One of the biggest mistakes you can make as an entrepreneur is to have certain assumptions with little or no foundation to them. To grow your business, you need to separate the facts from baseless theories. Here are some common mistaken beliefs:
“My customers will be loyal to me”
- Customer and brand loyalties are not as strong as they used to be. People won’t buy from you just because they’ve bought from you for 30 years. If a new competitor is offering a better price to your customers, and the cost of changing supplier isn’t all that great (for example, if the cheaper competitor is located in a faraway, hard-to-reach place, people may continue to pay your higher prices for the convenience of a shorter trip), people will switch to the competitor in a heartbeat.
- By all means, provide better service than your competitors, but don’t count on that to save you. You should also offer the lowest prices around and keep your costs even lower.
“I really don’t have to market my goods because if I do a good job, the word will get around”
- People don’t talk much about the positive experiences they have with their professionals or service providers (although they talk long and hard about their negative experiences!). Also, people aren’t staying in one place long enough to learn about local reputations. While your reputation is certainly important, it doesn’t attract new clients or customers.
- In any business, you have to get in people’s faces and constantly communicate what you do, how you do it and why you’re better than the competition, in a way that doesn’t turn people off.
Related: Marketing’s Best Kept Secret
“My business has no competition”
- If you think this, it’s because you gave the marketplace a quick look and saw nobody doing exactly the same thing as you. Not all competitors are obvious to the naked eye, though. Sometimes your competition isn’t a person or a company, but rather a thing. Book publishers, for example, compete not only with other book publishers, but with the Internet.
- Sometimes your competitor may be doing something entirely different from you. A suburban pizza takeaway outlet may have a local monopoly on Italian food, but the Chinese restaurant across the street is certainly a competitor for the “quick lunch” or takeaway dinner customer.
- Sometimes your competitor hasn’t yet decided to compete with you. Back in 1995, Netscape dominated the US market for Internet browser software. There were no significant competitors. But in Redmond, Washington, a guy named Bill Gates was thinking about getting into the browser market, and the rest is history.
“I don’t have partners or employees, so I must do everything myself”
- Just because you’re legally the sole owner of your business, doesn’t mean you have to do everything yourself. Sooner or later, in any business, you learn that there are a handful of things, five or six at the most, that must be done well in order for a business to succeed. They vary from business to business, and sometimes take awhile to figure out, but they are there, and you must learn them.
- For example, in my consulting business, one of my essential activities is to get written invoices out to my clients promptly at the end of each month. I’ve learned the hard way that if you don’t get your invoices out, your clients don’t pay you, and they’re more inclined to haggle over your fees when the belated invoice finally arrives.
- Once you’ve mastered the five or six essential activities in your business, it’s critical that you do them yourself because no one – not your employees, not your partners, not your spouse – will devote the same level of attention to performing them that you will. Everything else should be delegated to outside contractors, and their fees made a cost of your doing business.
“If I make enough and sell enough, and there’s money in the cheque account, I’m successful”
- Many entrepreneurs believe you can ignore profits if enough people are buying your stuff. Every business owner has to agonise over what his products and services truly cost. It seems sometimes that every day you stumble across a “hidden cost” you didn’t know you had. One young lawyer told me how proud he was of how successful his solo law practice was – he had literally hundreds of clients – until I gently pointed out to him that when you factored in the number of hours he was working every day to keep those clients happy, he was making only R50 an hour after taxes! Today he works as a paralegal for a large law firm – a little less money, but a much better return on his investment of time.
“I can’t really afford a lawyer, so I’m going to do my own contracts”
- Every business involves some form of legal agreement. They can be as simple as an invoice form or purchase order, or as complex as a 50-page property lease. Sometimes you draft them to be signed by others, sometimes others draft them for your signature. Every one of them, including standard forms, should be reviewed by an attorney before you use or sign them.
- Let’s face it: few people truly enjoy dealing with attorneys and nobody likes to pay legal fees. But when it comes to protecting your interests, the legal route is the best, and only, way to go and is bound to prove worthwhile in the long run.
Stop Surviving And Start Thriving In Business
It will inform your operations, which will inform your human and asset capital and lastly, the financial investments you make.
To thrive – and not just survive – in business you need three basic building blocks: 1) attract more customers and clients; 2) who spend more; and 3) buy more often. But how do we make this happen in the tight, recessionary environment we find ourselves in South Africa?
Despite the tough economic conditions, businesses can still thrive. In fact, many small businesses have been found to thrive in difficult economic conditions and are known as counter-cyclical businesses.
