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They really aren’t very good at marketing


One of the most common marketing mistakes I see is focusing solely on new clients and doing so in a way that annoys everyone else who has (or had) a relationship with your business.

This quote from Facebook (above) about a New England newspaper’s Groupon deal is but one example.

The process

The process goes something like this:

There’s a discussion in the marketing team and/or with the senior management team (which may simply be you and you) that includes something like this:

We’re not getting enough new customers.

Well, let’s create a deal just for new customers and see if we can get some.

Of course, this means that existing customers can’t take advantage of the deal, and nor can any former customers.

For your existing customers, it’s annoying to know that there is a better deal for what you bought, but it isn’t available to you. To be sure, there might be other parts of the deal (free or discounted this or that to start), but the recurring part of the bill is still more than likely unobtainable for your current customers.

This makes them angry. Ditto for former customers who are thinking of returning.

Meanwhile back at the internet

Most businesses want as many customers as possible. Newspapers fall into that category, but this problem is far from limited to them. I’ve seen it from cable / internet /phone providers and many other businesses that sell products or services via subscription – and even some who don’t.

Innocent enough, but unless you have figured out a way to hide all of your marketing from former or current customers, you’re ignoring human nature. Your ability to “hide” your marketing is an illusion. People talk and they look on the internet. Your marketing is extremely difficult to hide. Even so, that’s very much the wrong problem to solve.

Here’s a secret – get them, keep them happy and keep delivering more value so they buy more. Add upper tier services so you can afford to deliver more value to those who want it.  Coupons come right off the top of your profit – that’s why you don’t want your existing customers to use them.

Meet your customers where they are

Every few years, I would call a local daily newspaper and ask if I could get a Sunday-only subscription.

Every few years, they would tell me that they “can’t do that”. This has happened in more than one place with more than one paper.

Tossing a Sunday paper in my driveway costs them almost nothing. There are almost certainly other subscribers on my road, so the paper delivery driver already goes by my house on Sunday. The incremental cost of that paper and its delivery is pretty close to zero.

Yet – they won’t sell me a Sunday only subscription.

Maybe it’s because…

  • Their billing systems can’t handle it – but I doubt it.
  • The system that bundles papers for the carrier every day can’t handle it – but I doubt it.
  • Their carrier isn’t intelligent or caring enough to make sure that I get a Sunday paper but no other papers – but I doubt it.

I think it’s a management and/or marketing choice that ignores Sales 101.

Sales 101

Sales 101 is “The reason to make a sale is to get a customer, not the other way around.”

This applies to all businesses, not just the ones we’re discussing today.

If this New England paper’s people are in the right frame of mind, they’re thinking “If we can get people to subscribe on Sunday, then they’ll see that our paper is so awesome that they will want a daily subscription – or at least, they will want the digital edition every day and the paper version on Sundays.

I suspect this isn’t what they’re thinking, but instead it’s something like “People only want the Sunday paper, so let’s make them buy it seven days a week to get what they really want.

To be sure – the latter is a legitimate concern about customer mindset, but it can be made irrelevant. Thinking further, why do they want only the Sunday paper? Is it there a way to deliver the desired content daily or at least, more often? Is it about the delivery mechanism? Would a digital subscription that included the Sunday paper in the driveway boost sales?

Are you asking these kinds of questions of YOUR business?

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Creating client loyalty = dependability

What’s the easiest way of creating client loyalty?

The “easiest” way will differ by business. The key is to keep using it once you determine what’s easiest for yours.

I can’t promise that one way is easier than others but one of the ways I’ve found is to be the business your clients depend on to the point of rabid dependence.

I don’t mean that the relationship should be unhealthy, or that you should depend only on that client’s business. What I mean is that their dependency on *you* should be as strong as you can make it for as many top tier clients you can handle.

This will require systems because delivering this level of service manually rarely scales well much less remains consistent across employee changes, vacations and family crises (etc).

Isn’t that dependency up to them?

No, not if you’re paying attention.

