Self help group for new small business owners

We get pretty involved with our clients, especially those new to business. Often they find themselves in difficulties they never imagined in the afterglow of deciding to become self employed. Too many major suppliers to these small businesses bully the new business owners to gain preferential payment treatment. This de-motivates the owners and speeds up problems for the business. Not enough of the larger suppliers I observe step back and genuinely work with a small business in trouble – and often these larger suppliers have caused cash flow and other problems through accounting mistakes and over/under supply.

One solution I see is a self help group of new owners with experienced peer support and this is what we are establishing for our new owner clients. We are connecting new owners with some more experienced operators to check in with each other twice a week until the peer support person as certain that the new owner has a good grasp of all the pitfalls. We’ll support the group with free business analysis and regular phone and in person check ups to ensure that the business is in good hands.

The four business owners already in the self help group are going well, two have turned the corner and have new energy for their businesses.

Workchoices: is this type of industrial relations reform necessary?

I have owned my small business for 25 years. Across I employ over 50 people. Most full time and some casual. I see no reason for workplace reform of their extent bring brought in and am concerned that the changes will force me to act in ways I am not comfortable with.

I would have liked the government to consult more with small business as I know I am not alone in thinking these changes are bad for the community and bad for small business. This is not socially responsible legislation.

Experimentation

We’re a few weeks away from releasing a new software update while will ship to well over 1,000 small businesses. We’re been running various versions of this update in our two retail outlets and finessing it based on the learnings. Even though we’ve been doing this for almost ten years, the experience always amazes me as there are significant enhancements we make as a result of using the software ourselves. In the small business marketplace this level of hands on experience is essential if you want to lead in a market niche.

Loyalty marketing

I’ve got the rules on my desk for ten difference loyalty schemes from major retailers and all are poor at best in terms of rewards. I’ve compared these ten schemes with ten from local small businesses and the small business loyalty programs are better by far. It is like comparing chalk with cheese. The small business schemes are simple to use and quick to reward. The national chain schemes require you to complete details and always use their plastic card with your purchase. (Of course this so they can find out your purchasing patterns.) The small business schemes like the newsagency magazine club card, the coffee shop card, the card shop card and the bakery buy 5 and get the 6th free are all about genuine reward.

I would like to see the state governments introduce regulations requiring disclosure of the real value of each point accrued at the time of purchase so the consumer can know how much their business is valued.

I know that if I spend $100 at one major department store I will accrue around 50 cents value in points for the sale. I know that if I spend the same amount on coffee I’ll get $15.00 worth of free coffees. If I spend $100 on magazines at my own retail business I’ll get to choose two magazines to the value of $10.00 each – that’s $20.00 value from a $100 spend.

The lack of regulation is allowing the bigger businesses to get away with what I’d call loyalty theft. Small business groups ought to consider campaigns around how much better value of their loyalty programs.

Customer lines

I was in an Australia Post shop yesterday and waited five minutes to purchase $10.00 worth of stationery. At lunch I waited 2 minutes to be served at Subway. At the bank I waited 5 minutes to do some banking. In the morning I watched the counter at my small retail business and checked to see the average wait time before customers were served. In each case it was one minute or less – for large and small transactions – and in two out of ten cases customers were grumpy for waiting that long.

I’m curious as to why people will wait in a post office for five minutes to put a pack of paperclips but get grumpy in my newsagents when waiting a minute for to purchase the same product.

I think a key difference is that at the Post Office they organise their line whereas at my shop and many small businesses we do not have a regulated line. I suspect that our lack of regulation makes people feel we are not taking the next customer and the next and so or whereas at the Post Office that always happens so there is some certainty.

It’s the same here at my software business with help desk calls. People want to know that they are being dealt with in a linear fashion. Hopefully our CRM solution will provide the transparency they want so they can see that we do take them in order of arrival and not just pick off favorites.

In some respects I wish the Post Office customer mentality was available for small business customers – where people accept delays and public service like service. But then I don’t want their behind the counter arrogance. Not at all.

