Yesterday I took my four children out for a quick dinner (which sounds fabulous but in reality just reflects a home with an empty fridge). When we finished I went to the till to pay and was a little surprised by the amount. It just felt more than I expected.
But with 3 bouncy boys and a busy toddler under my arm I thought I’d probably made a mistake in my mental arithmetic so I just paid up.
On the way to the car though I paid a little bit more concentration to my mental maths and the number still didn’t feel right.
So I turned back, asked for the detailed bill, and sure enough we had been charged for some things we didn’t have.
It was an honest mistake and this sort of thing happens all the time. I wasn’t (that) cross with the cafe, but kicked myself for not trusting my initial judgement.
And that’s what today’s tip is all about: making estimates and trusting your gut.
What it is
Permission to trust your gut ahead of the brains of an expert.
Why it works
Experts make mistakes, more often, in fact, than our gut instinct. I know this sounds a little far fetched but much has been written on the subject (a great book if you are interested is Blink by Malcolm Gladwell), and you’ve probably got personal experiences to back it up too.
What you do
Well really the message is that if your gut is telling you anything, stop and listen to it. But in business I think it’s important to act on your gut feelings when experts are involved, particularly accountants and bookkeepers.
Now, I’m not singling accountants and bookkeepers out because they don’t do a good job - they do - but because we tend to trust the numbers they produce more than we trust our sense of what the numbers should be. And that can have dire consequences.
I once worked with a business that had employed an accountant to look after all the financial records. For the 18 months after the accountant arrived the owner was pleasantly surprised at how the revenue line was growing. Okay, so the cash wasn’t coming in but at least people were buying. Except they weren’t. The accountant had made mistakes in the, albeit complicated invoicing process, and had effectively double-billed the customers. Nearly two years after the accountant started, the owner discovered that his business was only half as good as he had thought. And barely profitable.
When I asked the owner how he hadn’t noticed, he said that he thought it ‘felt a bit too good to be true,’ but that he trusted the accountant because he, himself, was ‘rubbish at numbers’
And there are lots more similar stories.
Accountants and bookkeepers are human, and humans make mistakes. So if something doesn’t feel right to you, keep nagging until you get an answer you are satisfied with.
What if you don’t have a natural gut instinct with numbers? Well you can still be on the look out for odd information but doing just a little bit of upfront thinking. Here’s how:
Treat your accounts like a restaurant bill.
When you eat out I’m sure you, like I, tally up in your head what you - roughly- expect the bill to be and then you check your guestimate to the actual. If your number is close to the total, well you might just say that’s good enough to pay, but if it’s not you’re sure to double check the invoice detail.
Same with your accounts.
Before you get the monthly (quarterly or annual.....) accounts that your bookkeeper or accountant does for you, estimate your revenue, gross margin, overhead costs and profit. You don’t need to go into detail and/or find information you help you, you simply think about it and write down what you are expecting.
When you get the accounts compare them with the numbers you though of. Are there any big anomalies? If so have a chat to your accountant about the detail until you are happy as to why your number and his/her number are not in line with each other.
This is such a good discipline, and you will be surprised at how many misunderstandings and mistakes you find! It also works well for checking your own figures, if you have bravely taken on doing the job yourself.
Today’s recipe is inspired by this video “The Secrets of the Little Black Jacket by Chanel”.
I freely admit that owning a Chanel Jacket is on my bucket list. But that’s not the reason I liked this video. Rather, it’s because it shows the exquisite detail that goes into the making of the jacket.
If you’ve ever wondered why Chanel Jackets are so expensive, this video might just give you the answer.
What it is:
An elegant way to explain, or at least rationalise, the price of your handmade product.
Why it works:
As anyone who has ever made and sold their craft knows (and I use the ‘craft’ word to cover anything from homemade jam and dinners through to toys, jewellry, art etc etc), it’s mightily hard to price your product so that you get paid fairly for the effort you put in.
We customers just never seem to understand the effort you have gone to!
So how can you can explain it?
Well how about via a short and fun video.
That way you get to explain the magnitude of the process (without, um, sounding needy or desperate) and your customer gets a fun insight into the story behind their purchase.
