Case Study – Profit Driven Marketing (Special Trade Contracting Industry)

This is the first of our “Case Study” small business series, which GSM will feature on a regular basis.

The Company has been in the fire protection and general plumbing business since the early 1970’s. The current owner took over sole ownership of the business in 1995. Under her management the Company achieved consistent year-to-year profitability, until fiscal 2007. The gross profits in 2005 and 2006 were 29.5% and 31.2%, respectively, exceeding the industry average of 26.5% by a significant margin. However, in 2008 the worsening economic conditions which led to a recession, and foreign competition in the core industries of the region contributed to a drop in revenues of 31.2%. Trying to maintain their market share in a diminished market, competitors drove down the historical margins. The Company’s gross margins plummeted to the 12 – 13% level for three consecutive years thereafter. Unable to make substantial fixed costs adjustment to compensate for the steeply reduced contribution to overhead, net operating profits dropped into the red to the tune of 24% in the last fiscal year. This was expected to improve in the new year, but remain negative.

Where in the past the Company could count on 25-30% of the projects to be directly negotiated with general contractors, the intense competition compelled them to go to an open bid process – forcing a price war. The Company followed suit by reducing the overhead rate on many projects in order to be awarded the bid. At the same time, the pricing model used was inaccurately tied to the Company’s past financial history. The Company thus fell into the classical trap of competing on price alone by not effectively promoting the true value of its fire protection and plumbing services.

The strategic plan sets out to realign the company with its past history of consistent profits, by determining an appropriate marketing mix and sales effectiveness that will drive revenues past the $10.0 million level, at a 31% targeted gross margin. The strategic plan is to be matched by the implementation of a more accountable organization, improved financial and operational controls, and effective communications.

The Company relies on a core group of 40 clients that provided annual sales of $8.60 million in the past year, primarily located within a 100 mile geographic area. Twenty customers contributed 80.% of the total sales. In the top-20, eleven clients are from the core area – contributing 30% of the sales; three were located outside this area – contributing 50%, mainly due to a single large construction company, which accounted for 30% of the total. The approximate population in this area is 2,150,000. The biggest city where the Company is located has the highest population of approximately 900,000, and represents the greatest opportunity for growth.

In order to establish a successful strategy for future growth more definition is required of sales goals per Estimator/Project Manager and per market segment – health care, industrial, commercial, residential, institutional, and per service/product type. This is now in place and provides a starting point for future planning.

With the emerging strength of the economy, the Company is in a good position to grow and gain market share through the development and implementation of the new market strategies, improved sales program, and organizational effectiveness. It is the belief of the management team that a well-established Company with a superior marketing program can outdistance its competitors.

Based on licensing for fire protection and plumbing services, the Company’s territorial reach covers four states. It is difficult to establish market size in the targeted area. The national and regional census on fire protection equipment is mixed in with plumbing under the 1711 Standard Industry Code (SIC). An analysis of the competitors, and an estimate of their relative size in terms of number of employees and revenues is a valid approximation of total sales volume in the active territory.

Estimating the market size will lead to better targeting of market share. The Company’s goals and objectives need to be seen as a percentage of the total market potential. This leads to a more valid assessment of whether the goals are reasonable and attainable. It is insufficient to simply state the objectives in terms of annual growth rates. Seeking to improve market share by 5-10% is much more difficult than a 1.0-2.0% gain. The former calls for the allocation of vast marketing resources; the latter can be achieved with limited resources, but creative marketing mix and sales effectiveness.

Projected sales for the next fiscal year are $10,200,200. This represents a 8.70% share of the available market, within the Company’s territorial reach. The projected growth is $1,600,000, which appears aggressive, but when viewed from the vantage point of market share, it represents an increase of 1.42%. The macro economic conditions are currently conducive to expansion of the market, and well-positioned companies can gain market share through superior marketing mix strategies. The Company’s target markets are new construction, renovation, and retrofits in the commercial/industrial/institutional/health care/residential sectors. Within these broad segments the company is experiencing the fastest growth in health care (41%) in the new year, compared to only 15.6% in the previous year. This dramatic rise is mainly due to the long term contract with its principal client.

The health care segment brings new challenges because the work is generally more structurally complex than the historic industrial and commercial work with its primarily open box structures. Communications between the Construction and Estimating departments must consistently include feedback on the true costs of installation, so that they are pricing for what is achievable in direct labor on these more intricate projects. Although growth projections are rather aggressive in the next three years, care should be taken to avoid over concentration of activity with one single client as was done before.

A breakdown and comparison of sales per segment provides the basis for planning future growth. This must be tied to a definition of relative gross margin contribution from each segment. While this information is nor presently available, it will change with the switch to a new accounting software at the start of the new year.

