One of the most common things I hear from small businesses is that (a) they serve everyone; (b) they accept business from everyone equally and that (c) they have "dozens or even hundreds of competitors". Are these three comments related? I think they are. More worringly, they point to a misconception that is costing many owners both time and money.
The problem is that a business cannot serve every customers. Even if you try, you're certainly missing a chance to increase profit and to reduce costs. Because, if you've been in business a while, you have a rich customer history to analyse. (You can tell who your best customers are using a simple cost benefit matrix).
So, why do owners not just target their most profitable customers (Here at BHH, we call them the 'A' and 'B' customers)?
Owners can also reduce costs by not doing business with the most difficult or marginal clients (or at least charge them more so increase profit for the same cost).
There is another cost to not segmenting your customer base - the "opportunity cost" of serving everyone. Those A and B customer represent the best prospects for up-seling; Also, they are the most receptive to new (profitable) services. Not focussing on these clients can mean missing out on these other rewards.
So, is it time for you to look at your customer base more carefully and decide who you want to serve in the future? Should you choose your customers, not just let them pick you? Now, there's a thought!
Many people think that systems are a distraction – or just extra work. Here at BHH, we don’t think so. We think that systems are the key to business success – including growth.
Why are they important? Because systems ensure focus and allow replication. Understood as a standardised set of processes, they are the key to:
With the right system in place, you can recruit people with the right attitude to start with. The right system means that new staff do not have to be so skilled. They’ll know what to do from day 1 and, provided they follow the system, they’ll deliver the results you need and want.
But goals are more important than systems, right? Wrong!
Many times we focus on the goal, not on how we get there. Many people are surprised to hear me say this, but goals are often short term, whereas a system is forever.
Think of a system as the path to the future and your goals as signposts along the way. After all, when you reach one goal, you’ll want to set another one – that’s the way goals work. But a well-designed system stays forever.
Of course, a focus on systems seems like a diversion. There’s all the day to day stuff to manage, then staff, then customers. How to get started?
One tip we have here at BHH is to get staff involved. Properly involved. Explain why systems matter. Why they are important to the business and to staff themselves. Get them on board. Establish a template (a common way of recording how, what, who in each department or area). Set staff the task of drawing up a basic system for their area and set a timescale. They will surprise you. Apart from sharing the load, it gives staff real buy-in. It will also lead to improved processes, greater efficiency and happy staff.
But is it possible to systemise growth?
Here at BHH we know it is. The Business Growth System we implement with clients allows us to look at all areas of the business – operations, staffing, finance, legal and marketing – it really is a 360 degree view. We identify gaps, the actions necessary to close those gaps, and then agree a time bound action plan to close these gaps.
To sum up: If a system is a means to achieve a goal, and if your goal is growth, then there should be a system for that. Exciting times indeed.
Reading about how to succeed in business is very instructive. It can also be frustrating. While I like to learn as much as I can from business experts, I think they make things more complicated than they need to be.
For example, when it comes to how to make a great business, gurus talk a lot about products, capabilities and innovation. And, of course, all these are important. At the same time, I think experts often start from the wrong place. They focus on the mechanics of the business, not with what is delivered. In effect, this puts the business first and the customer an inevitable second.
So, faced with increasing competition, how can a small or medium business do it better? My view is that businesses need to differentiate to survive. While they need to provide what customers want, they should also strive to provide what other businesses cannot give them. But where to start?
I think the answer is to put the customer first. Naturally, all businesses claim to do this. But I’m not so sure.
A good way to do this is to use a ‘customer journey map’. This is a technique for describing all the interactions that a customer has with a business (and vice versa) from the first time a customer becomes aware to the last time they use you. It is designed to identify the path between these two points. It’s also a great way to unpick the necessary from the wasteful, and the unavoidable from the irritating. And it puts the customer squarely at the centre of what you do.
By incorporating a timeline, the maps also point to faster ways to bring services to clients. Another use is to discover points of differentiation at each step of the journey - awareness, selection, delivery, payment, use, ‘after sales service’ and selection once more. In this way, a business can uncover opportunities to position an offer in ways that competitors do not.
Not only is it a great opportunity to develop insight into how clients experience your service, it’s an opportunity to engage staff and to unlock creativity within a business.
Differentiation is a big word for thinking about how we serve customers. You can be faster, better and add more value in a number of ways. But, to me, putting the customer right at the heart of what you do seems a great place to start.
One of the major challenges in business is to ask other people to do the things that only you can do best... Of course, I'm kidding. But only about the last bit. (i.e. that the business owner can do everything better than everyone else).
It's not possible for one person to do it all - even more so as your business grows.
So it's inevitable that we need other people to help. The key issue here is how can we make sure the job is done well: Are there some guidelines to follow?
Our work at BHH brings us into contact with many business owners who face this dilemma on a weekly basis. And we think there are a few rules to try and make this delegation as painless - and even as productive - a process as possible.
First, it's very important that the business owner is clear with staff about the purpose of the business - why does it exist, what does it do for the customer, why is it different? This is essential to set expectation and to enable staff to ensure that their work conforms to this overall purpose. Have you as a business owner made this clear? Are you clear in your own mind what you are in business to do? Are your staff? It is surprising how often this is neglected.
Second, you need to be aware of the difference between "allocation" and "delegation". Asking someone to do something is allocating a task. Delegation, on the other hand, is handing over responsibility for an area of work. This means that the person who undertakes the work gets to decide how to do it themselves. It's important that the way they do this meets the overall mission and culture of the company (see point one). But they are given overall responsibility for the task.
Third, there needs to be a process to evaluate the results once the delegated task is complete. It is essential to sit down with staff to review the task after it is complete: To discuss how it went, perhaps even to disagree about the methods but, essentially, to decide what went well, what could be improved next time.
Fourth, delegation requires management. It is not "abdication", a process we see all too often here at BHH. It means spending time to describe the purpose of what is to be done, to set objectives for the task, to evaluate the results and to learn lessons. It takes time; and it's hard work. The pay-off comes later, not earlier, in a long term process by which staff come to be responsible for more of their own work.
So, while others can never be as good as ourselves (or so we think), we do need others. And, if we are to grow, we need them more than ever.
Therefore the art and practice of delegation is essential for the future success of any business - and the best time to start is now.