The Only 2 Ways to Grow Your Business...

More Money In, Less Money Out

If you’re looking for a boost to the bottom line, there are two, and only two, ways to get it. You either need more money coming in or less money going out, period. If financial growth is your objective, then your entire organization had better be focused around one of these two attack plans.

More Money In - Top Line Growth
How do you get more money coming in the door? You sell more of course. There are only 3 ways to get more sales coming in:

1. Increase the number of customers


2. Increase the average value of each sale


3. Increase the frequency of sales
   

Less Money Out - Cost Control
How do you keep more money in the business? You spend less, otherwise known as cost control. There are 2 basic types of costs that need to be controlled.

1. Variable Costs – these are the costs directly related to whatever product or service you provide. If you sell more, these costs go up, if you sell less these costs go down. The main variable costs are typically labor and raw materials.


2. Fixed Costs – this is overhead. It doesn’t matter how little or how much you sell, you still have to pay these bills. Examples of fixed costs are rent, and management and administrative salaries.

Who Should Work on What?
Each department has an important role to play in growing your business. Take a moment to look at the business cycle and see if you can determine which departments typically focus on which aspects. We’ll take a look at this next, you might be surprised by some of the answers.

Summary
There are only 2 ways to financially grow a business. If you want your bottom line to grow your business focus must address these two things. Each department has a critical role to play in the overall strategy.

Basic Business Organization

Organizing Around the Customer’s Process

Since the primary purpose of a successful business is to help customers with their problems it stands to reason that a business would be organized around the way customers look at problems.

The Customers Perspective
The typical problem solving cycle of any customer can be broken down into four stages, each with a trigger that starts it off. Identifying a problem triggers the customer to start looking or shopping for solutions. Identifying a viable solution triggers the customer to sort out the details and place an order. Reaching an agreement on options and payment details triggers the customer to let someone start working on delivering the solution. Accepting the final solution triggers the customer to use the solution.


Organizing Around the Customer’s Process
To keep everyone happy, you want the customer to progress through these stages as quickly and smoothly as possible. As a result most businesses are set up with four main teams, each one specializing in helping the customer through one of the primary stages of solving his or her problem.

The sales team is there to help the customer understand the available solutions, the solutions your company offers, and the benefits of each solution.

The orders team is there to help the customer choose the right details and options, and agree on payment and delivery methods. The orders team must be able to answer detailed questions and offer intelligent advice to ensure the customer gets a good solution. The customer should not have to learn any more than they want to about the details of your company and its products and services. The orders teams is there to make sure all the necessary details are covered.

After an agreement is reached with the orders team, the delivery team takes over to build and deliver the solution to the customer. In a products business this would include a factory and commissioning team. In a services business this team would include the people who provide the actual service. The delivery team is often referred to as the fulfillment team since their role is to fill the order.

After the order has been delivered and accepted by the customer, it is important to have a support team there to ensure the customer has as pleasant experience using the solution. This includes addressing any problems that arise after the customer has taken delivery of the solution, and answering general questions to make life as easy for the customer as possible.

All four teams are there to help the customer through the process.

Ensuring the Business Side
Now let’s look at this from the businesses perspective. Remember the solution needs to be advantageous for both the customer and the business. We call this a win-win scenario, and it is crucial to building successful long term relationships.

From this perspective, the sales team’s goal is to get the customer to decide that they want to buy from this business. The goal is not a purchase; the goal is a decision in their minds that they want to make a purchase. It follows that the sales team needs to understand the value of your solutions, and where they fit in the marketplace. It is not critical that they understand every detail, but they had better know where to get the answers.

The orders team’s goal is to get the purchase order. If the sales team has done its job, the customer already wants to buy. The orders team must sit down with the customer and understand the details of the problem they are trying to solve. They must then explain the available options, answer any questions, and work with the customer to find a mutually agreeable solution that helps both the customer and the business. A win-win philosophy is at the heart of all successful orders team.