The market can also be defined by the services and products that are offered by the Company, tied to the needs of the different customer segments. The forecast revenues are separated into four revenue streams, which reflect the different services that the Company provides: from a financial analysis of the previous two years, it is clear that service and inspections work produce an average gross margin of 47%. This compares well to the targeted gross margin for installation work of 26%. In fact, while the company was achieving only 12.0% overall margins in 2007, service and inspection work continued to exceed 44%.

From a service/product mix standpoint these statistics indicate that the Company should become much more proactive in growing the service and inspection work in the future. A good start was made by tracking sales by separate revenue streams. Inspection has recently been placed under an experienced manager, who reports directly to the General Manager.

Seven Ways To Upgrade Your Digital Marketing

The four drivers of marketing – product, price, promotion, and place – have been transformed by the digital age. This is particularly true for promotion and advertising. Without some form of advertising, potential customers will not be made aware of your business, and the products and services that it offers. This is just simple logic. But since the onset of the digital age, advertising and promotion have taken different twists and turns that require a new mastery.

The methods of advertising have changed dramatically in the digital age. The ingenuity of marketing managers has never been more tested to come up with new ways of getting their messages out to the public. The successful ones have discovered a trove of exciting digital strategies that are well suited to the global reach of the internet.

 E-mail marketing

Continues to be used but with limited impact. Abuses like spam and the establishment of regulations against spamming , has restricted this avenue of promotion to permission e-mailing, opt-in subscriptions, and to sending out E-zines and newsletters. Though this can still be an effective marketing tool, it can limit the sales effort to existing customers. It is essential to add an ever-green array of new customers to opt-in to e-mails. One way of accomplishing this is to provide new and interesting website content exclusively for those visitors who sign in with their e-mail addresses.

Article marketing

Articles that carry a message geared to niche markets have taken the lead in online advertising. These articles utilize an indirect approach. They do not refer directly to particular products and services offered by the company. They are designed to allude tangentially to them through helpful information that appeals to the general public. For example, a wine maker can write an interesting article about the wine making process, which drives traffic to the company’s website. Self-help, how-to, and various tips on best techniques are examples of articles that can generate internet traffic to a particular website.

To these subliminal hints in the body of an article, you can also add a personal profile of the author. This creates an opportunity to add the Uniform Resource Locator (URL) of the company’s website and leads to the exposure of its products and services through back links.

Article Directories

Many websites have been created for the exclusive purpose of accepting and posting articles to their site. This repository of articles and information, covering a vast and varied content, attract millions of visitors. These directories are frequented by other marketers looking for free content to enhance their own website’s traffic capability. This creates a vast network of linked websites that have an additive affect on traffic. A single article could conceivably connect thousands of other marketers. This is how articles, and YouTube videos go viral and acquire a global following.

Writers gain recognition and influence

Article and blog writers can gain international renown by submitting fresh and interesting content. The writer(s) become celebrities in their field of expertise, and have significant influence in the kind of choices that people make. Finding and developing creative, business oriented writers has become an essential part of cutting edge marketing.

Honing article writing skills

Always write as if you are talking to someone in particular. The more personal the message, the more interest it will generate. This translates into always keeping in mind the niche customers that you are trying to reach and appealing to their needs and wants.

Don’t get too technical

Writing should be attractive to as many people as possible from all walks of life and all levels of education. Find the critical balance that will make your articles appealing, both to the professionals and amateurs. Stay away from complex terminology that will be understood only by the initiated.

Avoid controversy

In articles that have a marketing purpose it is advisable to stay away from controversial topics and negative messages. This usually excludes political , socially sensitive, and religious topics. Keep it informative, simple, positive and potentially appealing to a large audience. Lean towards the light and humorous.

Business Mindfulness

After completing another hectic day at work, putting out fires, answering a myriad e-mails, and dealing with accumulated issues and problems, most of us just want to crash out, do nothing strenuous, or pacify ourselves with the latest Netflix episode. Nevertheless, tomorrow will bring new challenges at work with their inherent stresses. This creates a vicious cycle that drains energy and contributes to early burnout. Most of us just accept this as the nature of the beast. Work is fundamentally stress-filled and there is very little that we can do about it.

But it doesn’t have to be that way. Eastern belief systems have shown us the way to a more tranquil mindset, which can be applied to the business environment. Stress is a condition that we inflict on ourselves. Operating from a calmer mindset, problems and issues that arise during the course of the day can be handled with more equanimity. This approach usually transforms itself into better solutions, because we take the time to carefully weigh the cons and pros without rushing into decisions. By slowing down the brain we permit it to arrive at more well thought-out solutions.