The level of dependency is up to you because you’re the one who makes decisions about how you serve them. They might decide WHAT, but you decide the HOW. Only you can make the strategic decision to deliver more than they expected and do so with an owner’s mindset.

That owner’s mindset is critical: “We did this because if I was you, I’d want to watch out for this situation.”

It’s tough to quantify for you how much value this can create in the relationship with your clients, so I’ll say “a lot”.

You might be thinking that you can’t do this because your car wash business isn’t like my business, but this doesn’t matter. You could hand dry the cars after they pull out of the wash, even though that isn’t what your clients are paying for. Incremental cost – almost nothing. Value delivered – plenty.

Anyone can apply this mindset.

Ask them

Have you asked your customers if they depend on you? Ask.

You want to know what they depend on you for, and when you last disappointed them. Ask them how they depend on you and if there are things that they wish they could depend on you for. If they’re a good match, that’s new business on a silver platter.

Ultimately, you want them to know, not just think, that your business has their back. Consider the vendors you use that are so dependable, you don’t feel the need to check up on them.

Do you even have any that good? Is this a choice (perhaps due to your selection of service level\pricing) or is it because no one offers as much as you’d like to get? Have those vendors asked you if you could depend on them more?

Have you asked your clients that question?

I can’t afford to be that dependable

Maybe you’re thinking that you can’t afford to provide dependency-class service to your clientele. While you probably can’t provide it to everyone at your current price structure, there’s always going to be a group who needs more and will invest in better products and services. All they need to know is better offers exist.

What would you have to deliver to make it perfectly reasonable to add a zero to the price you get for your product or service? Add a zero = 10x. Since I suspect most aren’t going to easily see a 10X change, let’s start smaller.

What could you do to double the perceived value of the products and services you provide for the clients that you most want to depend on you?

For example, if you’re an attorney who charges $3000 for a document, you might be struggling with the idea that you could charge $6,000 much less $30,000 for it. Key: Start by changing the perception that the price is for a piece of paper.

Perception of value matters

Perception of value includes service level.

For example, if I buy a car and it breaks down, what happens when I call the dealer for help? Whether they act as my personal car genie or blow me off doesn’t change the value of the car (or does it?), but it certainly affects the perceived value of my purchase.

Over the long term your rewards are always proportionate to the value you provide. Premium pricing for the clients who need / want dependency provides you with the margin necessary to provide extraordinary value, while providing leeway to guide lower-tier clients up the ladder.

How are you creating client loyalty?

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Doing ahead, not just thinking ahead

Quite often, I talk with business owners about thinking ahead.

Something that happened yesterday tells me that I need to change my terminology to “Doing ahead.”

Why the change?

Primarily, I’m concerned that small businesses are thinking ahead, but stopping there.

Thinking ahead discussions often include strategic thoughts of putting yourself out of business by inventing new products and services for your customers that replace your current top seller.

So let’s talk retail for a moment, since they’re an easy example.

Every time you enter a WalMart store (something I try to avoid – I’m just not into the crowds), you’re likely to see something different. Just a little thing here or there that’s different. Sometimes it’s a test to see how something works, other times it’s the result of such tests.

What you never see is exactly the same store, time after time, town after town. Sure, the overall store is quite similar overall but there’s almost always something different. Something being tested. Something being implemented.

This effort isn’t limited to their brick and mortar stores. WalMart and the rest of big retail spend a lot of time looking at how they can improve the performance of their online retail properties. They have lots on their todo list simply by comparing themselves to – which blows away most (if not all) online retailers in end to end performance and customer engagement.

This is the price they pay for ignoring Amazon during their climb to cruising altitude.

What we don’t see is massive shifts designed to make the store or parts of the store irrelevant. It doesn’t mean they aren’t there, but they’re much harder to see in a brick and mortar store. Honestly, I can’t think of the last time I saw a brick and mortar store do something like this but I suspect I just don’t recall it.

