Business

First mover advantage; being the first one in a market or to develop a new technology can be a huge advantage. At the same time, doing all that hard work also lays the foundation for someone else to step in and do it better.

So if you’re a first mover, great. If not, no sweat. All you have to do is find an edge that gets everybody talking about the new kid on the block.

Let’s look at some “second-movers” and see how they did so well …

1. Microsoft

First there was Apple, then along came Billy G and some new ideas. Big ideas. Where Apple has always developed their operating system and assembled the hardware, Microsoft opened the floodgates to thousands of other compaines by licensing their OS and letting others build and assemble the hardware.

If you can create opportunities for other companies and entrepreneurs to prosper with your product, you can take the lead.

2. Pepsi

Coca-Cola was a strong and growing company when Pepsi came along. Today, by some metrics Coke is still in the lead and by other metrics it’s Pepsi. But Pepsi came along after Coca-Cola was well established.

I don’t know if I’d call a $100 billion company an underdog, but being the “alternative” and having the drive to do better will take you a long way.

3. Google

Before Google, there was Yahoo. And even before Yahoo there was Infoseek. A strong combination of stick-to-your-brain branding and innovative technology will get people to use your products and services.

If you can be memorable and fun, and if you can make a task faster and easier, you’ll do well.

4. Research in Motion

The Blackberry (or crackberry if you prefer) wasn’t the first cell phone. They’re insane success comes from doing a little bit of everything …

If you can develop a strong brand, create an easier way to do something, and create opportunities in the marketplace (RIM builds their devices and the mobile networking technology they and other devices use), you’re going to do very, very well.

Being first helps. But it’s not critical to creating success. Most businesses don’t create anything new, they just take something that already exists; something that already has a proven market, and they make it better.

So, you can be first. Or you can be better than first.

In Getting Paid 101 I talked about how to be pre-emptive and simply run your business in a way that helps (a lot) to make sure you get paid by delinquent clients. In Getting Paid 201 I talked about skip-tracing; or tracking down those fly-by-nighters that skip out on paying you.

Well, sometimes, you don’t get paid but you still have to do business with a company that owes you money.

It might be because they’re a significant portion of your revenue. And if they owe you a significant amount of money and you’re a significant supplier of theirs, it’s usually in your best interest to help them keep the ball rolling, generating revenue … so they can pay you!

This can be a very maddening situation so the first thing to do is get rid of all that emotion. Take a few minutes to yourself and cuss them out.

Good? Alright … moving forward, you have to play it smart and use your advantages. Here they are:

1. Hold Their Assets

“Possession is 9/10ths of the law” is an old decree that stems from Old English Law. Basically it means that if it’s in my hands, it’s up to you to prove it’s yours. In this case, if they owe you money, why would you give them their stuff.

So if you store goods or materials of theirs, or if you carry an inventory of items that are labeled with their brand or whatever, hang on to it. It has worth, so use it to bargain with.

Most of the time you can just tell them you’re hanging on to this collateral until they pay you. If you have to bring in the lawyers (and some industries have specific rules for this) you can put a lien on their property. What happens then is you hold on to it until they pay you. If they don’t pay you within a certain timeframe, you can sell their property at public auction.

Regardless, make sure you talk to your lawyer about your options when it comes to holding their assets.

2. Put Them on C.O.D.

They already owe you money. And you don’t want to get in any deeper than you already are. But you need to keep the business rolling.

This is where COD or “cash on delivery” comes in. The key to putting a customer on COD is to stick with it. No matter what. The longer it goes on, the more they’ll need something “right away” without you getting cash in hand first.

No payment, no delivery. Period. Call them up and tell them the order is on hold until you receive payment. If they need the order and they have the money, you’ll get a wire transfer or someone coming by with a check within a couple hours.

COD also offers a good opportunity to add a premium to your price. You can apply this premium to their outstanding balance (sort of a payment plan), but I generally just call it a price increase.