The beauty of this type of approach is that anyone can gain this calmness of thought and action with some practice:

Calmness before and after the storm – Most of us operate a hectic schedule and find that time is very constricted. Setting aside ten to fifteen minutes of meditation time before and after work seems like an impossible sacrifice. But time is often dissipated on unproductive thoughts and activity that leads to waste. A calm mind is a more focused and less disturbed one, able to concentrate and prioritize better. Meditating for 10-15 minutes before the storm – in the early morning – takes some time but its net effect is time saved..

Review your day in a more relaxed state – After the afternoon meditation, let your mind quietly review the day’s activity, interactions with other employees, customers, and any unsolved problems and issues. Solutions will come with unexpected ease, so that you can be more prepared to tackle accumulated problems the next day. Dedicating 10-15 minutes after work will suffice and should create a more efficient flow of ideas. Just sitting down in a quiet space and slowing down your breathing may be all that is needed. You can accomplish this without anyone being aware that you are meditating. There are many free tutorials available on the internet. You can choose one that best suits your lifestyle and schedule. A helpful book on this subject written by a business person can be found on Amazon: http://www.amazon.com/dp/197320438X

Eliminate the small stuff – Our minds are often entrapped in petty thoughts that take on a disproportionate amount of time. Many of these deal with ego and status infringements by others. We spend time overacting to perceived slights and negative remarks by work colleagues, family members, Facebook friends, and others. The old cliché of not sweating the small stuff can be more easily managed by a calm mindset. Name and breathe out these petty concerns during meditation.

Prioritize the big stuff – The same process can be used to prioritize the really important tasks that have to be undertaken the next day. A calm state will facilitate the choices that you have to make, and add an intuitive spark to the thought process. By being prepared for tomorrow you break the stress cycle, and begin operating in a more relaxed and productive state. Unexpected and disruptive events will always shake things up, but now there is recourse to a better approach.

Stop the brain traffic before bedtime – In order to start the next day on the right foot, we need a good night’s sleep. But the neurons and synapses of the brain keep transmitting all sorts of information and causes us to unnecessarily dwell on it. The solution may be to open up a book and read ourselves to sleep. If this works, then this becomes a form of meditation. If not, try a short form of meditation while lying down in bed, where you concentrate on your breathing or on a single sound (mantra). Try using a prolonged sound that resonates in the brain and removes all other thoughts (like sorrr.., or ommm..).

The one-minute meditation – Author Ken Blanchard wrote and influential book on management two decades ago called the “One-minute Manager”. It continues to be popular to this day because it simplifies the process of management into its essentials: the one-minute goal, one-minute praise and one-minute reprimand, etc. To this it would be very useful to add the one-minute meditation. Utilize this to prepare for any important meeting or event, to relieve stress and clear the mind of distractions. Either take a series of deep, prolonged breaths, or repeat a mantra sound internally for the one-minute duration.

The Value Of Women In Business

When we think that gender inequality has been defeated in the advanced economies of the world, recent statistics clearly show that there is still far to go. On the average, women earn 83% of what a man gets for the same job description. This ratio has progressively gone up in the last two decades but there is no reason that the gap should still be so significantly high. The last vestiges of gender discrimination is partly to blame, but it is also a question of self-confidence, value assessment, and an objective approach to salary negotiation.

These personal traits hold true not only for female employees but also for business owners who tend to undervalue their products and services, and price them below the average market levels. This mindset, that in order to compete for a job or in the business world, women have to somehow be more accommodating has held back their progress towards full equality. There are well established strategies and techniques for getting the best possible outcome that apply to both men and women. For the latter, it is a matter of building up a higher confidence quotient. Not allowing others to determine their value is one of the main paths to pay equivalence and pricing maximization. It is also a practical means of boosting self confidence.

Perform a self assessment – Many women and men make the mistake of waiting for that annual performance evaluation to determine their value and scale of pay. It is essential to use the same employee evaluation format to perform your own self evaluation long before the scheduled review, and be totally prepared with statistics, specific references to contributions, and research on comparative earnings both inside and outside the company. The internet is very helpful in providing wage and salary data across different geographic regions.

Create your own job performance criteria – If the company’s job description are too generic and do not incorporate measurable job performance requirements, then define this yourself ,and show how you have directly contributed to the major business drivers such as revenue growth, productivity, cost reduction.

Use a scoring method to define value – On a level of 1-10 score yourself on the following key job related factors: Education degree or certificates; advanced courses completed; years of experience; knowledge of work; level of independence in job performance; judgment; creativity; team cooperation; leadership; overall performance; outstanding contribution during the year. Add the score and use it as a negotiating strategy. Be ready to respond to any negative feedback.