Another crack at Jetstar

When I flew with them on Monday I arrived at the airport two hours before the flight. I was congratulated on being so early. Smiles all round. I was told I was in the blue boarding group, the second in line in the run for your life seat grab since they have no allocated seats. I asked why I was not in orange, the first group which gets the best seats and they said it was because that’s for anyone with children and those who pay a higher price for their tickets. So, families with kids can arrive just before cut off and they get the seats of their choice.

I’ve flown with Virgin Blue and while their model is different to Jetstar, they are both budget airlines. The Virgin Blue experience is delivered with some more panache and fun than that of Jetstar. At least with Virgin there is certainty about your seat allocation and for regular travelers this is important.

Jetstar and their fuel secret

I took my first Jetstar flights this week and have discovered how they can sell tickets for so little.

They encourage families with young noisy children onto their flights and somehow manage to channel the energy released from their long and loud screams through the flight to feed the engines. Sure saves on fuel. These kids are releasing pure energy in flight.

On each of my 2 hour 20 minute flights I was surrounded by these small monsters and they screamed from takeoff to landing.

Well done Jetstar for such a scientific breakthrough.

The sloppy hamburger eater

I was talking socially yesterday with someone who was a sales prospect in around 1992/93. (I hope he doesn’t mind me recounting the story.)

Over lunch I was told the story of a visit from one of my sales people in 1992/93 with this gentleman, seeking to interest him in our computer system. Our sales person turned up with the remnants of a hamburger on his shirt. This is what the story teller recounted yesterday, how the sales guy looked. He had one comment about the software but that was incidental. It was the burger on the shirt which was “the” story. It was the second time I heard this story from this person in the last six months.

Once I was over being annoyed that something small like food slops from thirteen years ago was worth recalling today, especially in front of other prospects, I realised how first impressions really matter and how some people will hang onto those and forever (almost) judge one’s business by those first impressions.

Sure, this chap should let go of the 13 year old memory and concentrate on what software from my company can do for his business compared to what his current software (chosen 13 years ago) does. But then he’d lose a good anecdote. It is timely that I am reminded about the importance of how we look – especially in this era of casual dress in business.

I am confident that I am not the only person this burger story has been recounted to (twice) and that in itself has a cost of my business. Running the business as if every contact today will be recounted in 13 years is a challenge. It means exceptional service every time. It means focusing as much on the look as substance. It means, too, finding a way to erase these thirteen year old memories so that we and our prospects can move on.

Starting today I’m banning burgers for sales people. In fact, all food during the work day. And drink. No point in taking the risk.

Woolworths / Safeway and their smile TV campaign

It’s interesting to see the latest Woolworths / Safeway supermarket campaign here in Australia. While there is a pitch about price, it’s really a feel good campaign about great service. Lots of smiling.

It’s a great TV commercial. Breezy, upbeat. It sets high expectations which, if not met each time you visit one of their stores, invite harsh criticism.

I don’t think people choose a supermarket based on a TV commercial focusing on great customer service or smiling. Those features are best demonstrated in store as that’s where I’ll lock the experience away to encourage the repeat visits. If you have to advertise that you do what should be basic retailing service then something’s wrong.

Small businesses would do well to take this TV campaign as a reminder to focus on exceptional service. It’s true that exceptional service and a great shopping environment allows you flexibility on pricing.

On the trail of employee theft

We spend a lot of time gathering evidence of employee theft in client businesses. We’ve developed some processes and rules of thumb which police in several states have found useful. The post recent case is in Queensland. In fact, one of our senior employees is out of the office for the next two days giving evidence at a committal hearing.

What frustrates me about this case and so many like it is that our client had the tools available to see this happening and did nothing to mitigate his losses until they had mounted to a more noticeable level.

The end result is more money stolen and us spending considerably more time helping the police and, now, the prosecutor.

Frustration all round.

