by Bert Shlensky | Apr 13, 2017 | Operations
Not having a tight grasp on the reality of your business could be the difference between success and failure. This article lays out some key concepts for small businesses to dramatically improve decision making through understanding reality.
I continuously run into well intentioned, and even, well informed clients who ignore this simple guidance. This is especially true in identifying target markets and pricing. For example, if you are not aware of Amazon pricing you are simply blind to the lead competitor, much like failing department stores have for years. Similarly, clients ignore even the reality of a simple google search to help identify competitors.
“You don’t want to know the truth!” – to paraphrase Jack Nicholson
However, there are lots of ways to handle the truth. On one hand, you must maintain your enthusiasm, confidence, and belief that you will succeed. Keep in mind, however, the challenges, barriers and realities of your efforts. Here are some tools to create a beautiful balance between your “expectations and reality”
Beware of confirmation bias
Don’t we always believe our ideas are terrific, and thus, focus more on their wonderfulness and potential for success? Of course, we do. The challenges are sometimes given a smaller amount of our attention, and downplayed. It’s just human nature. Review alternatives, enlist the help of industry experts and most important, make a special effort to examine competition.
Understand your goals
Understand your goals, resources and risk. In particular, your market analysis, competitors, how and why your company is different, and why customers should care. Are you focused on long term growth or quick profits? Many companies continue to keep growing when they should be pivoting to focus on profit. Having a clear less than one page mission statement is an excellent process to ensure you understand your goals.
When and how will you be profitable?
Only about 10% of startups and small businesses succeed and survive to their fifth year. The ones who do survive have developed flexible models to measure, and then compared alternatives. Many plans, forecasts, and proposals are done in a static format with one dimensional analysis and results. Usually they’re all wrong because we live in a more dynamic and interactive world (Startup Connection has developed a very simple model that lets you evaluate alternatives in less than 48 hours. Visit: www.startupconnection.net/business-templates/operating-profit-model-template/)
Do some market research
I cannot tell you how many clients discuss the uniqueness of their ideas when there are pages of competitors who are frequently more experienced, cheaper, with more compelling marketing on Google or Amazon. Even informal research can be highly productive in understanding markets and competition.
Hire good resources and continue to test, measure and adapt
Make certain the people you hire have real expertise and will do what you require. Hiring with the goal of saving money usually results in mediocre outcomes, at best. You get what you pay for. Remember the phrase “If you think an expert is expensive, try hiring an amateur.” That is especially true in trying to do everything yourself.
Make use of demographics
Understand and take advantage of the changes in demographics, the economy and your environment. For example, large companies frequently flounder with innovation and growth especially when considered in regard to demographic changes and the growth of mobile devices. Ensure that you can answer the questions who is your target audience and why would they want your product.
Have fun!
In summary, learning the truth or reality of your business involves continuously challenging your assumptions, reviewing alternatives and evaluating your progress. Don’t be a martyr, and encourage different perspectives. It just may make all the difference for your business.
Dr. Bert Shlensky, President of www.startupconnection.net, offers experience, skills and a team devoted to developing and executing winning strategies for small businesses. This combination and the personal hands-on approach has been the key to client success. For more info and his books for the business entrepreneur: Marketing Plan for Startups & Small Business and Passion & Reality for Business Success, are available at www.startupconnection.net.
by Bert Shlensky | Feb 24, 2017 | Marketing, Maximizing Effectiveness - Main, Operations
Operations and logistics are frequently viewed as secondary functions that can be handled by someone else. But here’s the thing: With data so richly available, using it to help reinvent operations and logistics can help you stand out just as much as the next electric car or purple cow.
Just take a look at some of the world leaders in business.
Amazon, Uber, Airbnb, and other sharing sites are turning their industries around with structural and operational changes that challenge old paradigms. It’s not the products or services that stand out but the operations, logistics, and method of delivery.
For example, Amazon does not just succeed on lower prices or by offering different products than their competitors. They have revolutionized, simplified, and automated ordering, customer service, distribution, and warehousing.
The results have been staggering. It’s estimated that in 2016, they represent about 30-40% of internet retail sales and 8-10% of total retail sales.
