Setting Your Goals – Yes, We Know It’s July

An important part of setting goals is figuring out how to know they are complete.  Although this is a topic typically reserved for December or January, July is actually a great time to talk about goal setting because your 2011 goals are old enough to evaluate, but still new enough to be accomplished.  Here are 4 methods for measuring goals that should be considered as you are refining for 2011 and moving into initial planning for 2012.

The Go, No-Go Goal Measurement

When I was in telecommunications sales, a common annual objective was to get products lab tested and approved for sale into major accounts.  Customers would provide a lab approval notice that gave the go, no-go for the “lab approval” objective.  The good thing about these types of goals is that they are very easy to measure, it’s either done or not done.

However, there is a down side, especially when using it for performance payment. Sometimes your goal becomes impossible a few months into the year – losing a specific RFP or landing a specific client, and at that point you have a goal with no hope of accomplishment.  It’s ok to have one or two of these, but be careful not to have a bunch of goals that are impossible by the fourth month of the year.

The Simple Goal Measure

Revenue is a great simple measure, as is profitability.  These are things that are already being measured and typically have a history of performance so that a realistic number can be set for achievement.  If you can set goals for things you already measure that also accomplish the things you want, it’s a great goal.  But many times, you want to accomplish things that aren’t already being measured….

The Not-So-Simple Goal Measure

Many times you want to set goals on things like customer satisfaction and brand awareness, things that are measurable, but ones that you probably aren’t currently measuring.  It might be a new goal that just needs to be set up for measurement or one that previously escaped your means to pay for measurement.  Many times it helps to figure out a cheaper and easier way to measure something indirectly. Using a well designed web site and Google Analytics can go a long way in measuring certain results, especially things like advertising effectiveness.

Subjective Goal Measurement

Once, I was interviewing a new client, a restaurant owner, and asked how they measured a successful day.  I was looking for a revenue number or even a number of customers, but they looked me in the eye and said, “It just feels like everything is going well.  Customers seem happy, the orders are moving and the wait staff is smiling.”  In the end there are some things we want to accomplish that either can’t be measured or we can’t afford to measure them and that’s ok.  Just make sure you realize the shortcoming and do the best you can.

In the case of the restaurant, I definitely recommended they use daily revenue as a measure they were already tracking.  But I also told them to count the number of days that things “felt good”, or even rate the good feeling on a scale of 1 to 5, and we could use that as a starting point.  Sigma College of Small Business helps small and medium businesses with their business strategies and planning, including setting up goal measurements for the things that you just want to get done.

Tell Us – What is the biggest obstacle you face in setting and reaching goals!

THE Four, or Even Five, P’s of Marketing

Amidst all the new ways to market your products – social media, email, search engine marketing – it is still important to build your communications on a solid foundation of marketing basics.  A good place to start is with the 4 P’s of Marketing!  Product, Place, Price, Promotion

Product

Your product and product mix are a critical first step in the marketing plan.  Here are some questions to ask periodically to make sure you are still relevant in the market place.

Market Need – Do your core products still meet the important market need?

Product Mix – Could you add products to more completely meet the need of existing customers?

Product Profitability – Is there a way to make your products more profitable by cutting material and manufacturing costs? (We’ll talk price in a minute)

Make sure your product mix is keeping up with a changing market need and that you are getting the most business possible from your existing loyal customer base.

Price

There are two basic approaches to pricing.

Cost Plus – Calculate the cost to provide our product or service and then mark it up enough to cover overhead and provide profit.  This method can be safe and very effective in many situations.  However, most small business owners under estimate their costs and leave money on the table.

Market Price –  Market price is about selling to value, to the amount people are willing to pay.  Businesses in markets where there are high quantities of similar sales can usually figure out a good market price and then adjust to their added value.  Gas
stations are a great example.  For the rest of us a good starting place is to compare purchase price to the cost of alternatives – buying this widget for $100 will save you $200.

Be careful not to undersell when you are getting started.  Charge what you need to make to
be successful and then deliver the value.

Place or Distribution

Determining the best, pronounced “most profitable”, way to get your product to market is often UNDER analyzed by small businesses.  Here are some things to consider for your product “Place”.

Sales Volume – independent distributors, network marketing or joint packaging can provide a very large direct sales resource that local retail would have trouble touching.

Most Convenient – it’s usually best to close a customer and get product in their hands quickly, without much effort on their part.  Leverage the post purchase attitude.

Cost and Efficiency – many great product ideas are dragged under by a distribution plan that takes too much time, energy and cost.

Channel Competition – are you using retail distribution or independent agents for your product?
What is the impact on them if you start selling directly online?  If you don’t coordinate closely you may lose a loyal sales force.

When it comes to distribution, beware of the statement or thought “Well, we’ll just….., shouldn’t be that difficult”, it’s usually more difficult.