From a business perspective, the delivery team’s goal is to get the customer to pay for the solution. They do this by providing a quality solution that the customer accepts. Managing delivery can be very complex, but it is critical that this complexity is not transferred onto the customer. The customer wants a quality product or service, delivered on time, and on budget. How the details are handled is not their problem. They are not that interested in how you do it. They are interested in the end result. The delivery team must deliver the end result.

So once a business has been paid for delivering a solution why continue to serve the customer? The support team’s goal is to deliver a happy customer back to the sales team so their job will be easier the next time around. This function is often under-rated by people who do not understand how much easier (and less costly) it is to sell to a customer something a second time, compared to getting a new customer. Post-delivery customer support is crucial to all successful long-term businesses. When a happy customer goes looking to solve his or her next problem, they will come to you first. An unhappy customer will go to everyone else first. The support team is there to ensure the next sale.

Summary
Healthy businesses are organized around the way customers pursue solutions to their problems.

The sales team helps the customer understand the available solutions and their benefits. The sales team helps the business get the customer to decide they want to buy.

The orders team helps the customer understand the details and place an order. The orders team helps the business understand the customer’s details and get the contract signed.

The delivery, or fulfillment team helps the customer by providing the agreed upon solution. The delivery team helps the business get the customer to pay for the solution.

The support team helps the customer by taking care of them even after they have paid their bill. The support team helps the business by delivering happy, ready to buy customers to the sales team.

Each team needs to have a strong relationship with the teams that precede and follow them in the business cycle in order to serve the customer well. Each team needs to look for the win-win balance of helping the customer and helping the business because helping the customer the right way is the same as helping the business.

How People Find Solutions

The 4 Steps to Problem Solving

We know why people want things:
1. to meet basic needs,
2. to save time or effort,
3. to get peace of mind,
4. it appeals to their image or ego,
5. fun or enjoyment,

We also know why people go looking for help with these things:
1. physically can’t do something
2. don’t know how to do something,
3. don’t have the time
4. don’t have the tools
5. don’t’ like doing it
6. more efficient to have someone else do it

Understanding why people want things is step one. Step two is understanding what people do when once they decide to find a solution to their problem.

Let’s assume for the moment that someone knows they have a problem, and they’ve decided they want to solve it. There are 4 steps to finding a solution that people generally follow:
1. Search for things that could address the need or want
2. Decide on a solution and set out to get it
3. Take it and get it ready to use
4. Use it

All problem solving can be broken down into these four basic stages. Here’s a more familiar way to look at it:
1. Go shopping
2. Place an order
3. Take delivery
4. Start using it

Let’s look at the four stages in a little more detail.

Go Shopping
Think about the last time you needed something. What did you do first? I was fixing the brakes on my son’s bicycle the other day, and needed an extra hand to pull the brake handle. “Hey Logan, can you come pull the brake handle?” I asked someone around me for help. I wanted a new cell phone plan because I learned that my bill was regularly twice as high as my fiancés. “Honey, what company do you use again?” Her response: “I think I have a pretty good plan, but why don’t we go the mall and ask someone who actually knows. There are at least 4 cell phone stores there”. So we did.

Searching for solutions generally starts with asking your friends, family or co-workers. If you’re still not sure you seek out an expert for more advice. You may even test-drive, or try on a few things to see what you like best. Finally you pick something you either like, trust or recognize from the suggestions offered.

Place an Order
Placing an order can be as simple as “I’ll take this one”. It can also be a complex series of decisions on options, delivery methods and payment options. When I placed an order for my new cell phone, they wanted to know if I would like to add a case, how I wanted to pay, and if I would like them to transfer my contacts over from my old phone to my new phone.

When I worked with equipment for utilities and industrial plants there were dozens of ordering options for different voltage levels, cabinet types, communications equipment options, system configurations or configuration services, wiring harnesses, the list goes on. The sales people didn’t even know all of the available options. There was a separate orders team to take them through the ordering process and ensure they got a solution that fit their needs correctly.

