Small business advice, Business principles and management
Welcome to my blog about which is a collection of 1001 tips and pieces of business advice. These are ideal for small businesses but will be equally helpful in larger businesses and business units of large businesses. Do please check back frequently as I’m constantly adding to this blog and tweaking the advice. I’d love to hear from you, so if you have a tip that I haven’t listed or have some feedback, do please leave a comment below.
Business tips and advice on starting a business
I think you will find that working through this blog will give you lots of good business advice for whatever sort of business you want to start. At this stage, I would also ask you to try the “7 Why’s Test”, which starts with asking yourself why you want to start a business. You might say “to make money”, You then ask “Why” again, and keep going at least 7 times.
If you are starting a business because you don’t like your boss or working for someone else, then stop and seriously think this through. You see, if you expect to get paid you will always have a boss, in the shape of customers. You may also have a boss in the shape of investors. Customers and investors will be unforgiving. When you understand this you may also appreciate your current bosses point of view and find it easier to progress your career working for them.
How to get a new business or project started
Finding reasons not to get started is so easy. What are you waiting for? There will never be a perfect time, you will never have all the information, all the skills, all the right people, a perfect plan or enough money. Here are some words of wisdom that I recommend if you are procrastinating:
Start where you are, use what you’ve got, do what you can.Arthur Ashe
The longest journey starts with a single stepLao Tzu
You’re never too old, never too bad, never too late and never too sick to start from the scratch once againBikram Choudhury
The key message in these famous quotes is that if you want to do something, just take the first step. What’s the worst that can happen? If you fail, great, you’ve learnt something, so don’t waste it, start again. Which reminds me of another quote, “Fall down 7 times, stand up 8”. It’s also true that many successful business leaders have had their share of difficulties and set backs. What separates these successful businesses is that they didn’t give up.
Measure what is important
Getting started with data collection
There is an old business saying, ‘if you can’t measure it, you can’t manage it’. This is still true to day. Any process, be it cars washed per day, apples harvested, number of phone calls made, or orders shipped, is being left to chance if you don’t measure it and track it.
Once you have decided what the measure, you can then monitor it and start to manage it. For example, how many calls made today, compare this with yesterday, last week, last month, same day last year etc? Then decide if you need to take some action.
As a manager you can start proactively measuring what’s Important in very simple ways. One business owner I know in the early 1990’s simply made a note each day in his diary of the total order value each day and the top 10 customers in his diary. Year on year he’d compare each day and get on the phone to those customers who had not placed a repeat order to ‘see how he could help’.
These days instead of a diary I’d recommend just keeping a simple spreadsheet of key figures, one row per date and items to measure going across the sheet. With the data in Excel it’s much more easily graphed and automatically compared with prior year.
Below is a simple example of how a small online store selling children’s toys might track some measurements:
|Date||Units Ordered by customers||Total value of orders||Page views on website|
|May 5th 2020||50||£7,500||20,121|
This is a very simple example to make the point, but as a manager you can fit this to your purpose. Using this example we can see that the sales were higher than the previous days on May 7th. This prompts the question:
Why were the sales better?
What can we learn?
Is there an action we can take to apply this learning to increase future sales?
But also imagine now that you as a manager are looking at these figures again a year or two years later and comparing them with the same day.
Tip: If you attend a regular meeting, for example a daily stand-up or a weekly sales meeting where numbers are shared, keep your own notes of what key numbers are being reported. It can be immensely useful to have some key figures at your finger tips.
A Single Version of the truth
Often as a business grows the numbers being reported or discussed become more confusing. It’s not unusual to have 3 or 4 areas reporting what appear to be different figures for the same thing. This needs to be understood quickly and a common measure agreed on. Let’s take Sales Value as an example. The Sales Manager, is reporting that last month his team made sales of £500,000. Meanwhile the Operations manager is reporting sales of £600,000 and the Finance Manager is reporting sales of £400,000. On investigation they are all right, in their own way, in their own context.
The Sales Manager, literally took orders worth £500,000 from customers. Think of this as new sales.
The Operations Manager, Invoiced out sales of £600,000. This being £500K from this week and £100K of backorders from the prior week.
The Finance Manager, is showing £400,000 of sales in the management accounts, because they had to issue credits to come customers for faulty goods and anyway the numbers in accounts are nett rather than gross.
