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The Margin Manifesto:

Financial Goal

The financial goal of a start-up should be simple: profit in the least time with the least effort. Not more customers, not more revenue, not more offices or more employees: more profit.

Profitability often requires better rules and speed, not more time. These are the principles we review whenever facing operational overwhelm or declining/stagnating profits.

Based on interviews with high-performing CEOs, here are the 11 tenets of the “Margin Manifesto”… a return-to-basics call . Which gives permission to do the uncommon to achieve the uncommon: consistent profitability 3 months or less.

Features

  •  Niche is the New Big – The Lavish Dwarf Entertainment Rule:

Several years ago, an investment banker jailed for trade violations. Someone caught him partly due to his lavish parties on yachts, often featuring hired dwarves. The owner of the dwarf rental company, Danny Black, was quoted in the Wall Street Journal as saying: “Some people are just into lavish dwarf entertainment.” Niche in the new big. But here’s the secret. iPod commercials don’t feature dancing 50-year olds. They feature hip and fit 20-30-somethings. But everyone and his grandmother wants to feel youthful and hip. So they strap on Nanos and call themselves Apple converts. Who you portray in your marketing isn’t necessarily the only demographic who buys your product – it’s often the demographic that most people want to identify with or belong to. The target isn’t the market.

  • Revisit Drucker – What Gets Measured Gets Managed:

Measure compulsively, for as  Peter Drucker stated: what gets measured gets managed. Useful metrics to track, besides the usual operational stats, include CPO (“Cost-Per-Order,” which includes advertising, fulfillment and expected returns, chargebacks, and bad debt), ad allowable (the maximum you can spend on an advertisement and expect breakeven), MER (media efficiency ratio), and projected lifetime value (LV) given return rates and reorder %. Consider applying direct response advertising metrics to your business.

  • Pricing before Product – Plan Distribution First:

Planning

  • so what is planning

Is your pricing scalable? Many companies will sell direct-to-consumer by necessity in early stages. To realize that their margins can’t accommodate resellers and distributors when they come knocking. If you have a 40% profit margin and a distributor needs a 70% discount to sell into wholesale accounts. Then you’re forever limited to direct-to-consumer… unless you increase your pricing and margins. It’s best to do this beforehand if possible – otherwise, you’ll need to launch new or “premium” products – so plan distribution before setting pricing. Test assumptions and find hidden costs by interviewing those who have done it. Will you need to pay for co-op advertising, offer rebates for bulk purchases. Or pay for shelfspace or featured placement? I know one former CEO of a national brand . Who had to sell his company to one of the world’s largest soft drink manufacturers before he could access front-of-store shelving in top retailers.

Limitation

  • Less is More – Limiting Distribution to Increase Profit:

Is more distribution automatically better? No. Uncontrolled distribution leads to all manner of head-ache and profit-bleeding. Most often related to rogue discounters. Reseller A lowers pricing to compete with online discounter B. Then the price cutting continues until neither is making sufficient profit on the product and both stop reordering. This requires you to launch a new product, as price erosion is almost always irreversible. Avoid this scenario and consider partnering with one or two key distributors instead. Then using that exclusivity to negotiate better terms: less discounting, prepayment, preferred placement and marketing support, etc. From iPods to Rolex and Estee Lauder, sustainable high-profit brands usually begin with controlled distribution. Remember, more customers isn’t the goal; more profit is.

  • Net 0 – Create Demand vs. Offering Terms:

Focus on creating end-user demand so you can dictate terms. Often one trade publication advertisement, bought at discount remnant rates. Which will be enough to provide this leverage. Outside of science and law. Most “rules” are just common practice. Just because everyone in your industry offers terms doesn’t mean you have to. Therefore offering terms is the most consistent ingredient in start-up failure. Cite start-up economics and the ever-so-useful “company policy” as reasons for prepayment and apologize, but don’t make exceptions. Net-30 becomes net-60, which become net-120. Time is the most expensive asset a start-up has. Also chasing delinquent accounts will prevent you from generating more sales. If customers are asking for your product, resellers and distributors will need to buy. It’s that simple. Put funds and time into strategic marketing and PR to tip the scales in your favor.

