Business Mentor

To make a business mentoring partnership work, both parties relish in leaving the ego outside the door. They are there to chat, explore, discuss, educate and enjoy the time away to think. One big mistake many new or growing businesses make is to “cocoon” themselves where they forgot to reach out when things are not working.

To help find a business mentor, maybe the guide below might help.

• What do you need mentoring on?  Decide what aspects of the business or skillset a business mentor can help with?  A retired CEO of a large company probably isn’t a good mentor for growth hacking a business on a small budget. So have an objective whether it is for sales, marketing, management, finance etc.

• Listen and Learn. A business mentor will always seek to understand before being understood. So if a business mentors listens is the business willing to learn?. Business mentors are passionate about helping a businessperson or company who loves to learn and grow. It also means that a good business mentor understands that on-one in business takes every bit of advice blindly, so build the relationship by being honest and open if advice is not practicably.

• Time – quality over quantity. Both sides need to invest quality time with focused sessions where the real business issues are aired and discussed in confidence. Ensure the time you need and the time the business mentor can give matches each other’s expectations.
• Driving the discussion. The businessperson or owner drives the discussion and agenda, the business mentor is there to listen, respond and offer up feedback. Business mentoring is at its most effective when the entrepreneur sets the agenda and requests specific insights while also getting broader or deeper insights from the mentor.

• Business mentor or business coach. The value of a business mentor is to tell it as it is not what a business might want to hear. A business coach or consultant is paid to focus on helping the business or person with specific actions or skills like selling, marketing, business development or presentation skills. Business mentoring is to advise on specific situations or business strategy issues. So sometimes a business needs a mentor, sometimes they need a business coach.

Do take the time to seek out a business mentor, someone who will genuinely care about the business and the person. A business mentor whose motivation is to see business success, business growth and the person flourish. A business mentor who brings passion, emotional involvement and real concern for the business are the keys to real business mentoring success.

Lastly, business mentoring is not a flippant decision for either the business person or mentor. The experience has to be a learning path for both sides. However, the fundamental reason for business mentoring is everyone needs a helping hand, no matter who the person or business. Business mentoring is about building relationships, they can’t clear all the obstacles a business or start-up faces, but a good mentor can certainly show a better route to get to where the person or business needs to get to.

Author Note:  If you would like to chat about business mentoring or have a business idea or plan, I am always interested in meeting. Feel free to contact me. Brian.

Business Mentoring – The Bitter Business

Building Blocks for a Successful Business

The building blocks for a successful business are built around three factors: The Team, The Product and The Market. Each factor or a combination will most likely determine the success or failure of any individual business with a particular focus on the product to market fit. It is often said that a business fails for two reasons, lack of funding and lack of execution. Lack of execution (and indeed funding to acquire customers) can be the failure to get the product and market fit right. If the product to market strategy execution by the leadership team is not right, the cost to fund the business for lead generation, sales, marketing and product development increase to the point where value cannot be extracted.

What causes business success?

In business which factors contributes the most to success of the enterprise, the team, the product or the market? Or put another way “what is the biggest cause of success”? Also which is the weakest link: a bad team, a weak product, or a bad market?

Let us briefly dig a little deeper into these factors. Investors and venture capitalists often say they don’t invest in businesses they invest in people, so the team can be defined as the potential effectiveness of the CEO, co-founders and senior staff relative to the market opportunity. Can the team execute against the market opportunity they have identified, will their effectiveness overcome any lack of experience, and has the team the ability to deal with the “never seen it before" obstacles.

The product can be defined as to what problem is it solving and how impressive is the product to any customer or user who actually uses it: How easy is the product to install/set up and use? How feature rich is it? How fast can the benefits be seen? How transformational is it? How well-crafted is it? How has it been tested and what were the results?

The market is the size, number, predictions and growth rate, of those addressable customers or users for the product.

One other factor I have written about before is the Cost of Customer Acquisition; that is that the cost of acquiring a customer is lower than the revenue or profit that customer will contribute. The rate of customer acquisition has to do with execution and the ability of the team to move enough prospects through the sales funnel. Remember also that product quality will not create market size; Steve Jobs learned that lesson with his NeXT business. What a business needs is a desirable product, a big enough market and an economical way to target it.

So which factor is the Number.1 building block for business success?

If anyone conducted a survey amongst business people on the question of which is the most important factor in business success, they probably would get three different answers.  Some will say team, some on the product, while others will choose the size of the market.

