Sles Process

Build Trust into the Sales Process

People buy from a person, not a company

How many times have you purchased a product from the second salesperson that came to your door or office…selling the exact same product at the exact same price? Why? Was the exact same product at the exact same price somehow better from the second salesperson? No. Chances are, you probably trusted the second person more.

Maybe you’ve heard this and maybe you haven’t but, at the end of the day, after all the marketing campaigns, after you’ve checked off all of the steps on your sales process flow chart, after all the PowerPoint presentations (hopefully not too many…please), after all the negotiations and after the reference checks have been made, people buy from a person, not a company. The prospect may love your company and your product but if they don’t trust you, well, there’s always the second guy.

We all know that you need to sell your company and your company’s qualifications and experience, that’s a given. But don’t just jump in with “my company this and my company that”.

Start a conversation

I don’t want to get into the basics here, you know, “my name is and my company is” but, start with a short conversation. You don’t want to make this too long and have the person at the door or on the other end of the line or across the table begin to think “wow, this guy’s wasting my time”. I’ve been on both sides of that and, as the sales guy, I’ve seen that look in the prospect’s eye. Not something you want to see. As always, be respectful of your prospect’s time. But start a conversation. Ask how their day is going and be sure to listen and respond…”yes, I understand how busy a Monday can be” or “yes, that was some storm that we had last night”.

Then, introduce yourself. Before you go on that first sales call, take some time to build your talking resume. Articulate your qualifications and experience. If you feel comfortable with it, mention something personal (not too personal). Maybe something about a recent trip that you’ve been on or a movie that you’ve seen. Again, not too long. Just enough to show that you have earned the right to be there. Let them know that you’re a human being and not just another salesperson looking to make a commission.

Sometimes we get so caught up in selling our product and our company that we forget to sell ourselves.

Of course, do your homework. Let the prospect know that you understand their issues, their problems and their needs. But build the trust in you first and continue to build on that trust throughout the sales process.

It doesn’t matter if you are selling a single product door to door or you’re selling a million dollar software solution to a multi-national company. Ultimately, you are selling yourself to another person or group of persons.

Merriam Webster defines trust as, “Assured reliance on the character, ability and strength of someone.” Dictionary.com defines trust as, “Reliance on the integrity, strength and ability of a person.”

Show your prospect that they can rely on your character, your ability, your strength and your integrity. Accomplish this and your sales cycles will be shorter, your relationship with your prospect/customer more congenial and your efforts more monetarily rewarding.  As for the rest, well, refer to your organization’s “Sales Process Flow Chart”.

Brand Awareness

How to Achieve Powerful Brand Awareness for Free or Low Cost

Brand Awareness has two goals. The first is moving the knowledge of your product or service from the unknown or unconscious mind to the conscious mind. The second is making a positive association with the brand.

According to John Jantsch in his book “Duct Tape Marketing” a customer needs to Know, Like, and Trust you to make a purchase. Brand awareness helps with the “Know” part and may contribute to the “Like” part of your marketing effort.

A prospect’s awareness of your brand aids in the sales conversation, but does not necessarily produce a sale. Brand awareness helps to associate the company’s name with the brand’s message. The rule of seven applies to brand awareness. Therefore, brand awareness requires a constant effort and can not be done just a few times and abandoned because it has not produced sales.

Direct marketing, often confused with brand awareness, by contrast has one goal: to convert the prospect into a customer through direct means. Direct marketing accomplishes the “Like” and “Trust” part of the marketing effort. Direct marketing need not always be done face-to-face or on the phone, but can include direct email, interactive websites, etc.

If the prospect is aware of your product and thinks positively about it, it is infinitely more likely that that s/he will buy from the company when they are a viable buyer. When it comes to sales, direct marketing alone without any brand awareness is far more difficult.

Free Marketing Ideas to Create Brand Awareness

Brand awareness often is not directly responsible for making sales, but aids in the conversion rates of more direct marketing and sales efforts. The brand’s message has to be constantly repeated to cross the divide from residing in the unconscious mind to the conscious mind before it becomes effective. Therefore, brand awareness is a constant effort. It cannot be done just a few times and abandoned because it has produced no sales.

That being said, here are 5 ways to create brand awareness for free.

  1. Write a Press Release about a new product or newsworthy event and distribute it using the many free Press Release Services.
  2. Create a human interest message and contact your local news stations to see if they are interested in running a human interest piece on your business. Local news programs are always looking for stories to run on slow news days. When I started my Invisible Fencing business I got all three major networks at the time (ABC, NBC, and CBS) to come out and do a story on us.
  3. Market your human interest message to your local newspaper. I contacted the writer of the business section of our citywide and neighborhood newspapers, which like the news stations were looking for story ideas and were eager to help us get our message out.
  4. Find a complementary business and exchange advertising posters to cross-promote each other’s stores. For example, a sporting goods store and a golf course or a fabric store and sewing machine repair service could make good pairs.
  5. Take out an ad on Craigslist to promote your service business or to sell your products.

Marketing Ideas to Create Brand Awareness For Under $10

BUSINESS CARDS – If you have a business to consumer (B2C) business, you can use tools like Business Decisions (often available at public libraries) to identify the ideal market demographic and psychographics, known as a Landscape Segment in Business Decisions, for your product or service. Within the text of each Landscape Segment is a description of the demographic’s preferences, which includes where they shop and spend their leisure time.  A free copy of the Business Decisions Landscape Segmentation Resource Manual can be downloaded from the resource tab of www.SteveBizBlog.com.