Amazon tweaks too

Naturally, is working hard to improve what they already do – testing and tweaking their retail site and their back end (such as the systems that email you about things you might be interested in). You can see evidence of this on a regular basis.

Meanwhile – they’re doing things like what you see in the video above (More video here from 60 Minutes).

This isn’t just about speed, though that is certainly part of it. Keep in mind that this also means that Amazon can deliver without using any of the established shipping systems – all of which have legislative limitations as complex as those currently preventing the use of shipping drones. The only difference is that no one wrote a pile of legislation in the 1920’s to protect the USPS, Fedex or UPS – all of whom are just as likely to have drones in their future.

Parts of this are not just changing the rules but eliminating them wholesale. I would expect this to be implemented in other countries long before it happens in the U.S., due to the legislative challenges here. We’re already well on the way to delivering relief supplies via drone. Why not retail?

Learning while looking ahead

Learn from seeing Amazon look years ahead without a guaranteed payoff, hitting on pain points, looking to shorten the sales cycle (money loves speed), looking to eliminate competitive disadvantages with WMT, looking to improve/control shipping, etc – while ignoring the fact that they can’t put the drones into service and prepare for the day when they can.

They’ll be learning new things about their business and their customers as well.

The challenge for you and for businesses all over the world is not to see another way that Amazon will eat your lunch, or to think you’re safe because you aren’t in retail, aren’t near an Amazon fulfillment center or are in a rural location unlikely to be served by drones.

Your challenge is to think beyond the advances you’ve been working on or considering. Those advances are important, but you also need to be figuring out things that are years off, all while considering what will replace them.

The dangerous thought is to ignore these things because they don’t threaten you now and wont for years.

Why is that so dangerous? Because that’s exactly what many in Amazon’s market did a decade or so ago – and they still haven’t caught up from making that mistake.

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Should your business grow horizontally or vertically?

When I see a business focused solely on a horizontal or vertical market, it’s hard not to wonder if that focus is what’s really best for them.

What do I mean by “vertical” and “horizontal” markets?

A vertical market serves a certain type of customer, even if the work performed for them is of broad use across many types of customers.

Welding isn’t really a vertical market, but underwater or aluminum welding could be. Narrowing that further might identify a business that specializes in aluminum component welding for recreational boat manufacturers.

A horizontal market is one where “every business” could be your customer. Their needs include technology, accounting, legal, taxes, insurance services and public relations, among others.

A horizontally-focused public relations firm might serve businesses in retail, hospitality, legal, manufacturing and other sectors, while a vertical PR firm might focus on a single type of client, like PR for the outdoor recreation equipment market.

A combination of horizontal and vertical might result in a firm that offers PR services to many types of customers, but only for a certain type of media, such as periodicals (magazines and newspapers).

Whether you’re positioned horizontally or vertically, you’d better be focused on your core customer.

What’s a core customer?

A core customer is one whose needs fit your business’ sweet spot – the customer that’s ideal for what your business does. Revenue from customers like these usually make up the majority of your revenue, perhaps 80% or more.

A law firm who specializes in transactional business might see their core customer as “local business owners with five to 20 employees”. These customers generate transactional legal work related to real estate, employment, business transfer and related activity.

It’s easy to identify them because of the nature of their business structure and activity. They hire and fire, they buy and sell business assets, and they build, buy, sell and update facilities as they grow or change what they do.

How you identify your core customer is critical if you’re going to continue to improve how well you’re serving them, how many you retain over time and how many new ones you acquire.

Expanding your market with a question

Ask yourself this: “Could a little adjustment radically expand what you accomplish – without abandoning your core customer?”

Looking back at the transactional law firm… many of their clients could’ve started out with one person doing everything. If the transactional law firm looking for new customers ignored those solos, they’d miss a fair number of future core customers who matured from a solo into that desirable employer/client of five to 20 staffers.