Operations Innovation Isn’t Just For The Big Businesses
You might be thinking, “But that’s for the big businesses. How can that help my small business?”
Changing operational paradigms is for small businesses, too! Take a look at GrubHub. They are a publicly traded company, but think of whom they help: restaurants, big and small. They’ve helped thousands of restaurants expand their sales by providing seamless delivery.
Outsourcing key activities like web design, social media, cloud services, CRM, and even distribution have become both less complicated and more affordable.
No matter the size of your business, you can streamline or maximize your operations to take your sales and profits to a whole new level. The key is maximizing forecasting, inventory control, and distribution to maximize service, investment return, sales, and profitability.
Here are a few things to keep in mind:
- Many operations experts say that 80% of sales are with 20% of your products. It’s often true, yet suppliers continue to proliferate styles, colors, sizes, models, and features to presumably serve more customers and provide more features. By keeping it simple, you help yourself and your customers.
- Pursue profit and not volume. Businesses frequently fail by adding too many stores, products, and marketing. In contrast, focusing on competitiveness, bestsellers, reducing costs, and reducing structure can have huge payoffs.
- Conduct a simple “SWOT” analysis (Strengths, Weaknesses, Opportunities, and Threats) to get a perspective on your business. The surprising aspect of this exercise is that we frequently take our strengths and opportunities for granted rather than maximizing them. For example, approaching key and repeat customers usually presents the greatest opportunity, lowest cost, and most profitable source of additional sales.
- Encourage testing new ideas and scrapping ones that don’t work. You will make mistakes. Focus on solving them rather than blaming someone. Consider using the process of develop, test, measure, and adapt. The measure step is, by the way, the most frequently forgotten.
It’s easy to get seduced by design, marketing, or the next flashy idea. Plenty of businesses innovate in these areas. Don’t forget, though, that just as frequently, success comes from innovation in operation and logistics.
This piece originally appeared on Alignable and was published with permission.
Dr. Bert Shlensky, president of www.startupconnection.net, offers experience and skills and a team devoted to developing and executing winning strategies for businesses of all kinds. This combination has been the key to client success. His books for the business entrepreneur: Marketing Plan for Startups & Small Business and Passion & Reality for Small Business Success, are available at www.startupconnection.net.
by Bert Shlensky | Feb 8, 2017 | Operations, Uncategorized
Are you part of a successful team? As the saying goes, “There’s no I in TEAM.” However, the team also needs to give its stars the opportunity to flourish. Great entertainment groups sports teams and scientific groups are examples of excellence. In addition, teams need to encourage diversity, expertise, and disagreement to encourage new ideas and solutions.
More on that in a minute. First, let’s look at what every great team needs to even have a chance of being bold.
Traditional Bosses Are Obsolete In Most Cases
The complexity, size, and diversity of many organizations have changed the role of leadership. In particular, top-down styles are being replaced by coordination, expertise, delegation and collaboration. In particular efforts like systems. outsourcing, operations, big data, measurement, and automation are adding complexity and coordination to leadership roles.
Goals Are Becoming More Diverse But Still Need To Be Clear.
Growth, excellence, innovation profits, social welfare, etc. are all present as goals to various degrees in most organizations. However, they still need to be understood and clarified. For example, many organizations fail to change when their markets become saturated and they need to focus on profits rather than growth. Similar, research and development teams need more freedom to encourage their creativity.
I learned this early in life when I asked a fashion designer if she really needed to go to Europe for ideas. Her response was I can’t just sit in this office (it was really an awful office without even windows) and develop ideas without the stimulus and the time to brainstorm with my team. By the way, design teams should also visit operations to understand the complete impact of their designs. For example, how many colors do you really need?
Having common goals isn’t just pointing everyone in the same direction either. It’s about everyone helping each other get there. Truly successful teams see themselves as the collective whole and the individuals within.
Multiple Perspectives
So, you’re well on your way to success, getting everyone on the same page, maybe even hiring like-minded individuals to make that part easy. This is where homogeneity backfires.
The most successful teams are diverse. They bring different things, ideas, skill sets, and perspectives to the table. Things that you might not have even considered. Even the best leader won’t have a solution for every problem; they shouldn’t take all that responsibility either.
