best business practices Tag Archive

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Don’t sell donuts

dont-sell-donuts

Let me describe a company and see if you can guess its name. I will quickly narrow your choices by revealing that this company is what the industry calls a QSR (Quick Service Restaurants, aka a fast food place). This company has thousands of locations the world over. Customers walk up to the counter to order, they experience speedy service and either take their order to go or sit down in the restaurant. What company name comes to mind? I suspect you are thinking of McDonald’s, Burger King or some other burger place, or maybe even Subway or Chipotle. Chances are you did not think of Starbucks, even though the description above totally fits. Why is that? Because Starbucks doesn’t want you to think of them that way! They don’t view themselves as a QSR. Dunkin’ Donuts, Krispy Kreme and Tim Hortons think of themselves as a QSR, but Starbucks doesn’t. Why? Because they don’t sell donuts. More on that later.

Imagine I started a business serving people who hate to do grocery shopping, so I hire people to do the shopping and to deliver it to your home. Assuming you were interested in that service, you will probably pay me a meager amount over and above the cost of the groceries and my cost in employing people to do the work. In other words, my gross margin on that business would be paltry. Said differently, even though I might amass large revenues, passing the cost of the groceries through the revenue line, the quality of my revenue would be poor. If, in addition, my staff were to unpack the grocery bags and stock your pantry and refrigerator, you would receive more value. Further, if I were to install detectors in your pantry and refrigerator that automatically determined your supply needs, and if I gave you an app on your smartphone with your needs all filled in for you to edit, you would appreciate that value even more. With each of these additional features, I improve my quality of revenue. The quality of your revenue – best measured by the gross margin you command – is a measure of your customers’ perception of the value you provide compared to their alternatives. How good is the quality of your revenue? How can you improve the quality?

Value is created by the use of capital and the use of labor. For example, a manufacturing company uses capital to procure raw materials and uses labor to turn the raw materials into a finished product that somebody finds valuable. A warehousing company might use capital to procure a warehouse and forklifts and use labor to store and retrieve warehoused products. An accounting firm uses very little capital but has considerable use for talented labor to provide their services. During the industrial revolution, when source of capital was considerably restricted, value was created using both capital and labor. But, today, when reasonable amounts of capital is much more readily available, there is a commoditized minimal premium for value created through the use of capital. So, to create quality revenue you must create significant value through talented labor.

What the customer is willing to pay for your goods and services is a function of both the real and perceived value of your offering in comparison to the alternatives they have. For example, McDonald’s cost in providing a hamburger to a customer – including all the cost of the store, furnishings, labor, etc. – is about $1.50. Interestingly, that is about the same as the cost incurred by Starbucks in providing a customer with one of their craft coffees. Yet, McDonald’s seems to need to sell its hamburger for $2.50 while Starbucks charges almost $4.00 for its coffee. Starbucks enjoys a much higher quality of revenue than McDonald’s does.

Why is that? Because, Starbucks doesn’t sell donuts. And, if they ever do, they won’t be your ordinary glazed donut for 99 cents, intended to be bought by the dozen. Rather, they’d be craft donuts, to be devoured and savored, and sold for at least two dollars and change. Starbucks doesn’t sell coffee; they offer you a coffee experience. If that experience requires that they offer pastries, they will do so. But it is the experience that is important. McDonald’s sells you food. Starbucks offers you an experience. That brand positioning allows them to create higher quality revenue.

Having grown up in the high tech world, I have always been amazed how Dell, Cisco and Intel are all $50-60 billion dollar high tech companies, but with distinctly different quality of revenues. Dell, for the most part, neither designs nor manufactures their computers — they market and sell them. For that service, they enjoy 20% gross margin. In contrast, Cisco hires talented engineers who design advanced servers and routers, but farms out the manufacturing to Asia. They, too, market and sell their products. But, for that extra work of their talented engineers they enjoy 60% gross margin. Intel does it all – they design, manufacture, market and sell their products. It invests billions of dollars in manufacturing plants and employs people to run them in two and three shifts. For all that work, it enjoys 65% gross margin. Which of these companies enjoy high quality revenue? Clearly, both Cisco and Intel do. But Cisco seems to have figured out what creates quality in their revenue.