Once you have identified where your customers frequently shop using the Business Decisions Landscape Segmentation Data, you can go to the parking lot where your prospect frequents and hand out your business cards.

Recently I was waiting for my wife while sitting in my car, when a fella came up to the window and said that he noticed my cracked windshield. He handed me a card for his windshield repair business. Years ago I placed business cards under cars’ wipers or under the rubber window seal by the door lock, with some marketing success. While it is technically not illegal to leave business cards on cars some people can get pretty annoyed, especially if you touch their new vehicle. 500 business cards can be purchased for under $10 through companies like Vista Print.

CORRUGATED PLASTIC YARD SIGN – We have all seen political yard signs all over neighborhoods as an election nears, or we have seen “open house” signs on houses for sale.

Placing a reusable sign with your company and contact information in the front yard of a customer’s home, either while you are working or for a few days after the job is complete, is a good way to promote your business to the neighborhood. This is particularly effective if the neighbors can see your work, such as with roofers and house painters.

You can also often place these low cost signs in vacant lots or near intersections for even greater exposure. At a cost often in the range of $10 per sign, this is a cheap way to create brand awareness.

PICKET SIGN – You have seen people protesting on the corner for higher wages or against unfair labor practices, but picket signs can also be used to create brand awareness.

You can simply attach poster-board to a stick to make a picket sign with your company’s information. Have idle employees walk up and down the street in front of your establishment to draw attention to your business.

Marketing Ideas to Create Brand Awareness For Under $75

BANNERS – The other day I went to the bank and passed a car parked in a dirt lot next to the roadway selling bonsai trees. He displayed a banner that ran the full length of his car, attached by bungee cords, to alert people to the fact that he had something to sell.

A reusable banner can be hung on fences, walls and even your vehicle parked on the roadside. These banners often cost less then $75 to design and make.

SPINNER/ARROW SIGN – You have seen these at intersections. Workers can be seen moving to their own beat, listening to music as they dance and twirl a sign promoting an income tax service or grand opening.

You can use an idle employee to stand on the roadside listening to his favorite music and spinning a sign to draw attention to your message. Signs can be had for about $75.

MAGNETIC VEHICLE DOOR SIGN – Magnetic vehicle door signs are very popular. A typical sign can be purchased for under $30 each, so your vehicle can become a rolling billboard for under $60.

The beauty of this solution is that the signs can be installed on your personal vehicle when used for business, then removed when you don’t want them.

A note of caution; you may want to check with your insurance agent whenever you place signs on your vehicle. Some auto insurance policies do not allow you to operate a vehicle for business without a separate business vehicle insurance policy. Each insurance company is different, so you should check your policy before using your personal vehicle for business.

VEHICLE DECALS – Add a logo or more permanent lettering to your business vehicle than is possible with simple magnetic signs. The price for modifying two doors can be under $75.

Marketing Ideas to Create Brand Awareness For Under $150

MAGNETIC CAR TOP SIGN – Pizza delivery vehicles often employ a magnetically mounted roof or window mounted sign. In most cases these signs include an internal light that plugs into the vehicle’s cigarette lighter, which draws even more attention to the sign after dark.

The signs are visible across a sea of cars and in large parking lots. Most cost about $150 and can be reused indefinably.

COSTUME – Dress idle employees in a costume and have them wave at passing traffic. Costumes (such as the popular chicken, lady liberty, or hotdog) can often be purchased for under $100 and be used over and over.

I am reminded of a variant on the costume idea when I travel to places like Sturgis, SD, during rally week. There you can often see businesses who hire shapely young women to wave at the traffic sporting nothing but bikinis to draw attention to their business.

SANDWICH BOARD – You see them on sidewalks, inside office buildings, and even at busy intersections. A sandwich board is a free standing A-frame sign where you can place your message on either side. These signs have the flexibility to set them up and/or move them to a new location in seconds. A deluxe A-Frame sandwich board can often be purchased for under $90.

WEARABLE SANDWICH BOARD – A variant to the traditional stationary sandwich board is a wearable version.

Have an idle employee walk along the street in front of your establishment or at an event to draw attention to your business.

Professionally created wearable sandwich boards, complete with straps, can be purchased for under $75 for a blank board. For another $75 the board can be printed with your logo and message. Of course, you can create your own wearable sandwich board by using two poster boards and some ribbon for next to nothing.

 CAR MOUNTED MEGAPHONE/PA SYSTEM – The classic image of a car driving slowly down main street with a political campaigner urging people to get out and vote for their candidate has been used for years.

Or the iconic ice cream truck, slowly driving down an urban neighborhood street playing music, which acts as the pied piper for kids. That same concept can bring brand awareness to your business in the same way.

Either project a live voice, a recorded message loop, or music while you drive your signage-affixed vehicle down a busy street, drawing attention to your business or special invitation.

A decent car-mounted megaphone can be had for under $150. Handheld units can be purchased for under $75.

Miscellaneous Low Cost Marketing Ideas to Create Brand Awareness

WALL PAINTING – Contact the owner of an old barn or blank-walled building to see if you can hang or paint your message. Or use a variant of wall painting, and utilize a projector to display your lighted message on a blank wall for even greater impact at night.

