What is MOTIVATION?
Motivation is one of the most powerful weapons available to us for bringing about change and shaping our circumstances. Motivation is the engine that powers our vehicle to success and fulfillment. Many dreams, goals and good intentions have been jettisoned primarily due to lack of motivation.
It is so crucial that we maintain our motivation levels, because we are unlikely to achieve and substantial measure of success without sufficient motivation.
Motivation does several things to us and to our circumstances. A vivid understanding of its power is necessary, if we're to use it to our benefit.
First, motivation makes us better as a whole. When you're highly motivated, you experience a much greater sense of clarity. You gain a deeper understanding of problems. Motivation also increases our discipline levels; tasks that look Herculean suddenly become ordinary.
You should also know that our motivation levels are almost proportional to our leadership levels. It's no surprise that in a group of people, the general tendency is for the most charismatic person in the group to attain leadership. Motivation makes giants out of timid minds. It transforms even the feeblest minds into determined fighters.
More than this, motivation also empowers us to bring change to our lives, our circumstances and ultimately our world. Motivation is so infectious. once a highly motivated person enters a circle of ordinary folks, everyone of them soon catches the "fever" and changes, developments and improvements that would hitherto have been impossible begin to occur.
Our most powerful dreams capable of causing tremendous transformation around us are almost always birthed in periods of intensely high motivation. In periods of high motivation, we see things as they should be, we see things as we believe them to be in our innermost recesses, and we begin to work with such intense fervency that we soon surpass even our wildest expectations.
But by far the most important benefit of motivation is our ability to both attempt the hitherto unattemptable and achieve many times more than what we would normally achieve.
When we begin most projects or tasks or try to achieve some preset goal, we usually begin with boundless enthusiasm. Along the way we gradually lose steam and by and large we jettison our goals. Motivation guarantees that we prosecute our goals with unwavering iron-clad ferocity.
Motivation guarantees our weathering the storms and turbulences of life and its many uncertainties.
If there's an ironclad guarantee for attaining any goal whatsoever, it's this: get motivated and stay that way.
Wednesday, April 14, 2010
Tuesday, April 13, 2010
Break Even Analysis...How Important is this to Small Business Owners?
Break Even Analysis Definition-
Break even analysis, defined as the studying of the path to the point where a company is neither losing money nor making a profit, is very important to the survival of any start-up business. It can be performed for either products or the business as a whole. The break even calculation can be in reference to pro or post-forma, that is before or after the company has been formed.
Break Even Analysis Explanation-
The break even analysis serves to provide your company with a very important piece of information: "How much revenue does my company need to make in order to break even."
This break even analysis is quite easy to do. The only critical piece of information that you will need to have is a breakdown of the your firm's expenses into Fixed Expenses and Variable Expenses.
Once you have a breakdown of fixed costs and variable costs, input these costs into a template. You will also be able to conduct various "What if" scenario analyses to see how the break-even revenue will change.
Once you are able to arrive at the break even analysis you can show the Owner(s)/Management this metric and make it part of their sales planning. Another idea might be to incorporate this metric into your review meetings. This way your staff can know on a weekly basis if they are on track to at least breaking even.
Break Even Formula-
Break Even Point: Total Revenue = Total Costs
Break Even Analysis: Process-
Accumulate Expense Information
In order to successfully do the break even analysis, the following financial information will need to be gathered and/or created: Current Monthly Fixed Expenses (Dollar Basis), Current Monthly Variable Costs (as a Percentage of Revenue) and any "What if" scenario changes that you would like to consider. Note: This is optional depending on whether or not you would like to conduct a sensitivity analysis.
Depending on the robustness of your financial system, you may or may not have some of the above inputs. As such, it may be necessary to first create them prior to working on the break even analysis.
Once the initial break even analysis has been done, it will just be a question of maintaining it by inputting the most recent financial information. This maintenance can be done on either a monthly or quarterly basis. The CFO/controller should set it up. Another consideration would be to "outsource" the task to a consultant. Once you get the expense info, you will need to separate the list into a Fixed Expense portion and a Variable Expense portion.
Also, as part of your break even analysis, you may want to discuss any "What if" scenarios with the Owner(s)/Management. They will be able to provide any direction you need with regards to changes in expenses going forward.
-Break Even Analysis Example-
Sly is considering starting a new business. Sly, an experienced business person and professional in his field of expertise, knows that proper planning is essential to consistent company profits. He wants to see that his company can survive before it is created.
Sly initially scours the internet for the keyword "break even calculator". Unsatisfied with the result, Sly really wants to get his hands dirty. He decides to perform his own break even calculation on paper before he creates financial models.
