Preneur Marketing - The Blog of Entrepreneur Pete Williams

It is one of my strongest beliefs in business that you should do it your way. Too many people start a business by copying whatever most similar businesses are doing. Sure this might seem safer, but will this allow you meet your goals? And think about this: if you set your business up the same as everybody else, how do you expect to do better than them? How will you dominate your industry if you are doing the same things as everybody else? If nothing makes you stand out from the crowd, why will people pick you over your competitors? There is a difference between designing a business and simply entering an industry.

With this in mind, let’s have a look at some examples of how to arrange your business systems (remember, Save Your Self Time, Energy and Money). Because of the almost limitless different types of businesses that people can start, we will of course not be able to examine every possible business operation, but the following should give you an idea of how to match your systems to your goals.

Income before expenses — leveraging your money

The basic idea behind most businesses that sell products is to turn cash into stock, and then turn that stock back into cash as soon as possible. A footwear store will have capital (cash), and purchase shoes (stock) to sit in the stock room and on the shelves with the aim of selling them for cash — and for a profit — as quickly as possible. A whitegoods store pays upfront for the items in its showroom, and then aims to generate a profit by then selling these to customers at a higher price. Toy stores stock toys which they have already paid for; bookshops stock books that they have already paid for; even restaurants have to pay for food and other ingredients that they then sell to customers as meals.

You should already have noticed the major drawback of running your business this way. Think of the amount of cash that is tied up in stock that is not earning any money! If you are opening a bookstore, you might have to spend $150,000 just to put books on the shelf. And you will have to pay for most of these before you have made a single sale. It will take a long time to sell these books and recoup that cash. And you know that some of the books simply won’t sell, so this is cash that you will never get back. The cash that has gone into buying this stock could have been used on marketing to generate further sales.

A few years back I actually looked at purchasing my own Athlete’s Foot franchise. One of the reasons I didn’t go ahead was the amount of stock I needed to purchase to be operational — it was a large investment. Even though I could have designed the business to meet my goal and had less stock, you need to be intelligent and still keep your customers in mind. Footwear buyers in a retail environment don’t want to wait for their shoes to arrive; they will just go somewhere else and get them. Even though I am saying design it your way, you still need to be intelligent and consider your customer’s objectives. You must design your business to suit your goals, but you must make sure your goals make business sense as well.

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Before you go any further, you must decide why you are going into business. Put this book down for a few minutes and think about it right now — it’s important! Before you even think about setting goals such as profit or sales targets, you must know what you hope to achieve with your business as a whole. Do you want to be your own boss? Do you want to work fewer hours? Or more? Do you want more variety in your job? Or to travel as part of work? Do you want to start a business with your partner? You must be able to clearly state what your personal goals are, so that you can structure your business and create systems to meet these goals.

Many people don’t think about this before getting started. They simply plan the business around their business goals, and then once they are up and running they find that they are working more hours than they did in the past, when they really wanted to work less. Or they hire staff to keep up with demand, when they really wanted to work by themselves. This is a result of putting the business ahead of personal aims. And it’s a mistake! Your business should be structured to meet your life goals, not your profit targets. Sure they are important, but are you going into business just to make money, or to improve the overall quality of your life?

You can set your own personal goals and desires for your business, and then build a successful business around these. Believe me, I know. I’ve done it — more than once! Don’t be lulled into going with the conventional wisdom, such as you need to work 9 to 5, or you need to have lots of stock in a warehouse, or you need to spend lots of money to get started, or you need to hire lots of staff. Build your business how you want. Create your own business goals. For me, this is the essence of being an entrepreneur — and most people get it wrong! They never think about escaping conventions. If you are going to keep playing by everybody else’s rules, why start your own business?

For example, if your goal is to create a business that allows you to travel, you can use the internet as your main distribution channel, arrange to have the products drop-shipped automatically when an order is placed, and do most of your customer service via email. Then you could be on safari in Africa, or at the top of the Eiffel Tower, or watching the sun set on the Gold Coast, and you could still run your business (as long as you can access the internet!). This isn’t a traditional business model, but I’ve seen people have great success doing this.

Maybe your goal is to work fewer hours. You need to create business systems that don’t require you to be constantly available during normal business hours. How do you do that? Outsource your customer service. Automate your ordering and shipment. Only take appointments in the morning. Sell a product rather than offering a service. Or maybe your goal is to work more hours (maybe the kids are driving you crazy), so you need to create business systems that will allow you to do this. Figure out what motivates you, what you are striving for, and then build your systems around this.

