Monday, 24 February 2014

Business Finance Bulletin #16: Robert Craven on Strategy & Finance

"In this week's Business Finance Bulletin Rob Warlow chats with entrepreneurship guru Robert Craven on the key aspects of business growth. More news on another new entrant into the banking market which promises to support small businesses with their finance needs. And in the Tip of the Week Rob shares his thoughts on taking time out of your business which came out of a day spent with members of the Infinite Group of business advisers."

Thursday, 20 February 2014

Why the Professional Service Firm Blocks Its Own Growth

If it wasn’t true you would think that someone had made it up.  

However, the story I am going to tell you gets recounted to me every single week of the year. It is a scenario that is played out all over the world, again and again, with depressing regularity.

The place is a professional service firm. I won’t name names (not ever, rest assured!).

I get invited to lunch by the new(-ish) spritely, young(-ish) partner or partner-in-waiting or new business development partner. Essentially it is the youngest person who has been offered the keys to the executive toilet... They are referred to (by their seniors) as “The new guard”, “The wave of the future”.

Because of their age and their enthusiasm they can see what is happening to the industry (law, accounting, architecture, engineering): Clients –
  • no longer equate the five star, city centre trappings with a five star service
  • are aware of other highly competitive offering
  • talk to each other online and offline about how good your practice is
  • no longer believe the empty vacuous promises in your advertisements
  • may buy most of your services in the form of a commodity via a Google search.

At its simplest, the PSF is faced with three market challenges:
  • more demanding and increasingly price sensitive clients
  • increasing complexity of services
  • difficulty in scaling progressively more niche offerings.

Meanwhile, the practice, on the other hand:
  • maintains a ludicrous overhead cost
  • is often run to maintain the partners’ pension fund above all else
  • has few, if any, commercially-minded business leaders
  • is in an industry where constant mergers (and occasional insolvencies) sustain the partners’ appetite and greed but do little to improve the client’s lot
  • talks little, if at all, about basics of business such as the client experience, delighting clients, or moving into the 21st Century. 

Did I forget staff satisfaction or career development?

This is just the tip of the iceberg.

Most practices suffer severe ‘five-year-itis’. They are running on five-year-old assumptions about what clients want and need, what competitors are doing, how much to charge and what is really going on.

The new kid on the block can see it. The writing is on the wall. Something has to give. Decisions need to be taken, bold ones, not half-measures, Action needs to be taken and now. However, life is not so simple.

The politics of the partners meeting now kicks into play. Senior partners are disproportionately more interested in defending their department and its headcount than working for the good of the whole practice.

The more senior a partner is, the more conservative they are. After all, “it wasn’t like this in my day... When you’ve been through as many recessions as I have” etc., etc.

More significantly, the most senior partners will be the oldest. With retirement (or early retirement) in sight, the last thing they want to do is have the boat rocked. It simply isn’t in their interests (emotionally or financially) to dismantle the machine that has looked after them so well for so many years.

In a token attempt to buck the downward trend in profits, they will employ some people in marketing/business development/account management. They won’t be given too much authority because fee-earners think they themselves must be seen to be more intelligent, worthy and grown-up.

A business that is hemorrhaging cash needs a serious injection of new clients. Marketing/business development/account management will clearly be major influences on future success. It beggars belief that this is not given the full respect it requires in terms of budget, authority, responsibility and respect. It requires a partner level responsibility from a full-time professional.

The days of amateurs playing at business are over. Just because you are a great professional (in whatever field) doesn’t mean you are a great business person. 

Which dumb rule book says that twenty years in law (or whatever) equips you to manage a team of 400 people including responsibility for budgets, profitability, marketing, HR, CPD as well as running your own department? This is just cloud cuckoo land. Some professions have understood this better than others.

Those working for you in marketing, business development and in account management know their place in every sense of the word. They know what the clients really think but they also know that the ‘powers that be’ are too thick-skinned to really listen. 

“Small wins” they say, “just keep pushing, little by little.”

Likewise our protagonist, proudly showing of his new partner status is probably emasculated by the seniors under the auspices of “don’t rock the boat” or “just let it be till he retires” or “you’ll understand what’s going on one day”.

The new partner is damned if they kick-off shouting, “Wake up everyone, smell the coffee, the emperor (= senior partner) is wearing no clothes.”

