Posts Tagged ‘brand’

Do You Have a Job or a Business?

Tuesday, February 19th, 2013

I don’t know who first asked that question, or when.Business owner's strategy determines job or business

I do know that there are lots of business owners who either have never heard it or who have heard it but choose not to think about it.

How do I know? Because we meet them and, if you think about it, so do you. In fact you may even be one.

How do you recognize them? They fit one of 2 groups.

The first is the “solopreneur”. A solopreneur is someone who starts a business but never grows it beyond the point of having only 1 employee – themselves. (If I seem a little nervous it’s because, a few years ago, I came uncomfortably close to being one.)

Some people do it deliberately. They’ve often had successful careers in large corporations with large teams reporting to them. They reach a point where they’ve had enough of managing people and playing politics and want to get back to just doing the work they love.

Others do it by omission. They want the rewards of building a larger company but either won’t take the financial risks or they share some of the characteristics of people I’ll talk about next.

The second group is people who can’t get out of their own way. Their companies have grown, but nothing can happen in the business without them. For example, only they;

• Know the key contacts in every customer and supplier.
• Can fix things if a customer is unhappy.
• Understand how products are produced/services delivered.
• Can conduct interviews “properly” and offer jobs to new hires.

As a result they work as close to 24 hours a day, 7 days a week as is humanly possible – for years.

And, despite what they tell you, they are not happy.

The irony is that, even when they collapse because of exhaustion, no one will buy their company because without them it doesn’t exist.

Andy Bailey, who is a reformed member of the second group, recently wrote an article about it. He describes the 4 steps he believes make the difference between building a business and having a job.

1. Define the company’s purpose (tip – begin with why the business was started) and hire people who buy into it. That will build a strong culture.
2. Replace the people with all the knowledge in their heads with systems and processes. This is what Michael Gerber talks about in “The E Myth”.
3. Create demand instead of always chasing sales. Consistently deliver quality products/services on time and build a reputation for the brand.
4. Create a strategic plan which produces results via prioritized action plans involving everyone.

These 4 steps are a neat précis of the advice in books like “Built To Sell” by John Warrilow. And they separate the owner from the company and a job from a business.

Why is that important? Because you can’t sell a job when you’re finished with it. But you can sell a company.

So which do you have – a job or a business?

 

If you enjoyed this post you’ll also enjoy 8 Things That Hinder Growth.

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Features and Benefits Don’t Build Brands

Friday, July 15th, 2011

This is the second guest post from Jeremy Miller, President of Sticky Branding, a brand consultancy specializing in digital marketing and social media. Jeremy speaks, consults and writes on how companies build remarkable brands online.

Companies love to compare their products to the competition, and justify why they’re better. They’ve got the latest doohickey, fandangled, whatyamacallit feature, which of course makes them better than the competition.

RIM has embroiled itself in this classic feature-benefit positioning game with their Playbook tablet. The key selling features listed in their ads:

1. It plays Flash. “It runs flash. So unlike some tablets we can mention you get the best of the internet,  not just part of it.”
2. It’s smaller. “Small enough to take anywhere, powerful enough to take you everywhere.”
3. It runs multiple apps simultaneously. “It runs all this at the same time. Why can’t every tablet do that?”

RIM backs up these impressive features with its latest tagline, “Amateur Hour is Over. The world’s first professional-grade tablet.” Compared to what? The iPad? If that’s the case, this is a pretty precarious branding and positioning strategy.

Positioning on features and benefits is risky for 3 reasons:

1. Features are susceptible to innovation.

RIM’s positioning strategy is a classic one. It’s applied in almost every industry: automotive, consumer electronics, computers, building materials, you name it. Companies are constantly trying to up the ante, and offer their customers new features or choices.

The challenge is features can be displaced by innovation. Apple has been the 800 pound gorilla in the consumer electronics arena. The iPod made the Walkman and Discman obsolete. Why carry around a CD with 12 to 15 songs when you can carry 1,000 songs in your pocket?

Then there’s the iPhone, which sparked the app revolution for mobile devices. And now the iPad is changing the way we interact with the internet and consume digital content.

Apple is an unusual competitor. In less than a decade Apple it has created 3 new consumer electronic categories. They didn’t try to compete on features and benefits with existing options in the market. Instead they created devices and platforms that serve untapped markets.

RIM is entering Apple’s playing field, and employing a classic features and benefits positioning strategy is shortsighted.

2. Features aren’t always the deciding factor

People are wise to the feature-benefits positioning game. Eventually they get tired of the comparisons, and choose what they’re comfortable with.

The Playbook does some things really well, and the iPad does other things really well. At the end of the day, both Apple and RIM have released incredible pieces of technology. Really you can’t go wrong with either, and buyers know that.

3. People value intangible factors.

The Playbook may have impressive features and capabilities, but it’s not an iPad.

