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#14: Routes to market – Direct

Now that we have moved on from looking at the main success factors you need to start a successful sole practitioner consultancy, it is time to turn our attention to what you need to look at next to progress further; sales.

When considering sales, one of the first things to think about is routes to market – how many do you have? We all have more than one; it’s just a case of figuring out just how many. In this article we will deal with the most obvious one – what I call “direct”.

What would classify a sale as direct? Several factors:

1. You identify the potential client as a prospect in the first place. You have assessed his or her potential interest in your offering based on sector, size, location and so on…

2. You make direct contact with the client, by one of the following mechanisms:

  • Networking (either at a formal networking group, or opportunistically at a seminar, conference, trade fair etc.)
  • Cold approach – letter, email, phone call…
  • Social media – an initial relationship with the prospect is built via one or more of the sites – LinkedIn, Twitter, Facebook
  • Subscription – the prospect registers on your website to receive further information prompted by blogs, newsletters, other articles.

3. You handle the sales process at all stages with little or no intervention from anybody else on your behalf.

4. Your “cost of sales”, or client acquisition cost, relates to your efforts and initiatives – no one else’s, e.g. networking subscription fees, direct marketing campaign, travel, entertainment. One notable exception could be if you are retaining someone else to create marketing collateral for you i.e. a freelance copywriter.

So, in the case of this route to market, you are succeeding or failing based on your own lead generation efforts. Next time, we will look at how you can involve others in strengthening your sales pipeline.

Posted in: Consultancy

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#14: Know your business skills – Part 1

Going back to my previous article on business inventory skills where you will have looked at your own strengths and knowledge, it is now time to turn to those in your team.

This business skills list is highly relevant, whether the business is going to be just you or more than you. I will reinforce the point by referencing “The Beermat Entrepreneur”, written by Mike Southon & Chris West. This is a great little book which starts with five guys setting up a company and dividing the roles up between them. The company they set up sees them each with 20% of the equity, so there is no argument over who earns what.

They divvy up the jobs between them based on what they are good at and what they enjoy doing. They are all capable of doing more than one thing but there are five of them, so how is it shared out?

  • They start with a great networker, who can go out and be very ambassadorial, press the flesh, make people aware of the business, what makes it different, and generate leads. They are not necessarily the best salesperson but they are brilliant at getting out there and making the world at large aware that the business exists. This person is supported by what Mike and Chris call “Cornerstones”.
  • The second is the creative member; he comes up with the first product or service based on market needs, and whilst that is being marketed he develops the next product or service.
  • The third is a sales person who will go out, selling what the creative has come up with and capitalising on the awareness that the networker has created.
  • Then you have the operations person who deals with everything post sale. So getting the right product to the right person, on the right day, in the right location and dealing with all the administration.
  • The final one is the finance person who keeps a vice like grip on the cash in and out. So, that is the way they share out the roles and responsibilities.

A set-up like this is really important if you are intent on building a business that is scalable and capable of sustainable profitable growth.

So whether you are working on your own or in a team, it is very important to know your strengths and play to them. Make a list of who is best at what within your team, and who enjoys doing certain roles the most, and use this as the base of you business skills list.

In my next article we will continue to look at business skills, and what you need to do if you are running the business alone, rather than in a team.

Posted in: Start-ups

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#13: Financial strength and stability

Over the past few articles, we have been looking at how to build and develop a business successfully, using skills both old and new. Many of these have been key characteristics, such as strategic planning, and managing implementation risk.

If you have embarked on a transformation process to move your business forward, one of the outcomes should be that the business achieves a different level of financial resilience.

One way to assess the extent to which this has been achieved is to evaluate how your business would stack up, from a financial standpoint, in terms of being attractive to a potential buyer. There are other types of due diligence which would be undertaken, notably around your market, product or service, management, and your people. But for the moment let’s stay focused on financial aspects, with a couple of risk factors thrown in.