What you do:
Quite simply you take a leaf out of Karl Lagerfeld’s book and put together a short video which encapsulates the work involved in putting together your product.
The three points that I think are most important to get across are:
The number of different phases involved in bringing your product to life. So you want to show the drafting, designing, mock up, production, packaging and distribution of the product.
The amount of time it takes. So although you want to put together a short video, you want to give the impression that the product takes a certain amount of time to produce. I’m sure you can do this in an understated way with a clock or calendar in the background.
A customer using (and enjoying) the finished product. Not in a cheesy way of course, but I think you can show the product in situ, or in use, to make it compelling for potential customers.
I don’t think you need an incredibly professional looking video (unless you are pricing at the Chanel end of town) but I do think you want to put it together as a compelling story rather than a mechanical process.
Then, just pop the video on your website (and Youtube) and if you have a retail store or gallery have it showing there too.
Today’s recipe is inspired by an email I received this week from Galore Park. Here’s an excerpt:
“Due to increased production costs, Galore Park will be increasing prices of books as of 16th April 2012 and exam papers as of 1st April 2012. If you would like to place an order at existing prices, please do so before these dates.”
What it is:
An elegant and clever way to announce a price increase
Why it works:
Few of us enjoy raising prices. Mostly we try to do it unobtrusively. Holding our breath we fervently hope that our customers won’t really notice.
So why then would it be a good idea to announce it?
Because it gives you an opportunity to:
Give customers a discount “Buy now before we raise our prices”
Remind customers you exist - in the form of a helpful note telling them about the discount and price rise.
You might think that this sounds like a bit of a risky ploy. But here’s how it works for Galore Park:
Galore Park sell text-books and exam papers to help students prepare for big (11+ and 13+) exams in England
The exams are in September (preceded by the big summer holiday) so March/April is prime time for customers to start thinking about buying study packs
Galore Park set price rise for April and offer customers a ‘discount’ if they buy in the next two weeks (prime time, remember)
Galore Park have an elegant way to remind customers that they sell study packs: they want to tell them about the ‘discount’
What you do: If you would like to sweeten your price rise by doing something similar, here are some tips:
Get into the habit of raising prices at least once a year. That way you won’t need to make a one-off horrendously large price increase. We customers find small and regular price increases easier to digest.
Pick the same date each year to make your price increase. It forces you to do it. Otherwise, like all unpleasant jobs, you will put it off indefinitely.
Select the date of your price rise wisely. Think about Galore Park. When would you like an excuse to remind people that you exist?
Set a smallish window (a couple of weeks, say) in which customers can buy at the old price. This creates a sense of urgency in customers
Tell your customers in a considered way. I particularly liked Galore Park’s email because it wasn’t screaming “Must-hurry-now-before-prices-rise” , rather it was quiet and factual
Raising prices isn’t fun. But if you have a plan for making it happen that feels right, you will find it much easier to do.
Would your method of announcement be the similar for a service business?
Julia Bickerstaff commented on 24-Mar-2012 10:48 AM
Hi Susan. Great question! And I would say yes, you can. Of course in a service industry you may get a deluge of people signing up in your 'discount' window - but you'll find a way of managing that....and it's a great problem to have! Julia
Chris Gray commented on 24-Mar-2012 11:32 AM
We did the same thing 2 years ago and almost got a whole years worth of business in 1 month. That's a great tip!
Julia Bickerstaff commented on 24-Mar-2012 03:53 PM
So the traditional way of thinking is to hold off paying yourself until your business can afford it.
But what if you went wild and paid yourself before paying anyone else?
Legendary management guru Earl Nightingale* had a saying “pay yourself first”. It’s a tip that could change your business.
What it is
A technique that gets you re-designing your business to make a better profit
Why it works
This tip forces you to think about designing your business to cover the true costs. After all, if you work in the business, it needs to be able to pay you.
When your brain is presented with a specific problem like “How do we bring in enough sales to cover $150,000 of costs?” it rises to the occasion and works it out.
But the brain is a super-efficient organ and it won’t do even the tiniest bit of extra work.
