To be effective, your marketing efforts depend on targeting the specific customers (and potential customers) who will produce the best results for your business.
No company, no matter how big their budget, can afford to spend precious marketing dollars on too wide of a group of people. You just can't be everything to everyone.
You can create fast and cost-effective growth however by identifying your core customers and focusing your marketing activities on them - attracting them, selling to them, and providing the right customer support and retention.
This doesn't necessarily mean to focus on customers who buy the most, though that is the most important criteria in a top customer. There are also the "Influencers" who are the most vocal or respected, and spread the word about you to others - very valuable, even if they don't buy more than other customers.
Who are Your Top Customers?
It's easy enough to tell which customers of yours buy the most. Look at sales receipts or customer information to see who has made the most purchases, or the largest dollar amounts.
Sort out the 20% of customers who have bought the most from you over time, and that's your target group to which you want to focus your marketing (mainly to find more potential customers like them).
Then gather whatever other information you have about these customers and see what they have in common. While every customer is different, you'll notice there are certain trends and common characteristics among your target customers.
The easiest and primary information to get about these customers is their demographics - the directly observable characteristics that describe them (as opposed to psychological characteristics such as preferences, needs, motivations, self image, etc.).
Find out their basic demographic information
This includes basic facts:
And also some less apparent information:
And if you serve business to business customers, demographic information will include information such as:
How to turn your customer knowledge into gold
Time for a little alchemy...suppose you're going through your list of top customers and find that the majority are married women in their thirties who live within 5 miles of your store.
What can you do with these four demographic facts? To me, this information could be used in the following ways:
1. Running ads on Facebook that only appear for women, age 30-39, within your city or town. By knowing this information you won't have to pay for clicks and traffic from people who are less likely to buy.
2. Using signs, flyers, or some other kind of print advertising just within the 5-mile radius of your store. This would further saturate your business area and make your potential customers more likely to buy (as it takes 7 contacts with your company or ads on average to get a response).
3. Running an offer that specifically appeals to younger married women; for example, an offer to bring in one's husband and receive a discount, if this is applicable to what you do.
4. Selecting photos for your ads of people who closely match your target customers. In this case, you'd show women in their thirties who look like they live in your city, however that can be represented. Or pictures of happy couples, if appropriate.
5. Using direct mail to target potential customers. Chances are the 5-mile radius around your store is all in 1-2 zip codes. This information is very helpful if you're doing a direct mail promotion. When you buy a mailing list through a service like MelissaData or Listsource, you can select only addresses of women within your zip code. Why spend $.50-$1.00 or more per person if they're not as likely to respond, purchase, or love you?
6. Finding out where these women congregate and then going there or sponsoring and event. For example, if you determine that most of your target customers belong to the local PTA (Parent Teacher Association), sponsor a PTA meeting or event. As a related note, this is why I love airport lounges. Yes, it's nice to stay in a comfortable environment when waiting for a plane, but I love the marketing implications. That is, virtually all of the people I see in these lounges are corporate executives and salespeople that travel a lot. If your business' core customers fit this demographic, then hanging out in these lounges could be a goldmine.
7. Designing your store's appearance and layout with these women in mind. Your store would probably be colorful, aesthetically pleasing, and perhaps "hipper" and less formal than if most of your visitors were Baby Boomers.
8. Conducting research to learn what has been discovered about these women's preferences. Did you know there have been tests showing that women prefer ovals over squares, or purple over red? This information would be very useful when creating a logo, designing your store's outside and inside, and all of your promotional materials.
See all the ways you could utilize this information? This is why big companies spend a LOT on market research and surveys, and ask this information of customers when they buy online, etc. The more you know about them, the better marketing decisions you can make.
But what if I don't have this information about your customers?
Start with what you know
If you're interacting with customers face-to-face, you know their gender and can guess their ages. Your sales receipts will probably tell you customer addresses, so there's the city and zip code.
If you have collected business cards or know your top customers' demographics from memory, write that up as a working profile for now until you can do it more formally.
Then, start collecting their information
The best way to do this is to ask for it! Have a jar on your counter for business cards and a drawing/raffle. Or hand them a short survey form to fill out with 5-8 questions.
Or you can make simple online surveys using SurveyMonkey, SurveyGizmo, or Zoomerang, and then promote the web address where people can fill it out. It helps if you offer them some incentive, like a free gift or chance to win something.
It seems like fast food restaurants are getting pretty systematic now about encouraging customers to rate their experience online or by calling into a hotline.
And last time I went to a new doctor, they had me fill out a "Patient Information Sheet" asking for quite a bit about me medically, as well as about my demographics. See how doctors and dentists collect this so routinely? Make it a part of the way you do things and you won't have to remember.
Have you ever registered for something online and they ask for your company name, company type, your job title within the company, and so on? That's a great example of collecting demographics about a business, for B-to-B sales.
Make a demographic profile
Take your findings and summarize them on one page, for easy reference.
I know several copywriters who have told me that the best way to "get through" to people reading their sales letter or persuasive copy is to sit down to write with a photo of their "ideal" or "typical" person from their target market, and write as if speaking directly to that person.
Photo or not, at least write what you know about your top customers' common characteristics and print it out on a sheet of paper.
