By: Thomas Rousing

I despise the term human capital

I despise the term human capital and its partner in crime, people assets.

That aside, if you don’t take care of your staff, they are far less likely to be able to take care of your clientele and thus, your business, in a way that you would prefer and expect.

Like anything that you’d like to retain and improve upon, your staff requires your attention and this comes in several forms.

To that end, this NY Times piece from Tony Schwartz and Christine Porath nails it.

 

By: Walter

Pricing custom work well is a strategic advantage

How good is your business at pricing custom work?

If you don’t have a way of pricing custom work that consistently accounts for your costs and labor, how do you know if you’re making any profit on these deals? How would it feel to find that you’re losing money on half your custom work?

Do you have a spreadsheet or software program to help? If not, do you have some other formulaic means of pricing work?

If you read the May 12 New York Times “You’re The Boss” piece by the owner of Paul Downs Cabinetmakers, you’ll learn that these guys are fortunate enough to have a formulaic method to determine the price of a custom item.

That they have this formula puts them ahead of most businesses that do custom work. However, the trouble starts when they discuss what’s going on behind the scenes as there are a number of things going on that conspire to cause problems when reality and the pricing formula meet on the shop floor.

The failure points

Downs¬†mentions that the spreadsheet’s material prices haven’t been updated in over 6 years, that material use and overages are not tracked, that tool use and labor methods have changed and that the info in the spreadsheet is sometimes entered wrong and fails to match the reality of the work actually being done.

As you read about all the possible failure points of this spreadsheet and how they’ve allowed it to become outdated and stale compared to their business reality, you can’t help but wonder how they got to that point.

Here’s the thing… this type of situation is pretty common.

Our tendency to think we’re too busy to address these critical, but tiny (at the time) maintenance issues has a way of giving us permission to postpone giving them attention. We think we’ll take care of them someday since some other thing seems more important right now.

It doesn’t seem to work that way, despite the best of intentions.

What usually happens is that the business lets these little things get out of sync an hour at a time, a day at a time, a week at a time and so on until we find that our internal systems look like they were designed to run some other business (or none at all).

At some point, things will have crept so far out of line that you’ll have no choice (like Downs) but to address them. Not only has the job you face become massive, your strategic advantage of having accurate, formula-driven custom pricing will have become the exact opposite.

Why does it matter?

The trouble with getting your business into this situation is that it severely damages your ability to see trends, know if you have enough (or too much) raw material or labor to deliver upon your work commitments.

If you’re already stuck, you have to consider the cost of continuing with a broken pricing model, assuming you have one.

If you aren’t sure you’re turning a profit on custom work – the showpiece work of your business – this merits immediate attention.

This is your best work. It’s the work that generates the reputation that earns your bread and butter work. It’s the work that you use to get your best, most profitable clients.

And yet you aren’t sure exactly how much profit you make on it?

If a close friend was in that situation, you know how you’d react. You’d go out of your way to make the situation clear to them, helping them if possible.

Why not do the same for yourself?

Should this take six months?

No, it shouldn’t. While Downs says his expert worked on this for six months, I suspect what he really means is that it took six months from start to finish – not that his expert worked on it eight hours a day, five days a week for six months.

The important thing to remember is that this doesn’t have to be perfect the first time.

Start with the highest impact item you can wrap your head around. and implement it. Tweak and add pricing components one at a time to improve accuracy.

This allows you to see results and adjust for accuracy and additional information without allowing any single change to be so complex that you have no way to assess its worth, much less its accuracy.

Get to work!

Why small business should care about Meeker’s slides

Mary Meeker’s annual Internet Trends report came out today, so I thought I’d offer a few comments about it and how its findings are likely to (continue to) affect small businesses, including small software companies.

The Slideshare version is rather slow right now,  so I suggest you check out the PDF version of the Meeker report.

Psst, thank you Mary.

Tablet sales

52% annual year over year growth. For software companies, this matters just a bit. Web apps that work great on phones don’t always translate to the tablet form factor. Do the work to make your UX good on both.

Context: There are 789MM laptop users globally and 743MM desktop users globally – this is after decades of computer sales. Tablets – despite the modern tablet only having been around for a few years, there are already 439MM globally. Ignore them at your own risk.

KPCBMeeker2014Tabletuse

 

Advertising media

Meeker2014AdSpend

When reading the “Print is over-indexed” comment, keep in mind that most businesses who use print do so very poorly. They carpet bomb rather than snipe and they don’t track lead numbers or ad/media performance. I suspect they will do the same when advertising on mobile ad platforms and will complain that, just like print, advertising doesn’t work.

Don’t be that business.

Hey, nice network!

95%+ of networks are compromised in some way, and small business networks are likely worse than most of the ones Meeker is referring to.

Yes, yours is probably one of them *or could be*. It happened to Target (et al), it can definitely happen to you.

A quote from the slideshow: “Vulnerable systems placed on the internet (are) compromised in less than 15 minutes“. This doesn’t mean the internet is the big bad wolf, unless you have a pile of XP machines that aren’t properly taken care of and operated by staff (and management) who will click on any-old-thing.

Free shipping

47+% of orders include free shipping, vs. 35% five years ago.

