by Susan Kristoph
with Dan Hubbard
& Rich Mater Mar 9, 2018
-- Business Strategy --
YOUR BUSINESS GOING THROUGH DARK TIMES? READ THIS, UNDERSTAND WHY, AND FIX IT!
WARNING: THIS IS MY LONGEST BLOG POST TO DATE, BUT YOU’LL FIND IT WORTH THE READ!
"If you find yourself wondering why your business or brand is in trouble 12 to 18 months in, and you want to fix it, you’ll want to keep reading."
Every so often, we get a flood of contacts asking about changes to an existing web platform, for one purpose – their business or brand is in trouble.
They feel like changing their web products will help to make everything alright.
Typically, the issue isn’t their website, or their app, or their social media presence. And more typically, they are a business that launched between a year and eighteen months ago.
If you find yourself wondering why your business or brand is in trouble 12 to 18 months in, and you want to fix it, you’ll want to keep reading.
You thought outside of the box!
You did your SWOT, learned, pivoted, and iterated!
You launched, and were an instant success.
But at some point, you noticed that the excitement over your new brand or business died down, and after looking at the numbers, you discover that the decline in excitement and sales actually began weeks or months before you even realized it.
Don’t worry, it happens!
Every business or brand – even large companies – go through iterations of success followed by a lull in demand for the services they provide or the products they sell.
There are a lot of reasons for this. There are the easily explained one-hit-wonders, there are societal trends that make early successes -- followed by rapid decline -- easy to understand, and then there are business/brand internal failures that lead to slipping consumer interest and sales.
But, I don’t want to spend too much time writing about notional reasons your business is in need of a second-wind.
Instead let’s dig-in, isolate, and discuss exactly how to do fix it. What strategies are we going to implement to put that second wind in your sail?
First, the product, service, or brand we’re talking about matters! And, so do the ecosystem and time-in-space in which it operates, and the market’s perception.
If you started a company based on selling a “pet rock”, or even a collection of “pet rocks”, then you put all your “rocks” in one basket, and we should probably look at that first. You either need another use-case for your “pet rock”, launch a follow-on product, or re-invigorate your existing “pet rock”. That last step rarely works out.
If you started a business in a perfect location, and something about that location makes it no longer perfect, and that’s the only delimiting factor, then we can stop right here and make some pretty simple deducements and decisions. Try to fix what changed about the location, wait it out if temporary, move, or fold.
If you started a great new restaurant, the first six-months was amazing, and then you got hit with a slew of negative reviews (“that place has dirty bathrooms”, “the service is poor”, etc.), then we can stop right there and contemplate why management has allowed those conditions and not taken to social media to directly address the reviews.
Each of those three are pretty common examples, and they are easy to analyze and tackle!
What’s more difficult are circumstances attributable to no apparent product/service life-span issue, no readily apparent human, process, or ecosystem failures, and no glaring shifts in the marketplace.
What then? What do you do when there are no clear indicators pointing to “why” you’re seeing the decline?
First, data doesn’t lie – go to the data!
I’m posing these questions for you to answer in terms of a business that sells products, but if your business is service-based just substitute the applicable terms (helps to do this on a white board/big sheet of paper):
1 What did you believe your top sellers were going to be before you went to market? What information did you have to cause you to believe that? 2 Exactly how and why did you believe that those products differentiated your business in the marketplace (not differentiate themselves, but differentiate YOU)? 3 What was your target market for those assumed top products (“market” should be types of consuming businesses or people, and geographical location)? 4 What were the prices and margins for what you believed were going to be your top sellers at opening? 5 What percentage of your startup capital/debt was attributable to those you assumed were going to be your top selling products? 6 What were your actual top sellers when you started in the marketplace? 7 How close were your assumptions about your top sellers to what they actually were? Why do you think that is? 8 Exactly how did/do the actual top sellers differentiate YOU in the marketplace? 9 What is the actual market that’s hitting with your top sellers? 10 What are the prices and margins for your actual top sellers now? 11 What percentage of your startup capital/debt was/is attributable to your actual top selling products? 12 What are your poorest selling products, and why do you believe they are poor performers? And, why do you still offer them? 13 What products do you (the business and all its staff) spend the MOST resources (time/money/space) on? Map that out!!!!