First, Sly estimates total revenue. He thinks about all of the products and services he would provide which create income. Now that he knows these he thinks about what he could sell them for. He does a little competitive research to find the standard market price for his products. Sly settles on this as a good point to begin his assumptions. He considers his products in reference to how many he can sell a year and decides he will be calculating break even points for each year.
Then, Sly estimates total cost. He thinks about the resources needed to conduct business. Overhead, cost of goods sold, salaries, and other factors are added. Once again Sly assumes the cost of these based on what he sees as the average cost of these resources in the market. He adds these together in regard to each year.
Sly now has his total revenue and total cost per year. Though these are estimations he is satisfied that they are an acceptable starting point. He moves on to subtract these total costs from his total revenues. Sly finds that he actually stands to loose, not gain, money from the business idea he is currently studying. Sly considers scraping his idea but decides to keep his notes and look deeper into the model. Though he has not found the results he is looking for he is pleased that he has performed a proforma break even analysis. In his current situation it is much worse than performing a post-forma break even analysis.
Break even analysis, defined as the studying of the path to the point where a company is neither losing money nor making a profit, is very important to the survival of any start-up business. It can be performed for either products or the business as a whole. The break even calculation can be in reference to pro or post-forma, that is before or after the company has been formed.
Break Even Analysis Explanation-
The break even analysis serves to provide your company with a very important piece of information: "How much revenue does my company need to make in order to break even."
This break even analysis is quite easy to do. The only critical piece of information that you will need to have is a breakdown of the your firm's expenses into Fixed Expenses and Variable Expenses.
Once you have a breakdown of fixed costs and variable costs, input these costs into a template. You will also be able to conduct various "What if" scenario analyses to see how the break-even revenue will change.
Once you are able to arrive at the break even analysis you can show the Owner(s)/Management this metric and make it part of their sales planning. Another idea might be to incorporate this metric into your review meetings. This way your staff can know on a weekly basis if they are on track to at least breaking even.
Break Even Formula-
Break Even Point: Total Revenue = Total Costs
Break Even Analysis: Process-
Accumulate Expense Information
In order to successfully do the break even analysis, the following financial information will need to be gathered and/or created: Current Monthly Fixed Expenses (Dollar Basis), Current Monthly Variable Costs (as a Percentage of Revenue) and any "What if" scenario changes that you would like to consider. Note: This is optional depending on whether or not you would like to conduct a sensitivity analysis.
Depending on the robustness of your financial system, you may or may not have some of the above inputs. As such, it may be necessary to first create them prior to working on the break even analysis.
Once the initial break even analysis has been done, it will just be a question of maintaining it by inputting the most recent financial information. This maintenance can be done on either a monthly or quarterly basis. The CFO/controller should set it up. Another consideration would be to "outsource" the task to a consultant. Once you get the expense info, you will need to separate the list into a Fixed Expense portion and a Variable Expense portion.
Also, as part of your break even analysis, you may want to discuss any "What if" scenarios with the Owner(s)/Management. They will be able to provide any direction you need with regards to changes in expenses going forward.
-Break Even Analysis Example-
Sly is considering starting a new business. Sly, an experienced business person and professional in his field of expertise, knows that proper planning is essential to consistent company profits. He wants to see that his company can survive before it is created.
Sly initially scours the internet for the keyword "break even calculator". Unsatisfied with the result, Sly really wants to get his hands dirty. He decides to perform his own break even calculation on paper before he creates financial models.
First, Sly estimates total revenue. He thinks about all of the products and services he would provide which create income. Now that he knows these he thinks about what he could sell them for. He does a little competitive research to find the standard market price for his products. Sly settles on this as a good point to begin his assumptions. He considers his products in reference to how many he can sell a year and decides he will be calculating break even points for each year.
Then, Sly estimates total cost. He thinks about the resources needed to conduct business. Overhead, cost of goods sold, salaries, and other factors are added. Once again Sly assumes the cost of these based on what he sees as the average cost of these resources in the market. He adds these together in regard to each year.
Sly now has his total revenue and total cost per year. Though these are estimations he is satisfied that they are an acceptable starting point. He moves on to subtract these total costs from his total revenues. Sly finds that he actually stands to loose, not gain, money from the business idea he is currently studying. Sly considers scraping his idea but decides to keep his notes and look deeper into the model. Though he has not found the results he is looking for he is pleased that he has performed a proforma break even analysis. In his current situation it is much worse than performing a post-forma break even analysis.
Monday, April 12, 2010
Looking to Build a Brand?.... or a Strategy?...or Both?
