This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in March 2014 and is posted here by their kind permission
A threat or a real opportunity?
Successful start-ups normally begin slowly, then grow rapidly. Growth is not usually a straight line, but can be compared to an elongated “s” curve, with a slow start then strong growth until it levels off. Think about a flat topped mountain – the lower slopes are quite gentle then the sides steepen until the plateau on top, where the business becomes static with little or no growth. Arriving there can be a problem where the company depends on growth to pay the bills, and if nothing changes then like the mountain example the only way from there is down. How can you avoid this trap?
Many S curve books focus on large corporates, getting to the plateau when they reach market saturation, but the slowdown can occur in businesses with less than ten employees, and in as little as two years from start-up. This is often attributed to running out of the friends and family the business relied on as customers in the early stages, or running out of working capital.
Running out of time
In my experience a frequent reason for getting to the top of the S curve is the management style of you, the entrepreneur. You often run everything, and do it very well. You learned this when the company launched and you had to manage everything – from sales to logistics. As the business grew you got better at them than anyone else, so there was no sense in delegating to others. One day you run out of capacity to do more work and the business stalls, limited by your available time. Continue reading
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in February 2014 and is posted here by their kind permission
Think positively to diversify your small business
Entrepreneurs are creative by nature. That is a core value and advantage. So it is not unusual for an entrepreneur to think of new business ideas that could be additions or diversifications for the existing business. Some of these ides will differ radically from their core business. Should they be implemented? If they should, how should they be put into practice? What are the things to look out for when you move away from your core business?
Entrepreneurial businesses thrive and grow by innovation; by adding new products, by fresh approaches to old problems and by creative development of new markets. This is one of the attributes that allows them to compete with large corporates. Diversifying is generally a great way to grow the business. Sadly it can also be a way of reducing existing business to shells. The difference is how the entrepreneur manages the diversification.
New ideas can arise out of boredom. Many entrepreneurs are enthralled by the activity and challenge of starting something new but are not happy with routine management. I call them the ‘firestarters’. The disadvantage of firestarters is that they get bored doing all the hard and repetitive work of growing a business after it has developed a toehold in the market. Their business can fail as the entrepreneur neglects it or strips it of resources to build a business based on the new idea. If you recognise yourself in this category then either become a serial entrepreneur, building and selling businesses as they mature, or find a partner or series of partners you can hand the core concept to when your mind starts to wander. This is a great way to build a huge business empire or personal fortune.
Things to watch for
Often a new idea looks attractive only because the core business is not succeeding. The entrepreneur will be thinking of ways to make the business survive and prosper. Adding synergistic opportunities to a business which is not producing expected results can be a great way to inject life and success into that business. Doing something radically different to cover up the failure of the current business to deliver on expectations can kill it. If the core business is not performing then either fix the business or close it, and create a new business with the new idea. Continue reading
This article was published as the Sanlam Business Market, Business Tips: December 2013 newsletter. The Sanlam Business Tips is an incredibly useful and free resource for entrepreneurs. If you have not yet subscribed you should.
Many business plans lead businesses into disastrous situations
We all know we should check our cars before travelling. Equally important is the need to check your business plan for faults and potential failures before making it the core of your business, or using it to ask for finance. Here is a 6 point check:
- Can YOU execute? Failure to convince financiers of this aspect is probably the number one reason for rejection. More critically, it is probably the number one reason for early start up failure. Points to check: Do you have enough knowledge to run the business? The entrepreneur of a business which markets services needs to understand marketing as well as the service. Do you have any experience in this field? Hobbies are often a help in this regard, for instance enthusiastic cooks setting up catering companies. Do you have the time to execute the planned actions, and will your family support that? Entrepreneurship is not for the faint hearted, there will be many late nights and early mornings. Can you take risk? If you are uncomfortable with being daring at times you should plan for safer businesses. Can you lead? You will need to tell people what to do and learn to make uncomfortable, even agonising decisions.
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2013 and is posted here by their kind permission
You have to tell potential customers what you offer – even with no money
It is almost a caricature. A new business is launched. The entrepreneur has used all the available funds to perfect products. There is no marketing and consequently no customers and all the technologically wonderful products remain unsold. The world does not beat a path to the door of the person who has the better mousetrap; it continues to buy whatever it has done in the past.
The message is clear – you have to tell people who could buy from you that you exist and why they should consider you. You can do this with little or no money for marketing promotions, but there are some rules.