And they are damned if they say nothing and just watch the practice slowly eating away at itself in a desperate bid to understand why things aren’t like they were.

But maybe there is a third way...

Saturday, 15 February 2014

More Profit for Hotel and Catering Businesses

Traditional marketing techniques deliver ever-decreasing results. It's time for a review of how to connect and reach customers, says Robert Craven.

Most marketing doesn't work. It is progressively more expensive and results seem to be harder to come by. 
eg the ad in the local paper or at the local cinema

Meanwhile most marketing is dull, unremarkable and unfocused. It doesn’t focus on benefits and positioning is wrong all because your customer understanding is wrong. There is no great commitment, no great customer engagement and cost of winning customers is rising. It just doesn’t work like it used to. And that is a fact.

There are more competitors competing more than ever. The marketplace is too busy with too many restaurants fighting for too few customers. (Or at least that's how it feels.)

Too many competitors giving away food at stupid knockdown prices we can't compete with.

Too many high street chains flooding the prime sites and flooding the internet with their big branding budgets.

I would like to construct an argument.
  1. It is clear that most 'traditional' marketing does not work. Despite what they tell you!
  2. Despite what they claim, most hospitality firms are falling well short of customer expectations especially in terms of customer service.
  3. Only 10% of any market and particularly in the food and hospitality industry actually buys on price despite what people tell you.
  4. Customers do not keep come back because you don’t appear to care (enough) about them.
  5. Customers choose you because of your engagement with them.
  6. You can get away with murder! (Well, it appears that some competitors do!)

I am more than happy to provide evidence for all of the above but let's just take these points as read. The marketing and sales landscape in hospitality is looking pretty fragile.

So, what is marketing that stands out, that 'cuts the mustard'?

For me, 'stand-out' is about challenging and shaking the food industry (and not simply about gimmicks) and 'marketing' is about revenue generating (which it should be). So, 'stand-out marketing' is inventing (new) methods to disrupt the normal way your industry conducts business.

We can now map out how to make your marketing stand out.

How to start creating some stand-out, disruptive marketing in the hospitality industry

To improve your whole approach to marketing you need to ask five questions of your customers and your business. This can be a quick’n’dirty exercise (grab a room with a flipchart and some of the key people in the business from the kitchen or form front-of-house) or it can be constructed in a more methodical manner incorporating some research.

Ask the following five questions:
  1. What really hacks off your customers?
    A clue: lousy or lazy service
  2. Why can't you sell more stuff?
    A clue: lazy marketing.
    Another: you look/sound/talk/sell identical to your competitors.
    Another: the adverts no longer work; word-of-mouth is what matters.
    Another: shouting louder doesn’t attract attention any more.
  3. What is your job from the customer’s point of view?
    A clue: it is almost certainly NOT what you do. People do not buy what you do; they buy what you do does for them. They buy the afters, what is left after you've 'delivered'. They want a great experience... they want to feel good... they want to feel that they have been looked after....
  4. What is the usual way of doing things?
    A clue: the usual way is almost certainly boring, dull and predictable.
  5. What could/should you be doing?
    A clue: this is where the hard work starts

A few more clues might be required here. A few 'starters for ten'. You could sell on 

  • low price
  • high price
  • no price
  • payment by results
You could be the:

  • best
  • slowest
  • fastest
  • first
  • last
  • only...
I am sure you get the idea.

When everyone goes zig, you could go zag.

After all, why should people bother to buy from you when they can buy from the competition, especially when the competition might well be cheaper or faster or friendlier? 

To blindly follow the pack is a mug’s game; in a team of husky dogs pulling a sledge, the only ones with a good view are the ones at the front!

What I refer to as stand-out or disruptive marketing is an alternative to the way you do things now. In your heart of hearts you know that you could be doing so much more. 

To quote Jerry Garcia: "You do not merely want to be considered just the best of the best. You want to be considered the only ones who do what you do."

It works for numerous food and hospitality firms already. They are different. They do things differently. They stand out for being different. Innocent Drinks, Bighams,  Madecasse ChocolateDans Le NoirDorset CerealsHobbs House Bakery & Cafe, One World Everybody Eats and Panera Bread Cafes. These are all food businesses with strong ethical motivations who are really well-connected to their customers. Maybe it will work for you? 

