Way to Grow

What to Do about the Box You're In

Yesterday I had lunch with a couple who I interviewed more than a year ago for my (yet unpublished) book. They have a photography business that has settled into a comfortable but small and not highly profitable niche. They bemoaned the fact that neither of them are real visionaries, and so they have yet to figure how to grow the business. We talked about several approaches -- expanding into a line of products that use photographic images (calendars, etc.), or moving up the foodchain and working with larger clients with bigger budgets.

Today I came upon a post Seth Godin wrote called Expand the Box. Although his topic was not quite the same as what my friends and I were discussing yesterday, Godin made an interesting assertion: "Thinking outside the box isn't nearly as productive as building a bigger one."

It occurs to me that in order to have a vision, you need to have a purpose. If this couple can settle on what their intention for the business is, it will be easier for them to envision the direction they need to take to get there.

There is a clear advantage to using the momentum you have built over the last 3 or 4 years to expand your box. But if what you really want is something altogether different, don't be afraid to envision yourself in a totally different box.

Fresh Blogroll

It has been way too long since I have updated my Blogroll on this blog, so I refreshed it today with what I have been reading and eliminated some blogs that have faded into oblivion. Enjoy!

In Business, It's Differentiate, Differentiate, Differentiate

Glenn Ross is the Customer Experience business adviser over at AllBusiness.com. I read his blog regularly and absolutely never disagree with him, because I too am a believer in building your business by building a base of loyal customers. What makes customers loyal?  Specifically, that depends on you and your business, but it always has to do with giving customers more of what matters to them than they get somewhere else.

Glenn tells of doing a lot of business travel in the 90s, going to an area where he had essentially two hotels to choose from. One offered steam irons in every room and the other did not. He became a loyal customer of the one with the irons because they gave him something that mattered to him.

His advice:

"First one to exceed the need wins! Something like this may seem like a molehill to you, but it can be a mountain to customers. Get feedback from your customers. What are the little things, the tiny adjustments that might help separate your business from the pack of your competitors? If you can identify these, then the additional cost will most likely be offset by your increased sales."

That something extra may not even have to cost you anything.  These days in retail, even a smiling employee can be enough of a bonus to make a repeat customer of me.

Hiring Is Up and So Are Salaries

According to the SurePayroll Small Business Scorecard, hiring by small businesses was up by 1.8% in May. It was the sixth straight month of hiring growth according to their data. Salaries rose even more -- by 2.7%. Small business salaries in the U.S. now average $32,142.

SurePayroll's President, Michael Alter, is surprised at the growth figures because GDP growth has been "fairly unimpressive. It's an intriguing question. If we are producing less, why is it that businesses are hiring more and how on earth are they able to pay higher salaries? It's a bit like the local weatherman is forecasting a rainy day and you look out the window and there's not a cloud in the sky. All we can say is what we see: small businesses are hiring, so the economy must be doing reasonably well." 

Alter goes on to suggest that the increase in salaries is a sign of a growing labor shortage. If that's the case, expect salaries to continue to climb for some time.

A nod to Dane Carlson who found the Entrepreneur Daily's article on the report.

How to Fire an Employee

Not anyone's favorite subject, but some day in your business the time will come -- if it hasn't already -- when you need to let somebody go. Be prepared, and know how to handle it before you need to do it. Jill Pugh offers 10 things to keep in mind when you need to fire somebody. Some of it seems pretty obvious, some not so. Here's the list, but read it in full for the explanations:

1. Don't lie
2. Don't leak the decision to anyone who doesn't need to know
3. Don't fire someone on a Friday or right before a holiday
4. Don't email of text an employee with the news
5. Don't withhold money from the paycheck, except what is allowed by law
6. Do have a third party present [This is tricky if the entire business is just you and one employee. See my note below on this one.]
7. Do have a security plan in place (in case something turns violent)
8. Do follow your policies and procedures [and I must add, have written policies and procedures, and share them with employees]
9. Do back up the employee's computer files and contact your IT person
10. Do contact an attorney in advance if you think this termination could lead to a lawsuit.

Now, on point #6, one of the subjects of my book came close to having to fire her sole employee who had taken a second job, was attending night classes, and whose attendance at work had become erratic. On several occasions, she backed up discussions they had about the problem with written "minutes" which she signed and had her employee sign, and each got copies. Although he protested at first, she explained it was for his protection as much as for hers.

Who's In Charge -- Email or You?

An Entrepreneur article, Time Out, struck a nerve with me. Sub-title is: Never enough time? Practice these simple time management techniques and get yourlife back in control. The first section in the article talks about email, and it starts with, "E-mail is just one time management pitfall for businesspeople: Turla [Peter Turla of the National Management Institute] estimates that 65 percent of the participants in his time management seminars compulsively check their e-mail."  Uh-huh!  Guilty as charged! 

