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

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.

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.

Business Rejection

If Einstein Can Take a Little Rejection, So Can You

Our subject today is rejection, that insidious killer of big dreams. All of us who have had any degree of success have no doubt had people tell us that our ideas were too different, too radical, too “out of the box,” too whatever! This is true if you are a business owner, marketer, salesperson, product manager or in virtually any other occupation. But lest you take such rejection too personally, I want you to know that you will be in very good company. No less a figure than Albert Einstein received a harsh rejection letter from the University of Bern when he applied to join the doctorate program.

I was as astonished as you probably are upon first reading this astonishing letter, which states that the Theory of Relativity is radical and artistic, and not actual physics. So why should your (probably) less-impactful ideas be taken any more seriously than Einstein’s?

Einstein Rejection Letter

Here are some of the other things you will hear if you take a stand and want to do something that is outside the norm:

That will never work.

That’s not the way we do it here.

We tried that already.

That idea is too radical.

The research doesn’t back you up.

We can’t take a chance on your idea.

As B2B marketers we face rejection on a fairly regular basis. Seldom does the CEO or CSO jump up and shout, “That’s the greatest idea I ever heard!” when we propose new branding, new offers, a new sales model, etc. Let’s face it; there are some people in the executive suite who would find a way to criticize sunshine.

I once worked for a tech CEO who would have tried to re-write Lincoln’s Gettysburg address. He seemed to thrive on knocking down anyone else’s ideas. I’ve also worked for great CEOs who are open-minded and let you test out-of-the-box ideas – and these have sometimes proven transformative, both to our marketing efforts and the company as a whole.

The point is, if you back off from your convictions and shy away from rejection, you will probably not accomplish very much, and this will not benefit you or your company. Better to keep in mind the words of Bo Bennett: “A rejection is nothing more than a necessary step in the pursuit of success.”

Lest you think that Albert Einstein was an isolated example, how about the likes of Walt Disney, Oprah, Robert Redford, Stephen King, Michael Jordan and Bill Gates. Yes, the richest man in the world had a business failure after dropping out of Harvard when a company he founded called Traf-O-Data failed. Good thing Gates and the others didn’t let a little rejection stop them. Many other examples of famous rejections are listed in this article.  As you and I take actions that cause us to face rejection on any scale, we should be pleased because we are joining very good company.

 

 

 

 

 

 

 

 

 

Startup Growth

8 Growth Hacking Rules for Startups

Media loves covering stories of startups that utilized unique hacks to grow their users and business rapidly. It’s become part of the “Facebook” dream (as opposed to the “American” dream) that many millennials have chosen to aspire. Traditional business development rules are broken every day when sites like Uber and Airbnb take off with seemingly unexplainable success, while many online businesses flail around with misleading statistics and unrealistic growth projections in hopes of finding that magic pill that will take them to the top.

According to this article, you are ready to growth hack your business, because at least 40% of your users says that life would not be the same without your product. If you’ve yet to reach that milestone, this article is for you. The rules of growth hacking your startup start long before the startup hockey stick success curve.

Rule #1: Don’t Look For Hacks

Prepare for the long haul in building a successful business.  Many people search for growth hacks like looking for a magic diet pill – a quick fix for success without any hard work. As you’ll notice, there still aren’t any magic diet pills, and there aren’t any 100% guaranteed growth hacks. Looking for shortcuts to massive growth can take you down a path that may bring you some short-term wins, but in the end: value, service, and authentic buzz are the keys to creating a successful company.

Rule #2: Build A Great Product

If your product is really industry shaking, it will grow organically.  Many business owners and marketers try to generate press when the product’s still not quite ready for market. A common belief is early buzz or speed to market is the key to viral success, but if your product/software/service stands out as the best of it’s kind, or completely changes an industry and improves efficiency, that will be your best growth hacking strategy.

Rule #3: Don’t Purchase Social Shares

Arash AsliBlog Image 2There’re ways to pump up your stats by buying traffic, likes, video views, or application installs. This is a big no-no. These users don’t stick around, and Google and Facebook’s algorithms for finding false interactions are getting better and better. It has to be natural in the way someone finds your application and use it because they want to, not because they were paid to be there or tricked into it.

Rule #4: Nurture Your First Customers

Preferably paying customers. Not only can they become your raving reviewers and greatest ambassadors, but they also are your most valuable product testers. Listen to them carefully, watch their interactions with your product to know exactly how their experience is going and be available right away to help them out.

Rule #5: Find Partnerships With Bigger Players

Use strategic partnerships to overcome your business challenges by teaming with larger companies that share the same vision and target market. Or, expand your own target audience by tapping the audiences of your suppliers.

Rule #6: Create An Easy-To-Use Rewarding Referral Program

You need to be dialled into understanding your audience, and where referrals are coming in from. We want to try to make the conversion as easy and seamless as can be. Choose a great incentive structure.

Rule #7: Keep Overhead Low And Value High

When it comes right down to it, cash flow is king.  The more you can keep unnecessary expenses down and invest deeply in product development, customer care, and sales hustle, the better off.

Rule #8: Find A Successful Mentor

Don’t try to reinvent the wheel. Hack your startup by using the expertise and experience of a successful startup founder or investor. Their knowledge can be crucial in helping you bypass pitfalls and distractions.

Startup incubator programs have a great mentoring process in place if you already have a start-up with some traction and show you’re ready to hustle for success.  Alternatively, there is mentoring available at Clarity.fm and SoHelpful.me. Successful mentors are busy and have been successful for a reason. Don’t expect them to jump at the chance to give you their “spare” time to motivate and teach you. Read their blog posts, listen to any advice they have already shared before even initially asking for some mentoring. An excellent approach is to offer to intern or provide some value to them first.

The process of growth hacking is actually very simple and straightforward. Start by asking the traditional question “How do I get more customers for my product?”

Author Bio: Arash Asli is at the forefront of business growth. As Co-founder and CEO of Yocale, he has a unique blend of technology, business development, corporate, and finance experience. Arash is honored to have been named the Business in Vancouver’s Top Forty under 40 business executive. http://www.yocale.com

 

Critical Thinking About Market Forces

Market ForcesWhen completing a Business Model Canvas, it is helpful to guide the discussion through the use of questions. When it comes to looking at market forces that will affect your business model, the following set of questions should help you in thinking more critically about your business model. These questions are broken down into five categories: market issues, market segments, needs and demands, switching costs, and revenue attractiveness.

Market Issues:

  • What are the critical issues affecting the customer landscape?
  • What market shifts are underway?
  • Where is the market heading?

Market Segments:

  • Can you define the customer segment further by demographic and psychographic characteristics?
  • Are there specific customer market segments that are growing or shrinking?
  • Are there peripheral customer market segments that deserve more attention?

Needs & Demands:

  • What are the customer’s biggest expressed/unexpressed needs?
  • What are the biggest unsatisfied customer needs?
  • Where is demand increasing/decreasing?

Switching Costs:

  • What binds the customer to a company and its offerings?
  • What switching costs prevent customers from defecting to competitors?
  • Is it easy for customers to find and purchase similar offers?
  • How recognized and important is your brand?

Revenue Attractiveness:

  • What are customers willing to pay for?
  • Where can the largest margins be achieved?
  • Can customers find and purchase cheaper products/services?

What market forces affect your business model?