3. Get a Secured Promissory Note

When a business fails there’s a certain order as to who gets paid first. It goes like this:

1. The government (taxes, fees, etc)
2. Financial institutions (loans and lines of credit)
3. Secured creditors
4. Unsecured creditors

If the amount they owe you is significant, then really push to get a secured promissory note. A secured note is registered with a government body (talk to your lawyer) and it basically says they promise to pay you and they’re backing that promise up with collateral assets they own.

As a secured creditor, you’re one step up from the bottom of the totem pole and you’ll get paid before any unsecured creditors will.

So there you go. Hopefully you don’t run into too many situations where you don’t get paid. But it will happen. That’s business.

Fortunately, you’ve got a few more tools in your bag now to deal with it.

In reference to the great California gold rush of the 1800s it’s really popular to say “Don’t dig for gold, sell shovels”. The logic is sound because rather than investing in high-risk speculation, you can take a much more certain road and sell the tools that these high-risk, high-reward speculators need.

But there’s a limit to how many shovels you can sell. And there’s something bigger that both the gold diggers and the shovel sellers need. And that’s the railway to get to California and back.

When you build a “railway”, you’re building a platform, a gateway. The backbone of it all. You’re building a conduit through which all things must pass.

Examples of Business Railways

1. Industry Standard Formats. Format wars are intense and Sony recently won the hi-def war when Toshiba bowed out. Sony now owns the hi-def railway and there’s a whole host of businesses that have to pass over it; companies that make DVDs, players, recorders, authoring software, films, and video games … they all ride the Blu-ray train now.
2. Platforms. The MS Windows and Mac OSX operating systems are both platforms. Railways. Every piece of software needs an operating system to run it. And the beauty of creating a platform is you can make both the railway and the trains. In this case, that’s the OS and the software.
3. Technologies. The Legaignoux brothers developed a simple yet amazing kite design for kiteboarding using inflatable struts. Every other kite manufacturer licenses the right to use their patented design. And those license agreements also set the price ranges at which each company can sell their kites. Can you say “All our competition are belong to us”.

There are lots of examples of business railways out there. And you don’t need to be a billion dollar company to do it. Microsoft started somewhere. So did the Legaignoux brothers. Any business can build a railway. You just need to recognize what people need, be innovative, and set the standards in your niche, local market, or industry.

Start small. And think big.

When you build a format, a platform, or an innovative technology, you’re building a railway. And everyone; gold diggers and shovel sellers included, needs to get to California somehow.

Can I see your ticket please.

Good times and bad times start at the top, and then the effects “trickle down” to small businesses and regular people.

Right now, we’re seeing the trickle down effect from a bursting property bubble and mile-high piles of consumer and government debt. So what’s the best way to deal with that?

Well, trickle “up” of course.

First, The Vicious Trickle Down Cycle

Because of the property price implosion, a lot of things are happening:

• Lumber mills are shutting down temporarily or even for good
• Companies like Linens & Things are filing for Chapter 11 bankruptcy protection
• Many large companies are laying off thousands of employees

These things might not affect your business or even your industry. But the next stage of the trickle down will. Millions of people and companies will have to cut back their spending. Some will cut back severely and eventually this will trickle over into other sectors.

And of course, it becomes a vicious cycle because it’s exactly the sort of economic climate that’s going to depress property prices further.

How to Trickle Up

This is a tough task for most businesses. It’s literally an upstream battle. But with a few smart strategies it’s easily achievable …

1. Show me the money. No matter what’s going on in the world, some people always have money. Start gearing your products and services towards these people and companies. Think quality, and exclusivity.
2. Problems need solutions. The great thing about bear markets is there are lots of problems. And every one of those problems need a solution of some kind. Create those solutions and you’re golden.
3. It’s time for a new deal. US President Franklin D. Roosevelt initiated a series of new reforms to help pull people out of the Great Depression of the 1930s. These reforms were called the “New Deal”. If you can’t beat the trickle down (and you don’t want to get caught in it) create a new direction. Be innovative and create new products and services that pave a new path forward.
4. Swim with a buddy. Sometimes the trickle down can be a raging whitewater torrent. Partnering up with another company that has different strengths is one way to make both businesses stronger. A partnership can give you access to new markets, additional expertise, and an avenue for creating innovative product and service packages you couldn’t create on your own.

