Finding money within your business

March 26, 2012 by

Most business owners immediately think of the bank or loans when they’re short of money. But there are many more resources you can tap before you ask for that expensive overdraft or for an overdraft extension.

You can often free up funds from within your business by re-examining your business systems, and these funds might in themselves be sufficient for your immediate needs. Even if the funds within your business are not sufficient, there is another payoff: the effort you make in searching for them helps ensure you are running your business in an efficient manner.

To free up funds from within you business, you must look closely at:

  • Assets
  • Customers
  • Suppliers

ASSETS

Your assets include debtors, stock, pre-paid expenses, vehicles, plant and equipment, fittings, and property. Each of these is a possible source of funds.

Debtors

Are you letting some customers have free use of your money for months? This is a common occurrence in small businesses where the owner(s) are so busy getting the business off the ground, products out the door, or services completed that they don’t pay enough attention to basic business procedures. Many customers will take advantage of this ‘free money’. But your business is not a free bank.

Here’s how you fix the problem.

  • Get invoices out promptly. Whatever else you do, become efficient at getting invoices out early. This is your future cash flow. You want to receive it as soon as possible. Start this new system now.
  • Send the invoice with the goods, and date the invoice from the day the service was completed rather than following the standard ‘last day of the month’ date for invoices. The earlier the invoice date, the earlier your chances of getting paid.
  • Change the terms for some of your customers, or for new customers. Can you reduce the payments terms to seven days or 14 days from the date of invoice?
  • Follow up promptly when invoices aren’t paid by the due date. Be polite but firm. If you haven’t the time to do this yourself, then appoint someone to do it for you.
  • Establish the average age of your Accounts Receivableand set yourself the goal of reducing this age by a set target every month. If your customers or clients have been taking advantage of you because of your previous laxity in invoicing, then you may need to re-educate them. Do this politely so you don’t offend customers.
    • Email invoices instead of posting them.
    • Consider factoring. This simply means selling your debtors to a finance company. So instead of having to wait 30 days or more until an invoice is paid, you receive your money upfront from the finance company that in turn collects the money from your customer. The finance company will of course charge you a commission for this service. Be aware, though, that there are pros and cons to factoring. For example, the finance company might be heavy handed about collecting the debts it has bought from you and antagonize your customers. Have a talk to them first about their collection methods.
    • Consider offering a discount for prompt payment. If you’re going to pay a fee for factoring, why not try offering a discount to your customers instead? Discounts are not a good option for low-margin businesses but can be an option for high-margin operations. You have to work out whether the use of money gained earlier is worth the discount you’re offering.

Stock

Do you have excessive cash tied up in stock? This can occur in two ways:

  • Carrying high levels of items that you could obtain from suppliers at short notice.
  • Having too many slow-moving items (and too few fast-moving items).

A quick sale?

You need to regularly review your stock levels, your stock turnover rates and your purchasing policies. Can you free up money by reducing stock? What about moving out of the slow-moving lines or having a quick sale of the slow-moving stock? It might pay you to reduce some items quite heavily to get some money in quickly.

Can you approach suppliers to take back some excessive stock you may have ordered? They might help you out of a temporary tight corner as a goodwill gesture if you explain you have a temporary cash flow crisis, but that you do wish to build a long-term relationship with them.

If you need additional funds to purchase more stock, make sure you’re replacing slow-moving stock with the faster selling lines.

Pre-paid expenses

This is another area you could look at. These pre-paid expenses often relate to services. For example, you might pay your insurance bill for the year all in one hit, but you could arrange to pay small monthly amounts. There might be an additional cost for doing this, but you must weigh the extra cost against the advantages of 12 small payments that your cash flow can comfortably handle versus one large annual payment. Then approach your accountant. Instead of facing a substantial bill once a year, ask if you can pay a set amount monthly.

Fixed assets

Fixed assets can often be the source of a significant amount of cash. Do you really put all your assets to full use? You might be able to sell off little-used assets and hire suitable replacements when you require them. You might be able to sell vehicles and lease others instead.