So how do you turn the tide from surviving, to thriving? You need to start thinking creatively, making informed decisions and being agile in the business environment. Always start with your marketing strategy. It will inform your operations, which will inform your human and asset capital and lastly, the financial investments you make.
Ansoff Growth Matrix
Business leaders continuously explore various growth strategies to retain and grow market share. One of most respected and often used is the Ansoff Growth Matrix. It was first published in the Harvard Business Review in 1957, written by strategist Igor Ansoff to help management focus on the options for business growth. Ansoff suggested that an effective strategy considers four growth areas, varying in risk. This strategic planning tool guides us to understand our current situation, contemplate strategic options and consider the associated risks.
- Market Penetration: Market penetration has the least risk of the four options. Here you are selling more of the same things to the same market. You know your product and market well. The question is, how can you defend your market share and sell more to your existing customer? You may consider special promotions or introduce a loyalty scheme.
- Product/ Service Development: Product and service development is slightly riskier as you introduce a new component into your existing market. The advantage is that you sell to a customer/ client that you know, and they trust you. Ask yourself how to grow your product and service portfolio? You may consider adding new services and products or modifying your existing offering.
- Market Development: With market development you target new customers and clients with your existing products and services. You sell more of the same things to a different market. You can consider new sales channels, online or direct sales. Do a proper market dissection to target different groups of people, considering different age groups, gender and demographics.
- Diversification: Diversification is very risky. Here you consider introducing a new, unproven product or service into an entirely new market that you may not fully understand. You may need new expertise, acquiring another business or venturing into another sector. The main benefit of diversification is that during difficult times only one component or element of the business may suffer.
Related: My Business Is Growing… What Now?
The fifth element: Passion
In addition, I would add one more element critical to business growth: Passion. It is the single component most critical to business success and, combined with any one or combination of the four areas of the Ansoff Growth Matric, it can equip small business owners with all they need to thrive in their business environment. Passion determines your business success, so make sure you have it in heaps to reap the rewards of your hard work.
6 Common Decision-Making Blunders That Could Kill Your Business
Among the logical errors nearly everybody makes is thinking only everybody else makes logical errors.
Humans are often very irrational. If you’ve ever explored behavioural economics or psychology, you may have found a host of examples demonstrating situations when we make objectively bad decisions.
Below are six of the largest decision-making blunders we all make. Avoiding them will dramatically improve your decision-making, your quality of life and success.
1. Sunk-cost fallacy
Of all the ones on this list, the sunk-cost fallacy is the most common. Many of the decisions we make are final or difficult to change. For example, let’s say you invest R1 000 in Facebook, and the price of the stock goes down to R600 the following day. The fact that you put in R1 000 initially is irrelevant to the situation at hand; you now have R600 worth of Facebook shares.
What this means is that once the decision is made and our cost is incurred, there’s no point thinking back. You already put in the time, money or other form of investment. Considering that in any future decision is illogical, despite how tempting it is. Instead, present yourself with the new options at hand — without considering the sunk cost.
2. Narrow framing
Would you take this bet? You pay me R1 000 if a flipped coin lands on heads and I pay you R1 200 if it lands on tails. Most people would say no. We tend to be risk-averse, unwilling to risk something like R1 000, despite the reward being a bit greater.
Now, what if I offered you that bet, but I promised we would flip 100 coins? Each time, the loser pays up. Would you take it then?
Almost certainly, right? The chances that you lose money, overall, are extremely slim. This idea can be applied throughout life. When we’re in situations that will repeat themselves over time, we should take a step back and play a game of averages.
3. Confirmation bias
Another common one in the worlds of psychological and behavioural economy is confirmation bias. It hurts our ability to keep an open mind and shift our opinion. When we have a held belief, we typically look for information that confirms our opinion while ignoring data points that tell the opposite story.
For example, if I’m really excited about a new software product that I just integrated into my business, with ten of my employees as users, I might have made up my mind about the quality of the service before we put it to use. I would then be more likely to listen to the three employees who enjoy it, not the seven who don’t.
There’s almost always information that will validate our opinions, no matter how wrong they might be. That means we need to always look for conflicting evidence and, from there, make judgements based on more well-rounded information.
4. Emotionally driven decisions
When we’re angry or upset, we’re much worse decision-makers. When you have to make an important decision and happen to be in a bad mood, you should hold off. Instead, wait until you cool down and can think more clearly. It will remove the outside influences and let you think more rationally.