The keys to trickling up and not getting caught in the trickle down are composure and creativity. Don’t get wrapped up in the mayhem. Get wrapped up in creating new avenues of unique and real value.

And don’t forget your umbrella.

The idea behind a loss-leader is that you sell something super cheap; in fact it’s such a deal that you lose money on every unit you sell. The idea behind this is to get customers in the door and it’s the other items they buy while they’re there that make you money.

And of course, customers love the idea of flaunting the deal they got at an obvious loss leader price. Loss leaders used to be quite popular. And promoting something like it is one is still really popular. But usually they’re not loss leaders at all …

The Business Landscape Has Changed

The first thing that most businesses have come to understand is that selling loss leaders doesn’t necessarily mean you’ll get any other business from a customer. This is especially true in business-to-business deals. And bringing on a loss leader doesn’t mean you’ll keep a contract you already have or that you won’t get the deal in the first place if you don’t take the hit.

This is partly why most successful businesses don’t sell loss leaders any more. There’s just no money in it.

But what’s really changed is the amount of sheer competition in the marketplace. Most companies can’t afford to take a hit with a loss leader. And the fact is, if you want to sell blue widgets at a better price than the next guy, guaranteed there’s a company out there who can supply you with “off-blue” widgets at a door-crasher price. So there’s no need to sell them at a loss.

To survive in such a competitive environment, you’ve got some choices to make. And here they are:

1. You stay in the premium “pure blue” widgets market. Build your brand; offer your best price and that’s final.
2. You start grinding your suppliers for a better price or find more cost effective suppliers.
3. You jump into the “off blue” widgets market where the buying and selling prices are much lower.
4. Some combination of all of the above (which is what most companies do). There’s one key advantage to getting into a high-volume, low-margin market and that’s volume buying. Getting better pricing on everything you buy can significantly increase the margins on your premium products even though you’re still making thin money on the stuff that moves the most.

Note … none of these options involves you taking a hit on a loss leader. You’re in business to make a profit. Profit is non-negotiable.

And loss leaders just aren’t cool anymore.

Some friends of mine are starting a painting business. Initially, they found it difficult to get contracts as most small businesses do. The best way is to just go out and start knocking on doors to introduce yourself. I suggested they hit small businesses where they can talk directly to the owner and just drop off 20 or 30 business cards a day.

It’s pretty much guaranteed in this market that you can line up 2 or 3 jobs just by doing that kind of networking for half a day. But most people, for whatever reason (lack of confidence in their own business), just won’t do it.

The Subcontracting Trap

So, as a lot of entrepreneurs do, they started talking to a contractor to get work. The good thing about being a subcontractor is they go out and get all the sales, do customer service, etc. Which takes that burden off you.

The bad thing is they usually take up to or over 50% of the pie. It can still be good money, but it’s little more than a glorified job. And it doesn’t make your business the killer cash you need to grow your business; it’s more like earning a wage.

Now, subcontracting can be a great way to get started. It’s paid training and experience. But at some point you have to cut the cord and go out on your own.

Just Put a Bigger Number on the Table

After some discussion, my friends decided they didn’t like the idea of earning 40% of the pie and put a plan together to go out and start networking their own business. And then my buddy said something really strange to me …

He said, “Those guys would charge $6k for a house and only give us 40%. And we could do that house ourselves for like $3000″.

Eeeeeerrrrch! … now hold on a second. That’s still only 50% of the pie. It’s only 50% of the going rate. There’s that confidence thing again. And you know what … let’s go with it …

But let’s do it the right way to get the business rolling. And it’s all in how you frame the proposition. So here’s the deal; for a $6000 job, you charge $5500 BUT you give your customer a $1000 business-launching discount for a limited time only.

That’s an easy way to get your business rolling, get a bigger slice of the pie, give your customers a savings incentive AND give your confidence-meter some slack too.

Don’tcha just love pie.

So you’re sitting there, alone, on one side of the table. And across from you is an army of briefcases. They’re gonna tear you apart, right? Not so fast …

There’s a great advantage to having a negotiating “team”. But there are some huge disadvantages as well.