CUSTOMERS

Don’t forget your customers can be a source of business funds. Apart from the good debt collection tactics already discussed, try the following tactics.

  • If you’re starting a new business, consider establishing it on a cash-only basis to keep the funds inside your business rather than locked up in Accounts Receivable.
  • If you supply goods over a period of time, or if you’re a service business, ask if you can invoice for progress payments. This is a common method of ensuring you get some cash flow during a project instead of waiting until the end of a project or delivery period to invoice – and then waiting at least another 30 days for payment. There’s another benefit here too. If the customer turns out to be dodgy, you’ll discover this early on instead of at the end and you can cut your losses before they mount up and perhaps drag your business down. This tactic is therefore very suitable for tradespeople subcontracting to a developer.

SUPPLIERS

Finally, consider your suppliers as a possible source of funds. Ask for extended payment terms to give you the opportunity to sell the goods first before you have to pay. If the supplier won’t budge, try this tactic: split the order in two and offer to pay normal credit terms (30 days) on the one half of the order and 90 days on the other half. Your suppliers will be more likely to agree to this kind of arrangement if you’ve paid them promptly in the past.

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How I learned to stop worrying and love deadlines

March 23, 2012 by

Deadlines are possibly the most useful writing tool since man first learned to furiously jump up and down on squid to source ink (that’s how they did it, right?).

And I say this as someone who’s known a few good deadlines in his time; some cheeky, many ridiculous, all audacious.

The infuriating, mercurial contradiction with deadlines is that their ability to inspire sugar-rush bouts of creativity or uncontrollable, mind-blazing panic is not divined from the timeframe, but your own perspective.

For example, when I was a rookie reporter working on a weekly newspaper, our deadlines built up to a crescendo of productivity in the middle of the week. If I filled the pages before Wednesday and no new stories broke on my news patch (which was about as likely as a flower pot bringing peace to the Gaza strip), the rest of the week was largely mine.

So I got into a pattern of writing a story list last thing Friday before heading down the pub, then sprinting out the blocks first thing Monday and getting everything written as fast as possible so I could then spend more time in the pub. I called it the circle of life.

Genius? Well, I wouldn’t quite go that far – but whatever you call it, the deadline worked. Without it, I’d inevitably have spread everything out and spent more time at my desk than at the bar.

So, on that note, here’s a former hack’s five-point guide to meeting writing deadlines.

1. Lists are your friend; they are your patron, your mentor. List everything, tick it off and draw a line through that baby when you’re done. Then give yourself a round of applause – because you’re a champion!

2. Find a goal, a motivation for getting up in the morning and wading through the frontlines of productivity to storm the trenches of success. One caveat, though – make sure it’s completely and utterly selfish. The less altruistic the better. If it’s suitable for a mission statement or a business plan, drop it like it’s hot. You’re not a writer. You want to get this done so you can go off and do something you actually like! Here’s a handy example:

Motivation #1:

“Expand our chain of tofu restaurants to the wider Omaha area.” = FAIL!

Motivation #2:

“Get everything done so I can knock off early and go to Vegas for the weekend.” = Yep, that’s a nail hit on the head right there!

3. Stop worrying about style and just write. People who aren’t professional writers assume journalists pore over every word and detail. Trust me, the only thing they’re pouring comes from a hip flask. The key to their speed is that they don’t alter style or even sentence construction from one article to the next. For business purposes, all you have to do is communicate an idea, so just state it plainly and stick to it. Wash, rinse, repeat.

4. Don’t confuse yourself for Hunter S. Thompson. If you really wanted to be a writer, you never would have started your own business in the first place and you’d be reading this in a bedsit right now throwing darts at a picture of Jonathan Franzen. Give yourself a break, stop trying to write the small business equivalent of The Unbearable Lightness of Being, and focus on content, not style.

5. If you have to write something with a “voice”, like a soft ad feature or a PR release, and you’re struggling, don’t muck about – hire a professional. Meet a deadline by delegating it. After all, if God wanted you to be competent with verse and syntax, you’d be the misanthrope with RSI, not the person paying them.

