GoHuman Blog

The first question I ask is, “Says Who?  What makes you think you are going to get anything close to 5% of the market?  Are your competitors going to have some higher industry authority figure command that they give up some of their business to your company to keep things fair on the business playground?  Better think twice about that statement because business, like life, is not fair!”

Business plan competitions are becoming more commonplace on college campuses and in small business incubation centers across the country.  I have sat in and judged several, and whenever I see a business plan that says a company is going to capture X percent of the market, they lose me.

Business is a dogfight for revenue.  Your competitors are not going to roll over and let some new kid on the block take away their customers unless they are fat and happy or extremely incompetent.  Only the strong survive and if you don’t have a plan, or don’t execute that plan properly, get ready to eat a steady diet of Ramen noodles.

Less than a year ago, I was given a business plan to read in which the person wanted to open up a funeral home in a certain area of town that also happened to be where a client of mine already had the same type of business!  That was bad enough, but the business plan was the best piece of fiction that I have read in a long time.

The new guy was going to perform something like 50 funerals during the first year of operations, at $10,000 per funeral average, for total first year revenue of $500,000.  Yeah, right.  The location was terrible, he had no prior experience in the industry, and he had just finished getting his funeral directors’ license.  If it was that easy, everybody would open a funeral home.

First off, he was expecting 100% of his business to come from full blown funeral packages with caskets, grave vaults, funeral services, etc.  The reality is, more and more people are choosing cremation and direct disposition of the remains without all the bells and whistles, and the new average funeral costs substantially less than what he was expecting.

The business plan was so far off the mark and out of touch with reality that I decided to do him a favor, so he would not sink $250,000 + into a business that had no chance of making it.  I wanted to get him in front of my client, the funeral home owner in the same market, and work out a deal.  The new guy could rent an office from my client and play “funeral home director” for $500 per month.  He could have his own office, hang his certificate on the wall, be given a desk with a phone, and be in the business he was trying to start…the next day.

My thought process was this: my client was not afraid of this new competition.  He knew the new guy was not going to be taking any business away from him.  If he could bring in one new funeral, all the work could be done right there and the new business, plus the rent on the office, would be a profit center to him.  After six months to a year of playing “funeral director,” the new guy would see that his dream business was not very lucrative, that it was harder than it looked, and he could pack up his certificate and move out of the office.  All in all, he would be out a maximum of $6,000 in office rent if he stayed an entire year, less any business he brought in that year.

The upside was, if he actually could hit those projected numbers, my guy would be more than happy to sell him the real estate, crematory, and all the things he needed to operate a funeral home, and he could retire!  So it would have been a win-win for both of them, either way.

Unfortunately, the new guy thought being in the funeral business was his “calling” and went ahead to another bank and was somehow able to land a loan to buy a converted house and turn it into a funeral home.  After all, he had a decent credit score and the 20% cash to put down and that is all that the bank required.  Banks don’t normally make loans that have zero probability of success, but every now and then you can get them to make a stupid loan, believe it or not.  Just look at all the sub-prime mess and realize it still goes on to this day.

After about six months, this business had only generated about five funerals, four of which were cremations.  He was tracking to maybe do 10 funerals his first year, if he was lucky — a far cry from 50 full-service retail funerals at $10,000 a whack.  I highly doubt the business can show a profit with only 10 funerals even if the owner doesn’t take out any salary.

The point of the story is this: people start businesses all the time thinking it is a great idea, that they can do something nobody else can, and they deserve a slice of the market pie.  But reality is often a different story.  When I get a business plan and flip to the projections page and know, within two seconds, that it is unrealistic and not going to work, well, “It is fourth and long…time to punt!”

So if you are not willing to listen to other people who have been around the block once or twice, you really have no business going into business.  One of my favorite sayings is, “They don’t know what they don’t know.”  If you don’t know something, the best thing you can do is go find out what questions you should be asking before you make a monstrous money-losing mistake.  If you approach people in the right way, even certain competitors, but certainly business professionals who have no ulterior motive other than to keep you from making a huge and costly mistake, you will generally get some enlightenment that could save your bacon.

 

 

But as I thought about it, I realised I have already indirectly done this myself anyway. Globalisation is here and it’s not going to go away. I believe that globalisation is a major factor in the world economic crisis – or maybe that should be economic adjustment – and instead of trying like King Canute to keep the tide of less expensive overseas labour away, we just have to find ways of working with it and adapting to it. There are many positives to be found in this situation.

