Some Emotions Just Can't Be Transferred to an Ad

I really, really wanted to let this one go but it has seriously been bothering me for more than 2 days now.

I was driving in my car the other day and this ad comes on the radio. I believe it was an ad for action.gc.ca where they had new regulations for credit card fine print and terms and conditions changes.

The radio ad had one man pleading for the credit card holder to give him another chance, much like when a husband is found guilty of something by his wife. Amongst his pleas there were lines such as "I will really change this time, please give me another chance" etc. I wish I had a copy of the ad but this radio ad wanted to leverage off an emotional connection that credit card holders usually DO NOT have for their credit cards.

How can you transfer feelings of a husband/wife relationship to a user/credit card relationship? Plus, there is a negative connotation to the whole ad, since when a husband (I only use husband here because they used a male voice in the ad, it could very well be the wife pleading for forgiveness as well) does something wrong and they say things like this, the person on the receiving end knows that:

1. You say those things because you know that's what we want to hear
2. You promise that you will change but you really aren't sure if you can; again, it's something you know we want to hear
3. We forgive you because we love you, not because you gave us the facts.

The third reason above, is precisely why an ad like this is not going to work; rarely do we experience the same emotions with a credit card. 

Enough of me blasting this ad - I will provide an example of what works well. Have you seen Ally ads on TV? The theme is that fine print in credit cards' terms and conditions are a silly thing to have, and they illustrate it with children wanting to do certain activities and the salesperson saying no, the fine print says you can't. 

Now this is an emotion/feeling we can ALL relate to, because at one point or another, we have all been screwed by credit cards and their fine print. 

What?! I didn't know they changed to charging a 30% annual rate!

What?! I didn't know international usage would cost me 6% of my purchase!

What?! I didn't know that this offer is only valid for new customers that have never had this credit card and live in Shanghai.

You get the idea. We've all been there. Point is, when you are trying to arouse emotions to associate with your brand, make sure that it does transfer, in the right way.

Writing Your Business Plan - Make it Modern?

Many of us learned how to write our first business plan in business school.  My first business plan, was a whopping 120 pages of...fluff, diagrams, thousands of pages of projections, etc.  Read like a textbook - BORING.

How does yours look like?  The longer I've been running PeerFX, the more I find that everybody is constrained on time, and usually a 20 slides slide deck or an exec summary is sufficient for an investor to decide if they want to see you.  Then it's your performance during your meeting that gets you the money.

What is a business plan for anyway?  As Seth Godin puts it - for us to think through the actual implementation.  Write it so that after reading it, YOU would be convinced to put money into it.  Seriously, if you can't communicate how your business is going to make a gazillion dollars in less than 20 pages (including appendixes!) then I question whether you've nailed down your business details enough.

I say that the business plan components have to be continually revisited - anyone that has gone beyond just writing the plan would know that it never happens just like it.  If it does, please go buy a lottery ticket because you're seriously super lucky.

So what components are in a Modern Business Plan?  5 things

1. The TRUTH - look all around you, how does the environment affect your business - be realistic - you have competitors, existing alternatives, the economy...
2. Assertions - How do you propose to change the way things are done?
3. Alternatives - like I said, never happens like you want it - so what do you do for plan B, C and D?
4. MONEY - money, money, money - without money either in the form of revenue or investment, you don't have a business.  Figure out your finances!

Read more about Seth's push for writing a modern business plan here.  THEN WRITE ONE.  Reading without doing you learn nothing.

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American Express Accepted Everywhere

Over the years I grew up with American Express being positioned as a prestigious, high status credit card brand.  They worked so hard on it that they made sure their cards were accepted only at places of high status - luxury restaurants, hotels, etc.

Then I saw this at Eaton's Centre in Toronto the other day.  Made me think: "Burger and American Express?  Really?" 

An Amex black card may even have been a goal for some aspiring businesspeople out there, but now that they can use the Amex card at the local burger joint, what does this do to the brand?

