Tuesday, 9 July 2019

Small Business Tuesday - My top five tips for success in a small business

If  you are reading this, it's probably because you have an interest in running a small business and you want to be successful. Reading blogs written by other small business owners who are successful is a good way to learn, but don't forget, there is more to be learned from failure than success. There are some really insightful blogs on the subject of failures. Not all of the lessons will be relevant to you, but what is interesting is that many of the lessons in some of these happen by accident (good or bad). For example in one blog that was about a failed Pizza business in Brooklyn (a very different business to mine), and there were several important lessons, which applied to my business, and we'd managed to avoid the pitfalls purely by accident. We were lucky with our location, it couldn't be better for a music studio, we built a team that runs day to day without my involvement out of necessity as I could not always be around, and we've always been finding new ways to boost our revenue more because our customers suggest it and we listen rather than having some amazing talent for predicting the future. Some of the other lessons in the blog we've found the reverse to be true. We started as small as it is possible to start and have grown organically. I guess that it just depends what sort of business you want to do. I also run the business with my wife and have done for 25 years. Just because something works for you, doesn't mean it will always work for someone else. That is where judgement comes in.

Having read many of these articles, I have put together my own five top tips for success.

1. Ensure there is a market for your product at the price you want to sell it for.
Anyone can make a success of selling, assuming there is a market for your product. If you have a massive budget for advertising, your product is of better quality than your competitors and you are selling it cheaper, than anyone else, you will sell your product. But making a profit is a very different matter and if you make a loss on each item, then you will fail. Work out your margins, these need to include paying your overheads and advertising and pay you a living wage. There are times when it is wise to sell products at a loss, such as when you have to shift stock that is taking up space. Many businesses do not recognise the cost of products hanging around and not selling. They are using space, time and energy that could be more profitably used for something else. All of these are factors in the price you should be selling your product for. If you are launching a new product on the market and you are trying to raise finance, the first question a sane investor will ask is whether there is a market for the product. For me, when I launched our rehearsal studio in 1979, it was in a derelict caretakers cottage in the industrial estate which my father owned. I knew there was a market because I was in a band, all of my friends were in other bands and none of us had anywhere to rehearse. From day one, I turned over a profit. Every time we expanded, it was based on the fact we'd reached capacity. Opening pop up shops/stalls/venues is a good way to gauge customer response. If people express an interest, but this doesn't convert into sales, then that is a big red flag.

2. Worry about what your customers are doing, not your competitors.
In my opinion, the biggest mistake small businesses make is that they worry about what their competitors are doing, rather than worrying about what their customers want. If you are a huge multinational, such as Apple, then of course you worry about Samsung, but if you are a small local business, such worries are a distraction. In my business, we get musicians from all over the world. Often they will say to us "we were rehearsing at XXXX studio last week and they had this great new YYYY". If it is something I've not thought of or some new equipment I am unfamiliar with, I'll do some research, but I'll always ask the customers why they were so impressed. A good example of this is air conditioning. Seven of our studios are air conditioned, and ten are not. Some customers want to pay a premium for this and others simply couldn't care less. It is a huge outlay and has high running costs. So we've built flexibility and choice into our offering. The same is true with new innovations in equipment. We will try this out in one or two studios. If this works, we gradually roll it out to other studios. Many of our competitors over spec their studios, which means that they price themselves out of the market, with equipment that is often too complicated for many of their customers. I've seen the same thing in all manner of businesses. There was one family run cafe that I used to love. It was packed to the rafters every day. It did a good cup of tea and a great bacon sandwich. As the family were getting old, they sold to a new owner, who had grand plans. Sadly, they didn't realise that doubling the price of tea and not making it properly was not a winner and if your customers wanted a traditional bacon sandwich, then making it twice as expensive, with boutique bread and a sprig of lettuce was not a winning formula. The logic of the new owner was that all of the other half full cafe's in the locality were doing this and the margin was better. He lasted a year. He wasn't taking his customers with him. I always thought he should have stuck with the PG Tips and the bacon sarnie, but added fancy teas and designer sandwiches as an upgrade, then he'd have attracted both markets.