So, all three of them are correct, but from a managers perspective this can be confusing and worse still it’s confusing when trying to communicate this to more junior staff. The solution is to agree clear and concise terms for each of these. For example
Sales Manager: £500,000 of “New Orders Inclusive of VAT”. This is a useful figure as it shows how hard the sales team have worked brining in new business.
Operations Manager: £600,000 of “Invoiced sales”, or better still £100K of invoiced backorders and £500K of new business invoiced. This is important as it shows how much work the Operations team have had to do. It also gives content to labour costs in this area, packaging and carriage costs.
Finance Manager: £400,000 “nett invoiced sales”, but better still to break this down and report it as £500K net invoiced sales, £100K net credits, making weekly nett sales £400K.
Agree which of these figures you are using for various purposes and don’t mix them up.
Moving to a data driven business / data driven decision making
How a business makes decisions is a measure of it maturity and agility. The best businesses now try to measure almost everything. With IoT (Internet of things), it is much more reasonable and cost effective to measure everything which matters. Even details like the weather are important to capture as they affect performance. Data collection, capture and storage needs to be automatic. This is a big topic, and mentioned here so that you are aware of it. The value you can get from all this data is immense but it all starts with data collection, capture and storage. Cloud platforms such as AWS (Amazon Web Services) and Microsoft Azure have IoT (Internet of Things) gateways and pay-as-you-go databases to store the results. Data collection can be as simple as deploying Raspberry Pi’s or similar with sensors or input devices for staff, which communicate the measurements back over wifi to be stored.
But don’t let data drive your business
For a longtime the idea of a Data Driven business was seen as an ideal or goal to aspire to. As we discussed above data is essential to any successful business but rather than let data drive your business let it inform your business. The difference between “Data Driven” and “Data Informed” is quite subtle but a world of difference. In Data Driven businesses, decisions start to become quite binary and often limited by the available data. Contrast this with a Data Informed business where space is left for human skill, judgment and intuition. While data will take you a long way, intuition, good judgment are essential skills. If you doubt this, then consider two businesses, both with exactly the same data but run by managers from quite different backgrounds. Would you expect both companies to perform equally? No, taste, judgement and intuition can help one business leapfrog others.
For this reason, try and develop good judgment, good taste and learn how to tune into your intuition. Practices such as learning to appreciate classical music, religion, art, yoga, breathing, and gardening and meditation help to tune the brains powers of intuition.
The 80/20 Principle
Perfection is the enemy of progress.Winston Churchill
Minimise inventory – Stock doesn’t generally get more valuable the longer you keep it.
Avoid wherever possible tying up resources in stock. Keep stock as low as you can without impacting on the operation of your business and service to customers. This isn’t easy and while there is a science to it there is also an element of art involved in some businesses.
When considering a new business venture, I would always ask if it involves buying and holding stock. If it does how is this going to be funded and managed?
Rule: One – Don’t hold stock if you can engineer it out of your process
You may have heard about Just In Time (JIT) Supply Chains. The concept is simple, you take an order and promise for example 14 day delivery. The moment the order is taken you schedule production and place orders with component suppliers to cover the parts required, which are then booked to arrive a few hours before they are due to be assembled. This happens and production builds the product, despatch and invoice it before the parts are even due for payment from your suppliers. This needs tight supply chain management (SCM) and watertight SLA’s (Service Level Agreements) with suppliers.
This tends to be the model run by most large successful factories and supermarkets these days. With few of these businesses carry more than a few days stock.
For many online businesses you may not need to hold stock at all. Retailers can often take orders and then arrangement fulfilment directly by the manufacturer to the consumer. For example, many websites sell things like t-shirts with custom designs. When you order from these sites their custom designs (see IPR) are sent through to the t-shirt printer along with the customers details. The printer then does the work and sends the product directly to the customer and invoices for retailer for the t-shirt and carriage.
Rule Two – If you have to buy and hold stock, you need to understand cashflow
I will discuss cashflow in more detail shortly, but for now you just need to understand that stock has to be paid for and you need to know that you will have the cash to pay for it. I’ve seen many businesses with 30 day terms with their suppliers and customers who pay on 90 day terms. So for example you may be paying your supplier for stock in January, but assuming you sell it through, you may not get cash from your customer until April. Lack of cash, kills successful businesses. There are many solutions, the simplest being you retain enough operating cash in the business to cover these costs until you are paid.
Understand the Pareto principle, it can be applied to most problems
Keep things looking fresh
Communicate like your life depends on it.