So if you ask your brain to cover $150,000 of costs it works out how to do exactly that. Not a penny more; and nothing for you unless your earnings are included in the $150,000.
Therefore, if you want to have enough to pay yourself you’ve got to put it in your budget!
What you do
This recipe is at its best if you actually pay yourself. I know this is a big ask, so if you can’t do the cash thing straight away, at least put a modest monthly salary for yourself in the budget.
The what-you-do is easy:
Start by calculating a monthly salary for yourself. I’m not suggesting that you go from paying yourself nothing to drawing a full wage, so make it a modest amount. One of the best ways to do this is to decide on something that you are going to pay for in terms of the family budget. You might start off by paying the monthly food bill (although that’s not so modest in our household!) or something else that is a monthly recurring cost.
Every month draw your new wage out of the business (note: there is also that thing called tax so you might want to check with an accountant about how much you can take out without having to account for that!)
Try it for three months and see if it makes a change to the way you work. I have a client who started this in January. She was quite adamant that the business could not afford to pay her but she agreed to give it a short trial. She called me last week to tell me that in April she is putting the monthly salary up! She’s successfully paid herself for three months and the business found a way to make it happen!
If you owe a lot of money and can’t possibly actually pay yourself, at least put a monthly fee in your budget. That way when you look at your monthly numbers you can aim to make a small profit even after notionally paying yourself.
You may be wondering why more people don't advocate paying yourself. I think it's because most business information is written with the assumption that you are building an enormous business and reinvesting every dollar. If you are running a lifestyle business - and need to make money during the journey rather than wait for the (mythical) crock of gold at the end - then your business needs to get used to paying you. Pronto!
If you’ve not heard Earl Nightingale speak watch this fabulous video of him talking about goals. He has this wonderful gravely voice which is very moreish - and yes, he talks common sense too.
Today’s recipe is inspired by this witty little story from Southwest Airlines:
Mrs Crabapple flew regularly on Southwest Airlines. After every flight she would write to the company to complain about some aspect of the service, be it the look of the uniforms, the lack of catering or the absence of a first class section.
At their wits’ end, the customer service team sent Mrs Crabapple’s final letter to the CEO Herb Kelleher.
He quickly wrote her a reply:
“Dear Mrs Crabapple, We will miss you. Love, Herb”
What it is:
A directive to sack customers that bully you or make your life otherwise unpleasant!
Why it works:
Cantankerous customers suck up time with the effectiveness of a Dyson. If you do the maths you’ll quickly see that what they bring you in terms of profit is completely negated by what they cost you in aggro.
What you do:
Step 1:
Write on a piece of paper and stick to the wall in front of you “The customer is not always right”
Harry Gordon Selfridge is to blame for this misunderstanding. He was the founder of the divine London department store which bears his name. In 1909 in a drive to make customers feel special he told his staff “remember the customer is always right’. Apparently he never meant anyone to take it literally, but that part of the message got lost.
Step 2:
If you have a customer that is making your life fairly unpleasant with their behaviour work through these questions:
How many times does the customer raise concerns?
What tone does the customer use to do so?
What action does the customer expect you to take?
Does the customer make threats?
Are the customer’s concerns relevant to your business? (In the Southwest Airlines example at the top of the page, the airline prides itself on being ‘no frills’ so the criticisms aren’t relevant)
How much time do you spend dealing with this customer?
How much time do you spend dealing with your best customer?
How does the time in #7 compare with the time in #8?
Step 3:
The next time the cantankerous customer contacts you, sack them.
I’d be gracious and say to them something along the lines of “I don’t think we are the right business for you to work with”.
But if you want to be really smart, refer them to your main competitor.