The article has some great tips on dealing with email and other time-sinks in our lives, but the one action I took has already made a difference for me. I created an email folder called "Later", and the daily news emails that I used to pore over every morning now go in there unread. If I have time later, I go back and read them. If not -- and there have been plenty of days when I have not -- I just move on.  You see, I've been something of a "news junkie".  I have now learned I can get along just fine without so much news, and I have freed up close to a half hour each day.

You probably receive some category of email that you could drag into a Later folder. If you can't get to it later, life will go on. Buy yourself some time.  The article's other email suggestions are:

• Delegate less important e-mail to employees.
• Set up different e-mail accounts--one for vendors, one for clients and one for employees--so you can organize and prioritize. 
• If it works for you, set up an automatic reply that says you check e-mail at 10 a.m. and 4 p.m., for example, and advise people with urgent requests to call instead.
• Prioritize your e-mails in terms of urgency, so every e-mail doesn't require a quick reply. 
• Set aside 15 to 30 minutes in the evening to reply to detail-oriented e-mails. This will give you time to craft a good response instead of typing on the fly during the day.

Why Networking Matters

When you started your business, you probably did a lot of networking. I hope you haven't stopped. Building a business takes time, and it grows faster with referrals. But that's not the only reason to network. People you meet through networking can turn out to be good resources for your business. When you need specialized professional services, for example, someone in your network can probably refer you to that specialist.

Patrick Carney had a wonderful metaphor for describing what works in business relationships:

Southern California is home to many huge, tall, lush eucalyptus trees that topple over fairly easily in the high winds that occur almost every year.  When they’re uprooted and blown over, you can see that their root system is broad and wide but not very deep at all. Imagine your network in terms of those eucalyptus trees – for it to be strong it must not only be broad, but also deep

So keep networking to deepen those roots, so those relationships will be there for you when you need them.

How You Pay Makes a Difference

Michael Sturman at Cornell's School of Hotel Administration found in a study that while raises increase performance, bonuses increase performance significantly more.

Simply spending more on employee pay would yield minimal results. Improving the merit-increase pool by one percentage point but otherwise not making any allocation changes, for example, would be projected to increase performance only by roughly 2 percent. However, if the same money was applied to pay-for-performance bonuses, the analysis suggests a performance increase of better than 15 percent. Indeed, the results suggest that providing a strong pay-for-performance link for bonuses rather than raises had the greatest potential benefit, predicted to improve employee performance by nearly 20 percent.

Sturman acknowledges that his study covered just one company of 700 employees. Further research might turn up differences. The result could be tied to other factors that weren't measured. But my gut tells me that while performance improvement may not always be as large as in the group he studied, there is a genuine motivational factor at work here. If employees believe, for example, that a pay raise is a cost-of-living adjustment, there is little challenge to them to perform better. However if they are told the increase is a bonus that is related to performance, there is a clear incentive to improve work habits.

Interesting. Even though the bonus is a delayed increase in compensation, it is valued more by hard-working employees.

A nod to Guy Kawasaki for uncovering the report.

Your Personality Magnified

People aren't prepared for this. They're surprised when it happens. When you start your business and you're still the only employee, clearly the "personality" of the business will be yours. As you grow and hire employees, you continue to set the tone, and your style defines the "style" of the business. Even as you grow, as long as you are the CEO, you will set the "corporate culture". Your company's reputation will ride on your reputation.

• Are you thoughtful and analytical? Your business culture will be thorough and somewhat cautious.
• Are you creative and decisive? It will be an innovative, aggressive organization.
• Are you a loose cannon? The company will rush off without preparation into ventures.

For better or for worse, your business will be like you.

Work on a Two Word Strategy

If you can describe your value proposition clearly in two simple words, you're onto something!  One of the problems with a lot of marketing materials and sales pitches is that they are too long and lack clarity. Anita Campbell suggests in The Importance of a Two Word Strategy that you keep honing your value proposition down until you can get it to two simple words. She refers to a talk given by Gary Harpbst, author of Six Disciplines for Excellence, whose point was that this refines organizational focus and alignment.

Well, I suggest that it's also important for marketing -- and I'd settle for three words.  But her point is valid.  She gives Dell's "being direct" and Intel's "Intel inside" as examples. These were each definers of the value proposition and messaging for two technology companies, but don't limit it to tech. I'm thinking of BMW's "ultimate driving machine" and Nike's "Just do it".  I like to use "Helping sales succeed" for my own marketing consulting business.

What is your two-word strategy?  Think about it!

Price vs. Product

Researchers have found that consumers evaluate product and price separately, according to Ks blog. Here's the explanation, and it makes a lot of sense to me:

• The consumer evaluates a product and places a pleasure value on it.
• Then the consumer evaluates the price and places a pain value on it.
• If the pleasure value is greater than the pain value, the consumer buys.