One of the things business owners tend to avoid is change, unless we can’t avoid it. If your attorney has served you well as you’ve grown, you’re unlikely to switch firms unless they really mess up.  That makes it even tougher to get new clients who are already perfect for you. Without significant differentiation, a special “mojo” or something that screams “You have to use US!”, where are your new “ideal customers” coming from?

Given the tendency to avoid change and the thought process that some solos are future five-to-20 employee businesses, the natural thing to do is get more of those solos and do what it takes to keep them as they grow into the core customers you wanted all along.

Your challenge is to figure out (at least) three things:

  • What the solo needs and wants NOW
  • How you can serve them as they grow
  • How to tell which solos will become an ideal customer.

This isn’t just about law firms – they’re just today’s example. “The question” applies to your business as well…I promise.

Everything or nothing?

Many vendors sell the same products and services in the same packaging (real or virtual) to everyone. Being everything to everyone usually means you’re special to no one.

Horizontal vendors can stand out by customizing what they do for a certain vertical market – rather than selling the same “box of stuff” to everyone.

Vertically focused businesses can seek out customers whose needs are similar to their core customers’. Dentists and energy companies couldn’t be more different, yet they both use scanning technologies to find correctable defects. Is there a sweet spot there?

Whether horizontal or vertical, you can grow without abandoning what you do and how you do it.

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The Amazon Prime Directive

Moving away from the light....and into the darkness of night
Creative Commons License photo credit: mendhak

What did you learn from – and change in your business – after Amazon launched Amazon Prime?

If you aren’t aware, Amazon Prime is a membership-based service that provides access to Amazon video-on-demand and free Kindle books from the Kindle lending library – but more importantly, it upgrades all purchases to from regular ground shipping to free two-day shipping.

The question remains – what did you take away for your business from the launch and subsequent success of Prime? Did it provoke you to change anything about your business and how you work with customers?

Even if you don’t do retail, there are lessons to be learned from what Amazon is doing.

The Fresh Prime of Bel-Air

Plenty has been written about the success of Prime and what it’s done for customer loyalty.

One quote from the Small Business Trends piece (linked above) that might get your attention – a comment from a Morningstar analyst who researched Prime:

What we found is that, generally speaking, last year Prime members spent about twice as much as non Prime members. (emphasis mine) They spent about $1,200 dollars compared to $600 for non Prime members. What’s also interesting is that the average person shopping online last year spent approximately $1,000. What that says to us it that Prime members generate more incremental revenue per than non Prime shoppers. They are doing most of their online shopping on Amazon as opposed to going to other sites. Prime members generate more income.

Recently, Amazon took the service a step further with the introduction in Los Angeles of Amazon PrimeFresh, which expands upon their Seattle-based test program.

What can you take away from this and implement at your business? Do it for them. Deliver it for them. Automate it for them, as appropriate. All with more personal touch than Amazon can afford to do *in your community* and *in your market* with *your customers*. Yes, automation *can* result in more personal touch.

The key is the emphasis on your community, your market, your customers. I’m not suggesting that you try to clone Amazon.

Behavioral shifts

There’s much more to this than automation allowing you to buy produce via your web browser. Customer behavior is central to what Amazon does.

When Amazon saw that Prime members behaved differently, then they could work differently with them. Simply by buying a membership in Prime, a buyer is telling Amazon “I am going to buy more, more often.”

If your customers could send you a signal in advance like that, how would you use it to improve what you do for them? How do you care for your best customers? How do you encourage new customers to take advantage of what you offer like your best customers do? How do you make buying friction-free and easy?

Now reverse that. If you look at customers who buy more and more often from your business, what are you doing to take care of them? What if you did those things for more of your customers – would it turn some of them into Prime-like customers?

Amazon, WalMart, You

We’ve talked repeatedly about “When Wal-Mart comes to town“. Amazon’s taken WalMart’s game and made it more convenient and logistically efficient.

Take from them what makes sense for your business and implement it a step at a time, even if your implementation looks completely different. The lesson is doing what matters for your customers, rather than blindly cloning what Amazon or WalMart do.