  • Repetition is Usually Redundant – Good Advertising Works the First Time:

Use direct response advertising (call-to-action to a phone number or website) that is uniquely trackable . Fully accountable advertising – instead of image advertising, unless others are pre-purchasing to offset the cost (e.g. “If you pre-purchase 288 units, we’ll feature your store/URL/phone exclusively in a full-page ad in….”). Don’t listen to advertising salespeople who tell you that 3, 7, or 27 exposures needed before someone will act on an advertisement. Well-designed and well-targeted advertising works the first time. If something works partially well (e.g., high response with low percentage conversion to sales, low response with high conversion, etc.), indicating that a strong ROI might be possible with small changes, tweak one controlled variable. Micro-test once more. Cancel anything that cannot be justified with a trackable ROI.

  • Limit Downside to Ensure Upside – Sacrifice Margin for Safety:

Don’t manufacture product in large quantities. To increase margin unless your product and marketing are tested and ready for roll-out without changes. If a limited number of prototypes cost $10 per piece to manufacture and sell for $11 each. That’s fine for the initial testing period. Essential for limiting downside. Sacrifice margin temporarily for the testing phase, if need be. Avoid potentially fatal upfront over-commitments.

  • Negotiate Late – Make Others Negotiate Against Themselves:

Never make a first offer when purchasing. Flinch after the first offer (”$3,000!” followed by pure silence, which uncomfortable salespeople fill by dropping the price once), let people negotiate against themselves (”Is that really the best you can offer?” elicits at least one additional drop in price), then “bracket”. If they end up at $2,000 and you want to pay $1,500, offer $1,250. They’ll counter with approximately $1,750, to which you respond: “I’ll tell you what – let’s just split the difference. I’ll overnight FedEx you a check. And we can call it a day.” The end result? Exactly what you wanted: $1,500.

Hyperactivity vs. Productivity

  • Hyperactivity vs. Productivity – 80/20 and Pareto’s Law:

Being busy is not the same as being productive. Forget about the start-up overwork ethic that people wear as a badge of honor–get analytical. The 80/20 principle. Which also known as Pareto’s Law. It dictates that 80% of your desired outcomes are the result of 20% of your activities or inputs. Once per week, stop putting out fires for an afternoon. Then run the numbers to ensure you’re placing effort in high-yield areas: What 20% of customers/products/regions are producing 80% of the profit? What are the factors that could account for this? Invest in duplicating your few strong areas instead of fixing all of your weaknesses.

High-Maintenance Customers

  • The Customer is Not Always Right – “Fire” High-Maintenance Customers:

Not all customers are created equal. Apply the 80/20 principle to time consumption. What 20% of people are consuming 80% of your time? Put high-maintenance. Low-profit customers on auto-pilot–process orders but don’t pursue them or check up on them–and “fire” high-maintenance. High-profit customers by sending a memo detailing how a change in business model requires a few new policies. How often and how to communicate, standardized pricing and order process, etc. Indicate that, for those clients whose needs are incompatible with these new policies, you are happy to introduce other providers. “But what if my largest customer consumes all of my time?” Recognize that 1) without time, you cannot scale your company (and, oftentimes, life) beyond that customer, and 2) people, even good people, will unknowingly abuse your time to the extent that you let them. Set good rules for all involved to minimize back-and-forth and meaningless communication.

Deadlines

  • Deadlines over Details – Test Reliability Before Capability:

Skills are overrated. Perfect products delivered past deadline kill companies faster than decent products delivered on-time. Test someone’s ability to deliver on a specific and tight deadline before hiring them based on a dazzling portfolio. Products can be fixed as long as you have cash-flow, and bugs are forgiven, but missing deadlines is often fatal. Calvin Coolidge once said that nothing is more common than unsuccessful men with talent; I would add that the second most common is smart people who think their IQ or resume justifies delivering late.

