Archive for September, 2012

Strategies versus Tactics: Beware of Greeks Bearing Gifts

Tuesday, September 25th, 2012

Our guest this week is Marcus Miller, a Partner with Sticky Branding Inc., a business development consultancy specialized in firms selling professional services such as accounting, legal and wealth management. They help their clients sell more, faster by developing marketing and business development strategies for the post-Google era.

The “Trojan Horse” is a tale of how the Greeks took the city of Troy, which had been under siege for ten years. The Greeks tried and tried for a decade to take the city, but could not break through the walls. But the Trojan horse changed their fate.

Here are the quick facts. The Greeks constructed the huge wooden horse, and hid a select force of men inside it. The remaining Greek army made a great display of breaking down their camps, and pretending to sail away. They left the horse at the gates of the city of Troy as a “gift”. In celebration the Trojans pulled the horse into their city as a victory trophy. They believed they had won the war by standing their ground, defending their walls and holding the Greeks at bay for ten years. However that night the Greek contingent hidden inside the horse crept out of the structure and opened the city’s gates. The rest of the Greek army – the ones who pretended to sail away – were waiting, and the city of Troy was destroyed.

The Greeks’ strategy is one of deception. They deployed the wooden horse as a gift, and appeared to sail away in defeat. The strategy worked exceedingly well. Their goal was to open the city’s gates, and attack their unsuspecting foe. The wooden horse was an important part of the strategy, but it was simply a tactic.

The strategy is the most important aspect to winning a war. Marching into battle without a well thought out strategy does not deliver success. The Greeks demonstrated that for ten years. The Trojans were able to sustain the Greeks’ attacks, because their strategies were based on their conventional tactics of war. The Trojans understood the Greek history, and built defenses that nullified the traditional attacks. The Trojan Horse was a change of strategy.

Growing a business fits very well into the metaphor of waging war. When you focus on tactics you can get mired in a stalemate, and never achieve your goals.

The key to growth is strategy. You first have to come up with a clear strategy, and then execute it with effective tactics. The problem is tactics are a lot easier to grasp than strategy. Tactics are tangible like a wooden horse. In modern terms we talk about hiring sales people, implementing software systems, creating new websites and executing campaigns. And companies love to buy tactics. They see how tactic works, and can get moving on it right away.

Some companies even believe strategy is baked into the tactics. For example they may employ a marketing agency of some ilk (design, advertising, web, digital, whatever), and expect the tactical service they are buying to deliver a growth strategy. It doesn’t work that way. It’s like they’re assuming marching drills and frontal assaults will win the war without considering the big picture and how the enemy will counter. Adopting others’ winning tactics is not a clear strategy to succeeding.

Do you have a well thought out business strategy for winning your battles, or do you adopt tactics first and try to make the strategy fit? Trojan horses are not strategies, they’re tactics. They only turn into strategy when combined with other tactics to accomplish a desired outcome.

You can reach Marcus at 416.479.4403, ext. 21 or Marcus.Miller@StickyBranding.com.

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Ask 5 Questions To Find Out What Customers Want To Pay

Tuesday, September 18th, 2012

I’m a Scotsman and happy to admit that I fit the “cost-conscious” stereotype that sticks to people from the country of my birth. In fact my friends call me “the canny Scotsman”.

While I’d hardly say that pricing strategy is my favourite part of what we do, I keep an eye open for anything that will give us – and our clients – an edge in that area.

That’s why a blog post about how to find out what customers will pay caught my eye.

The author, Rafi Mohammed, is a pricing consultant and he says that it’s as simple as asking your customers. My first reaction was that they won’t tell the truth. Human nature being what it is, it would be only natural for them to give a “low ball” answer.

But, as with so many things in life, it turns out that it’s not so much what you ask, it’s how you ask it.

Rafi suggests that, rather than ask the question directly, say that you’re carrying out a customer satisfaction survey. Tell your customers that you’re trying to understand what they like about your product or service so that you can serve them better in the future.

Then include these 5 questions in a series that probes general customer satisfaction.

1. “What competitive products did you consider buying?” If the answer is “none” then the customer is not price sensitive and you may have room to increase price. I think that, at worst, the answer will tell you who else your customers are looking at – a valuable piece of intelligence in itself. But, in this economic climate, I don’t think there are many companies that don’t consider alternatives.

2. “What do you think of our prices – are they too high or too low?” The logic is that some customers will clam up when asked this question – but that others will give a lengthy answer. Listen to the second group carefully, without probing any further, and then move on.

3. “What other features would you like added to the product/service?” I really like this question. The information you gather can be used to offer different versions of your service e.g. Silver, Gold and Platinum. It will also tell you what your customers would be willing to pay a premium for – fuel for the development of your next version of the product or service.

4. “What do you like and what don’t you like about our pricing strategy?” I like open ended questions like this. Everyone can find something to say, so the question gets people talking. And lays the groundwork for more probing.

5. “Are there other ways you would like – or even prefer – to buy our products?” This is the kind of question that – 9 times out of 10 – will produce an unsurprising answer. But that lone surprising answer, when it does come, could shake your current assumptions to their core.

If you want to read more, the blog post is called How to Find Out What Customers Will Pay.

By the way I’m not at all bothered being lumped into the Scottish stereotype. In fact I think being called “canny” – a term we Scotsman invented – is a compliment. The Pocket Oxford Dictionary defines it as “shrewd and cautious; worldly-wise; thrifty.” How can that be bad?

If you enjoyed this post you’ll also enjoy Prices – 6 Reasons To Keep Them Up.

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8 Things That Hinder Growth

Tuesday, September 11th, 2012

How often are you surprised by the results of a survey?