Learn how to blow your own horn – Female employees and business women sometimes feel that talking about yourself in a positive and confident manner can appear abrasive and clawing. This can indeed be so, if done with arrogance, and too much bravura. However, when this is performed diplomatically, at an appropriate moment, and supported by statistics, it can be very persuasive. Keeping the tone and body language at an even keel adds impact.

Avoid language that diminishes you in any way – When this is done it downgrades personal value in the eyes of others. Stay away from expressions that contain words such as small, little, insignificant, poor, low etc.. If you have done well in a business venture, don’t bashfully refer to it as my small business, or that you have played a small part in the company’s success.

Price your products and services objectively – There should be very little emotional content in pricing. The focus should be on achieving a profit that is commensurate to the industry in which you are competing. The pricing formula must be based on the data for direct and overhead costs, and gross profit found in the historical financial accounting records. Being competitive is not solely a matter of price, excellent customer service often compensates for a higher price, and women are particularly good at using empathy to that end.

How To Be A Consistent Winner In Business

There are individuals who are more consistently successful in business than others. This does not mean that their record of success is totally unblemished. It does mean that they eventually win because they are able to bounce back from adversity, learn from their mistakes, and ultimately succeed in achieving their goals and objectives.

These may vary from one individual to another. Not everyone measures success on strictly monetary metrics. Becoming a billionaire is not on everyone’s radar. For some, it is a matter of achieving consistent growth in revenues and profits so that they can gain financial freedom. Others encompass the welfare and happiness of their employees in their calculus of success.

No matter what the underlying reasons are, in business there is no escaping the fact that winning relies on building a viable and secure platform, which can withstand the vagaries of time, creative destruction, hyper competition and globalization. Just surviving in this environment is difficult, thriving requires a winner’s mindset. It is worthwhile to pin down the factors that contribute to winning:

Boost your knowledge – Recognize early on what it is that you know about the business and what intelligence you lack to succeed. It requires an honest assessment of your strengths and weaknesses and how they may affect the company’s performance. Certain weaknesses can be compensated for by hiring somebody who possesses the missing skills and knowledge. However, people that are hired do not necessarily become permanent cogs in the organization, and may choose to move their services elsewhere. Winners are fully cognizant of their missing links, and make the commitment to reinforce them by registering to online courses, subscribing to continuing education, or seeking experienced mentors. They understand that you cannot fully rely on others to fill the gaps.

Take the long term outlook– To win in anything you start of by building a solid foundation that will endure over the long term. While setting objectives in a five and even ten year time frame, you cannot get there without shoring up the company’s short term needs. It is only through a strong organizational structure, intrepid marketing, optimal productivity, and solid financial controls that the business can succeed over a much longer time horizon. This requires other talented players in the organization to work in close proximity and cooperate in setting goals and objectives.

Leverage through delegation – In any organized endeavor you win or lose as a team. This is as true in sports as it is in a business environment. You require total synchronization, cooperation, and commitment of all players. The coaches can’t succeed on their own, they need to delegate and distribute responsibilities to each member of the team. The key word here is delegation, and successful managers know that they cannot move forward without delegating responsibilities and authority to fulfill the different functions in the organization. They possess the necessary confidence to let go of the “B” list of responsibilities and allocate them to others without fear of losing control. They are also aware of the “A” list consists of and focus most of their energy there.

Turn failures into opportunities – Nobody goes through life without some failures in their personal or business life. The business environment is a risky one, particularly in the initial years. Forty percent of companies fail in the first five years. This can undermine confidence, destroy personal and business connections, and make it difficult to fashion a comeback. But to win, you must possess the drive to get up from the mat and find a way to overcome adversity. A good start in the case of initial business failure is to learn from the mistakes and forge a new, more sustainable plan for the future. In order to win you may have to start by losing.

Get others on board – A winning profile always includes great communication skills that promotes morale and group cohesion. This is evidenced by motivating, coaching, mentoring others to up their game in the performance of their duties. It is an indispensable trait that is either inborn or needs to be developed. The adept communicator of today does it well not only through verbalization but is also highly capable of using the internal and external communication media to their advantage. Effective company e-mails are important, but just as necessary is the ability to use social media to capture and influence a wider audience.

Manage time well – No commodity is more precious than time, yet it is often wasted on dealing with upside down priorities. The winners realize that their time must be focused on the items that are in synch with their stated responsibilities and are intrinsically tied to the achievement of revenue and profit goals. Time is managed through tight scheduling of priorities that include not only company obligations but also personal commitments. One can easily undermine the other. They are constantly aware of what the “A” items are on their schedule and deal with these first.