For example, I have used a website called fiverr.com several times and I’ve been pleased with the results. On fiverr.com people advertise what they will do for five dollars. I have had a cartoon version of a photo of myself drawn, a logo designed, and a QR code that links to my website. The people I purchased from were all apparently based in the US, so even in relatively wealthy countries you can find people willing to offer good, quality work for very cheap returns, for reasons known only to themselves.

When I clicked on the QR code I had commissioned, my website appeared with adverts on it that I hadn’t booked and wasn’t earning any money from – so I’ve nailed the reason behind that one. As for the others, maybe they were looking for ways to broaden their portfolio or have full-time work but wanted some extra cash from doing something they enjoy.

On www.freelancer.com, project fees start at $30 and rarely exceed $200, according to the website. I think we’ll see many more of these websites soon, offering a range of skills within various price brackets. When I designed my own business website, using a WordPress template, was I denying a local website developer income? Not really, because I simply couldn’t afford to pay the £600 which was the lowest price quoted when I tried to find a developer. I just don’t have that kind of money.

The first website template I tried gave me terrible results, so I did an online search and found www.350.com. It has a very user-friendly drag-and-drop system. The result looked a bit rough round the edges, but was easy to update and served its purpose well. I stayed with www.350.com for about a year before reading an online blogging course from Glen Allsopp of www.viperchill.com. Glen’s course explained how to design your own website using an online web-hosting company (I went with http://tsohost.co.uk) and a WordPress template. I am very happy with the result. The website looks professional and is inexpensive to operate. There is much more I could do with it if I had the time, but the important thing is, it brings me customers – relatively high-spending ones.

I launched an online shop about 18 months ago, and I pay for a UK-based professional online shop template service, www.ekmpowershop.com. So I have used inexpensive outsourcing to get me started and then upgraded when the need arose.

Social media is an important learning curve. It’s easy to do it yourself, but experts can help you maximise its potential. Finding the right expert is the problem. I have a Facebook and a Twitter account for my business, but I haven’t made the best use of them. I haven’t had the time – or maybe I haven’t prioritised the time.

Social media can be a great way to reach a target market, to link with the people who like the type of products you are selling. And you don’t have to be a brilliant wordsmith or a marketing genius to use it. I got a few “likes” after I simply posted a cute photo of a squirrel drinking a smoothie and a link to the Daily Mail article it came from.

But this is elementary. A new pub opened near my shop just a couple of weeks ago, and it seemed to be full of customers from the day it launched – despite the fact that the site had been host to a couple of restaurant failures in the recent past. I asked around and was told that it has been running a targeted Twitter campaign. I don’t know whether the owners have put the campaign together themselves or if they have been working with a marketing expert, but they have certainly managed to build up awareness very quickly.

This example illustrates that there are some areas where it pays to work with local people. I think someone based overseas would have struggled to put together a social media campaign of this nature. Clearly, not everything can be outsourced. The trick is knowing when to outsource and when to stay local.

This particular banker knew the day was coming for his dream golf outing, so he went to the course every day after work (which would be 3:00 pm….sorry, had to get that jab in) and practiced like there was no tomorrow.  He did not want to embarrass himself when he played with Arnold.

When the day came, he showed up and was greeted by Arnold Palmer and they set out to play their round of golf.  The banker played up to his best and actually beat his own former low score on this particular course.  Of course, Arnold still handily beat him, but not to the point of humiliation.

As they walked back to the club house, the banker looked over to Arnold and said, “You know, Arnold, some of my best shots were as good as your shots back there.  Maybe I could still make the PGA; what do you think?”  To which Arnold replied, “It’s not how good your good shots are that is keeping you from being a professional golfer…..it’s how bad your bad shots are.”

Now I relate this story not for golfing purposes (since I can’t stand watching or playing the game), but to make a very important point.  Almost everything in life has both good sides and bad sides.  For example, you see beautiful, rich, glamorous movie stars that marry other beautiful, rich, glamorous movie stars and then several (fill in the blank with days, weeks, years) later, they divorce.

I don’t know how anyone else feels, but my feeling on the subject is this:  “It’s not how good the good parts are (ANYONE can put up with the good stuff….the beauty, the wealth, the glamour…..that’s SO easy) but it is how BAD the bad parts are!  If they are a psychotic, neurotic whiner with the mental depth of a baby pool, who will put up with that for very long?

Sometimes I watch the beginning of these reality dating shows on primetime and wonder, “Why can’t these apparently attractive, educated, successful people find someone to date and/or marry without subjecting themselves to being humiliated on national TV?”  Then I watch for a few minutes and say, “OHHHH, that’s the reason why they can’t find someone to date….they are (fill in the blank) freaks!”