Ok, what have you learned so far?
The vast majority of businesses are founded upon key products/services providing successes, but they are usually experiments. Those are the MVPs.
And, most business leader’s assumptions about their initial top selling products/services are the foundation of their value proposition. They go into business assuming that the value proposition is sound based upon the MVP being successful in the marketplace. Finger’s crossed!
And if a business started off successful, then the MVP(s) and value prop were probably, at least initially, sound.
But what I’m betting you learned from answering the questions above, is that there was a lot of ‘ish’ in your notes; i.e. kind of, sort of, somewhat, mostly, not sure, and a lot of buts.
That’s because no matter your planning, the marketplace is a moving target, and people make up the marketplace – and we all know how WE can be.
You likely already knew that some of your assumptions about who would buy what, for what price, in what volumes, and how the purchases would be made weren’t exactly what you expected.
But look at your notes real closely. I’m betting that what you learned, or strongly suspect, is that:
You’re not entirely certain what your margins are for your top sellers, but you strangely can isolate your margins for your poor performers.
You had a pretty good idea that factors ‘A’ through ‘X’ would contribute to you making a widget [“What’s a widget?” – I love Rodney Dangerfield]. But what you’ve learned is that even small changes to supply-chain, processes, personnel, and marketplace influencers can throw-off those planned factors. And top sellers obviously consume more resources, so those factors are intensified with them. In stark contrast, poor performers, while taking up resources such as space & time, and while failing to service debt, are predictable and their margins are typically clear.
Your top sellers are not actually servicing your debt (especially the debt directly attributable to those top sellers) adequately.
A few examples: a) Your top selling food item consumes more time, energy costs, consumables space, man hours, and media output than you planned, and so your margins are off, and so is debt service; b) Your plan to sell an engineering service costs you insurance premiums, tech, license, and professional fees, and advertising/networking dollars that look like you’ll never get out of the whole with; or, c) The supplier relationships you had to pay upfront for are geared to sell products & services that are in low or seasonal demand, and so you can’t map out the ROI, nor service debt.
You allocate WAY TOO MANY resources to both your top sellers AND your poor performers.
Resources are finite! And typically, in a brand-new venture, resources are mostly allocated in a first-come first-served basis. E.g: Something is selling well, like really well, and in order to keep selling it uninterrupted, you need to feed it more resources (materials, technology costs, personnel, a bigger sales platform, etc), and usually very quickly. But in doing so, you may very well NOT be increasing your margins, and you’re likely taking resources away from products/services that can produce better margins and therefor service debt better. And that’s obviously not the best way to do it. True top sellers should require and should be given PLANNED resources; adjusted frequently of-course. IMPORTANT: If at any time your top sellers are in need of unplanned resources, you need to stop – you may very well be overlooking greater ROI (raise prices, decrease advertising, etc). Poor performers should receive very little resources; like none – get rid of them. I know that can be hard, especially if they were supposed to be your MVP of all MVPs. And I’m not suggesting that they can never be part of your success, but you have to stop the hemorrhaging for now.
This is what I want you to try now. Don’t look at your notes from answering the questions above. Put them aside, and out of your mind.
First, create a list of your known top three sellers in three columns; NOT the ones with the best margins, just the top three sellers. In each column list only the resources they each have in common. All three take some sort of time, money, energy costs, consumables, etc. Only write what each of the three shares. The more detail, the better! When you’re done, set it aside, drink some coffee, and then come back.
Next, create a list of your top three performers in terms of margins – how much money they actually make you. List only what resources they each have in common in each of the three columns.
Now compare the two lists.
You should note that each column includes time resources. If they don’t, you did it wrong! Even if it’s only time that you spend thinking about a product or service, that time is a resource.
You should note that each column includes technical resources. If they don’t, you did it wrong! Internet, email, phone calls, web sites, payment gateways, and merchant services are all technical resources.
