The Australian Small Business Blog

Friday, November 24, 2006

Diary of a New Business- 4. The Reality Check





After considering a number of business models, I had come to a conclusion that an online group coaching model was going to meet all my objectives while utilising my competitive advantages. But would it work? Would it make money? Could I work less?

So it was time to do a Reality Check before I started to invest the considerable time and financial resources that I knew it would take to create the new business. To do this I needed to create a financial model to see if the new business could make money.

The first step was to consider the costs of the new business. These included, the cost of the website- which was not going to be cheap, the cost of operations and the cost of my time. To value my time, I looked at the opportunity cost of not continuing my existing business. In other words, I needed to be able to make more than I was making in my existing business. I also needed to make estimates on the time it would take to manage the business and provide the service. I also needed to consider the types of products I would offer.

The next step was to consider how much I should charge for the service. I started to consider what alternatives there were in the marketplace, but as what I was proposing was novel, it was not possible to make direct comparisons. But I was able to establish a working range.

With this information, I was able to determine how many clients I would need and how much I would need to charge to make the business viable. While I could handle many more clients with this business model, there was some incremental time cost to each new client. After experimenting with time, cost and income, I was able to establish some pricing points with numbers that were easily manageable, and prices that fit within my target range.

But there was one step left in the reality check. Was the number of clients achievable given the marketing allowance that I had made for the business? Fortunately, I had a reasonable handle on possible numbers based on my marketing experience with my existing business.

The new business was going to be Australia wide while my existing business was only actively marketed in Melbourne. And I already had a measure of those who wanted my services but were unable to afford private coaching. So it was possible for me to estimate for a given marketing effort, the number of clients that it would be possible to attract.

Note, all this was done before detailed planning of the business and the development of anything beyond a very basic marketing strategy which was little more than an extension of my existing strategy. But this was a screening exercise, a reality check. Up to this point, the resource expenditure was mainly my time. Daydreaming, and daydreaming inspired research. My financial exposure was very small.

Have you done a Reality Check for your new business, or new business strategy?

The next article in this Diary of a New Business will be: The Critical Success Factors.

Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is a Business Coach and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems.

Friday, November 17, 2006

Design your business before you plan it - Part 1.

By Ron Stark


Designing your business for success comes long before you even think of having a business plan, or even understanding what a business plan is. So how can you define a successful business?

The best answer I can come up with is this: A successful business is one that delivers on your expectations and meets your needs.

That in turn means it is necessary to understand your own view of success first, if you're to have any hope of starting a successful business. After all, one person's motivation may be to start a corporate empire, another's to supplement their retirement income, and some, because they've just been retrenched and need a job. In each case it's not the business itself that defines success, but the founder's wants, needs and expectations.

You as an individual


Many people fall into the trap of starting a business for its glamour, its perceived profits or because it's a well-known franchise, and fail because they've overlooked the most important thing of all - your new business depends on your individual skills, experience and personality.

Some of the things you need to carefully examine are:

  • Be honest with yourself about why you want to start a business. There are no right or wrong reasons, providing the business you want to start fits your motivation for doing so.

  • Research what a particular business demands by way of skills - don't guess. If possible talk to others in similar businesses.

  • Match your skills and experience to the requirements of the business. Be brutally honest with yourself - if you don't have the necessary skills, be prepared to employ somebody, outsource the work or get training. Once your business is running, you will be the key employee in your business, and you don't want to employ the wrong person!

  • Explore the impact of your new business on your lifestyle. For example, if you have a young family, starting a business that needs to be open 14 hours a day, your lifestyle and family are likely to suffer.

  • Consider the chores and tasks that you love - and absolutely hate. The thrill of a new business quickly disappears if you are always compelled to do those things you hate or are not good at.



Exploring one's self is usually very difficult, especially when reality risks getting in the way of your dream. If this is you, then it is best that you speak to an expert who is trained to ask the right questions. Your success may well depend on it.

The next article will look at you as an investor in your own business.

Ron Stark is the founder of Business Kits, a company specialising in helping new businesses before and during their crucial design and startup stage.

The Australian Small Business Blog

Tuesday, November 14, 2006

We vs I; The importance of grammar and getting it right.


I learnt the hard way. I thought it was what businesses wanted. Clients would ask to sound ‘big’, even though some clients were actually sole traders. As a writer, it’s my purpose to put words on paper; to research the product, business or service that a client wants to showcase. It’s my role to ensure the appropriate language which truly represents their style is featured throughout. Easy, huh? That’s what I thought.