I would suggest that you consider the following areas of financial analysis:

1.  Are the following on an upward trajectory:                                                                                                                      – Turnover                                                                                                                                                                – Maintainable earnings (profit excluding exceptional items)                                                                                    – Cash flow

2. What is the quality of the revenue stream:                                                                                                                        – Transaction based or ongoing                                                                                                                                – Repeat business

3. Is there a strong balance sheet?
4. In particular, how heavy geared is the business (ration of debt to equity), and how liquid is it (in its simplest         form can all short-term creditors be funded out of cash and debtors)?
5. Is there a reliance on a small number of customers?
6. Is there a reliance on one supplier or service provider?
7. Is there any liability to past customers?

It may be useful to go back say three years, and score yourself not just on where you are now, but where you have come from. Depending upon what you discover you can then move on with confidence or take corrective action where required.

In my next article, we will focus on the choices you may now be facing as your business continues to develop and grow, and how to tackle these effectively.

Posted in: Growing Businesses

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#13: Price integrity

Over the past few articles, we have been looking at the three main success factors you need to establish the overall framework of a successful sole practitioner consultancy. So far we have looked at Self-Awareness and Clarity of Purpose. Today it’s the turn of Price Integrity.

There are 6 tips I would invite you to consider in terms of establishing price integrity:

1. Try to price based on value created not time expended. This is far from easy, but if you don’t try it won’t happen! It is very dangerous to assume that there is always a direct correlation between the time you commit and what you are paid.

  • Consider the range of activities you undertake; could some of them be described as “commodity”, and some as “value-add”? By way of example, a sole practitioner accountant probably has a range of activities that could be described as commodity (preparing a set of accounts), but may also have some activities where he is genuinely making a difference (devising and implementing an efficient tax management strategy). These probably deserve different levels of reward.

2.Consider pricing options. Does your business lend itself to Day Rate, Fixed Fee, Performance-Related, or a hybrid of these? I have used all of these at different times.

3. Structure proposals on a modular basis. The reason for this is you can then trade time for money, and not just face having to concede, i.e. if the client baulks at the price you can just take a module out and bring the price down accordingly.

4. Know your worth. If you are offering a “Rolls-Royce” service, the prospect will be confused if you are offering a bargain basement price. You need to stay in line with the market, and match your pricing to your overall strategy – low cost offering/niche offering/differentiated offering – with the latter two representing the best opportunities to price at the top of the market.

5. Be prepared to take a degree of risk – this brings us back to the performance-related aspect. I have on occasions done work where I have offered the prospect a choice between a full day rate or a lower day rate,     with a performance “kicker” if a target increase in pre-tax profit is achieved by a certain date (and on a formula agreed with the client’s accountant so there can be no “misunderstandings”).

6. Be prepared to walk away. If you sense that you are viewed as a cost as opposed to an investment then, unless your model is to be a low cost provider, or there is some form of ulterior motive, you should think long and hard before agreeing to undertake work at an unsatisfactory fee level.

Now that we have covered the three success factors you need to set yourself up as a successful consultant, it time for you to implement them. I hope this list of tips is helpful for you, let me know how you get on if you try them out!

Posted in: Consultancy

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#13: Business skills inventory

Now we know the key characteristics of a successful business, which we covered in my previous article, it is now a good time to take stock of our Business Skills Inventory; bearing in mind we have in all likelihood left a business world where we had developed specialised functional skills.

Now, this piece is very important. One of my famous lists is to be found below, one of many found in From Crew to Captain.  What I suggest you do is go through the list as an inventory and don’t cheat – be honest – and ask yourself; “is that something I can do?”

If not, is it something that would be sensible to invest in and receive training for, or would it benefit more from being outsourced to someone else?

If you actually duck any of them, or persuade yourself that you can do it when in fact you can’t, it may well prove to be the “Achilles Heel“ of your business, and come back and haunt you at a later stage.