Own your digital landscape
Don’t force your customers to use Facebook, Instagram or WhatsApp
Many people don’t want to use products and services associated with Facebook for many reasons, such as their algorithms. If you run a business don’t force your customers or followers to have a Facebook account so that they can follow you and interact with on Facebook. Many small business owners have found that customers have set-up Facebook accounts just to interact with their business. That’s not nice, friends, don’t make friends join Facebook!.
Platforms like Mighty Network are a simple alternative to Facebook. For a low fee they allow you to set-up a website and a community which you can monetise. Importantly if you don’t like what Mighty Networks do in the future, you can download your membership list, including the email addresses and take it to another platform. Do read the small print however as like platforms like WiX there is an element of lock in with the website and it gets ever harder to move to another platform, the bigger your community and business get.
If you choose to go with a commercial platform like Mighty Networks, remember businesses get bought and sold all the time and a new owner could take them in a different direction which you may not like. They may have a change of policy in the future and decide they don’t want to host businesses like your.
Embrace Open Source Platforms
In my view, by far the best option is to use an Open Source platform like WordPress. With this you download the software (WordPress) and install it on a web hosting account somewhere on the Internet. There are literally thousands of companies online offering web hosting, and if you don’t like the service you get, you can move your wordpress website from one host to another.
You can buy your own hosting package and install WordPress yourself, and many do, but I recommend finding a local web designer who can do this set-up for you and manage it for you for a fixed monthly fee. Just make sure you have a contract with them and that you are not locked in to them. If you fall out for some reason you need to be able to get another web company to take over the management of your site.
You don’t need to do social media, and you really don’t need a million followers
Using platforms like WordPress or Mighty Networks, it is better to get just a thousand true followers / people signed up as members or to your mailing list. When it comes to followers, less is more and it’s all about quality over quantity. Many businesses can run very successfully and profitably with a thousand or less people on their mailing list – these are your Super Users, make sure you know them and stay in contact with the,. This allows you to really know your followers / customers and what they want. You can then make sure you are serving them really well with content and new services. In publishing for example, there are niches where the author and the publisher will be able to name many of the people or institutions that will buy a new book, and they will have them in mind when creating it.
Tip: Less is more, aim to create a mailing list of just one thousand true followers.
Tip: Find your Super Users
You don’t need to be unique to be successful
The person who fails the most, wins
Don’t be afraid of making mistakes
Minimise labour: keep the number of people on your payroll as low as possible
This isn’t to to say should not have people helping you with your business. The secret is to outsource and buy-in services where it makes sense to do so.
Automate low value work and anything which could sensibly be automated.
Fixed versus variable costs
Generally it is best to minimise your fixed costs in a business. These are the costs you will have to pay, even if you don’t make a single sale. For example rent, insurance, deprecation on fixed assets, wages for full-time staff. This contrasts with variable costs which only increase inline with the amount of business you do. For example, a baker will use more flour if she sells more cakes. With variable costs, you should have money coming in from the sales to cover these and generate profit. With Fixed Costs, you have to fund them from profit made on sales or cash which has been injected (invested) into the business by the owners.
Another example was a business who bought in bulk and sold products through Amazon and eBay. They could have bought or rented their own warehouse and then filled it with staff to receive, store and despatch the products. Instead they found 3PL (third-party logistic providers) who could do this on their behalf. When they had done this once, they were able to replicate the model in the UK, USA, Netherlands etc.
Knowing when to convert a variable cost to a fixed cost
You have to keep an eye on this and spot when to convert a cost from variable to fixed. For example, a catering company were hiring plates, cups and glasses each time they did the catering for an event. They looked at their costs and identified that with what they were spending on hiring coffee cups each year they could buy their own. Once bought these coffee cups could be expected to last for two or three years. In reality, although they had to replace some of the cups over time, most actually lasted for well over five years. This is an example of converting a variable cost to a fixed cost and then sweating an asset (cups in this case) to generate more profit.
Create IPR (Intellectual Property Rights)
This is fundamental in many businesses. It was recently summed up by Jeff Bezos when he said “Create more than you consume”. For example although Amazon started life as a simple online bookstore, along the way they need an IT platform to host their bookstore and growing eCommerce business. They could have outsourced this to any number of IT providers but instead they built their own hosting platform called Amazon Web Services (AWS). They used this for Amazon’s own business and then started selling the technology to everyone else.