Make this profile a quick snapshot to reference that will represent them, rather than going about your marketing haphazardly, or in a less focused manner.
Lastly, do some research
As I said, you should also look for studies and reports online about how people of certain ages, genders, or marital statuses behave differently (from a marketer's perspective).
Lastly, in order to prevent false assumptions, if your main customers fit a certain demographic, for example they are mostly of a lower income, ask yourself if this was intentional, or if your previous marketing efforts just happened to attract them.
Executing on the ideas above will shed light on exactly whom you're working hard to serve, and will aid you in your efforts to find more of them and treat them the way they want to be treated.
Otherwise, it's "Round peg...meet Square Hole."
Here's to focused, targeted marketing...good luck!
Suggested Resource: Growthink's Ultimate Marketing Plan Template allows you to expertly create your marketing plan. Importantly, it allows you to quickly and easily build your target customer profile as explained above, and much, much more in order to dominate your market. Click here to learn more.
Below is an easy exercise that will boost your profits.
First, list your products and/or services
Create a spreadsheet. In Column A type the names of each product or service you offer.
Second, list your market segments (customer groups)
In the first row of columns B, C, D, etc., write the names of the different types of customers you serve.
For example, if you have a walk-in store as well as a website set up for e-commerce, you will have at least two groups of customers - those who come in to purchase and those who buy online.
Or you may sell to consumers and businesses.
Or you may sell to affluent consumers and less-affluent consumers. Or you might sell different products and/or services to men vs. women.
List all of these customer segments in the first row of columns B, C, D, etc.
Place an "X" in each cell in which you have a combination
To recap, in Column A you have a list of your products and services. And in the top row of the other columns, you have a list of all your customer segments.
Now, place an "X" in each cell in which you offer that product or service to that customer segment.
For example, if you sell insurance to affluent consumers, then type an "X" in the cell that intersects these two variables.
The result will be a chart with "X"s showing all your product/service and customer segment combinations.
Next, write down a list of all the combinations you found. For example, your list might include:
Determine your revenues and profits for each combination
For each combination, type in how much revenue and profit you generate from it.
In many cases, you will find that one combination dominates your profits. Or that one customer segment (among several products and/or services) buys the overwhelming majority of your products and services.
Importantly, in completing this exercise, you may also identify combinations you didn't know even existed.
Sharpen your marketing focus
Most entrepreneurs and business owners place equal marketing focus on ALL their combinations of product/service and customer segments.
But, smart entrepreneurs and business owners place more emphasis on the combinations that are proven winners. Now that you know your winners (i.e., the combinations that are generating the most revenues and profits for you), focus on them.
Using the example of "insurance to affluent consumers" being a winning combination for you, here's what you should do:
1. Do more marketing to them. Figure out how can you reach more affluent consumers. Perhaps stop doing general advertising that reaches both affluent and non-affluent consumers and do more targeted advertising like direct mail or cable television. Or perhaps there's another company serving this clientele with whom you can partner. Etc.
2. Better tailor your marketing to them. Rather than having advertisements that mention several of your products/services, create ads that solely focus on your insurance offering, since this is what generates the most revenues and profits. Likewise, since you know the specific customer segment you want (i.e., affluent individuals) use terminology and images that will specifically appeal to that segment.
Most entrepreneurs and business owners make the mistake of trying to be all things to all people. As a result, they water down their value proposition to the customers that give them the most revenue and profits.
Rather, by identifying your most profitable customer/product combinations and focusing your marketing efforts to them, you can quickly grow your revenues and profits, and distinguish yourself from your competition.
Suggested Resource: Growthink's Ultimate Marketing Plan Template allows you to expertly create your marketing plan. It will help you fully leverage your most profitable marketing combinations and dramatically increase both your revenues and profits. Click here to learn more.
In your business experiences, you may have noticed that "selling" is not particularly hard when you have the right product positioned correctly, in front of the right person who wants it NOW.
But, when one of these factors are "out of whack," it can be a much tougher sale to make.
Getting funding from angel investors is the same way. It's not so much about how good of a presenter or salesperson you are (though those qualities help). Because the most important time you spend influencing potential investors is done long before you present to them, even long before you even contact them; it's done when you prepare your company for funding.
You've probably heard the quote from Abe Lincoln, "If I had 8 hours to spend cutting down a tree, I would spend 6 hours sharpening my saw." The point -- you can get a job done with a lot less effort when you are fully prepared.
So how do you prepare?
You prepare by making sure angel investors will want to invest in your company. And they'll want to invest if they believe your company has great potential to achieve a liquidity event, and one that enables them to earn a significant return on their investment.
Trust me, you're not going to show them that potential with your passion and enthusiasm alone, or a killer presentation. There are certain criteria that, if your business meets them, will show the angel that you DO have the potential. Here they are below...
Criteria #1: Scalability
This is the potential for your company to achieve significant annual revenues. An angel investor, when no future funding is required, might be willing to invest in a restaurant or website that has the potential to generate hundreds of thousands or a few million dollars-as long as a clear path has been laid out regarding how they could get a sizable return on their investment.
The problem is that some businesses are not as conducive to scaling as others. If you offer a professional services business, you can probably only handle so many customers yourself. Even with an office full of lawyers, for example, you would have to hire and manage more and more people in order to grow.
