How to avoid making entrepreneur `s classic marketing, operations and financialerrorsRichard Sandor: Founder, Eustress Marketing Coaching
Marketing
Someone much wiser than me once said, "There are no mistakes, only learning opportunities." So let me highlight a few "learning opportunities."
Marketing in its most basic form is getting the right message to the right person at the right place. So let's use that framework for starters.
1. Who is the right person? Most entrepreneurs have a decent idea but can do much better in truly knowing their target audience. Get to know your target group – its barriers and motivations. Learn from your customers – why did they buy from you? How has this changed? So many companies fail to do even the simplest of new customer surveys, and they miss out on a wealth of knowledge to attract, retain and grow their business better.
2. Ah, the right message. Make it short. Make it punchy. Make it relevant. Be heavy on benefits. Be light on features. Have a couple of proof points to back it up. If you don't know which benefits, features or proof points to focus on, test them out. You don't need full-on focus groups. There are many quick and inexpensive methods to test and refine.
3. One "right place" is your company website. Too many sites are bloated digital brochure dumping grounds, causing pain for visitors. Knowing your target audience and what they want to achieve on their visit of your website will help you map out your site flow and the best places to surface your relevant messages and content. Build your site around customers, not brochures.
4. Bonus "learning opportunity": putting marketing in a silo. Marketing goes beyond the right person, message and place – there is product experience, be it virtual or physical, sales or customer service. All are opportunities to further your customer knowledge, marketing, brand and business.
Tara Landes: President and founder of management consultant Bellrock
Operations
Are you worried you're missing out on vast amounts of profit just by making the most common operations mistakes of entrepreneurs? Ask yourself these questions:
Do you believe management activities are best saved for slow times?
There is a purpose and value to dedicated management activity in almost every environment. If you prefer to stick to "working foremen" on the shop floor and chargeable managers in a professional service firm, planning (and profit) is what you sacrifice. Even if your industry is on fire (oil patch, anyone?) and you are growing, a well-managed company is significantly more profitable than a poorly managed one in the same growing industry.
Do the same problems keep coming up repeatedly?
Companies without a systematic way of identifying and resolving problems waste significant time, energy and money. If there is a chronic complaint in your organization (time sheets take too long, we keep running out of this material, we don't know how to get this client to pay, etc.) you need a process for resolving problems. Now.
Are you calculating your burdened hourly rate using last year's financials?
Entrepreneurs often base their costing on a burdened hourly rate, where the "burden" includes things like overhead. The frequent mistake made, however, is basing that costing on last year's actual financials, rather than the budgeted costs for this year. The entrepreneur concludes that the certainty around last year's numbers trumps the forecast for this year. They are wrong. Even cost of living increases change your margin significantly in a competitive environment.
If you said yes to any of these, run a process benchmarking to see where you can improve operations. Whatever's missing could be costing you millions of dollars.
Axel Christiansen: Managing director, subordinate financing – BC/Yukon, Business Development Bank of Canada
Financial
There are three key errors entrepreneurs make:
•Fixation on the interest rate: Often entrepreneurs will view financing as a commodity and will heavily weight their decision-making based on achieving the lowest possible interest rate. Experienced businesspeople recognize that there are other factors to consider that can have a far greater impact on success. These include such things as experience, connections, repayment flexibility, ability to support the business when facing challenges and reduced personal exposure. Additionally, it is appropriate to use higher-cost forms of financing where there are higher return opportunities.
•Capital structure: The first step to developing a proper capital structure involves being aware of the available forms of financing and understanding where each is appropriate. For every business there's a suitable mix of senior debt, sub-debt, equity and other sources of financing (such as ABL, leasing, factoring, etc.). The right balance depends on the stage of the business, nature of its assets, predictability of cash flow and return potential. Common errors include capital structures that, in pursuit of the lowest rate, use too much senior debt and thereby increase default risk and personal exposure. The flip side is having no debt, which is inefficient from a tax perspective and doesn't position the company to maximize its return on equity.
•Communication: Keeping one's lenders informed is crucial in maintaining their support. This means timely reporting of financials, being aware of covenants and security items and discussing planned changes well in advance of them happening. An uninformed lender is one who will panic, whereas a lender with all the data required to make decisions will be able to be supportive even if the business faces difficulties.
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