Now I do believe that’s a job done.

Write facetious blog post about deadlines √

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Why you should learn programming

March 22, 2012 by

Mr. McGuire:     I just want to say one word to you. Just one word.
Benjamin:             Yes, sir.
Mr. McGuire:     Are you listening?
Benjamin:             Yes, I am.
Mr. McGuire:     Plastics.
Benjamin:             Exactly how do you mean?

Jump forward almost half a century and replace ‘plastics’ with ‘programming’, and a modern-day Benjamin Braddock might well be as equally bewildered.

Computers have found their way into almost every aspect of our lives and we now carry in our pockets mobile phones with more processing power than the fastest of desktop computers of a decade ago. However, over the past couple of decades, end-consumers of technology have been further and further removed from the inner workings of these machines. Little thought is given to what happens inside the machine when we ‘like’ something on Facebook, click on an icon, use a mobile app or any other function you might use your computer for.

This isn’t necessarily a bad thing. You don’t need to know how the internal combustion engine works to be able to drive a car. You get in the car, turn a key and can go places without giving too much thought to the fact air and fuel is combusted and converted to mechanical energy, somehow, magically, right in front of you under the bonnet. However, the benefits of being able to bend a computer to do what you want, rather than what an existing program thinks you want, can be tremendously useful.

I work on a computer all day but in a non-programming role. Most of my work can be easily done using existing tools: writing a document with Word, editing a website with a Content Management System (CMS), analyzing data using Excel… However, every so often, there’s a problem that doesn’t fit the usual mould that’ll need a bit of a workaround. For example, if something is not sitting quite right on a web page or requires a custom layout not already built into the CMS, I can quickly duck into the page source code and tweak the code to create a quick fix. Likewise, if I want to test out a quick concept using a new technology like HTML5, I can write up some markup and JavaScript and quickly have a working prototype.

I don’t think this just affects me. Most occupations nowadays involve at least some degree of computer interaction, so imagine what you could achieve if you upped your level of computer literacy. It’s an empowering feeling, thinking of something the computer could do to make your job easier and then making in happen. Wouldn’t you love to be able to write a quick script to automate some of the more repetitious parts of your job?

It’s not just about the direct benefits of being able to write your own programs. You’ll be exercising your brain in ways you haven’t before, and you’ll notice an improvement in your ability to:

-        Solve problems

-        Plan ahead and predict issues

-        Deal with complexity.

And the great thing is, it’s never been easier to learn how to program. There are plenty of fantastic and free resources available online:

Looking ahead as computers become even more pervasive in our lives, computer literacy is going to be the new, well, literacy – a skill that all employers will be looking for employees to have. And if you don’t have it, chances are you will be left behind. Or you could become a mechanic. My car keeps breaking down and I don’t have a clue how to fix it.

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US businesses share the company

March 19, 2012 by

Dansko is a market leader in comfort footwear, exporting their products around the globe from a busy factory in West Grove, Pennsylvania. Despite their success, in 2005 co-owner Peter Kjellerup decided to join a growing number of US businesses and hand his business to his employees (find out more about this in Dansko’s video).

The popular shoe manufacturer is not alone. According to a recent article on business blog The Bottom Line, US-based small businesses are offering employees a stake in the ownership of the business in droves, for either a small amount of capital investment or as part of retirement or remuneration packages.

Employee Stock Ownership Plans or ESOPs have existed in a limited form in the US since the 1970s, but in recent years the use of ESOPs and related plans has skyrocketed to include an estimated 20% of the approximately 120-million strong nongovernmental work force in the US.

ESOP businesses claim the biggest benefits are improved employee performance, productivity, job satisfaction, long-term stability and financial performance.

How does it work?

In an ESOP, a company sets up a trust fund, into which it contributes new shares of its own stock or cash to buy existing shares. Alternatively, the ESOP can borrow money to buy new or existing shares, with the company making cash contributions to the plan to enable it to repay the loan.