The natural conclusion, then, is that you should introduce the product first and let the buyer develop a pleasure value before you introduce price. It's a useful sales strategy to keep in mind.

A Week That's All About You

Get ready for EntrepreneurshipWeek USA!  Between February 24 and March 3, 2007, in each of the United States plus Puerto Rico there will be multiple opportunities to learn more about entrepreneurship. The week will be "a collection of thousands of activities, ranging from high school competitions to academic gatherings and local town halls to a national policy summit." Clearly it is academically oriented, and many of the events are held at colleges and universities, but many are also open to the public. And there will be podcasts, too.

It's fair to describe many of the speakers as illustrious. In my area (Northern California), for instance, Thomas Friedman of the New York Times will speak on Green Is the New Red, White and Blue, and Guy Kawasaki of Garage.com and his How to Change the World blog will be interviewed by Ann Grimes, formerly of the Wall Street Journal on Silicon Valley's Favorite F-Word: Failure.

In digging to find who was behind this broad-ranging program, I found that, "The Kauffman Foundation is launching EntrepreneurshipWeek USA -- along with a group of sponsors including the New York Times and Inc. magazine – to ignite the nation’s consciousness around the importance of being entrepreneurial. The initiative will be designed to stimulate on-going interest from individuals and organizations serving as an educational kick-start for the uninitiated, and an inspiration for young people to begin a journey to fulfill their potential as self-starters and entrepreneurs."

Go to the EntrepreneurshipWeek USA website and choose your State on the left to find what is happening in your area.

Why Discounting Can Be Harmful to Your Business

You offer a discount and you'll sell more product, right?  Yes, could be.  But how much more do you need to sell to be better off than if you didn't discount? This is fundamental math that every business owner needs to consider.  Reuben Swartz authors Dollars and Sense: The Pricing Blog, and he recently treated this topic in a very clear and simple way. Rather than repeating what he says, I urge you to go there and read it all yourself.

One of Reuben's commenters pointed out that low-margin customers are often more demanding than high-margin customers. Sometimes. If this turns out to be true for you, you may be better off with fewer high-margin customers.

Another argument for not slashing prices applies if you have a large competitor. Chances are the big company has lower costs than you, and they can still undercut you without spilling red ink.

Know If Your Market Is Changing

Gary Bourgeault, who writes a thoughtful blog called Managers Realm, wrote Are You Monitoring the Market You're In?  Speaking of the U.S. auto industry, he puzzles, "With companies that have been so long in the business and having been through a number of difficult periods of time, what was it that caused them to not respond to what is obvious to those that take even a cursory look at the auto industry?"

Some industries change more rapidly than others. In ones like tech, people tend to be very watchful, sometimes even paranoid, of market trends. In less fast-paced industries, entrepreneurs can slip into complacency. "Business is good!"  "If it ain't broke, don't fix it."  Except the landscape may be slowly eroding beneath them, and they haven't been watching out.

Bourgeault admonishes, "We need to take a somber and thoughtful look at this and ask ourselves if we are doing what huge companies that should have know better have done. Whether you're a sole proprietor or managing a huge division, somebody has to understand clearly and without prejudice what the true condition of the market you serve is, and where your current customers are at in reference to your products or services."

The start of a new year is a good time to look outside your business and see where your market may be heading.

Local Communities

An article caught my eye today, Independence from the Global Corporate Economy. It was in the GreenBiz newsletter which I follow for alternative energy stories, but as a trained economist, I was interested. It starts out looking like a rant against globalism and capitalism, but it really isn't. It's a bit of an ode to the local economies that are out there flourishing.

The articles speaks of Community Market Economies—networks of exchange built from small businesses and cooperatives that are accountable to their communities through social ties, innovative ownership models, and mutual support.

This rang bells because in a recent interview for my book, I heard from a woman who operates a retail franchise business in a small town on the outer edge of Silicon Valley. It became clear that in her bedroom community, people prefer to do business locally. She said,

"Because it’s a small market, it is important being part of the Chamber [of Commerce], and there’s a Women in Business group. I thought when I went to these kinds of meetings I would be connecting to the people who would be coming in and placing orders with me. And interestingly enough, because a lot of them are small business owners, they’re really not spending a lot of money, but they’re talking. So if somebody mentions that they need a framer, they’ll say, “Oh, you have to go see Leah.” And I do the same thing. I tend to refer people to these businesses that are involved in these groups.'

I, myself, recently joined an association of home-based businesses in my district in my city. And I have become a user of Yahoo Local when I want to find a business in my own community. I prefer to find a business near me rather than get in the car and drive to the mall. I have a hunch that I'm not alone. I believe we'll be seeing a great deal more of local economies in the next decade.