Advertising screen overload

The retail world has gone advertising screen crazy. They are everywhere and in all manner of shops. There was a time when they were confined to supermarket checkouts, now they are deep within the store. Some are just visual, others have sound. Each is a flashy bouncy ‘come on’ enticing you to spend.

I wonder whether retailers are going overboard. Small businesses are under pressure to bring more into their stores and that means that we as a software provider to small business are being asked to link into these screens and provide sales related visuals.

I’m all for intelligent use of IT to drive sales. However, I wonder is small business could differentiate by providing a calm environment. An oasis if you will from the usual noise of retail. If a small business is noticeably more calm than a competitor will customer stay longer and spend more? I am sure that the marketing experts will disagree, in part because they need to be pushing the next big thing to justify their existence and in part because light and colour is more interesting than stillness.

My point is that businesses contemplating these advertising screens need to consider what retail environment they really want to provide before copying the bug boys into the razzle dazzle.

Maybe there is room for calm.

Workplace reform frustration

I wonder how many other small business owners are frustrated with the Federal Government’s workplace reform changes. While I have not been able to escape the advertising blitz of the last month, I am yet to receive anything from the government, as a business owner and employer, which explains the changes.

I’d much rather the government focus its attention on the challenges of small business in competition with big business as this poses a greater risk to employment in this country.

Yeah I’m not happy with some aspects of our current industrial relations laws but there is no reason to strip away basic rights as these changes seem set to do.

Despair at small business and the lack of interest in business

I despair sometimes whether small business has any hope at all against big business competitors. Not only in terms of operational costs (lease, labour and cost of goods sold) but also in terms of advertising buying power and brand discipline.

The independence of small business, while admired by many, kills small businesses. The cost of reinventing the wheel in thousands of businesses even in the same sector daily makes of a debilitating overhead.

My biggest concern relates to decision-making. Whereas national and international companies centralise decision making and base it on accurate and timely data, small businesses rely more on gut feel and while this may win on some situations in many it does not.

I am concerned about this today because of another client on the phone and in trouble. While we will do everything possible to help them, the problem was evident six months ago in two or three crucial management reports available through our software. When asked by they don’t even look at such basic reports the response was “if I wanted to look at reports I would have stayed working for someone else”. I have looked at their data from six months ago as represented in these three reports and I can see falling traffic, the categories affected and even why the sales are falling.

Now it may be too late because they have let one thing pile on another to the extent that they are in default with several suppliers. This business is their only source of income and it is backed by all of their assets.

As I said, we will help them in every way possible. In the meantime, a question we have for ourselves is what could we do to have alerted them about the problem and if we had done whatever that is, would they have acted sooner? We have considered alters in the software and a range of other measures. However, it comes back to one key point – whether people using the software are businesspeople. Not even using some basic reporting tools is like driving a car while not looking at the road.

We figure the best next step to encourage engagement is to tell stories like this one to our clients – to encourage engagement.

The Apple iTunes / Coles deal still rankles

Big businesses move in circles many in small business cannot comprehend. Deals are interlocked favors which build layer upon layer and in a way which cuts out all other players.

National and global corporation relationships are such that small business has no hope in achieving a level playing field.

I’m not writing this to be critical of big business but to acknowledge the reality of the game. On the iTunes deal announced last week, Apple wants to sell more iPods, Coles has the retail network so it is logical that they enter into a mutually beneficial deal. Small businesses, like newsagents, never had a hope because Apple wouldn’t seem them on the radar as relevant. While newsagents have more stores than Coles, they lack the one think which Coles leverages exceptionally well our of their head office – market power.

The only way small businesses and, specifically, newsagents, will be able to leverage in a way similar to Coles will be for them to create and or control products and services exclusive to their channel. It may be that the focus is on premium service, for example – service so good that customers rave about it. If newsagents can deliver that and have customers talking up the line that they prefer to deal with newsagents then suppliers will want to tap into the goodwill built through such service.