Quality of revenue is achieved by providing value that is unique, maintaining a perception of that value through a brand proposition that includes pricing. If you sell your products cheap, you might increase volume, but you will harm the quality of your revenue. It is a tradeoff. The same is true if you discount your products. I ran a number of electronic instrumentation businesses. These high tech instruments often sold for tens of thousands of dollars. Additionally, we would sell software that would analyze the data gathered by the instruments. The software packages would often sell for equal or higher value than the hardware, and customers would often ask for a discount. I had a simple policy: I would never discount the software; and if I felt obliged to discount the hardware, I would give some of the hardware away for free. Why is that? Nobody asks for another piece of hardware for free the next time because they know there is a real cost to manufacturing the hardware. However, they will be tempted to ask for more copies of software for free.

Quality of revenue is achieved by brand positioning (what customers think of you), product positioning (what customers think of your product) and price positioning (what customers think of your value). You must actively and intentionally manage all three. There is nothing wrong with a business like McDonald’s or Dell. If that is the nature of your business, you must be operationally excellent. However, if your business is like Starbucks or Cisco, and you want to maintain the quality of your revenues, make sure that you don’t get tempted to start selling donuts.

Originally published on ThinkShift.com

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Eat what you kill

Now I am not much of a hunter however the saying “Eat what you kill” is a great business strategy to follow to ensure your financial success in dentistry and any other kind of business.

“Eat what you kill” translates to running your practice on a cash flow basis as an astute business owner and entrepreneur. This approach also works extremely well with your personal finances, and ultimately can be the key to avoiding the pit falls of personal and professional bankruptcy. And is so easy to manage. You do not need an accounting degree to follow this strategy. Anyone with the desire manage their business or personal finances extremely well can do this.

It is not taught in schools, as far as I know. Many industries benefit from you not following this strategy, including banks, credit card companies, leasing companies, and of course bankruptcy attorneys. The “eat what you kill” strategy prevents you from making poor financial decisions. It displaces the wants and redirects to the absolutes and must haves to grow the business.

The benefits are far flung, like decreased stress in your life due to no worries regarding your finances, no concerns ever about being overdrawn at the bank, always knowing the status of your financial capabilities when the opportunities present themselves. The most important benefits to me have been a lifelong ability to grow my business and personal wealth without major setbacks.

Sound too good to be true? Not at all, simply… Spend what you earned.

The trick is to apply this approach to finance consistently and continually, with no exceptions on a daily, monthly, and annual basis.

Spend only what you earned this month in your business. If you do not have the money, then don’t obligate the company for the liability. For a small business this means the owner only gets paid if there is money left over at month end.

Spend only what you earned and deposited in the bank. This prevents your business from getting over extended financially waiting for a check to clear or accounts receivable to come in.

Guess what? You start to pay very close attention when there is no money left over at month end. You will take action quickly to correct your cash flow direction. Works like a charm!

Now some of you will be asking “how do I apply the approach to purchasing significant capital assets needed to grow the business?” Consider technology purchases such as a $100,000 3D cone beam CT scanner. I highly recommend that you plan to pay off the lease/loan for any such purchase in a 3 year period. That has been my policy for many, many years. Less money ends up in paid interest, more of your money ends up paying for the technology itself. Quite simply if you can’t pay it off in 3 years – don’t buy it.

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What are you waiting for?

Change: Realize Your Greatest Potential

It’s pretty clear the world is changing at a remarkable pace. And this pace, as overwhelming as it feels today, is poised to steadily increase – many say it will continue to double every five years. So if you thought the last 20 years were something, the next 20 will be something else.

For example, within three years there will 10 billion “things” connected to the internet, everything from your keys in case you lose them, to streetlights and garage doors so you can control them. Remote controlled air ambulances, cars that drive themselves and package-delivering drones were science fiction just a few years ago, but today they are real and tomorrow they will be commonplace.

The change is naturally spilling out everywhere, in culture, strategy, service, product development, communication, manufacturing and on and on. As evidenced by Kodak and Blockbuster and many more, those who fail to see to the change and course correct will find themselves at a distinct disadvantage – or even gone.

As Eric Shinseki said, “If you don’t like change, you are going to like irrelevance even less.”