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Sales Pipeline Name

spreadsheet-oriented project

 

What is Project Management?

Project management can mean different things to different people, depending on their needs. For some, project management is a formal discipline, a structured process for managing projects across all industries and led by a certified project management professional. In formal projects, there are defined project phases that make up the entire lifecycle of the project, as well as clear documentation and reports that are to be produced at each stage. For others, projects are simply “things that need to get done,” such as launching a new app, planning an event, publishing a book or coordinating a new process at work.

 

Using Excel for Project Management

Project Managers working on small to midsize projects can use Microsoft Excel to visualize, plan and track their projects. This may be a simple project management spreadsheet an Excel project tracker or something even more complicated like an Excel project management dashboard. For important client and executive communications Excel data can also be converted into PowerPoint slides.

 

For a similarly spreadsheet-oriented project tracking approach that is seamless and easy to use, try Smartsheet. Plus, enjoy access to features like:

  • Automatic reminders as deadlines approach.
  • Embedded conversations and files on each row.
  • Powerful, customizable spreadsheets with integrated Gantt charts.

… and much more. Follow the link: http://www.smartsheet.com/template-gallery/sales&s=56&c=54

Or, if your company uses Google Apps, your Google Apps Domain Admin can install Smartsheet into your Google Apps:

https://www.google.com/enterprise/marketplace/viewListing?productListingId=3429+2160493882579061918&s=56&c=54

 

The attribute must not be used to hide content that could legitimately be shown in another presentation. For example, it is incorrect to use hidden to hide panels in a tabbed dialog, because the tabbed interface is merely a kind of overflow presentation — one could equally well just show all the form controls in one big page with a scrollbar. It is similarly incorrect to use this attribute to hide content just from one presentation — if something is marked hidden, it is hidden from all presentations, including, for instance, screen readers.

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10 Slides of a Pitch Deck Presentation

only 10 slides ptich

10 Slides

  1. Introduction – Who are you and why are you here? Keep it short and sweet.
  2. Team – Show the people behind the idea and briefly describe their role.
  3. Problem – What problem are you trying to solve? Is it really a problem?
  4. Advantages – What makes your solution special? How are you different from others?
  5. Solution – Describe how are you planning to solve the problem.
  6. Product – How does your product or service actually work? Show some examples.
  7. Market – Know, or at least attempt to predict the size of your target market.
  8. Competition – What are the alternative solutions to the problem you are trying to solve?
  9. Business Model – How are you planning to make money? Show a schedule when you expect revenues to pour in.
  10. Investing – What is your planned budget? What kind of money are you looking for?

 

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Tools for Small Business Management

File Management Recommendation: Google Drive

• Google Drive is a great tool for not only file storage but is also useful when sharing files among a team. Files such as logos, pictures, marketing plans, and QuickBooks files can all be saved and archived.
In addition, there is a desktop instantiation that allows you to store the files on your desk which is automatically synced to the cloud, so you can work even when you are not linked to the internet.

  • Calendar Recommendation: Google Calendar

• Google Calendar is a useful way to keep track of upcoming scheduled events. The tool allows for notifications and color coding for different types of events.
You can share calendars with your team and you can have events tagged as private so it only shows you are busy not what you are accomplishing.

  • Task Tracking Recommendation: ASANA

• ASANA is the tool used for scheduling tasks. Tasks can be created within a Business Company Project and reassigned to other team members.

Multiple projects and team members can be created or assigned and several predefined reports and views are available.

You are also able to email tasks into the system and have action items created.

  •  Accounting System Recommendation: QuickBooks

• Used to manage finances, bank feeds, deposits, and checks writing. It comes in two flavors, a desktop version or a cloud version. For small startups the cloud version is relatively cost effective and contains most if not all the required features.
QuickBooks is a robust double entry accounting system used by thousands of companies.