That may not be fair, but that’s how many people think. The iPad is a status symbol. The iPad has more apps. The iPad comes from Apple. The iPad looks cooler. Everyone else has an iPad, and I want one too.

Perceived value, perceived leadership and perceived quality all come together in the customers’ minds to influence their purchases. It may not be logical and may not even be accurate, but those perceived values are as important to customers as the actual features.

Brand beyond the features

Features and benefits come and go, but brands last much longer. People buy brands first, and features second.

Instead of pushing the features and benefits of your products and services, look to the intangible aspects of your brand. Why does your company exist? What does it value? What is it thriving to accomplish? What kind of relationship does it have with its customers?  These are the intangibles to build upon that can lead to a clearly differentiated brand.

You can reach Jeremy at Jeremy.Miller@StickyBranding.com or 416.479.4403, Ext. 22.

The Future Of Your Business: Succession or Exit?

Thursday, May 5th, 2011

Our guest this week is Jim Pullen of Concert Partners. His career has included cross-border mergers and acquisitions of international technology companies. He is a senior advisor to Tequity, a specialist M&A firm in the technology sector.

Succession or exit – it’s a stark choice, but since we are all mortal, one of these is going to happen!

A recent study of Canadian businesses showed that while 70% recognized that a transition or exit will have to take place, only 7% had a plan! And incidentally, selling at the best price at the right time doesn’t constitute a plan!

I worked for an international mergers and acquisitions company in both London (UK) and Boston (USA). While I was there we carried out a study of 250 M&A transactions we were involved in, over a span of 8 years.  The transactions took place in Europe, US, and Canada. 

We wanted to find the key areas that buyers looked for in a transaction.  Based on the study, we developed a framework for ranking and assessing a company on the factors that were proven to drive a valuation.

The main areas of value enhancement that emerged are described below.

1. Financial

This category includes basic financial metrics such as profitability and revenue growth.  Companies with high profit margins and high rates of revenue growth obviously command a higher valuation. 

Other aspects include the type of revenues a company generates.  Recurring revenues can add to a valuation as it makes the company’s cash flow more predictable. So, for example, a company that sells big ticket one-off products could look to build up more of an offering around maintenance and post-sales services for their product – where they can sign their clients into multi-year maintenance contracts. 

Companies with strong cash generation are also more attractive to buyers.  They are able to take on more debt that can be used to finance growth.  It also makes a leveraged buy-out possible.

2.   Market & barriers to entry

In this category the factors include the strength of customer relationships and degree of uniqueness the company enjoys in its market.  Companies that have a direct and strong relationship with the end users/purchasers of their product will get a higher valuation.

Brand, which clearly has to be part of a long-term strategy, plays a large role in the value a buyer places on a company.  We found that a strong brand can make up to 70% of the value in a company.

In terms of barriers to entry, companies should use many mechanisms to defend their position. Examples are legal protection though patents and trademarks, exclusive relationships with key suppliers, and building internal expertise through strategic hiring.  Anything a company can do to make it harder for competitors to enter their space will help command a premium on valuation. 

3. Human resources

In this category, the framework looks at both technical skills and management skills.  As companies grow, it is important to distribute the key skill sets deeply across the organization.  Often after an exit, the founders will want to leave, either because they have a large financial gain or they prefer to be entrepreneurs over working in a large corporation.  A buyer will place a premium on a deep management team so the company can continue to innovate and execute even with the loss of the founders.

4. Strategic fit

This factor relates to the degree that the company being acquired is a strategic fit for the buyer’s product portfolio.  We have seen cases where buyers are willing to pay a 50%-70% price premium for a company that fills out a missing piece of their product portfolio and gives them access to the markets and expertise. 

Partnerships are an excellent way to lay the foundation with a potential buyer.  A partnership is a low-commitment way for them to get deeper experience with a potential acquisition. If things work out well and strategic synergies start to develop then it is easy to take the step towards a deeper relationship.
 
5. Governance

The last factor involves good governance.  We have found that a strong board of directors can add a 25% premium to the value of a company.  This is due to the buyer having more assurance that the company has been well governed and there will be no unexpected surprises they need to deal with.

A Few Final Thoughts.

There are 3 main ways in which the succession issue can be handled: a younger generation of the family takes over; the executives buy out the owner via a management or leveraged buy-out (MBO/LBO); or there is a liquidity event (the shares are given some realizable value) by means of a trade sale or listing on a public market (Initial Public Offering or IPO).

Whichever route is taken, it is clearly in the shareholders’ interest to maximize the value of the business prior to that event.  The ideal time to begin that process is on day one, but it may not be too late; 2 years is a realistic timescale in which to groom a company for sale/transition.

Let me leave you with 2 thoughts. Begin thinking about it today. And get some help from people with experience.

Jim currently provides corporate development consulting services and mentors early stage businesses at the ventureLAB in Markham. You can contact him at jpullen@concert-partners.com

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