Today’s world is often defined as VUCA – volatile, uncertain, complex and ambiguous. Volatile because challenges are unexpected and situations are unstable; uncertain due the lack of predictability and the likelihood of surprise; complex because situations have so many interconnected issues that chaos and confusion are often the norm; ambiguous because we have not been here before – precedents don’t exist for many of the opportunities and challenges staring us down today.

Yet in the midst of this appears to be the greatest panacea of opportunity the world has ever seen.

We take for granted how much is available to us now. We know where population is distributed and where it’s growing, we have unprecedented access to capital, knowledge, innovation and technology, and we have the ability to combine them to create value. The question is: will we?

Will we push to find new ways to create value, to connect with people and share ideas? Will we move away from what worked yesterday if it looks like it won’t work tomorrow? Will we push ourselves past what is in pursuit of what could be? Will we realize the potential that comes with change – in ourselves and in the organizations we serve – or will we settle for the status quo?

I am convinced that most of us are missing out. That far too often we become lulled into a false sense of security and the belief we should wait, accept the role, status or result we have been assigned.

That we should let things work themselves out as opposed to getting out there and making them work. That we should wait for permission or approval before taking action. The question, as David Lazarenko put it, is, “Are you a waiter or a creator?”

So, while many accept the notion that we should stand in line and patiently wait while someone else decides the next opportunity or right move, we know that day has come and gone. And it is no longer up to anyone else.

We have an opportunity to think differently and go beyond what “is” today to find the potential in people and organizations, and be intentional about making it a reality. We combine intentionality and potential and call it “potentionality.” It’s what drives us, and it is at the heart of why we go to work every. It is a made up word, but it’s apropos to the idea of seizing opportunity in change.

If you don’t see an opportunity, just create one!

Shift in Thinking is a monthly article from chief storyteller David Baker with a call to action for organizations and individuals. Using engaging narratives and probing questions, he seeks to provoke a new way of thinking around brand, culture and leadership, and to help readers intentionally realize their potential – Potentionality!

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Overcoming 6 Business Paralysis Areas

Overcoming 6 Business Paralysis Areas

6 Business Paralysis Areas That Can Kill Your Business

The month of September is my mentor’s month for one of her retreats and this one is on mindset. Even though I wasn’t able to be there in person, she has been sharing insights into our mindset all month long. This has caused me to be in tune with Mindset and how what you think…really think…is actually what you get.

It’s all about alignment of your conscious, subconscious, and actions. And what you think…I mean what you really think (subconscious) is what you will get!

This explains why so often when we set some type of goal or make a resolution we don’t see the results we wanted to see. Why? Because what we thought (conscious) and then really thought (subconscious) weren’t lined up and this is the big one…the Subconscious will always win.

In a teleseminar I did, I spoke about the 6 areas in our business that our mind can bind us and can lead to business failure if we’re not careful.

In my coaching I’ve found there are 6 issues that can bind you and be fatal to the business if not addressed. See if you relate to any of these….

Issues like:

Fear: We have that fear we’re going to mess things up or afraid we’re going to go in the wrong direction or worse yet, maybe someone will think you’re a fraud.

Over Analysis: This can quickly lead to “analysis paralysis”. I know this one personally and If I’m not careful, I’ll analysis this, and then… I’ll analysis that, and then… when I get it all together,… I want to analysis my analysis!!!

Small Thinking: Instead of thinking BIG, you think small. Usually this is from self doubt!

Setting Unrealistic Goals: Be careful of this one. Goal setting is mandatory yes, but your goals must be realistic and reachable. Setting unrealistic goals can quickly kill your entrepreneurial spirit!

Shiny Object Syndrome: I also know this one personally and I bet a lot of you here do too. Constantly going from one thing to another… trying the newest marketing method, or buying the next big “bell and whistle” thing being offered. You change what you’re offering…or even worse…you change your entire business model? Do you see yourself here? Then there is…

Perfectionism: This is the big one and can really keep you tided up and bogged down, never moving forward…because you’re changing this….changing that….tweaking this…and tweaking that…. Saying…. “Just one more whatever…… and it will be perfect!!”