AIR DANCER – You have seen the inflatable tube man dancing in front of a business. You can often purchase an arm-waving inflatable tube man, also known as an air dancer, for under $200 to get folks to look your way as they pass your establishment.

PARADE FLOAT – Many parade organizers look for businesses to create floats. By re-purposing an old trailer and adding a few leftover items, most businesses can create an appealing float on the cheap.

THEATER AD – Contact your local movie theater, where you can often advertise for under $10 per day.

SEARCH LIGHT – Often used to draw attention to a new location, you can rent a search light that is visible for many miles and creates a curiosity factor, causing people to go out of their way to discover the light’s source. Prices start at $350.

Uncommon Advertising Locations for Brand Awareness

URINAL AD – Public restrooms for men have urinals affixed to the wall. When in use the man is forced to look straight ahead at a blank wall. With a captive audience for a minute or so, some establishments display advertisements positioned at eye level.

PUBLIC TRANSPORTATION – Many bus, light rail, and taxi companies derive additional revenue through advertising inside as well as outside the vehicle.

BENCH AD – Bus stops often have a simple bench or an enclosure to keep people out of the weather. These generally contain space for advertisements.

The Sequence Signs for Brand Awarness

Growing up in Boston, on the way to the airport you would pass a series of very simple signs on the side of the road. They encouraged you to relocate to Boston and read: “If You”, “Lived Here”, “You Would”, “Be Home Now”.

Burma-Shave became an outdoor advertising icon by delivering a catchy message with a punchline in the dawn of the car culture.

Sequencing signs are most effective on secondary roads, where traffic moves slower than on the interstates. A simple series of about six roadside signs like the corrugated plastic yards sign discussed above, placed only about 25-50 yards apart can create a unique marketing message.

Since traffic counts on these roads are often lower, they are not the domain of the big outdoor advertising agencies.

Permission to erect a series of corrugated plastic yard signs can often come from a single land owner and be far cheaper then standard outdoor advertising.

Bumper Stickers Promotion for Brand Awareness

Ever notice that on the trunk of most vehicles is a decal or emblem identifying the dealership where the vehicle was originally purchased? For the life of the vehicle the dealership’s brand is viewed by thousands and thousands of drivers as they wait at stop lights and stop signs or walk through parking lots.

Some time back I remember a radio station that gave away bumper stickers. Each day they sent out someone from the station to a undisclosed location, whose job it was to look for one of the bumper stickers. If they located your vehicle with the sticker you won a prize. Drivers were eager to secure one of the stickers so they might be the next winner.

I consider this one of the most brilliant marketing ideas I have ever seen, since it created a desire in a person to actually promote the radio station. Imagine you owned a tire store or oil change center and you offered vehicles with your bumper sticker promoting your brand a discount off their next purchase. You could create an army of potential marketers driving around town promoting your business every day.


This post was derived from a few excerpts from the book “Practical Marketing Concepts For Your Small Business”. Buy the compete book at Amazon.com.

Practical Marketing Concepts For Your Small Business is a wisdom packed book that was written for the budget conscious entrepreneur looking to better market their products or services.

The books is divided into 9 chapters that look at:

  1. How to identify and target viable customers
  2. Tactics to get noticed in an ocean of interruption marketing
  3. The attitude and behaviors of various target demographics
  4. The buyer psychology including behavior economics and emotional appeals
  5. Dozens of free and low cost ways to achieve greater brand awareness
  6. Tactics to make your message more memorable and sticky
  7. Common pricing mistakes that can kill a sale
  8. Ways to leverage economic gyrations and current events to improve sales
  9. General marketing and sales advice to help make better marketing decisions

As a serial entrepreneur and mentor to thousands of small businesses the author has distilled a lifetime of business marketing content that every entrepreneurs should consider applying to their business.

Practical Marketing Concepts For Your Small Business is a concise and easy to read guide packed with solid advice delivered in small bites that the reader can use to make incremental improvements to their marketing efforts. Be sure to get your copy today!

This article first appeared on LinkedIn, June 21, 2017.

Word of Mouth Marketing

3 Free Ways to Boost Your Word-of-Mouth Marketing

The availability and speed of at-home internet connection has caused more people to create a side hustle, which in turn has increased competition. This increase in competition is in turn driving down margins while simultaneously driving up the advertising clutter as more and more people clamor for their customer’s attention.

Smaller margins translate to tighter budgets, which explains why word-of-mouth marketing is the principle marketing strategy most of my clients utilize before they walk into my office. After all, word-of-mouth marketing is essentially free.

When I ask my clients to elaborate on how their word-of-mouth strategy plays out, most simply suggest that if we make a good product or deliver a good service, their clients will tell their friends how great we are, which will in turn lead to a greater number of sales.

Suffice it to say, this is a rather passive tactic where you lose the ability to control the message delivered to potential clients. There are much better ways to use word-of-mouth to promote your product or service that are also essentially free, but allow you better control of the word-of-mouth message.

Most people think word-of-mount must be from your client’s mouth to your potential client’s ears. However, your word-of-mouth strategy should also include video, audio, and text you had a hand in creating. Next time you think about your word-of-mouth promotion strategy, you should include internet enabled word-of-mouth tools such as YouTube, podcasts, or blogs.

When you consider promoting your business in this day and age, don’t think about ads or commercials, which are essentially “interruption marketing” and are based on conditions that really no longer exists in much of the market place.

