by Bert Shlensky | Feb 15, 2019 | Operations
Ah, the good
old 80-20 Rule… The saying “Rules were meant to be broken,” certainly applies
here. It’s one of those things that can seem like a positive or a negative
depending how you look at it. Similar to the, “Is the glass half empty or half
full?” question, your view of The 80-20 Rule is all about perspective and
making sure yours is aligned with the goals of your business.
Perhaps it’s
frustrating that 80 percent of your efforts account for only 20 percent of your
bottom line. But, it’s also pretty cool that just 20 percent of your customers
and products produce 80 percent of your profits.
It’s all about balance. And, as you find that equilibrium, you need to know when to reconsider The 80-20 Rule:
1.When More Selection is Required
There are times when one size does not fit all. You may provide the best
gosh darn spicy mustard the world has ever tasted, but sometimes a spicy
mustard isn’t the right mustard choice. There are circumstances when a classic
yellow mustard is preferable. Or maybe there’s a recipe that calls for a Dijon
mustard…
The point being: There are complexities that require consideration and adjustment on your end. That might manifest in a variance in investment strategies, production process, or product offering. Small tweaks to your 20 percent can result in a major boost in profit.
2.When The Present Does Not Reflect The Future
While a company’s best product and most loyal customers will consistently
account for a higher percentage of sales and profits, there are instances when
those factors are not reliable in the long run. Sales may drop as necessity
decreases and/or newer products/services become available. Competition is
always a factor and, during a time when technology constantly and rapidly
changes, your current best seller may not always be in high demand.
If you only focus on what’s doing well now, you’re bound to experience adversity in the future. If you rely to heavily on one thing, you inhibit potential growth. There is a simple need to develop and test new products to advance and survive.
3.When Expansion Creates Opportunity
Opportunities to expand your market will arise and the investment may not
be a part of your current 80 percent. These instances are worth serious
consideration—especially when the investment is minor. You may open up the door
to a broader 20 percent. For example, babies’ diapers are still the major
market segment, but adult diapers are the fastest growing segment. Expanding
your offering (this may include accessories, convenience items, or new market
segments) can draw in a wider customer base and that is never a bad thing.
One last
thing to consider: Diversity Requires Variation
Many markets
rely on analysis, which is based around the assumption of a bell curve where
the bulk of a population is around a center number and then distributed evenly
around that number. For example, the average U.S. adult male is about 5 foot 9
inches and 75% are between 5 feet 4 inches and 6 feet. However, if you start
segmenting by age, race, ethnicity, and country of origin the distribution
becomes much more complex. The average Danish man is almost 6 feet tall while
the average male from India is 5 feet 5 inches. In both cases using an average
of 5 foot 9 inches would miss much of the population.
Therefore,
it is beneficial to dissect your target consumer and consider multiple
offerings based on the possible variations that exist within that group.
In the end, The 80-20 Rule is still a reliable
tool in most cases, especially when trying to eliminate excess product or hone
in on top buyers. However, as always, exceptions to rules always seem to be
where the fun happens—the chance to maximize growth as you reassess opportunities,
trends, and market segmentation.
We’d love to hear about your
experience improving business performance by adding or reducing offerings.
Have questions? Call (at 914-632-6977) or email us for a FREE analysis and discussion regarding your offerings. We’d love to help you design a personalized solution.
A customized approach that caters to each of his clients’ specific needs is what sets Dr. Bert Shlensky apart. With a PhD from the Sloan School of Management at M.I.T., he focuses on implementing individualized strategies that have helped countless businesses increase sales and profit. He knows what works and has the experience and expertise to help you take the steps necessary to achieve your business goals. Visit StartupConnection.net today!
by Bert Shlensky | Sep 13, 2018 | Operations
Operations is finally getting its rightful place in small business strategy. Automation, technology, customer needs, and the sharing economy are becoming vital components of the branding and marketing process. In order to achieve marketing success through operations, here are some examples:
- In sports, analytics can be used to improve the individual impact of player skills. Defensive shifts in baseball, the three-point play in basketball, and increased passing in football are fundamental changes that have been accelerated by analytics.
- When selling on the internet first started, delivery and security were thought to be major barriers. Today, customer service and delivery in 1-2 days are generally standard. In addition, the internet has proven that eliminating stages of the sales process (like those used in brick and mortar stores) can dramatically reduce costs and prices.
- Creativity, differentiation, and advertising have been the focus of traditional marketing and branding programs. However, issues like value, service, quality, and culture are producing better results. Compare the focus of many brands in department stores, versus Amazon and other leading online sites. I argue that online retailers succeed partly because of the lack of technological skills among many traditional marketing professionals.
Here are some ways to improve marketing success through operations:
1. Digital Branding and the Internet – If you research anything about business today, it’s obvious that Apple, Google, and Amazon are three of the most important sales and communication vehicles. Nearly everyone uses their phone and/or laptop to research and buy products and services. However, the digital efforts in many companies are still buried in departments like accounting or marketing. I argue that digital activities and marketing need a special place in organizations and should be a major part of marketing programs. For example, digital activities need to be an integral part of efforts like emails, websites, sales, marketing, social media, logistics, and customer service (and should be treated that way.)
2. Excellence – There is an ongoing debate about pursuing excellence versus change just for the sake of change. This topic is affected by several issues and we need to understand how problems can require different solutions. Businesses are subject to radical change, so they need to build mechanisms into their processes. While we will face more uncertainty and instability, we need to focus on changing and simplifying processes to reduce the risks. Strategies like pivoting, developing and testing/measuring/adapting need to be built into our organizations.
3. Service – Service, image, and culture are frequently the biggest (and often least expensive) ways for small companies to develop a brand and differentiate themselves. Some suggestions:
- Focus on your target market, segment, and your ideal customer.
- Be polite, listen, and then act based on what you have learned.
- Become a trusted resource to your prospects by providing information that will help them make a good choice.
- Build an email list and send informative mailings on a regular basis.
- Keep in touch with potential and existing customers.
4. Company Culture – Creating and maintaining a positive company culture is a critical component in achieving excellence and establishing a great brand. A great strategy without a supportive culture will undoubtedly fail. I’ve seen it happen too many times.
Open systems are becoming a critical aspect of great cultures and they often reject bureaucracy, authority, and hierarchy. Open systems encourage participation, diversity, new rules, and to some extent, chaos.
There is no better example of this than the Golden State Warriors, who just won their third NBA title in four years. Much of the attention is given to their super stars, but if you look behind that, you see how the entire organization (including the training staff, coaching staff, medical staff) are all united to create excellence and a unified culture.
5. Prioritizing with the 80-20 Rule – Prioritizing can produce dramatic results. In particular, focusing on strengths and eliminating weaknesses has dual benefits. For example, I have a client who has the best product in the industry, but charges a little more money. She has achieved success by moderating some prices, but mostly in developing messages that explain her quality difference.
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.
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.
In summary, operations, and logistics should be viewed as a critical opportunity to improve sales, profit and competitive positioning. While there are some technical aspects to this, it is the thought process and integration of the key components that will lead to success.
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 start-up and small businesses.
by Bert Shlensky | 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:
- 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.
- 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.
- 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.
- 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?
- 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.
- 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.
- 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.
- 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.
by Bert Shlensky | 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.
by Bert Shlensky | 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.
