What To Focus On When Starting A Business (And What To Avoid)

What To Focus On When Starting A Business (And What To Avoid)

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- I've seen companies double if not triple their price and not have it affect their win rates on sales conversation. - Okay. - So if you think about that... (upbeat rock music) - Jill, how you doing? - I'm doing fantastic.

- I'm excited to chat. I believe you've got a new idea that you're working on and you want some thoughts, advice on how to kick this off with the right steps forward. Tell me about the idea, how long you've been working on it, where'd you get the inspiration for it? - Well, I have a partner and we used to work together and we worked in diversity and inclusion. We are now working in different jobs, but we still want to do this type of work.

And we get called all the time from different companies to go in and speak. So we thought, well, we're doing this for free, we might as well make a business out of it. We're both still working full time. We want to turn this into a business so that when we retire in four to five years, that it will be up and running and that'll be our new job.

If it gets up and running more so than we think in the next three or four years, then we'll quit our jobs and take this. But right now we're just going slow. We have actual contracts right now that we're working on over the next four months. But basically what it is, is we promote inclusion in the workplaces. And we do that for organisations who are looking for social equality equity education for their employees to create a diverse and inclusive workforce. We do think that we do have a niche in the market right now, with everything that's going on in the world.

And we do have an Atlantic province aspect of it. So we really looking at the Atlantic provinces. But we do this through our keynote speaker series. We have workshops, we have coaching circles, and we create inclusive frameworks when they want to create an appointed equity and diversity committee in their organisation. And we deal with in the areas of inclusion, wellness, and conflict mediation. - Cool! Let me ask a few questions, Jill.

Is the business operating today and generating revenue? - It is generating revenue and it is operating today. - Okay, but early stages in the revenue, I'm assuming not enough to support either one of you, guys, to go full time? - No, no. Within the next four months, our revenue will be $15,000. - Cool. Congrats! I mean, that's real money.

What are some of the questions you might have for me to kinda help you move forward? - Well, we're getting lots of advice on what we should do. We're thinking maybe what is a pitfall that we should avoid when we start up? What's something we shouldn't do? - Yeah. I mean, it's such a great question. The biggest thing, Jill, I would say is not doing too many things at once. When I look at my career and I've had the privilege of talking to probably 5,000 entrepreneurs at this stage of my life, and it sounds like a lot, but you know, I did 1,300 clarity calls when I built my company Clarity.fm. I coach hundreds of SAAS founders around the world. So yeah, about 5,000 calls, speaking at accelerators, etc.

So I've seen the pattern of people starting off to the ones that were successful. And the ones that were successful triaged quickly the things that were needed by the market, that were bought quickly, and produce the most gross margin or profit. Because if you have too many things you're selling then it adds complexity to the conversation. And most people do that 'cause they feel like they don't have enough opportunity in one thing, So they add, here's the menu and we can do these three things or five things, because they wanna get the sale.

And the best entrepreneurs say, hey, we've got this widget, this is this thing, this service, this product, this object that we sell and for the right person, it's amazing, and for everybody else, it's not 'no' forever, it's just 'no' for now. Does that make sense? So I think that just that idea of saying, I've got this thing that's really valuable that we love to do, that creates a tremendous amount of value for our customer, that creates revenue for us in a way that's sustainable, etc. And then we can then reinvest and grow the business because we have that focus.

So selling one thing over and over and getting really good at it is incredibly lucrative. Trying to do that with three things or five things, it makes every conversation a consultative sale, which is more complex and hard than a pure, here's an offer, what are real problems, I can solve that, here's how it works, do you wanna buy it or not. So doing too many things at once, I always say that companies usually die of indigestion meaning they do too many things at the beginning then starvation, meaning they do too few things or have too few opportunities to actually execute against. So that would be the biggest thing.

What I look or hear the different things, you have the workshops, you have the circle of the coaching, etc., I would ask you if you had to pick one to generate a hundred thousand dollars in revenue, the fastest that would create the most value for your customer out of everything you do, what's that one thing? - [Jill] Workshops. - [Dan] Perfect. - Because we have created, yeah, yeah. - Yeah. You already know. So, I would encourage you to not do the rest of it.