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Having created your business skills inventory, you should now have a clear picture of how you can move forward and develop your business. In my next article, we will start looking at the relevance of this.

Posted in: Start-ups

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#12: Measuring progress

Going back to my previous article on managing implementation risk and why this is important to building your business further, I mentioned that knowledge was also a key component in this process.

Knowledge is a massive asset for any business. Some of it is written down or captured somehow, but most of it is “tacit” and inside either your head, or that of one of your partners or employees. How you manage your knowledge will have a significant impact on how successful you are in growing your business.

It is worth spending some time assessing what information you do have. Ask yourself the following questions:

  • Can I get hold of it on a timely basis?
  • When I do is it accurate?
  • Is it meaningful and relevant?
  • Can it be monitored, measured and compared to my targets?
  • Does it enable me to take action?

The key issue to keep in mind at all times is that you want to create value in your business, so what information will help you achieve that?

I see a lot of businesses that suffer from “analysis paralysis” – they have more information than they can cope with and can’t strip out the key “nuggets” which will help with decision-making. Quite often, when you are wading through an established company’s board pack, you can figure out how they have done in the last month or quarter. But you wouldn’t necessarily know how they had achieved their results, what you could learn from them, and what should be done differently going forward to realise the full potential of the business.

Let’s consider value creation for a moment.

Wouldn’t it be good to grow value contributors to your business? By way of example, your more profitable products or services and customer types. Equally it would be helpful to reduce or eliminate value destroyers; the less profitable or unprofitable products, services and clients. In other words, you could improve the financial value of your business mix. You could also assess opportunities to sell more and improve margins, thus creating financial value from sales and operational efficiencies.

Another thing to look at is how you manage your net working capital. How could you achieve improvements in your cash management practices? Not forgetting debtor management, creditor management, and inventory control. You could also review and dispose of underperforming assets, such as property, machinery and so on. By doing this, you would be making better use of your capital.

Finally, you could review how you were funding the business and see whether you could make any financially attractive adjustments to your cost of capital.

Tracking all these aspects would be an invaluable discipline. You could capture these in some form of “dashboard”, so you could see at a glance what was working and what wasn’t, and take immediate corrective action. Another useful tool in this regard is the Balanced Scorecard, where typically you would measure how you were doing in 4 key areas of the business:

I know a mutual organisation that created a great little scorecard to ensure they were measuring their performance against the pledges they had made to their members. It is worth bearing in mind that profit was not their only measure of success.

The elements they measured were:

Finance:

  • Number of members voting at AGM (refection of member support and engagement)
  • Operating profit (to ensure their solvency and payment of a “divi” to their members
  • Net interest margin (they wanted theirs to be lower than any of their competitors i.e. difference between the rate they would lend at and the rate they would pay on deposits)

Customers:

  • Number of membership points per member (measure of relationship depth and breadth)
  • Share of UK mortgage market (sign of operational and technical excellence)
  • Customer advocacy (reflection of customer satisfaction)

Staff:

  • Customer satisfaction with employee performance (customers happy with behaviour of employees)
  • Employee engagement survey results (satisfaction with leadership and development)
  • Position in national surveys (recognition of a good place to work)

Process:

  • Cost:asset ratio (sign of cost-efficient systems and processes)
  • Percentage improvement in processes over time (sign of continuous improvement)
  • Number of compliance breaches  (satisfying regulatory requirements)

If a “balanced” approach is taken to these areas of activity, then the chances of strategic objectives being hit is increased significantly.

So now that you know how to properly use your knowledge to your advantage, it is time to look at another skill for growing your business, managing your finances.

Posted in: Growing Businesses

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#12: Clarity of purpose

When establishing the overall framework for a successful sole practitioner consultancy, we cited three key success factors for people to consider when setting up as a consultant – Self-Awareness, Clarity of Purpose, and Price Integrity. My last article looked at Self-Awareness, so today we will consider the second of these in greater detail.

