How To Start A Business. Business Ideas That Work:
Small Business Ideas #2
The Business Value Cycle.
If you want to know how to start a business it is a good idea to “begin with the end in mind” Stephen R Covey
Since the beginning of time, every small business that has succeeded has been good at delivering value in each of the 5 areas of the business value cycle. Whether you are starting out in business, or looking for business ideas that will help you to grow your business, an understanding of the business value cycle will help you to achieve your business goals.
The five parts of the business value cycle are:
- Creating Value
- Marketing Value
- Selling Value
- Delivering Value
- Monetising Value
Success in small business will come if your small business does well in each of these areas.
There was a hairdresser in the middle of a certain city where he had successfully plied his trade for 20 years, charging $17 for a haircut. One morning he arrived at work, turned the key to his door, walked inside and wheeled out his sandwich board as he prepared for the day.
Glancing across the road, he was shocked to see a competitor had arrived on his street, and had placed a sign in the front window advertising “Haircuts, $10” It seems he did not read the article on “How to start a a business”. 🙂
How should the hairdresser respond to this threat? The answer to this question is the best way to describe what is meant by “creating value” as opposed to “adding value”. There is a big difference between the two, and knowing how they differ well help you to succeed.
A price war is not recommended unless you have a huge pot of gold to ride out the storm. Adding value can be a good strategy at time, such as – a free coffee with every haircut, but this adds cost and sacrifices margins. What to do?
The next morning, the hairdresser wheels out his freshly painted sign saying: “Haircuts $20”, subtitled “We fix $10 haircuts”!
Creating value, is all about “perception”. Not many people will risk ruining their personal appearance just to save a few dollars.
There is nothing as powerful in business as a well timed idea. Leveraging the right business ideas for a product or service at the right time, puts you on the right track to achieving your goals and aspirations.
Marketing has been described as everything you do to tell the world about your product or service. Marketing and sales differ from each other, however, marketing at its very best is simply automated sales. In a digital world, automated sales is very possible, but with the possibility, come lots of challenges and a very high level of competition.
Once you have decided on your main business ideas, you will need to think about your “Main Marketing Message”. This is the short slogan or tagline you will place on every form of marketing and promotion for your business.
Marketing resources are usually limited. It is important to focus your resources on high payoff activities. Millions of dollars is spent every year on marketing that simply does not work. Here are some key thoughts that will help you to get a better return on investment (ROI) for your marketing dollar. Business Pilot can help you on how to start a business marketing plan.
- Invest time and money in thorough research – get help if this is not your strength.
- Be very clear on the Unique and Sustainable Proposition (USP) your business offers.
- Develop a detailed marketing plan – include a budget.
- Find out which marketing channels work best for your product or service.
- Measure everything so you find out what works.
- Once you find what works, keep on doing it over and over.
Marketing generates leads. If you are not getting leads, you are wasting your money. Your marketing goal should be to generate as many quality leads as your business needs at any point in time in order to meet its sales targets.
So you have created compelling value for your products or services, you have told the whole world about it, and your marketing campaigns are delivering a constant stream of qualified leads. Selling is all about engaging your clients in the unique value your business is offering.
Sales happen when “the right people, ask the right questions of the right people at the right time.”
Many businesses succeed on the strength of the business owners sales ability. When this is the case, the business owner will often be time-poor, and neglect other facets of the business. This can limit the growth potential of the business, but never-the-less, if you had to pick an area to be good at, sales would certainly have to be at the top of the list.
Great sales people are very hard to find. A good sales person knows his value, and needs to be properly rewarded for his time. Zig Ziglar is famously quoted saying, “”You can have everything in life you want, if you will just help enough other people get what they want.” Ziglar believed that high performance sales people only made up a small percentage of those in sales. He liked to call them the “4 percenter’s”.
Quick tips on sales:
- If you can’t sell or don’t want to find someone who can and get them on your team.
- Qualify, qualify, qualify. Get a solid stream of leads and invest most your time with those who tick all the boxes.
- Learn to listen. “Selling is not telling” – another Ziglar quote!
- Understand the difference between and Objection and a Condition.
- Don’t waste your time when conditions need resolving. Help resolve the condition, or move on..
- Understand an objection is simply the client saying, “tell me more” (Tom Hopkins)
If you create fantastic value, succeed in telling the whole world about it, and can close all the deals you want to, you are well on the way to business success. If you get all this right, but can’t deliver the value you promise, it is known as a “Scam”.
There are 3 elements to consistently delivering value:
- Quality products or services
- Delivered on-time
- At the right price
Get these right every time, and you have a great start on how to start a business.
Customers pay for a particular quality. The pricing will be determined by the value you provide. A lot of money is made in businesses delivering low quality products, and providing it is clear to the customers that they get what they pay for, everyone is happy. That is until the thing breaks, or doesn’t deliver on the promises! The main thing here is that the customer understands before a deal is struck what they are buying and, realistic expectations are establish whether it is is a Rolls Royce or a budget priced item.
A survey once asked customers in the construction market, “what is it your fear most in dealing with suppliers in this industry”. Interestingly, the response was not that the quality was good, or that it represented good value for money, but that they got the job done on time! This is indicative of just how important on-time delivery is in just about every field of business.
It has been said that the majority of people ( possibly as high as 80%) are not buying on price alone. This is because people are pretty smart and quickly realise that if they don’t pay enough, the thing they buy will not do the job it was intended to do. The right price is not the cheapest (if you are the buyer) and it not the highest price (if you are the seller). Right right price is a fair price enabling the seller to make a reasonable profit while meeting or exceeding the expectations of the client.
OK, so you have created great value, told the world about it, closed some deals for a profit, and met the expectations of your client by delivering quality, on-time at the right price. In theory at least, this should be enough to get you over the line as far as “monetising” your business.
A business exists to make profit. If this is not the case, you don’t have a business at all, you have a hobby at best – even sadly the possibility of a “train-wreck”
Stripped to the bones, business is about numbers, and if you do not understand the numbers you should not be in business at all.
Not that many people get a huge buzz out of studying and analysing the business numbers. As a result, many business owners who want to know how to start a business go to their accountants for advice. This is a great idea, but the next thing they do is “abdicate” responsibility for the numbers to their account and or their bookkeeper. The business owner must have a solid understanding of the business numbers.
The three main financial control documents consist of the balance sheet, cash-flow forecast and profit and loss statement. All business owners should educate themselves on what these documents are and become familiar with the business numbers personally. Regular financial reports – accurate and timely – will enable the entrepreneur to make wise and timely business decisions.
A business plan is essential for all who want to know how to start a business. This plan should include a detailed 3 way financial forecast. This budget can be integrated with most accounting systems to provide a budget and actual report enabling the business owner to keep an eye on how things are tracking.
Most people can only be good at one or two of the parts of the business value cycle. Your business will only succeed if it consistently works in all of the 5 areas of the business value cycle. Most successful entrepreneurs understand the need to focus on our strengths and build a team that covers all the bases. A great book to read on this idea is “Business Stripped Bare” by Richard Branson – learn from the best!
A simple plan of action that will get you the business results you are looking for:
Try rating your business in each of the five areas of the business value cycle.
- Creating value
- Marketing Value
- Selling Value
- Delivering Value
- Monetising Value
Which areas are your strengths?
Where do you need to improve?
Are we missing key skills and resources to get the business performing well in all areas?
Develop a simple action plan that will help you to leverage your strengths and build up the businesses in the areas you are lacking. Put your plans into action and watch your results soar! Business Pilot offers a complimentary strategic session where we can assist you with improving performance in any of the areas where you need to improve.
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