Prioritizing is Easy With the 80/20 Rule

by | May 17, 2018 | Marketing

The original concept in 1908 by Pareto was that 20% of the population controlled 80% of the wealth. In the modern business realm, it has been proven time and time again that 80% of business revenues are generated by just 20% of our customers. Yet we all continue to waste time, money, and inventory dollars on customers that bring in a lower return. This tendency also frequently adds confusion and complexity. At StartupConnection, we help our clients prioritize.

While much of following the 80/20 rule is focused on analytics, the most important (and sometimes simplest) way to keep existing customers happy and is to exceed expectations. As Walt Disney said, “Do what you do so well that they will want to see it again and bring their friends.” Satisfied customers, repeat customers, positive social media, and referrals are the best and least expensive marketing a business can have. There is no substitute for a satisfied customer. In contrast, dissatisfied customers, poor service, and negative referrals can offset even the best marketing efforts.

Some specific examples of using the 80/20 rule with my own clients:

  • We helped a number of businesses create sharing sites for parties, home services, programming etc. While the concept is relatively simple, the cost of finding suppliers and developing marketing programs can be both expensive. I have been successful in encouraging these businesses to focus on the services that have the most potential.
  • We helped a textile company prioritize its product offerings; at first they were focused on being all things to all people. We worked on developing groups of products, increasing design and marketing efforts, and eliminating over 40 % of the products (which represented less than 10 % of sales.) The result was greatly improved efficiency, but more importantly, the ability to add products by more integrated merchandising.
  • Prioritizing and following the 80-20 rule can be easily improved by just taking care of your best customers. For example, why do new customers sometimes get better discounts than the best old customers? I encourage clients to treat the best old customers really well, in addition to seeking out new customers.

Here are some tips to consider when executing the 80/20 rule:

  1. Reduce inventory. By following the 80/20 rule, you’re choosing to operate using less inventory. You must first admit that certain products (even if you truly believe in them), simply are not selling. This leaves more room for carrying the products that do sell.
  2. You should spend your resources on what you know will provide a return on your investment. Reducing products that may or may not be a good fit for your customers can save you money. Also, think of all the headaches, space and time you’ll save by not having to market obsolete inventory.
  3. The 80/20 should not preclude development and testing of new products. However, this usually requires more analysis of the program, evaluation of results, and withdrawal if success is not apparent.
  4. Simplify products and services. Your customers will also appreciate this. Think about the last time you went to the store to buy one simple thing, and you saw enough options to fill a late 1980s Sears catalog up. It made it difficult to choose the right product, didn’t it?
  5. By focusing on the products that you know your customers want, you’re making them feel much more confident (especially when you’re selling online.) Instead of finding new ways to market products that simply aren’t selling, you may be better off to shift over to what is selling. If you give people what they’re searching for, they’ll buy. If you don’t, they won’t. It’s that simple.
  6. Have you run an unsuccessful AdWords campaign lately? It may be the actual product or service that you’re marketing and not the ad. If you’ve followed every best practice and your product isn’t selling, maybe you have to blame the product, and not the ad.
  7. I know you hate developing complex forecasting models and spending lots of administrative time on the logistics of obsolete products, but you’ll get over it. Who knows? You might even find some more leisure time.
  8. Suppliers also like the 80/20 rule, and they may reduce prices or increase service if their orders are more concentrated. Everyone in the supply chain, right on down to the customer, is much happier as a result.

This brings me to my next point… what is the MOST important reason the 80/20 rule works? Happy Customers! Want to start rocking your business by following 80/20? Contact me and I’ll get you started!

Dr. Bert Shlensky, president of Startup Connection ( www.startupconection.net ) has an MBA And PhD from the Sloan School of Management at M.I.T. He served as the president of WestPoint Pepperell’s apparel fabrics business and President and CEO of Sure Fit Products. Having provided counseling to over 2,000 clients, he now focuses on working with select startup and small businesses.

How to Write a Winning Elevator Speech

by | May 11, 2018 | Marketing

OVERVIEW

how to write a sales pitch (or elevator speech)At Startup Connection, we believe that the skill of communicating passion for your business — in the form of a refined “elevator speech” or mission statement — is a pure necessity to your success.