Friday, 14 February 2014

The Lost Redundancy Package

Jack and Jill (names changed to protect the innocent) took their respective redundancy packages and set aside the sum of £100,000 to set up and launch their ‘baby’ which we’ll call NewCo.

Having attended various workshops and seminars the pair felt equipped to “follow their dream”. They employed the services of a marketing consultant, a market research bureau and a web designer who all made the right kind of noises and felt/claimed/projected (or rather, led the client to believe) that the project could be hugely successful and sold for several million pounds after a couple of years. (On which planet did they live?)

On launch literally nothing happened. No-one noticed the launch. No-one really visited the site and no-one bought anything. It was at this point, with £70,000 already spent with the consultants, that I was called in to try and make some sense of the mess they had got themselves into.

The stark truth was that all the service providers had seen the project as a licence to print money. No-one had spoken honestly and frankly about whether the business idea actually stacked up and no-one put their hands up to say that they thought that the clients might be wasting their money. The consultants simply took the money.

And what could Jack and Jill (novices in the field of buying consultancy services and novices at creating sustainable business models) have done differently?

They did need external, expert advice and they did need external support but our intrepid pair quite simply didn’t know what they didn’t know so how were they supposed to make sense of the proposals and promises of the various consultants?

It would appear that they were stupendously unlucky in their choice of fundamentally irresponsible advisers. At the same time J and J just lapped up the overly-ambitious and totally unrealistic projections being put out.

From the consultants’ points-of-view, they would all argue that they were simply following their clients’ directions. However, none of the consultants had a vested interest in the success of the project. They just delivered what was asked of them. Proficient?  Yes. Professional? No.

First and foremost, it is the responsibility of the professional adviser to work in the best interests, the very best interests of the client. End of. That is what you get paid for. To do anything else is unethical and immoral.

It doesn’t matter what type of professional service firm you are (accountant, doctor, dentist, solicitor, architect, start-up adviser, web designer, market researcher, homeopath), your first duty is to help your clients. That is what you are trusted to do.

I am afraid J and J were shafted.

Buying in any unregulated market is incredibly risky. The consultants concerned were a disgrace to their various professions and fields. Their behaviour was unforgivable and yet they seem to have got away with it (this time!). They have lined their own pockets at the clients’ expense. They have put the entire consulting/advising community to shame and damaged the prospects of their colleagues to do good work. Shame on them.

Next time J and J will be more cautious and will take references to make sure that they are working with providers who will work for them.

In the meantime, I am afraid ‘Buyer Beware!’

Monday, 10 February 2014

How Growing Businesses Blow Themselves Apart

Logically there are some key things that have to be going on to qualify as a growing business. Unfortunately not all of these pull in the same direction.

By definition, a fast-growth business is growing quickly; this means that there must be significant sales effort (or rather sales results) taking place. Normally bred out of the insatiable passion and excitement of business growth we expect to see all the trappings of an entrepreneurial business: a can-do attitude, impatience, speed in decision-making, speed to market, and a sales and customer-focused attitude.

To put all this in place and have it actually ‘kicking off’ is what most entrepreneurs dream of. Being on the crest of a wave. Watching the sales graph grow exponentially. How great is that.

There is, however, a problem that most people seem to forget about, ignore or sweep under the carpet. That is the boring, dull, tedious and mind-numbing requirement to put tight and effective systems and processes in place, to measure and record everything and to be generally pretty anal about everything that happens. Not a lot of fun here! At least not for the typical entrepreneur.

So, should we allow the wild and zany exploits of the gung-ho sales-focused entrepreneurs be hemmed in by the Larry Logic mindset of the systems police?

Well, obviously the answer is “no”, but how on earth do you do that?

The whole thing about putting systems in place is that they need to be seen as an asset to the running of the business. For everyone. If they make life easier for the crazy salespeople then they will use them. What they object to more than anything else is systems that appear to be there for ‘systems’ sake’. They seem to serve no other purpose than to perpetuate the myth that they are important if not urgent and cannot be ignored. These kinds of systems just drive everyone bonkers (apart from the jobsworths that set them up in the first place).

But the point has to be made. Businesses go bust because they run out of cash. The faster you grow, the faster you burn cash. Grow too quickly and you literally haemorrhage the cash. Suddenly, game over.