  • POS Recommendation: Square

• Square provides all the features of a more expensive POS, with the main feature desired is the acceptance of credit cards. It also has an interface for collecting and paying taxes. It can be used on the multiple device for instance computer, tablet, or phone.

  • Spread Sheet Recommendation: Excel or Google Sheets

• For document creation and editing either Excel or Google sheets is used.

  • Document Processing Software Recommendation: Word &//or Google Docs

• For document creation and editing either Word or Google Docs is used.

  • Email Recommendation: Google Mail.
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Starting a Business – Structure

Over the next few weeks, I will be posting a series of articles on starting a business. The focus will be on structure, tools, processes and mistakes to avoid.

starting a business - structureThis week I will focus on structure.

Every business essentially has three possible forms of structure, with variations on the types.

Sole Proprietor

    1. Sole Proprietor: Many businesses start with this structure. In other words you have a good idea and you start it yourself. According to Entrepreneur Magazine,”The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.” You can use your name or file for a fictitious business name, which is sometimes called a DBA or “Doing Business As” name. This does not change the structure. You are still responsible for everything, debt, and liabilities. The good thing is it is simple and the bad thing is you have no protection from bad things happening to the company.

A Partnership

    1. A Partnership: This is a step above a sole proprietorship, however many times liabilities are shared, but if one partner does not have means, the other partner can become liable for everything, ultimately, BBES does not recommend partnerships. I see little attractiveness and a corporation can handle any agreement that a partnership encompasses.There is a structure named Limited Liability Partnership (LLP). Partnerships allow direct management versus a corporation which has a BoD, however with closely held corporations this is a difference without a significance. LLP are usually associated with Lawyers, accountants, and architects. I would take great care in any LLP that I was asked to join.

Corporations

  1. Corporations: These come in many shapes and sizes, however, for our purposes, the two major corporations are C and S corporations. These titles come with the IRS tax code that defines their properties. There also exists and Limited Liability Corporation.

    C corporation

      1. A C corporation’s major significance is that the corporation is taxed separately from its owners (shareholders). Also since the corporation is a separate legal entity, liability remains with the corporation. Profit takes from a C corporation in dividends. The most significant drawback is the double taxation.  The corporation must pay taxes on profits and the shareholders will pay taxes on any dividends received. C Corporations can have an unlimited number of shareholders and they can have different classes of shares. They can also deduct almost any kind of expense as long as can be demonstrated as relating to the business and off course it is not for illegal activities.

    S corporation

    1. An S corporation is a special corporation that passes corporate income losses, deductions, and credits through to their shareholders. This avoids the double taxation, however, this type of corporation has some limitations. As with all corporations, the advantage of protection from liability exists. An S Corporation can only have one class of stock and the number of shareholders is limited. In some circles, it is believed S Corporations get audited more frequently, however that is not my experience.
    2. Another Common entity is a Limited Liability Corporation. It is very similar to an S Corp. However, there are no limits on the number of members and you can have managing members and non-managing members. Limited Liability corporations may also have restrictions on selling membership whereas S corp shares can be freely traded.

Most business start as a sole proprietorship, move into an S corporation and should they be lucky enough to grow very large, they will transition back to a C Corporation for long-term management.

 

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Managing Expectations is Key to Success

Outside Circle-Center Circle-Inner Circle

Delivering products and services to meet expectations is a constant demand for today’s businesses. In other words managers who know how to manage and exceed expectations better meet client needs. Which improve their business climates.

The first step is to establish realistic expectations. This is done through early communications and documentation if required for the product or service you are providing. You have to ensure that the expectations are realistic and achievable. If they’re not, you can–and should—stop and institute expectations that meet reality. The key here is to balance your team’s abilities with the client’s needs. Being clear and honest about what can be delivered and what the plan goes a long way in instilling confidence and creating satisfaction when the job is complete.

As can be seen in the attached graphic you can visualize the expectation environment delivery as to concentric circles.