Some US businesses have voluntarily become 100% employee owned, but the majority of US businesses using ESOPs are around 30% employee owned or less – it’s up to businesses to decide what will suit their needs best.

Shares in the trust are allocated to individual employee accounts as part of their retirement fund or general salary. Although there are some exceptions, generally all full-time employees over 21 participate in the plan. As employees accumulate seniority with the company, they acquire an increasing right to the shares in their account, a process known as vesting. Employees must be 100% vested (entitled to 100% of the stock benefits) within three to six years.

When employees leave the company, the company buys back the shares at fair market value.

The legal framework for ESOPs is governed by the Employee Retirement Income Security Act (1974), which covers retirement funds and all employee benefits schemes.

Benefits

So why would a business voluntarily hand over a significant chunk of its ownership to employees?

Here are the biggest benefits for ESOP businesses.

Increased employee motivation

Employees who have a share in the company generally feel more motivated to perform and are more driven to achieve company goals. Employees are also compelled to learn more about the company and consider other roles within the business.

Better customer service

If an employee is motivated at work, they are generally more driven to provide good customer service. An added benefit is that when a customer speaks to an employee, they are speaking with an owner.

Community profile and PR

Businesses that have an employee ESOP program can have an increased community profile.

Succession planning

Many of today’s large, multinational corporations become larger by acquiring small companies. Plants are often closed and production is moved offshore. The knowledge and talent of those employees is lost as they find jobs in other industries. ESOPs retain skills by keeping employees motivated to stay with a business longer.

Increased employee retention

US research has shown ESOP employees are likely to stay with the company longer and are more committed to resolving workplace issues and disagreements than non-ESOP employees.

Increased employee remuneration and retirement benefits

ESOP employers can boast that their employees are better equipped for retirement than non-ESOP employees. Some studies suggest ESOP employees have up to three times the retirement benefits of non-ESOP employees.

US tax benefits

ESOPs have a number of significant tax benefits, the most important of which are as follows.

  • Contributions of stock are tax-deductible: That means companies can get a current cash flow advantage by issuing new shares or treasury shares to the ESOP, although this means existing owners will be diluted.
  • Cash contributions are tax-deductible: A company can contribute cash on a discretionary basis year to year and take a tax deduction for it, whether the contribution is used to buy shares from current owners or to build up a cash reserve in the ESOP for future use.
  • Contributions used to repay a loan the ESOP takes out to buy company shares are tax-deductible: The ESOP can borrow money to buy existing shares, new shares, or treasury shares. Regardless of the use, the contributions are deductible, meaning ESOP financing is done in pretax dollars.
  • Dividends are tax-deductible: Reasonable dividends used to repay an ESOP loan, passed through to employees, or reinvested by employees in company stock are tax-deductible.

Find out more

To read more about Dansko’s decision to become an ESOP business, visit the Our Story page on the Dansko website.

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Six tips to help lenders identify start-ups with potential

March 14, 2012 by

Bank managers receive applications from start-up businesses every day and need to make decisions on finance requests by assessing whether the business has a chance of being successful. Sometimes a bank will rely on factors such as the track record of the person they are lending to or how much equity they have in their house, which isn’t ideal. Conversely, banks also decline business clients that later turn out to be dream clients. So how can banks most effectively determine a start-up’s chances of business success?

Here are six questions you can ask any start-up business owner. If they can give accurate and thorough answers to these questions, then you should be more inclined to back them.

1. Who will be your customer base?

Ask the owner why this business should exist. Who will be its customer base, and how will their business benefit them? How will their product or service solve their customer’s problems or satisfy their needs?

2. What will be key factors to your success?

Have the owner name three or four factors that will be essential to their new business’s survival. For example, a restaurant will need to provide quality, value for money, service, ambience, cleanliness and consistency. Does the owner recognize the key factors in their business and do they or their staff have the experience to deliver them?