It is really important that you are clear in your own mind what it is that you are offering, as without that clarity it will be hard for you to articulate to your prospects what your offering is. Below I have set out 10 questions which you may want to ask yourself. If you can answer these 10 questions in a robust manner, then you are pretty much “good-to-go”:

  1. What business do I want to be in?
  2. What do I want my business to look like 5 years from now?
  3. What key values and principles are going to guide me?
  4. Who is my audience?
  5. How will I market my offering?
  6. How will I run my business?
  7. What help do I need to run my business?
  8. What are my financial targets?
  9. How will I measure my performance?
  10. What does my Action Plan look like?

Try capturing your answers to these questions in a one-page plan to keep your approach crisp and concise.

A final thought for you; Michael W. McLaughlin wrote a fantastic article entitled “Creating a Service Offer Your Prospects Can’t Refuse”. In the article he said the following:

“Before most clients buy anything, they expect evidence that shows you can answer three questions:

  1. Do you understand the as-is state that creates the need for outside help?
  2. Do you have a vision of the future in which the current problem becomes a distant memory?
  3. What is that path to a brighter future?

If your service offer misses any of these questions, it’s a dud”

Worth reflecting on…

In my next article we will look at your business skills inventory and the last of the three key success factors, Price Integrity.

Posted in: Consultancy

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#12: Further characteristics of successful business

Following on my from my previous article on the Characteristics of a Successful Business, we are now going to look at the next three, which business owners need in order to run a business successfully.

The first was making sure that from the day the business starts, the owners have an exit strategy, and know what kind of a business they want to run, i.e. lifestyle or value.

The second characteristic is that the owners reach a stage where they are managing “on” the business rather than “in” it; they have an opportunity to see what is going on around them and can react accordingly.

The third characteristic is that they only spend money on what is in the budget. They have a vice-like grip on the cash both in and out.

The fourth characteristic is that they build the business around systems, not people. By that I don’t mean people are not important, but that people work much better if they know the process they are supposed to be following.

That applies in two areas:

  • How you win clients in the first place, i.e. you need a sales process
  • How you keep your clients happy, insuring that they will buy from you again and/or recommend others to use your product or service, i.e. you need a delivery process

I have learned the hard way that if you skip any of the stages in the sales process it will come back and bite you in the backside – you end up with either a timewaster or a potential bad debt.

Whether you are going to be selling a product or a service, think about what would be the right process for you, and then, even it is only going to be you, document the procedure and follow it. You needn’t slavishly follow what others have, but it is useful to look at existing sales processes just to give you an idea of the kind of process you might find useful, should you decide to go down a similar route.

If you want to see an example, From Crew to Captain contains my own sales process.  I follow it, and am well aware that departing from it increases the risk of storing up a problem for myself.

One of the many advantages of a good sales process is that if anybody else joins you, be it as a new member of staff, a strategic partner, or an associate, you can show them it and say quite simply ”This is the way we do things”. You don’t need a 60-page operations manual, you just need something simple and clearly defined. I would encourage you to do this, even if it’s just you that is following it and nobody else.

The sales process is intrinsically link to the delivery process.  It helps you to weed out the time wasters and bad debts; with the delivery one, you increase the chance you have a satisfied client who comes back and refers other people to you.

And, by the way, it is much easier to build a business from quality referrals and recommendations than it is having to go out in the cold all the time trying to find new customers.

Posted in: Start-ups

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#11: Self-Awareness

When establishing the overall framework for a successful sole practitioner consultancy, we cited three key success factors for people to consider when setting up as a consultant, namely Self-Awareness, Clarity of Purpose, and Price Integrity. Today we will consider the first of these in greater detail.

There are some very strong links between understanding yourself better, setting personal goals, and creating your personal brand. Only then can you come up with a coherent and consistent social media and networking strategy. In addition, if you can heighten your appreciation of your own self-awareness, you are in a better position to heighten your awareness of others, thereby relating better to them as a consultant.