In a truly scalable business, you can multiply your sales without having to greatly increase your resources. You would simply turn the knob up and an existing infrastructure can handle it.
Criteria #2: High Barriers to Entry
Barriers to entry are those things that make it difficult for another firm to compete against you, such as patents or proprietary technology, a unique location, strategic partnerships with larger firms, and long-term customer contracts.
Having first-mover advantage (being the first to offer something) will give you an initial head start. But rest assured, competitors will copy your idea, once proven. You've got to find ways to keep that advantage by excelling so well at what you do that it will take others a long time to catch up.
Your company will need what Warren Buffet describes as a "sustainable, long-term competitive advantage" and looks for in the companies in which he invests.
Criteria #3: Strong Management Team
Who is running things (besides you)? The angels must believe in and be comfortable with both the founders and the key operating personnel of the company.
Does your management team have relevant experience and successes under their belts? Are they capable of taking things to the next level? Do they advise you, or are you currently more of a babysitter to your managers?
Experiencing massive growth is hard. You need capable leaders who can deal with the unknown and adapt to rapid change. You need people who can figure things out on their own and pioneer new ways of getting results.
The "Who" often comes before the "What" in priority. Get the right people together and they will likely choose the right course among all the options. Keep this in mind when hiring managers-will they be able to grow with your company, or does it seem like they will only be capable of their current role?
Criteria #4: Your Exit Strategy
The fourth criteria in which angel investors need confidence is your exit strategy. This means that the chances are good of eventually having another firm purchase you or your firm going public.
You have to remember that it's typically through your exit strategy that these investors profit from their investment in you. It's hard to get a company to generate enough cash off the top to pay them back over time-the original investment and some interest, maybe, and generating the cash to pay them several times their investment isn't likely (or desirable).
So angel investors count on some event happening that will generate a very large sum of money that pays them back, plus their profit. Unless they want to be an owner of your company forever, you have got to choose and prepare for your preferred exit in advance.
If you plan to sell, that's the most straightforward way to go. Set a time frame for when you'd like to accomplish a sale and work consistently towards that end. If you don't intend to sell, you'll either need to take the company public someday, or negotiate other ways of paying back the angel.
Criteria #5: Being a Local Company Helps
Another important criterion, while not necessarily tied to liquidity potential, is that angel investors tend to invest in local companies. In fact, according to the Center for Venture Research, 70% of angel investments are made within 50 miles of the investor's home or office.
Angels often like to invest in companies that are close by so they can visit them and participate in Board meetings and other events. And for retail businesses like a restaurant, they like being able to drive by and think or say "I'm an owner here."
Criteria #6: The Right Price
Finally, angel investors will only invest when the price is right. If you price your equity too high, angels may not have the potential to reap significant enough returns and will not invest.
If you know a few angel investors or angel groups in your area, find out in advance what kinds of prices and returns they would find acceptable. With this information, you may have to reset your revenue goals to achieve before getting the next stage of funding from angels, ask for less funding to increase their return, or commit to a higher payout if that's what it takes.
Understanding and preparing yourself and company to exhibit these six criteria will help you achieve your main goal-to convince angel investors to write you a check.
And not surprisingly, working towards the same objectives that attract angels will also help your business to be more profitable, stable, and positioned for growth even if you decide not to raise additional funding down the road.
So, start sharpening your saw today. Think about and strengthen your exit plan. Think about how you can build a better management team. And so on. And then, you'll be able to raise all the angel funding you need.
Suggested Resource: In Growthink's Angel Funding Formula, you'll learn exactly how to find and contact angel investors, exactly what information to convey to them and how, and how to secure your financing check. This angel funding video explains more.
When seeking equity investments, the source of capital is, for the most part, tied to the stage of capital being raised.
You see, equity capital is raised in stages or rounds. The five main stages include the following:
1. Pre-Seed Funding
2. Seed Funding
3. Early Stage Investment (Series A & B)
4. Later Stage Investment (Series C, D, and so on)
5. Mezzanine Financing
Most companies that raise equity capital and are eventually acquired or go public receive multiple rounds of financing first. Do you intend to go big before selling or becoming publicly-traded?
No right or wrong answer here, but if this is your vision then it's important to consider when negotiating deal terms on earlier stage financing rounds. As Steven Covey said, you'll want to "begin with the end in mind" and not make arrangements with your angel and/or early investors that will complicate later stages of funding.
If it's not your plan to get venture capital down the road, then you'll probably stop in Stage 2-receiving enough funding to boost your marketing, sales, and infrastructure to grow organically from there to the point where you are satisfied or ready to sell.
Here are the five main stages of equity capital:
Stage #1: Pre-Seed Funding
Pre-seed funding refers to the initial capital a company brings in that comes from friends, family members, credit cards-whatever you can get. This could be as small as $5,000 and as high as $100,000.
Though the dollar amounts are lower, this round is more difficult to get institutional funding for ("institutional funding" is when a financial institution, rather than an individual person, funds you). Banks are not ready to make a Small Business loan on a company that has yet to launch, break even, or establish a track record.