3. What’s your point of difference?

If they aim to provide a product or service no one else is providing, that’s great – as long as they have established there is a demand for it. However, if there are already similar products or services in the market place, they will need to have something that sets them apart from the competition. Their product or service must somehow be different or better than their competitor’s. What makes their product or service unique?

4. Do they have enough potential customers?

Ask them to provide evidence for an estimate of how many potential customers the business will have. Can they define the traits that will make somebody a potential customer? Can they identify more than one target market and where all these potential customers currently purchase, if at all? Are there enough potential customers among all their target markets? Do they know how they will market to these customers (through trade magazines, clubs, special interest websites, etc.)?

5. Who are your competitors?

Find out if they know who their direct and indirect competitors are. Have they worked out what their strengths and weaknesses are and how they will counter and exploit these? In addition, have they considered how difficult it will be for competitors to copy what they do or steal their suppliers? And how do they think competitors might react to their start-up – will they start a price war?

6. What is your break-even point?

Check if the owner’s calculations have taken into account set up costs (fit out, stock, uniforms, processing equipment, office equipment, etc.) and running costs. Have they added up the costs for monthly rent, utilities, wages, advertising, insurance, transport, and so on, and are these costed realistically? Crucially, have they worked out how much money they will make for each unit they sell, after its specific costs, and how many units they need to break even?

Now consider all the facts. Do they really have a potential business? If they’ve provided credible answers to these six questions, you should have more confidence in accepting their application. If not, then you’ve saved yourself, and them, the time and trouble.

No bank likes to turn down custom and no bank likes to call in bad debts. It’s bad for business, bad for the customer, and creates negative publicity. Increase the number of great businesses you have as clients by using this feasibility test.

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Taking responsibility

February 28, 2012 by

The topic for this blog came to me while munching into my morning bowl of muesli and reading the cereal packet. The company who manufacture this particular brand of cereal, I have always found interesting and inspirational as they do business slightly differently from their competitors and in fact most other businesses. However, they are part of a growing and successful trend in business that encompasses a wholly different philosophy from your traditional profit-driven company.

Hubbards is a New Zealand-based breakfast cereal manufacturer. They are a relatively small player in the cereal market (but appear to be gaining market share consistently). I think their products are great, prices fair and packaging is interesting, but what sets them apart for me is the fact they wholeheartedly embrace the philosophies of sustainable/green business, businesses for social responsibility and triple bottom line reporting. I really like that, and I would love to see more small businesses buy into it! (Incidentally, these days all these concepts tend to get bundled under the one ‘sustainability’ title.)

To me it just doesn’t make sense, nor is it sustainable for a healthy society to be made up of businesses making more and more profit so that shareholders can get more and more wealth – at the expense of their employees, the environment and members of the society it operates in. I think this is an old-hat and dated approach. A sustainable business focuses on the three pillars of triple bottom line: people (fair pay, fair hours, profit share, socially inclusive working environment, scholarships, sports sponsorship, community work, etc.), planet (aiming for zero waste or minimal impact, focus on packaging, etc.) and profit (money for the shareholders), and usually in that order. Profit is still a priority but not rated as high as people and planet.

Douglas Adams in his 1979 book, ‘The hitchhikers guide to the galaxy’, demonstrated our current approach to business and money graphically, when the (7) characters arrived on the new undeveloped Earth. They realized they had no currency so chose to use tree leaves for money. However, as there was an abundance of trees and therefore rapidly rising inflation, they then burned down all the remaining trees.

There are some important reasons why sustainable business works, and should become the dominant business thinking in the future. Here are my top ten reasons.

  1. Ever increasing profits are technically impossible for all businesses to maintain forever. Something or someone has to suffer. Sufficient profit is enough.
  2. Your employees spend a huge part of their lives working in your business. Businesses with happy, healthy and motivated employees who work with their employer, succeed.
  3. Continually depleting and defacing the environment a business operates in is self-destructive, socially immoral and creates expensive legal and PR issues.
  4. It’s cost effective. Waste reduction, effective employees and energy efficiency saves money.
  5. Environmental issues are a major decision factor for a rising number of consumers.
  6. Marketing on green issues is highly effective.
  7. A business with high social standards is attractive to high-quality employees.
  8. Being part of an organization that is respected and admired by its employees and community is rewarding for business owners and employees alike.
  9. It saves money on recruitment. People will want to work for you.
  10. It makes being in business rewarding and worthwhile.