As written about earlier in this article, if you ask entrepreneurs or VCs which of team, product, or market is most important, many will say team. This is an obvious answer because most of their knowledge and reference points in the beginning is the team as the product may not be built or ready to market plus the market will not have been fully evaluated yet.

Marketing and techies will say the product is the most important factor. The business is product driven, creates great products, then markets buy and use the products. The most valuable companies today are brands such as Apple and Google because they build the best products and without the product there is no company. Right? Try building a great team and having no product, or a great big market and having no product.

This leaves “The market”, where researchers, students of business success and business leaders will tell us that the market is the most important factor in a business success or failure. The argument is that in a big market (fragmented market or badly served by existing solutions), a market with lots of real identifiable customers, then the market needs will pull products out of the business. The market is ripe for change, has an appetite that needs feeding and the market will consume, viable products that will feed it. Maybe the product doesn't need to be the greatest; it just needs to work. And, the market doesn't care how good a team the business has, as long as the team can produce those viable products.

Has history shown us that the No.1 business killer is lack of market?

To expand on this a little further, maybe the business killer is not just lack of market, but more importantly a lack of product to market fit. Could the building blocks for a successful business be about being in a sizeable market with a product that can satisfy enough of that market to make profits?  Is being in business about “making things that people want and will pay for”

Take the example of search engines, smartphones, online marketplaces even cars, when there is a growing, sizeable market with an appetite for change. Is this the story of telephone directories morphing to the web as search engines, the evolution of the telephone into people’s pockets, the buying and selling of goods being streamlined online or the transportation of people becoming about journeys.

The flip-side is in a market with little appetite for change, a business can have the best product in the world and super leadership team, and it may not matter, the business is going to fail. A business can spend a heap of money digging for years trying to find customers willing to pay for a product, little reward for a lot of effort and the team eventually will disintegrate, and the business folds.

Has history shown us that the No.1 business success factor is market?

When a great business team meets a stagnant market, market wins. When an average business team meets a great market, market wins. But when a great business team meets a great market, then something really special happens. Now this is not to say a business can’t screw up a great market, it has been done many times, but assuming the team is effective and the product is accepted in the market, a great market will tend to return success for the business and a poor market will tend to return failure to the business. So does Market matter most?

A few things worth remembering

Great products are really, really hard to build. So surround yourself with a great team, as a great team will always beat a mediocre team, given the same market space and product appeal."

Great products can sometimes create new markets. Product that are so transformative to business or consumers it creates a whole new big market and the business becomes a gorilla. Think Microsoft.  

The team needs to know how and on what battle ground it will take on and beat the competition to gain market share.  

As a business leader or start-up, what should you do next? Focus on the thing that matters in your business strategy; get the product to market fit right. Product to market fit means getting into a good sizeable market with a product that can satisfy that market and capture value for your business. Do whatever is required to get to product to market fit. Seek out people who can help build your vision, change the product, change the sales model, move to a different market, tell customers you need some customer validation for the product, whatever is required.

Lastly, build a team that can make the product to market fit happen.  A team that can go out and get customers buying the product. Then get product usage growing across lots of customers. This turns into revenue (and profits) from customers as money comes into the business bank account.  As a result of the team getting the product to market fit right, the business is hiring sales and customer support staff. VC’s are calling because they've heard about your business and they want to talk to you about getting a slice of the action.

The Cost of Customer Acquisition

The true cost of customer acquisition is critical factor in a new business survival and often underestimated in a growing business. The cost of getting customers can be the difference between success and failure no matter how good a business believes its product to be.  I once read that the goal of any business is to acquire, develop and maintain customers at a profit. The develop and maintain aspects are more clear forward but let’s focus on the cost associated with acquiring new customers regardless of the channel.  

Every business needs to acquire new customers to make products and businesses work. Whether the product is aimed at enterprises paying big money or getting thousands of visitors to a website, how a business gets and the cost of getting customers is the important part.

The Definition of Customer Acquisition could be defined as “The process of persuading someone to purchase a company’s goods or services”. The cost associated with the customer acquisition process is a critical measure for a business to evaluate in tandem with how much value having each customer brings to the business.

Is The Business Ready for Customer Acquisition?