For example, let’s say you sell high quality, organic meats that your area’s chain grocer doesn’t carry.

Do your customers forget to stop by your place? When they’re at the grocery, do they grab something there because it’s in front of them? That convenience can cost you a $25 sale. How many can you afford to lose each week?

While you probably can’t afford to provide same-day delivery like Amazon does in Los Angeles, you can serve your neighborhood or small town in a similarly convenient way. Maybe you deliver on Thursday evenings so people have their weekend meat supply for campouts and family gatherings in advance of their weekend grocery shopping. A part-time employee could deliver their pre-paid orders.

You don’t have to cover the whole state 24 hours a day, just your market area (or part of it) as convenient.

Make quality, local buying easy. That’s the local Prime Directive.

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The unexpected message clients get from you

Creative Commons License photo credit: Nicholas_T

Have you ever received a new-customers-only offer from someone that you already do business with?

In particular – Have you received one and found that the “new customer deal” in the ad is better than what you’re paying?

As an existing customer of that business, how does that make you feel? To me, it devalues whatever relationship I might have with that vendor.

What message is that vendor sending you when they make new-customer-only offers that you can’t take advantage of?

It might feel something like this:

Dear Old Client,

Today, we’re going to offer a great deal to people we don’t know because we really want more new customers.

Because you’re already a customer, this discount isn’t available to you. Yes, we realize that we have a customer relationship with you, but we’re going to ignore that and the fact that you may have been one of the key customers who helped get us where we are today.

Again… discounts are just for NEW customers, so please don’t ask us to give you the same discount they get.

Until next time,

Some Business Name, Inc.
“Your (whatever) vendor”

I doubt that’s the message you wanted to send them.

So do I hide my new customer offers?

Discount offers intended only for new clients aren’t necessarily a bad thing, but they should never appear in front of an existing customer unless you’re using mass media.

With mass media, it’s going to happen because you can’t control who sees the ad and who doesn’t. Radio, TV, newspaper, magazine and billboard come to mind as possible places where long-time customers might be exposed to your “new customer deal” ad.

If you’re going to place ads in a media that you can’t control access to, there are some options for minimizing it – such as your choice of radio time slot, TV time slot, TV show your ads are shown with, magazine location and so on.

Still, some customers are going to see/hear the ad.

Why? Because you’re advertising in a place where you expect to find people who resemble the customers you already have. If your customers restore experienced sailboats and you advertise in “This Old Boat” magazine, people who are already your customers are pretty likely to see your ads.

So what do you do?

What else do you have?

Normally I would encourage you to use a direct, personal means of reaching the new prospect. If you did, an existing customer would be unlikely to see those ads. Thing is, you should already be doing that, and that doesn’t apply to mass media (yet).

When your ads are targeted at a new customer, it’ll be tempting to assume that existing customers won’t call or email to respond. They will. They might even want to add new people, new location(s) or new services to their account.

If your sales team’s response is so formally scripted that they can’t  (or aren’t allowed to) adjust appropriately to a response from an existing customer – you could lose that customer. You need to have something else (presumably better targeted) to discuss with customers who call to ask about the probably cheap thing you’re hanging out there to attract new customers.

Mature, advanced, special

Your newest customers tend to have less mature needs than your long-time customers. What would attract new customers that long-term customers already have and are unlikely to express interest in? That’s your new customer deal.

For example, long-term customers probably don’t need startup services and entry level products – unless they are starting a new venture. In that case, they should qualify for the deal you’re offering and you’re nuts not to let them have it.

When existing customers aren’t starting something new, be prepared to discuss advanced offerings with them, even though they called about your new customer ad. A meaningful conversation with long-time customers is more important than a discussion of the thing you frequently sell to new customers. Your offer might include more, better, more frequent, more frequent *and* better, extended hours, access to senior staff, exclusive services and so on.

The point is not to bait and switch – after all, your ad was targeted at new customers. The existing ones will contact you despite that, so engage them in a conversation about something that really matters to them.