I appreciate that this is less tangible than an exclusive product as such. However, it is something which newsagents and, indeed, all small businesses, can own today. But it’s a chicken and egg situation. You need great traffic to be able to serve enough well so they rave about you and you only get the traffic if you have good current product and right now you’re only getting this if you’re a big business mate and doing a reciprocal deal.

Hmmm…

Apple has tainted its image by doing a deal with Coles Myer and hopefully consumers will see it that way and not purchase recharge at Coles stores.

In the meantime it would be good if our politicians researched deals like this from a policy perspective and assessed whether they are in the best interests of the consumer. The last time parliament research anything like this was in the late 1990s. Small business is not on their radar it seems.

Coles Myer, Apple and the social responsibility of cutting out small business

Coles Myer and Apple have done a deal giving Coles group stores exclusive access to selling a prepaid card consumers will use for purchases at the new Australian iTunes store. They are using technology provided by Bill Express to manage the transactions.

Newsagents have 50% more Bill Express prepaid outlets than Coles yet they are not part of the equation. Okay, that’s business. Deals between companies are done every day so why is this one different?

Newsagents are a better fit with the typical iTunes consumer. Newsagents are better socially connected than Coles and this should sit well with Apple.

Just as businesses have an obligation to buy Australian, so too should there be an obligation to seek out small business partnerships. Otherwise the big will get bigger and the small will cease to exist.

I’m not proposing a free kick for newsagents from Apple. Rather, a commercial and more valuable arrangement than with Coles. Newsagents offer more outlets than Coles, equal compliance (through Bill Express) and a better consumer connect i this space.

Newsagents have committed to $25K in hardware infrastructure to support the Bill Express network and to lose a logical fit such as with Apple must make many wonder about the value of the investment.

I would like to see Government place an obligation on big business to somehow work with appropriate small business networks on deals like this in the future.

Australian government small business policy

Why is the government demanding that Telstra compete in an open marketplace while it protects the best stores in the Australia Post retail network from open competition?

Why has the government allowed Australia Post to aggressively pursue product lines sold by small business newsagents?

Why has the government demanded that newsagents deregulate (in 1999) yet refused to open the sale of postage stamps to the same retail competition?

Is the government prepared to compete with all small business sectors or will it restrict its enterprises to competing with newsagents?

How does the government feel when its employees visit small business newsagencies, note retail prices for items and return to their PostShop and adjust sales prices?

Does the government have a small business policy which is pro small business?

Why will the government not set a policy of selling off the PostShop retail businesses to local small business people?

Footnote: This is a repeat of what I have posted at my newsagency blog. I have posted them here because they relate to the small business issues I cover here. The two faced approach of the government on small business needs an explanation.

The government operates 863 PostShop retail businesses. These businesses are increasingly competing with newsagents for general stationery, greeting card and related business. The old post office has become a retail chain and it is trading off exclusive postal products to grab sales which would otherwise have gone to small business.

Offer of collusion spurned

A few months ago a competitor approached me about the support fees we charge, suggesting I might consider reaching an “accommodation” on support fees. His suggestion was that we both increase fees and stop trying to take customers off each other. I refused to even consider the suggestion, knowing it to be illegal. His response was along the lines of no one will find out.

I’d forgotten about the brief exchange until reminded today when talking with some folks about the Trade Practices Act. Thinking back to the suggestion of a few months ago I wondered how many such collusive arrangements go unnoticed.

Small business is tough enough. While I’m not about to dob in the competitor I am wary of everything they do because their suggestion demonstrated the lengths they would go to for revenue.

I’ve taken the opportunity to remind my sales team members to be careful about what they promise and to be even more careful about any conversation with a competitor.

While I was never going to agree to anything which disadvantaged my clients and prospects, just being invited to consider it makes me feel somewhat dirty.

The Wal-Mart you don’t know

This Fast Company article from December 2003 documents some of the practices of Wal-Mart and its negotiations with suppliers.