Hi, after reading this i was not sure if it was a joke or was this really a suggestion for dealing with clients. Can i suggest that suggesting this sort of irrational behavior to deal with clients is absolute nonsense. why - my experience tells me that
if you have a client that is unhappy they are more than likely going to take there business elsewhere and not complain. The ones that do complain should be listened to as this is gold for a business owner and more than likely will lead to the business addressing
the problem. If one client is unhappy and has bothered to call you and tell you it is highly likely that there are 10 more customers who wont bother and simply shift there business to one of your competitors. I suggest any business owners - SME that try this
sort of negative approach with their clients wont have a business for long. Mike
Julia Bickerstaff commented on 22-Mar-2012 01:52 PM
Hi Mike Thank you for taking the time to comment. You make a good point and maybe I didn't make the distinction between customer feedback and customer bullying clear enough. Of course we all need to hear from customers. We recognise that we aren't perfect
and we want to learn what we can do better. However, as I say in the post- persistent, irrelevant and sometimes plain old nasty, demands are not useful. Many small businesses that I know have been subject to, basically, customer bullying. It's not acceptable
and it doesn't make good sense from a business point of view to keep servicing these customers at the expense of the ones who are good customers of the business. I stick by my suggestion. Sack the cantankerous customers and spend your time loving the ones
that love you. If you don't, those ones will go and love someone else! It sounds to me like you have never come across a customer bully. But the people who have tell me that it is extremely liberating - and profitable - to chose not to work with them.
This recipe is inspired by the following story from the Early Learning Centre (ELC).
ELC is a massively popular educational toy shop in England (and there are a few in Australia).
A while ago in England they decided to run a little experiment. On Tuesday mornings the shops would close their tills, take the toys out of their boxes and invite parents and kids in for a play.
Just for fun, no charge, no ‘selling’. Like a playgroup I guess, but with nice clean toys.
On Tuesday afternoons the stores would reopen as ‘shops’ and the tills would ring like Christmas.
After Saturdays, Tuesdays (even though the tills were only open for half a day) became the highest sales days of the week!
What it is:
A clever and authentic way to boost sales
Why it works It’s a clever technique that works on many levels, two of which are:
Parents and kids get to test the products out. When a kid gets absorbed by a toy the (grateful and tired ) parent will want to take it home
Psychologically, when we are given something ( a free play) we feel indebted to the giver. In this case, to settle the debt the parents (sub consciously) feel, they spend some money.
How you can do it
The trickiest part of this technique, for some of you, will be thinking of a way that you can let customers have a ‘play’ with your product. So my tip here is: be clear on the essential pieces that make this technique work and then just let it float around your mind for a few days.
On that note, here are the ‘rules’ :
Customers need to touch or experience the real product
There must be absolutely no selling. This is not a ‘invite-them-in-for-a cocktail-and-give-a-half-hour-sales-speech’ thing
Customers must value the ‘play time’. If they don’t feel like they have had a fabulous freebie they won’t feel, psychologically, indebted to you. To this point, be very discerning with your ‘invite’. Better to pick a few people who will love it than a huge number who probably couldn’t care less.
Customers need to feel that you have ‘given’ something. In the ELC example customers could see that the tills were closed and that the business was foregoing sales.
This is a great technique to trial as an experiment. You will quickly know whether it is working. Sales at ELC shops rocketed after starting the play sessions.
Questions you’d like to ask the people who you admire
Why it works
There’s a website called ‘Thought questions” and it’s tag line is ‘Asking the right question is the answer’.
It’s a neater version of the phrase “We have the answers, it’s the questions we don’t know” .
And isn’t it true?
Have you ever been asked a random question about your business which has left you both speechless and thoughtful?
In business, we rarely spend good thinking-time on the questions we should ask. So we don't get the benefit of the answers.
What you do
I met an amazing lady today: Julie Thomas, a designer. She runs a profitable, sizeable, ballsy business. Solo.
She told me the story of how many years ago she met Richard Branson.
He was on his own, in a lift. (Sounds like a fairy tale, but it’s true! She was in New York, had her room in a hotel upgraded because of an issue and he happened to be in the suite next door).
She seized the moment, told him a bit about her business and asked him a question.
The (stunningly simple) question was: “Can you give me one business tip?’.
The reply :“Use contractors for everything”.
And that’s exactly what she did!
Julie’s story reminded me of a terrific tip. It's about imagining you get to ask the people you most admire a question about your business.
Here’s what you do:
Name the six people you most admire in business
Write* down the one question you would ask each of them?
Now write down why you would ask that person that particular question
Finally, write down what you think they would say.