Managing Employees

Outside Circle

These are the expectations that a professional will reasonably deliver. For instance, if you are providing an oil change service. You will be expected to drain and dispose of existing oil,replace the oil filter and refill with new water.

Center Circle

To operate in the circle, assuming you have established the expectations, is to provide more than agreed to. One should strive to always operate in this circle. This will result in clients that feel they received more than they expected. In the oil change example, you could refill the window washer, check the air filter, and put paper floor mats.  This will be seen as going above and beyond. Which will create an atmosphere of client satisfaction.

Inner Circle

You will not be able to always operate in this circle. But when you do you will hear you delighted the customer. As time goes forward. Then the competitive environment increases you may find that item in the inner circle actually move out to the Center Circle. In our example, it might include, washing the windows, cleaning the tires. Or providing a discount to a partner provider such as a cash wash provider.

Communicate, Communicate, Communicate

The key to this simple management concept is communications. Through early communications and reasonable expectations are established. There is no confusion on what you are delivering. The client has a complete understanding.  Therefore this communication should be consistent and repeated throughout the process. Reinforcing what is expected and highlighting what is given on top of the normal delivery to please the client.

Following this approach will eliminate 75% of the problems businesses experience when dealing with customers. Customers are reasonable. When they know what they are buying and then receive more the vast majority will be pleased and help you promote your business.

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Life Goal Worksheet

Life Goal

Try this Worksheet to set a Life Goal

Setting a life goal to initiate change in your life can be very useful in taking the best care of yourself and your loved one. A goal is something you would like to achieve within three to six months. But a goal is only a dream if it doesn’t have a plan behind it.

Life Goal

Framework Specifications

Using the SMART framework, you can affect positive change in your life and turn dreams into reality. This worksheet is designed to help you set a few goals to improve your life. The acronym SMART is explained below:

Specific

    • S = Specific: Make your goal clear, specific and easy. It’s the what, why, and how of the goal. For example, instead of setting a goal to take better care of myself, set a specific goal to find someone to stay with your family member once a week or to walk 3 miles at an aerobically challenging pace.

Measurable

  • M = Measurable: You’ll never know if you accomplished your goal if can’t measure it. Include some deadlines when writing your goal. For example, I will find time to walk 30 minutes each day by six weeks from now by starting with 10-minute walks and increasing the length by 10 minutes every two weeks.
  • A = Attainable: A goal needs to stretch you slightly so you feel you can do it but don’t make it such a stretch that you are doomed to failure. Reaching your goal will require a real commitment from you. The feeling of success will help you stay motivated.
  • R = Realistic: The goal needs to be realistic for you and where you are at the moment. Devise a plan or a way of getting there which makes the goal realistic. A goal of never again eating sweets, cakes, crisps and chocolate may not be realistic for someone who really enjoys these foods.
  • T = Timely: Set a timeframe for the goal: for next week, in three months, by your birthday. Without a time limit, you’ll feel like you can start at any time. Putting an end point on your goal gives you a clear target to work towards.

 

Go through the worksheet below, and the end, you will be emailed your first goal and some additional tips to help you get started.

Identify your first life goal. Pick something you want to change in your life. There may be many things that are bothering you to choose from so try to start with the most frustrating one or the one you think you can most likely achieve. List a few ideas here:

____________________________________________________

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Make Your life Goal SMART:

Picking your first life goal from above, use the worksheet below to more fully plan it out. Here’s an example of a SMART goal:

Because I want to improve my future revenue, I will allocate 30 minutes each day to perform an active opportunity search related to my selected business..

I’ll reward myself for accomplishing this by going out to a meal with an old friend. I am fairly confident I can achieve this life goal.

 

Life Goal Title (what I will accomplish): ___________________________________________

Why I want to accomplish this goal: __________________________________________

How I will accomplish my life goal: ______________________________________________

When will I accomplish my life goal by: __________________________________________

What activities will I do and how often to support this life goal:

Activity Description

How Often or By When

Date Complete
(You can update this column as you go)

–> –> –> –> –> –> –> –> –> –> –> –> –> –> –> –>

How Confident are you that you will achieve your life goal (circle)?