 

Become a Dataist – Transform Your IT

Super algorithms aided by bots with artificial intelligence are making it possible to harvest data from a large variety of sources. Social media, banks, online e-commerce businesses such as Amazon place tremendous value on data. Mergers and acquisitions, worth billions of dollars, are often guided by the quantity and quality of data that they bring to the table. This data allows a laser sharp definition of target markets, which can now be focused on a single individual. Customer targeting is made with precision that was not available even three years ago. Cloud based data storage has made it possible to store immense quantities of data, and then convert this huge flow of information into useful market insights. We are now fully immersed in the era of mass data.

The large multinationals are at the cutting edge of this movement, and have become prime movers in applying the harvested information to grow their market share. The potential for data is vast and it can transform any business. Marketing strategies, targeting, segmentation, and operations can all be made more productive and efficient through better data.

Small businesses must embrace data – But is the small business sector at a disadvantage in this data onslaught? They certainly don’t have the size and heft to gather and use data to the same extent as the large players. But they can surely establish a creative IT department that can organize their data flow better, and tap into the data banks of others. Government legislature is moving towards increased sharing of data so as to create a more even playing field for all. The European Union has taken a lead in this direction and is expected to draft regulations on this crucial matter soon.

Become good data flow managers– Small businesses must take up the challenge of modernizing their IT departments to compete in the global market with the big players. By transforming themselves into good data flow managers they can fuel their performance at every level. Not getting on the data bandwagon is no longer an option, it is a path to obscurity. But solely gathering data is not the solution in itself. The challenge is to turn this data into an actionable plan.

Obtain outside assistance – IT know-how can be leveraged by employing the services of outside experts who specialize in data utilization. This can offer a more competitive boost to small businesses unable to afford the top talent. In this age of specialization and global connectivity trusted IT consulting companies can be used as mentors and facilitators for small business. Empowering the IT department in this way should be part of every business plan.

The data loop – Access to mass data allows companies to keep up with technological transformation. This is accomplished by analyzing the volumes of data generated during design and production. Every company can, to some degree, convert their data into a continuous loop of useful feedback for improvement.

Match IT solutions to specific industry needs – This is a fundamental principle of marketing. Mass data optimizes this connection, and provides a much sharper image. IT departments must also learn to anticipate change in this age of rapid creative destruction and find a way to adopt to innovations like machine learning, 3D manufacturing, robotics and even cyborgs.

Check the cost benefit of IT investment – Most small businesses don’t have deep pockets, so the investment in IT must be tied to tangible results in sales and profit growth . It is important not to get caught up in the technological buzz, and incorporate changes without analyzing the cost to benefit. Leveraging the IT department with outside assistance, and introducing new software should be approached with care. Look for the best value by choosing potential IT partners that have a proven record of success, and bring the experience and skill sets that are well suited to your particular business.

Sharpen The Cutting-Edge of Your Marketing Mix

With the massive amount of information, data, videos, and podcasts churning on the internet, it is difficult to devise cutting-edge strategies that don’t quickly get dull, and lose their power of conviction. Marketing has entered the era of hyper competition where you can no longer find safety in a local market, because consumers possess the power to search as far afield as they wish through the power of the internet.

Whether you are a small or big player in a particular market segment, your marketing mix must now respond to the challenges of ever freshly devised strategies that understand and utilize the full range of internet marketing tools. But not all of this is brand new, the old strategies have been altered and modified to adjust to the digital age.

Ultimately, it is still a question of catering to the needs and wants of customers, and providing the best possible customer service that will maintain them in the company’s fold. The new market has moved from a predominant focus on content to finding complementary products, piggybacking possibilities, and marketing across networks, multi-media, multi-platforms, and affiliated online networks. Looking for synergistic opportunities, and willingness to link to other websites in a give-and-take environment has proved to be the winning formula for capable players.

The website has become the preferred tool for new marketing strategies because it is flexible, low cost, and has the potential to attract a huge audience. It is a question of honing certain successful strategies to the needs of niche markets. Through the power of data harvesting and cloud storage, the targeted markets can be shrunk to ever more finite segments. These seven action steps will help you to modernize your marketing strategy:

The boomers want nostalgia – This is still the largest age demographic, which is moving into their sixties and seventies. Their youth has been dedicated to embracing the peace movement, social liberation, individualism, political protests, and sexual freedom. Many of their most life transforming ideas and experiences are associated with this period. They are still caught up with the tastes, sounds, feel, and touch of the late sixties and early seventies.