Promotion

FINALLY! PROMOTION! For most people with no marketing experience or education, marketing is promotion.  When I interview new clients to build them a marketing plan, or when I have students in my marketing classes, most think I’m there to talk about advertising.  Where should I advertise? Should I be on Facebook? What about Twitter? My web site isn’t generating traffic!

It usually takes me some time to talk them through the importance of focusing on Product, Place and Price first, so that when we spend our Promotion money it isn’t flushed down the Pot!

A simple approach to every advertising, promotion or communication decision is to first determine the Audience, Objective and Message and then figure out the media that will be most effective.

Audience – a defined group of buyers and influencers that you want to reach.

Objective – awareness, attitude or action.  What are you trying to accomplish?

Message – what is the right thing to say and the right way to say it to meet your objective with the target audience

Media – the communication tool or set of tools that will most effectively deliver the message

Persistence

OK, I made this one up as a fifth P, but it might be the most important.  We could sit together for 15 minutes and come up with a multitude of ideas to market your business.  That’s the easy part of marketing.  The hard part, especially for the small business owner, is to consistently and repeatedly deliver your message patiently over a long period of time.
This takes money, marketing knowledge, resources and patience, not traits associated with the average entrepreneur!

Not getting the most from your marketing efforts or don’t know where to start with your marketing?  Sigma College of Small Business provides marketing classes, marketing services and marketing consulting to get you going.  We keep it practical and affordable to meet your immediate needs.

But We Just Got Here! Developing an Exit Strategy

Welcome to our class on “How to Start a Business”, our first topic is on “Exit Strategies”! This opening never fails to get a class full of raised eyebrows, but I’m convinced that considering your exit strategy is an exercise every small business should start with and periodically review.

Starting with your company name…

…most of your decisions will be affected by your exit strategy.  Let’s say you want to build your plumbing business over a few years and then sell.  Using your name as the brand will detract value for a new owner with a different name.  The legal entity; C-corp, S-corp or LLC, that you choose is another big decision made early in the start-up process that can be dependent on your exit strategy.  Hiring employees, the value model, buy or lease decisions – your exit strategy may effect all these decisions, which is why I encourage every small and medium business to have one.

Controlled Dissolution

In a controlled dissolution exit strategy the business stays in operation as long as the owner is working.  When the owner decides to stop working the business is done.  This exit strategy is typical of many professionals who are the primary revenue generator for the company – a consultant who bills all the hours or a plumber who does all the labor.  There is no passive revenue and the value of the business is basically zero without the owner’s daily involvement.

There is nothing wrong with this exit strategy, as long as it is a conscious decision and the owner plans the rest of the business around it.  For instance, the value model is that you pull out as much cash as possible and invest in outside resources, which means the marketing strategy should maximize profitability and cash flow.

Ownership Transfers

An ownership transfer exit strategy is one in which the owner plans to sell his ownership to another party in whole or in part.  The most common transaction for smaller businesses is a complete sale to another person or another company.  For a few entrepreneurs with the right business concept, “going public” is a valid strategy where the “sale” of the company is to many outside investors on a public stock exchange.

In an ownership transfer exit strategy the value model is about building “transferrable” value.  This is the kind of value that can be realized even in the absence of the owner.  With this exit strategy the sky is the limit for your return on investment.  The value of the company can be a passive revenue stream, typical of insurance agencies, or the potential for growth from a new technology, a high value customer mix or demand for a specific product or process that you own.  In general owners with this exit strategy should always be looking for ways to make the business less dependent on them through solid processes and a strong work force.  That will make the business much more valuable to any potential outside buyers.

Transition to Passive Investment

This exit strategy is used very often in family businesses.  As the kids are able (and willing) to take over the business, ownership is sold or gifted to them over time.  The owner either sells them the business and finances it over a number of years, or maintains a diminishing ownership stake as they buy ownership through the transition process.  The passive income for the owner is in the form of principle and interest payments on a long term loan, additional sale of their ownership and distributions from the profit of the company over time.

This is a solid strategy when done correctly.  First of all, it is imperative that the owner ensures the transition of operations is to someone competent, because if the business fails, the passive income source is done.  Also, if you are dependent on distributions or dividends as an income source, make sure the new ownership is planning to make those.  If they decide to put everything back in the company, your income source could dry up quickly.

Pick One and Decide Accordingly

Picking an exit strategy is not about predicting the future and yours will probably even change over time.  The important thing is to have one in mind so that when you make daily decisions they are based on a long term vision, not just a gut feel for what’s easiest at the time.

Of course there are many variations and nuances to exit strategies and I’d love to hear about your experiences or struggles in deciding on and implementing an exit strategy.  If you need help in this area give Sigma College of Small Business a call and we can help.