#21: Competition

Now that we have finished looking at propositioning people and businesses and you have a clear idea of how to portray yourself, properly, within your professional area, we must move on to tackling the issues associated with these propositions. More specifically, the things that could block you working with others: competition.

My definition of competition is anyone or anything that prevents you from winning business; I think there are six categories.

1. People you go head to head with, where it is a straight fight on service or product quality and price.

2. People out there who could be confused with you. Because if you can be confused with somebody else, either by the way they describe themselves or by what they are called, then that confusion could be sufficient in the potential buyer’s mind to increase the risk they don’t buy from you.

An example for my world: if I am at a networking event and do a particularly bad job of articulating what I do, I can guarantee you that somebody will assume that I am a coach. I am not a coach, I have no coaching qualifications, and I would never portray myself as a coach. But the very fact that people might mistake me for a coach can be a problem, as I have to explain why I am not a coach and what I actually am and do. I have to get back to zero before I can start selling. That is what I mean by being clear about who you are and what you do.

3. “Closet competition” which is people who do what you do, and operate in your geographic patch, but win all of their business from word of mouth referrals; they do not have a website, and operate “off the radar” but they could be taking business you could otherwise win. Competition is therefore not just what you can see around you.

4. Overlap. This is people who do partly what you do, but the overlap is sufficient for them to be competition. An example from my world is the accountancy profession:

Over the years we have had many conversations with accountants and tried to build strategic relationships with them.

We have said, “Look, you have clients with a whole range of needs, one of which is finance; if we teamed up, you could do the finance aspects and we could deliver some of the other aspects.” I spent some time working with a consultancy that was very strong horizontally – we had consultants who were strong on marketing, sales, human resources, operations, IT, finance, and so on – anything you would expect to see on the board of a company we had people who could do that. Most consultancies go deep the other way, i.e. they will be experts at marketing, sales, finance, human resources, logistics, IT, etc.

We used to promote the “virtual board concept”, i.e. if an entire board got wiped out in a plane crash we could put a complete set of replacements in and run the business. A very powerful message. The accountancy profession tended to look at us and conclude that we were competition, as we had finance people. We would counter that, we were happy to do everything else, apart from the finance, but most accountants remained reluctant to work with us and as a result a potentially lucrative route to market was largely closed to us.

5. Internal. This is particularly important if you are trying to get into the consultancy or contract space in IT or HR, as these are two disciplines where companies can move between choosing to outsource or bringing the work in house. Depending on where a company is on its cycle, you can either get business or lose business.

6. Inertia. The potential client chooses to do nothing. I can only think of a couple of recent examples where I have pitched for business and not won it. I can however think of many examples where people have decided to do nothing and just take their chances. Inertia is a huge, huge challenge. If the prospective client decides to do nothing, then in my book it’s competition because it stops you getting business. How do you deal with client inertia? You will all face it, whether you are selling a product or a service. You need to have a disciplined diary system so that you can follow-up effectively on anything when the answer from the prospect is “yes, but not now”.

Next month we will look at researching potential clients and the market you are working in to see where you stand, and how your business differs from others, your competition, in the same area.

#20: Proposition – Part 2

This month we follow on from last month’s article on propositions and what this can do for you and your business. If your market is “business to business” there is only one reason why they are going to buy from you, and that is money. If you cannot get into your message that you are going to make money for people, save them money, or both, the likelihood is that the recall level will be lower as sooner or later they will have to link it to a budget that somebody has to approve.

A good example of this would be an accountant I know. He changed his pitch from “I am an accountant” to “I help business owners make more money and pay less tax”. He told people what he did as opposed to what he was.

When I first started in consulting, we used to say we helped business owners set and achieve their strategic objectives. People just used to look at us blankly – what does that mean?

I changed it and now say we help people make money and free up their time. So the antennae go up and they ask, “How do you do that?” and then you are in a conversation. All they needed to know was that we could do something that makes or saves them money, because that is the return on investment for them taking our service.

Whether your market is “business to consumer” or “business to business”, there is a simple test you can carry out to discover the effectiveness of your proposition and check that you have avoided jargon:

• Create one page of A4 (in a sensible typefont) that captures the essence of what you do. This can also go on to form a key component of your website (more on that later), and the content of your elevator pitch (more on that also).
• Test your proposition on a twelve year old. A twelve year old should have reached a level of literacy where, if you avoid jargon, he or she should be able to understand what you say and faithfully play it back to you to demonstrate the fact. If you put jargon in, they won’t be able to do so.

If, after you have done this, you find your paper gets your point across quickly and effectively, then you know you have used the best language to describe what you actually do rather than what you are.

Once you have figured out how to best sell yourself and your business, it’s time to turn your attention to the competition surrounding you. We will cover this in next month’s expert article.

#19: Proposition – Part 1

It is really important that you can articulate with absolute clarity what your business proposition is. This is vital because, unless you are really fortunate, there will not be many occasions when you meet somebody for the first time who is ready at that moment to buy what you do.

You will meet two types of people:

• Those who at some stage might buy your product or service
• Those who can refer to you people who might buy your product or service (some people could fall into both categories.)

It is therefore essential that you can communicate what you do, both verbally and in print, so that it is easy for the listener or reader to grasp what you do.