I wonder why Amex made the decision to go mainstream and compete for the same customers that are currently catered to by Visa and MasterCard.  They had a nice little niche - is it because the high status, high spending group is shrinking?  Or they feel like they've saturated that market?

What do you think is the reason for this switch in brand positioning?

The Mirror Test Book Review + Interview with Kodak's CMO Jeffrey Hayzlett

Image by www.dld-conference.com via CrunchBase

Jeffrey Hayzlett's book "The Mirror Test" is a hands-on guide for small business owners and entrepreneurs that are looking to start a business or are reevaluating their current way of doing business.  After reading it I actually think it's a wake up call for business owners and start ups that are getting too comfortable with what they're doing.  Jeff says that his job involves creating tension in his company, to challenge the way things are currently being done in order to get innovation.

I was fortunate enough to meet Jeff at an SMEI presentation where he was the keynote speaker.  I bought his book and asked him to do a book review - surprisingly he said "Sure."

So here are the 10 questions that I asked Jeff in 20 minutes.

F: Florence

J: Jeff

F: In your book, The Mirror Test, there are 3 mirror tests, with the first one being Proof of Life.  How about for businesses like Google, where they spent years developing in the garage before they ever turned revenue?  Wouldn't they think that they fail the first mirror test?

J: That's the key portion they anticipated that over a period of X number of years they knew they would be losing money before they give up; if they're not meeting their objectives; so that's the key thing in mind - you can still lose money the first couple years - but you need to figure out if you're hitting your set milestones and whether you're generating enough traction.

For entrepreneurs that hang on for way too long - you know when things are goin south and you see the writing on the wall - with enough experience you know when it's time to get out of the business, experience showed me that I can do a lot better than staying with what I was doing.

F: On Leadership - you say that we should fire ourselves from jobs that we aren't good at and focus on our strengths.  This is what small business owner struggle with; we have limited resources that don't allow us to fire ourselves.

J: There's an evolution for small businesses.  You start out as a one man band, doing everything.  You gotta do what you gotta do.  Paint the walls, clean the bathroom.  In the second phase you develop followers that join your business because they believe in what you are doing.  The third phase is where you start adding skilled technicians and experts; this is the step that people don't make the transition to and it kills the business.

To actually transition from the second to the third phase, it is understanding that I don't have all the answers and look beyond just myself for the answer; some people find it hard to do that and they get comfortable.  My belief as a leader, I have to create tension, continue to ask people whether I want to do it this way or that way, more innovative.  Not resting on your behind so to speak.

F: You say that we should get everyone involved in the process, but how realistic is it to show employees our roller coaster cash flows if we're running a start up business?

J: They know it anyways if you don't have money to pay them tomorrow; if that's the case, being transparent that they start seeing that things are coming in on credit.  You're better off having transparency so they can help you speed up collection and make sure you don't make an over commitment to a supplier and vendor.  They know when things are good when the business owner is taking more trips, afternoons off for golf and buying a new Mercedes.

F: I agree that a small business should never compete on price, like what you said "people can go anywhere for price but can't go anywhere for happy".  Can small businesses scale enough to compete on price with the big boys if they initially focus on providing quality?  

J:  I don't think it's possible to do both or even to do a switch strategy - I say you have to pick and choose - stick with one strategy, either high quality or low price.  It's like you're on a seesaw, you pushed down the other way had to give.

F: The story of Mike, your copier technician.  You paid for him and his family to stay at the hotel across from your print shop so you would have access to a technician in the middle of the night.  Looking at this buyer/supplier relationship, do small businesses have to treat our suppliers better because of our lower buyer power?

J: In a lot of cases yeah you can't have the scale of the big boys and you don't have leverage to pull on but there are things you can do better.  You can be more agile than the other guy and you don't have to go through all the steps to make decisions.  For example there was a customer in store A that told store A owner about the low prices offered by the big box competitor.  So store owner A picks up the phone and dials the service line for the big box competitor, only to be put on hold for the duration of his entire conversation with the customer standing in his store.  He then called his own service line, which was picked up immediately - this is a very good way to show how small businesses can be more responsive than the big guys.

