"After finishing The Black Swan, I realized that there was a cancer"

From my post on the AMEX OPEN Forum, Sept 21/09

The anniversary of the Lehman Brothers melt-down has given pundits and newspaper business sections lots to write about.

One person whose opinion is courted is Nassim Taleb, author of The Black Swan: The Impact of the Highly Improbable. (Random House)

You’ve probably read the book and recall the story that spawned the title: all swans were once believed to be white – until black swans turned up in Australia.

Taleb makes the point that we are make decisions only on what we know, and we are vulnerable to unexpected events. And that the credit crunch was absolutely not one of them.

In a recent interview, he said “After finishing The Black Swan, I realized there was a cancer. The cancer was a huge buildup of risk-taking based on the lack of understanding of reality. The second problem is the hidden risk with new financial products. And the third is the interdependence among financial institutions.”

If Taleb is correct and we are still vulnerable, what should we be doing in the small business world to insulate ourselves?

Well, let’s look at diversification. For years, marketing experts have told small business owners to focus on one core offering. This was because most small business owners do not enough sufficient capital - or time – to invest in more than one primary product or service. But in a new economy characterized by the threat of another meltdown, maybe we should be looking at Plan B.

As Taleb says, “A Wall Street trader who's also a belly dancer will do a lot better than a trader who winds up driving a taxi.”

Plan A should be a focused investment in a relatively low-risk business. This means sticking with a profitable concern where you have the experience to succeed, low debt and good cash flow from loyal customers.

Plan B can be looking for what Taleb calls “a good Black Swan”, an unpredictable success. Technical innovation is one route. It goes without saying that this is a risky business, and therefore warrants a much lower investment in money and time than Plan A. 80 percent focus-as-usual and 20 percent on Black Swan hunting seems about right.

Who is answering your phone? Do they give your business the right image?

Telephones used to be so easy—you could place calls and receive calls. That was it. Suddenly things got a lot more complicated—not only could you do the aforementioned, you could add another person to the call, take a message automatically, call forward, actually identify who is calling before you answer …and about a million other things Alexander Graham Bell never thought of in his wildest dreams—after all, when he invented the telephone, he was actually trying to develop a device that would aid the deaf!

One thing that’s been pretty much a consistent factor in this whole telephony thing since the beginning is the need for the phone to be answered. We’ve come a long way from lifting the earpiece and shouting “ahoy” into the speaking part!

The important thing to remember is that in spite of all the wonderful technology we have available to us today, the way your phone is answered actually “speaks” volumes about your company. How many times have we all been frustrated by getting on the voicemail merry-go-round of some large company or government office? I’m sure that wouldn’t happen with your firm but have you ever stopped to consider how your phone is answered? Go out right now and call your office. Who’s answering? Is it a recorded message? Does it sound business-like yet cordial? Does the person, or recording, sound like they actually care that you called and do their best to route you to the person you’re calling with minimum fuss? Do they speak well, not resorting to slang or being overly familiar?

The worth and quality of your business and its product/services are being judged by the way your telephone is being answered. Don’t leave things to chance.

When we set up our business, we knew we would not be able to always be on hand to answer every call as we were often out of the office. In fact, we didn’t have just one office; we were each working from a separate home office—in separate towns! We found a professional service that could answer our phone calls and direct the callers to each of us no matter where we were. And what’s more, they were able to provide a big city phone number and a toll-free number as well. Callers, who have no idea how small our office really is, often compliment us on how well our telephones are answered by the angel voiced telephone receptionist at the service we use. Image is everything.

Where do you live on the net? The importance of a good address.

Remember when a common expression was, “He (or she) lives on the wrong side of the tracks”? That was back when we all had only one address—where we lived. Business owners realize they have a home addresss, where they live, as well as a business address, where they do business. But there’s another very important address as well—your online address or where you live on the Internet. This is just as important as your physical addresses.

Here’s an example: you’ve probably heard of “hotmail” or “Yahoomail” just two of the many places on the internet where you can get a free email address just for signing on. Nothing wrong with these but they’re kind of like discount hotels—just sign in, not too many questions asked, if you know what I mean.

These places have their uses, they’re good to use as secondary email addresses if you don’t want to give your real email addresses out—you know, to avoid spam and other unsavoury email.

But why would you use one of these addresses for business purposes? Especially when you already own a domain? Are you hiding something? Is there something about your business you don’t want people to know?