If the cash doesn’t get you then customer service levels and operations will. Unable to keep up with the demand, it is simply a question of time before you screw up with a customer. Big time.

And a subset of service levels is the whole people piece. Growing businesses need staff who are happy to tolerate the chaos and ambiguity that inevitably go with the growth. One person resigning or not being able to find the right candidate for a key post (at whatever level) becomes a block to progress.

I cannot count the number of times an entire growth strategy has floundered because one key piece of the jigsaw puzzle has vanished: a key member of staff moves on, cash isn’t quite what we thought it was, can’t find the newstart.

The ability to deal with all this uncertainty and put in place effective systems is what sorts out the successful from the wannabe growth companies.

But, to re-iterate, no cash = no business.

Thursday, 6 February 2014

Working Hard But Not Getting The Results You Deserve?

Despite our best intentions we spend too much time in the detail of the business and we lose the plot; suddenly everything seems a bit like hard work... we become addicted to this hard work and think that this is what running your own business is all about.

It is time to step back and set about making some changes.

The best-kept secret
The best-kept secret of successfully growing a business is simple – take massive action. Don’t take half-measures. Action and speed are everything. Without action nothing happens.  What have you been meaning to do but avoided doing?

Be proud
I am fed up with standing in front of young businesses that seem to apologise for their very existence. Painfully shy and embarrassed about their business aspirations, it seems like they’ve already decided that the business will fail.

Get rid of those voices inside your head
Most entrepreneurs have a voice in their head which keeps telling them things like “You’ll never make it”, “You charge too much” or “You are an impostor and don’t deserve success”. Eliminate all this negative thinking, as it is singularly unhelpful.

Sort your pricing
Charge what your products and services are worth – don’t be shy.  Demonstrate their value; show customers how you can help them. Stop selling yourself short. “Because you’re worth it!”.

Ask for the business
If you don’t ask for the business then your competitors will.  You have a great product and you know that your customers will love it, so ask for the business, now!  And always ask for referrals.

Sort your marketing
In the Bright Marketing survey of 15,000 business owners, most scored themselves as ‘high’ for their operations performance, but ‘low’ for their marketing performance. To improve your financial performance, sort your marketing: get more, better customers – they are more profitable and more pleasurable to work with.

Fix the under-performers – sack the scum!
You have seriously under-performing staff, suppliers and customers. You spend a disproportionate amount of time trying to sort them out. Just let them go and find some better ones. Suddenly you can concentrate your energy on constructive things rather than dealing with these energy drainers. 

You might have sown the seeds of your own destruction
We go into business to do our own thing – put two fingers up at systems, processes and controls.  My first and toughest lesson in growing up was that the one thing that a business needs in order to grow is systems, process and controls. 

You are the bottleneck - sack yourself (as best as you can!)
There is a tendency to grow your business around yourself as the owner.  You become addicted to being the centre of attention.  But actually it is you that is holding your business back – you are the bottleneck – you are the problem. 

Take evasive, decisive action, now. It is your business. It is up to you. Some tough decisions ahead?  You don’t have to make them alone.

Wednesday, 5 February 2014

How to be disruptive and make money

Being disruptive pays. Following the pack does not. Here's how to get noticed – and make money from it.

Most marketing activity interrupts. It interrupts evenings in front of the TV, reading the newspaper, walking down the street. However, the interruptions get less effective as the consumer becomes immune to the endless messages.

Advertisers have to shock or surprise the consumer in a bid to have their full attention – but this is just a "louder" form of interruption: louder TV ads; brighter colours; larger typefaces. Just because the consumer can’t avoid seeing or hearing a promotion, it doesn’t necessarily mean that it engages the consumer’s attention.

The guerrilla-marketing school of thought looks for devious ways of going under the radar, of reaching the consumer in ways that the competition has not thought of. This is relatively disruptive – it seeks to bend the rules to do things differently, to get noticed. It messes with the rules of engagement.

To be disruptive, you have to shake up the market. Let's look at some examples.

Starbucks was a disruptive business. It changed the habits of a generation (as did Facebook, Google and so on). But what is new today becomes old tomorrow. Today’s revolutionaries are tomorrow’s old guard.

Whole Foods Market: All wholefood stores were small, local affairs – then along comes the real deal (in the same vein as Virgin Megastores).