Say this 3 times: “Lifetime customer value”. If this hasn’t reached your area – and in many cases, it may be a long time coming, consider beating the world to the punch. Leaders lead.

Cloud computing costs still dropping

A bit of Doctor Obvious, but the numbers are huge.

  • Compute (ie: CPU costs) – down 33% per year from 1990 to 2013.
  • Disk storage costs – down 38% per year from 1992 to 2013.
  • Bandwidth costs – down 27% per year from 1999 to 2013.

Where’s your competition?

Anywhere and everywhere, perhaps.

Meeker2014Competition

Vicarious video living

The highest volume video streaming site is Twitch – a site where people watch other people play video games. Presumably they do this to learn how to play better, I really don’t know why else you would do this. While this is of little specific relevance to me, Twitch’s numbers are certainly relevant.

Twitch has more user viewing minutes than WWE, Ustream, MLB.com and ESPN combined. Yes, COMBINED. 12 billion minutes per month.

How does video fit into your strategic plans?

As of January 2014, 43% of TV content viewing minutes were on non-live-TV. IE: DVR, DVD, streaming, mobile streaming, etc. They want it when they want it, not when someone says they must consume it.

How does *on-demand* video fit into your strategic plans?

The world is flat

As of January 2013: 9 of the top 10 producers of internet content are in the US, yet 79% of their monthly visitors are outside the U.S.

As of March 2014: 6 of the top 10 producers of internet content are in the US, and 86% of their monthly visitors are outside the U.S. 4 of that 10 have effectively zero US-based visitors. Yes, China.

Alipay’s “Yu’E Bao” asset management startup went from $0 to $89B in managed assets in 10 months. It is now one of the top 3 global money market funds based on assets under management. TEN MONTHS.

60% of the top 25 tech companies in the US were started by 1st or 2nd generation Americans. 1.2MM employees as of 2013.

By: Nina Matthews

Create a truly meaningful guarantee

Does your guarantee provide value and eliminate risk for the prospect, or does it simply give their money back?

While giving their money back is often seen as an ideal guarantee, the fact is that while it’s the easiest effective guarantee you can make, it’s also the least common denominator.

Does your business reputation depend on least common denominator service? I suspect it doesn’t.

Least common denominator?

A least common denominator is like a best practice.

The term “best practice” implies something only the best companies employ, but the reality is that there’s so much focus on best practices that they’re often the average.

“Average” because these best practices are what most businesses do. The truly best practices of the best companies are often unseen to most other, or they’re simply not recognized as something that provides a substantial competitive edge.

These things don’t have to be expensive or mind-blowing. They simply require seeing your business relationship with the customer from their perspective. One example is being mindful of opportunity cost.

What about opportunity cost?

While a money-back guarantee does eliminate the client’s obvious loss-of-investment risk, it doesn’t take into account their opportunity cost – the cost to them of your inability to deliver.

Protecting the client from lost opportunity isn’t part of most guarantees, but it should be part of yours.

Let’s look at airline flight guarantees to understand why.

If you book a seat on a plane for travel to a critical face-to-face meeting and the plane is late for reasons other than severe weather, the airline may reroute you, book you on a competitor’s flight or worst case, get you a hotel room for the night so they can try to get you to your destination the next day.

What they won’t do is compensate you for missing the meeting, even your late or non-arrival is entirely their fault. How would they calculate what to pay you, assuming they could afford to?

If you miss a meeting due to air travel issues and this ultimately costs you $20 million, do you expect the airline to cough that up because you bought a $400 plane ticket? Only the narcissistic would have such expectations.

All the airlines can really offer is a full refund in the form of a future flight, a flight on their competitor, or to ask you to be patient while they work to eventually get you to your intended destination.

Even if the airlines sold “guaranteed travel” tickets at a much higher price, the logistics of delivering a guaranteed service would likely make it unprofitable for them.

Given the possible reasons that a flight can be late, it’s understandable, so why does the lack of an opportunity cost guarantee come off as weak in your business?

Create a truly meaningful guarantee

Most of you don’t have the logistical issues that airlines have, so you can offer a guarantee that deals with lost opportunity cost without a huge expense or effort. All it takes is some thought, action and follow up.

That’s why not protecting a client’s opportunity is weak.

If you own a local hotel, there will be times where you can’t fulfill a reservation. Plumbing leaks. Power fails. Stuff happens.

If you have an arrangement with nearby competitors, a bed and breakfast and a few airbnb hosts, you can avoid leaving a guest out in the cold. While it might not seem like a big deal to you, these things have a way of happening when the prospective guest is an influencer on Trip Advisor, or worse, a travel writer with two million Facebook likes and a cable TV show.

The same thought can go into guaranteeing carpet cleaning, car rentals or whatever you do. Take away the investment risk like everyone else, then wrap the opportunity loss in bubble wrap.

Go to the bullpen

When a pitcher throws so many pitches that they “lose their stuff”, managers call the bullpen for a pitcher with a fresh arm.

That’s what customers want. They don’t want excuses. They just want whatever you promised. Your job is to figure out how to deliver that even on your worst day, or when your pitcher has lost their stuff – whatever that means in your business.

To a client, an appointment or a reservation is a promise – and often that client has made promises based on the one you made them.