People hate T.V. and radio commercials as well as newspaper ads and have tools to filter out the promotional content. In fact, this idea came to me as I was watching T.V. on my Hopper by Dish Network whose value proposition is that they allow you to watch a delayed T.V. show where the company (Dish Network) effectively removes (or hops over) all the T.V. commercials for you, hence the name “Hopper”.

So today when you think “promotion,” you should think about developing content that establishes you as the expert. You no longer should focus on directly selling your product or service, because in the new age of the internet, you want other sites to link to your content to thereby spread the word about you and your company. When consumers of internet content see you as the expert, they will seek you out to buy your product or service when they become viable.

For example, when you are in the market for a new car, you’ll likely consult the internet. If you’re like 99% of shoppers, you won’t be searching for online ads produced by auto manufacturers to make your car buying decision. Instead, you’ll likely search for reviews and opinions on various makes and models provided by “experts.” If you are one of these experts and provide that valuable content, perhaps gained because you are an online auto broker, the consumer will seek you out when they are ready to buy because they perceive you as the expert and feel they can trust you.

The first step in harnessing internet word-of-mouth is to imagine that you are your customer and consider what they really need to know, then address that need using one or all three common and cheap internet enabled word-of-mouth strategies.

1. First, let’s consider YouTube. Next to Google, YouTube is the 2nd largest search engine and is where most people go to learn about a particular topic. Best of all, it is free to post your video content message on YouTube.

Let’s say you produce a stain-glass cutting system. You might provide a few YouTube videos showing how to cut stain-glass or how to make various projects, and “oh by the way” your demonstration uses your cutting system. If the viewer likes your content and needs a cutting system, many will see how easy the tool was for you to use and seek you out to buy one just like the one you used in your demonstration. Note: You never asked for the sale, but you should provide a way for the consumer to buy from you.

Make sure you concentrate on content or the viewer will consider it an interruption marketing message and filter your message out. Furthermore, if you simply produce an infomercial to showcase your product, other retail sites won’t link to your video, thereby eliminating the true value of internet word-of-mouth. All you need to produce a YouTube video is a simple webcam.

2. Then there are podcasts, which are essentially audio programs (mini radio broadcasts) downloaded or streamed as an mp3 file over the internet rather than over the airwaves. You can post podcasts directly on your website or upload them to show sites like iTunes or Stitcher for your potential client to download and listen to on their computer or mp3 devices such as the ubiquitous iPod or most smart phones.

Perhaps you are a lawyer who specializes in estate law. You could conduct a mock interview where you answer questions about estate law in your podcast. In the end, you establish yourself as the expert deserving of the customer’s business who will seek you out to help draft their estate documents when the need arises.

All you need to produce a podcast is a recording device such as your webcam or digital recorder. If you want to record a phone interview as part of your podcast, the “Smart” Phone Recorder Control from RadioShack only costs $20. Also, you will need some free computer audio editing software such as Audacity or a similar tool to both record input from an offline recording device like a digital recorder and edit it down to produce your own podcast that you can then share with the world on platforms like iTunes and Stitcher.

3. Finally, you can create your own blog where you can not only establish yourself as the expert that you are, but you can also create content with the express purpose of encouraging your clients to carry on a dialog with you.

For example, if you are a cleaning company, you could share how you might get a red-wine stain out of carpet and encourage others to share their tricks or encourage them to share their worst cleaning problem, which you can then address. Creating a blog is relatively simple with free content management tools like WordPress.

Using any or all of the above internet enabled word-of-mouth tactics allows you to control the dissemination of the information posted to the internet. Additionally, you can develop content that other sites will want to link to, thereby allowing you to take on a much more active role in implementing your word-of-mouth strategy.

How do you control word-of-mouth marketing?

Note: this article first appeared at www.SteveBizBlog.com

Business Goals

Establish Your Life Goals Before Your Business Goals

Through my consulting practice and teaching, I talk to a lot of individuals who have ambitious goals, either for the start of a new venture or expansion of an existing business. My favorite was the founder of a start-up software company who told me her objective was to be “bigger than Google”.  That was five years ago and she still has only two people on the team. 

While she is not likely to be bigger than Google, why does this entrepreneur, and many others, have an objective that is so outlandish?  Better yet, how does such a goal, even if miraculously attained, make their life more enjoyable, interesting or fulfilling?  The answer is; it often doesn’t.

One of my former clients often complained about how hard he was working in his small business and the negative impact it was having on his family and health. Yet he had left a comfortable corporate job where the pay was better and the time demands were much less. Even worse, he insisted on controlling every factor of his business and instead of delegating, he was mired in the minutia of day-to-day operations.

In each of these scenarios, and many more, the problem is misalignment of personal and business goals. My advice is that before you solidify the objectives for your business (or career) you always start with a blank sheet of paper and ask yourself questions like:

1.       If money, time and the potential for failure were not obstacles, how would I like to spend my work time?

2.       What do I really love to do, and hate to do?

3.       How do I want to spend my workday in terms of what I am doing, who I am doing it with, and how much I am doing?

4.       How hard do I want to work and how hard am I willing to work, to achieve success?

5.       How much time am I willing to invest in the short-term, in order to reach my goals in the mid- to long-term?

6.       How will my family and friends be impacted by my business venture and am I willing to make this tradeoff.

7.       What sacrifices am I willing to make to achieve greater levels of success?

In business school, students are taught start-up strategies of companies like Apple, Facebook and Microsoft – not about the successful restaurant grew from one to a dozen locations, or the consulting practice that grew from start-up to 25 employees. Students naturally set their sight on achieving the massive success they are taught, despite the fact that such levels of success are rare and in some cases, not even desirable.    