F: You like to refer to ROI as Return-on-Ignoring, but even though you're not a huge fan of using tons of performance metrics, you still have to measure something in business right?

J: 

 
I measure 3 key things:

1. Increase in sales;
2. Increase in margins;
3. Increase in customer satisfaction.

These are the three most important things to measure.  I know whether things are working or not just by looking at the bottom line.  You don't need a lot of fancy tools to tell whether it's working or not.  I've worked in companies where they use predictive modeling to see where things are going - I just don't think I need to spend tens of millions of dollars when I can look at the results very quickly with these three metrics.

...then we get to know Jeff

F: You strike me as being high on intuition and your book says that people shouldn't be afraid of a little bit of Ready, Fire, Aim.  Is this a correct view of who you are?

J: Yes - but it's deeply grounded in a lot of experience; I'm shooting from the hip and some people think there's no process behind my madness.  My decisions are based on a lot of what I've been through - it's based on experience.  It's my gut telling me and it's also my head telling me.  To do what I do you have to go out there and TRY doing things yourself, not just go out and learn.


F: What's the biggest mistake you've ever made in business?


J: I think in business we're always going to be making mistake and I think I have yet to make my largest one.  If I'm running an innovative business I want to keep making mistakes because I gain a great deal from them.


F: I read the press release on your resignation from Kodak as their CMO 2 days from now - what's in store for you after this?


J: I am pursuing another book, some television projects, and probably do something more entrepreneurial - I have an idea of what I'm going to do but I'm not ready to announce it.  


F: You like hunting - does that affect the way you do business?


J: There's a soft side to me too.  Some people are just more aggressive than others and it's just more my style.


Thank you Jeff for spending your valauble time with me for this interview and I'm sure all of you reading this interview knows Jeff better now.  I would strongly encourage you to pick up a copy of Jeff's book The Mirror Test if you haven't already.  It is in your face but is a much-needed wake up call for some of us who are getting too comfortable in our business.

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Can Superb Service Exist with Scale?

I am sitting here in Timothy's World Coffee at the corner of Bay St and College St. The service is one of the best out of all the coffee shops I've been to, in many different countries including Japan, Hong Kong, Korea, Canada and the US.

The service was friendly, and it looked like the owner was manning the cashier today. They also heated up my sandwich and brought it out for me. I saw other customers come in and the owner recognized them by name and remembered their usual drinks with a side of yogurt. I have to say that my sandwich was just OK but the superb service has definitely made me a repeat customer.  Their offer was $5.99 for the sandwich and it also came with a drink - usually I pay extra for the drink. So I would say this coffee shop also wants to offer their customers good deals (low prices).

Is it possible for companies with hundreds, even thousands or millions of customers to do this on a large scale?  To provide superb service and low prices at the same time?

If I think of companies that are attempting to do this, Flight Centre comes to mind with their travel manager services for small businesses, and I wonder how profitable that is.

As for other larger companies like Dell, their low price offer is based on the fact that there is low to no customer service (they do have Dell Kiosks in some places but limited number) and customers are expected to take care of themselves.  This makes sense, since deliverables should also be adjusted as your revenues go down, you deliver less - in this case, it's lower levels of customer service.

What would happen if one day out of the blue that Timothy's World Coffee generated so much goodwill and word of mouth that their lineup wrapped around the corner?  Will the owner still recognize everybody by name?  Will the staff be bringing out the customers' orders to their tables each and every time?  Will the coffee and blended drinks still taste as good given that they must increase the speed of their operations to decrease wait times?

Most start ups start out focusing on getting great word of mouth going for their businesses by totally babying their customers and I think PeerFX is doing this to a good extent as well - we want our customers to spread the word about our service.  What happens when we suddenly hit a point where word of mouth brings in tons of customers and we can't treat them all the same way we treated our initial group of early adopting customers?  The same way that this coffee shop is running itself based on great customer service and low prices, PeerFX aims to provide a 24/7 service at the best exchange rates for small to medium sized businesses.