I found that clients wanted to sound like corporations; they wanted words on brochures, websites, pamphlets, and letters which made them portray an image of professionalism and tone, something which made them sound like a CEO of a national bank. Trouble is, they weren’t – they were running small businesses with fewer than 5 people and less than $750,000 in annual turnover. An IT client of mine - with fewer than 3 employees, wanted to ‘sound big’. The client was situated slap-bang in the heart of community life, near a busy road with plenty of run-on traffic. He could offer something which the bigger firms couldn’t: personal service. The client was adamant of the words he wanted and the approach he deemed suitable.

He gave me a document which contained IT babble and techo jargon, something about a flux capacitor, IP provision service, and an accredited service of integrated network solutions. I had no idea what to write. Yet I had my brief. Work needed to be done and a client had to be satisfied.

I researched and wrote away until the early hours. Pleased with my work, I slept on it and awoke fresh and raring to go. I open the word document which contained my words. And guess what? I hated it. It contained the following:

· Frameworks, going forward, leveraging, solution and integration.

Do these words mean anything to you? Chances are they don’t mean much to anyone outside of the IT industry. Corporate rubbish morphed into small business. Worse, it contained too many nouns (“direct return on investment and maximum business efficiency with our integrated IT solutions”). I learnt that business professionals, especially those running a smaller venture, don’t have to pretend. Words are you. The words you use should sum up everything about you.

Too many people get caught up in sounding like someone else. Business people are afraid to write how they speak. They use big words and long sentences. For example, I was presented with the following:

“We are preparing a vigorous review of our financial structure and budgetary constraints and have identified the Research and Development department as a major contributor of growth and innovation for this company which remains vehemently geared towards technology driven solutions.”

Try saying that over a wine with friends. The sentence meant, “We are reviewing our finances.”

I learnt that people should be open, lively, friendly, and convincing. Businesses come to me because of this very reason.

Stuart Evans is a professional copywriter, PR practitioner and freelance journalist and is the director of Vibe Communications.

The Australian Small Business Blog

Thursday, November 09, 2006

The Diary of a New Business- 3. The Business Model





When you are considering a new business, it is essential to identify your business model. You may be selling widgets, but how are you doing that. Will you sell through your own retail store. Will you be a distributor who sells to retailers? Will you use network marketing? Will you sell online?

Each of these models has its own pros and cons. And this is where your original motivator (see previous article) comes in to assist you in determining which model is best for you.

In my case, my motivation was to actually make more money by working less. Therefore a business model based on selling more coaching hours even at higher prices was not going to satisfy my objective. This business model would always be totally dependent on myself, and would require more and more of my time, spent either in delivering my coaching services, or undertaking marketing which would justify continual price increases. Looking five years from now, that was not what I wanted. I needed a business that I could eventually separate from myself, potentially franchise, and create a passive income. Private coaching was never going to achieve that objective.

So what other models are there? I have been approached by a number of new coaches who wanted me either to hire them, or licence them. In both cases, there was the issue of quality control. I offer a premium service based on my experience and qualifications. This is very hard to replicate with others. If I brought in employees or licensees, I would have to set up a quality assurance process, and a lot of other systems that would create even more work for me. And I had seen a number of coaching franchises fail. It was not that I believed that a good franchise model couldn’t be created, as there are several that appear to be successful, but there will always be that tension between maximising franchise sales and maintaining coach quality.

A model that utilises other coaches to leverage my time, would take even more of my time, and I would also be competing in a territory with some very established competitors, without any particular competitive advantages. When I combined these factors with a mismatch with my motivation, it was clear that this was not the business model for me.

Creating and selling coaching products was another business model I considered. Again, there are a lot of products available in the marketplace and I would need to differentiate my brand. If successful, this would be a great way of providing a passive income. Now I did not reject this model, but I felt it was not viable for me, on its own. It would be something I would want to do, but longer term leveraging off my other activities. I saw this as complimentary to my main business model, not its primary focus.

The other obvious model was a one-to-many coaching model, so that I was selling the same hours many times. This was much more in line with my motivation. But how would I deliver such a service? There are coaches who have regular group coaching sessions at their offices or in a hired room. And while that could have worked for me, and I would be happy to do that, there was another factor to be considered. This time, one where I had a distinct competitive advantage.

A growing percentage of my existing business was coming from the internet. In fact, in most of my keywords I was on the front page of google. eMarketing was a very strong competitive advantage for me. So the logical choice for me was to provide an online coaching resource where clients would get the benefit of my knowledge with a much reduced component of my personal time.