I’ve witnessed more than a few business owners (also corporate workers) who achieved their financial goals but lost their families in the process. Some don’t mind the tradeoff but I think most regret making such lopsided work-life balance choices. The point is that you can be successful and quite happy by hitting a single, double or triple in business. The home run may cost you more than you ever wanted to pay!

This issue recalls a personal moment of truth earlier in my career while I was a director of marketing at a large software firm. I received an offer from a prestigious technology company to be an “evangelist” which meant that I would be on the road doing speeches and meeting with partners about 90 percent of the time. When I shared this news with a COO friend who I respected, he said something to the effect of, “I was on the road so much when my kids were little, they might as well have called me “uncle” instead of daddy. I got the point and turned down the prestige and money.  I chose my family over career and have never regretted the decision.   

Of course I want you to prosper, and to achieve as much success in business as possible, but only in a way that aligns with your important lifestyle objectives. Better to ask the right questions early than face the regrets later.    

How to Apply Cumulative Advantage and Social Agents to Scale Your Business

As business owners, we often focus on meeting the desires of a specific prospect so we can make the sale, but that is like being an employee in the cash flow quadrant where you only get paid when you make a sale.

This approach to sales is very labor intensive and therefore not very scalable. To succeed in most businesses, you have to be scalable and that means creating a word of mouth epidemic. Therefore, you must locate, attract, and nurture what are called “social agents” to help spread the word about your product or service.

Social agents, sometimes called social influences, are people that share your message with others. While a social agent may actually never do business with you, they love recommending you to others.

While working with a prospect one-on-one has the opportunity to make a single sale, attracting a social agent creates the opportunity for a business to make many sales. As related in the story “My Greatest Source of Business Was Right Under My Nose” by Andrew Griffiths the author shares how simply befriending his delivery man yielded a social agent that translated into significantly higher sales.

By engaging one or many social agents, you will not only keep your sales pipeline full, but through a principle known as cumulative advantage, also known as the “Matthew Effect,” it will enable your business to scale over time.

The principle of cumulative advantage states that once a business gains a small advantage over others in its industry, that advantage will compound over time into an increasingly larger advantage. The effect is well known and is embodied in the catchphrase, “The rich get richer while the poor get poorer.”

To demonstrate this principle, think back to the last time you played Monopoly. Each player starts out with an equal sum of money and on a level playing field. As the game progresses, one player (through a combination of luck or through skill) begins to amass a few more income generating properties than the other players. The additional income allows the player to invest in even more income generating properties in comparison to the other players. While there may be some ups and downs during the game, there is a snowballing or amplifying effect that acts as a tailwind for this player. Most often, this advantage continues to multiply and grow as the game progresses. What started out as only a slight advantage ultimately results in this one player owning  the entire game board. The advantage is small at first, but by the end, one player dominates all the rest.

As an entrepreneur, your business may be seemingly just moving along sideways for an extended period of time. Then one day, you attract the right social agent who begins to promote your business message and you get that seemingly invisible boost in sales.

Over time, this advantage continues to grow through the principle of cumulative advantage. It occurs slowly at first, perhaps even inconspicuously, but gains momentum over time. This momentum creates a kind of gravity, making more and more people aware of you and your business. Once your customers perceive you have an advantage, the gains begin to accumulate at a much faster rate as you begin to dominate your competition.

Do you focus on finding, attracting, and nurturing social agents in an effort to employ the principle of cumulative advantage to scale your business?

This post originally appeared March 31, 2017 at www.SteveBizBlog.com.

There Is No Prize for Originality

Earlier today, I was reading a reddit.com post about a young man ready to graduate college this summer who was desperately looking to start his own business. He didn’t have a business idea and was looking to the readership to help him come up with one. I often suggest to clients with a desire to start a business, but who lack an credible idea, to simply find something that works in one place and considering bringing it to another.

For instance, Elliot and Ruth Handler went to Switzerland with their kids, Ken and Barbie. While there, they saw an adult doll dressed in work cloths. The doll was not a kid’s toy, but was marketed to adults. Up to that time, all dolls in the U.S. were marketed to young girls and were babies so that the girls could pretend that they were the doll’s mommy. As their daughter Barbie handled the doll, the Handlers got an idea. They replicated the doll in the U.S. and named them after their kids, Ken and Barbie. This new toy helped launch their company Mattel.

Learn more about how the Barbie doll helped launch Mattel.

In another example, I was watching a current affairs show on T.V. the other day. The story featured a bar in Tokyo that featured a show made up of robots. That bar is crazy popular in Tokyo. I asked myself why wouldn’t the same idea make sense here in the U.S.?

A number of years ago, I was opening an office to support a contract we had with HP in Stuttgart, German. As I sat in a lawyer’s office, discussing Germany’s employment laws, an automated window shade called a “Rollladen” began to come down. Fascinated by the idea of an automated shade, I asked the lawyer what that was all about. He explained that when it gets hot outside, the shades automatically close to reduce the load on the air conditioner and save energy. I asked myself why wouldn’t the same idea make sense here?