Nevertheless, this is when you get the startup money to kickstart your business with the bare essentials needed to begin making and fulfilling your first sales. Necessary machinery, an initial website, your first batch of inventory-things you can't function without. Put everything else on your "wish list" to buy with revenues from sales or additional financing.
With this funding, the company often perfects its business plan and starts building its management team in order to position itself for its next round of funding. Your first year or two in business is where your dreams merge with reality and take a new form to guide your future efforts.
Many entrepreneurs end up taking their company in a different direction after some time spent testing your initial business model. Take the founder of Wrigley's chewing gum, who began selling baking powder and soap door-to-door and giving away gum as a bonus before discovering people wanted it a lot more than soap.
So during this round, you'll be testing what works and what doesn't. Here, you prepare to scale up the things that do with future funding. It might even be a good thing to not have too much funding at this point of your business so you don't invest too much going in a direction you'll abandon later.
Stage #2: Seed Funding
Seed funding (also called seed capital) typically ranges from $100,000 to $500,000 and is often provided by angel investors, and is usually structured as convertible notes or common stock.
With seed funding, you hope to grow your business and, at the very least, gain proof of concept. That is, you'll use the funding to build a product or service and prove that customers want to buy it. At this point, you will be ready for institutional investors who can provide funding to scale or rapidly grow your business.
Stage #3: Early Stage Investment (Series A & B)
"Series A" is the term used to describe the first round of institutional funding for a venture. The name is derived from the class of preferred stock investors receive in return for their capital.
The average Series A round is between $2 million and $5 million, with the expressed goals of funding early stage business operations. Providing enough capital for 1 to 2 years of operations, funds obtained from the Series A round can be used for the full gamut of needs-from product development and marketing to employee salaries.
Series B is the round that follows series A in early stage financing. In this round you can generally raise $5 million to $10 million, but can sometimes you can raise up to $20 million in capital or more.
Stage #4: Later Stage Investment (Series C, D, etc.)
Series C, D, etc. (some venture backed companies have raised over 10 rounds of financing) are further rounds of venture capital funding.
Each round may raise between $5 million and $20 million or more. Series C, D, etc. rounds are also typically obtained from venture capital firms and/or strategic/corporate investors.
Stage #5: Mezzanine Financing
Mezzanine capital, often provided by private equity firms, is capital provided either as equity, debt, or a convertible note that is provided to a company just prior to its Initial Public Offering.
Mezzanine investors generally take less risk, since the company is generally solid and poised to "cash out" relatively quickly.
Hopefully this lays out the different types of funding you can get and when. There's no sense going after venture capital if the time isn't right, or if it's not needed to reach your vision. For most of my readers, the main concern will be preparing your business for angel financing until the time is right for venture capital.
Suggested Resource: In our Angel Funding Formula program, you'll learn exactly how to find and contact angel investors, exactly what information to convey to them and how, and how to secure your financing check. This video explains more.
Every business needs a vision - a clear definition of what you'd like your business to become in the future. And, every business needs a set strategy - a definition and plan of how your business is going to reach this vision.
All the key elements -- what you sell, to whom, for how much, what you promise, etc. -- they are all part of your company's strategy or direction towards creating the business you want. My last article covered how to set this strategy so that the rules of the game are tilted in your favor.
When you've chosen a direction and vision, the next step is strategic planning - mapping out how you will achieve this over a long-term time frame (usually one year). This, like all planning, involves determining what projects you will complete and when, and how you will allocate resources such as man hours, money, and assets.
Lastly, your strategic plan will break down into specific, detailed short-term plans that help you know what to do on a month-to-month and even day-to-day basis.
But can you imagine what happens when you have a short-term plan to handle all the business and projects you have going on, but no longer-term, strategic plan to tie it all together? Maybe you've experienced it...the answer is chaos, drudgery, and endless wheel-spinning with no little progress.
So, let me explain some of the key errors and obstacles facing entrepreneurs and what to do about them:
Unclear, Unshared Vision
With all the time team members spend together in meetings and talking to each other, it's surprising how often they come away with different mental pictures of what the company is supposed to be and in what direction it's supposed to be going.
Everyone sees the company's future from their own perspective and function. It's your job to repeatedly communicate your company's vision and strategy to them-50 or 100 times if you have to-so they're all on the same page and can give you better advice and support.
Operational Thinking Dominates Your Time
This happens when most of the time spent in meetings is discussing how to run the business and putting out the fires that come up so often. Rather than also spending time strategizing and planning.
It's easier said than done to carve out time in your schedule for strategic thinking and planning, but that's the nature of entrepreneurship-taking care of today's business with an eye on the future. Hard to do, but keep in mind that delegating more of the day-to-day operational tasks to your team can free you up to do the strategic work, which may be something that only you can do.
I have to admit, when you show up for work it's easy to turn your attention first to all of the urgent tasks and demands for your time. Strategic thinking, on the other hand, is one of those activities that time management gurus classify as "Important, but not Urgent" (an example of "urgent" being something you must deal with immediately like an irate customer on the phone).
This means you have to fight for your strategic time, as it's the process that takes an unfocused business and sets it firmly on the track to success. Block it out on your calendar -- each week, schedule time to assess and/or discuss strategy.