You must set both personal and business goals to be a successful entrepreneur. You will need the personal goals to help you when the going gets tough. If you have to work late or on the weekend while your friends go to the pub, or that crucial order is accidentally sent to Siberia (again), you’re going to have to remind yourself why you are doing this. And you need the business goals so that you — and others in your business — know where you are headed, and you will know when you get there.

Only once you have established your lifestyle goals for the business should you get down to the detailed stuff, such as profit levels, number of customers, and inventory turnover. All of these goals should be considered secondary to your primary aim of building your business how you want it. Think about what targets you want your business to reach. Do some research. Find out what other similar businesses earn, how many customers they have, what their profit percentage is. Also use your own experience if you are familiar with the industry.

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So you have an idea to market a nuclear-powered mouse trap or, like a few of the entrepreneurs mentioned earlier, you are going to market an existing idea better. You need to be able to clearly communicate what sets you apart from your competition. Whether you term it a unique selling proposition, strategic competitive advantage or differentiating statement — and there are many more — you need to define it.

The concept of having a USP was developed by Rosser Reeves over 60 years ago, in an attempt to distinguish similar products from one another. (Reeves is now in the Marketing Hall of Fame.) What do you stand for and why is your business different? Ask yourself a simple question — why will my clients come to me, and not my competitors? If you can answer this, you have your USP. It is a statement of benefit, a consumer’s buying motive, a strategic competitive advantage; whatever you want to call it, you must define it. If you can’t identify it, how will your customers? Your USP can be included in the title of your business, or as a catchphrase or slogan. I know you have probably heard this before, but that is because it’s so important.

Think about what USP means: unique selling proposition. This must be something that only you can offer that is useful to your market. Good service is not a USP. The best service is. Cheap prices are not a USP. The cheapest prices are. A pizza shop that delivers has no USP. A nursery that delivers might. Phone help available 24 hours is not a good USP for a furniture store, but it might be for a vet. Find the USP that suits your business and your market, and incorporate it into EVERYTHING your company does, from changing the lining of the rubbish bin to issuing gift vouchers to advertising. Make it succinct and memorable, so that your clients will remember it and instantly recognise your business.

The areas you can base your USP on are:

• Selection: The average widget store carries 3 to 7 widgets, some even have as many as 15 widgets, but our store always has 27 different types of widgets in stock. For example, Blockbuster’s get it first time or get it free offer. Their USP is that they have more copies of each movie than their competitors.
• Service: Willy’s Widgets has 12 expert widget staff to assist you with your every need. Or, We will be at your door within two hours, guaranteed. For example, FedEx — absolutely positively be there overnight. This was a FedEx innovation.
• Price: We always have $50 widgets for sale at $34. Or, We will beat any price by 10%; for example, Bunnings Warehouse. Their USP is that they will always be cheaper.
• Quality: We simply make the best widgets, regardless of cost. For example, Mercedes Benz — sheer driving pleasure. Do you think ‘We will beat BMW prices by 10%’ would work for Mercedes? Of course not. Part of what Mercedes sells is prestige, which means they don’t have to concentrate on prices. In fact, being expensive is expected in this market.

Look at the business from the perspective of your customers — what will be the most important feature of your business for them? If you wish to portray an upmarket image, you can use words such as ‘exclusive’ or ‘quality’ to describe your USP. If your service is fast, use ‘rapid’, ‘quick’ or ‘speedy’.

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Many people in business don’t know the difference between advertising and publicity. The two have the same ultimate goal, which is to increase sales. But they are very different.

Advertising is when you pay for space or time to promote your product or service. You can do this in newspapers and magazines, on television, radio, and billboards, on the side of a bus, in a cinema, on the side of a building — the possibilities are just about endless (and people are coming up with new ways to advertise all the time). You create your own advertising message, and you pay to have the ad created. You then pay for the advertising space. Even a basic advertising campaign can cost thousands of dollars, and larger corporations spend millions of dollars on this each year.

Publicity, on the other hand, is when you send out a media release, stage an event or do anything that attracts the attention of the media. The aim is to have the media attract attention to your business for you. The biggest difference compared to advertising? Cost! Generating publicity can be done for next to nothing.

As an example, let’s compare receiving the same amount of space in a newspaper through advertising and publicity. A reasonably large ad in a major daily newspaper could cost you thousands — or tens of thousands — of dollars. Or you can receive the same amount of space — in the form of an article about you or your business — for the cost of sending a fax. You don’t have to pay for space, or to have an ad designed. Just write a press release, surf the net to find out who to send it to, and that’s it. Think about that in terms of percentage return on dollars invested. It doesn’t get much better for attracting attention and generating sales.