So you see, in almost every area of life, it’s not how good the good parts are….it’s how bad the bad parts are that really matter.

Now let’s get back to the topic at hand….starting/buying/running your own small business.  It is not how good the good parts are (I get to be my own boss, no cap on my income, get to be a big shot in my hometown, my picture is in the paper for interviews, etc.) with running your own business.  Anyone could handle that.  It is how bad the bad parts are (it is my job to bring in the sales, constantly worrying about having enough money to meet payroll, putting up with employees who act like children, customers who are rude, long hours, etc.) that keeps people from getting into, and staying in, business for themselves.

Granted, life is not easy and you cannot simply avoid the bad parts because they are unpleasant.  But we each have to “choose our poison” when it comes to deciding which bad parts that we can live with.  That is the key.  Since we cannot completely avoid all the bad stuff, we at least have to come to grips with what sort of bad stuff we are at least willing to tolerate.

I will use myself as an example with something many of us can relate to….marriage.  My spouse knows there are both good things about me and bad things about me.  Each of us who is married can probably list, with relative ease, the good things and bad things about our spouse.  Since roughly 50% of all marriages end in divorce, there are many people who say, “I will not get married because half of all marriages end in divorce.”  What they fail to see is there are a lot of extremely happy marriages and these people have an unbreakable bond that each partner would die for, literally.  I know of marriages that are that strong.

Being married to someone is not all strawberries and champagne.  But it is also the most fulfilling relationship known to humankind if it is done properly.  My wife knows about my bad stuff and I know about hers….and we are both willing to live with the bad because the good FAR outweighs the bad.  So we live contently with one another because even though we are not perfect (no one is), we certainly have much in common and we enjoy each other’s company and conversation, so the bad stuff is miniscule by comparison.

The same metaphor can be used for owning a business.  There are things about owning a business that are about as pleasant as taking your dog for a walk and picking up their poop with a plastic bag.  Nobody wants to do it, but if you don’t, you won’t like the end result.  And when it is your business, it is your responsibility.

But the good news is, as the business owner, if you don’t want to pick up the poop, you can delegate that task to an employee.  But remember, if the employee quits or doesn’t show up for work one day, you still have to pick up the poop.

When working with new clients on their initial social media strategy, there are a few basic questions that I ask:

1. How do you want social networking to benefit your business goals?
2. What do you expect to gain from implementing a social networking element to your existing marketing plans?
3. How much time do you expect to devote to social media each week?

The first two questions typically lead to lengthy discussions about the business, long-term goals, and how social media platforms can extend an existing marketing strategy. It is always good dialogue, as it yields information that helps to shape the way we develop the “go to market” plan.

The third question is the real test of my client’s understanding of the reality of social media and the sustained effort it entails. Most responses are something like “a couple of hours a week” – which indicates that there is much to learn about the time and effort required to manage true social media.

Good social media is not a few characters, a hashtag and shortened links put into HootSuite. It is hours of research on who to follow, what should be retweeted, and how to blend your business personality into the messaging you want to get in front of potential customers. It takes time to nurture your online persona into something that people will want to follow, and which benefits your business. Most importantly, you have to engage your customers online one-on-one, in a way that lets them know that they really matter to you – and that you are not an automated system.

This last piece is one of the biggest misconceptions about social media. But if properly understood by business owners, it is the one thing that really separates good social media from great social networking.

The fact remains that social media is not going anywhere. It is a moment in time that will decide what your company can become. Recently, on a webcast about the ROI of social media, one expert stated that the ROI is that “you will be in business in five years.” There may be some FUD in that but there is also some truth to it.

So what do you do next? Engage your 15-year-old nephew to explain what a hashtag is and how to create a bit.ly link? You could, but wouldn’t it be better to find a local expert? This is where GoHuman can provide you with the expertise you need to develop a solid social networking strategy, including determining the right platforms, identifying resources and content, and building the right infrastructure to make your campaign work effectively and efficiently from day one.

One great way to get started is to enter our Change the Way GoHuman Works Contest!

Contact us today to find out more about how to enter the contest… and to get your social networking up and running.

I said I could, but that I wouldn’t be able to guarantee that it would be there before 12:30 – however I would try my best. “Oh, but we’ll have to have it by 12!” was the reply. “Well, I might not have time to do the other sandwich then,” I said. “But we need it!” the secretary pleaded.

It doesn’t take long to make a sandwich, but there were other customers in the shop and the lunchtime traffic was building up. There was no point arguing anyway. “I’ll see what I can do,” I said. Then I turned to serve the next customer. 