Finally, as a child in the 1960’s, I traveled to Germany for the summer to stay with my Aunt and Uncle who spoke very little English in what I call “my total German immersion vacation.” I made some friends over the summer, as all kids do, and was offered a milk box by one of my new friend’s parents one day. I had never see a drink in a box before, but it made incredible sense. Juice boxes were not introduced into the U.S. market until the 1980’s, some 20 years later, and they became an instant success. Again, why did it take so long for ideas like the juice box that was successful in one part of the world to make its debut here in the U.S.?

There is no prize for originality. Like my old boss, Debbie Sagen, once told me, “R&D stands for Ripoff and Duplicate.” So, if you are still looking for that one thing to start your next great business venture, look at what is popular somewhere else and consider bringing it to a new market.

Where will you find the next great product marketing idea?

This post was originally published March 3, 2017 at SteveBizblog.com. Follow Steve on Twitter @SteveImke

Changing your business and its culture

Probably the hardest thing to do at a business is to change its culture.

How did Genghis Khan and other medieval rulers change the culture of their acquisitions? Eliminate every male over a certain age or they rounded-up all the nobility and professionals then eliminated them. Another step communist rulers like Mao Tse-tung of China used to change culture, in addition to eliminating critics and sending people to work camps; he eliminated historical and cultural icons, books… Harsh, and unnecessary, with time and good leadership culture can change, especially if it’s for the better.

I have led the change at a few organizations; with change came cultural change. The U.S. military was pulling out of Iraq in late 2011 and I leading the replacement organization for the Department of State (DOS). DOS was taking over the airport operations in Baghdad from the US Air Force (USAF). I was also an USAF reserve officer so the transition started out fine; I was working with peers to change from a USAF operation to DOS. My DOS operation had less than 10% of the USAF workforce so we were taking a different approach to how we were going to run things. The USAF began to resist our new operation, they made it hard for us to train, limited our access to facilities, they wrote letters to HQ to complain that our operation would not be able to do the USAF mission… They were correct; we were going to run a new DOS operation with different procedures and a different culture. It was sad to see; we were all on the same team, we all had the same goals but some of the USAF leaders could not accept the change. The date for the US military withdrawal from Iraq was set in stone, so the day came and out went the USAF, the new DOS operation stood up and worked smoothly. The new culture was less hierarchy and more collaborative; we trained workers in multiple tasks and made a much flatter organization.

In another organization, I helped lead the transition to save a failing manufacturer. We established a plan before we showed up at the manufacturer; we planned to fire the President and his closest advisors. The culture wasn’t team oriented, power resided in a few and little information on the business flowed to the owner, the President was secretive. When we arrived, we implemented our new processes and reorganized the staff. We improved morale by making the organization more inclusive, giving everyone a voice in the success of the business. The management team led by being very open to the workers and we established open door policies to get everyone’s input. However, despite recommendations from the management team, the new President did not eliminate the next level of leadership. She allowed the Chief of Operations to stay. My consulting team completed our reorg and left. 6 months later, I got a call from the owner of the company, he had to fire the new President because the manufacturer still wasn’t profitable, it turned out they had reverted to the old processes and they had the same problems with completing projects on time. Lack of leadership allowed the company to fall back to its small circle of power; it did not provide progress updates and failed.

If you lucky enough to start a new business you set the standards, you set the culture. Take the time to think about the culture that will work best for your type a business. A collaborative culture is great for a creative organization; a more authoritarian culture may be better for inflexible manufacturing processes with lower skilled workers.

I’ve found that changing an organization is difficult but doable. Changing the culture is also difficult and often goes together with organizational change. Ensure you have a culture that is positive and works for your business.

Sometimes during a reorganization or planned cultural change, you must make difficult decisions. There may be a time you must let some people go to make room for the change. You may need to let someone go after the change if they are resisting it or reverting to old practices.

Establishing a new culture takes LEADERSHIP. It also takes deliberate planning and action. State your values, vision and mission; post positive information on your work place culture. Talk about what you expect within your organization, what is expected of your team. Bring in trainers if required. You may need to change the layout of your office to improve communications or the work floor to improve workflow. Then most importantly, live the new culture! Be the example!

Yes, that is all you need to do to change the culture but it is harder than you think because you cannot take a day off, you must hold everyone accountable. Most important, you as the leader must live the culture, be the example and hammer if necessary.

Buying a Business

Are you ready to break those corporate chains and own a business?

So you want to own a business.

The market looks great; it is a great time to buy a business or to start a new business. Before you venture off and buy or start a business you need to evaluate yourself. Is this right for you? Will you be able to withstand the stress of being self-reliant? To run your own business you need to have an entrepreneurial spirit.

As you think about controlling your own destiny with a small business, consider the options out there. You could buy a successful existing business, startup a new business or buy a franchise. Each option has its own plus and minuses, so take some time and find the right option for you.

As the baby boomer generation prepares for retirement, opportunities to scoop up a successful business from a retiring owner are possible. What do you enjoy doing? Picking a business that you have a passion for will make it easier for you to be excited to go to work. However don’t shy away from a business that you are not an expert in, why, work with the owner to learn the business. Owning a business, whatever it is, is something to be passionate about!