Paper never refuses ink and this saying has been true in many a business or sales plan when it comes to putting a cost on customer acquisition. The cost is not just the marketing or sales cost but the time and resource cost to getting new customers. Has the business planned for the sales cycle, the demos, the travel, product trials or has a website planned for the cost from free signups to paid, customer or product support prior to a customer making a purchase. In other words, can a business survive while potential customers go through the acquisition cycle? While a quote like “move fast and break things” is exciting in a company start-up situation, it may not be the best advice when it comes to customer acquisition. 

The decision to start spending investor or shareholder money taking a product to market and begin acquiring new customers should be given the weight it deserves. Entrepreneurs or a business might have spent months or years developing the product, so the execution of the customer acquisition strategy has to be thought out very carefully.

Even before you spend a cent on customer acquisition ask the questions “is the product ready for some/many customers”? Are there still bugs that will make the customer interaction with the product flawed? While the saying “done is better than perfect” to avoid feature creep is practical; it would be a mistake to launch a broken product and fall at the first hurdle.

To take a step back into the business plan around customer acquisition, can a business tick the box on questions like; how many sales calls per day do you expect the salesperson to make, do they have a target list of suspects and prospects, how much activity on the website can the servers handle? Do you have the customer support with the knowledge required to respond to the questions from new customers? Does the product value proposition the salesperson has to sell make sense to people outside the company? In other words, have you done customer validation? These are the type of questions that you need to answer before committing money to a launch.

Being Prepared Always Matters

Any customer acquisition process is not straight forward or predictable but especially so for new companies, but that doesn't mean a plan is not useful or necessary. The customer acquisition process is far from an exact science. There are many things that can (and do) go wrong, however there are some things that any business can do to mitigate risk and improve the chances of successfully acquiring new customers. Be clear with your team what “Cost to Acquire Customers” (CAC) means, is it paying customers, trial customers, engaged prospects or even website registrations.  In the long run it should only mean the cost to acquire a paying customer.

Estimate the Cost of Customer Acquisition

Money for new product or new business launches is hard won. The budget and time for a start-up may be tight, so the business needs to estimate “worst case scenario” the cost to acquire customers (CAC) before beginning the marketing or sales process. A businesses CAC is loosely defined as the cost of ALL the sales and marketing expenses over a given period of time, divided by the number of customers the business plans to acquire in that time frame. While no business can have a firm sense of the CAC until they begin acquiring customers, having an estimate will help the business leaders prepare to act accordingly.

Logic rules, no matter how excited a business is about getting it out there, do not underestimate the impact of starting the customer acquisitions spend before the product is ready. The greatest risk apart from alienating potential customers by launching a flawed product is the money a business can burn through before it realises it got something in the product wrong.  Every business should ask, what is the baseline product I am willing to “show” potential customers and in what target markets?

Thread carefully in the world of social media and PR, spending time and money on journalists to line up business or product coverage of your launch, only to find out that the product is delayed or has issues, can put the business credibility in jeopardy . Journalists lose interest pretty quickly and are never your friends.

Do Realistic CAC calculations

While a business waits for SEO efforts to kick in, a business may utilise Google Ad Words to drive traffic for (a) for lead generation or (b) sales. Take a look at this example. The cost per click works out at 50 cents, the resulting 1000 website visitors converting to a trial rate of 5% (50) at a cost of €500. These 50 trials are then converting to paid customers at the rate of 10% which is 5. So each customer is costing €100 in just lead generation expense excluding sales/product/support costs. For many companies in the B2C space or in the B2B space with software using the web as their main acquisition channel, it can be hard to get the consumer to pay more than €100 for the product or service

Many business underestimate or do not budget for a realistic CAC, if we take the above example the cost of customer acquisition can climb rapidly if leads require a sales person to convert them. This human interaction can be as simple as email follow ups right up to inside sales people doing multiple sales calls and demos. Depending on the trial/registration rate along with sales conversation rates the cost can vary from €400 to over €5,000 per new customer acquired, depending on the level of interaction needed.

Another CAC calculation is to look at the cost of a field sales force. The fully loaded cost of a field sales executive with travel, car, expenses and salary can push the CAC into over €10,000 in enterprise sales.

In trying to address the single most important early-stage question – customer acquisition – it is easy to waste a lot of money in the wrong channels and on the wrong customer acquisition tactics (lots of companies in the graveyard from just this one failure), especially the new companies that went  toe-to-toe with the big guys and can got blown away.

Every business has to execute in a different way

A business will only thrive by marketing and selling smart; acquiring customers in an economic way and in a way that differentiates the business from the crowd. To goal is to build a customer acquisition strategy for paying customers the business does not have to keep paying for every month.