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When is $5000 like $100000?

One of the first questions I ask business owners when we start working on their company is “What will it take to transform your business?”

I’m asking for several reasons – each of which are critical to knowing where you are with your business.

I want to find out what is top of mind – in other words, what tends to consume your thoughts about the business.

I want to learn what you’re focused on beyond that one thing – assuming there’s only one.

I want to know how big your thinking is.

And I want to know what’s next – but sometimes, that isn’t important yet.

That payroll thing

Why? Because another issue that’s consuming your thoughts has a way of blocking your ability to think clearly about anything strategic, including what’s next.

The issue that usually does this? Making payroll.

The pressure of making payroll has a way of becoming such a focus that it distracts you in the worst sort of way – like an itch you can’t scratch.

To make serious strategic progress on your business, whether you’re working with a coach or trying to grow things on your own, you need to get things to the point where you aren’t totally consumed with the worry (or fear) of not making payroll every week.

A little bit of that fear is probably a good thing – but the key reason to eliminate it is that when payroll isn’t the number one thing weighing on you day-in and day-out, you’ll be able to think far more clearly and more strategically about your business.

In other words, I’ll get a much better answer to the original question, “What will it take to transform your business?”

Five K

More often than not, the solo business owner answers that question with a number in the neighborhood of $5,000. Per month, that is.

This, despite the fact that my “transform” question said nothing about revenue,  money or payroll. The vagueness of the question lets them reveal their focus.

If five grand is the difference between confidently making payroll and the distraction of sweating payroll down to the last few hours every week, it’s usually an indication of some basic things that aren’t getting done – most of them related to paying attention to the details that your customers (and your customer database) should be none too shy about.

Once you get past the FiveK challenge, you can start focusing on the things that still might keep you up at night, but in a good way rather than in that payroll-induced cold sweat, how do I avoid laying someone off kind of way.

I don’t know

With the smallest businesses, it’s not unusual to get no answer to the “transform” question, or “I don’t know.”

That usually means you’re part of the FiveK club and don’t want to admit it, or you’re so involved in creating what your business delivers that you spend way too little time thinking about (much less working on) the strategic aspects of your business.

If you don’t want to admit the FiveK thing, it might be because you think no one else is in the same boat. The reality is that lots of businesses are one bad revenue month away from punting and starting a job search.

If that sounds like your situation, you’re probably so focused on making payroll (paying the minimum on bills, etc) that you risk taking your eye off the ball strategically, as well as in in ways that your customers will notice.

Getting the FiveK monkey off your back starts with marketing – even if you don’t have money for a marketing budget – and attention to basics like follow up, customer service and the sales your customer database can tell you about.

The bottom line

My goal is to bring transformational improvement to a client – which is pretty tough to do when they’re worried about this week’s payroll. The FiveK thing is nothing to be ashamed of, but it should make you want to take action. It’s simply a step along the road, even if the only one on the payroll is you.

Another place to deal with this is your customers. Ask them two simple questions: “What are we doing wrong?” “What are we doing right?”

Listen, but don’t take the answers personally. Take action.

PS: When is $5000 like $100000? When you don’t have it.

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Giving away what you do – strategically

While looking for new post fodder in my drafts folder, I found this unpublished post from 2009. I hope you enjoy looking back over it, while considering how things have changed with “free” since that time and how those things affect your business today. Note that four years later, the Beacon is bigger and stronger than ever and the news business has continued to react to the things this post talks about. Enjoy. – Mark

Before I got around to listening to Free a few weeks ago, I’d tossed some thoughts together in my Beacon column about ESPNChicago and (soon), partly in response to a local writer’s consternation about ESPN’s entry into the local sports/newspaper scene.

As you might expect, I segued into how that relates directly to what you do, but I had other motives as well.

Those other motives? I wanted to stir the pot at the Beacon a little bit.

In 2007, the Flathead Beacon was the new media darling (news-wise) in Northwest Montana.

Primarily, it had 3 things going for it.