Funnily enough, by contemplating what to ask and articulating what you think the answer would be, you are often able to answer the question yourself.
It's all about asking the questions.
* These things are always better done in writing. Something to do with the way our quirky brains work
If you hark back to school days and the chemistry lab you may remember doing good old scientific experiments. The best ones (from a scientists point of view, not mine; Bunsen Burners were not my thing) was to come up with a hypothesis (“we think A will happen”) and then prove, with a test, whether it was true.
The key to the success of the experiment was working out what you expected the outcome to be before you started the test. That way you could understand the result and would be under no illusions as to whether it had worked or not!
The same can be applied to new business ideas.
Setting them up as an experiment can help us to understand whether they have worked or not.
This is a terribly important point because often we get so carried away with our ideas that we never stop to pay them proper attention and we don’t check in to see whether they have actually worked!
What you do:
Take the next idea you have and run it through this little process:
Let’s say we have an idea to run a referral campaign to drum up new clients.
Take a piece of paper (or a word doc or whatever)
Head it up “Idea 1: Referral campaign
Work out what you would like the result, as a minimum, to be. For example you might set the result as ‘10 new clients’
Next write a subheading “Hypothesis” and under that write, ‘our referral campaign will bring in 10 new clients”
Then write the next heading “Method”. This is where you write out the test that you are going to do (Something here along the lines of asking current customers to refer a friend). Put some detail in here, for example the number of customers you are going to approach (100) and the time period you are going to run the experiment over
Keep some records. Set up a spreadsheet or something similar so you can track the work you’ve done (“asked current customers”) with the results (“new customers won”)
At the end of the time period you set, tally up the results.
If you hit your target or did better, the experiment is a success. If you missed target by a little bit you need to weigh up whether it was worth the effort. And if you missed it by a lot, you know to stop and have a re-think.
Now you may be thinking that this recipe sounds very obvious. It is. But most small businesses don’t put this type of discipline in place. Instead many of us start off on our new ideas and merrily continue not realising that we are spending a heap of time and money on an idea that doesn’t work.
The Power Hour - a fabulous technique to super-charge your efficiency, awesome for the time-challenged!
Why it works
It gets you doing your most valuable work at the best time for your brain. So you get the important stuff done in much less time.
How you do it
The how-to-do it is easy; the doing of it less so, until you get into the habit.
You start by finding the time of the day when your brain is on fire. My guess is that you know when your peak time is. Some of us are morning folk, others are evening types, some of us are 3 am-ers. It doesn’t matter what anyone else’s time is, this is about working with our own natural inclination.
Then you arrange your day so that you can spend at least one hour during your ‘on-fire’ time working on the most valuable stuff in your business.
The tricky thing for most of us is that we are running our businesses around other commitments, and those commitments have a tendency to fall right into our ‘on-fire’ time.
I know this personally. I’m a morning person. Ideally I would wake at 6am and head straight to my computer for 3 hours of writing. Pre-kids that’s what I did. I was so efficient that I could accomplish stuff in those three hours that would easily take me 7 or 8 hours if I started later in the day.
But now I have 4 children; 3 are at school and one’s a toddler. Mornings start at 5:15 when the youngest wakes and I don’t get a moment to think about work until after the school run at 9 am.
I’m also in the middle of a big writing project so could really use the on-fire time.
A couple of months ago I read a few articles about authors who got up at strange times of the night to write. It planted a seed. Could I get up at 4 am and write for an hour?
I’m neither a masochist nor a complete nutter so it was a big ask.
Would the one hour at 4am be productive enough to make it worth the pain of getting up at 4am? (Just between you and I, I also asked myself whether I’d be able to sneak in a Nanna-Nap later in the day!)
I decided to give it a go.
Two months later I can say that while it was painful at the start I quickly got into the 4am habit. It’s a bit weird and I am desperately hungry at unusual times, but that one hour equates to the output of about three hours later in the day. The maths makes sense to me.
Don’t get me wrong; I’m certainly not advocating early mornings. But I am carrying the banner for finding your on-fire time and redesigning your day so that you get to do one hour -yep, just one hour - during the on-fire time.
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