Small business often focuses on how a major competitor like Wal-Mart in the US or Woolworths, Coles, Harvey Norman or Bunnings etc in Australia might have on their business. As the Fast Company article outlines, the impact can be felt way down deep in the supply chain. Small businesses are not as tough in negotiations in part because they are not as powerful. Therefore they carry themselves the financial pain inflicted by big competitors on suppliers.

Maybe this is why newsagents get 5% commission for selling Vodafone recharge compared to the 16% paid to a major supermarket chain. Who knows? The greed of some of these giant companies inflicts a pain which is felt not only by suppliers and the sooner the broader community understands that their discounts are not as beneficial as the TV commercials make out.

Is there no end to fuel discounting?

At the supermarket today they are offering 14 cents a litre off fuel. Certainly that’s what the signs were screaming at me. However, upon reading the fine print I have to buy certain products, post the receipt, my details and 50 cents postage fee and wait for a bonus fuel voucher to be sent. It’s all too hard. I’d prefer better prices at the checkout. Every time. But then they cannot bounce me to their company owned fuel outlet from where they would bounce me back to the supermarket.

The range of fuel discount offers is an opportunity for independent retailers. Ignore the hype. Provide discounts at the register and put real money back into consumers’ pockets. Not this hypes up cents a litre off which, in real terms (if you shop around for fuel), is probably not worth as much as they suggest.

A challenge for Google moving forward

The moves by Google over the last year have been astounding. Their profit announcement this week is proof that they are serving their customers well and that will please their shareholders. The challenge for Google is their size. Rather, the challenge for the rest of us is the size of Google. They are the Microsoft of our time. Even more so. Their size makes it challenging for competitors on a range of fronts. However, it is difficult to work out who is a competitor, for Google is playing in so many spaces and on a variety of scales. Sure Yahoo is a competitor. But from stories published over the last few weeks so are book publishers and newspaper publishers among others. The internet has been a leveler, allowing small and independent businesses to establish electronic real-estate almost as easily as much larger competitors. That opportunity is less today than a few years ago thanks, in part, to the Internet becoming big business in itself and thanks to the clever Google advertising tools which only larger businesses can afford. Google’s success attracts more businesses online and with them come more of the bricks and mortar world practices and independent businesses risk being drowned out again.

While the laws of economics meant that such growth and the attendant commercial power was inevitable, Google and other companies managing the freeways used to access online businesses have an obligation to keep it affordable.

My fear is that Google and any competitor their size will be like the giant shopping mall landlords who have priced their real-estate such that independent retailers give anything from 12% to 20% of their sales to pay rent. With shopping mall rent it’s a supply and demand situation based on finite space available. Google does not have similar physical world constraints and so ought not be under similar pressure on its pricing model.

I’m not a Google basher. Indeed I use their AdWords service and appreciate the sales the Google generated traffic brings. My hope is that it remains cost effective for small businesses like mine to get online and access the traffic Google and others control on their freeways.

We need a healthy small and independant business community online.

It must be Christmas

I’ve now received more than 10 letters and or calls from charities seeking donations connected with Christmas. In most cases the pitch is along the lines of give us this money and you get to put a sticker on your mail or a link in your emails indicating that you are supporting us.

While that in itself is not necessarily bad, that some pitch this ahead of the work they do is concerning. Maybe it’s what they have to do to get the ‘sale’.

Based on recent experience I prefer to make donations to organisations which are open about the percentage of donated funds which go to the actual work and charities which commit to not constantly harassing you for more money.

Stakeholder versus shareholder

Central to this start up we are developing is how we plan to look at stakeholders, that is the broader community which will interact with the business.

We want to set aside a portion of net profit before tax and return this in some way to the community. We want to do this because we genuinely believe in the community as a stakeholder in every business.

Achieving the goal is a challenge because we need to allocate the funds prior to tax being calculated. This means they need to be donated to charities etc which have tax deductible status.