Mark Twain is often credited with saying, “I would have written a shorter story, but I didn’t have the time.” These days, we refer to a very short synopsis of your business as an “elevator speech,” and in this article, we’ll call it “the sales pitch.” A sales pitch is a concise, carefully planned, and well-practiced description of your company that anyone should be able to understand in 60 seconds or less. Learning how to give a great sales pitch is a valuable way to share your message. It is also a great way to truly refine the essence of your company’s vision and plan. On one hand, starting the sales pitch is not easy, and it requires some effort and practice. On the other hand, the process should be made as simple as possible.

One of the best strategies we suggest is to start with taking less than one hour to write a first version. Focus on your idea, passion and emotion in this draft. Don’t worry about content, format, or style… we can help you fix all that later.

The sales pitch is as essential as your business card, and you have about one paragraph to get the attention of your audience. You need to clearly and rapidly be able to communicate who you are, what you do, and how you can help your listeners.

Before you can convince anyone of your business proposition, YOU need to know exactly what that business proposition is! You need to define precisely what you are offering, what problems you can solve, and what benefits you bring to prospective customers or clients.

Specifically, the sales pitch answers some of the following questions:

  1. Who are you and who is your company? For example, “My name is Jim Cando and my company are Cando Widgets.”
  2. What are your key products or services, and what are their strengths? “We make awesome widgets that are guaranteed to make you healthier, richer, and happier. Our widgets are made with 100% healthy ingredients, cost less, and are easy to use.”
  3. What adjectives come to mind to describe your company? Avoid common words like better, bigger, and well made. Instead, think of emotional terms like indestructible, exciting, or scrumptious.
  4. Who is your target market? Be specific in terms of age, lifestyle, location, and income. “We target millennial men who work out and are looking for a shirt that fits”.
  5. What problem do you help customers solve? Talk about benefits instead of just descriptions. Examples of benefit statements include: “We help you save time and money,” “We make what is usually a horrible experience into something satisfying and exciting,” or “We understand our customers, and ensure that they have the best product selection.”
  6. What is your business model and strategy? For example, “We are a home service company. Our goal is to develop a base business of 500 customers and $1 million in revenues, and then to grow 10 to 20% per year. We plan to spend 15 to 20% of our sales on internet marketing, materials demonstrations, and exceptional customer service. Our profitability is derived from our low overhead, competitive margins, and growing brand.”
  7. Who is your competition and how are you better? For example, “Our competition is anyone who sells widgets. We offer the right product at the right price, with great customer service and product selection. We save customers money by helping them purchase the most effective product (rather than the cheapest or one with the most bells and whistles) based on what they need.”

Your challenge is to deliver a great pitch that will make someone want to know a whole lot more about your business.

WORKSHEET

Basic Elements of a Good Elevator Speech

Once you have developed a good sales pitch, you will be amazed at how handy it is, and how often you use it in a variety of settings. To be sure your pitch is top-notch, here is a checklist of important elements to consider:

  • A “Hook”: Start with a hook, a statement or question that piques interest and makes the listener want to hear more. A hook can be a surprising or amazing fact. For example, if you were marketing a product geared towards entrepreneurs, you might start with “More than one out of every two Americans works for or owns a small business.”
  • Length: Your pitch should be less than 60 seconds. If your sales pitch runs on for too long, you risk losing the interest of your listener. Get to the point you are trying to make, and explain why it will benefit your target audience.
  • Passion: Listeners will expect energy and dedication in your speech. If you aren’t excited about your idea, why should the listener be? Why is this idea exciting, and how will it benefit your target audience? This must be conveyed in your sales pitch.
  • A Request: At the end of your pitch, you must ask for something. Are you looking for capital? Strategic partners? New markets? Use the fact that you are with the customer to your advantage – ask them to take advantage of this opportunity and close the deal on the spot. Always establish a follow up question, in case your target is unable to commit outright.
  • Practice: Be sure to spend time developing, practicing and testing your pitch. Create short videos of your pitch and critically review your presentation. It is imperative that you convey confidence in your product, and how it will benefit the customer.

Think about your ideas and call me for some free mentoring. I know it is not easy, but the more you work on defining your business, the more comfortable you will become. Call today at: (914) 632-6977.

Dr. Bert Shlensky, president of Startup Connection ( www.startupconection.net ) has an MBA and PhD from the Sloan School of Management at MIT.   He served as the president of West Point Pepperell’s apparel fabrics business & President and CEO of Sure Fit Products. Having provided counseling to over 2,000 clients, he focuses on working with select start-up companies and small businesses. Call today for a free consultation, so we can use our business plan templates to take your business to the next level.