The first one is to realise that with limited funds you needs to reach the people likely to buy from you as efficiently as possible; you cannot afford to market to people who will never be your customers. It is amazing that this simple piece of logic is so often ignored. Identify who your most likely customers are, and then to figure out the best way to get a marketing message to them with as little wastage as possible.
The right media
Another rule is that you have to use the right media. It does not make sense to advertise wedding dresses by flyers in business post boxes. Instead you must be on the internet – unless you can afford to be at bridal exhibitions or to advertise in specialist magazines. Find out which information sources are used by your target market and then use the most cost effective ones. A useful cost saver is to form an alliance with a non-competitive supplier to the target market. The allies agree to share exhibition or other marketing costs, but they also introduce each other to their customers.
Barter is an ancient and honourable way of saving cost – you print my brochure and I will plan your conference for example. Community service by you and your staff can attract the attention and goodwill of community minded businesses and individuals and it is free. Continue reading
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in October 2013 and is posted here by their kind permission
Remember how fanatical you were when you opened your doors?
The plateau phase can happen when a business stabilises after the initial survival struggle, and growth becomes static. The company may be at break even or making a small profit; it falls short of its sales forecast and cash is tight. The entrepreneur is frustrated, customers pay late and suppliers are demanding. All of this has a bad effect on the staff.
If you are in this position or have been there you will know about searching for ways to solve the problem. How-to books, mentors, motivating speakers and training will be considered. Salespeople will come under pressure and some will succumb and leave. Some entrepreneurs will blame the economy, the government, the banks, trade unions or suppliers, and become helpless.
There is a simple answer to the problem. Cast your mind back to when the business launched, when making the next sale was a life and death issue for the business. You would have walked on hot coals to satisfy a potential customer, you would have tried desperately to anticipate their needs. Carelessness or laziness affecting a prospective customer would see the perpetrator in real trouble. A mistake in an order or a telephone that was not answered promptly would have been cause for a tantrum. You would celebrate with the entire company when you got orders that today seem trivial, and the enthusiasm would have spread. Continue reading
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in September 2013 and is posted here by their kind permission
Early sales are vital for start-ups, early bad sales are dangerous
When you open the doors of a new business your immediate thoughts are likely to be about income producing sales. If it is a retail business you will be watching anxiously for the first people to enter the store, restaurant, hairdresser or filling station. If you sell business to business (B2B) you must build new prospects to develop early sales. Expenses mount up, and insufficient sales income means your business could run out of cash and be forced to close before it really got started. Making early sales is that important.
Low hanging fruit
Everyone has heard about ‘low hanging fruit’ and you, the new entrepreneur, should look for those sales which you can most readily close. ‘Low hanging fruit’ is usually understood to mean potential customers which are easy to start selling to, but there is a problem in trying to sell to anybody who will listen. If the prospect is obvious to you it is also obvious to competitors, and they are more established, have customer references and will be more assured than you. They will also be eager to shut out a new competitor.
To really be ‘low hanging fruit’ the prospects should be those which your new business can easily close. This means retail customers who buy rather than browse, and a high ‘strike rate’ – the ratio between sales cycles begun and closed – in B2B organisations. Continue reading
Image courtesy of Foto 76 at FreeDigitalPhotos.net
When to sell and when to walk away
You’ve got to know when to hold ’em, Know when to fold ’em, Know when to walk away, And know when to run The Gambler, Kenny Rogers
Kenny Rogers was not referring to selling when he sang those famous words many years ago, but he could well have been. Whether you are an individual salesman, an entrepreneur building your business or an organisation intent on improving profits you should consider the words of the old gambler.
There are certainly sales that you should stick to, even though they do not close easily. There are others where you should realise that you have no realistic chance of success and yet others where the effort to close them is not worth the return you will get. There are definitely sales opportunities you should run from as fast as you can. As the old gambler advised in the song, the difficulty is in knowing which sales opportunity is which. Continue reading
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2013 and is posted here by their kind permission
What is the right type of a new business for young people?
A young relative asked me: “If you were 23 what sort of business would you open?” I realised what an interesting question this is. Imagine being 23, with the experience to know what to consider and where the opportunities lie. Thanks for the great question entrepreneur-to-be Jean!