When looking for a business to buy don’t rush, take the time to understand the market. Find a successful business, something that has been around for 10 plus years. Review the books; make sure its making money. If you decide to buy, consider keeping the current owner on for 3 to 6 months so, they can teach you how to run the business. Don’t rush to make huge changes with the business, learn your business first. Be wary of business that need a turn around, there may be a reason beyond your control to why it needs a turnaround.

Startup a new business, sound fun… and risky. Don’t let the risks keep you from trying; an entrepreneur must accept some risk. Before you start your business, take some time to create a plan and analyze the market. At CBM we use the Business Planning Framework to analyze and plan a new venture. To learn more about CBM’s Business Planning Framework click here. I cannot emphasis enough you must create a plan and you must have a business model. The model is how you plan to make money, how you will sell to your customers. CBM has tools and the know how to help you create the business plan and model.

Another option is to buy a franchise. The great thing about a franchise is that you can buy a business with a successful model. A franchise can be expensive to buy and have never ending royalties to pay, but the great thing is risks have been reduce because you have a plan and model, you know what your profits should be. With a franchise, you will have a support system to help and a team that wants you to be successful.

CBM will continue to blog about starting your new business whether it’s a existing business, startup or franchise. If you are ready to break those corporate chains and get out there and be your own boss. CBM can help your business succeed. I wish you luck.

Business Valuation

Factors that Effect a Business Valuation

There are several factors that can positively and negatively affect a business valuation from the point of view of the buyer. Some common factors that add value to a business valuation include:

  • The organization, including its employees and internal processes
  • Its reputation in the industry
  • How well the business fits with the acquiring business, including the culture
  • Terms of the final deal
  • How “hot” the industry is and if it’s getting hotter
  • Overall market conditions
  • Other intangibles
  • Timing of the offer
  • Number of competing offers

Click here  to see a video of Ron Chernak, a business broker talking about intangible assets that add value to a business valuation.

When I sold my first business, the payment was to be made in the acquiring company’s public stock. Since it was during the dot com era, stock prices reflected the good market conditions and were on the rise. Also, the acquiring company had a hard deadline for the transaction since it needed to complete the transaction prior to its year end close. This deadline added value to my business so I began to increase my demands as the closing date got closer. Therefore, I was able to leverage several factors that enhanced the value of my business from the prospective of the buyer.

On the flip side, there are factors that can discount a business valuation from the prospective of the buyer, including:

  • Employment-related liabilities
  • Environmental liabilities
  • Litigation liabilities
  • Tax liabilities
  • Product warranty liabilities
  • Contract liabilities
  • Duress by seller such as health or monetary issues
  • Lack of time to complete the deal on the part of the seller
  • Not using an intermediary to remove emotions
  • Coming to an agreement too quickly/easily
  • Only one offer
  • Overall seller naïvety since a buyer may buy many businesses while a seller often only sells a business once

Click here to see a video of Ron Chernak and John Zayac two owners of large M&A brokerage houses, explaining ways to enhance or detract from a company’s business valuation.

How to Value an Existing Lifestyle or Micro Business

When it comes to buying a business, size does matters. Most lifestyle or micro businesses have under 1 million in annual sales. When it comes to lifestyle and micro businesses, the owner is also the top manager.

For business valuation purposes, a good rule of thumb for a marketable lifestyle or micro business is that the owner should generally earn about 10 to 20% of the gross sales.

Therefore, a lifestyle or micro business that does $400k in revenue should have an owner that earns between $40k to $80k per year from owning and working in the business.

Often when the million dollar gross sales per year threshold is eclipsed, the owner’s income drops to 10% or less. This drop is mostly due to the need to increase management,which leads to thinner margins, and higher inventory or carrying costs.

In summary, the important issue for you as a buyer is how much can you expect to earn?

When it comes to lifestyle and micro businesses where the owner is responsible for managing employees, taking care of customers, and other day-to-day activities, the owner likely views bookkeeping as a low priority. If anything, he relies on compiled financial reports and is far less inclined to use these reports to run their business. Therefore any financial records provided by the seller may be less accurate and require more due diligence on the part of the buyer.

From the prospective of an accountant or a banker, the value of a business is purely based on historical financial statements, which can be an incomplete view of a company’s real value.

Other factors that drive the value of a business valuation is its location, equipment, inventory, employees, patents, existing customer base, industry, vendor supplier relations, completion, and what you plan to do with the business after a sale. Therefore, you cannot rely on your accountant or banker to define a quantitative value of a business you are looking to buy.

Other value drivers aside, another rule of thumb is that businesses often sell for a little more than two times discretionary earnings.

To understand discretionary earnings, you must first understand that a small business is an economic entity that provides a product or service that customers buy in sufficient quantities to allow the owner to pay all costs and operating expenses, including the owner’s salary.

Let’s say that water represents revenue and a bucket represents the volume of all non-discretionary costs and operating expenses such as rent, employ salary (including a fair wage for the owner), marketing, insurance utilities, etc.

The lip of the bucket represents the breaking even point of discretionary income. The water or revenue that overflows the bucket is considered discretionary income.

Let me be clear– discretionary income is not yet profit since the surplus revenue can be used in a variety of ways. The owner can use the surplus to buy more inventory, increase his promotional expenses, pay off debt, or pay himself more money.

It is the discretionary income that is most often used in a business valuation. According to a business broker’s friend, with over 15-year experience selling businesses, the average selling price for lifestyle and micro business was 2.3 times the business’s discretionary earnings.