Create Demand

In larger companies with deeper pockets while the customer acquisition isn't exactly simple, they do have more resources. The process of customer acquisition is more challenging for newer companies. Established business’s will utilise bigger budgets, have greater brand awareness, and an ever growing community of influencers. Most new businesses will not launch with a partnership with an established brand like Microsoft, Apple or Google where the demand for the product already exists. Instead a new business has to allocate sales resources and money wisely to fight (and a fight it is) to let potential customers or audiences know that you exist, explain to them why they should show interest, and initially even offering to go the extra mile by holding their hand through the sales process.

The focus of everyone in a new business is not only to create the brand but also the demand. Sales and marketing are not two different departments,  the person leading the marketing drive needs control spend on brand marketing and really understand how to execute lead nurturing, content marketing, web demand generation programs and work hard at marketing efforts that require time but not money. Marketing and sales need to work at the hip to generate a steady, growing stream of leads each and every month.”

Acquiring new customers means understanding what makes your customers tick and investing in inbound marketing strategies such as content and quality articles, got onto the forums, become a subject matter expert and invest in search engine optimization (SEO) as a longer term tactic.

The Business Model

Business model viability, in the majority of new companies, will come down to balancing two things:

Cost to Acquire Customers (CAC)

The ability to extract value from customers, or LTV (Lifetime Value of a Customer)

Web based companies have long understood these metrics as they have a much easier easy way to measure them. However there are huge benefits for all businesses to look at these same metrics.

To repeat the message from a few paragraphs back, to calculate the cost to acquire a customer, CAC, a business needs to take the entire cost of sales and marketing over a given period, including salaries and other headcount related expenses, and divide it by the number of customers that a business has acquired in that period.  (In pure web plays where the headcount does not need to scale as customer acquisition scales, it is also very useful to look customer acquisition costs with/without the headcount costs.)

To compute the Lifetime Value of a Customer, LTV, you would look at the margin that you would expect to make from that customer over the lifetime of your relationship. Margin should take into consideration any support, installation, and servicing costs.

Manage Optimism with Reality

To be in business requires huge optimism, and in a belief in how much customers will want to buy your product. Unfortunately this can lead businesses to believe that customers will be kicking down the doors to purchase the product. This has the effect of grossly underestimating the cost it will take to acquire customers. In too many companies there is little or no focus on how much it will cost to acquire customers. Vague strategies along the lines of web marketing, and/or viral growth with no numbers are not business.

To finish, a well thought out CAC plan outlines the need to acquire customers through a series of steps like SEO, SEM, PR, Social Marketing, content marketing, direct sales, channel sales, etc. with the cost of each step worked out. This planning brings honesty to the real cost of customer acquisition.

What do we mean by Business Leaders

Everyday in the press or online, we read articles and quotes from business leaders. What are these so called business leaders?. I was taught a business leader was a wealth generator, someone who took a risk, set up a business to create wealth while generating employment. So real business leaders are the legends that are Bill Gates,Michael Dell, Larry Ellison,Steve Jobs to name but a few right down to the real heroes of a local economy, business people who create opportunity and employment for their local area.

So how come middle or senior managers in large multi-nationals often get referred to as "business leaders" in press articles?. Maybe I'm missing something but surely a business leader is someone who leads a business in that they define strategy, how the business operates, the culture and the direction of the business. So the business leaders I see quoted in the press in most cases are business managers (even if they do have the title VP or director they are in reality managers).

Some business managers aspire to be business leaders but most don't. Having an MBA with a C level title while working within the cushion of a large organization does not a business leader make. The role of these business managers is to "Implement". That is to take the pre-defined strategy and Business goals and implement them whether its sales,marketing,finance or product. They may lead the unit or division from a tactical stance but they do not lead the business.

The world seems to fallen in love with titles and in a centralised decision making business world maybe bigger titles such as VP or Country Manager are a way of compensating for the true role a manager is expected to perform.
I love business, the cut and trust of sales,marketing, trying to win a customer, managing people to deliver higher results but I am not a business leader. Knowing ones place in the business world is healthy and honest. No need to perfume the pig, a great manager is a great manager, no need to embellish it with titles that do a disservice to the title "business leader", a title many aspire to but few earn the right to be called it.

Till the next time

Brian.

TBB
thebitterbusiness