Take Delivery
So after the order has been placed, someone needs to fill your order. With my recent cell phone purchase the same person who sold it to me and took the order then took my old phone, went to the back room, and came out a few minutes later with my new phone. It was all set up complete with all the contacts from my old copied onto it. I have no idea whether he did it himself or handed it to a technician to do. Frankly, I don’t care. I just know my salesman took care of it.

In the industrial world, taking delivery is a little more complicated, but it follows the same basic steps. Instead of going into the back room, the equipment is ordered from a factory, and team of people are engaged in building and configuring the equipment. Shipping is then arranged with the customer including transport and cross-border customs clearing. On first deliveries the customer often comes to the factory to do some tests and provide formal acceptance. Some changes are almost always made at this point. After shipping the first ones to the installation site, an engineer is often deployed to help set it up and ensure everything is working correctly. All part of the delivery process.

Use It
And finally you get to use it. But the story doesn’t end here, there’s more. Remember when you got that brand new PC home? You got it set up, you started using it, and then you tryed to print out that first piece of paper and nothing happened. You tried everything you could think of and still nothing happened. Enter Customer Service.

Even after things are delivered and paid for, people still need help. If you get good help you are happy, and you go back to that store and recommend them to your friends. If you get bad help, or no help, you may never go back there. You will also probably make sure everyone you ever meet looking for something similar knows to stay away from that company because they will cause them nothing but pain. After all, that’s what happened to you.

A pleasant experience with the Customer Service team after you buy something is often the difference between loving and hating the people that sold it to you.

Summary
Whether we realize it or not there are 4 steps we all go through every time we purchase a product or service.
1. Shop for potential solutions
2. Decide and order something
3. Get it
4. Use it

Why People Get Help

The 5 Fundamental Benefits

For any business to be successful, the people inside the business must understand why people would want their products or services. Understanding the 5 reasons people ask for help, and the 5 corresponding benefits they receive is critical to understanding what type of help you should offer.

I was brought up in a very small town where we learned to do most things for ourselves. My father seemed able to fix anything that broke, and build anything we needed. We tuned our own bicycles, replaced engines in our cars, we even built onto our house and added a garage. I learned that it was good to be able to do things for yourself. I feel very fortunate to have learned how to do so many things for myself from my dad.

What took me a little longer to figure out was when to ask for help. It was rare that my father needed to ask for help, so I began to see asking for help as a type of failure. I felt bad if I could not do something myself. Looking back now I realize there were many times my father asked for help (and many more my mother wishes he would have). When he did it was not a sign of failure, it was a sign of intelligence. He asked for help for some very good, basic reasons. The same reasons everyone asks for help if they are smart.

1. Don't know how to do something
Sometimes you plain don’t know how to do something. This applies to business just like it does to every day life. There are things that you don’t need to do every day, and you just never learn to do them. What’s the solution, get some help. Of course you could always go out and learn how to do it yourself, but usually its far better to just get some help from someone who already knows.

If you don’t know how to do something, your best bet is to find someone who has that knowledge and get it done right by an expert.

2. Don't have the time
I don’t know about you, but my list of things to do is always longer than my available time. To top it off, I don’t want to spend all of my available time working on to-do lists. Just because you know how to do something, doesn’t mean you have the time to do it.

If you don’t have the time to do something that needs to be done, you need to find someone who does have the time and free up your time for things that matter to you.

3. Don't have the tools
I spent a year work in residential construction, still one of the best jobs I ever had. I worked with two brothers who were great fun, and treated me well. We used a lot of tools on the job, but when it came time to put the roof on a building we always called a local crane owner-operator to come over and give us a hand for a few hours. He would hoist the roof trusses up, and we would nail them in place one by one. We asked for his help because he had a special tool that we did not, a crane, and he knew how to use it safely and efficiently.

Sometimes you can rent the tools. Sometimes it’s best if the tools come with someone who knows how to use them.

If you don’t have the tools to do a job, you need to find someone who has the right tools to get the job done.

4. Don't Want To Do It
Sometimes we come across things that we just don’t want to do. As a youth I changed the oil in my car myself. I don’t do it any more. I know how. It wouldn’t take me any longer than it does to go to the lube place and wait for them to do it. I have all the tools sitting in my garage. I just don’t like doing it anymore so I go to the lube shop and pay them to do it for me. I’m glad they’re there. They provide me with a valuable service.