So what are Hubbards doing?

Besides still making adequate profits, here are just a couple of examples of how Hubbards demonstrate their commitment to social responsibility.

  • Installed the largest commercial installation of thin-film solar PV panels in New Zealand to power part of the factory and as part of an experiment in solar power.
  • Flew 102 staff to Samoa for a picnic to celebrate the company’s 10th birthday.
  • Every packet of cereal includes a four page newsletter (‘Clipboard’) with an editorial by the owner. Everyone likes something to read over breakfast and this is a great way for the company to market their community commitment.
  • Included a free children’s book with every cereal pack for a period to encourage kids to read.

To finish, here’s a quote from Dick Hubbard, owner of Hubbards and early adopter of the ‘Businesses for Social Responsibility’ philosophy. This was said during his term as mayor of Auckland.

“If we focus on values, then we can generate a strong connection for Kiwis with economic growth and with creating value. Our values centre on quality of life and environment.”

Links

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Quality, targeted content is the key to being noticed online

February 27, 2012 by

If you’ve popped some information about your business online and then sat back believing you’ve unleashed the ultimate 24/7 online marketing machine, I’ve got some bad news.  Your website won’t attract repeat visitors or droves of potential new customers without  further effort on your part.

There are more than 250-million websites competing for the attention of some two billion Internet users – and this means you have to do something to make your website stand out or your message will be lost in the frenetic white noise of cyberspace.

Apart from promoting your site as often as you can and including it in the likes of advertisements, email signatures and social media profiles, there are two key things you need to do to ensure your website is as effective a marketing machine as you’d hoped it would be. You need to:

1. Appeal to search engines – they help ensure your target audience finds your site.

2. Appeal to human readers – they decide what to read, how long to stay on your site, whether to transact, and whether to return.

The good news is there is a relatively simple way to achieve both – by providing quality, targeted, expertly written content; created by professionals with your target audience and marketing goals in mind.

Content is the key

Putting relevant, quality content on your site is the key to achieving this.

  • It allows you to include the relevant, target keywords on your site. Your site content is the main way search engines determine if the content of your site is relevant for a search on a particular keyword; which in turn determines where your site will appear on search engine results pages. If your content is well written you’ll be able to appeal to search engines without putting your readers off with keyword rich, SEO-focused, jargon-heavy mumbo jumbo [A deliberate attempt at over-the-top keyword heavy copy here – Ed] that fails to get any message across before the browser teletransports elsewhere in cyberspace with the click of a mouse.
  • It allows you to provide useful information and add value for the user. This will keep visitors on your site, encourage them to stay on your site, and hopefully encourage word-of-mouth recommendations, social network shares and repeat visits to your website.
  • It feeds a self-perpetuating promotion cycle. Popularity and social traction with site visitors or users in turn indicates to search engines that your site has quality content worth recommending, and helps to increase your search engine rankings and the chances of being found online.

Poor or sloppy web copy can cost you business (read more in three tips to avoid losing business with sloppy web copy), while quality, targeted copy can be used effectively to generate and maintain customer loyalty, and business growth. It is probably best achieved by hiring a specialist.

For more information, read our white paper on how banks can drive customer loyalty and growth with business-focused content. Although this applies specifically to the small business banking industry, you’ll be able to draw parallels and better understand how quality web content can help improve businesses in your industry too.

And yes, The Small Business Company specializes in providing a range of business-focused web content and online training, so drop us a line if we can help.

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Three tips to avoid losing business with sloppy web copy

February 22, 2012 by

If you’re going to invest time and money in creating a website, you’ll want to put your most stylishly clad, well-polished business foot forward. Just as we strive to present ourselves and our staff, premises, products and services to a high professional standard in the real world, so it should also be online.

