Category Archives: Owning a Business

Competitive Advantage is a Moving Target

Smart business owners have their competitive advantage front and centre at all times.

“Competitive advantage” answers the question, “Why will customers buy from you instead of your competitors?” It’s the starting point to positioning your products and services in the mind of your customers, the key to setting yourself apart from other businesses, and critical to the success of any enterprise.

Here are a few competitive advantages and examples of their use in the marketplace.

1.    The First. Being the first to offer goods will be an advantage over other businesses. The downside of this advantage is that it rarely lasts for long, because others will soon get the scent of success and jump in to compete for a piece of the action.

2.    The Best. One way to distinguish your business from the others is to offer products and services of higher quality. Being the best is an enviable place to be, because everyone wants to deal with and be associated with the best.

3.    The Cheapest. The Dollar Store business model has parlayed this advantage into a highly successful chain of establishments. Interestingly, the franchisor’s website claims to be “Canada’s largest franchised dollar store chain and the fastest growing concept in retail.” “Largest” and “fastest growing” are advantages designed to tug at the heart strings of potential franchisees, while the basic business case is built on offering goods for a buck.

4.    The Fastest. Fast food services and drive through lineups are visible evidence of this competitive advantage at work. Everywhere you look something claims to be fastest: fastest car, fastest computer, and fastest weight loss program.

5.    Convenience. Small corner stores in high profile locations turn convenience into profit, while pizza delivery drivers turn it into part-time self-employment. This competitive advantage commands higher margins for making customers lives easier.

6.    Technology. Newer, better or faster technology can lead to savings or a superior experience for customers. Technological advantages can position a business ahead of competitors, at least for a few blinks, until the next miracle blasts its way into the marketplace. Have you tried to get your VCR fixed lately?

7.    Secret Formula. The Coca Cola Company is still a surefire example of leveraging a “secret formula” to massive gain. According to Wikipedia, the business offers “more than 400 brands in over 200 countries or territories and serves 1.6 billion servings each day.”

8.    Exclusivity. An exclusive agreement with a manufacturer will provide a competitive advantage over other retailers. Winning a contract from an established organization, such as a government agency or a larger corporation, can also be a competitive advantage. A pitfall for this business strategy is the tendency to drift into being a one-legged pony, relying on one or two contracts for survival. Unless the owner is diversified, the business can evaporate when the contract ends.

9.    Qualifications. Work experience and education are commonly used to advantage, both in business and when competing for jobs. A handsome set of credentials sweetens the deal for any potential buyer.

Competitive advantages don’t last forever, they evolve. For example, a business that is successful by being first will almost immediately find competitors on its doorstep, vying for a piece of the market. Being first might be an advantage for a while, until someone else offers a more enticing deal to customers, like lower prices, a faster service, or higher quality products.

In business, you don’t have the luxury of creating your competitive advantage and then forgetting about it. Smart business owners continuously innovate to stay at the forefront.

Forecasting Isn’t the Same as Accounting

There’s no doubt that forecasting or attempting to predict the future in any way, is considered by many to be a mild form of insanity.

Forecasting is one area of business planning that entrepreneurs tend to resist. There are many reasons for this.

  • Beyond spending, many people simply don’t like to deal with money matters.
  • Unless you’ve previously owned a business, the entire business financial arena tends to be a vast, spooky mystery.
  • Those who have weathered a financial black eye in their personal lives are inclined to be apprehensive about tackling the management of business finances.

Many people assume that forecasting is the same as accounting, and that it should be left to highly skilled professionals, such as bankers, accountants and MBA’s. And yet, the process of forecasting is sure to be a healthy learning experience for owners and anyone thinking about starting a business.

To dispel myths and misguided fears about forecasting, it is helpful to clarify what it is… and what it isn’t. One way to do this is to identify the ways that forecasting differs from accounting.

  1. Forecasting is an educated guess at future scenarios, while accounting is a detailed compilation of past transactions.
  2. Forecasting takes place prior to a period of business, while accounting happens after commerce is done.
  3. Forecasting provides an approximate picture of the future, while accounting shows an accurate record of business past.
  4. Forecasting is built upon safe assumptions and conservative estimates, while accounting is built upon precise records and receipts.
  5. Forecasting is usually best done by the small business owner, while accounting should almost always be entrusted to an accountant.

The truth is, most entrepreneurs have no crystal ball skills whatsoever, and most will never be accountants. Any yet, small business owners need to have a certain level of confidence in the future of their enterprises. A rationally constructed forecast can give you the confidence needed to move forward, while arming you with the information necessary to weather upcoming threats.

As surely as the business owner must pay taxes, he or she should take on the responsibility of forecasting. You can hire someone to foretell your future and you can certainly turn your business records over to an accountant for compilation, but at the end of each year it is the business owner who pays for any mistakes made and who reaps the rewards when things go right.

While attempting to predict the future might seem a bit crazy, the real insanity is trying to run a business without the benefits of forecasting. 