It usually happens to me when the survey is about an area or topic I think (or I assume) I know something about. A case in point is one of the questions in the Inc. 500 CEO Survey.

The question is “What Could Possibly Hinder Company Growth?” The CEOs were asked to rate 8 factors on a scale of 1 to 5, with a score of 5 indicating the greatest obstacle to growth.

Before I even finished reading the question I was confident that offshore competition was going to be a major factor.

Was I ever wrong! Competition from abroad received the lowest score (1.43) i.e. it ranked 8th out of 8.

Once I saw the other factors I began to understand why it wasn’t number 1. But I didn’t expect Taxes (which scored 2.5) and Government regulations (2.4) to be considered significantly more of a hindrance to growth.

However, I’m getting ahead of myself. Let’s take it from the top.

According to the CEOs of these very successful companies, the biggest factor getting in the way of growth is finding talented workers. (It scored 3.31.)

The obvious question is why that should be the case given the current level of unemployment. And the answer is (I’m going to make another assumption here) what it has always been. There’s a mismatch between the talents that are available and the talents that are required.

Keeping up with demand (with a score of 2.67) came in second. I thought that was interesting given how weak the economic recovery is.

The companies in this year’s Inc. 500 are spread across 25 different industry sectors and so they’re not concentrated in one part of the economy. But they are, by definition, the fastest growing, privately owned companies in those sectors, outpacing the rest of the pack because, presumably, there’s great demand for their products or services.

Factor number 3 was domestic competition (2.55) which came in just ahead of Taxes (2.5). It’s interesting that local competition was also considered a significantly greater threat to growth than offshore competitors.

Steady cash flow (scoring 2.43) ranked fifth and I’ve already mentioned Government regulations (2.4), factor number 6.

The final factor was getting financing, which came in at number 7 with a score of 2.06. The explanation for that may lie in the answer to another question in the survey.

42% of the CEOs said that they had no need for outside funding. And only 4% said they had encountered difficulty in accessing capital to the extent that it had impeded their growth.

I’ve spent the last 15 years working with owner managed companies. And I spent 25 years working my way up the corporate ladder before that. The greatest lesson I’ve learned in that all of that time is that people have a greater impact on growth or success than anything else.

So, while I was surprised by the results for competition from abroad, I’m not in the least surprised that finding talented workers is the biggest factor getting in the way of growth.

If you enjoyed this post you’ll also enjoy 5 Tips for Fast Growth in a Slow Economy

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When “What If?” Becomes “What Now?”…

Tuesday, September 4th, 2012

 

This week’s guest is Howard Lerner, Partner at SBLR LLP Chartered Accountants, a full-service accounting and business advisory firm located in mid-Toronto.  With 9 partners and over 40 team members, including a strategic tax department, SBLR specializes in providing creative income tax solutions and high-level growth and exit strategies for profitable, privately-held companies.

 

One of the most important – but often ignored – reasons for preparing for the future succession of your business is to minimize the fallout from the unexpected.  While things don’t always go according to plan, the business has a much better chance of surviving if you’ve made preparations, in advance, for it to continue without you there.

The following is based on an actual story, illustrating the importance of planning ahead.  In a real-life situation, Karen, 56, started Staywell Corp, a health services business, 23 years ago. Her son John, 27, and daughter Beth, 24, have worked in the business since graduating from university.

Karen recently contracted a life-threatening virus leaving her paralyzed and unable to work.   Not having developed a strong senior management team, much of the business knowledge resided with Karen.  With the help of a few loyal employees, Karen’s children kept things together for several months, hoping in vain that their mother would quickly return to work.

Karen and her family never discussed what would happen in case of a tragic event, so John and Beth were completely unprepared for the responsibility resulting from their mother’s lengthy absence.  After six months of declining sales, John and Beth realized it was necessary to sell the business. The value received for Karen’s shares was substantially less than it should have been, as much of the intellectual capital was tied up with her.  The proceeds still resulted in a taxable capital gain to Karen of $1.2 million, thereby costing her family $110,000 in capital gains taxes.

After the sale, John and Beth left the company; only one has since found new employment.  Karen’s disability insurance, a fraction of her former CEO’s salary, means the family is struggling financially, as Karen needs full-time nursing care, and the after-tax proceeds were used to pay down debt.

How could this family have experienced a better outcome?  The answers all have one thing in common:  PLANNING.

1. Succession Planning – Karen could have developed a strong and capable management team and delegated as much responsibility as possible to the team, with the objective of making herself redundant to day-to-day operations.

2. Insurance Planning – At least bi-annually, life and disability insurance policies could have been reviewed to provide adequate coverage in case of death, illness, or disability.  Insurance strategies can often include funding the premiums using corporate assets certain situations.  This planning also involves the preparation and updating of proper wills and powers of attorney.

3. Tax Planning – A proper corporate structure also might have allowed Karen to multiply the Capital Gains Exemption on the sale of Staywell Corp’s shares, possibly eliminating all of the $110,000 of capital gains tax.

4. Exit Planning – Karen could have been developing and communicating her plans for the business, so that the key stakeholders (her family and senior management) would know and understand Karen’s wishes and how to execute them in case of disability or sudden death (yes, that happens, too).

5. Financial Planning – a solid financial plan could have established family assets in addition to the business investment, making the group less reliant on Staywell Corp for support.  Debts could have been managed to maximize interest deductibility.

Karen and her family have a tough road ahead of them but their situation offers an important lesson to the rest of us. Call your trusted advisors today and put some plans in motion to mitigate the implications of unexpected yet potentially disastrous situations.  After all “What if” can often turn into “What now?” but with a phone call or two, you can avoid that.

For more information, please contact Howard Lerner at SBLR LLP Chartered Accountants at 416-488-2345 Ext. 222 or at hlerner@sblr.ca

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