Getting Complacent When Things are Good
My friend Paul Lemberg refers to the Comfort Zone phenomenon as leading business managers to become "fat, dumb, and happy." In other words, becoming complacent when things are going fine. This can lead to becoming reactive with your strategy, rather than proactive. Do you want to be reconfiguring your company and innovating under duress at breakneck speed at the last minute, or well ahead of time when the pressure is off?
Quite a few companies wait until a crisis comes around to kick-start their strategic thinking out of necessity. You don't want to be planning during a crisis...
Wasting Time With 5-Year Plans
Let's be honest here...isn't a five-year pretty much a one-year plan, plus 4 years of guessing?
You MUST have a clear vision of what your company will be like in 5 years, but to try and guess the details of what will be going on in 43 months, for example, in a fast-changing world is wishful thinking.
But once again, you must create your long-term (5 year) vision, which will guide all of your annual and other planning. Take a sheet of paper and describe the key elements of what you'd like your business to do, be, and look like in 5 years. Document this and use it to judge new opportunities and directions to see how well they fit.
Planning Once Per Year, Out Of Routine
We all know how around New Year's Day, many individuals start thinking about their personal goals for the year ahead. And many businesses work hard on a yearly plan during the same month of every year.
But can you wait to do your strategic thinking until your annual cycle calls for it? The business environment just isn't that predictable.
I suggest writing up your strategic plan right now and then making periodic changes throughout the year. You must set your annual plan, and then judge your progress and adjust your strategy and plan as needed.
No Process or Methodology For Strategic Planning
I suggest you discuss and choose your strategy in one session, then do your full strategic planning in another.
In setting strategy, you'll be in creative mode, exploring all possible options. Choose the strategy that makes the most sense, and then figure out the precise action plan to achieve it in a separate, more analytical meeting.
With appropriate time set aside for strategic thinking and planning, and by avoiding the obstacles discussed herein, you'll experience the joy that comes from knowing exactly what you're striving for and how to get there.
You'll feel more grounded, balanced, and centered. You'll come to work with greater purpose and passion. And you'll have more to show for your efforts at the end of each year.
Suggested Resource: You just learned how to remove the obstacles that cloud your strategic thinking...a key part of the strategic plan to guide you in growing your business. What else should you include in your current growth plan? To have a great strategic plan, there are 13 crucial sections. For your reference, they're listed in this video I put together. Watch it now.
The entrepreneurs and companies that will prosper and outpace their competitors during the next two decades will be those that outthink their competitors strategically, not outmuscle them operationally.
Specifically, the winning companies will craft a focused strategy that gives them a distinctive advantage. Conversely, too many companies try to compete by imitating their competitors. A successful strategy is one that makes competition almost irrelevant.
Isn't that the best position of all to be in...to have no direct competition? To achieve this, you have got to stop playing the game by the same rules as everyone else, and to embark on a strategy that changes the rules in your favor.
Chances are you're in imitation mode when you:
All of this results in a race with no winner...it will just be brief leads and falling behind again. It leads to incremental advancement only, often fleeting, and certainly isn't going to help you dominate your market.
Let me give you an example of market dominance by discussing the market for cigarette lighters. Most cigarette lighters are disposable and cost 99 cents or so. However, rather than playing the price game (a race with no finish line), Zippo has turned the game on its head by specializing in more expensive, higher quality lighters that sell for $15-35 each-or more, for certain collector's editions.
Another example is IKEA, whose distinctive strategy sets it apart from other furniture dealers. Ever walked through an IKEA store? I doubt you'll find a larger selection anywhere else selling furniture so inexpensively.
Why? Because their strategy targets customers who are willing to assemble furniture themselves (relatively easily) in order to save a bundle. The furniture's materials can be compactly packaged for shipping still in the box, at a much lower cost than shipping, say, an assembled dining room table that takes up a lot more space.
So here's the golden rule...never play the game according to the rules the leader has set. Don't try to outdo the top dog at their own unique strengths they've spent years or decades developing. They know the rules better-after all, they designed them!
The joy of entrepreneurship is finding a game worth playing!
Find things competitors are lacking in, or-even better-reach markets they're not reaching. No matter how big they are, no one company can be everything to everyone.
For every mammoth Anheuser-Busch selling the most beer to the most people, there's a quaint microbrewery selling a double chocolate stout that would fail on store shelves but is the ONLY one that a certain rabid group of buyers want.
As an example, I pretty much love all the beers created by Lagunitas Brewing Company in Petaluma, California. Since my supermarket doesn't carry it, I'll drive 20 minutes to a beer distributor that does.
When you change the rules, you neutralize and paralyze the leader. The odds are they are so entrenched in doing business the way they have, and have grown so large, that they're slow to change. You can make a lot of progress while they're catching up.
In fact, sometimes changing the rules of the game can put the entire industry in jeopardy. Examples are Charles Schwab allowing people to trade stocks online by themselves in 1997, and Craigslist making life difficult for print classifieds salespeople.
You might be wondering, "Sure, all this sounds great...but HOW do you actually do this in real life?"
Here are some questions to get you started on your game-changing strategy:
What can you excel at?
The odds are your leading competitor has achieved success because they dominate in some area.
So what? You don't have to compete against them, remember? Ask yourself what YOUR company can excel at, and you'll attract customers no matter how big a competitor is who's not serving their needs as well.