Business Planning is a Process (Not a Formula)

by | May 3, 2018 | Planning

Creating a business plan is a lot like forecasting the weather… those who are in charge of predicting a storm get blamed if they are not 100% accurate. The same logic applies to business planning in terms of timing, expediency, and execution. This can lead many business owners to abandon ship, rather than seeing it as an opportunity to change course.  Always remember, business planning is a process.

Carl Schram, former head of the Kauffman Foundation for Entrepreneurship, recently wrote Burn the Business Plan, which echoes a similar strategy for a streamlining the planning process. Reis and Schram are mostly right to criticize excessively lengthy business plans. At Startup Connection, we argue that business plans are necessary, but that they need to flexible and dynamic (and meant primarily for yourself, not others.) As the saying goes, “If you don’t know where you are going, any road will get you there.” Making plans for others (especially venture capital firms) and following specific rules almost guarantees the process will not be useful to you. In addition, venture capital firms account for a very small segment of business financing, especially in the beginning. A business plan is not just a document to be stored on a shelf; it should establish parameters and be developed, tested, and be continuously revised. Even with a “perfect” business plan, there will be failures along the way. In particular, failing and learning from failure are critical components of the ongoing planning process.  Business planning is a process.

Some Planning Suggestions

There is no cookie-cutter approach to writing a business plan. Get your ideas on paper before stressing about the organization of information. Don’t stifle yourself. Write it in your own words, as simply and concisely as possible.

Focus on your passion. A successful business plan should express why you think your business is a good idea and why you will succeed. If you need to dress it up in a suit and tie to show to investors, do that later. A business plan should be YOUR vision.

Common Parts of a Business Plan

Every business plan is different because every business is different. However, there are some common elements to consider, such as:

  • Mission statement
  • Goals
  • A description of products and services
  • Ideal customer
  • Analysis of the industry and your competitors
  • Marketing and sales tactics
  • Operational plans
  • Manufacturing and delivery logistics
  • Resources necessary (this includes labor, equipment, and facilities)
  • Financial budget

Also, focus on the components that are most important and challenging, rather than worrying about making every section perfect.

Some Further Tips

  • Don’t be too verbose: A formal business plan must focus on the needs of the audience and the entrepreneur. Business plans must be on point and clear. Typically, plans should be 15-30 pages. If additional details are required, put them in a short appendix.
  • Think it through: You might have a great idea, but have you carefully mapped out the steps you’ll need to make the business a reality? It’s worth investing your time in the planning phase to ensure you might make money in the long run.
  • Do your research: Investigate everything you can about your proposed business. Google and Amazon are great and easy tools to understand the market and your competition.
  • Be realistic about your competition: Is your product or service something people really want or need, or is it just “cool?” Why do you think people will buy your product or service?
  • Get feedback: Obtain as much feedback as you can from trusted friends, colleagues, nonprofit organizations, and potential investors or lenders. You’ll know when you’re done when you’ve heard the same questions and criticisms again and again. The goal is to have a good answer to almost everything that can be thrown at you.

Completing the business planning process can be challenging, but it should also be interesting, productive, and satisfying. The hardest part is developing a clear picture of the business that makes sense, is appealing to others, and provides a reasonable road map for the future. Another challenging aspect is integrating your products, services, customers, marketing, operations, management, and financial projections seamlessly together. However, these pieces should not dilute your enthusiasm to succeed.

Dr. Bert Shlensky, president of Startup Connection ( www.startupconection.net ) has an MBA and PhD from the Sloan School of Management at MIT.  He served as the president of West Point Pepperell’s apparel fabrics business & President and CEO of Sure Fit Products. Having provided counseling to over 2,000 clients, he focuses on working with select start-up companies and small businesses. Call today for a free consultation, so we can use our business plan templates to take your business to the next level.

New and Disruptive Methods of Financing

by | Apr 11, 2018 | Finance Articles

We all know that new strategies and technologies such as the internet, social media, Smartphones, and major online retailers are rapidly disrupting organizations. However, financing and the financial industry have been very slow to adapt. The purpose of this article is to recommend a number of tactics to take advantage of new (and sometimes disruptive) financing opportunities. At the Startup Connection (www.startupconnection.net), we believe that a very important (but often overlooked) opportunity is that operating and marketing processes should also be viewed as financing tools.