Another business person built up a lot of knowledge about investing in stocks and shares. He wrote this up and sold his own Guide to Investing. This creates a modest income which continues to this day and which has fuelled other business ventures.
What can you create? What can you sell to others?
Focus: Don’t spread yourself or your business too thinly.
There is an old expression, “If you want to dig for water, dig one deep hole, not lots of little shallow holes”. Often people have a recurring pattern of giving up when things don’t work fast enough for them. They move on and try something else. It is a fact, that the difference between success and failure in many businesses is they didn’t give up. When things got difficult, they gave it another day, and that was the day which changed everything for them. Do balance this with, knowing when to walk away. It can be sad to see people stuck, sinking ever more resource into something which will never work.
Try using the ICE principle when you need to prioritise a list of developments / projects / changes in your business
ICE stands for Impact, Confidence and Ease and these are the 3 metrics on which projects are scored. This simple tool helps you identify those high return projects, which are highly likely to be successful and which can be easily carried out.
You know more than you think
Expect to fail
Doubt is good but learn to turn down the volume
Use your disadvantages to your advantage
Life and business are like the waves on the ocean
For every down there is an up. When you are in a down be glad that good times are ahead. Don’t take good times for granted as they will inevitably peak and eventually crash.
There is much to learn from this simple observation of nature.
Root cause analysis and the five whys
Listen to understand rather than to reply. Stop resisting what is happening
Focus on what you can control
Nail daily habits
Know your core values, adapt on everything else
Respond not react
Show up, get through, make meaning on other side
Mistakes are all in the past.
By their very nature mistakes are all in the past. You can’t change the past. Think about how you should best respond to a mistake rather than just react. What response will have the best outcome for everyone.
All great products start with necessity
At the end of the day Business is only about solving a problem for someone else. When you are stuck for ideas or ways to innovate, look at the daily problems in your life, your co-workers and friends, think through how a business might be able to solve each of those problems and what people might be prepared to pay for a solution.
Don’t blindly copy the next big management idea or fad, or try and transplant things which work in one company directly into another.
When Google started allowing 20% time for people to work on pet projects lots of other businesses tried copying it with little if any benefit. Other trendy ideas come along like, 360 Appraisals, unlimited holiday and dress down days. The problem is that many of these ideas started in Silicon Valley where the culture is different. (Note, I said Different, not necessarily better). Would you expect the culture in a Silicon Valley start-up to be the same as a start-up in Cambridge or Norfolk in the UK? Well no, they may have some similarities, and many differences, some good and some bad. Some ideas just don’t travel well, whereas others need to be localised. Even within the same town or city the culture of organisations varies greatly. I once saw someone try and take some policies and procedures from a financial institution, change a few words, names etc and put them into a logistics business in the same town. The staff didn’t read past the first paragraph and bad to blindly sign the policy. So the manager involved got a tick in the box for having written a new policy and a slap on the back for having rolled it out so quickly, but a few months later when there was almost zero compliance a more experienced leader had to tear it up and start again with something right sized for the organisation and culture.
Is the balance of power right in your organisation?
If your business is creative, makes great products and services and has happy customers, where should the power sit in the organisation? The trap is that the support services, HR, Accounts, Legal and IT actually stop supporting the creatives and start trying to run things rather than serve the business and the creatives. These support services all have a job to do, for example the Accountants need to make sure there is cash to pay staff and suppliers, but do you want them really constraining product & service development. IT need to make sure systems are backed up and secure but do you want them constraining and controlling which tools and services the product development staff use? We’ve all seen businesses where the Accountants have insisted on the use of cheaper materials, to the detriment of the quality of the product. Likewise, we’ve all seen internal IT Teams try and force Windows laptops on staff who want to work on Mac’s or Linux. If you care about customer service and product integrity, make sure support services ‘support’ the creatives rather than ‘constrain’ or ‘control’.
Master the Forever Transaction and build recurring revenue
This is a key concept and one that can transform many small businesses. Essentially you need to avoid chasing lots of customers and making one off sales to them. Businesses that do that have to spend a lot all the time of Marketing, Advertising, Sales Teams and maybe even pitching for projects. This can account for a high proportion of your operating costs. One of the oldest examples of this was Wilkinson Sword who sold a cheap shaving razor that used disposable blades. Once the shaver had been purchased the user would be back to them every few weeks to buy fresh razor blades. These days, I would think twice before getting involved in a business which doesn’t have a plan for recurring revenue.