Trust & Respect On A Successful Team
The team can only work together towards that common goal if they trust each other to do so. When you have a diverse team, you especially need to build trust and respect with empathy and understanding for all those different viewpoints.
Good teamwork means camaraderie, brotherhood, and kinship. It’s a much sought-after feeling by managers, directors, coaches, and others in the leadership position. It means your team has a glue that holds them together. This is often seen as the ultimate end-goal to good group dynamics, but you’re not out of the woods yet.
Trust is key if your team members are going to feel able to express themselves. If you build your group up to speak their minds, though, you all better be able to listen too. Social informal interaction and activities are great for most groups. They can range from interesting dinners to group baseball games where everyone plays.
This can sometimes conflict with the elephants in the room that no one wants to discuss for mostly good reasons. Things like politics, sex, age, ethnic background, education, intelligence all affect the interaction of the group. On one hand, we need to understand these issues and encourage the diversity. On the other hand, we to ensure best practices even if it is not obvious. For example, it has been shown that in most cases test scores and background are better determinants than interviews in things like selection or college admissions efforts because of the underlying biases.
Positive Criticism
Feedback drives growth and everything is realistically vulnerable to criticism. There can be no precious ideas if those ideas aren’t the best for success. Ideas are morphed and molded by criticism and disagreement. For example, many cases of entrepreneurship as noted by Walter Jacobson in his book “Innovators” and others have witnessed wild conflicts between the principal parties. In many cases, one the parties even left after a few years.
This brings us back to that original point: Disagreement, conflict, and diversity are an inevitable part of growth. Bold decisions are only bold because they go against the grain; if everyone always agrees, there can be no bold decisions. The best teams are already capable of dealing with disagreement at this point because they have a clear common goal, a diversity of voices in the mix, and a respect for one another’s ideas.
So, it turns out that while there isn’t an I in TEAM, there’s a whole lot more than just T-E-A-M. A really great team brings out the best in all the I’s without sacrificing the total effort. When you find success within your team, only then do you stand a chance of finding success with it.
Dr. Bert Shlensky, president of www.startupconnection.net, offers experience and skills and a team devoted to developing and executing winning strategies for businesses of all kinds. This combination has been the key to client success. His books for the business entrepreneur: Marketing Plan for Startups & Small Business and Passion & Reality for Small Business Success, are available at www.startupconnection.net.
by Bert Shlensky | Aug 3, 2016 | Operations
In helping hundreds of small businesses and startups at Startup Connection (www.startupconnection.net ), I have learned that improving forecasting is frequently your best path to success. This includes financial, sales, marketing, operational, internet, human resources and other forecasts (which include models, plans and budgets) that help understand and improve business. A few fairly simple recommendations can make the process much more effective:
Commit to the process
You need to commit to the process of forecasting and not be limited by the natural fears and frustrations that can occur. Even if you never forecasted before, there are lots aids. Here are two:
First, just take a peek behind the curtain and see forecasting for what it really is. It’s a process like anything else, and simply participating in this process and understanding the mechanics of it are often just as important as the actual numbers. Frankly, the numbers always change and require constant development, testing, measurement and adaptation.
Secondly, follow Nike’s advice: JUST DO IT! I have developed hundreds of forecasts, and the more clients take charge, understand the variables and suggest changes, the better the forecasting is. For example, last week we helped a client allocate their inventory to better stock their shelves and improve productivity. In this case, simply having to add a fixed inventory goal at 100 percent made noticeable improvements.
Dynamic forecasts: or the art of understanding that life changes
Many forecasts are based on simple relationships, a few variables and one point in time. In reality, truly helpful forecasts require integration, change and have interaction among factors. For example, pricing, marketing and sales all affect one another rather than being separate. None exists in a vacuum. That may seem obvious, but most off-the-shelf models do not deal with them together. Similarly, forecasts that simply grow future sales by a percentage can be less effective because sales, marketing and costs do not all vary simply by volume.
