Category: Blogs

Warren Buffett understands the importance of a good reputation — and how difficult it is to overcome a poor past. When Buffett wants to add another company to Berkshire Hathaway’s portfolio, he’ll ignore those options with bad reputations even as he looks at companies with cash-flow problems and members of weak industries. Says Buffett,

When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.

He has every confidence that he can deal with any other problem in a business, but even Warren Buffett doesn’t feel up to repairing a poor reputation.

Build An Amazing Reputation

We know that a poor reputation is not something we want. But how can we build a reputation that really helps our businesses (and our personal brands)?

Many companies build their reputation by ‘underpromising and overdelivering.’ They want to give the image that they’ve gone a step beyond for their clients while really just performing at their normal level. As far as reputations go, this sort of average performance isn’t bad: businesses that succeed in underpromising and overdelivering certainly won’t scare off prospective clients. But they also won’t have a great reputation.

To get a great reputation, your business needs to go beyond average. You need to promise great things and deliver. Go back to Warren Buffett for a moment: everyone wants stock in Berkshire Hathaway because of his reputation of making money for his investors. He got that reputation by demonstrating, time and again, that he could get the great returns he promised. You don’t have to get Buffett’s return to build a great reputation, but you do need his ability to follow through.

On one level, building a good reputation is easier than building your brand. You don’t need to print out fliers or distribute business cards to let people know about your abilities; your clients will do it for you. You do need to make sure that your clients have a few good things to contribute to your reputation, though. At the most basic level, your customer has to be satisfied. Your product must be problem-free or your service must be completed on time. But you should take customer satisfaction to the next level. Go beyond their expectations and provide a product with an extra bell or whistle.

As your business grows, your brand will change. Your logo may go for a redesign and your website may get an upgrade. But the reputation you have today will still be affecting your business. In ten years, your customers will still remember you — if you go beyond their expectations.

The problem with most small businesses these days is that they don’t actually know whether they’re actually successful or simply lucky to be surviving.

“But Paul,” you might say, “my store/website/lemonade-stand received 2,200 visitors last month and it generated 35 sales.” My response: “Great! So, was last month a successful one for you?” And then, I get nothing but a blank stare. (Seriously, I have a conversation like this at least once a week these days.)

Look, everyone knows that selling more stuff can usually mean that your business is doing just fine. But, the key is to define a clear, measurable goal.

“Sell more stuff” is not a goal. “Sell 30 widgets and 50 hubcaps every week” is much, much better.

As a rule of thumb, always start with your goal. You can’t create a good plan until you know your objective. So, be crystal clear on exactly what you intend to achieve. (Use this template to track your goals.)

Then, measure compulsively. Seriously, you’ve got no excuse — spreadsheets, Google Analytics or the 872,345 other tools out there will all do the job for you. Besides the usual operational stats, other useful metrics might be CPO (“Cost-Per-Order,” which includes advertising, fulfillment and expected returns, chargebacks, and bad debt), ad allowable (the maximum you can spend on an advertisement and expect breakeven), and projected lifetime value (LV) given return rates and reorder %.

In the end, just remember that you’ve got to start thinking about how to systematically build the business that you’ve started. Setting goals and measuring progress towards them is the smartest way to get there without wasting a ton of time and energy along the way.

Need some expert help to sort out the right goals or get some sort analytics package in place? Let me

Most companies spend some amount of time figuring out how to make a visitor buy something from their site. In some cases, they’ll even spend tons of money on some overpriced contractor to actually make this happen. When they actually launch the site, the sales process looks a little something like this:

Visitors somehow end up on the company website and, if you’re lucky, they’ll buy something. Yep, it’s pretty weak. But then again, it’s the first iteration of the site — hopefully you’ll learn something from the the data you’re collecting via Google Analytics or other free services. (If you haven’t already, check out 14 free tools to understand your visitors.)

Soon thereafter, you realize you can setup RSS feeds, newsletters and integrate your content with Facebook, LinkedIn, Twitter… you get the idea. The site naturally moves to its second evolution.