Building a Negotiating Team

Whether it’s a good-cop, bad-cop “buddy movie” kind of team or it’s a boardroom platoon, there’s just one rule your team has to live by: Nobody says nothin’.

The power of having a good negotiating team is knowledge. Each person on your team is an expert in something. But that knowledge has to be very carefully safeguarded so it can be used strategically. The only time a team member should be engaging the other team at the table is when the team leader specifically asks for their input into the discussion.

There’s 3 reasons for this:

1. Rhythm. Your opponent is putting an offer in front of you. You’re quiet, looking kind of stupid and uninterested. You want more. And you want to control the rhythm of the negotiation … and then someone on your team blurts out “Great! Let’s get this down on paper”. Silence is uncomfortable and very effective. And even your own team can crack under its weight.
2. Who’s My Dance Partner? If the people across the table start to get different ideas from different people on your team, they’re going to wonder who it is they’re supposed to be dancing with. Who’s calling the shots here? Is this a company with a lot of internal turmoil and ladder-climbing that can be exploited?
3. Name That Tune. Is this the salsa or the rhumba? With different ideas flying around, it’s easy to lose sight of what your goals are and how you’re getting to them. You don’t want anyone leaving the negotiation unsure of what it is they’re expected to do next.

Understanding the inherent strength and weakness a team can bring to the table is critical. If it’s your team, you need to make sure it’s a disciplined one. And if it’s theirs, you might want to take it apart piece by piece.

If you don’t have a team that “gets it”, then it’s better to just go in solo.

Personally I like to negotiate one-on-one simply for the entertainment value; playing both good-cop and bad-cop can be a little schizophrenic, but it is amusing …

One minute you’re Starsky. The next, you’re Hutch.

Also check out my previous posts, The Art of Negotiation and Aikido Negotiation Tactics.

fluffer [fluhf-er] n, slang: An off-stage person hired to keep a male porn star in a state of erection.
~ Dictionary.com

Okay, provocative headlines aside, business is a contact sport. It can get rough. No doubt about it … but, are you doing all the work, yet you’re never the star?

Here’s how you know. If you’re saying one of these 3 things, you’re fluffing:

• “Hey, gotta pay the bills and keep the lights on”.
• “Well, it’s just for now. Until we get rolling”.
• “They’re going to bring us some real opportunities down the road”.

Well, you DO have to pay the bills. You CAN cut a client loose later and there REALLY might be bigger opportunities with that customer down the road.

Don’t Get Caught With Your Pants Down

But there are companies that can smell blood in the water. They’ll grind down your margins to nothing. They’ll ask you to put every cent you’ve got into meeting their rigorous standards and requirements. They’ll make huge down-the-road promises.

In the end, you’re doing all the work and they’re making all the big bank. And operating your business on other people’s terms can become a downward spiral where you never get ahead. It can kill your business.

And all those things you’re saying to justify these bad contracts are all the things you started your business to get away from in the first place.

Take the Leap and Be the Star

Doing the jobs you don’t want to do but have to do is a difficult position for any business to get out of. It takes conscious effort. You need an action list and here it is:

1. Limit Your Exposure. Cut back on the expenses you’re paying to fulfill your fluffing contracts. Renegotiate cheaper rates with your suppliers. Put more of the customer service burden back on your clients by getting them involved to solve their own problems. Create efficient procedures and automate as much as possible.
2. Actively Seek Good Business. Put aside a certain amount of time where you’re not available to your not-so-great customers and use that time to go out and hunt down the kind of customers you really want. Go to trade shows. Schedule as many meetings as you can. And decide right now that you’re only going to take on new contracts that are good for your company with this time. If it’s another fluffing contract, move on to the next meeting without skipping a beat.

It’s a short list, but it’s that simple. Cut your costs and raise your revenues. The key to turning your company into the superstar you want it to be is to go after the superstar jobs.

They might be smaller jobs with smaller clients that pay a higher rate. Or they might be good-sized jobs with large companies that throw cash around because they’re not well organized.

Next thing you know, it’s your movie. And you’re the star.