It may seen naive but I would like the government to consider such a concept of community ‘stakeholdership’ (as compared to share ownership) and how businesses might allocate funds in a tax deductible form without the need for the funds going to tax deductible approved charities.

For example, we would be interested in providing a scholarship for rural students moving to the city to study. Under current arrangements would could only do this through a charity already established to do this and with tax deductible status. We want to keep the line between our provision of funds and the recipient as short as possible to ensure maximum funds get to the recipient and no on charity overheads.

While it is somewhat premature to consider these things for a business yet to make even a dollar in revenue, we want to have the processes in place from the outset so there is no doubt about our intentions and how we plan to execute.

chasing a deeper customer experience

It’s a constant battle this software company caper. At McDonalds or Subway, you make the food, the customer pays and you’re on to the next one. You rely on Head Office to do the marketing and get the menu right. Your only focus is customer service.

Here we design the software, make it, deliver it, train people how to use it and even use it ourselves in our own business.

I’m not complaining, I love this business. Some days, though, it is daunting. We genuinely want to deliver a unique and valuable customer experience: in every call; in every software update; and, at unexpected times. This is where it gets challenging – finding ways to engage with customers which are genuinely valuable and unexpected.

We’re working on a new type of user meeting, one where we get a small group of users together to expose their businesses to each other warts and all. Kind of an adult version of show and tell but with a please help call at the end. The show part is a reports from our software. We’re inviting them to come along with a specific set of reports – all the same for the businesses attending and for the same period.

We’re billing this as a self help group but with our people moderating, keeping things moving and providing insight into some of gems hidden in the reports.

The challenge, if our trial of this format works, is to package it so that we can get to our 2,000+ customers. Each session will include 5 or 6 businesses and run for 3 to 5 hours. There will be follow up and further training.

We’re not charging for participation as we see this event as another way we can dedifferentiate ourselves from others in our space. It’s not something Microsoft or MYOB would do for small business. It’s the difference between the local burger shop and McDonalds. Yes it’s hard work but it’s also an opportunity for joy when an attendee calls a few months later to say thanks.

Software companies have an obligation beyond the sale to make sure that the rewards we promise are achieved, particularly in the small business area. The software itself is not the solution, the day to day assistance, encouragement and advice is what the end user is really paying for.

Our first round table session is next week so maybe I’ll report back here how it went.

The startup as as mistress

My company turns 25 in January next year. While we continue to record good growth we’ve parented a small start up this year, investing around $30,000 and are a few months away from another start up which is a million dollar investment.

Starting new businesses is both frightening and exhilarating, especially if you are playing in a space foreign to you. We are more than a year in on the bigger of the two new ventures and we still have several months work to do. The only experts we could draw on are working with potential competitors.

We’ve funded this new venture so far and are about to seek capital outside to extend our intellectual resources and capital. Having not been in the need of capital for 25 years it’s an interesting situation. It’s compounded by the difference between the new business and our existing business and the possibility that the new business could eclipse the existing business in a couple of months if successful.

I am enjoying the dilemmas along the way but am concerned for the existing team and that the focus on the new business might think their efforts are not the main game anymore. While we have been open (internally) about our plans and included existing team members along the way, there is little feedback to indicate their feelings.

When you are $200,000 or so into a new venture and still months away from even getting close to any revenue it’s not unexpected that some doubts surface. Given the age of Tower Systems I feel as if I’m seeking a teen bride by pursuing this start up. Ridiculous as that may sound to some, I am sure there is a similarity in feelings. For example, the excitement of the start up takes one back to decades before. I wonder if I’m pursuing this for the same reasons a bloke married for 25 years would pursue a teenage girl: to prove he can; to feel younger; to find a goal in life beyond the mundane? I don’t think that’s me as this start up has an important social value for the community and a specific small business sector. We have built into the model a stakeholder dividend without the need to be a capital investor.

In the meantime I’ll find off the feeling I’m being unfaithful while enjoying playing with the startup and encouraging it toward its first steps.