I have been using PRISM for some years now, and I have found it to be a very simple and pragmatic way of improving business performance.

So what is PRISM and PRISM Brain Mapping?  It is a unique way of identifying people’s behaviour preferences based on brain activity. Unlike traditional psychometric instruments, PRISM approaches human behaviour from the perspective of neuroscience, rather than psychological theory. This exciting online tool takes advantage of some of the most up-to-date neuroscience discoveries to provide users with a series of ‘maps’, which are representations of how their brain prefers to work.

PRISM’s reports

  • Show not only people’s natural or instinctive behaviour preference, but also the extent and the way in which they modify or adapt their preference on occasions to respond to what you see as the demands of specific situations e.g. their job.
  • The reports also indicate where individuals may be overdoing or not making full use of their preferences. This insight also helps them to understand more about their true potential, as well as what may be hindering them from achieving even higher performance.
  • The remarkable complexity of the brain has shown that human beings cannot credibly be divided up into a fixed number of types or groups of people who are unable to act outside of their preferences. PRISM does not, therefore, label people or fit them into ‘boxes’, nor does it have ‘scores’, or right or wrong answers. Instead, it provides users with a powerful, graphic explanation for why they approach situations and individuals in different ways.

The brain is the source of all human behaviour. It stores our memories, enables us to feel emotions, gives us our personalities and produces the behaviours that enable us to survive and achieve success – in short; it makes us who we are.

Although genes set boundaries for human behaviour, within these boundaries there is immense room for individual variation. Now, thanks to great advances in brain imaging technology, scientists can watch the brain at work and in great detail and are uncovering many of its secrets.

For all of us, that discovery is really good news. The adult brain can and does, adapt, develop and change even into old age. This means that education, learning and development take on a whole new level of importance. Neuroscience has also shown us that people tend to be most motivated and successful when they use, and are rewarded for using, their own natural, preferred behaviour.

This highlights the importance of matching people with the right jobs – doing those things they enjoy and do best. In simple terms, the better the fit between the person and the job, the better the performance. The best recruitment results from paying attention to three factors:

  • What the person likes to do most
  • What the person does best
  • What adds greatest value to the organisation

I have used it for a range of activities with my clients:

  • Recruitment
  • 360 degree reviews
  • Leadership development
  • Building high performance teams
  • Practising adaptive selling techniques

One of the great benefits is helping people improve their self-awareness, which in turn helps them relate better to others, both within their businesses and outside.

If you would like to know more, take a look at the website or drop me a line. I love talking about PRISM!

Posted in: Consultancy

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#11: Taking the pain out of exit

Happy New Year everyone! 2013 may have come and gone, and hopefully you have found my expert articles helpful in developing your skills and businesses. Now is the time to put these newfound skills into action.

In my last article, we touched on one of the key characteristics of running a successful business; having an exit strategy. It is important to know how you want to leave or end your business from the moment you start up, so you can plan your finances and game plan accordingly.

I recall one business owner whom I met when he was 52; his game plan was to retire at 57, sell the business, buy a property in the Mediterranean, fly south with the birds for the Winter, then come back in the Spring.

We were chatting away and he was asked what the required capital sum was for this retirement lifestyle, and he had no idea. What about pension? Well the business was his pension. Did he know what the business was worth? Again, no idea.

Would it not be a shame, I asked, if in five years’ time he found that the business could not be sold for the capital sum needed, or even worse couldn’t be sold at all, which would mean that he would have to keep working? So I offered to help him create a value business, and fortunately we had the timescale to do it.

There is a time bomb ticking in situations like this, where people sometimes live in a world of illusion, where they consider the business to be a retirement nest egg, when in fact it is worth little or nothing. Certainly it is often not worth what they think it is, and in many cases the value walks out with them!

Successful businesses have figured this out up front and plan accordingly.

There is nothing wrong with a lifestyle business, provided you take out the money wisely. There is not a right or wrong situation; you just have to understand the implications of the way you choose to run it.

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