Entrepreneurship, Marketing, Owning a Business

Competitive Advantage is a Moving Target

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Smart business owners have their competitive advantage front and centre at all times.

“Competitive advantage” answers the question, “Why will customers buy from you instead of your competitors?” It’s the starting point to positioning your products and services in the mind of your customers, the key to setting yourself apart from other businesses, and critical to the success of any enterprise.

Here are a few competitive advantages and examples of their use in the marketplace.

1.    The First. Being the first to offer goods will be an advantage over other businesses. The downside of this advantage is that it rarely lasts for long, because others will soon get the scent of success and jump in to compete for a piece of the action.

2.    The Best. One way to distinguish your business from the others is to offer products and services of higher quality. Being the best is an enviable place to be, because everyone wants to deal with and be associated with the best.

3.    The Cheapest. The Dollar Store business model has parlayed this advantage into a highly successful chain of establishments. Interestingly, the franchisor’s website claims to be “Canada’s largest franchised dollar store chain and the fastest growing concept in retail.” “Largest” and “fastest growing” are advantages designed to tug at the heart strings of potential franchisees, while the basic business case is built on offering goods for a buck.

4.    The Fastest. Fast food services and drive through lineups are visible evidence of this competitive advantage at work. Everywhere you look something claims to be fastest: fastest car, fastest computer, and fastest weight loss program.

5.    Convenience. Small corner stores in high profile locations turn convenience into profit, while pizza delivery drivers turn it into part-time self-employment. This competitive advantage commands higher margins for making customers lives easier.

6.    Technology. Newer, better or faster technology can lead to savings or a superior experience for customers. Technological advantages can position a business ahead of competitors, at least for a few blinks, until the next miracle blasts its way into the marketplace. Have you tried to get your VCR fixed lately?

7.    Secret Formula. The Coca Cola Company is still a surefire example of leveraging a “secret formula” to massive gain. According to Wikipedia, the business offers “more than 400 brands in over 200 countries or territories and serves 1.6 billion servings each day.”

8.    Exclusivity. An exclusive agreement with a manufacturer will provide a competitive advantage over other retailers. Winning a contract from an established organization, such as a government agency or a larger corporation, can also be a competitive advantage. A pitfall for this business strategy is the tendency to drift into being a one-legged pony, relying on one or two contracts for survival. Unless the owner is diversified, the business can evaporate when the contract ends.

9.    Qualifications. Work experience and education are commonly used to advantage, both in business and when competing for jobs. A handsome set of credentials sweetens the deal for any potential buyer.

Competitive advantages don’t last forever, they evolve. For example, a business that is successful by being first will almost immediately find competitors on its doorstep, vying for a piece of the market. Being first might be an advantage for a while, until someone else offers a more enticing deal to customers, like lower prices, a faster service, or higher quality products.

In business, you don’t have the luxury of creating your competitive advantage and then forgetting about it. Smart business owners continuously innovate to stay at the forefront.

Business Planning, Financials, Owning a Business, Starting a Business

Forecasting Isn’t the Same as Accounting

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There’s no doubt that forecasting or attempting to predict the future in any way, is considered by many to be a mild form of insanity.

Forecasting is one area of business planning that entrepreneurs tend to resist. There are many reasons for this.

  • Beyond spending, many people simply don’t like to deal with money matters.
  • Unless you’ve previously owned a business, the entire business financial arena tends to be a vast, spooky mystery.
  • Those who have weathered a financial black eye in their personal lives are inclined to be apprehensive about tackling the management of business finances.

Many people assume that forecasting is the same as accounting, and that it should be left to highly skilled professionals, such as bankers, accountants and MBA’s. And yet, the process of forecasting is sure to be a healthy learning experience for owners and anyone thinking about starting a business.

To dispel myths and misguided fears about forecasting, it is helpful to clarify what it is… and what it isn’t. One way to do this is to identify the ways that forecasting differs from accounting.

  1. Forecasting is an educated guess at future scenarios, while accounting is a detailed compilation of past transactions.
  2. Forecasting takes place prior to a period of business, while accounting happens after commerce is done.
  3. Forecasting provides an approximate picture of the future, while accounting shows an accurate record of business past.
  4. Forecasting is built upon safe assumptions and conservative estimates, while accounting is built upon precise records and receipts.
  5. Forecasting is usually best done by the small business owner, while accounting should almost always be entrusted to an accountant.

The truth is, most entrepreneurs have no crystal ball skills whatsoever, and most will never be accountants. Any yet, small business owners need to have a certain level of confidence in the future of their enterprises. A rationally constructed forecast can give you the confidence needed to move forward, while arming you with the information necessary to weather upcoming threats.

As surely as the business owner must pay taxes, he or she should take on the responsibility of forecasting. You can hire someone to foretell your future and you can certainly turn your business records over to an accountant for compilation, but at the end of each year it is the business owner who pays for any mistakes made and who reaps the rewards when things go right.

While attempting to predict the future might seem a bit crazy, the real insanity is trying to run a business without the benefits of forecasting. 