With an online coaching model, I would be able to leverage my time, and also create a business which could over time, run without me. Now this was a business model that was aligned with both my motivation and my competitive advantages.

Does your business model align with your motivation, your competitive advantages and your long term objectives?

The next article in this Diary of a New Business will be: The Reality Check.

Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is a Business Coach and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems.

Monday, November 06, 2006

Business Insurance – Protect Your Assets


So, you’ve developed the idea, the marketing plan, identified your customer base and raised the capital that will enable you to realize your dream….. running your own business.

One very important aspect of risk management is insurance. Protecting one’s assets from unforeseen events such as fire, theft, storms and other losses, is one of the most important considerations any business owners faces.

After 26 years in the insurance business, I still get those calls from anxious clients who left their risk management strategies to the last minute.

Each business enterprise has its own unique set of risk exposures depending on their scope of activities, products manufactured, imported and sold to customers, geographic location and the list goes on.

Just how an organization protects itself from unforeseen events is a specialized area and an insurance broker is there to assist you identify your risk exposures and minimize loss, through a tailored insurance program.

In this article, I would like to briefly explain a number of products available to you, the business owner.

Business Insurance

Generally provides a tailored package of individual covers including, fire, business interruption, burglary and theft, loss of money, glass breakage, machinery breakdown, accidental damage and general / products liability.

A brief explanation is provided and should be used as a guide only. For complete details of the terms and conditions of this type of insurance contract, refer to the various policy wording available upon request.

Fire and Extraneous Perils

Covers you against loss to your assets resulting from fire, storm, lightning, riots and civil commotion where offered, flood. Many insurers provide benefits in addition to the above.

Business interruption

Losses resulting from the above examples can have a significant impact upon your capacity to trade. This may result in a reduction of revenue derived from selling your goods and or services. A large number of businesses do not have adequate protection in this area.

Burglary and theft

Break, enter and theft is a serious cause of many losses. With these illegal activities on the increase, this cover is most important for the discerning business proprietor.

Money

Provides cover for loss of money and other negotiable instruments against loss from theft or holdup for example. Cover money in transit, at private residence, on the business premises during business hours, outside business hours, in safe or strong room.

Plate Glass

Damage to fixed plate glass both internal and external

General and Products Liability

Provides cover against damage to third party property or damage and or injury to third party persons, resulting from the insured’s negligence. Damage or injury resulting from the use of products may also be covered.

This provides a generalized overview of business insurance. It is important that you seek the professional advice from a qualified insurance broker who can identify your risk exposures and then tailor a product that suits your requirements.

Koert Slik is the National Development Manager of NAS Insurance Brokers.

The Australian Small Business Blog

Thursday, November 02, 2006

Golden Rules of Websites - Rule 3 in a series

By Ron Stark


Your sales rep is busy making 20 or 30 sales calls each day. He's working long hours, meeting customers after hours as well at weekends. He's handing out brochures to everybody he meets. He's telling prospects about a fantastic offer that you've got going. His social life is just as frantic - at every opportunity he's networking, handing out business cards and telling everyboody how good your business is. He's even leaving flyers in letter boxes in his neighbourhood. He epitomises enthusiasm and commitment.

But for some reason he rarely gets new customers or makes new sales.

As a responsible business owner you want to find out why. To your dismay you discover that the brochures he's handing out describe products that were replaced two years previously. That special offer expired six months ago. The business cards he's using have got the wrong phone number - it was disconnected a year ago. And you changed your service provider to save some money and the email address on your business cards and flyers is out of date so that emails bounce with the "Unknown Address" error.

You call him into the office, only to discover that he looks like a refugee from the '90s.

It's an intolerable situation, right? Let me guess - you fire him. Or maybe you tell him to improve his appearance, issue him with the proper sales collateral and give him new business cards. Assuming, of course, that you're still in business. Or perhaps you're thinking "That's just plain stupid - it would never happen in my business."

Why, then, do so many businesses let their website do exactly the same things? It's working 24 hours a day, with obsolete information and an "email us" link that goes to the wrong address. It has an outdated design with blinking text and brash colours. The "Contact Details have the wrong phone number, and the "Coming Soon" link should read "Long Gone".

If this applies to you, fire your website by getting rid of it, or urgently bring it into line with your business. While you still are in business.



Golden Rule 3

If you don't accept the discipline of maintaining your website, you're probably better off without one.



This is the third article in a series that exposes the many, yet frequently overlooked fundamental business principles that successful websites should follow. The author Ron Stark is the founder of Snapsite, who take the trouble to understand your business.

The Australian Small Business Blog

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Dr. Greg Chapman is also the author of
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