Wednesday, August 12, 2015

Pareto's Principle: A rule of thumb to help you get through the day.

Here's a short story for you.

John and Stuart are two salespersons who are great at closing business deals. They work in the same city and are both in the stationery business. They are also roughly the same age and have also recently had their first child.

John focuses on being efficient; making sure that he offers all his customers the best customer service possible, ensuring their every need is cared for and, as a result makes €10,000 in sales turnover a month. He also works busy 10 hour days, everyday and only gets to see his wife and child for a couple of hours before going to bed.

Stuart, like John, wants his customers to get the best service possible. Unlike John, however, Stuart does not focus on all his clients, just 20% of them. He makes €9,000 in sales turnover but works 2 hour days, everyday, and gets to spend as much time as he likes with his wife and child.

How is this possible?

Thanks to (the understanding of) Pareto's Principle, more commonly known as the 80:20 rule.

This scientific theory says that 20% of your input gives out 80% of your output. This is something important for you to remember, 80% of your turnover comes from 20% of your clients. The remainder 80% of your customers give you only 20% of your turnover but normally give you 80% of your troubles and stresses.

Like Stuart you should focus your energies to doing good business with (roughly) 20% of your big spenders. You will see that before long you will have more time on your hands. Don't stay worrying about the remainder 80% of your customers, instead spend the time hooking 1 new big client or enjoying with your family or even learning a new skill; in other words, having FUN!

Don't be afraid of losing some business at first. Some of the 80% will go off to your competitor and that is good for you; let your competitor waste his or her time with them whilst you enjoy having more time to chase the big fish. 

Not yet convinced of the validity of Pareto's Principle? Take this blog post, its got roughly 7 paragraphs. If your time is limited and you wanted to get 80% of the knowledge reading only 20% of the article, you would just read the statements in bold!

What do you think now?

Sunday, June 21, 2015

3 reasons why you’re better off outsourcing

As small business owners one of our constant worries is having sufficient cash flow to be able to operate smoothly. Entrepreneurs often choose to mitigate this problem by carrying out a lot of administrative work themselves. Such work could include back office administration, cleaning, delivering, etc. The reasoning behind this is, presumably, to save money. 

The reasoning is wrong. Here’s why,

1. Time spent doing administrative work is time not spent with clients.

It is a known fact; a business succeeds if it makes sufficient profit, and profit comes from sales to clients. If you do not spend time getting clients and keeping them well kept, your competitors will. Use your limited time wisely, instead of cleaning your office you’d better send a newsletter to potential clients, instead of data entry you’d better set up a meeting with a major client. You are leading your business and you can only lead it from the front.

2. You can have a motivated, dedicated and reliable workforce, without employing them.

Nowadays you can find businesses which will do pretty much anything to support you. Through websites such as fiverr and SEO clerks you can outsource any part of your business. Even locally, by searching the web or looking through social media you can find a business that can carry out any operation of your business.

These are normally one or two person businesses and they want to win you over as a client and do your work for you. Being their own businesses they are motivated persons. They took a risk by working on their own and therefore they are eager to succeed. Upon agreeing on the terms of the task you needn’t worry about managing them, about them not getting along with their colleagues or any other challenges which employees bring with them.

3. It will cost you less in the long run.

Consider yourself for a moment. You are, or inspire to be, an entrepreneur and that means that you feel that you are very good at something. You might even consider yourself an expert. Similarly, business owners of these outsourcing companies tend to be professionals in their respective fields, in most cases, better than you could ever be. No one can be an expert on everything. Being professional at something also means being efficient. Taking less time than it would take a non-professional to do and also making it better. It could take you 3 hours to clean your office, plus the cost of the cleaning equipment, when it would take a professional cleaner an hour at no extra cost for equipment.

You should not think of outsourcing as an extra cost but rather as cost saving. Remember that everything, even your own time, comes at a cost, so your goal should be to get more value for your money. If you can make a profit of €1000 in 4 hours today, why would you want to spend the next 4 hours entering data, when you could outsource it for €25/hour and get it done in 3 hours instead? Don’t be busy, be productive.

Wednesday, June 3, 2015

Crowdfunding is a Game Changer - And You Should be a Part of It

In the world of entrepreneurship few are the mechanisms which make your adventure more fun and successful whilst not costing you an arm and a leg. If the term Crowdfunding is either new to you, or you are vaguely familiar with it, now is the time to do your research.

Traditionally, to fund your business your options were split between using your own funds, securing a loan or getting equity investment. Using your own money is straight forward, but if things go south you risk losing part of all your life savings. Going into debt or getting equity investments means doing hours of number crunching work, which means having less time to focus on your business or spending money to have other people crunch the numbers for you, professionally.

Enter Crowdfunding, the game changer.