Where do you see opportunities for leverage?
Successful companies leverage their unique set of capabilities (things that make you excellent) across as many products, markets, and people as possible.
Often this is done through alliances with strategic partners and other opportunities for synergy.
What new products or services could you innovate?
No matter how much advertising and distribution a monster competitor has in place, they still can't profit from a product or service they don't offer.
Creating a new product or service, or specializing in an overlooked product/service category can make you the best in the eyes of certain customers.
How's your implementation?
The best strategy in the world still won't bring results if it isn't executed. This is where your project planning and management skills will come in handy, to see your dreams through to completion.
In summary, if you want to make substantial gains at your competitor's expense, tilt the playing field to your advantage. Choose a strategy that helps you sidestep the copycat game, and build your strategic plan around it.
As General Sun Tzu, famous Chinese war strategist, would say, "To subdue the enemy without fighting is the acme of skill."
Suggested Resource: You just learned the importance of choosing a distinctive strategy to change the rules of the game. This is the key to a great strategic plan that will guide you in growing an ultra-successful business. What else should you include in your current growth or strategic plan? Click here to find out.
In an interview on his blog, billionaire and founders of the Virgin companies Sir Richard Branson said the following about Steve Jobs:
"I admired Steve Jobs, although he was completely different from me. He used to shout at employees that made mistakes. He did not delegate much, and broke all the rules I believe in. Somehow it worked for him. Apple is one the best brands in the world."
Branson, on the other hand, delegates a ton; how else could he manage nearly 50 companies at once?
Now, I'm not saying that Jobs' management style was any better than Branson's or vice versa. But clearly, even Jobs delegated a ton of business activities. For instance, Jobs clearly didn't' do Apple's bookkeeping.
Both Branson and Jobs are/were masters at delegating activities. Which allowed them to focus on the highest value uses of their time to building their companies.
But a natural question arises for entrepreneurs with regards to delegating. And that is: what should I delegate or outsource? [From a definition standpoint, I consider "delegating" to be giving a task to someone else within your organization and "outsourcing" to be giving a task to someone outside your organization.]
This question is particularly acute if/when you are an earlier stage entrepreneur with limited resources (versus Apple and Virgin who are billion dollar companies).
If you look at your business, there is probably a very long list of activities you could delegate, or rather (particularly if your company is relatively small) outsource.
For example, you might outsource activities related to:
In addition to outsourcing tasks like these, you may simply choose to outsource tasks that are just plain annoying or take up a lot of your time.
But, once again, if you're working with a limited budget, you will have to make some difficult decisions about what to outsource, and what to outsource now versus later.
Preparing to Outsource
Even if you had unlimited funds, you would still want to prioritize what you outsource and when. This is because each task, role, or responsibility you give to someone else requires work. There is time required to plan the task, find and train the individual, and support or coach them among others.
For example, if you want to hire someone to call local businesses and set appointments for you, you would need to:
As you can see, simply preparing to outsource a task takes times, so you can't outsource everything.
What to Outsource First
Every business is different and only you can determine what to outsource. However, read the following to see examples, rules and guidelines that I and other successful entrepreneurs have found to be effective.
Task Type #1: Lead Generation Tasks
Since the biggest challenge of most businesses is not having enough leads no matter how great your product or service, lead generation is probably one of the first things I would outsource if you want to make more money. This is particularly true if you think that your investment in outsourcing can be returned very quickly in the form of new sales and profits.
You should specifically consider outsourcing lead generation tasks that you don't already do, or that you do poorly or ok (but not great).
For example, search engine optimization (SEO) is a lead generation task that most entrepreneurs don't do, or do very poorly because they don't have the time to devote to it. Conversely, some search engine optimization firms and outsourced individuals stay abreast of the latest SEO techniques and technologies and can generate significantly greater results than you or your team can in a fraction of the time or cost.
Task Type #2: Fulfilling the business you generate
Once you generate leads and convert them into clients, you need to fulfill the orders. Particularly in service businesses, fulfillment often becomes a bottleneck; particularly if you need to perform the work yourself.
This typically results in a "feast or famine" cycle. That is, once you close a new client you are in "feast" mode from the money the new client brings in. But then, you spend all your time fulfilling the client, and when the work ends you are in famine mode. Specifically, because while fulfilling you didn't spend time on additional lead generation, once the client job ends, you are left without enough revenues and searching for new clients.
So considering putting someone in place to handle all the new business to generate. If not, you'll likely find your lead generation to be sporadic and less effective, or your customers not getting the quality of service they deserve.
Task Type #3: Other ongoing, repetitive tasks
There are many tasks your business needs to perform over and over again-like bookkeeping, filing, creating reports, compiling data and contact lists into spreadsheets, researching vendors, etc.
Your job is to grow your business by initiating new projects, not taking care of business as usual. So you need to outsource these administrative tasks.
Task Type #4: Your most painful tasks
Each of us has our favorite tasks and our most dreaded tasks. And each of us has strengths and weaknesses. Ideally, you should perform the tasks which 1) you like, 2) which leverage your strengths, and 3) which have the most value to your organization.
And certainly, if a task doesn't meet any of these three criteria, you must outsource it immediately.