Projecting a professional image is important in business. Especially for small businesses. The last thing you want to do is hand a client an invoice you scribbled out in pencil on a piece of lined paper you ripped out of a 3 ring binder.

If you have a small business, a good set of business forms can run your company without the costs of buying and managing an accounting package. And if you’re on the road frequently and find you can’t access your company system, cranking out an invoice or whatever on the go keeps the business rolling forward. 

Snap*start Business Forms

One of the first things I created when I started messing around online was a package of professional business forms. There are lots of free forms around the internet, but most of them are not very high quality. The Snap*start package is. These are real forms; the kind that million dollar businesses use every day and they’ve come in very handy for me.

And best of all, they’re free!

To get Snap*start, just subscribe to my RSS feed or to Email Updates and at the end of each blog post is a link to download your copy.

It’s a zip archive, so after you download it, right click the file and choose “extract all” to pull all the docs out of the archive. The forms work with Microsoft Word and Excel and the freely available OpenOffice.org.

Forms in the Package

Here a list of forms in the package. Some of them are in both Word and Excel, so use whichever program you’re more comfortable with; the Excel forms have certain auto-calculations already set up. There’s a basic instruction sheet and all the forms contain sample information to guide you through them:

• Annual Budget
• Bill of Sale
• Cash Deposit
• Commercial Invoice
• Contact Sales Sheet
• Customer Credit Application
• Demand Promissory Note
• Direct Deposit
• Employee Time Card
• Employment Application and Info-card
• End-of-Shift Register Closeout
• Expense and Mileage Report
• Fax Cover Sheet
• Inventory
• Invoice
• Payroll Advisory
• Payroll Summary
• Petty Cash Journal
• Petty Cash Voucher
• Purchase Order
• Purchase Order Log
• Purchasing Forecast
• Product Supply Agreement
• Product Line Card
• Quotation
• Sales Order

Subscribe to Zoomstart RSS or Email Updates and get your free copy of Snap*start. When you subscribe, you also get access to my free eBook on Branding and whatever other free tools I cook up in the future!

There’s something to be said for coming up with a great idea and just jumping in to it. In fact, there’s a lot to be said about it and I can sum it up in 3 words … just do it. Entrepreneurs are about taking risks. Sometimes it works out and sometimes it doesn’t. But there is no reward without the risk.

At the same time, you have to be ready and willing to just cut a bad idea loose no matter how much time and money you’ve pumped into it. The key is to get back on the horse immediately and move on to your next idea without missing a beat.

Risk Flipping

The biggest risk in any entrepreneurial venture is that you don’t know whether you can sell it until after you build it, roll it out, and start marketing it. Then it either flies or flops.

But if you could be certain of at least some measure of success, would you be more willing to take more of a risk? Would you invest more in the idea? Well sure, why not.

And that’s where test marketing comes in. And the beauty of the internet is that you can test-market anything relatively cheaply. And more importantly, you can test-market an idea BEFORE you invest anything else in it. And if you do it right, it can cost you almost nothing.

Free (or almost free) CPC Test Marketing

The idea is really simple. Create a simple landing page based around an idea you have. Throw some Google ads up on the page … make sure they’re prominent, high on the page, and blend in well. These will help you get your advertising dollars back and minimize the cost of your testing.

Now start advertising and promoting your page using AdWords or whatever. This is basic arbitrage and you probably won’t make much if any money on it. But I’ve found it’s a great way to test-market an idea for … well, pretty much free.

This kind of test-marketing lets you see how well people respond to your idea by:

• The amount of traffic you can get with your advertising. This comes from a combination of the keywords you choose to target your advertising, how compelling your ads are, and how big a market there is for your idea.
• The type of ads that are shown on your page that people are compelled to click on. Because Google AdSense is contextual and shows ads related to your page text, this is a very powerful measure of how well you can match your landing page text (related to your idea) to writing compelling ads that draw in people who are interested in your idea.

Put 10 or 20 of your ideas to the test. When you find one that gets a great response across the board, that’s the one you start developing. That’s the one you want to take a risk on.

You might find that your big kick-butt idea won’t fly but your so-so idea is actually a huge winner. Only test marketing can tell you for sure.

Now jump.