The first answer is that if you want to be business owner you should become one. Starting a business is nowhere near as difficult as people suggest. Even desperately poor and illiterate people open sustainable businesses all over the world without business advice, bank loans or advertising. It is more difficult to launch and develop a business that can grow out of the survival phase to provide employment and value or wealth to the entrepreneur, and if that is your dream choose a business that can grow, as opposed to lifestyle entrepreneur businesses like a photographer.
Be capable of running it
You should be capable of operating the business. At 23 you may lack business experience but business owners need to be able to handle finances, marketing, sales, HR and administration. Don’t choose a very complicated business or one in a highly regulated sector, like food or medical supplies. Choose an area you know or have a passion about. Continue reading
This article was written by Ed Hatton, the Start Up Coach for the South African edition of Entrepreneur magazine, as the My Mentor column published in July 2013 and is posted here by their kind permission
What makes your business the supplier of choice for your customers?
I occasionally ask groups of entrepreneurs why they think their customers buy from them. After an awkward silence some in the group will give answers about product uniqueness, price advantage or better location, or easily copied ones like good quality and better service. At least some entrepreneurs in the group will really not know.
Entrepreneurs who do not know why customers buy take a huge risk of customers drifting away for unknown reasons. The question is even more important for start ups. Anyone who plans to open a business and does not identify clear reasons why customers would buy risks opening a business which will make no sales.
Why customers buy
There is a huge body of research about buyer motivations which is good to study. In my view the most important business differentiators are uniqueness or competitiveness
Uniqueness may mean innovative products or services, but can also be the uniqueness of the business principal. Products like trousers, perfumes, sporting equipment and coffee bars have thrived from being driven by a famous sports or entertainment star. For the average entrepreneur who is not famous or an inventor there are still options to be unique. Businesses which use a unique pricing model will rent when others sell, offer last minute sales at incredible discounts, or develop other pricing innovations. They will not simply sell at lower prices. Continue reading
This article was written by Ed Hatton, the Start Up Coach for the South African edition of Entrepreneur magazine, as the My Mentor column published in June 2013 and is posted here by their kind permission
Entrepreneur optimism in sales forecasting
Entrepreneurs are natural optimists; they have great belief in themselves and their products, they see even ordinary products as being irresistible to potential customers. There is nothing wrong with self-belief; without that we would see few new businesses being launched.
Optimism in sales forecasting is much more serious. There could be disastrous consequences if the venture fails to make unreasonable sales targets.
Before the entrepreneur even thinks about forecasting the sales volume he or she must define the target markets; groups of people or businesses most likely to become customers. These groups must see a good reason to buy from the new venture rather than their existing suppliers, and be able to learn about the goods and be motivated to buy. The entrepreneur must identify the processes to achieve these requirements. Please do not skip these steps. The belief that ‘everyone will want this product and my website will bring enquiries’ has produced many poorer and embittered ex-entrepreneurs. Continue reading
This article was written by Ed Hatton, the Start Up Coach for the South African edition of Entrepreneur magazine, as the My Mentor column published in May 2013 and is posted here by their kind permission.
That terrible time when it looks like the business cannot continue
There comes a time in almost every business’ life when failure seems inevitable, and the entrepreneur fears that they are unable to continue. His or her self confidence nose dives. Prospects for success or even survival appear to be extremely limited and a sense of hopelessness sets in. It is a terrible time, and often happens within the first year of operations, sometimes near the launch.
There is a real basis to this fear. Businesses frequently fail and start-up businesses are especially vulnerable, with many never getting beyond the first year of operations. Entrepreneurs may not have the skills, knowledge, risk taking ability or drive to manage their businesses profitably.
The key to managing through this stage is to decide rationally whether the business is really doomed or whether the entrepreneur has just hit that painful wall that left so many others bruised and shaken but stronger and thriving. Many business owners quit in despair at this stage when with the right tactics they could have succeeded. Decisions have to be made only on facts and stripped of emotions, pessimism, and blame. This is extremely difficult for an entrepreneur to do alone at a time when they are swamped by doubt about the whole business concept, their own abilities and their fears of the consequences of failure including catastrophic financial loss and shame. This is a great time to have a mentor to turn to.
An old business saying suggests that the best loss is the one taken early. If a rational analysis of the state of the business shows that there really is no likelihood of the business succeeding then plans must immediately be made to close the business with as little damage as possible. It is not smart to continue to ride a failure into yet more debt and broken promises.