5 Reasons for a Business Valuation

There are many reasons to conduct a business valuation. Some business valuations are pretty straight forward while others can be quite complicated. If there is a good possibility that the valuation will be challenged on legal grounds or by the IRS, it is often best to have the business valuation performed by a qualified appraiser.

That said, I have counseled scores of clients on business valuation issues and I have come to the conclusion that there are five primary reasons for conducting a business valuation.

  1. The first and clearly the most popular reason for conducting a business valuation is related to some form of merger & acquisition (M&A) activity. Most of the time, it is the buyer that is attempting to value the business they are considering buying.
  2. Another reason to conduct a business valuation is related to estate planning. When a family owned business is passed on, there may be estate and gift taxes involved. The American Tax Relief Act of 2012 set the exclusion of estate and gift taxes at $5 million with a maximum of 40% estate tax above this threshold.
  3. As new members enter and exit a closely held business, there is often a need to establish shareholder or membership values for some form of buy/sell arrangement.
  4. Intergenerational transfers of ownership often involve transferring a mix of assets to several parties. Allocating them among the parties requires an understanding of the value of the asset.
  5. Finally, some owners choose to covey their ownership to their employees through an Employee Stock Ownership Program (ESOP), which requires credible evidence of the value of the business.

 


This post originally appeared in SteveBizBlog.com and was derived from content from just one chapter in the book “Buying or Selling a Small Business”.  Buy the compete book at Amazon.com.

When you buy the book you get links to exclusive streaming videos from experts in the Merger and Acquisition (M&A) space as they comment on key aspects and provide valuable insight based on their professional experiences with buyers and sellers.

Strategic Partnership

Strategic Partnership Principle – The Truth about Competitive Analysis

Manager entrepreneurs use their causal reasoning skills to conduct a competitive analysis to help them define a unique niche for their business. This is demonstrated by the blue ocean strategy postulated by W. Chan Kim and Renée Mauborgne. In contrast, founder entrepreneurs use their effectual reasoning skills to build strategic partnerships with customers.

Founder entrepreneurs do not start with a pre-determined target market or niche in mind nor do they conduct a competitive analysis to see who else is offering similar solutions since they are not sure of their ultimate solution yet. Instead, they target a single customer and conduct a dive deep analysis on their very specific needs. This analysis helps them understand and then design a custom solution to meet that customer’s specific needs with a “one size fits one” solution. They pick the brain of their single target customer and do not focus on their competitors. They strive to develop a product or service that is so well aligned with the customer’s desires that it dislodges any incumbents that are operated by manager entrepreneurs with a “one size fits many” solution. Once the solution is established, the founder entrepreneur looks for ways to re-purpose the solution for other potential customers.

By engaging the customer in designing the solution, founder entrepreneurs invite their clients to be strategic partners as opposed to simply someone to sell to.

When I started Horizon Interactive, an infrastructure business, my first customer was Digital Equipment Corporation. As a former employee, I worked with their divisions to design our deliverables and processes based on their specific needs. Rather than performing any upfront competitive analysis, we engaged the client directly to help us design our service offering. We even educated the client to possibilities they were not aware were of based on our technical domain experience using the three T’s of challenging sales.

Having the client participate in the design was more effective than speculating on what a potential customer might want, building it, and then trying to sell it to them. Furthermore, our customer has ownership in the solution since they helped design it and were much less likely to switch to competitors in the future.

Moreover, founder entrepreneurs often secure development funds before even committing resources to a solution by having a strategic partnership with their client. In this way, the founder entrepreneur has a low level of capital outlay when developing their offering.

One of my business mentors, Ron Muns, used the strategic partnership principle very effectively when he started his company Bendata. With the personal desktop computer just making inroads into businesses, companies needed a way to track the location of all their computer related assets since they were no longer all located in a central computer lab. Ron developed a strategic partnership with three clients to develop a software application to track all their computer related assets across their businesses. Each strategic partner contributed technical specifications for the application and provided a portion of the capital needed to develop the the first product.

In the end, Muns owned the rights to the underlining software while the strategic partners got their application for a fraction of the cost of doing it alone. The software Bendata initially developed morphed several times as he added new features to the application for new customers and to achieve a better Product Market Fit (PMF). Ultimately, the product went on to become the wildly successful GoldMine Customer Relationship Management (CRM) application and spun off several other successful businesses, including the Help Desk Institute, along the way.

As a variant of the strategic partnership principle, some founder entrepreneurs leave their employer and develop a business based on their extensive industry knowledge and relationship with their former employer’s vendors and customers. This was the case with Sam Walton who parted ways with his former employer, Ben Franklin Five and Dime, and created Walmart. Another example is Arthur Blank and Bernie Marcus who left their former employer, Handy Dan Home Improvement Center, and started Home Depot.

All too often conventional business advice discourages founder entrepreneurs from practicing the strategic partnership principle of making the customer part of the design process, fearing that exposing them to a less than perfect product will diminish their brand. Instead, they advise new businesses to identify the most profitable customer segment, perform a detailed market and competitive analysis, and define and build a unique product where there is limited competition before ever getting any real customer feedback.

Is your product or service based on defining a unique product for an untapped customer segment through the use of a competitive analysis or is it based on working directly with a customer and getting them to not only bring real world requirements to your design, but getting them to perhaps even pay for some or all of it’s development as well?


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Note: this post originally appeared January 20, 2017 at www.SteveBizBlog.com.