3. Don't be a snob.
It never ceases to amaze me just how stupid some business owners are when it comes to their customers. Last year we supplied a major sound system for a local Mosque. They urgently needed it for a big celebration for Eid. I spent three days laying cables and testing the installation. The Imam and the worshippers were really friendly. To my amazement, they even offered me a cup of tea, which surprised me as it was during Ramadan and Muslims are not allowed to eat or drink. I queried this and they said "you are a guest and hospitality to guests is a requirement of our religion, so do not worry about offending us".  What shocked me was that the technical director of the Mosque told me that he'd approached several other companies that had been unfriendly and unwilling to even quote. They were a model customer and paid on the nail. We've had the same experience with African Churches, many of whom we supply with equipment. They tell the same story about our competitors. If you are a racist or a snob in your approach to your customers, it is very bad business and you don't deserve to be successful. One of the most corrosive terms in the small business community is "timewaster". These are people who come down, take up lots of your time, pick your brains and don't buy anything. In our retail operation we see these all of the time. Generally they are looking to use your knowledge to buy the same product more cheaply on the internet. We always inform customers that whilst we support customers who buy from us for free, it's £25 per hour for support if they don't. When they buy a guitar and need a new string fitted or a small adjustment to the intonation, they suddenly find that the internet savings have disappeared. On more than a couple of occasions, they have returned guitars to Amazon and done what they should have in the first place and bought it from us, when the penny drops and they realise that there is more to service than the purchase price. Civility meant that we get their in the end, most of the time.

4. Understand the difference between Ryanair and The Orient Express.
So you want to take your beloved to Paris for your anniversary. Would you go on The Orient Express or would you fly Ryanair? Both will get you to Paris, but the experience and the cost could not be more different. Both companies business model could not be more different, both companies customer base could not be more different. Both are successful, which is demonstrated by the fact that you've heard of both. It is a good illustration of the fact that you there are many ways to do the same thing (in this case get you from A to B). In the case of Ryanair, they are set up to do it as quickly and cheaply as possible. The Orient Express is set up to do it in the most comfort possible. The Ryanair journey will be forgotten as soon as you get off the plane, the Orient Express will be remembered for a lifetime. They are both successful because they stick to what they are good at. If you are offering an Orient Express service, you can't do it at Ryanair prices and vice versa. Work our what you can do best and stick to it.

5. Don't lose focus.
Every day I get at least three sales calls and a dozen unsolicited offers of business services. These are for all manner of things, cheaper electricity, advertising opportunities, better SEO, a better website, business factoring, a whole manner of other things I can't even recall right now. Just imagined if I spoke to every single one? I'd have no time to do anything else. But if I ignore all of them, will I be shooting myself in the foot. Just suppose that one of those calls I ignored today could save me £1,000 a year on my electricity bill? Just suppose the SEO sales person could bring me in £50,000 a year more business? How do I see the wood for the trees?

I have a simple way to keep focus. It is called efficient time management. I have a spreadsheet of all of the things our business spends money on and all of the things that bring customers in, such as advertising. Once a week, I clear out my mailbox and as I go through, I have a look at the costs / income associated with the proposal. If it is clearly a 'blind spam' email of the type I've seen a million of, it is dumped as it is likely to have nothing interesting. If it is on a subject I've never seen, I will read it and if there is perhaps an element of interest, I will investigate further. A relatively recent example was an email imploring me to use a company's services for Instagram advertising. Whilst I didn't take up their kind offer, I did a review of our company Instagram. A quick google of a few websites, gave me some great tips. In a couple of weeks, we doubled our followers organically, with people who are interested in our business. It also made me focus on the content of what we were posting and on trying to make people share and be interested in the posts. As with all social media, it is all about content. So stay open to new ideas, but don't fixate on them and don't pay other people to do things for you until you can see that there really is a payback.

As with any form of advertising, it is difficult to know if money spent on social media is effective. We have had some very effective social media strategies. They don't work for ever, but they do work. My view has always been that a good long term plan is simply a succession of good short term plans. Set your objectives and work out how you will realise them. In 2013, we set a five year goal of increasing our turnover by 100% in the rehearsal business. We have massively over achieved that. As you learn, you should be able to improve your plans and strategies. You may think that I would be smug and self satisfied about that. Not at all. I have realised that we've neglected developing our retail business and have missed opportunities in both the hire and recording business. The reasons for this was the necessity to invest in bringing our core business into profitabilty following our massive development in 2012, which we largely financed ourselves. Now we have to get the rest of the businesses performing to the same level. How will we do that? Watch this space. I will be writing regular updates on a Tuesday, so you can follow the fun!

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