We still mostly live with an old world of small business financing. Most financing (including institutions like banks and the SBA) are based on antiquated businesses, such as manufacturing and retailing. In the old business model, you quit your job, built a building, bought inventory, hired lots of people, paid high interest rates, gave away lots of equity, and then waited 1-2 years to make any money. This was financed through asset loans, guaranteeing debt with family assets and your own savings.

Fortunately, the reality today is very different. Most new business are service or technology businesses, and they require much less investment. Another very important factor is that you can now quit your job much closer to actually starting the business.

The biggest changes may be finding marketing opportunities to accelerate growth and using techniques to minimize financing needs. At the Startup Connection, we recommend a more comprehensive and flexible approach to the process. This approach puts a slightly different perspective on key issues, such as: How much money do you need? How and when will you pay it back? Why should someone invest or partner with you?

Many clients start the entrepreneurial process asking the age-old question, “How do I raise money?” I argue that is the old way to start, and this mindset needs to be changed to be more successful. Old style advisors often recommend raising as much money as possible. In contrast, I believe in minimizing to reduce costs and risk, and to keep equity and avoid excessive financing charges.

There are other new perspectives to financing your business. We live in an environment with low interest and inflation rates, and lots of capital to invest. This article identifies financing suggestions, organized into operational, marketing, new, and traditional methods.

Operational Financial Resources

The simplest source of funds is to reduce the need for funds through regular business tactics. This can be accomplished with strategies of outsourcing, contracting services, using sharing resources, and testing. While not all of these strategies may be appropriate for every business, consider the ones that have most potential to save cash:

  • Use services for internet management, warehousing, and programming,
  • Plan and manage inventory to maximize return: focus on the 80-20 % rule that 80 % of your sales will come from 20 % of your products. In addition, manage inventory and services for seasonal and market changes.
  • Minimize investment through strategies like renting or sharing. For example, warehouses, cooking facilities, and manufacturing can all be outsourced. One caution: doing things in of your home has long term, operational and frequently legal implications.
  • If asked, suppliers are frequently willing to help a business through things like financing, holding inventory, reducing production times, and shipping direct.
  • Consider direct shipping from your facilities, or organizations like Amazon.
  • Understand and minimize complexity. For example, there is a big difference between selling a shoe (with various sizes, colors, widths and styles) versus selling food products (that have a few ingredients that can made into a number of items.)
  • Analyze why you are really spending and what you will get from it.
  • If the business is profitable and growing, you can frequently finance the growth with working capital from profits. This also means giving up less equity.

Expanding Marketing Efforts

Don’t wait for business to come to you but consider the rule: you have to spend money to make money. Analytics, internet marketing, and outsourcing programs provide numerous opportunities to grow and make money faster:

  • A website and simple marketing statement provides basic information for potential customers. These can be inexpensive through programming tools like WordPress.
  • Amazon is the fastest growing retailer in the country and controls about 30-50% of most category internet sales. It is easy to set up and relatively inexpensive.
  • Paid search through organizations like Google and Facebook are underestimated. These options can be inexpensive and fast, and the results can be measured.
  • There is nothing as productive as Networking, Networking, Networking!
  • These tactics need to be tested and measured. Kill or modify the ones that fail and expand the ones that succeed.

Non-traditional Sources of Financing

  • Crowdfunding was initially used by “social entrepreneurs” to fund their projects, films, books, and social ventures. It consists of offering to small investors in your business, through organizations like KickStarter.
  • While credit card interest can accrue (at a high interest rate) if not paid off right away, some credit cards do offer a startup business a 30-day free program, or zero interest (for sometimes up to 18 months) with a new account.
  • Bartering, alliances and exchanges are viable methods to get both excellent services and save cash.
  • Community based lenders (such as non-profit, independently financed, or private organizations) often make loans to small businesses or entrepreneurs who do not qualify for traditional commercial bank loans.

Traditional Sources of Financing

  • Equity from yourself, friends and family. This is the amount of money you can put into the business on your own, and you don’t have to pay it back until you see profits. It can come from a variety of forms and can include sweat equity and contributed assets. It also provides other investors with more confidence in your commitment
  • Outside equity had the same properties, except it involves giving up at least some equity in the company. It can come from a variety of places like partners, venture capitalists, private equity dealers, private offerings, and private investors.
  • Traditional banks and loan institutions are focused on reducing risk and making certain they get paid back. These are usually asset-based loans or combined with equity contributions.