Finding out why
An assessment of the current situation is vital, write down cash resources, sales prospects, market reaction, product and service quality and fitness for purpose and all the things a buyer would look at it he were thinking of buying the business.. These must be compared to the business plan to see what has changed. Why were the expected returns not made? Are the causes fundamental or can they be reversed? Be certain that the real causes have been identified; this is not a place for rose tinted spectacles. Once the causes of the distress are identified it is a whole lot easier to make a close or survive decision. Often the crisis is brought about by something as simple and reversible as the failure of marketing promotions to attract potential customers, deviating from plans to satisfy unreasonable demands by early customers, trying to attack too many markets or spending too much time on product development and not enough on selling. This is where a mentor can bring an impersonal outsiders view, especially if the mentor has experience in managing similar situations. Continue reading
This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in April 2013 and is posted here by their kind permission.
You have the expertise but where are the customers?
This entrepreneur had 26 years experience in the security industry when he started his own security company. For several years he has been unable to secure guarding contracts, and asks for help
Every start up entrepreneur believes that a sustainable and profitable enterprise can be built and this belief is reinforced by expertise in the product or service that the company will deliver. An expert in the chosen field has big advantages; he or she does not need to climb the product learning curve that affects so many start-up entrepreneurs. However as our questioner has discovered to his cost, expertise in the chosen field alone does not guarantee success.
A successful business must provide customers with services which they perceive to be more desirable and valuable than the services available from competitors. This perception is not just about the product or service; it covers the supplying company, people, styles, and brand association – the whole package on offer. The challenge for start up entrepreneurs is to create a business that provides the package which will attract customers away from alternatives – and then communicate the package to them. Continue reading
This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in March 2013 and is posted here by their kind permission.
The subject must be important to potential buyers
This entrepreneur was the victim of a horrific motor vehicle accident that left him brain damaged. He has beaten the odds and gained several tertiary qualifications. He asks how he can turn his inspiring story, as well as information about brain injuries into a career as a speaker.
This entrepreneur is very passionate and knowledgeable about his subject and has researched the high prevalence and management of brain injuries. He believes everyone should be aware of this information. He also has an inspiring story to tell, of overcoming huge obstacles on his way to his qualifications. His problem is getting paid speaking assignments.
Many entrepreneurs have products and services in which they believe passionately, and think potential customers should share their enthusiasm, but consumers at every level have the choice of more products and services than they could ever buy. They select those which are important, which may not be the services the entrepreneur believes in so passionately. So they do not come asking for the entrepreneur’s services and that can leave the him bewildered and frustrated. Continue reading
Image courtesy of Paul FreeDigitalPhotos.net
How to negotiate difficult market conditions
“It’s tough out there” a veteran entrepreneur said to me recently, “this is the worst I have seen in 30 years of trading in this market”. Many businesses are really feeling the pinch as the long lasting effects of the global economic downturn slash budgets and postpone new developments. The phrase about tough conditions is heard frequently.
In the local marketplace labour unrest which often turns violent, energy cost and availability concerns, high inflation, increasing red tape and low labour productivity add to the problem. During the good times competition increased with more companies being launched or expanded. This means a shrunken market is being contested by too many suppliers with high and increasing costs. Buyers become more demanding because they can – there is always someone who will shave the margins to the bone just to keep the factory ticking over and some staff employed.
Good entrepreneurs react to situations like this; they do not simply accept that times are tough and that their businesses will underperform. The business needs to win more of the scarce business, effectively denying this slice to competitors, and it needs to compensate for increased costs by increasing efficiencies. Continue reading
This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in February 2013 and is posted here by their kind permission.
Capitalising on strengths and overcoming problems are essential entrepreneurial abilities
This entrepreneur asks if it is advisable to start a clothing business without the ability to sketch or draw designs. She has a good eye for trends and understands the clothing manufacturing process.
This entrepreneur-to-be has identified her major strengths and weaknesses. She then asks for advice about a significant weakness. This is smart thinking. All too often would-be entrepreneurs simply dive into their dreams without evaluating their talents and skills and then become frustrated when they cannot get start up finance, or attract customers because they lack a vital skill or simply do not understand the complexities of the business they wish to enter.
In this case her strengths of having an eye for trends and understanding the manufacturing process are significant advantages in a business where being the first with a trend is a huge competitive advantage. She worries about her inability to get her ideas on paper, and correctly so. If she cannot overcome this weakness then all the talent for spotting trends cannot be turned into saleable garments. Continue reading