And what about if you happened to get on television? You could end up as one of those feel-good stories at the end of the news, or maybe you will be featured on Today Tonight because of the revolutionary new product you have invented. How much would that air time have cost you in the form of advertising? More than most small businesses can afford.

Publicity can give you massive exposure for just a few dollars, it generates sales, and it creates awareness about your product or service. Publicity is the cheapest form of marketing that exists, and it produces the biggest gains. Used properly, publicity can make you rich.

For more info on getting publicity for your business visit www.RenegadePublicist.com

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Any business can barter their goods or services. For example, if you are looking at opening a florist you could approach a local restaurant and offer to supply them with fresh table flowers each week, in exchange for a $100 meal every Sunday. The cost to supply $100 worth of flowers to the restaurant would not actually be $100; maybe the wholesale price is only $30. Thus as the florist you get to eat out each week, have a $100 meal, and save $70.

Today there are organised third-party record keepers called trade exchanges that have thousands of members in almost every industry that help facilitate these types of contra transactions. It’s a small but rapidly expanding segment of the economy. The member directories of these exchanges are the size of a large Yellow Pages, and they have members all over the world. The exchange acts as a conduit. It’s like a bank, and a lot of people lose sight of this fact. The exchange simply acts as a conduit in the transaction.

Basically you are going to get the best benefit from your trade exchange if you use it only in your ‘down time’ or when you have excess stock — it’s not designed to replace cash business, only compliment it. There are a few costs involved , but basically during your quieter periods you can offer your products or services for ‘barter dollars’ which you keep in your bank until you have the need for a product or service offered in the exchange.

To explain how this work let’s use a typical example. Let’s say you are a florist again, wishing to get some printing done for your business so you can attract extra sales. In the ‘cash economy’ the printer might charge $10,000 for the flyers, brochures and business cards that you need. If you approached the printer to try to work out a direct contra (like the one with the restaurant above), it’s fairly unlikely the transaction would occur as the printer would have no use for, say 1000, $10 bunches of flowers to cover the cost of $10,000 for the printing.

However, with the use of a trade exchange this contra deal is possible as trade exchanges offer members an interest-free line of credit to initiate and support trading. If the florist and the printer are members of the same trade exchange, the florist can use their interest free line of credit to pay for the $10,000 worth of printing, in what are referred to as trade dollars (T$). Instead of being in debt or owing the printer directly, the florist now owes the ‘exchanges’ T$10,000. To pay off this debt of T$10,000, the florist over the next 12 months might sell T$2000 worth of roses to the printer, T$500 worth to an accountant, and T$6000 to a reception centre, and so on, all of whom are members of the trade exchange. So you can now see how this contra transaction could work and be facilitated using an exchange.

Let’s look at it from a dollars and cents perspective:

For a florist to sell 1000 T$10 bunches flowers and pay off the T$10,000 debt, they would obviously incur out-of-pocket costs to purchase the flowers at wholesale. I am not a florist, but for this example let’s use the same costs as above and say the average wholesale cost of a bunch of flowers (which they sell for $10) is $3. They will incur a total ‘cash’ cost of $3000 to supply 1000 bunches to the exchange members.

Being a member of a trade exchange is not free. There are fees involved for the exchange to act as the record keeper. These fees are described and explained below, but for the sake of making this explanation easier let’s say the fees for selling T$10,000 worth of flowers is $1000 in cash. Therefore the total cash cost to the florist to pay back the T$10,000 in flowers is only $4000 ($3000 for the flowers and $1000 in fees) — that’s a $6000 SAVING in CASH!

In other words, at the end of the day they have received $10,000 worth of printing for the cost of only $4000. They are only having to pay 40 cents on the dollar for every purchase they make using the trade exchange — now that’s power! But it gets better. These 1000 bunches of flowers are generally going to be sales they would not have otherwise made. That’s new business to the florist, and they have saved the 1000 bunches they may have had to otherwise throw out and write off.

Looking at it from the printer’s point of view, they have received $10,000 worth of new business they would have otherwise had to forfeit, which they can now spend on accounting services, holidays, phone bills, graphic design, and whatever else they need, which they would have otherwise had to pay cash for. Again, to provide the T$10,000 in printing the printer may only have had raw costs of $4500.

What about overheads and wages, you may be asking; they were not included on the calculations. Exactly right! As the idea for activity in a trade exchange is to bring news sales and/or take up downtime or idle stock, there are going to be no extra overheads to provide the additional services. It’s only the incremental costs that need to be considered. The rent is already being covered by your cash customers, as are the wages and electricity, and all the other overheads. A trade exchange is designed to help milk every spare moment of downtime (printer) or idle inventory (florist).

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