A local plumber worked really hard, installing central heating systems in new houses, but was constantly being pushed by developers to quote low for work or risk losing contracts to another firm. Over the years he had installed literally thousands of heating systems, but once they were installed he never saw them again. Developing an annual maintenance contract that he could sell homeowners transformed his business. Now he charges an annual fee to homeowners which includes an annual inspection and service and access to 24 x 365 telephone hotline if they have a problem and need to report a breakdown.
Understand the Membership Economy
Business Advice Mindset : Where the attention goes, energy follows
I love this simple statement, it has been found to be true by sportsmen, muscians, actors, climbers and many other people. At the heart of this is the power of your mind, your thoughts and your dreams to shape reality. For example, a musician having difficulty playing a complicated piece of music may take time out to imagine playing the piece perfectly. Climbers frequently mentally complete a climb successfully before starting off and a yogi may picture a perfect posture or a balance. In all cases, from all around the world people have reported breakthroughs and step changes in their performance after doing nothing but using the power of their thoughts to imagine success. This is a form of meditation and a skill you should master.
Business Advice Mindset: Avoid excitement, surprises and excesses of all kinds
You need to strive to create a calm mind which can focus on ideas and problems for hours if not days on end. If you ask anyone how has been teaching for a few years they will tell you that students attention span is getting shorter every year. Children frequently can’t focus for more than a minute to two. When I was a school you would frequently see double maths lesson on the timetable and children did manage to focus through a long class.
So much in modern life works against this and almost trains us to expect frequent changes, such that when things don’t change we feel bored. If you don’t believe me, just look a almost any modern film or TV program. Try counting the second between each change of scene. Once you wake up and become aware of the constant rhythm of rapid scene cuts some films and TV programmes become almost too painful to watch.
I once visited an office where computer programmers were trying to do complex work with the local radio station on loud in the background, playing pop music and adverts all day. I had this switched off and found that the quality of work improved and the team started to communicate more with each other.
In summary, practice focused concentration and avoid things which excite the mind.
Business Advice Mindset: Don’t do anything to damage the environment
Being bad to the environment is bad for business and bad for you and your family. Some ancient peoples live by a principle of looking at all decisions through the lens of how they would affect them and the next seven generations. This is a great principle for making decisions which we can all adopt. For example, would you build a nuclear reactor if you knew your childrens children would have to decommission it and they and their children and their childrens children would have to deal with the highly toxic nuclear waste? Likewise would you sell your product in plastic packaging knowing that it can’t be recycled and will end up releasing plastic particle into the sea and hormonal changing chemicals which reduce fertility? You see it’s all about perspective, your awareness and your conscience. You need to develop your perspective so that it is wide enough and you are fully aware of the impact your decisions have on the present and the future. Remember, being good, is good for business, for you and the next seven generations.
There is also opportunity in healing the mistakes of the past. There is an old saying, “where there’s muck there’s money”. Well, if we extend the definition of “muck” to include “pollution” then that is a good pointer. If we also agree that “pollution” is a problem that’s another good pointer. At the end of the day, all good businesses exist to solve problems, so along with Space, Computing, medicine, fixing yesterdays mistakes will be big business for those who find solutions to that problem.
Business Advice Mindset: Stay off social media
Social media has its uses but you should be cautious and selective in your use of it. In particular platforms which don’t charge you a membership fee should be treated with care. Remember if you are not paying, then you are the product and you are being explored by algorithms and AI far more reaching and clever than you could probably imagine. Whenever I have seen any of the top execs from Silicon Valley interviewed they have all said they either don’t let their own children on their own platforms or really restrict their use.
Business Advice Mindset: Develop good taste
Practices such as learning to appreciate classical music, religion, art, yoga, breathing, cooking your meals from raw ingredients, gardening and meditation help to tune the brain and body to perform at their optimum.
Should you really be starting a new project?
Do you have a pattern of starting things and then walking away when you get bored? Or do you see things through if you are passionate about them?
If you answered “yes” to the first question then think carefully about this pattern. It may be better to invest and see through one of your existing projects before starting something new. You will grow so much through investing consistently there, and will have pride as you see the results of your work. There is an old saying, to find oil you have to dig a deep well, not lots of shallow ones.
If you have some more Small business tips and advice please leave some feedback below,