The exception to this (and a warning) is when there is a skill or competency that you really do need to improve in order to be a successful business owner. Decision-making, planning, building a team, and other leadership responsibilities are not always fun, but critical to perform yourself (or with a co-founder or management team if necessary).
Action Plan to get started
With these thoughts in mind, create a list of tasks that you are doing right now that aren't the highest value uses of your time. Also include tasks you aren't doing (e.g., lead generation tactics), but should in order to boost revenues and profits.
I realize there often seems to be a chicken-and-egg issue, which is that you need money to outsource projects, but if you spend your time doing those projects yourself, you won't generate enough revenues or profits to pay for an outsourced person.
The answer is to take the leap. Go ahead and outsource a task or two. You will inevitably find you can generate more revenues and profits with the time you gain from outsourcing. You will eventually start outsourcing (and delegating) more and grow a thriving company.
So make a quick list of the 5-10 activities you should outsource (either because they are a pain, you are not doing but need to do them, or they are low-level repetitive tasks). And then find someone to which you can outsource them.
Suggested Resource: What should I delegate? What are the best marketing strategies? How do I most effectively build and lead my team? If you're looking to grow your business, would you rather (1) try unproven strategies and see what works? or (2) follow the exact footsteps that other ultra-successful entrepreneurs have already taken? If you're like me, you'll choose number two. And if so, you'll want to watch this video to see learn those exact footsteps.
If you're business isn't growing, it's probably dying. Inflation and costs increase whether we expand along with it. Customers, markets, and trends are changing whether we are changing along with them. Those who do not grow get left behind.
But what is growth? That's the tough question, isn't it?
Growth is making progress in narrowing the gap between your vision of the company's future and its present status. It doesn't necessarily mean getting larger, having more people, and more revenues, though it often does. Growth is making progress towards your vision and future as only you can define it.
We also know that your business has several "parts," or functions and departments that work together. They don't grow by themselves haphazardly or unintentionally. They have to grow together in an integrated, coordinated way-by choice!
So what ties it all together? The answer is "Growth Drivers." These are the three areas in which you can focus your growth efforts:
Whichever of these on which you choose to focus, you have three "growth strategies" available to choose from:
This gives nine possible ways to grow, which I'll break down for you shortly.
But first, for growth to be successful and sustainable, it has to start with marketing knowledge. The right marketing knowledge and intelligence will tell you which available market segments can give you the best opportunities for growth, what products will attract and please your customers, and which lead generation channels and messages will bring them to you.
To acquire this intelligence, pay attention to your customers and collect feedback; conduct formal market research surveys, assess customer demographics, etc.
After you've conducted this research and it's time to grow, here are the nine ways to grow your company:
1. Market expansion - Increasing your target market to include more people or a larger geographical area. This is doing more of the same but to reach more people in more places.
2. Market Saturation - This means getting a bigger piece of the current pie. Whatever target market you are currently in, you would attract more customers from within it and make them "yours."
3. Market Diversification - This entails going after additional market segments. If you're selling donuts to walk-in customers, then you might start selling them in the grocery stores or directly to businesses as well (new segments of your market of donut buyers).
4. Product Expansion - Adding more variety to your existing product. An example of this would be Coca-Cola adding Diet Coke, Caffeine-Free Diet Coke, Cherry Coke, etc.
5. Product Saturation - This means customizing products-tailoring custom-made goods for individual customers. If you go this route, make sure to raise your prices for the extra value (and work).
6. Product Diversification - This means introducing new product lines. The more you have that might appeal to the same group of people, the more likely it is that they'll buy one of them. You might sell items that complement your flagship product and enhance your customers' experience.
7. Expanded Lead Generation - This means advertising through the same channels you have been (magazines, signs, direct mail, etc.) but using more of them (ads in additional magazines, mail to new lists, etc.).
8. Concentrated Lead Generation - This means advertising more often through the channels you already are. You'll reach a higher percentage of the market more frequently to increase response and sales.
9. Diversified Lead Generation - Adding a greater variety of lead generation channels and messages that you're not currently using, to reach prospective customers in as many ways as you can.
If you are just starting your business or launching a new business model within it, do your best to plan and execute on a small scale.
Once you are farther along and/or are ready to really grow, choose one or more of these 9 growth strategies and focus on implementing them.
As a business owner, I encourage you to think about your business a little differently. That is, I want you to think about your business as a product. And specifically a product that one day you might sell to an acquirer (for a lot of money of course).
By thinking about your business this way, you will be more likely to build a company that an acquirer would want to buy. As opposed to the vast number of un-sellable businesses most entrepreneurs unfortunately create.
Importantly, even if your intention is never to sell your business, I want you to adapt this way of thinking. Because the same attributes that will make your business attractive to buyers will also make it perform better for you. Remember, your business should work for you, not the opposite.
Looking at your business as a product, the first question to ask (and the first question an acquirer will ask) is:
Does the company you built stand out from the others?
In assessing a product, we typically consider its unique attributes or unique selling proposition. For your business, what about it will get the buyers' attention? Will it be your cash flow, recurring revenues, or potential for significant future growth?
A second question a product buyer might ask is '"how easy is it to use the product?" Similarly, an acquirer will ask:
How easy will it be to run this business after acquisition?