So many times, we see a small business with an email address that leads to hotmail and the like, or are the free ones that come with your Internet connection provider so the hosts name is involved e.g. “yourname@hostname.com.”

This makes you look like an amateur or a business that’s not serious. Wouldn’t you rather have an address like: yourname@yourbusiness.com? We thought so! Well it’s so easy—and it will probably cost you under $10. Here’s what to do: go to a large hosting service online, we recommend www.1and1.com and register a domain. That’s all. If you register a domain, using their search tool to find one that’s available, say “yourbusinessname.com” or .biz, .net, .info or whatever is available, you can then set up your email address to be, you guessed it, yourname@yourbusiness.com or whatever you like.

And what’s more, you don’t have to change your current email addresss at hotmail or wherever, you can set it up so your new professional sounding, business-like email address “forwards” to your current email address. Sound simple? It is and what’s more, you’ve just moved from that trailer down by the river to a very nice part of the internet—your own domain. Congratulations!

Oh, and one more thing, be sure to set your email so that the “replyto” address is your new domain not that free one you’re still using (if you really must).

Don't get bamboozled by 'spec' creative

If you own a small business, and you have decided to work with a marketing or advertising firm to get to the next level—congratulations! You’ll about to have more learning, more challenges and more downright fun than you’ve likely ever had in your business career.

Good agency people know you are hiring them because you want to do more business, and be smarter about it. They know that if they don’t succeed, they will lose you as a client, so you’ll find they are likely more aggressive in wanting to drag all your years of knowledge and experience out of your head than any of your current employees.

Good agencies will constantly surprise you with ideas you have never thought of and insights about your prospects and clients you haven’t had time to discover. They do this by getting to know all about your business.

Agencies know, that regardless of anything else, what you’re really going to do is “fall in love” with the creative. That’s why agencies often produce really amazing, cool ads for “the pitch” without really knowing all the pertinent facts on your business. These agencies know that if you fall in love with the ad—even if it will never work for your company—you will fall in love with them and hire them.

So how do you choose between several equally talented, fairly-priced potential agency partners? Simply look at what they’ve done for other clients and assess the results.

By the time you have your “short list” of potential agency partners, we hope you’ve clarified what is important to you and your company, and identified the agencies you think might be the best fit. By then, you should also have told them what the assignment is and what your ballpark budget is.

Now you need to ask the agency team to come in and talk to you one-on-one.

Make sure the people who will actually work on your business are at the meeting. You are about to hire people you might be talking to every day, not the “pitch” team you may never see again.

Think of this as a “First Date”. You are going to entrust the agency with confidential information, and you have some pretty aggressive goals, so you should look on this first meeting as a way to get to know them, and find out if you can like and trust them.

Don’t ask for “ideas” to market your business; they most likely won’t know anywhere near enough about what you do to give you ideas that will actually work.

You won’t be able to see “samples” of marketing plans—these are confidential documents the agency can’t share with you. How would you like it if they shared your business plans with strangers?

So what can you ask about? Case studies will tell you lots about how they work, especially if you make sure to follow up with the client contact after the meeting. Ask about the business problem the program was designed to solve, what they did and how it worked.

You should have a good handle on what the agency people are experts in, so ask about new technology, direct mail, media buying, events, sales promotion, radio, TV, point of purchase. Can they help you install in-house expertise and coach your staff, or will you rely on them to do everything as consultants?

You will be working closely with your agency, so find out if they are a good fit. You can have a good time looking at their portfolio of work. They will choose their best stuff to show you and looking at ads is like walking through someone’s house; you’ll get a good idea of what they are like. Just remember that what works for another company might not work for you.

At the end of the process, you’ll have talked to several firms who are competent and capable. You will make a final decision the way all buying decisions are eventually made—using your emotions. Who did you like and trust the most? Who made you fall in love with your business all over again by asking smart questions? Who shared their knowledge and experience most freely? Who feels most like a partner?

Once you’ve chosen your agency, ask them to sign a non-disclosure agreement, and share your business plan and your financials. Then set your goals, and get going.

How to create a marketing company RFP

You are thinking of hiring marketing professionals for your organization. Many people use an RFP - Request for Proposal – process as a way to feel confident of making a good choice. But beware! There are pitfalls in the RFP process that are easy to fall into.

If you’ve never worked with a marketing professional, or this is the first time you’ve hired an advertising agency, here are a few “secrets” that will save you time, grief and money.