There is always someone out there to help you with these things. They may like doing it, they may like you, or they may just want your business. In any case, helping people with things they don’t like doing is a great service.

If you have something you don’t want to do, you can always find someone who does. Let someone else worry about the things you don’t like doing.

5. More efficient to have someone else do it
Every person and business has certain things they do very well. This is generally because they have some combination of knowledge, time, tools, and desire that other people don’t have. Because they are so good at it they become very efficient and can often do things two times, ten times or even a hundred times faster than the average person. It is well worth paying someone twice what you think your own time is worth to get something done if they can do it ten times faster than you.

If someone else can do to faster and cheaper than you, it makes sense to let them do it. Having something done by someone efficient can save you tons of time and money.

Conclusion
There are 5 basic reasons people get help:
1. Don't know how to do it
2. Don't have the time
3. Don't have the tools
4. Don't want to do it
5. More efficient to have someone else do it

And consequently there are 5 basic service benefits that can be offered:
1. Get it done right by an expert
2. Free up your time for things that matter to you
3. The right tools to get the job done
4. Let us worry about that for you
5. Save your time and money

Providing a good service improves the quality of people’s lives. The better you understand people’s reasons for wanting help, the better equipped you are to help them. Remember every successful business helps themselves by helping others.

Why People Buy Things

The 6 Fundamental Reasons

For any business to be successful, the people inside the business must understand why people would want their products or services.

I travelled to Brisbane Australia several years ago, arriving at midnight on a bus from Sydney. I was alone, had no place to stay, and very little money. I needed a place to live out the next 6 to 8 hours. I was looking to meet my basic needs. With no real knowledge of the city, I started looking for a bridge to sleep under. As it turned out I met a cab driver walking down the road who took me to a nearby hostel where I got to sleep on the couch for the night. If he had tried to sell me a trip to the Grand Hyatt, I would have had to decline. I was not looking for comfort; I was looking for basic shelter. He had backpacked in his youth, and understood where I was coming from. He correctly assessed my situation, and offered me a solution that worked for me. The cab driver understood not only what I was looking for, but why I was looking for it. I needed shelter, but I only wanted to meet my basic needs, nothing more. If I ever met him again, I would thank him and buy two of whatever he was selling.

We can break the reasons why people buy things down into 6 categories: basic needs, convenience (saves time or effort), peace of mind, image or ego, fun, and increasing personal wealth. Understanding which category (or categories) a problem falls into is critical to providing an appropriate solution.

Why people buy things:
1. basic needs
2.convenience
3. peace of mind
4. image or ego
5. entertainment
6.increase wealth

1. Basic Needs
Basic needs are easy to understand. These are the things we need to survive. On a personal level this includes food, shelter and the like. On a business level these are basic elements required to do business like materials & labour. If you are addressing a basic need you can expect price to be a major factor. People don’t want to pay extra for their basic needs; they want to save that for more interesting things. When I slept on the couch in the hostel in Brisbane, I felt fortunate to have done business with that cab driver. The cab driver had met my needs exactly.

2. Convenience: Saving Time and Effort
We all like saving time and money. Anything convenience that saves us time and effort is a big plus. At a personal level, we often make purchasing decisions for convenience. Why do people buy dishwashers? Could we really not do the dishes by hand? Sure we could, but we don’t want to be bothered. If we’re looking for a place to live, we’d like a dishwasher or a housekeeper. It’s not a basic need. It’s a time and effort saving convenience. Paying for convenience is common. We want to spend our time and effort doing things we like.

In a business setting, time and effort savings are money in the bank. I don’t know about you, but I sure don’t want to be paying someone $20 an hour to cut lumber by hand if I could pay them $20 an hour to cut it with a chainsaw. If I need much lumber at all, a chainsaw purchase makes good business sense.