Not at all // Somewhat // Very Much

If you are not feeling very confident about your life goal, you might want to go back and revise it. You should feel pretty confident that you can do this which you can.

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Do you know the life cycle of your company?

All organizations have a life cycle. Thus face standard challenges as they grow. At each new stage, an organization must deal with these challenges. How well or poorly management addresses these challenges. Which goes from one stage to the next, deterimines if the company succeeds or fails.

Life Cycle of a Growing Company This process while easily understood is not easy. One of the greatest challenges a manager faces is the belief that a set of systems, challenges or processes can be skipped. While occasionally, what venture capitalists call Unicorns, may fast track the situation. Eventually a well-managed company must put in place standard systems and processes or they will fail. Leaders who fail to understand their life cycle needs will impact the growth of their companies. This will lead them to premature failure.

Therefor, the challenges that every company must overcome at each stage arise from the growth and success of the company. This simple unavoidable reality leads to the following phases. It is a typical challenges.

The 4 phases of life cycle growth in an SMB Companies are:

  • Consultant ($50K to $400K)
  • Small Business ($400K to $1M)
  • Medium ($1M to $20M)
  • Large ($20M to $100M)

The best way to understand each life cycle  is through a structured approach to the organizations style. Also with company culture. This starts with consulting which leads to small business and finally to operating a large company.

Consulting

This phase consists of one or two people working as business-to-business advisors. They generate between $100K and $200K, per consultant. Each consultant can supports a staff of one to three people. In addition there are seldom systems or rules, thus processes are owner-driven and controlled.

This model is slightly scalable through the addition of other consultants. Also some growth is possible if product or hardware sales are included.

This phase is driven by wide-ranging clients which drive company ups and downs. Thus the consultants must single-handedly managing all aspects of the enterprise. Examples include having to market and produce income. The limitation of revenue and personnel either inhibit or drive growth into the next phase.

Small Business

This phase consists of three to fifteen people. Systems become necessary, therefore, systems start to take shape. Payroll becomes mandatory and infrastructure begins to develop. This can be a difficult phase because roles begin to stratify while key individuals must continue to perform both sales and operations.

The long hours begin in this phase. Thus, it is not unusual for key personnel to regularly work sixty-hours plus. So many companies never make it out of this phase. Therfor a system of operations is needed (usually retail type operations) or they fall back to the consulting phase. A more manageable and lifestyle-friendly undertaking.

For example, owners with young families often have to make a choice of growing through this phase and missing some of  family time or  falling back into the consulting mode and spending more time with family.

During this phase, it is also not unusual for owners to pour money back into the company and actually make less money than in the consulting phase. This is due to the fact they are feeding –or investing gains—into a growing company.

Medium Business

This is the target size for many businesses. This size creates an company with clear roles and responsibilities. There are between twenty and 150 employees. Employees can focus on systems, growth, customer relationships and strategic direction. First line managers can focus on execution.As a result, at this size, they can have dedicated sales people, accounting, and professional services.

A healthy mid-size business can fund several six-figure salaries and generate profit of $500K plus. Though key employees at this income level can afford to reduce their hours, because of their heightened level of responsibility and commitment to the company, it isn’t usually the case.

The transition to a larger company requires significant change for growth to occur. This may happen by the business being purchased by a larger company. Thru long hours of work and significant dedication, this stage and beyond, is attainable.

Large ($20M to $100M)

Very few businesses achieve this size. It is $20 Million to $100 Million in revenue with a few hundred employees. At this size knowing all of the employees is difficult for a leader. To have any hope of success, the processes must become mature which leads to less flexibility. As this level is reached, any significant growth will probably occur through acquisition and owners explore employee buy-outs or IPOs as exit strategies. At this size, the company also becomes an attractive target themselves.

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