1. Provide background
Let prospective suppliers know how your organization is structured, who your buyers or users are, and what business issue you need your new agency to solve. They’ll want to know what ballpark your budget is, and how you will make a decision. TIP: Share your value proposition and what about your company has made you a success. WHY IT’S IMPORTANT: Good agencies want to work with good clients. You may not get the best to respond if they don’t believe they can do meaningful work, even if your budget is reasonable.

2. What are the “got to’s”?
These are the absolute minimum criteria for a company to be on your short list. They include things like years in business, previous experience in your industry, and geographic location. Provide a “fill in the blanks” form for their responses. TIP: Be very specific about your criteria. Instead of saying “seeking well-established agency”, say “Must have been in business 5 years or more.” WHY IT’S IMPORTANT: Quickly and accurately evaluate responses, and exclude companies from consideration.

3. Ask about their processes.
You should understand how the agency works. What is their “sweet spot” – the typical account size range they work with? How would they communicate with you? How do you give them information? What is their approach or methodology for assisting you? How do they create plans and recommendations? How do they make the ads? How do they get paid? TIP: An agency with a defined business system they’ve used for many clients will be effective and efficient at creating solutions and getting them out into the marketplace. WHY IT”S IMPORTANT: Assurance that you are guaranteed an efficient use of their time, since most agencies bill by the hour.

4. Ask about their people.
You want experienced people who won’t have to learn on your dime. Get biographies of the people you will be working with directly. See the work they have done and ask about the results it generated. Get references and check them. TIP: Take extra time to check the “chemistry” between you and the agency team. WHY IT’S IMPORTANT: You will be sharing your most intimate business information with these people, so you must like and trust them.

8. Avoid this!
Don’t make the RFP form long and involved. Avoid intrusive or irrelevant questions. Don’t ask for answers that can easily be found on the agency’s Web site. TIP: Don’t ask for ideas or ads “on spec”. WHY IT”S IMPORTANT: The only thing an agency has to sell is its ideas. Goods agencies won’t do the work before they get the job. The busy, successful agency you want on your business will likely not respond to your RFP.

The Single Biggest Mistake Small Business Owners Will Make This Year

Did you know that small businesses could actually double their sales by simply following up with leads and contacts? That’s right: 99 percent of small businesses do not consistently follow up with their prospects and customers.

Look at the math: If you close 25% of 100 leads or sell to a quarter of 100 store visitors, you have 25 customers. If you close 10 percent of the remaining 75 leads or visitors, you have 32.5 customers—that’s a 30 percent increase. Close 20 percent and you’re up 15 new customers, or 60 percent more. Follow up with customers to get them to buy one more item this year, and you’ve added another huge increase.

Why don’t we follow up? Because we fall prey to an insidious and dangerous belief about our business that’s so bad it’s like having someone’s hand in your pocket, just reaching in to take our hard-earned money. It’s called product management and it will guarantee you don’t make the money you need and deserve.

See if this sounds familiar. You are a retailer, and you know the margin on every item in your store. More than that, you know exactly what it costs to keep an item in inventory, and how many times you have to turn your stock to maximize your return. You know your sales per square foot, and what every area of your store delivers in sales and profit.

Perhaps you are a manufacturer. You run tight controls on your raw materials, and you insist on just-in-time delivery from your suppliers, and just-in-time manufacturing and shipping to your customers. You control your labour costs and capacity utilization, and you manage your receivables really well. You have a good handle on foreign currency.

What if you provide a service, say accounting, financial planning or law? You know your billable rate, and how many billable hours you must account for and bill during the year. You review the realization rate for the firm regularly. You know where you make money, and where it’s better to put lower-paid juniors on the case.

Now all this activity is laudable, and we are not denying the importance of managing costs. In fact, tight controls are vital to a well-run business. But focusing on costs won’t do the one thing you need more than anything!

Managing costs will persuade ZERO customers to do business with you. In fact, this approach is so insidious it can actually make your business fail.

We fall into it because we manage our relationship with products, not clients. And let’s face it, products don’t write cheques; customers do.

If you are spending more time following up on products, shipments, and inventory than on leads, prospects and clients, you are literally throwing away the opportunity to double your business.

If you are a business owner, we urge you to delegate everything that takes you away from communicating with prospects and customers. We’ll be sharing a way to automate your follow up to ensure you don’t miss out on that potential 100% increase from now on.