And even when you say workshops with an 'S' I would do workshop, right, and get really good at selling that workshop. And maybe there's a part of the workshop because this is where the economic model kinda has to be considered. Maybe there's 'cause selling one-off things is great, if you can get them to pay up front and get a schedule going, but having something that pays ongoing, so maybe there's a component of the workshop where it's a certain amount for the workshop, but then there's a fee they pay every quarter to get access to you, to jump on a call with the participants, to answer any questions.

And then it becomes a multi-year engagement even if it's a lower revenue point ongoing, just to create that consistent revenue base. Because that's the hardest part for a lot of businesses that don't have 'subscription' is a really hot term lately, right? Because Netflix and Amazon Prime, and all these services are getting these incredible multiples. And software, obviously, has a subscription component, but you can build a subscription component in every business from sign shops with an insurance programme to cell phones, right? Cell phones have their coverage that they're going to sell you, Apple care. Those are all subscriptions to get you paying a little bit of money long-term over to build that revenue base.

Because with predictable revenue base, you can hire easily, you can invest in marketing easier, you can invest in the product design. So that would be my first suggestion is figure out what's that one workshop that you know when people hear, it's easy to sell, gets them in the door and then when they're there or shortly after, or right before, how can I sell them an ongoing thing? And that would be the offer and stick to that and just try to scale it up. That would work really well.

- Yeah, and I can actually see that happening with our first client that we're working with right now. So that's great advice, thank you. - Awesome. What else you got? - We're trying to decide whether we should incorporate right away.

We don't know if we should do it now or see what our revenue is for the first year or... - Yeah, I mean, my rule of thumb for anything in businesses is cross the bridge when you get to it. I think a lot of people waste time and energy investing in things that are not now things.

It's not that they're not important. Having a world-class website is a great idea, but is that really the thing you need to do now when most of your sales are gonna come from referrals or word of mouth? And nobody's really going to your website, they're getting an email introduction, they're getting on a phone call, they're getting a proposal and they're buying, they may never go to your website, as an example. When it comes incorporating, it's the same thing.

Until you do over, I think, $30,000 in Canada, I don't know what it is in the US, and US has different corporate structures, but you don't even have to get an HST number, you don't even have to charge HST. So I would say, until the revenues are there, there's no reason to do it. I mean, as long as you know that you're protecting yourself in liability and all that, but always, always cross the bridge when you get to that problem. You need to be strategic. You might say, okay, well I can see where, if we follow this trend line we're gonna get there in the next nine months.

So maybe in three months we do it as long as we're on that trend line still and that gets us ahead of it. I always think of businesses kind of like, I have certain amount of resources and I have to deploy them across the business: marketing, sales, customer success, support, delivering the product. And there's a hundred things I could do that are all really important, that nobody would argue should it be done, but I get to decide what is relevant today versus later. Today as in what needs to get done this week versus this month, this quarter, this first half of the year, this year? And that skill, I would argue, is the differentiator between great entrepreneurs and not great entrepreneurs.

Not great entrepreneurs invest in things that are 'not now' things. And then they don't have the capital, the resource to invest the things that are 'now things', but because they've depleted the resources they don't have the resources to invest in them to get the return today. So I'm always looking for, what do I need to spend money on that I can get a return on as fast as possible and not even just a revenue return, gross margin or profit. 'Cause the more profit I can collect faster today, the more resources I'll have to redeploy tomorrow to be able to grow the business. And it's compound interest. It's no different than trying to stack a bunch of compounding returns as an investment over time that will build like a hockey stick.

What a lot of people do is they make an investment early and then stop, so it doesn't produce any returns and then start it again in the future. Compound interest only works if you keep the investments going. So some people invest and then pull their money out of the market, invest and pull their money out of the market, as an analogy. Well, all of a sudden you reset every time you do that so there's no compounding growth. Same thing with business. If you invest too early into something that's not a 'now' thing, all that potential compounding growth gets depleted until it's actually relevant.

So hiring a salesperson today when you don't have a marketing function generating leads or an ability to teach that salesperson to go out there and get deals that you've taught that you know works, then paying that person a base salary even if most of it's gonna be on the commission side is probably not a good use of your capital, as an example. So then you waste it instead of having it invested in freeing up your time, hiring an assistant because you're delivering workshops and you're doing the sales calls, which are incredibly high value, and having an assistant take care of administrative, accounts payable, receivable, legal reviews, contract signing, calendar scheduling, your inbox, as an example. - Okay. Good.