Time to start planning ahead!

Warren Buffet and The Interpration of Financial Statements

Image via Wikipedia

On my flight out to Toronto I read Warren Buffet's book on the Interpretation of Financial Statements. Quite a quick and easy read for those of you who have a grasp of financial statements already (ie. know that the names and components of the statements)

So what does Warren look at when he's investing?

1) A consistent product - ie. low R&D costs. If the company has to keep investing to change it's product then that means it's in an extremely competitive industry, not a good sign when searching for a company with a durable competitive advantage.
2) Low Debt - looking at the cash flow statement, if a company generates enough cash from operating activities, it doesn't need to finance its investments through debt or equity.
3) Zero Preferred Stock - his theory is that a company with a durable competitive advantage doesn't need to issue stock for capital - they have such tremendous earning power that they have enough to buy back shares, which leads us to our next point.
4) Treasury Stock - this means the company has enough money to buy back its shares and it's sitting there waiting to be reissued.
5) Leverage - Warren stays away from companies that are highly leveraged. Banks borrow at 6% and lend out at 8%, generating earnings for the company. However, once the borrowers start defaulting on their loans, the earnings disappear and the need to pay back the loan is left on the shoulders of the company - a total disaster.

Those were a couple things I took from the book, a quick summary for your benefit. Back to work!

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Working ON and not IN the Business All the Time

So I asked my advisor Raymond about this today: If you were asked to put money into PeerFX today what would you be looking for?

Raymond works actively with us and asking him this question would let me know where the main problematic areas of the business are.  Running this business I feel that more often than I would like I am working in the business rather than on the business. It really takes someone that is further out from the center of the business to give me another perspective on what the priorities should be.  I have my own set of priorities, but what matters most to parties that I need buy-in from? 

Here were the four things that Raymond mentioned:

1. Sales funnel and a cult-like adherence to a process. Also included in the funnel is a estimate of $ value/qualified prospect with probability of close within 30, 60 and 90 days. This way we see actual sales and a projected discounted sales pipeline.  Great suggestion - we're definitely focusing too much on signing up clients and not doing the greatest job of keeping track of our sales activities.  This needs to be cleaned up in the next week.

2. Product Mgmt process: where new products or services are contemplated. This is the where we work ON the business and not IN the business  Like I said, this is what I need to work on - there's one problem - I can't delegate a lot of the work that I handle such as banking operations and transaction processing.

3. Customer satisfaction metrics. - this is extremely important for us since our business depends heavily on recurring transactions.  We are working on several ideas to pump up recurring transactions and we will see results this month.

4. A peer or formal board and mgmt review every month (using some sort of Balanced Score Card) I have admittedly been slacking in this area; we do have a weekly progress review with Raymond but my Toronto advisors are probably wondering what the heck is going on out in Vancouver.  This can be fixed by simply sharing our meeting minutes from every week with our advisors.  Smack myself on the head - why am I not doing that already?

I encourage you to ask yourself and your advisors similar questions on a continual basis.  The more often you work ON the business and not IN the business, it will help focus your thoughts on where to take the business.  Admit where in the business things are going wrong and work to improve it!

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Wanted Buyers vs. Actual Buyers

Many of you are often asked: "So, who is your ideal customer?"  In other words, who do you want to buy your product?

I have a staple answer for that as well for PeerFX - small businesses that have less than 10 employees, less than $10 million in revenues, and are growing international revenues with recurring monthly foreign currency transactions for receivables and payables.

Great, this is the ideal customer - I would be really happy if each and every customer knocking on our door fit this profile.

In reality, we get another type of customer at the beginning; I say at the beginning because the ideal customer comes when you build enough credibility, features and volume in your business.

Right now our customers are split 50/50 between individuals and small businesses that aren't at the $10M revenue mark. 

