds and learn the triggers that will motivate them. The more insights you have about your potential customers the better.
Discovering insights doesn’t have to be difficult. At my advertising agency Red Rocks when we got a new client or were pitching for a piece of business, we would always start by putting our ‘insights’ together. These insights told us the core messages we would build our campaigns around. To learn these insights we would find people who represented a typical customer for our client and ask them questions. Sometimes we brought them together as a group and asked them their thoughts in a discussion type format. Other times we would go out and about and ask people on location, in a shopping mall, at an event or typical situation (such as kids at a skate park if you were selling a new brand of scooter like MGP).
Example questions for ‘insight’ survey
If I were to launch a new business planning tool and wanted to gather some insights from the small business market, here are some questions I might ask:
What do you love about owning your own business?
What do you like least about owning your own business?
What is your biggest frustration as a small business owner?
On a scale of 1 – 5 (with 5 being excellent) how would you rate your confidence around business planning?
What aspects of running a business are you most confident about?
What aspects are you least confident about?
What topics in the area of business education would be most useful for you right now? Please list your top five.
Which of the following method for learning would you prefer? Book/Live seminars/webinars/video seminars/ipad app/other (please list)
When you ask such questions of large enough groups of people you start to see some trends happening. Themes will appear and from the themes come your insights. If enough people are telling you the same frustrations, you know you have an opportunity to fix this for them with your approach.
From the desk of liber8yourbusiness. Business mentors and experts in small business exit strategies. Based in Wellington, New Zealand.
Just finished the chapter in my book with the same heading, so thought an abbreviated version of this would make a great tip.
As you know, my advertising agency went from zero to billings over $15 million within nine years. To achieve this we had to win some pretty big pieces of business, often coming from the underdog position. This blog post is based on my experience of what it takes to win business in a competitive situation. If you have a business that involves tender situations, where you’re up against other players to win business, these 11 tips will give you a good head start to winning.
1. Make sure you are invited. If you have taken any notice of my previous tips you may well by now have created your “Wall of Fame”, listing your top 20 – 50 ideal clients. The ones you’d love to win one day. And you would also have contacted them – they know who you are. If not… do it now, because you never know when such clients will decide to change supplier and go to market looking. You must make sure you are on their hit list when they do.
2. Discover their needs. Once you have been invited to tender, see if you can make an appointment to go visit the people who will be involved in the decision. If not, get the phone number and give them a call if you can. Be prepared with a list of questions to ask them. You are on a mission to find out what they really need. Here are some example questions:
What are you looking for in this relationship?
What are your core frustrations in this area right now?
What’s really working about your current strategies?
What’s not working?
What are your customers telling you?
What would you like them to be telling you?
What are your goals/sales objectives this year?
How would you describe your ideal relationship with the successful supplier?
3. Ask their customers. Once you’ve found out as much as you possibly can from the client themselves, go interview the people who represent their customers and find out what their needs are. Show that you know the market.
4. Get the right team. When you are very clear what the potential client is really looking for, you must make sure you have the right skills and experience on the team you put forward for this business. Make sure you put forward those on your team that have either worked in the same industry or have got something to add that this client was looking for. If you don’t, be prepared to bring in a ‘ringer’ (a substitute with exactly the skills you need) or as many ringers as you need.
5. Write a damn good brief. Before you start to try and solve the problem or develop your approach, create a briefing document you can share with your team. Put down everything you’ve learned from your meetings and research – the background, all of the objectives as you understand it, the clients’ real needs, the customer needs that you’ve uncovered, and the key insights that you think will help win this pitch.
6. Develop your strategy. When everybody on the team knows what the client’s looking for, you need your strategy for how you are going to win this account. What have your insights told you? What can you suggest to the client that is going to make a difference to them? How are you going to show them that you are the best company for the job?
7. Create a theme. Once you’ve done all that, as part of coming up with your strategy for your pitch, develop a theme, be creative. A theme ties your whole presentation together – your document, your powerpoint slides, your follow up. You can base your theme around one of the insights you’ve discovered. Or around one of the key messages you are giving about yourself. For example, if you are showing the benefits of a smaller, more responsive company over the larger, more expensive companies, you could theme your proposal around “Boxing above our weight”. Give it a boxing them, use boxing gloves as your icons for points being made. We did exactly this one time when pitching for an account. We even had the ding ding sounds of the bell in the ring each time we changed powerpoint slide!
8. Plan your presentation well. Carry the theme through to your presentation, so your t-shirt, your Power Point headings, everything about your presentation is themed so that you look really cohesive. Make sure in your presentation that you cover off all their requirements, make sure you checklist everything that they’ve asked for in their original tender document plus everything they’ve told you when you’ve met with them. Make sure your presentation has a really good flow, allocate time well, don’t go over time. Make sure each team player has a clear role. And here’s the most critical thing – practice, practice, practice. I’ve put that three times for a reason – because you should practice at least three times!
9. Send a teaser. Here’s how you can get a head start over the others. If you are going to present, or even before you send the main document, send out a teaser. Something that gives them a taste of the brilliance to come. Get them excited about your proposal before they’ve even seen it.
10. Show your passion. On the day of the presentation, just throw it out there. Be excited by what you’ve come up with, excited by the thought of working with this client. Have them walk away thinking that team really, really wants this business and they’re going to work hard for us – they’re the ones we want to work with.
11. Follow up. After you’ve done your presentation, leave behind a great document summarizing everything you’ve presented. Then a few days afterwards, send everyone who was on the panel a follow up. Ideally, a fun little gift along the theme of your presentation. And a thank you card. Show them once again how much you want the business and give them a sense of what a great company you’d be to work with.
Next time you are in a competitive tender situation, pull these tips out. Then go get ’em!
From the desk of liber8yourbusiness. Business Mentors and experts in small business exit strategies. Based in Wellington, New Zealand.
Rarely does a great business person sit for long inside their comfort zone. Doing what you are comfortable with every day will inevitably lead to complacency. When you are complacent things start to go wrong. Someone else will come along with a better offer. Your customers will no longer feel special.
The world around you will change, this much you can guarantee. And it can be very uncomfortable indeed when you are forced out of your comfort zone by external events… such as your biggest customer leaving you. “But what did I do wrong?” you will cry. And all they will be able to say is, “you didn’t do anything wrong, you just stopped doing everything right. I didn’t feel special any more”.
Don’t risk complacency with your favourite customers. Think of something you could do right now to make them feel special. Do something today that will make them go “wow”…. then make that part of your comfort zone. Do this at least every six months and not only will your comfort zone grow… you will be building an amazing ‘wow’ factor into your culture that will make you, your team and your customers feel great.
From the desk of liber8yourbusiness. Business mentors and experts in small business exit strategies. Based in Wellington New Zealand.
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