As I work with more and more smaller businesses, including start-ups, it has become obvious to me that some businesses attempt to address underlying business problems through branding. I find that I am not only consulting on branding but also general business strategy and especially the intersection between the two. Given this clear need, this post is about the intersection of branding and business strategy in creating a successful new business.
A very common problem I encounter is businesses that have a product and a manufacturing process but little understanding of the underlying customer need that the product addresses. Businesses should always start with a solid understanding of the customer needs that its products and services can fulfill – functional, emotional and otherwise. This assumes that the business has already identified its primary and secondary target market segments and knows a fair amount about those segments’ needs, desires, hopes, fears, values, aspirations, problems, concerns, shopping behaviors, etc. All of this can be discovered through formal or informal market research. Research techniques are myriad, but often include one-on-one interviews, focus groups, online surveys and discussions with current customers. Another technique is to ‘shadow’ your customers and ‘live the brand’ with them to discover how they experience it.
Another common problem is developing a product or service that does not deliver a superior value proposition to what is already available, either because it is not differentiated in relevant ways from what is already available or because its cost structure demands too high a price for the perceived value.
Sometimes, while the business may understand the customer’s need and have created a superior solution at a reasonable price, it may not be able to easily identify or communicate with the target audience (or be made aware of the event or situation that triggers the need) making the marketer’s/media planner’s job very difficult and sometimes even impossible.
I have said this many times before: a brand promises relevant differentiated benefits to specifically targeted customers and then makes good on that promise in all that it does. Ideally, it promises a benefit (or benefits) that: (a) are extremely important to the target customer, (b) the company is particularly well suited to delivering and (c) that the competition is not addressing. The most powerful benefits to own are often emotional, experiential or self-expressive.
Another common new business problem is being under capitalized, leading to cash flow problems. What may otherwise have been a very successful, profitable business, dies for lack of cash. This can be solved by accurately forecasting cash flow needs and raising enough funds to cover inaccurate cost or revenue estimates or other faulty assumptions or unforeseen circumstances. A related problem is the ability and will to live with low or no income for a few years until the business has a chance to more fully develop.
Choosing the right business model is also important.
What is the long-term profit potential in the product/service category? Is the business scalable? What is the ratio of fixed to variable costs? What is the sensitivity of demand to price? What, if anything, will make your execution of the business more profitable than everyone else’s?
Adaptability is critical. Most successful businesses have reinvented themselves many times until they have landed on a formula that is successful.
Hard work and attention to detail is also extremely important.
And again, I will stress that businesses often start with a product or an idea, but no real understanding of the underlying customer need or purchase/usage behavior. Marketers, when asked to develop marketing for start-ups and other small businesses, must be able to deliver much more than a logo, tagline, brochure, trade show booth or ad campaign. They must be able to help the business understand its markets and its business model and define and deliver upon its unique value proposition.
Another comment: business owners in my experience -- especially doctors, engineers, and other very smart, analytical types -- often underestimate the importance of marketing and the unique skill sets of experienced marketers. This sometime leads to cutting corners where they shouldn’t be cut or second guessing messages or campaigns based upon anything other than the communication of product functions and features.
I have seen businesses that have created superior product functionality but ignored the look and feel of the product (its aesthetic design). What otherwise would have been very successful products are spurned by the target customers for this reason alone. Don’t forget product aesthetic design (and packaging, if appropriate).
Two other areas in which marketers can be very helpful to small business owners: in crafting the optimal pricing and distribution strategies (which can only be adequately addressed in separate dedicated articles).
Last, but certainly not least, newer quickly growing businesses are almost always constrained in what they can spend on marketing and brand building. The brand marketer will best serve these businesses by focusing on (a) the basics (defining the unique value proposition, crafting pricing and distribution strategy, etc.), (b) low or no cost marketing techniques (such as publicity, customer referrals, building ‘buzz’ and highly targeted marketing) and (c) the quickest and easiest incremental revenue wins – identifying and pursuing the ‘lowest hanging fruit.’
Here are the criteria that I use to estimate the potential for a new business or brand:
•Size of market (customer need, total revenue potential) – bigger is better
•Rate of market growth (or contraction) – high long-term growth rate is best
•Market fragmentation – this may be good or bad – requires additional analysis regarding the factors that underlay this fragmentation
•Your unique value proposition within the market – extremely important – be honest with yourself
•Your current or projected share of the market – bigger is better
Market profitability – higher is better
•Market entry and exit barriers – high entry barriers and low exit barriers are best
I hope this helps you as you think about the value of marketing and branding in the context of new business ventures.