A great disruptor doesn’t just do more than interrupt; it can change the face of the landscape.

The small record shops were pretty much destroyed by the arrival of the Virgin-type megastores, while Starbucks changed how and where we socialise. I think that we can all disrupt, if only on a smaller stage.

Take Dans Le Noir restaurant, where you're served by blind waiting staff in a pitch black room. The concept is wonderfully disruptive. It disrupts every part of the standard process we call going to a restaurant. You don’t know where you are or what you are eating. You are lost. A truly memorable experience, which changes how guests see food forever.

What I refer to as "disruptive marketing" is when we disrupt how things are done in the marketing world. Think Apple or Innocent Drinks.

Hobbs House Bakery sells very expensive (and wonderfully delicious) bread on the internet – no-one else did it before and why not?

You can zig when they zag. Go against the traffic. Challenge the notion of “that’s how we do it around here”, a myth perpetuated by the majority who have lost the passion and excitement to try to create newer and better ways of doing things. Get innovative in every possible part of the process.

Looking at your industry, what could be improved to give the client a significantly better deal? You could deliver quicker or higher quality or cheaper – but what would be disruptive?

Depending on your marketplace, think what would happen if you:

  • Charged by results only
  • Let customers decide what to pay
  • Only work online or by phone
  • Charged per five-minute slots…

Being disruptive creates attention. In business this is a good thing. You get noticed. But a gimmick will be seen for what it is. To disrupt effectively, change how people buy and give them the service they really deserve. No easy task.

Monday, 3 February 2014

Big Board, Little Board... makes no difference!

A board is a board. Whether it is in a big business or in a small business, there seem to be some common features of a board. 

While we can emphasise the differences (size, scale, scope, resources, experience, stakeholders), I would like to emphasise what they have (or rather don’t have) in common.

Go into almost any board, big or small, and you are welcomed by the same, nonchalant glare that says, “What do you know about my business?” or, “What right have you got to be here telling us how to run our business?”

A few questions later and you have not only upset everyone in the room but there is now a risk of being physically ejected. Asking basic, straightforward, but highly relevant questions is what does it. But one is safe if one can also help them close the gap in their understanding (and help them become more profitable!).

My top questions are:
  1. What do you sell/do?
  2. Why should people bother to buy from you when they can buy from the competition?
  3. What makes you different from the rest?
  4. Who/what are your target customers/markets and what problem do you solve?
  5. List your targets in order of priority.

Most business boards struggle, I mean really struggle, to answer these questions adequately. 

Most get stumped at number one. Nine times out of 10 the answer to, “#1. What do you sell/do?” is wrong. The answer is nearly always about product or maybe about distribution process. But it is the wrong answer.

If your answer is about product or about distribution process then you are suffering from a severe case of myopia, thinking that what you do is all about YOU and what YOU do... You are looking through the wrong end of the telescope and as a result you have a totally distorted view of the world.

I understand why people get product-focused, but it really is a self-indulgent and distorted view of the world. You need to be thinking about how the customer sees you.

Customers don’t buy your product for what it is but for what it does for them. People don’t buy drills but holes, they don’t buy accountants but peace of mind, and so forth. So, if you think about your product for its own features then you are missing the point. You need to think about your product in terms of:
  1. The benefits the product/service gives consumers, the problem/hurt it solves. 
  2. Why those people should buy your product/service.
  3. Why/how it is different from/better than the rest.
  4. What the groups of consumers are (and their specific requirement).
  5. The order in which we prioritise these target groups

Yes, this is a rather marketing-focused way of looking at things but poor marketing means poor sales means poor profits, so it makes sense to get the marketing sorted out properly. I regret to say that most businesses are not on top of the marketing fundamentals and as a result they make a lot of hard work for themselves.

In fact I will go further. The obsession with financial metrics is hugely misguided. You measure results (which is fine) but you fail to move forward using financial metrics to grow the business. Bean counting is great but it has to be relevant to the future: to the key decisions, actions and results you seek. A marketing mindset will enable you to chase and achieve those sales most effectively.

Rarely do boards understand the basic levers that make a business work: marketing creates sales, operations deliver the product/service and delight the customer... creating financial performance that gets measured. But first you have to get those sales. And to get those sales you need to understand what you are selling, and to whom, and why they might buy from you rather than from the competition