Raising financing is a two-way street that requires honesty, understanding and communication. Understand your needs and risks to find the right kind and type of investors. Don’t overestimate your potential or what is needed to meet your goals.  Develop plans, measure results, and satisfy investor requirements.

Dr. Bert Shlensky has an MBA and a PhD from the Sloan School of Management at MIT.  He is the President of the New York-based consulting firm The Startup Connection, where he uses his 30 years of high-level business experience to guide his clients towards maximum sales and profit. For a free consultation, please visit www.startupconnection.net.

Don’t Let Technology Hinder Your Bottom Line

Don’t Let Technology Hinder Your Bottom Line

by | Feb 8, 2018 | Marketing

Technology has created lots of great tools to increase sales and conversions like targeting, follow-up and lead generation tools. However, I am concerned that these may be becoming an excuse for ignoring basic good practices and too many small business owners are getting burned.

“A great idea without execution is a hallucination” as Benjamin Franklin once said. We sometimes get enamored with the latest technology or fad and forget the importance of factors like executing, expertise and experience.

The most robust technological solutions in the world are only as strong as their greatest area of weakness. If one thing fails with your technology, are you still capable of devoting enough attention to resolving the negative and turning it into a positive to increase their satisfaction with you? Are the consultants you hire?

Without a human element continually factored into your equation for success, you’re doomed for failure. We all know satisfied customers are the best marketing tool and dissatisfied customers are the biggest negative.

Here are some increasingly common scenarios for businesses that I’ve consulted with who are trying to grow their businesses by improving their online presence:

Lead Generation Consultants Leading to Nowhere

Many lead generation consultants seem to have some great tools. However, they frequently ignore that the specifics of who your customer base is and how to reach them. This can lead all parties astray when it comes to staying focused on your goals and needs and more importantly your customer’s experience.

Choose a lead generation program or outsource lead generation to someone who prioritizes communicating with you about what they plan to do and will be honest with you about the expected results. Learn about the process instead of fobbing it off to someone along with a big financial commitment.

Web Designers Who Skimp on Deliverables

All too often, web designers ignore the parameters they provide clients with, such as timelines and features that they are capable of delivering on. Clients should always be informed of schedules, deliverables, and given the respect of communicating when there is a delay expected.

In a recent survey, 92% of small business owners plan to have a website by the end of 2018, so it’s important to be choosy. The competition is getting stiffer. That doesn’t mean you can’t be choosy about your web designer.

Digital Marketing Agencies That Dodge Questions

Chances are, if you’ve shopped around for a digital marketing expert, you’ve encountered many who ignore simple explanations of themselves and their services. Social media consultants in particular frequently ignore excellence and best practices while becoming obsessed with technology.

Websites, blogs, and emails are great, simple efforts to illustrate if they have what it takes to follow through. If they’re not up to par, they probably won’t do more for you than they are doing for themselves.

References are still important, but in so many cases, those we hire hesitate to provide them. See what’s on their website and LinkedIn profile and pages. Do others sing their praises?

Furthermore, it’s not enough for them to point you to what they’ve already done. They should be able to explain what they can do for you

Beware of The One-Stop-Shop

More and more consultants claim to be a “one-stop-shop.” If they’re vague on potential outcomes and like a “dog in heat” on your commitment, be skeptical. If they require commitments involving thousands of dollars for 3-6 months based on limited proposal details, projected timetables, and potential takeaways, steer clear.

Many solutions are frequently boasted as one-size-fits all solutions, especially when it comes to expensive technological solutions. Eric Rise, one of my favorite authors right now, argues that failure is part of achieving success in his recent book Lean Startups. We all need to measure and then pivot to eventually achieve excellence.

So many say that they can “do anything” and this is simply not a realistic response. Someone you hire should be able to speak about what they are unable to do just as well as what they are able to do. No one can do everything well.

The worst part about all of these examples is that small businesses waste so much money in these scenarios and start to give up hope. Many efforts are ruined by dumb distractions when all that anyone wants is to find useful and simple tools that can help us all grow in the long run from our investment.

Want to speak to me about how you can grow your business online without getting into lengthy commitments with people who don’t come through? Contact me.

Dr. Bert Shlensky, president of StartupConnection is a graduate of Sloan School of Management at M.I.T. He served as the president of WestPoint Pepperell’s apparel fabrics business & President and CEO of Sure Fit Products. Having provided counseling to over 2,000 clients, he focuses on working with select start-up and small businesses.