The Art of Putting Off Procrastination

I’ve been meaning to write this article for some time, but kept putting it off.

Procrastination is a rat and a killer of dreams and life. As near as I can figure, it’s just a bad habit with its subversive roots somewhere in the realm of fear: fear of failure, fear of success, fear of change, and fear of one’s own shadow.

Although I pride myself in being action oriented, I am also capable of long periods of procrastination for some things. The rat lurks below the surface, rising only to taunt me occasionally when I realize I’ve been putting something off for far too long.

Black belt procrastinators have their bulletproof rationales ever at the ready to justify their inaction. One of the most sinister cornerstones of inaction is that there always seems to be an abundance of reasons to put things off until later. You can wait for the government, the health system, your health, your advisors, till the time is right, or you have enough money or time—if those don’t do it, you can wait until your friends approve or your grandma gives you her blessing. A procrastinator will defend his inaction to the death, and then choose the slowest possible way to die.
Putting off personal issues is troubling enough, but business owners can’t afford the luxury of procrastination. As we all know, what doesn’t get done today… will still be waiting for you when you wake up tomorrow morning. Business owners need to have a bias for action and a way to stay focussed on the most important matters in front of them.

Here are seven steps sure to help you deal with procrastination.
1. Clarify Your Vision. What kind of person or business do you aspire to be? Clarifying your vision will enable you to channel your energy into actions that are right for you.

2. Write Your Mission. How will you fulfill the elements of your vision? Will you be the best, the fastest, or the friendliest?

3. Identify Your Goals. Goals are specific, measurable, achievable, realistic, and time dated.

4. Select Your Most Important Goals. Choose the top three to five goals. Feel free to pick the low-hanging fruit, the ones that will bring the most results for your investment of time and energy.

5. Make a To-Do List. Make a list of tasks for each of your top three goals. If you’re still listing tasks three days later, you’re probably still procrastinating.

6. Choose Your Payoffs. Identify how you will reward yourself once you’ve achieved each of your goals. It’s also helpful to make a list of the benefits for each goal.

7. Take Action. Choose one task and go to work on it immediately—today.

Unless of course, you’d rather take a bit more time to think about it.
At all times we walk a narrow path between under and over thinking our actions. Too lean and quick might open the door to disasters, too long contemplating and we drift into the fuzzy world of procrastination. That’s the deal.

Business Killers Part 3

caution-tapePreviously I posted Business Killers Part 1 and 2, and discussed such challenges as not staying on top of accounts receivable, falling behind on paying the bills, persistent low-bidding, and getting buried in debt. Here are four more business killers.

Lousy Customer Service. While most business owners are motivated to provide excellent customer service, problems creep into the workplace when the business starts to grow, requiring that the owner take on hired help. It should be the goal of every business to provide top-notch customer service for every person that comes through the door. No small business can afford to have employees chasing away customers. Owners need to provide training for employees and monitor customer service ongoing.

Financial Illiteracy. There are five financial reports that are critical to managing a business: the balance sheet, the income statement, the aging accounts payable, the aging accounts receivable, and the cash flow forecast. Too often, business owners who get into trouble don’t even know they’re insolvent until they’re turning the keys over to the landlord. It’s not enough to get financial reports and pop them into a file folder—you need to get them shortly after the end of each month and you must learn to read them and use the information to make business decisions. In order to be able to calculate prices and put together bids, owners need to know the cost of producing products and services, as well as the true cost of making sales.

Fumbling the Hurdles of Growth. Business start-up requires a certain set of skills, but owners who get through that early scramble are in for an even bigger challenge—expansion. Growth blows the doors off the micro-business model and invokes different threats, demanding a whole new set of skills. The path to growing a business from zero to several employees never seems straight or clear. It’s always cluttered with difficulties that exact critical decisions along the way, many of which can propel you forward or flat backward, depending on the quality of each decision. The keys to growing a business are: a clear vision, courage, passion, perseverance, a dash of good luck, and the ability to make more good decisions than bad.

Burnout. It’s fun and exhilarating to get caught up in a new business. The realization that you can build an enterprise and achieve financial and other dreams, the ability to chart your own path and sustain your family without having to punch a time clock or report in to a boss every day, the thrill of working at something you love to do—these are all wonderful things. But for some entrepreneurs, the real enemy is the inability to shut the business off. Working for others, you usually have welcome restrictions on the amount of time you can work—weekends, holidays, regular work hours—those restrictions all go out the window once you’re self-employed. When burnout overtakes a person, it usually comes at a high cost: unable to enjoy the work, too tired for leisure or family time, health issues, and limited energy to serve customers. The best time to battle burnout is before it happens. Set your work and personal boundaries early, exercise regularly, eat healthy foods, and take time each day for your family, friends and you.

Stay tuned for Business Killers Part 4 where I will cover such business killers as the cash flow crunch, fingers in too many pies, trying to be all things to all people, and knowing when to fold ‘em.

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