“Do you have any egg mayo sandwiches?” he asked. “No, but I can make one up for you,” I said. 

“How long will it take?” he asked, anxiously looking at his watch.

“About five minutes,” I said, not wanting to be hurried. “Umm…” he dithered, looking at his watch again, impatiently. “Umm… OK then.” It actually took about two minutes to make the sandwich, and he seemed very pleased. And the lunch got to its destination at about 12:05.

It would be hypocritical of me to complain about how impatient people are these days. I always seem to be in a hurry, and it does seem to get worse as the years pass. Why is this? Labour-saving devices were meant to give us more time, not less. I remember watching programmes as a child in the 1970s that told us that in the future we would all have so much leisure time we would need more sports centres and libraries to help us fill the long hours. How quaint that sounds now!

I think the economic climate has made things busier for those of us who work. We are expected to do a lot more in less time.

And we should never underestimate the importance of time. When you’re running a business, every minute counts. The minimum wage in the UK is £6.08 an hour for those over 21, and it increases each year. That means every minute of labour for each employee costs the business owner at least 10 pence, and five minutes with a customer costs 51p.

If it takes five minutes to make a sandwich, that 51p has to be factored into the cost. It might seem petty to worry about such costs, but when the business electricity or rent bill arrives, these concerns won’t seem petty at all.

And if you’re the business owner, what value do you put on your own time? If you run a café it’s tempting to compare your prices with the café down the road, or to set your prices according to the price of the food. The research I did before I launched my café advised me to add a percentage margin to the cost of the ingredients. However this method of pricing does not take into account the increasing cost of labour and other costs, such as VAT. So I will have to look into my pricing structure again.

When we visit the hairdresser we don’t just expect them to charge for the cost of the scissors and shampoo and add a percentage to that. We’re paying them for the service they offer, for their time. It’s the same with any service.

That’s why we should never undersell ourselves. Time is precious. Whatever you do for a living, make sure you’re paid the full value for your time.

For example, last week I visited the cash and carry intending to buy honey. I use it in our smoothies. It was £7.99 for 1.3kg, or £6.15 a kilogram. I suspected I could get it cheaper at the local discount supermarket.

I was right – the discount supermarket had 500g jars of honey for £1.64, or £3.28 a kilogram, almost half off the cash and carry price.

Honey is not the only product that is cheaper to buy in discount supermarkets, although the cash and carries do offer some savings. You have to shop around to get the best deals.

No wonder so many small retailers are going out of business or selling up. If you compete on price alone you’re up against a lot of unbeatable competition – and in a recession consumers have become increasingly price-conscious. You need to offer something more.

The internet offers great opportunities for anyone with creative talent or a good idea. If you have a skill or can offer a service, the internet allows you to market your product or service directly to your consumers (like on GoHuman for instance!), without having to pay commission to retailers. I have an online shop for The Flavour Co, but because my business is locally-based, I have to work out how to reach a very local clientele.

One person I know who has grown their business by using the internet is my former part-time employee, Christopher Currie. He used to work in my café while he was building up the wedding photography business he runs with his partner, Gillian. He now works full-time on the wedding business. A brief look at his website shows why he and Gillian have achieved success. They are passionate not just about the photographs they take, but about the presentation, the editing and the finished product. They are painstaking in their efforts to get every detail right, and the blog on their website reveals how much they enjoy what they do.

An enterprise like this cannot just be flung together on a whim. It’s the passion – the wow-factor – that makes the difference between an enterprise or idea that stops you in your tracks and a lack-lustre one.

Take this small café, Vanilla Black, which is a few miles away from my own, for example – it specialises in enormous meringues and gooey cakes, but you don’t need me to tell you that. Just look at the picture!

This café is a magnet for hungry, tired shoppers. Of course you have to get the basics right too – a business cannot be run on passion alone. There’s no point offering the best chocolate cake ever if the coffee you serve tastes foul. And you have to be able to look at your finances dispassionately. Customers might be beating down your door, but if your overheads are too high or your prices too cheap, you could still be losing money.

I don’t think I’m there yet with The Flavour Co. I certainly have the passion and have put loads of effort into producing the best-tasting and most nutritious, wholesome food I can, but I need to improve the in-store presentation. At least I know I am still following my dream, and that allows me to keep the new ideas and inspiration coming, while enjoying the journey enormously.

So…what’s your passion?

My motivation in launching my own café was quite different. I was doing a very stressful office job and found it hard to get food that was not sweet, stodgy and unhealthy. I wanted to make light, healthy food available to office workers without giving them a guilt trip if they wanted something a bit more indulgent.