- [Dan] Cool, great question. - Thank you. - What else you got? - Well, we're struggling with determining how to cost our services. We work on contract basically, for our workshops and we work with nonprofits, and then we work for provincial governments and municipal governments. So we're costing them out totally different but we really don't know if there's a specific formula you're supposed to use or, we don't know. - So here's an interesting thing.

Few little nuances. Let's not use the word cost and let's use the word price, okay? 'Cause even the psychology of what does it cost? When somebody says, what does it cost? I reframe it for them. Like if Jill, you said, hey Dan, what does it cost to hire you as a coach? I would reframe and say the investment is. So I want you to practise that on your next call. If somebody says, what does this cost, Jill? I want you to go, the investment is with confidence, say the number. And you can even say the investment is only and then the number.

So it's a little nuance in word, but it's really important because I think in business the words we use kinda communicate competence in our services. So that's a little thing. The reality for pricing is and it's a topic I'm incredibly passionate about because a lot of people starting off want to compete on price.

Like I don't wanna lose the deal, I don't have this huge overhead, so I'm willing to price myself below what I know this person's doing this at, or I've heard this person's doing it at, or even what I think it might be worth, I'm willing to do it 'cause I want the customer. Here's the thing about pricing, is that the race to the bottom can ever only have one winner. You can only ever have one low cost leader. There's only ever gonna be one Walmart.

There's no other Walmart. Walmart's Walmart. And that's why Walmart's the largest company in the world with hundreds of thousands of employees. And it will be really hard for anybody to compete against Walmart, maybe Amazon's giving them a run for their money, but to be the lowest cost leader, there's only going to be one because it's the lowest price.

So what I always do in every business is ask myself how do I create a premium service? How do I make sure that the price to value or the investment to value is at least three times the investment minimum. If you can get to 10 X, that's great! And it's perceived value. So what I would do is say, what would be a premium level? Not what everybody else does, not what, off the shelf e-learning diversity training company X, Y, Z does because that's not what you're giving them.

You're giving them the Jill experience with the experience and knowledge and it's customised. It's really potent and valuable. So you wanna price it. And the other thing is your price tells a story.

It tells a story of quality, of confidence, of completeness. If it's too low, people will go, wow! I've seen people tell me about their service and I'm like, amazing! What does it cost? And then they go, oh, it's only this price. And it seems too low. So that tells me, A - you're not charging enough to make money, which is never a positive experience.

B - if you're that low, a lot of people are using you, which means you're probably over capacity, which means I may not get the best level of service. And if I want you to be around, right, Jill, if I want you to be the person I turn to every time I have a diversity challenge and I want you to be in business, I want you to love what you're doing, you need to make money. If it's too low then there's also this calculation I'm gonna make that maybe you won't be in business for a long period of time. And I see this all the time in the software world. $10 a month, $20 a month. Look, I'd rather pay you $50 or a $100 a month knowing that you're making money so that in five years, when I'm still using your product, you're gonna answer my support emails.

So the cool part is being a premium product is available to multiple people. So you can have multiple people teaching inclusion and diversity. And what makes them unique is their positioning, okay? So positioning is one of the most powerful things in marketing. Positioning allows you to be a premium service for nonprofits or government, or this kind of organisation. Because you're not only do you do a workshop for diversity and inclusion, but you do it for this vertical, this industry. So if I'm making a decision and I've got like these options, and I've got this one company that says they only do it for people like me, and it's more expensive, I'm gonna do the calculation in my head, well, yeah, but it's because you only do that.

If you go to a mechanic and you drive a Volkswagen and the mechanic only works on Volkswagen but he's 10% more, but you can go to somebody else and he works on all cars, if you value having your Volkswagen worked on by a mechanic to understand your ins and out you can assume it's gonna be way easier, they probably have the parts, they've done this a hundred times. And somebody that cares about that is probably a better customer. And they're gonna go with the mechanic that focus is, and it's 10% more, but they're not trying to price shop.

Do you wanna customer that's price sensitive or not sensitive? Not. You want people to care about what you do as much as you care about what you do. - Right, yeah.

- So you wanna price it, so I would say the easiest way to do it for now at this stage, Jill, and the cool part is you should be putting your prices up every six months. Sounds crazy, right? - [Jill] Yeah. - Every six months. Yep. Here's what I mean by that.