Understand, we all go through these issues from time to time in life and in business. If I can be open and honest here with you, in my own experience, I have dealt with all of these at one time or another since I started Simple Social Media in January of 2010 and since going online in the mid ‘90’s!

I can also share with you that as someone who is actively working with a business coach, these issues are being dealt with by many business owners from the beginner level all the way to the 7 figure level. So don’t think you’re alone…you’re not!

Any one of these issues on their own can present major problems and could become deadly to a business, but when you combine any of them… you have a lethal weapon on your hands.

It’s important to
1st – understand it…
2nd – Acknowledge it, and then
3rd – make every effort to change it.

This might even mean working with a coach in a particular area or for some it can be as simple as making a decision to change something and then implementing that change.

Most all of these binding issues can be related to perfectionism, or for me they have, and perfectionism will slow you down…. I know from experience!

Taking an even closer look at what this looks like:
I could write and re-write my blog post… 20 times… (and I have). I could Record and re-record my videos for hours… (done that too!) I could just freak out every time someone contacted me that I misspelled a word or sent something out with a bad link… I could just redo and redo… (Yep and yep to those also!)

But How many clients did all that tweaking, re-writing, re-recording, re-doing bring in?? NONE!

How much money did I make while I was doing all this tweaking and re-doing and not bringing in any clients?…. again…NONE!

But if you want to move your business forward and move fast, then you are going to have to……

….put your perfectionism in a box…. And send it packing!!
I know I just heard a bunch of “gasps” here from you readers because for a perfectionist (like me)… that’s a very hard pill to swallow!

But now I’m learning to take action and become a massive implementer! And guess what…since my focus is no longer on perfection but it’s on taking action and implementing…. I’ve gained more visibility for me and for SSM.TV, I’m connecting with prospective clients and…. I’m moving forward… it’s a win-win!

Perfection will never come. There will always be changes, additions, tweaks….and yes… even mistakes.

If you wait for it to be “perfect”… you will never move forward in your life or your business.

It will only slow you down from reaching the dream lifestyle you want for you and your family.

So…. Put it out there, get it going, come back and tweak it later. Seek help with any of these issues if you need to… but get it going! YOU…. can do this!

Simple Action Step:
I want you to look at what areas do you need to let go of?
What fears are you trying to face on your own?
What bright shiny objects are you currently chasing?
What about that perfectionism? And…
Who could you reach out to that could help you work through these areas?

This is just one of the many areas we take a deeper dive into in The Power Up Online Academy training programs for game changing entrepreneurs and small business owners looking to attract more clients, accelerate their business, and make more money. If you’d like to find out more details visit www.SimpleSocialMedia.tv OR reach out herewww.simplesocialmedia.tv/contact

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Prioritize Vendor Training for ROI

software ROI
Training from your software vendor is a crucial step to successful use and ROI on software investments. In my experience, many practices, especially small ones, think that they can read the manual and self-train and get the benefits of their software. However, many times dissatisfaction with software is actually a lack of training. Many practices don’t use all the relevant features, or use them wrongly, and therefore spend much more time and effort on tasks than needed.

When selecting software, asking around is a common method to figure out if software will work for you. Talking to other users, checking references and finding out about the user experience is valuable.  However, dentists need to recognize that few dental practices prioritize vendor training and make the most of it. Further, at any particular software vendor, there may be several trainers and there may have been changes/upgrades in software. Furthermore, practices that use a software may have purchased the wrong software or not allowed enough time for their own training.

In addition, training from a vendor is the first step in a two-way relationship. Establishing the importance of the software in daily work is necessary both internally to the practice and to create a channel of communication with the vendor. Ideally, a practice has selected the best software for their needs, and will use that software for years to come. To build a strong, ongoing relationship, practices need to treat vendor training as a mechanism for setting up communication channels, providing feedback and important information. The trainer often becomes the go-to person, the key link in the communication chain for practices to understand upgrades, communicate unique needs and problems, and receive important information from the vendor.

Using your software fully demands deep knowledge, and trainers can provide personalized information about the nuances and features. Communicate with the vendor and trainer; don’t suffer in silence, and don’t expect the vendor to read your mind.

In small and large practices, the organization must value the training and be committed—even if that is hard to do. Treat training as an obligation and an opportunity that you have paid for.

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