Many of them have accumulated or inherited wealth, and want to spend it on themselves, their children and grandchildren. No large demographic group is homogeneous, and therefore their needs are dispersed across a wide range of products and services. This is where niche targeting becomes critical, but fortunately any marketing strategist can hook up to providers of very specific data on the internet, and hit the target with much more precision. In today’s online marketing programs, tying products and services to articles and blogs that invoke the nostalgia of the boomers’ youth has a winning appeal.

The millennials trust their peers – The class of ’82 to ’04 is a different breed that has been squeezed out of jobs by the boomers, who are loth to retire early. This group uses different connectivity networks that are more inclined to trust their peers, and look to them for recommendations. Social media is the strongest influencing factor in their lives. They follow their friends on Twitter, Facebook and other platforms to pick up on what is in, and cool to have. Although not fully employed, or underemployed in jobs that are not compatible to their level of education, many of them have reached the nest-making phase of their lives. This leads to a plethora of demand associated with this life cycle. But the market place has been drastically transformed, so that instead of the acquisitions made by their parents they are choosing to participate in the sharing market, where almost anything can be leased or loaned. This creates other opportunities on which almost anyone can capitalize i.e. rent a room, a car, equipment, etc.. It makes for an ideal environment for small businesses. There are many ways to take advantage.

Solve problems and prosper – Instead of directly flogging your products and services through the conventional media, redirect some of the marketing funding to self-help blogs and articles associated with your website. Operating instructions or installation advice for software or equipment on YouTube will be much appreciated and can be linked to your website’s other product offerings. Keep this kind of helpful information flowing on a weekly or monthly basis, and it will drive more traffic to your site. This holds true for almost any product or service. Using the indirect approach scores better across all generations.

Entertain them – Cats and dogs doing funny and weird things have gone viral on YouTube countless times. Weird and funny video episodes, and comic doodles get attention and can carry subtle references to associated products and services. Fun presentations can lead to serious messages that will be appreciated by the viewers. You can hire professionals for this, or try and develop this type of content through the creative talent within the company. All you require, at times, is a smart phone and an interesting theme. Pictures and videos can be programmed to contain links to your website.

Turn your customers into idea generators – In this age of sharing and group participation through cyber-networks, creating a special members VIP group within your website, or linked to an associated site, creates an interactive ecosystem that encourages super loyalty. This special group feels empowered to participate and contribute to the company’s success. You need someone in the organization to be in charge of this program – to answer serious inquiries, and consider incorporating valuable feedback into the company’s products and services.

Small Business And ESG

Small businesses that ignore ESG as a passing phase do so at their own peril. In the next few decades there will be a massive transfer of wealth to the millennial generation. This is purported to be the largest in history, surpassing even the inheritance of the Boomer generation.

The influence of the former is already roiling the investment market, because their criteria for placement of funds is vastly different from that of their parents. Boomers have disassociated virtuous activity, such as donations to charities or voluntary community work, from investment of their money. The millennials, on the other hand, tend to connect the two closely. They are bypassing the old polluting and sin industries like coal and oil and embracing cleaner renewables. This not only influences their own actions but also that of their parents, who ask them for advice.

This amounts to one of those tectonic shifts in the market place that small business needs to pay much more attention to. The value of the products and services that are produced are already much more subjected to ESG criteria environmental, social, and governance impact. Both short and long-term business planning must take into account the changing values of this new cohort of investors and entrepreneurs.

The ESG and SRI connection  socially responsible investment is implicitly connected to ESG. The new generation shows every sign of elevating this to a priority for their investment decisions, and purchasing intentions. This applies not only to large investment vehicles such as private equity funds, which sell shares to the public on the stock market, but also to small business funding and start-ups. Many banks are now requesting a sustainability assessment from both large and small businesses.

Small businesses can boost SRI – The company website and newsletter is a good starting point to show that your business follows a socially responsible path. This can be manifested through a commitment to a more eco- friendly supply chain for products and services produced by your company. If you import some of your parts, it is important to know that your foreign suppliers treat their workers well and respect the environment. It is not enough just to pay lip service to this, because in this internet connected world, information is just a click away. Activists investigate corporate claims and call out laggards.

Millennials are more demanding- They are twice as likely than the average consumer to check the impact of packaging on the environment, and to verify the social credibility of companies from which they purchase goods. Switching to biodegradable packaging, and acknowledging ecological and social concerns is not expensive, and must become part of the small business mindset.

The ESG trend is here to stay – When very large money management funds start paying attention to a new trend, and changing their investment philosophy, no company small or large can close their eyes to the impact that it will have on their business. The reality of climate change has its deniers, but the millennials are not fooled and have jumped on the bandwagon of sustainable development.