3. Peace of Mind
Peace of mind is something we all want. This is about buying security. The motivation is very similar for personal and business situations. We want to know we are safe, so we buy smoke detectors and fire extinguishers, maybe even a sprinkler system. We want to know our families, our employees, and our homes and businesses will be okay if something unexpected happens, so we buy insurance. Everyone has some level of fear of the unknown and the uncontrollable. Peace of mind is a powerful motivator.

4. Appeals to Image or Ego
Never underestimate the power of the ego. People are vain. We all love to look good in other people’s eyes. We like it when people are a little bit jealous when they look at our lives. We certainly don’t want to be looked down on or felt sorry for. We do and buy many things either because we like them (our own self-image), or because we think others will like them. Image and ego based decisions are emotion based decisions. Logic has no place here, it’s all about how something makes us feel. Tell your parents or friends that you’ve just bought a house in the right neighbourhood, and you are sure to get that hearty “Wow, good for you”.

So Image and Ego definitely motivate personal buying decisions, but do they also impact business decisions? Absolutely! At every level, business is personal. The owner of a business wants his business to appear to be the best. The manager of a department wants his department to be the envy of the other managers. The salesman wants to be recognized as the top seller. The Engineer wants to be seen as the most innovative designer. Ego and image are still driving decisions. Remember that a business is just a collection of people. Personal relationships and feelings are still what get things done. Business people still buy with their emotions. The only difference is that they then (sometimes) apply logic to justify the decision. If two solutions are similar you can be sure the one that satisfies the ego best will be the winner.

5. Fun
You need look no farther than the multi-billion dollar entertainment industry to know that this is true. We love our leisure time, and we’re willing to spend, spend, spend to have fun. That big screen TV, or the pool table in the basement have no practical purpose, they’re just fun. Businesses are no exception. Millions are spent by businesses every year on employee events, sports tickets, and workplace ambience. This is where we like to spend our money. It’s Fun.

6. Saves or Increases Money
Financial freedom is a burning desire inside many of us. It is our road to ensuring all the other objectives: basic needs, convenience, peace of mind, satisfying our ego, and having fun. So it’s no surprise that people will invest their money in things that either save them money, or make them money. We all want to be free. For individuals financial freedom means securing your retirement, increasing your leisure options, leaving something for your kids, and the ability to help others. For businesses, this is what it’s all about. Business success equals personal success for everyone involved in a business from the owners to the employees. Helping everyone save or increase their money is the name of the game.

Understanding the reasons people buy, is just as important as understanding what they buy. Just knowing I’m looking for a place to live is not enough information to solve my problem. Do I want basic shelter for the night (basic need)? Do I want to be closer to work (convenience)? Do I want to feel safe letting my kids play outside (Peace of Mind)? Do I want a home I’m proud to entertain in (Image or Ego)? Do I want a pool table and a big screen TV (Fun)? Do I want to be able to sell it and finance a move to an acreage when I retire (increase money)? Understanding the reasons why I want a new place to live are critical to solving my problem. This applies to all purchasing decisions.

The better you understand people’s reasons for wanting something, the better equipped you are to help them with a great solution.

In the end providing the right solution improves the quality of people’s lives. The better you understand people’s reasons for wanting something, the better equipped you are to help them with a great solution. Remember every successful business helps themselves by helping others.

Why Are Businesses In Business?

A Short Rant on Business 101

Looking back I can’t believe how long it took me to truly understand what a business was for. I’d heard it repeated countless times, albeit for the most part by parrots and non-believers. I’d seen it portrayed in posters and articles all around me, but somehow I remained blind to the message. Like many of us, I was brought up believing that to make it in business you had to be ruthless and unfeeling at times. Clouded by this false perception I refused to believe the mantra all around me: “The Customer is Number One.”

The Purpose of Business

What follows is, admittedly, a bit of a rant. It’s important that you read it. Here’s why. To understand what businesses do, you need to understand why they do it. To understand how to improve the business you are in, you need to understand its true purpose. That’s what this is all about.

When it comes to business, you can look at things in one of two lights: Good or Evil. The evil view is that the heads of major corporations exist for the purpose of taking our money from us. If you’re looking for a bad guy, few compare to the faceless evil of corporate America so often portrayed in today’s media.