Yet often this doesn’t happen.

I recently perused the website of a new adventure tourism operator and found ten grammatical and punctuation errors in their 202-word home page blurb. I was so busy mentally negotiating the non-sentences, misspellings and erroneous punctuation that I struggled to take in what they were trying to sell me. And despite all the pretty photos scrolling along the top of the screen and clear menu options, my first impression was “Huh?” followed by “They’ve really been careless with their website.”

Forced to read the home page blurb a second time to try and glean some information, I cringed to note they were trying to convince me to try one of their products (a guided alpine walk) because there was a chance I “might see a hobbit” <nudge, wink>.

Sigh. This cliché has been trundled out by too many New Zealand adventure tourism operators trying to cash in on the success of The Lord of the Rings films. Worse than that, it tells me nothing about the true magic of this scenic walk and why I wouldn’t regret paying their business to guide me on it.

Though dismayed by the scruffy and unimaginative writing on the home page, I was still curious. I clicked a few more times and had my suspicions confirmed – the written content on the other web pages was as bad as that on the home page, both technically and in terms of the lack of useful information conveyed.

“But,” I hear you say, “You’re a professional editor. The average customer won’t notice or even care about the odd comma being out of place.” And I agree to an extent – some customers won’t notice small errors. But I guarantee that all customers will quickly sense whether they find it easy to understand the information on your site and whether it tells them what they need to know or grabs their attention. And whether they consciously understand why they find poor writing harder to take in or get excited about, it could still influence them to head to another site.

So how can you put your best business foot forward online, communication-wise?

1. Get your website proof read. If you have the budget to pay a professional, great. If not, what about asking your friend who’s studying for a Masters in Literature? Or Aunty Louise who used to be an English tutor? Ask around your friends, family, colleagues or staff and offer them a meal or gift vouchers for their trouble. Even better, get two people to proof your site. The more grammatically enlightened pairs of eyes, the better.

2. When writing for the web, you only have so much space to fit your text in. So you need to focus on what makes your company’s products or services the best. If you want to sell me a guided alpine walk, don’t waffle about fictitious characters that roamed mountainous terrain in a movie shot in your region – tell me about the glacially-fed lake and rare species of bird I’ll see, and the picnic lunch of local delicacies my guide will serve me.

3. If you can say what you want to say about your products and services but in half as many words, you have a better chance of getting your message across before your potential customer clicks back to their search engine and looks at another site. People are time poor, easily distracted and want everything now. So edit, edit and then edit again. (I edited this blog seven times, for example.) Grab your potential customers with perfect prose and concise descriptions that both pre-empt their questions and showcase your business’s wow factor.

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Is customer satisfaction a good measure of small business banking success?

February 16, 2012 by

M&T Bank recently won 14 excellence awards and was recognized as one of the best small business banks in the US, in the Greenwich Associates 2011 Small Business Banking Awards.

Three of these awards were based on satisfaction measures – personal banking satisfaction, treasury management satisfaction, and overall satisfaction – and this got me thinking about other measures of success and whether there were better or more appropriate small business banking success metrics.

In my experience, quite a few banks, in the US and internationally, use some sort of customer satisfaction measure as an indication of how well they’re doing. To be fair, they probably do have some sophisticated and complex algorithm that is used to evaluate what each point of satisfaction is worth in dollar-based revenue, but it strikes me as a very vague way to measure success.

What’s wrong with satisfaction surveys?

Essentially, I am not convinced that people answer honestly and accurately when asked about their level of satisfaction. Using customer satisfaction as a measure reminds me of seminar or workshop assessments where presenters are rated on a scale of 1 to 10. I guess 8 and above is good. Or is it? Who knows?

I don’t really believe that this sort of satisfaction rating tells the presenter whether the people attending implemented the ideas successfully, or used the information learnt. It’s an arbitrary measure to keep the course going. Not many people give a low score of 1 because they may need to justify their reasons; it’s easier to give an arbitrary score of around 7 – not that good, nor that bad….