5. Ego depletion
This one makes intuitive sense, but it’s one of the most common ways to make bad decisions. The idea of ego depletion is that when we’re drained, physically or mentally, we’re less likely to think critically. Think about the times you’ve been exhausted after a long day of work. In those moments, you don’t want to have to think hard about anything. Instead, you want your brain to work automatically.
What that means is that when you’re tired and faced with challenging choices, you’ll rely more on your instinct or automatic processes as opposed to analysis and thought. That can be extremely problematic in situations that require effort.
6. Halo effect
The halo effect says that once we like somebody, we’re more likely to look for his or her positive characteristics and avoid the negative ones. This is similar to confirmation bias, but it’s oriented around people.
Related: 10 Stupid Mistakes Smart People Make
For example, let’s say I just hired someone named John, who was great during his interviews. Through his first few weeks, John does a few things well at work, but he also does many things poorly. The halo effect — brought on by his wonderful interview persona — could cause me to ignore his poor attributes and emphasise his good traits.
This can be detrimental to our ability to make judgements about others. We have to realise our biases toward certain people and eliminate them.
These are a handful of the many decision-making errors we’re all prone to. Although it’s challenging to scrutinise your preconceived notions, doing so is worthwhile. It gets easier over time and will, ultimately, make you a more effective decision-maker — personally and as a business owner.
This article was originally posted here on Entrepreneur.com.
8 Reasons Why Failure And Focus Are Essential To Business Success
There are two Fs that define the long-term and sustainable success of your business – Failure and Focus.
There is an event that runs globally across countries such as the United States, Spain, France, Brazil and Israel. It is a conference that is aimed at the entrepreneur, the investor, the developer and the designer. It also caters exclusively for failure – FailCon asks the entrepreneur, specifically within the technology space, to embrace failure. However, this focus on failure isn’t about leaping blindly into the ball pit of collapsed dreams and wallowing in its sorrow as you shout ‘Bazinga!’. It’s about being comfortable with the idea that failure can happen and using it to drive your business focus and long-term success. These eight steps define exactly how…
1. Not big, iterative
Giving someone advice to fail big isn’t practical. It isn’t the kind of attitude that investors will be drawn to either. Instead, embracing failure is about being open to the fact that it may very well happen to you and some of your ideas. It isn’t necessarily going to be a gigantic failure on a scale of company-wide collapse. It could just be that you had an idea, and it wasn’t a very good idea so it failed.
2. Focus on your agenda
If you’re not focused on your end game and business agenda, don’t expect your staff to be. This level of focus is critical as it gives people direction. They then understand exactly where the business is going, what it hopes to achieve, and the role that they play in taking it there.
If you don’t have this level of focus, your staff don’t have anything to latch onto.
This is where your ability to fail is of value. You need to test your assumptions and ideas and then use their failures to learn more about how they could potentially succeed in the future. You have to learn from your mistakes. Don’t drown in self-doubt, take the mistakes and move them towards enhancing your business.
4. Success isn’t easy
Look, if being a hugely successful entrepreneur was easy, everybody would do it. You need to keep the focus and intensity you brought on your first day all the way through to today. Create short term goals and objectives that give you endless purpose and a sense of achievement and use their success to drive you onwards towards your final destination.
5. Build in plenty of goalposts
Justify every decision and long-term goal through relentless measurement to ensure they are the right decisions. The last thing you want is to hit your goal in 10 years and discover that it wasn’t the right one, your business hasn’t gone anywhere and you’ve worked incredibly hard for nothing. The effectiveness of your time, decision making and execution is critical.
6. Define failure
What does failure mean to you? Understand how you define it and then use this as a barometer to define your idea of success. As long as you have clear objectives for both, you can assess your business, its effectiveness and your results. As mentioned in above, always set goals and objectives so you give your company and people a sense of purpose.
7. Your ideas aren’t always that good
Some of your ideas are not going to fly. They’re going to collapse with an embarrassed sigh. The lesson is that you should be constantly questioning yourself so when you are in a situation where your ideas don’t work, you can objectively examine why they failed and use these learnings to change and adapt.
There needs to be a healthy tension between learning through theory and practice. The latter is learning to win and to handle defeat in real time with real results.
Related: Your Business Failure is Your Fault
8. Get over it
It’s quite easy to wallow in your failure misery and lose years to personalised anguish. It’s harder to just get over it and move on. The thing is, it’s moving on that counts. Those who get up, dust themselves off and start again are those who end up thriving. The ability to compartmentalise and learn is invaluable as you take your business from your first idea through to a sustainable, epic enterprise.
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