The virtuous business leader is in favour -Social responsibility is connected to business ethics. The consumers in advanced countries demand a different approach to the way business is done. The exploitation of the environment at any cost is no longer tolerated. Climate change dynamics, supported by a more activist generation, will force business owners to shift to a more ethical approach. The sooner this is realized by business leaders in different industries the better will be their chances of survival in the long-term.

Social media will play an important role The millenials are masters of social media, and will use their networks to promote the ESG concept. This has the potential to attain a critical mass that will sway people all over the world. The effects are already visible in the way that the Chinese government has committed itself to non-polluting sources of power. The vast inherited wealth of the new generation will support SRI with hard cash.

Improve Your Entrepreneurial Skills

Entrepreneurs have certain unique qualities of vision, creativity, and risk taking that are well suited to starting a business venture, but often have no patience with the seemingly monotonous, day-to-day grind of operating a business. The passion and enthusiasm in starting something new dissipates with time, and is replaced with a whole range of concerns that involve seemingly boring financial controls, organizational structures, sales and marketing strategies, and employee problems and issues. This requires a major adjustment, which is not always in line with the entrepreneur’s temperament and desire for ever new challenges.

While they can hire others to fill in the gaps in their experience and knowledge, they should not become totally dependent. The peripatetic movement from one venture to another, without ensuring the survivability of each, quickly stretches financial resources. Turning into an effective manager can be just as exciting as starting a new business. Contributing to the strategies that affect growth in the company’s market share, revenues, and profits can be personally stimulating.

There are certain key behavior patterns that an entrepreneur must master right from the start, which will serve them well in any new undertaking. Some are based on common sense, others require a deeper knowledge of good business practices, which can be acquired online (MOOCs) or in formal educational centers. It is all about constantly improving their business related game, so that every new venture will be built on a stronger foundation. It is useful to play by some well established principles.

Business is not poker You certainly don’t want to go all in on a venture as you would in Texas Holdem. This is particularly dangerous when the gambled stakes do not only belong to you but are shared with other family members or friends. No business is completely safe and certain, as the low survivability rate of small business attests to. The impulse to put everything on the line is never a good approach. Use your entrepreneurial skills to raise money from third parties, so that both successes and failures will be shared. Conveying passion and enthusiasm for a business is usually an intrinsic part of the entrepreneur’s makeup and can be put to good use in raising seed money or expansion funding.

Protect your intellectual property (IP) Many businesses are started with breakthrough technology developed by the founder. The cost of seeking patent protection, and trademarks may be high for a start-up. But then procrastination sets in until it is too late. Unprotected IP is quickly lapped up in today’s global inter- connectivity, and internet hacking. Being first in the market place certainly helps but without protection the competition will quickly copy and adjust their own products to keep you from realizing the fruits of your innovations. Include IP protection as a prime item in the initial financing.

Raise your game Just as in  sports, you tend to raise your game by playing with superior players. They have mastered certain techniques and strategies that you can observe and copy. To find these advanced players, it is beneficial to join business clubs and associations where you can meet celebrity business people. Search for them in the community, or participate in presentations by guest business speakers. This is a proven source of inspiration and new knowledge that can then be applied in your own business. The internet is another repository of useful business articles and blogs presented by experienced and battle-tested writers.

Keep track of your successes Repeating what has proven to be successful in one business context is often transferable to another. It is good practice to review and record in detail why, and how success occurred in a given situation. Breaking this down into a step-by-step process is like building an algorithm, which can then be applied somewhere else. It may be necessary to tweak the formula slightly but it provides a useful head start.

Check in with your customers Never shut yourself off from having some direct contact with your customers. Leaving it exclusively to the sales and marketing people may leave you out of the loop on customer issues and problems. This is one area of the business where barriers to communication should be removed, and where the entrepreneur must always stay informed. Nobody in the organization has the same keen interest in the success of the business, which starts with customer satisfaction.

Question all fixed costs Many of the greatest companies were started in basements and garages by intrepid individuals with ground breaking ideas. But when these ideas take on wings and become marketed, the initial low fixed costs can quickly escalate and eat up profits. Every overhead item must be carefully scrutinized and justified through a cost/benefit evaluation process. This holds true for all businesses. It is particularly important for any new business venture because of its financial fragility. Salaries are one of the biggest cost items.

Obtain Business Financing Through OPM

 

 

 

Not knowing how to obtain financing for your business can be a huge hindrance to growth. You may see, what in your mind, is a great opportunity to create wealth for yourself and others. It could be some real estate deal in your own or some foreign country; or you have one of those “eureka” moments for a product or service that provides exciting possibilities. Unfortunately you have absolutely no money to carry this through to reality. This is where knowing how to organize an OPM can get you the initial funding needed to launch your project.