Getting better. You’re keeping visitors engaged and, as long as you’re providing them with valuable information, they’ll hopefully come back to the site later on and actually buy something from you. For most companies, this is probably as advanced as their sales processes are going to get.

Though, the few insanely smart businesses out there instantly recognize that there’s a huge gap in the sales loop and realize that they’re leaving a ton of money on the table. The key is to understand that when customers buy something from you, they’re voting with their wallets. They clearly like something about what you have to offer and, chances are, they’re likely to buy from you again. So, why not take advantage of it?

The point here is to keep your customers engaged in what you’re doing. They’re already loyal to you, you might as well take advantage of that and keep talking to them. The simplest way to do this is to make sure they’re subscribed to your newsletters, RSS feeds or whatever else you think is good. Better yet, segment your lists so that customers are on a totally separate list — this lets you send them different materials or even give them exclusive special offers that regular visitors never even see.

First things first: Clear off 15 minutes today, grab a pen & paper and start making flowcharts that show how you interact with your customers. Chances are, there’s at least one thing you could be doing better.

If you’re feeling especially lazy (or would rather get some expert help), let me know.

Buy or Bury the Competition.

If you’re cutting costs across your business and you’ve done a decent job of keeping your employees focused on the right things, you’re probably in a good position to take advantage of the one big benefit of the economic downturn: the opportunity to hurt or, better yet, destroy the competition.

Two tactics that might be useful as you start going after your competition:

1. Steal their customers. The competition is probably hurting for cash, but you’re probably in a better position to extend some decent credit lines to customers that you may never have been able to reach before.
2. Steal their employees. If you’re doing well, start talking about it. Your competition’s employees are probably getting concerned about their job security — use this to your advantage and get some great talent that you might not have ordinarily had access to.

Look, there’s no doubt that you’ve got to get on the defensive in times like this. Just don’t forget that there are some benefits to going on the offensive while everyone else is weak. In the words of Jack Welch,

There’s little downside to an overaggressive response to economic turmoil. The risk lies in wishful thinking and timidity.

Rather than focusing on your own survival, think about how you can take advantage of the fire sale.

Working 90% to 95% of the time is not working. When my company’s services fail to deliver, we don’t get paid—and our customers get angry. When a technology product doesn’t do what it’s supposed to do all the time, we’re stuck. Unfortunately, the technology my company buys fails way too much. But like everything else that makes me angry, I just deal with it. And so can you.

Something you should know:

1. Technology sucks. Once you begin to depend on it, you’re confined by it’s inherent limitations.
2. It won’t make you successful. That is, not unless you completely understand how it will help your business.

What Great Businesses Do

Have you noticed that so many successful companies are “behind” on tech’s latest trends? It’s because successful businesses relentlessly focus on creating incredible value for the world. They know that once you begin worshipping technology, you switch focus from providing value and then continue going downhill from there.

The Key: Exploit tech only when you know precisely how it can help accelerate your ability to get ahead.

“So, how do you exploit technology?”

Two steps:

1. First, embrace low-tech. Spreadsheets can single-handedly kick the asses of pretty much any of the latest gadgets out there.
2. Then, grow outward stubbornly. Improve your systems as you go. You will know you’ve outgrown your current systems when you understand precisely how to increase your efficiency.

And dont forget: Since the beginning of time (and up until a few years ago), most businesses didn’t need completely custom technology solutions. They used paper, spreadsheets, whiteboards… you get the idea.

• You’ve probably got a website. So, why’s it so hard to subscribe to RSS feeds or newsletters? I may not be ready to buy anything today but sign me up for one of your lists and keep me updated with tips that are relevant to me. Do this right and it’ll be obvious that your product can solve my needs, I’ll buy it when I’m ready.
• You probably sell a product. So, why don’t I hear from you after I’ve bought anything? If I’ve bought from you once, it’s reasonable to assume that I might be interested in buying from you again — talk to me! Stop being a product focused business and become a product-and-long-term-service business. Guarantee the benefits of your product to me over the long run and do stuff to help me get those benefits.
• Your competitors probably sell something similar to you. So, go the extra mile and solve a particularproblem for me in a unique way. The Trunk Club sells clothes, just like most other clothiers, but they actually do most of the work for me.