A note about Jargon

Avoid jargon. You will be amazed at the number of people who blow their own feet off using jargon. Here are a few examples I have come across over the years:

• I was grooming someone to go in front of the real life Dragons’ Den; my objective was simple – help him go forward into a business angel environment and come out with a cheque rather than in a body bag or on a stretcher.

He had a First from Oxford and a Masters from Sussex and told me he was an expert in neural networks. I just looked at him. We got off to a horrible start and I threw him out (in a nice way) and told him to come back when he could tell me what he did in words I would understand.

• Use doing words, not descriptors. It makes your description more dynamic! I met a lady at a networking event who introduced herself as a trained hypnotherapist and NLP practitioner. The eyes of the entire room of 40 people glazed over. Nobody knew what a NLP practitioner was.

Not only had she used jargon, she had put herself in a “box”. The people who ran the event took her to one side and said, “Look, if you are going to make the most of this, you have to make it easy for people to know what you do, so if you don’t want people to look blank, you have to change what you say”.

The next week she came back and to her credit had changed her pitch, she began with “if you are scared of flying, I can help you with that; if you are trying to lose weight, or stop smoking I can help”. She then went on to explain that she had certain qualifications which gave her the ability to offer this. She had come up with a much more successful way of getting her proposition over to an audience.

• Something which I did not realise until recently was that, when you talk to somebody, they open a folder in their brain with your name, company name and what you do in it. If they can come up with a helpful image they will put that in as well.

So our NLP practitioner did exactly that – everybody could picture a plane, a cigarette, a piece of cake, a spider or any other phobia and they could create a record that she was someone who could deal with that.

Another thing you should be aware of is understanding why people might buy from you. If your market is “business to consumer” there is a whole variety of reasons why people might buy from you, and you have to build that into your description of yourself. It could be convenience, peace of mind, security, safety, fashion or a range of other features. You have to make sure your message taps into the right one so that you get the recall.

Next time, we will continue to look at propositions and why telling people what you do rather than what you are is vital to securing new business.

#18: The Risk Spectrum: High Risk Case

This month sees the final instalment in my articles on The Risk Spectrum. So far we have already looked at low and medium risk case studies. Now we will look at high risk.

High risk is where everything you have learnt thus far is not directly relevant to your business idea, and in addition you are going in to a market you don’t know and which does not know you. This is really where you need to make sure that you have done your research before you start, so that you go in “eyes wide open”. I have two examples for you.

The first one was a lady who, from memory, was a junior in the fixed income operations area of an investment bank. She said that she had a one-off opportunity to turn her hobby into a business. This normally scares me, (alarm bells – potentially high risk) but I asked her to elaborate. Her passion was her garden and she had decided to open a florist shop. What this lady did is quite remarkable.

She identified a town which had no florist in the high street; she further identified there was a vacant retail outlet in a good spot in the high street. She then did some research and found a commuter town where there was a florist in the high street.

She telephoned; a man answered and she outlined her plan, said she was no threat to his business as she was so far away, and she asked whether if she came to see him, he would share his experiences with her. The man agreed and they met.

He told her everything – the mistakes he made; the things he would do differently second time around; how to fit the shop out; where to source materials for the fit-out, and likely cost; how to deal with suppliers and what tricks they played; what margins were available, promotional ideas that worked; dealing with seasonal issues, and how to deal with deliveries.

He explained about footfall count and the average amount people spent; this is hugely important if you think about it, as if you go into a florist you have already decided you are going to buy some flowers – it’s not like going into a clothes shop and browsing. So the footfall count is quite a good predictor of how many people you would expect to come in and the average amount that they would spend.

Armed with this data her next step was to head south and sit in a cafe on the high street, from which she could see her potential shop; she sat there all day Monday, all day Wednesday, all day Friday and all day Saturday. Monday was quiet, Wednesday was market day, Friday was really busy and Saturday was a typically manic high street day. Four different profiles in terms of footfall.

Monday to Friday she also stayed on into the evening, so she could pick up the commuter traffic coming home and see how many of them passed the shop. Now she had the data she could map it against the conversion ratios that the North London florist had told her. She also had the pricing model, and a costing model, so she could now create a set of assumptions from which she could create her financial forecasts and subsequently create a business plan.

She then went to the bank and said she was interested in taking the lease on the property, so that she could open a florist. She showed them her calculations, indicating that her savings and redundancy money would cover 50% of the start-up costs and 50% of the year one operating costs without selling anything and asked the bank to match fund her, which they did.

I can guarantee you that banks are not used to seeing a pre-revenue start-up submit a plan of that calibre with such robust assumptions that could be defended; moreover she had gone out of her way to eliminate, or at least reduce the technical risk.

Contrast her approach with that of an investment banker I met:

He was, articulate, well dressed and supremely confident. He was going to sell his property and move to Cornwall and run a guesthouse. When questioned about whether he knew much about the guesthouse business he said that he had stayed in one. Once.

Enough said.

If anything here resonates with you, or you want more information on high-risk cases and where you stand, please contact me. Or for help that is always to hand, why not read my books From Crew to Captain and From Crew to Captain: A Privateer’s Tale.