Every six months could be a price increase for the overall workshop. Maybe all of a sudden you have... It's changing of your prices every six months. Maybe you have an upsell for the backend thing, the coaching, maybe you charge for that, now you don't, in the future you will. So it's just one element of your packaging, your plans, or your pricing that you're gonna tweak and change.

Maybe you have an add on, for an extra 1,000 dollars, we'll do this thing. So that's what I mean by changing your pricing. But the easiest thing is yes, put it up minimum 3-5% every year because you're just trying to combat inflation with the dollar. - [Jill] Yeah, yeah. - So I would say wherever you're at today, go up 10% and then see if it changes the conversation with your prospects.

My gut tells me, I've seen companies double if not triple their price and not have it affect their win rates on sales conversation. - [Jill] Okay. - So if you think about that, double the price, same conversion rate to customer, applied to the last three years of their business, it would have transformed their ability to grow. So that's why I'm always trying to test what is the price yielding curve. And what you'll discover, some people will push back, some people won't. What's true about the ones that don't push back? The ones that are, yes! You ever do like yard selling and then somebody says, what's the price, and you say it, and then they go, great, I'll buy it.

And you're like, oh man, I wish I would've asked for more. - [Jill] Yes. - You wanna find out the people that, what's true about them? What do they believe? What's true about their business? What's true? Because if you can find a hundred of those people, your business becomes dramatically different. It becomes better. And that's where they say the riches are in the niches.

Niching down, doing one thing really well for very specific customer. Now you need to know if the market has enough customers and enough of those customers are actually looking for your solution. But if those are true, then you can create an incredibly lucrative business. And you should be the premium product out there.

And you should make money and be incredibly profitable because something tells me, Jill, if you make money you're gonna do good in this world and you deserve to make money. Does that make sense? - [Jill] Yes. Thank you. - Cool. Based on what I've shared with you what are the biggest takeaways for you? - Well, the fact to only do one thing. Do one thing to do it good, right? Yeah. I think that's it. Because I think we were trying to customise too much, but we know what we're good at and that's what we sold to our last three customers.

And that's what they wanted. - And sometimes you need to tell them what they need and that's why you're the expert and that's why they're gonna choose you. So when they want you to customise you go, great, I understand where that's coming from, but based on our experience that won't be as valuable as this. So if you trust me, I would encourage us to go down this path.

And that's how I bring conversations back. Again, my job as a service provider is to get them the thing that they need that I know is gonna have the impact. And if my customer's trying to ask me to go off that trajectory, then I need to get really confident and try to bring them back.

And most clients I've discovered, if I'm arguing with my doctor and he says, hey Dan, I understand that you wanna do this procedure, but here's what's happened in the past with people that went down that path, and based on your age and this circumstance, I would recommend why and it's gonna have a better outcome, I'm gonna appreciate that and probably take his recommendation. - [Jill] Yeah, right. - Cool.

'Cause if they go forward and then you don't have a positive experience, it's a net loss. Or if it's too complicated and you don't, it just gets too hard. So I love that. So focus on one core offering that you can over-deliver on.

What else? - Oh. Just the encouragement, I think. 'Cause we started off very, very slow. And the more we talk about it, the more encouraged we get to do it and to go forward. And just having this chat with you and you making it sound like it's a possibility, we can really do it. - Oh, not only it's a possibility, you have to do it. I mean, the work you're doing is needed in this world.

And it's easy to dismiss it and say, hey somebody else is gonna do it if I don't do it. I don't agree with that. They're not Jill. They're not gonna bring your perspective, your lens, your approach to solving that problem.

And that's what makes great artists great artists, right? It's like a country singer saying, well there's enough country songs, I'm not gonna create another one. I'm not gonna write another one. Imagine if all these incredible musicians that we appreciate decided because other people had already gave their version of that thing that they're not gonna create. I mean, that's the beauty of being in a service based business that we're creating this interaction, this choreography, this content that for the right person they're gonna respond appropriately, otherwise they may not have.

So I believe you need to do this, you need to shine your light, you gotta be the example and you deserve it. - [Jill] Thank you. - Awesome.

Well, I hope this helps, Jill, appreciate the opportunity and looking forward to hearing how it goes. - [Jill] I thank you for the opportunity. (Jill laughing) It was great. Thank you so much. - You have an amazing day. We'll talk soon, cheers.

- [Jill] Bye.

2021-06-23 17:27

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