So for those of you that are writing a business plan, and defining your target segment, you need to think about how long it will take you to create something that will attract and keep your ideal customers.  Be realistic and accept the fact that you will need a slightly not as ideal batch of customers to help you prove your case in the beginning.  This doesn't only apply to running or wanting to start a large business.  For example, a marketing consultant starting out has an ideal customer in mind that needs different marketing campaigns each quarter and pays at least $10,000 for each of them; does this usually happen right away?  Probably not, the consultant is building his/her portfolio of customers with the smaller accounts first before they gain enough history and experience under their belt to approach the bigger accounts.

Think about this for your own business - I'm thinking about it right now as today's my down time for some strategy implementation (not just planning!!!) :)

Promoting From Within

There are a few companies that advocate promoting people from within to higher ranks as they gain tenure and experience within the company.  I'm not sure if this is the most efficient way to ensure you have the right people in the right place in your company.

I'm sure if you have been a manager, run your own company or ran your own company before, you will know that some people are "soldiers" and some are "generals" - some soldiers will NEVER be generals.  It's often not the hard skill set that the individuals have, it's more often the soft skill set that separates these two groups. 

Generals are able to connect the dots to see how details matter in the bigger picture.  Soldiers usually have ideas for their own area of expertise and are able to work very diligently, ensuring that things are implemented.  Imagine promoting a Soldier into the position of a General - the Soldier would know their own area really well, but they don't know how the other fields affect them and how their own field affects other Generals.  There is also nobody to tell the Soldier what needs to be implemented (at least there will be less instructions than when they were working under a General); and the scary thing that can happen is the newly-promoted General will work without seeing how him and his team contributes to the larger picture (or the greater vision of the company).

There are certain skills you can train for but there are some other factors that impact a person's ability to contribute to a company - think again when you want to promote someone who has tenure and an average skill set that you know has hit the wall (ie. it doesn't matter how much $$ you pour into training this person, the output will always be around the same level), you run the risk of jeopardizing the entire department's productivity.

3 Sales Mistakes You Can Avoid

The following mistakes happen so frequently when people want me to sign up for their services...just thought I would share it here and how I think they (and maybe you too) can improve their success rates.

1) Not Listening: You have done your research and you walk into the client’s office prepared to sell them on a solution that you prepared already. Great – it shows that you have done your homework, but you should still ask the client how they are currently solving the pain that your product solves and tailor your pitch and solution to their specific needs. The key to getting a sale is being a good listener – listen to what your customers need before you recommend something.

2) Pushing for a Sale: Some people say it takes 7 times of contact before someone would consider doing business with you. Of course this varies with industry, with the level of sales expertise and the product being sold; but you get the idea – sales might not happen on the first time you meet with a potential client. So what is the right way to do it? Keep in touch with new contacts that you make and you will be surprised by the amount of referrals and sales that come from these contacts.

3) Talking to the Wrong Person: So you think you are connected to the decision maker at the company you are pitching, think again. Usually the person using the product is not the person buying or is not the person signing off on the purchase (some times this may be 3 different people). So when you get a meeting set up, ask the person if they are the only person involved in the decision-making. Most likely the answer is no. Get the right people at the table and it will save you a ton of hassle and shorten your sales process.

Enterprize Conference

I've been meaning to post about this over the weekend but of course friends and Superbowl festivities pushed that back as soon as I landed in Toronto.

I hosted a workshop session at the Enterprize Business Plan Competition this year and it really was a great experience to go back to my business school to speak to aspiring young entrepreneurs.  When I first sent in my slides, which was 10 slides for an hour, I got an email back asking whether I would have any material on my own business, because students would be interested in seeing that.

I did, but that slide didn't have any text on it.  Powerpoint 101 for me is that there shouldn't be more than 3 lines of text on a slide...if the audience can read through the entire presentation I might be an audiobook.

I started off with a short blurb on the company and on the one slide I had, which was titled the PeerFX Heartbeat, went over the ups and downs I went through in the past 2 years, from flying solo in the initial stages of the business to securing government funding to finding committed advisors and employees that impress me with their passion for the business on a daily basis.