Entrepreneurship, Owning a Business

The Art of Putting Off Procrastination

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I’ve been meaning to write this article for some time, but kept putting it off.

Procrastination is a rat and a killer of dreams and life. As near as I can figure, it’s just a bad habit with its subversive roots somewhere in the realm of fear: fear of failure, fear of success, fear of change, and fear of one’s own shadow.

Although I pride myself in being action oriented, I am also capable of long periods of procrastination for some things. The rat lurks below the surface, rising only to taunt me occasionally when I realize I’ve been putting something off for far too long.

Black belt procrastinators have their bulletproof rationales ever at the ready to justify their inaction. One of the most sinister cornerstones of inaction is that there always seems to be an abundance of reasons to put things off until later. You can wait for the government, the health system, your health, your advisors, till the time is right, or you have enough money or time—if those don’t do it, you can wait until your friends approve or your grandma gives you her blessing. A procrastinator will defend his inaction to the death, and then choose the slowest possible way to die.
Putting off personal issues is troubling enough, but business owners can’t afford the luxury of procrastination. As we all know, what doesn’t get done today… will still be waiting for you when you wake up tomorrow morning. Business owners need to have a bias for action and a way to stay focussed on the most important matters in front of them.

Here are seven steps sure to help you deal with procrastination.
1. Clarify Your Vision. What kind of person or business do you aspire to be? Clarifying your vision will enable you to channel your energy into actions that are right for you.

2. Write Your Mission. How will you fulfill the elements of your vision? Will you be the best, the fastest, or the friendliest?

3. Identify Your Goals. Goals are specific, measurable, achievable, realistic, and time dated.

4. Select Your Most Important Goals. Choose the top three to five goals. Feel free to pick the low-hanging fruit, the ones that will bring the most results for your investment of time and energy.

5. Make a To-Do List. Make a list of tasks for each of your top three goals. If you’re still listing tasks three days later, you’re probably still procrastinating.

6. Choose Your Payoffs. Identify how you will reward yourself once you’ve achieved each of your goals. It’s also helpful to make a list of the benefits for each goal.

7. Take Action. Choose one task and go to work on it immediately—today.

Unless of course, you’d rather take a bit more time to think about it.
At all times we walk a narrow path between under and over thinking our actions. Too lean and quick might open the door to disasters, too long contemplating and we drift into the fuzzy world of procrastination. That’s the deal.

Business Killers

Business Killers Part 4

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Previously in the blog, I published the first three of this series of articles on the simple things that kill small businesses. Here is the fourth and final part of the series, with four more business killers.

Cash Flow Crunch. Cash is the lifeblood of a business. If you’ve ever tried to operate without it, you’ll know it’s not a lot of fun. The cash flow shortfall starts off quietly but doesn’t stay silent for long. It first raises its ugly head in the form of sluggishness in paying small bills, late filing of taxes, or delaying needed repairs and maintenance. More sinister indicators are failing to make payroll, falling behind on lease payments, or having equipment repossessed. Cash flow shortfall always makes the business owner busier, his time and energy devoted to dealing with angry stakeholders and humourless collectors. The final stages of cash starvation involve the joys of having major creditors and tax authorities lock up your bank account and being hogtied to the point that you can no longer serve customers. The keys to navigating a shortage of cash are: to maintain open communications with creditors, only make promises you can keep, and then keep those promises.

Fingers in Too Many Pies. Once an entrepreneur makes a success of one business, there’s a dangerous tendency to think he can duplicate his efforts in another business, and then another, and another. Spreading resources over a number of ventures can weaken an entrepreneur’s ability to deal with financial difficulties.  Aside from stretching finances, getting pulled in too many directions can deplete an owner’s time and energy, making it difficult to maintain the core business that brought about the initial success. The key to avoiding this pitfall is to know your abilities and be sure to keep enough energy, cash and focus to maintain your core business.

Trying To Be All Things To All People. In the flurry of serving customers it’s easy to lose your focus and latch onto whatever work comes along. In the early days of a small business there’s a tendency to follow the money. This means jumping on opportunities that arise when customers request products or services that aren’t part of the current offering. There may be nothing wrong with accepting the odd crumpet as long as you have time and the customer is satisfied. Too often it seems that trying to be all things to all people, as a way of doing business, tends to hold a venture back rather than advancing its mission. The key to staying on target is to identify what you want to be best at, then focus on providing that core service and refer all other business to trusted colleagues.  

Knowing When To Fold ‘Em. Not all enterprises are going to be successful. In reviewing case studies of failed businesses, it easy to see that the owner should have closed the doors sooner. Yet, when you’re buried in a bad situation, it’s more difficult to know exactly when to pull the plug. It’s important to learn when to walk away from a product, a service or a business.

Building a business is like growing a garden. You begin with a vision for success, nurture the parts you want to succeed, and weed out everything else. In business, cash flow and net profit are two critical measures of performance, but there are others as well—your quality of life, working at something you love, and the impact the business has on your family.

Your Business. Your Plan. Your Way.