There is an English saying, the proof is in the pudding! You can carry out the best market research before launching a product, but the answers given by your prospective clients are just...words. Crowdfunding allows your prospective clients to show how interested they are in your product (or service, or project or charity, etc.) by donating or investing a sum of money. The amount can start from €1 which means that anyone can participate. In exchange, people who donate receive rewards or special privileges.

So, all of a sudden, the wider community, which depending on the project could mean a great portion of the world, can be directly involved in the creation and growth of your business.

Imagine it! This community would spread the word about your product, provide feedback if you request it and encourage others to get to know more about it, before you've even sold your first one.

Monday, May 18, 2015

There is no way around it: Do Your Research!

If there was one piece of advice I could give my younger self, it would be to research my target market better. It is something which is often overlooked, especially by small start ups that don't have the funds to allocate, but it is as vital for the success of a business as knowing your flight details before catching a plane!

You may think you have the greatest of ideas, a unique and extremely necessary product or service, but if you don't market it well then it won't sell. If there isn't a demand for it, it won't sell.

Take Segway; a futuristic product which was created to replace the motor vehicle in city centres. No doubt that it is ten times cooler than walking, but also comes at a hefty price. So hefty in fact that was it not for its client base of police forces and city tours, it would have been a total flop. Back in its research days the team believed they had an incredible product, but their market research was not done well. One reason might be that they didn't ask all the right questions.

Before starting your market research, ask yourself these questions:

1. Do I know who my target market is?
You might know this from beforehand and if you do, that's great. The results of your research should confirm this information or it might point you in a different direction.

If you do not know who your target audience is, then guess, to a certain realistic point. An invitations maker can, for example, guess that the target market are young adults 20-35 who are soon to be married and parents, 25-40 who are planning children's parties. Therefore the invitations maker will focus the research on these age groups. This can vary depending on your business, area and culture.

Where can I get in contact with the greatest number of people from my target market?
This will help you identify the best option to carry out the research. Taking the invitations maker again, one place where many brides- and grooms-to-be congregate is on dedicated Facebook pages. If travellers are your key market a safe bet is that you'll find many at an airport. Every group of people has something in common and probably a meeting place, virtual or physical. The key is finding the right place where you can, with little effort, find many people from your target market.

What answers are vital to show that the business, product or service will most probably succeed?
Ask the right questions, get the right answers. Sounds easy enough! Remember that it takes time to carry out research and then to decipher it. It also takes time for the respondent to answer you, therefore you cannot ask too many questions.

Get straight to the point. Would the respondent use your product or service. What price (offer different options) would he/she be ready to pay? How long would they be ready to wait? Do they use a similar product or service? What is missing?

How many people should I interview?
Ideally, all your target market! Realistically though, as many as possible. The more answers you have the easier it is to build the recipe for your product's (or service's) success.

It is also a very good idea to give respondents a special discount or a freebie in exchange for their contact details so that when your product or service launches you would already have a mailing list ready and waiting.

Tuesday, May 5, 2015

When you feel the World is Crashing Down on You

Being an entrepreneur is fun, but that does not mean that there are days where you feel that everything is against you. Days when you feel that Mother Nature got in touch with Father Time and the entire human race and together they are finding ways to create obstacles to all your goals and dreams. Such days do exist, but there are things which can help.

To get you through these times just remember these 3 truths:

1. Everything, good or bad, cannot last forever.
Then it is not a matter of if, but when your misfortune will end. Believing that it will end will allow your subconscious to start figuring out how to get to that point quicker. You might not find a solution immediately, but your brain is probably already working on it and will show you in due course. You must believe this.

2. Sometimes, it's just how you look at things.
Very often, a problem you are directly involved with for which you cannot find an immediate solution keeps growing bigger in your head. Eventually you can see this problem as taking over all your life. Take a step back and re-evaluate the problem. It might help you to list the negatives of this problem. Then also list the possible positives, yes, that's right, positives.

One time we were very close to finalising a considerably large order with a client. This order would have gone a long way for us to reach the turnover target. At the last minute the client lost funding for the project and the order vanished, overnight. At that time seeing the positive was difficult. We were intending on getting a short term facility from the bank, incurring fees and interests. This was no longer needed - a small consolation. This loss eventually led to a change in policy within the company which required the client to pay a deposit up front with sizeable orders. When the time came soon after for another large order we didn't require the bank's assistance and saved a bundle in fees.

3. You are probably not a Superhero, speak out,
though I could be might actually be a superhero, in which case please get in contact with me!

For the rest of us, problems immediately seem smaller when we speak to other people about it. Choosing the right people to speak to is important. In business, your friends or partner can listen to a problem, but might not be able to offer any guidance. An experienced accountant or mentor might be a better solution. However it is better to speak to someone than to keep the problem inside of you. If nothing else is available speak to your pet or your plants as this has been proven to help.

You are also most welcome to speak to me, if you would like to discuss any problems you may be facing. Just comment on the blog below.