The Evil Corporation: Out to get your money!

The Good Company: helping us fulfill our needs and desires.

If you bother to take a second look with the good light turned on, you will have to admit that successful businesses are there helping us fulfill our needs and desires at every turn in ways we could never achieve without them. Are they in it for themselves? Absolutely! Are they also in it for you? Absolutely again!

Are they in it for themselves? Absolutely!

Are they in it for you? Absolutely!

Fundamentally successful businesses are started for two reasons.

1. To help themselves
2. To help others

Yes, they can do both. In fact they need to do both to remain useful to themselves and to remain useful to others.

Think about your favourite store, maybe it’s a stereo shop, a clothing store, or even a grocery store. What happens if they raise their prices so high, or hire such rude sales people that you and your friends stop going there? They start losing money and go out of business. You probably wouldn’t care, but they would no longer be able to help themselves, at least not with that business.

Now what happens if that same business hires lots and lots of really nice people to spend extra time with you, and then lower their prices so you get everything at near cost? They start losing money and go out of business. This only difference is this time you care, because now you can’t go back to that friendly store. Now you can’t return that item you didn’t want, or get it fixed under warranty. Because they didn’t help themselves enough, they can’t help you any more either.

So what’s the solution? Simple, they help themselves by helping you. They want to do both. They need to do both. You also want them to do both.

What do businesses do? They help others achieve their needs and wants, and they also help themselves in the process. The one who figures out how to help others the most is the winner. There is no other reason for people to patronize a business, other than to get something they either need or want. If a business doesn’t help you get that as much as their competitor up the street does then they go out of business. If a business helps you so much they can’t make a profit, they also go out of business and are not much help to you in the long run.

Every successful business helps themselves by helping others.

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Welcome to Business 101

A Quick Overview

All too often people make the transition from task based or technical job functions to management without really understanding what their business does. That was certainly my story. So I learned as I went along. I went to seminars, questioned my peers and managers, listened to audio courses, read a lot of books, and banged my head against my desk for long hours trying to make sense of it all. The “how” was easy. The “why” is what drove me crazy because so few people seemed able to explain it. I truly wanted to leave things better than I found them, and to improve the “how”, you must understand the “why”.

This writing is the compilation of years of personal study and experience. Its intention is to help you understand business as a whole, and provide some answers to these questions:

1. What is our business for?
2. What does our business do?
3. How should our business be organized?
4. What is the objective of each part of our business?

I believe everyone needs grounding in business 101 if they hope to help shape their business, and provide the very best for our friends the customers. I hope you enjoy what I have to say, and learn a lot along the way.

Upcoming Topics

The Basics of Business - Grasping the Concepts

Why Businesses are in Business - People helping People

Why People Buy Things

Why People Get Help

How People Find Solutions

How Business is Organized to Help Provide Solutions

The Two Ways to Grow a Business: More Money In or Less Money Out

Top 3 Ways to Shrink a Business

Basic Measurements - How do we know if we are succeeding?

Basic Business Cycles: Day to Day Operation

Daily Business Cycle: Sales, Orders, Fulfillment, Support

The Sales Cycle

The Operations Cycle

The Roll of the Orders Team

The Roll of Customer Service

Growing the Business: Increasing Sales

Increase the number of customers

Increase the average value of each sale

Increase the frequency of sales

Growing the Business: Lowering Costs

Understanding Variable Costs

Understanding Fixed Costs

Reducing Costs

Introducing New Solutions

Finding New Ideas

Creating New Solutions

Commercializing New Solutions

Are We Succeeding? Finance 101

The Balance Sheet

The Profit & Loss Statement

Cash Flow Projections

Sales Forecasts

Success Rate Metrics

Cost of Failure Metrics

Budgeting

A Deeper Look at Each Department

Core Competencies

Sales

Orders

Fulfillment (factory)

Customer Service

R&D

Marketing

Cross-Functional Business Segments

Strategic Planning

Quality Assurance

Human Resources

Finance