Outside that, my dream of running my own business was of being able to make my own rules, work my own hours and pay other people to run the café when I wasn’t there.

I drew up what I thought was a robust business plan and spent about a year making plans and adding up figures. This advance planning led me away from the idea of a shop selling only smoothies and shakes – I saw that if the business was to survive I would have to expand the concept to include a wider range of food.

I bought some books about running a café and I also worked a few days on a voluntary basis in a busy café. The book that became my bible was Start and Run a Sandwich and Coffee Shop by Jill Sutherland. This book, written by a woman who gave up a career in PR to launch a successful coffee bar chain, details all the steps you need to take in advance of the launch of your café.

I was all set to go – however, I reckoned without the effect of the Great Recession. People are spending a lot less than they used to and as a result I have to work more hours than I had ever anticipated.

Surprisingly, this doesn’t make me too miserable. I enjoy actually doing the job of running a café more than I had expected to, and one of the biggest surprises is how much I love chatting to the customers.

I meet a much broader range of people than I did in my last (office) job. I have some fascinating conversations with customers and staff. I hear gossip and local news, before it hits the newspapers.

If I were to detail the hours I spend not just in the shop, but driving around the cash and carries and markets (in search of the best quality, best value food) – not to mention the meager financial returns – it would put off anyone from starting a business.

Yet, I have no regrets. My new life is more physically demanding than any other job I have done, but much less stressful. I hardly ever get angry. In my previous job I was angry almost every day.

A couple of things have helped me cope with the challenges of launching a small business in a recession. The first is the support of friends and family.

Another thing that’s helped is my love of adventure sports – even though I haven’t had time to do any for the last couple of years. In the past I’ve enjoyed skiing, snowboarding, windsurfing, hiking, camping and back-packing. I’m no Bear Grylls, but having trudged through deep snow at high altitude in Nepal and battled with winds on a windsurf board, if I now have to get up in the middle of the night to go to the fruit market and then carry heavy boxes down to the basement, I can pretend I’m doing extreme enterprise building. And when things go wrong, instead of throwing my hands up in despair, I think: “How am I going to get out of this one?”

As a small business owner, you learn to enjoy the challenges. Each one teaches you something new.

For example, when I first launched The Flavour Co I was making the smoothies using pre-bagged frozen fruit ordered in bulk from a supplier. The delivery cost a flat fee of £17, no matter how big or small the order was. At that stage our sales were quite small. One time I paid almost £85 for a bulk order of frozen fruit, and after the boxes had been dropped off I noticed that the sell-by date was due to expire in 10 days time. I phoned the supplier to complain. He said there had been a big mistake and that the order would be replaced – but it never was.

Instead of making a big scene, I decided to start buying fresh fruit in bulk and getting the staff to freeze it. This was much cheaper, tasted fresher and meant that my staff always had something to do even when the shop was quiet. It also saved a load of plastic.

I often see discussions on social media about “what characteristics you need to be an entrepreneur.” I don’t think there’s any blueprint. Everyone has the potential to be a good entrepreneur.

Rob Law, who invented the Trunki ride-on suitcase for kids, had a rough ride from the business “dragons” on the BBC TV business start-up programme Dragon’s Den in 2006. Since then, 900,000 Trunkis have been sold, in 62 countries.

In a magazine interview last year, Law said: “Being rejected in the Den was the least of the setbacks I experienced. My advice to entrepreneurs is to see every hurdle as an opportunity to develop resourcefulness and character. Once you leap over the first few they start to seem smaller.”

Or in the words of the Roman poet Horace (65-8BC): “Adversity has the effect of eliciting talents, which in prosperous circumstances would have lain dormant.”

It is my hope that for at least some of our GoHuman user community, the GoHuman blog may be a source of ongoing “luck” for which you have been waiting (and preparing).

As we wrote about in 2009, Goldman Sachs started an initiative called “10,000 Small Businesses” in which they’ve set aside $500 Million to assist small businesses operating in Chicago, Houston, Los Angeles, Long Beach, New Orleans and New York (but it’s spreading to other cities).

Why is Goldman Sachs doing this?  We think we called it correctly in 2009, but we also wanted to alert you to the fact that regardless of the self-serving nature of the gesture, opportunities still exist for you to benefit.

So, please, if you haven’t already: have a look, apply, and come back and comment here and let us know if it’s worked for you. We’d love to know!

Thomas Jefferson said “I’m a great believer in luck, and I find the harder I work, the more I have of it.” Well, you’ve worked hard …. Good luck!