Look, we’re not talking about rocket science here — in fact, you’ve probably heard tons of advice on how to build your business. The problem is that many entrepreneurs either do too much of the wrong thing or, worse, sit around as they figure out what to do next.

The key is to focus on doing something, anything, to actually build the business — for most people, improving the stickiness is the most effective place to focus your efforts.

Ever heard of Starbucks? Contrary to what you may have heard or thought, Starbucks never sought to create a brand. Instead, the company passionately sought to create appreciation for a better tasting cup of coffee. It was, in fact, as basic as that.

Starbucks was too busy sourcing and roasting the highest-quality coffee beans to think about branding. Starbucks was too busy educating customers on how and why they should appreciate a stronger, bolder, more flavorful cup of coffee to think about branding. Starbucks was too busy creating a comforting and welcoming place for people to exhale than to think about branding.

Last week, I met Ryan Moede with Viget Labs (a web strategy firm based just outside of Washington, DC). He told me that before they accept a particular client, the Viget team asks themselves if they’d ever become employees of the client company. Unless the answer is yes, they won’t proceed. Rather than taking just any work that comes their way, they’re relentlessly focused on building their business with the right clients — the branding inevitably follows.

So, the first thing to do is to start ignoring all the “professionals” out there that advise you to spend hundreds, or even thousands, of dollars on “creating” a brand for your company. Instead, focus your efforts on being the best at what you do — the brand will follow.

Mark Vadon, Blue Nile’s co-founder, was quoted in a recent BusinessWeek article:

I want to be the best in the world at one thing. I don’t want to be half-assed at a lot of things.

Most businesses suck when they try to do too many things — cut down the number of things you do and your margins shoot through the roof. Every small business that I’ve consulted has told me that once they narrowed their focus to a specific niche, their sales skyrocketed.

In fact, when my own construction company decided to stop actively looking for commercial work, our residential sales skyrocketed. Once we focused on the few things we did better than anyone else, everything got better — more clients, more money and, most importantly, less stress.

How do you define your niche? To start, determine one thing that you do better than anyone else. Not sure? Ask people who know you well. I bet they can come up with at least one thing that makes you a rock star. If you need more help, Geekpreneur has some tips on ways to find your niche and I recently included a few more tips here: the importance of being the best at what you do.

By narrowing your focus, you’ll start to be seen as the expert in your industry. Which instills confidence in your customers and brings even more people to your door. Doesn’t get much better than that.

The point is not to avoid asking for the discount but to know exactly what to do when that tactic fails.

The art of asking for more

Next time you’re negotiating, try asking for more. I use this tactic when buying cars, dealing with vendors or bargaining with street merchants

and it works every time — despite what you might believe, most businesses would much rather give you something more than reduce the price. When your request gets shot down, don’t walk away pissed off —ask for something more: get them to throw in something else. (Tip: If you’re buying a car, you can usually get floor mats and your first few service visits absolutely free — ask for them after you think you’ve gotten the price as low as you can go.)

What businesses are thinking

At a 10% discount, a typical firm would need to sell 50% more units to keep the same profit on the bottom-line. Costs also increase in the “discount” game, so companies can literally discount themselves out of business. Instead of cutting cash out of the deal, they’d rather add value to whatever you’re buying — this “value added” proposition means they can “give away” something that won’t come out their profits. Done right, it adda to the customer’s experience and that’s the key to getting that customer back.

Oh, and one more thing

Use this tip when you’re negotiating your next pay raise. If the conversation gets bogged down before you get to the number you want, start asking for other perks instead — extra vacation days, telecommuting perks or educational reimbursements. It’s all fair game.