  • A new coherently-designed website, driven by a modern content management system.
  • Up to the minute news and opinion written by news professionals (myself excluded) who were exclusively educated at the U of Montana journalism school (hometown rep), earned their reputations at places like CNN, then became “comebackers” by returning to the Flathead to work for the Beacon
  • Content published in its entirety online, with a subset published in print on a weekly basis.
  • Free. The Beacon is advertiser supported (and 2 years later, solvent).
  • It offered an alternative voice to the media-conglomerate-owned, long-time daily in town, whose site was little more than an afterthought of their business.

2 years later, despite numerous ongoing improvements and definite success, I have concerns that it could slide back into the comfort of old media and compete with the newspapers who don’t get it, such as those publishing news online only after it has gone to press.

Myers’ story about and the ensuing move into NYC, Dallas and LA was the perfect opportunity to talk about it and get a column on the books as well. Two birds.

Meanwhile, as yet unreleased post that uses the newspaper biz as an example while focusing on changes in technology and their impact on your business continues to languish at 4000-5000 words (note: that turns out to be this post).

Seth v. Malcolm

To that end, I recently got around to reading what Seth said about the whole Free thing and particularly what he said about Malcolm Gladwell’s comments about Free (these 3 make an interesting triad of ‘arguing’).

While in the middle of reading the dustup between Malcolm, Chris and Seth, Seth says this: “People will not pay for yesterday’s news, driven to our house, delivered a day late, static, without connection or comments or relevance.”

When you describe a newspaper that way, it sure sounds quaint and outdated. And that’s exactly what many of them have become.

While “people will not pay” might not be 100% true today, that day is rapidly approaching as my parents’ generation ages. Take one look at the financials of the newspapers across the U.S. if you need evidence.

It’s obvious to state that people may not pay for it online either, but figuring out how to make it work is the premise of Chris Anderson’s Free. If you’re asking “Who is Chris?“, there’s your answer. It’s worth doing your homework on this topic, so have a listen (or read) Free and consider how it might reinvent your business.

One thing is certain: When my parents’ generation is gone, the news business is in for yet another shakeup.

Paging Mr. Cialdini

Beyond the financial obviousness, an awful lot of this Free thing goes back to what Robert Cialdini talked about in Influence.

Reciprocity. Guilt. Call it what you will.

Meanwhile, as you read/listen to Free, you almost get the idea that all of this is somewhat new fangled and currently relates primarily if not exclusively to (as Anderson puts it) products “made from pixels rather than atoms”. Obviously that’s not the case.

Who hasn’t accepted a tasty snack-sized nugget from a nice grandmotherly type, enjoyed it and ended up tossing a box of that item in the cart? Sam’s Club and Costco sure didn’t invent that strategy, but they use it.

Meanwhile, how exactly do you get home with a box of deep-fried, fudge-coated wookie bars that you’d never buy intentionally? Reciprocity? Guilt? Or is it about that nice grandmotherly person?

Should you give it away?

If you have trouble with ideas on this, think about what would be most painful if your strongest competitor started giving it away. Likewise, what would pain that competitor the most if you gave it away? It’s a place to start the thought process and might even identify a new value proposition for your business.

All of this is about finding a way to reinvent your business more so than just that Free thing. Not necessarily because your business is broken, but because reinvention forces you to improve strategically rather than being forced into it in an attempt to survive.

That’s what Free (as a tool, rather than book) did to the record companies, some newspapers and many other businesses. Better to act strategically than to react to someone else’s.

It’s interesting that the book “Free” isn’t free.

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How to do strategic business planning that actually matters

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Creative Commons License photo credit: Evil Erin

Go ahead, admit it – if it fits.

Your business plan doesn’t really reflect your real business.

You may not even use it.

Ask yourself these questions:

  • “Do you use it to run your business day to day?”
  • “Does it bear any resemblance to what really happens at your business?”
  • “Did you write it just to get a line of credit?”