You should note that each column includes energy costs. If they don’t, you did it wrong! Electricity, driving to a meeting – these are energy costs, and driving is also a transportation/time/insurance/maintenance cost!
You should note that each column includes marketing costs. If they don’t, you did it wrong. Social media, flyers, business cards – anything that gets a person to a point of sale – is included.
You need to be specific! Go back!
All revised and ready to go?
What you’ll note is that with exception to things like specific licenses for technical products, or a certain type of condiment for a food product, or a particular labor-cost for an attributable skill-set – each column in both lists is virtually identical.
I could have asked you to make lists of your poor performers from a sales perspective, or poor performers from a margins perspective, but they too would be virtually identical (with the same type of one-offs).
“Well just what the h%^$ does that mean! What have I learned? I mean, if everything uses virtually the same resources, why are there such varying sales and margins results?”
What you learned is that the resources that you listed do not include the timing or order of their consumption, nor the manner in which they are consumed, nor who is consuming the product or service that is consuming them.
The easiest examples I can use to explore this is something we can all relate to, running errands.
You need food for the house, a cake for a party, cleaning supplies, vehicle fuel, a bite to eat, and to pick up your dry cleaning. In your mind, you plan your trip so that you hit each place in a way that saves you resources – time, fuel expense, and money. Easy to understand, right!
But the businesses you’ll visit have also planned on your excursion, and have allocated their own resources to compete for your time and money. They have not only considered the base resources they need to allocate to their products and services, but they have also considered the timing, order, and manner in which they are consumed in the course of competing for your business. The businesses that tend to succeed are there for us on our terms, and on our schedule, and they allocate resources to their products, services, and processes accordingly.
That’s very likely what you are missing, failing to do, or not doing well!
Every Harvard MBA, business consultant, and enterprise pundit loves convincing you that “knowing your numbers” is the secret to success. I had you thinking just a few minutes ago in this blog that a list of resources contemplating margins and ROI would do just that. That’s not the secret, if there is one!
But the answers, the way you get you your second wind, is by focusing on how, when, and by whom your products are “consumed”. Figure out “why”!
Is your business “on the way” to where your perspective customers are going? Are you offering your widget at the exact time that it is needed by a perspective customer; do you know when that is? Are you right there when your target customer discovers they need your product or service? Can customers spend their resources with you in a more meaningful way than with your competitors? Are you only selling your customer one widget, when what they really want are three widgets (why don’t you sell the other two widgets)? Bottom line, what problems do you solve for your customers and are you easier to do business with than your competitors?
If you just read through this without doing the work, do yourself a favor and go back and run through the questions, answering them fully. I don’t care if you took a dozen little courses offered by the SBA or local entrepreneur’s hub, or if you have an MBA! Trust me, you will gain valuable insight!
And after you’ve done that, or if you already did do that, now write a very difficult list. It will be tough!
It’s a list of every reason you can think of that people shouldn’t do business with you or should do business with a competitor instead of you. This will likely take you several hours, even days. You may get discouraged. Don’t! It’s going to become a very powerful tool.
There is a common failing of business courses and entrepreneurial workshops, and even great start-up books. You and your MVP have yet to be truly tested, and so that SWOT you worked on before you launched was not quite as valuable as you believed. And when you launched, if things went well, you really didn’t go back to it.
Early adopters of your product or service were excited, and so you were excited. People likely did business with you because they are part of your social circle, you were bright and shiny spanking new, and they wanted to know for themselves what they might be missing out on.
Now you have to do the tough work to become part of their day-week-month-year; their circle. You have to convince them that they’re still missing out, that you can solve their problem, and that your shine hasn’t warn off.
Ask them what you can do better and prove to them you’re REALLY listening. Show them that you’re concerned about their problems. Be easier to do business with!
Now go back to all your lists and notes! Get excited! Because now you’re going to start mapping how and when to match resources to goals – to actual sales and identifiable ROI – not to products or services. You’re going to start small, and you’re going to think about the right-market, right-customer, right-products, right-time, repeat (“5Rs”).
The 5Rs are subject of the next blog! If you want to read it before it posts, sign-up or comment below!
P.S. If you do need help with your web products, engage with us!