Using satisfaction as your measure of success can help marketing departments prove that their budgets are justified. It can be hard to prove that sponsoring an event, advertising in the media, signage, branding and social media activities actually makes any money. It is easier to conduct a survey of customers and ask them if they are satisfied. (Of course I would be asking the dissatisfied customers why they left… but that is another story.)

So how would I measure success?

I would measure:

  • Increases in website traffic
  • Increases in small businesses signing up to e-newsletters
  • Improvements in small business client retention
  • Reductions in the number of declined small business loans
  • Increases in the number of new small business clients

To me, these seem to be more practical ways to measure the performance of small business banking – although they are the result of happy and satisfied customers. This is what I would report on.

Interestingly, smaller banks also tend to score better on customer satisfaction surveys than the larger banks. This suggests that mimicking the smaller banks will help to improve all the measures: Thinking globally but acting locally. Actively running workshops for small businesses, getting managers to volunteer in schools, and providing free advice in enterprise centers are all ways to increase customer satisfaction and the more practical measures outlined above.

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The importance of key influencers

February 14, 2012 by

More than 40 years on from the Pentagon Papers, all eyes are still on the Washington Post. As ever, America’s foremost news-gathering organization can’t escape the glare of attention it has so unflinchingly shone on others over the years.

But it’s not what you think. Rather than being at the centre of a Supreme Court hearing or indeed anything remotely related to Oval Office tape recordings, the Post is on a growing number of peoples’ radars because, like all newspapers, it’s currently transitioning into a digital future.

As more local advertisers have migrated to the web and Post bureaus in many American cities have closed down, the Post has had to slash staff and reorganize the newsroom. Like the London Times – that now famously has a pay-wall protecting its website – many businesses are watching the Post because they too are facing a do-or-die situation in the Internet age. If the pioneers of 20th Century print journalism can finally ditch the ink and be online pioneers also, then there’s hope for other businesses struggling to adapt.

So it’s perhaps not too surprising to read – in the New York Times, admittedly – that the Post’s newsroom is a changed beast altogether. With print and web journos working side-by-side, the newsroom is littered with flat-screen monitors giving real-time updates of the most popular stories on its news site, while deadlines are defined as much by online metrics as print capacity.

However, the most interesting detail to come out of the Post’s current situation is its focus on key influencers.

Being widely read is great but for a paper like the Post that’s not enough – they need to be read by the right people, too. This is why one of the key metrics for its blogs is who’s reading them, not just how many. Put simply, if a blog doesn’t attract the numbers overall, but still registers a high percentage of hits from web locations ending in a .gov, .mil, .senate or .house address, then it’s considered a success because it means it’s being read by Washington’s power elite.

A period of transition isn’t easy on any business, least of all because of the unknown impacts change can have on the target market. But as the Post is demonstrating, if customer numbers no longer necessarily translate into sales (the Post has no pay-wall on its website), then identifying and measuring your impact with key influencers can be a real light house in the storm.

So what can you do to measure your success with key influencers?

  • Set your goals first. Think before you leap, because your goals should define who and what you measure, and the tools you employ to get that done. Are you looking to raise brand awareness generally or get across a specific message to your target market? The former might use a direct consumer survey, while the latter might measure media responses to a PR effort.
  • Accurately identify your market’s influencers. Survey customers about who they listen to and where their most powerful third-party recommendations come from. A key influencer can be anyone from a media personality to a family friend who fits a certain demographic you can target. If your business is active in online marketing, consider using social media monitoring software and text analytics to identify the social networks your customers use.
  • Connect the dots. It’s not enough to know who’s influencing your consumers; you need to know how they’re connecting with them as well. Research has shown that different influencers interact with buyers in different stages of the purchasing decision-making process. Some plant the idea through recommendation, while others – like bloggers and product-testers – are sought out for a second opinion. Divide your target market’s influencers into categories so you can then market to each in an effective way.

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