Many planning programs put financial plans at the end of the process. Startup Connection helps client’s starts as early as possible with a forecast and then revises as programs develop and relationships change. For example, companies need to determine sales, growth, profit, and cost parameters and interaction while they are developing programs.
The plans that ignore financial and performance realities end up with the proverbial “hockey stick” graph of explosive revenue growth. Entrepreneurs frequently detail initial programs and assumptions they will then assume 20-50 percent growth rates (the hockey stick with little analysis of assumptions, resources or programs). It may look nice on paper, but it usually gets pretty ugly in real life.
Simplify wherever possible so you do lose sight of the forest for the trees
How do you make forecasts simple and still be dynamic and integrated? Focus on what’s important. Follow the 80-20 rule where 80 percent of your sales will almost always be represented by 20 percent of your offerings or customers.
We have helped saved clients over $2 million in the last two years by simply reducing slow-selling items and conversely being in stock and focusing on the most effective marketing programs. How many times have you been to a grocery store sale where the basic items are out of stock in a few hours and the weird stuff is there forever?
Simple also relates to the characteristics of your forecasts. Focus on factors that really affect your business so you can understand them and estimate factors that are not as significant. For example, look at aggregate costs and administrative expenses rather than trying to forecast small items like telephone, utility, and insurance costs on a monthly basis. Also, forecast on a quarterly or annual basis and then break down months only if necessary.
Bias: Whether we admit it or not, we all have biases
The biggest problem with forecasting is bias. Analysists love to discuss mathematical formulas and measurement in affecting bias; however, most bias especially in small businesses, is simply human. Your assumptions, analysis and data can all unknowingly affect results. Variances in political polls are the obvious example but there are many others. For example, analysis of different age groups like millennials and baby-boomers can vary simply by using different starting and ending birth years.
Because we love to be right, we frequently will go to extraordinary lengths to make sure that we’re proven correct. Many times we don’t even realize we are doing it. A simple suggestion is to develop failing, realistic and optimistic forecasts and examine the reality and probability of the differences.
Keep the goal in sight: improving your decision-making
The goal of forecasting is to improve decision-making and identify great alternatives. Focusing on satisfying investors, suppliers, employees, etc. is simply an invitation to long-term problems. Similarly, you need to understand the goals, timeframe and precision in your forecasts. Are you simply trying to make a living in a short time or build a giant business that you know will lose money in the first few years?
One of the crucial aspects of decision-making is risk and outcomes, which are greatly affected by probability and information. Predicting results where there are significant and consistent historical data can be fairly simple; however, predicting results for new programs or with little or inconsistent data requires developing educated estimates.
Just remember that it is a process, and you will make mistakes. The goal is to learn from them and continue to improve. In summary, more consideration of the some of the issues above will lead to better forecasting. In general, I also believe we are overly concerned with the consequences of mistakes than the potential of risk. Thus, don’t be afraid to test new ideas and adapt to their results. This approach is well stated by Sheryl Sandberg in her comment, “What would you do if you weren’t afraid?”
Dr. Bert Shlensky (Bshlensky@startupconnection.net ) and Startup Connection (www.startupconnection.net) help entrepreneurs and small business owners maximize their capabilities and opportunities. We empower clients to understand and balance the risks of failure and the rewards of success.
We provide entrepreneurs with tools and recommendations to facilitate operating a business. Our focus is on understanding and analyzing the dilemmas and challenges to help entrepreneurs have better results, avoid mistakes, have greater efficiency and become profitable in less time.
by Bert Shlensky | Mar 21, 2016 | Operations
When running your business, it can come in handy to trust your gut instinct and rely on your intuition. It’s important when reading people. It’s important when being creative. It’s important in a multitude of circumstances. It has its limits, though. At a certain point, you need to start testing and measuring so you know what really is working instead of what feels like it’s working. That’s why we at Startup Connection recommend learning how the scientific method can help your business. (more…)
by Bert Shlensky | Jun 4, 2015 | Operations
We make numerous decisions every day like what to wear, what to eat, and what form of advertising should our business pursue?
We even make a decision to defer a decision, or we decide to procrastinate.
We spend too little time on the how and the why of our decision-making, decisions that deeply affect the outcome of our business. (more…)