However, it would've been pretty boring if I talked for the entire hour, so I focused 80% of my presentation on scenarios.  I bluntly told the students that participation is mandatory and I would just pick on people if no one raised their hand.  Great.

I will highlight the scenario that the students had the most fun with:

Customer Service:  You run an online dating site and for the past month you have been getting complaints from customers saying that their online match has cheated on them, what do you do?

What would you do in this scenario?  Apologize?  Tell the customer that it's not of your business?  Give them free match ups the next time?  How do you save your business' reputation?  We all know that one bad experience is repeated to 100 friends...do you want to lose 100 potential customers?

The Art of War

Cover via Amazon

Lately I've been reading the book The 36 Secret Strategies of the Martial Arts (basically the same 36 principles of the Art of War) and am intrigued by the fact that these principles are being applied time and again in modern day business.

One of the strategies is translated into "Sacrifice the Peach to Secure the Plum".  Applied to business, an example may be that you give up a small market segment to your competitors and in order to secure your position in the more profitable market segment. 

The strategy states that leaders lacking talent may be easily distracted by a limited loss (think of those that fail once and just somehow can't suck it up and get back on their feet again); the right question to ask when you incur a loss is: in what way can the loss be linked to future gain?

Business is War.  Why else would they rank the "winners" on different lists and categories?  YOU are fighting everyday, to secure that new account (from that other sales agent), to get products to market (faster than your competitors), to increase your market share (at your competitor's expense).  Sometimes you just can't play nice (but you always have to play fair, no nasty tricks people!)

The Value of Marketing

Image by Matt Hamm via Flickr

So you've built a better mousetrap.  It's going to revolutionize the lifestyles of millions of customers.

Do you assume that customers are going to beat a path to your door? Most if not all of you are smart enough to say no.  So how do you bridge the gap between your product and making your potential customers aware of your product?

Here are a couple answers that I think I would get: Social media (facebook, twitter, linkedin, etc.), online partners/affiliates, blogging, hiring a PR firm to get media coverage...

All of that falls under some sort of marketing - which in my opinion is any venue you use to make you customers aware, trial, evaluate and buy your product.  So everyone says that it's hard to quantify the impact and/or value of marketing.  I can quantify it for you right now, it's the sales dollars that you record in your top line.  Without marketing, how else will customers find out about your product?  Some people say they use trade promotions, well in that case you're marketing to the intermediaries by giving them a discount - still marketing.

That was easy.

Awesome Salespeople

Lately we've been working on bringing on board salespeople.

I've been chatting with a few people from different companies that are at the front line ie. they're the salespeople bringing in the cash.

It's interesting how companies motivate their staff. One case I came across that was inspirational for me was my friend that works for a large printing/document management company. Over 80% of my friend's pay is in commission payments.

It makes me wonder why it's been so hard for us to find salespeople that can be motivated by commissions. I've been told that great salespeople are motivated by the challenge of performance-based pay and understand the concept that they will earn more when they deliver more for their employers.

My friend is obviously a great salesperson and is able to deliver month after month of increasing sales. I guess only a salesperson that is awesome at their job is motivated by performance-based pay - since they know they can earn a lot of money. For those that whine and complain about being on commission, those are the ones that can't sell and eventually get fired.

As my friend very bluntly put it:

"If I'm on salary, then a bad month for sales is a bad month for sales; if I'm on commission, a bad month for sales means I don't have enough to pay my mortgage."

You always need to see the needs and psychology of both parties to the deal - in this case it is our company and potential salespeople. We want sales, dedicated effort and minimal up front cost. They want more initial up front security (base salary, contract, etc.) and a floor to their downside (so that even if they don't perform for sales it can't be so bad).

In a start up company you have no room for dead weight, if you have salespeople that have the above characteristics: can't perform, are taking your base salary for granted, and whine and complain about being on commission - get rid of them.