Clearly, the acquirer will want the smoothest transition possible when taking over. The acquirer does NOT want to deal with:
Likewise an acquirer would NOT want to purchase a company in which a small handful of clients represented the majority of revenues. In such a case, even just one or two clients leaving could materially hurt revenues and possibly bankrupt the company. Yes, even thriving businesses have been bankrupted by one or two trophy customers leaving because they failed to diversify their customer base.
Another question a product buyer typically asks is "what are the key features of the product that allow it to perform?" In relation to your business, these features include the Financial Metrics you've achieved and Business Assets you've built.
How has your business performed financially?
Obviously a buyer will want a business that makes money (or could make it money), and the more predictable and turn-key it is, the more you can make from the sale.
Doing your homework on what similar businesses sell for will help you plan your exit in this regard. Find out what yearly revenues and earnings is the "sweet spot" for businesses or individuals on your target acquirer list, and make this your revenue goal to shoot for before selling.
This is harder to do in the "survival" stage of your business, obviously. But over time as you discover what works and what doesn't and double up on what's effective, a higher percentage of your efforts will succeed and that adds to its predictability and stability.
What business assets has your company built?
A big part of your business' value is the time and effort you put into building the business assets that allow your company to profitably and efficiently run.
These business assets, which will strengthen your business and increase its value, include:
A final question you might consider when purchasing a product, and particularly an investment product, is its future growth potential. When considering purchasing a company, a similar question the acquirer will ask is:
What are the odds of sustainable future growth?
Few buyers are going to pay you a significant multiple of your annual revenues or profits unless they believe they can increase those revenues/profits even more. Otherwise, how are they going to get a return on their investment?
The ideal time to sell is after you have demonstrated profits and growth, and right as you're positioned to grow even more, and that means:
By looking at your business as a product, you can build a thriving enterprise that satisfies your needs and the needs of a big-pocketed acquirer. Specifically, you want to build your business so that it's unique, can run easily upon acquisition, has strong financial performance, includes valuable business assets, and is positioned for future growth.
Do this and then enjoy the success that comes with it!
Suggested Resource: If you want to build a sellable business, join me on a free webinar where I explain exactly what to do. It's called "Million Dollar Exits: How to Build a Business You Can Sell For Millions of Dollars." Reserve your seat for the webinar by clicking here.
If you are ever in a position to sell your company, you'll learn that there are two general types of buyers.
There's an individual buyer, or a person who wants to buy your business so they can run it themselves.
And there's a corporate buyer, or a company who wants to buy your business and integrate it into their own.
For the most part, there's a financial cut-off between the groups. That is, if you are selling a business for less than $2 million, generally you are selling it to an individual buyer. And for businesses above $2 million, you are generally selling to a corporate buyer.
Now, when selling a sub $2 million business, you often use a business broker (versus using an investment banker to sell a larger business). And most business brokers among other things, will list your business for sale on several websites.
One of the largest of these websites, in terms of number of visitors, is BizBuySell.com.
Occasionally, I visit BizBuySell.com myself for educational purposes. I like to see the types of businesses that are for sale, how they are positioning themselves, and what prices they are asking.
And the last time I visited BizBuySell.com, I asked myself an interesting question:
Who primarily visits this site?
And the answer I came up with was 1) business brokers, 2) business owners who are selling their companies, and 3) entrepreneurs looking to buy businesses.
Now, it was this latter group, entrepreneurs looking to buy businesses, which I found most interesting.
Because, what must these entrepreneurs have if they are looking to purchase a business?
Money, or access to money.
Now why this is so important is that there are tons of entrepreneurs with businesses or business ideas seeking funding for their businesses. And these other entrepreneurs (who don't have businesses or business ideas) clearly have their own, or have access to funding.
Which led me to a potentially creative technique for raising funding.
1. List your company (even if it's just a startup or concept) on a site like BizBuySell.com
2. When buyers contact you, explain to them that your preference is not to sell your business or concept to them, but rather to partner with them. That is, have them buy-into your business. Specifically, if they invest $Y, they will get X% ownership in your business.
So, the concept here is simple: find someone who has money and is looking for a business opportunity, and have your company be that opportunity.
Now the question is whether this strategy is ethical or not. Mainly the fact that you are listing a company for sale that isn't really for sale in order to meet potential investors.
I think each of you have to answer that question for yourselves.
On one hand, if you legitimately would consider someone buying your business in its current state, then this strategy is clearly legitimate.
However, if you have no interest in selling, it becomes questionable. But perhaps, in your company listing, you more explicitly state that you are more interested in selling a portion of your business, and not the whole business to a buyer. Then, it seems more legitimate.
Note that I have not discussed this idea with the owners of BizBuySell.com or similar sites. But from their terms of service, it seems that such a strategy is acceptable to them.
A similar and clearly 100% legitimate strategy would be to contact local business brokers and see if they know of any potential buyers who would consider partial ownership (i.e., investing in your company) instead of full ownership.
Finally, one of the key points of this article was not to tell you about this one strategy for your consideration. But rather to let you know that there are tons of creative and alternative ways to fund your company beyond the "usual suspects" of angel investors, venture capitalists and banks.