A very common problem I encounter is businesses that have a product and a manufacturing process but little understanding of the underlying customer need that the product addresses. Businesses should always start with a solid understanding of the customer needs that its products and services can fulfill – functional, emotional and otherwise. This assumes that the business has already identified its primary and secondary target market segments and knows a fair amount about those segments’ needs, desires, hopes, fears, values, aspirations, problems, concerns, shopping behaviors, etc. All of this can be discovered through formal or informal market research. Research techniques are myriad, but often include one-on-one interviews, focus groups, online surveys and discussions with current customers. Another technique is to ‘shadow’ your customers and ‘live the brand’ with them to discover how they experience it.
Another common problem is developing a product or service that does not deliver a superior value proposition to what is already available, either because it is not differentiated in relevant ways from what is already available or because its cost structure demands too high a price for the perceived value.
Sometimes, while the business may understand the customer’s need and have created a superior solution at a reasonable price, it may not be able to easily identify or communicate with the target audience (or be made aware of the event or situation that triggers the need) making the marketer’s/media planner’s job very difficult and sometimes even impossible.
I have said this many times before: a brand promises relevant differentiated benefits to specifically targeted customers and then makes good on that promise in all that it does. Ideally, it promises a benefit (or benefits) that: (a) are extremely important to the target customer, (b) the company is particularly well suited to delivering and (c) that the competition is not addressing. The most powerful benefits to own are often emotional, experiential or self-expressive.
Another common new business problem is being under capitalized, leading to cash flow problems. What may otherwise have been a very successful, profitable business, dies for lack of cash. This can be solved by accurately forecasting cash flow needs and raising enough funds to cover inaccurate cost or revenue estimates or other faulty assumptions or unforeseen circumstances. A related problem is the ability and will to live with low or no income for a few years until the business has a chance to more fully develop.
Choosing the right business model is also important.
What is the long-term profit potential in the product/service category? Is the business scalable? What is the ratio of fixed to variable costs? What is the sensitivity of demand to price? What, if anything, will make your execution of the business more profitable than everyone else’s?
Adaptability is critical. Most successful businesses have reinvented themselves many times until they have landed on a formula that is successful.
Hard work and attention to detail is also extremely important.
And again, I will stress that businesses often start with a product or an idea, but no real understanding of the underlying customer need or purchase/usage behavior. Marketers, when asked to develop marketing for start-ups and other small businesses, must be able to deliver much more than a logo, tagline, brochure, trade show booth or ad campaign. They must be able to help the business understand its markets and its business model and define and deliver upon its unique value proposition.
Another comment: business owners in my experience -- especially doctors, engineers, and other very smart, analytical types -- often underestimate the importance of marketing and the unique skill sets of experienced marketers. This sometime leads to cutting corners where they shouldn’t be cut or second guessing messages or campaigns based upon anything other than the communication of product functions and features.
I have seen businesses that have created superior product functionality but ignored the look and feel of the product (its aesthetic design). What otherwise would have been very successful products are spurned by the target customers for this reason alone. Don’t forget product aesthetic design (and packaging, if appropriate).
Two other areas in which marketers can be very helpful to small business owners: in crafting the optimal pricing and distribution strategies (which can only be adequately addressed in separate dedicated articles).
Last, but certainly not least, newer quickly growing businesses are almost always constrained in what they can spend on marketing and brand building. The brand marketer will best serve these businesses by focusing on (a) the basics (defining the unique value proposition, crafting pricing and distribution strategy, etc.), (b) low or no cost marketing techniques (such as publicity, customer referrals, building ‘buzz’ and highly targeted marketing) and (c) the quickest and easiest incremental revenue wins – identifying and pursuing the ‘lowest hanging fruit.’
Here are the criteria that I use to estimate the potential for a new business or brand:
•Size of market (customer need, total revenue potential) – bigger is better
•Rate of market growth (or contraction) – high long-term growth rate is best
•Market fragmentation – this may be good or bad – requires additional analysis regarding the factors that underlay this fragmentation
•Your unique value proposition within the market – extremely important – be honest with yourself
•Your current or projected share of the market – bigger is better
Market profitability – higher is better
•Market entry and exit barriers – high entry barriers and low exit barriers are best
I hope this helps you as you think about the value of marketing and branding in the context of new business ventures.
Saturday, April 10, 2010
Utah 100 Lunch 2009
Some of the amazing folks at Universal Accounting celebrating their invitation to the Utah 100 fastest growing private companies luncheon event. Great keynote fromFormer Utah Gov., John Huntsman Jr.Friday, April 9, 2010
Change Your Thoughts - Your Life Will Follow!
" The significant problems we face cannot be solved at the same level of thinking we were at when we created them" - Albert Einstein
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