If your answers are “No”, “No” and “Yes” respectively, your business plan probably doesn’t matter. So how do we fix that? Really, why do we care?

Why do we care?

We care that our business plan matters, meaning that it serves and guides us every month, because:

  • Running a business without consistent cash flow is a drain on both financial and mental resources.
  • It’s nice to know in advance where 63% of our revenue will come from next month.
  • It’d be nice to know in advance that we’ll need three extra people and 34 extra pallets of flour next month, vs. finding out when the orders come in.
  • It’s scary not knowing for sure that we’ll have any revenue next month, much less enough.
  • We had a horrible sales month that killed our cash flow and we’d rather not have that happen again.
  • We’d like to know these things by some means other than gut feel.

But how?

Knowing your numbers

Developing a way to consistently predict your cash flow and revenue numbers isn’t magic. It’s dependent on tracking month to month lead flow and how those leads perform as they flow through your business processes.

Do you know the history of your leads’ performance? What about closing percentage? Your new and returning customers per month? Their average purchase size, respectively? Can you break those numbers down for each lead source?

These numbers are critical to managing the impacts on cash flow of your operations, marketing and advertising efforts.

Manage it

Weather forecasts help us manage our expectations and alter our behavior so we don’t spend our lives cold and wet. Cash flow can work the same way, rather than simply accepting it as unpredictable.

The early years of my photo software business are a perfect illustration: Our customers hunkered down in September, October and November. They were busy with senior portraits, yearbook photos and Thanksgiving portraits that would become Christmas gifts. In December, they were focused on getting all those orders ready and shipped in time for gift giving.

Guess what many of them didn’t do during those months? Buy software.

A consistently lower level of first time sales during these months also meant that there would be low recurring revenue during those months during ensuing years. It forced us to change our revenue model to smooth out the peaks and dips in our cash flow, which made monthly revenue far more predictable.

That’s the kind of thing that many retailers face every January.

Collect them all

The primary key to dealing with events like our October surprise and the typical January retail sales drop is tracking your lead / sales / closing history and using it to predict future activity. Next, use actual performance data to improve your predictions. As they improve, you’ll see issues coming in advance – buying time to solve them.

The finance component of a meaningful business plan will depend on your lead-related performance data if you’re actually going to use the plan to run your business. This component includes financing (credit card, bank, mortgage, payables, receivables), cash flow management, taxes, legal, benefits, and insurance. For retail businesses, open-to-buy planning (OTB) is critical. Ignoring OTB can kill a retailer.

Next, integrate your lead performance data in your daily operations planning. Lead performance will always drive the resources used in day to day operations, since sales volume impacts the need for raw materials, tools and the trained people necessary to crank out what you make. This helps you predict expenses since they’re driven by the performance of your investments to market your products, manage their leads, and sell / service their customers.

Each of these components help your business plan reflect reality and actually use it to run your business.

Why do all the work to write a plan and then not use it? Make it matter.

Disclaimer: I am blogging on behalf of Visa Business and received compensation for my time from Visa for sharing my views in this post, but the views expressed here are solely mine, not Visa’s. Visit to take a look at the reinvented Facebook Page: Well Sourced by Visa Business. The Page serves as a space where small business owners can access educational resources, read success stories from other business owners, engage with peers, and find tips to help businesses run more efficiently. Every month, the Page will introduce a new theme that will focus on a topic important to a small business owner’s success. For additional tips and advice, and information about Visa’s small business solutions, follow @VisaSmallBiz and visit

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What’s the most important question?

Dan Sullivan’s favorite question: If we were getting together to chat three years from today, what would have to happen during that three year period of time, looking back on it, for you to feel satisfied with your progress?

One of mine, a trio in fact: If we were to redesign your business based on what you’ve learned since you started it, what would it look like today?

Where would it go from here?

What sort of things do you need to do in order to make that happen?

Start today.

Rather than spend a bunch of time fretting about which of these things are most important, just pick one and do it every day.

Then do the next one. prompted this post. Thanks:)