OPM stands for Other People’s Money. If you truly feel passionate about your project and have done your homework on competitive offerings, market acceptance, preliminary survey of consumers and potential customers it becomes a matter of persuading those with money to get involved. At this stage of development the established avenues of funding such as banks and other financial institutions cannot be targeted because they are not risk takers and need existential proof of success in the short and long term. Many budding entrepreneurs are prevented from going further, as the money obstacle seems insurmountable to them.

This is the time to build what is referred to as an investment deck – or a platform from which you can solicit funds from private individuals or non-establishment investors. A deck consists of a detailed business plan, which clearly states the goals and objectives of the business, defines the market in terms of product/service, price, place and promotion, analyzes the competitive landscape, defines the uniqueness, benefits, and features of the new business, describes the strengths, weaknesses, opportunities and threats, and places this all in a financial context.

The latter requires help from an accountant so that realistic projections of revenues, costs and profits can be made that will withstand careful scrutiny. A three year projection that includes a profit and loss statement and balance sheet is a prerequisite. This is not only necessary for the potential investors but also provide a guideline for the founders.

Once the investment deck is in place it now becomes a matter of targeting investor groups who may be persuaded to join you in developing and bringing your ideas to market. This involves a carefully honed presentation strategy, which effectively uses the information in the investment deck to solicit funding. Passion, commitment, enthusiasm supported by cold statistics are needed to win people over to your cause.

Fortunately banks are not the sole source of initial funding for a business – Many of the world renown companies started as basement or garage operations that were launched through the help of ordinary individuals or organizations that provide platforms to raise funds. There are many sources of this type of assistance, each will require a slightly different approach:

Friends and relatives – These people know you and hopefully trust you. You will want to minimize the risks to any one person by soliciting money from many individuals in this group. The proposal may involve shares or loans, depending on the individual’s preference. Keep in mind that when accepting funding from this group you are risking treasured relationships that may be jeopardized if the business fails.

To minimize this, make sure that they are investing discretionary money that they can afford to lose if things go sour. No business is foolproof, and the best laid plans can be upset by shifts in the marketplace that are not foreseen at the outset. Being up front on possible risks reduces the consequences of negative outcomes.

The Indie approach – This uses the very successful online crowd funding platforms of which Indiegogo is one of the most prominent players. They have helped raise over a billion dollars in funding for start-ups in various business categories around the world. To launch a crowd funding campaign requires some preparation and initial funds but they are very reasonable, and can be organized on a shoestring budget.

One of the requirements is to create a video, which extols your product or services in a persuasive manner. The duration in which the solicitation takes place is limited and requires the full cooperation of the soliciting entity. The advantage of this form of funding is that you can reach a broad audience around the world, while at the same time making a special appeal to those people that personally know you. This applies not only to relatives and friends but also to the virtual friends on social media. Having a strong presence on such business platforms as Linkedin provides access to those that may themselves have been involved in the business launch process, and will thus be more receptive to the campaign.

Angel investors – are individuals who have set a personal mission for themselves to aid and incubate new business ideas and concepts. They have a more sophisticated approach in choosing where and how they place their money on risky ventures, but they are definitely open to new ideas. Usually, there is more interest in high tech proposals than other ventures, but this does not exclude the possibility of a sound business plan in established commercial or industrial sectors. Angel investors are usually involved in local business associations such as the chamber of commerce, and this is a good place to tap into this funding resource. A classified ad in a local newspaper can often ferret out this type of investor as they are always seeking new business opportunities.

Immigrant investors – Many countries offer a fast track to citizenship to foreigners who are capable of investing in new businesses. There is a minimum investment required, which is usually in the $500,000 + range. A good business plan, or/and a past record of success in business, or as an executive in a company related to the products and services in the proposal, is helpful. In most cases it is necessary to show that the new venture will provide additional jobs in the community where the investment is made. The commerce and industry development department in most countries would be a good place to look for these type of investors. Direct advertisement in South Asian classified ads is another avenue that can be followed.

Investment clubs – In most locations there will be some sort of formal or informal investment club, where people seek peer advice and group market analysis to make investments in stocks and bonds. Members of these clubs are usually less risk averse and therefore are more likely to welcome a presentation by a local entrepreneur with a good idea and plan. To locate these opportunity seekers ask around the neighborhood, or better still join the local chapter of the chamber of commerce where you will have a better opportunity of meeting them. Many are themselves involved in some business and understand the difficulties in acquiring seed or growth capital.

No money doesn’t have to be a show stopper if you have a great idea and a solid investment deck.