Business Coaching

Entrepreneurs: How Much Should You Earn?

Yesterday I started answering the question I am often asked "How much profit should I make from my business?" by looking at the issues surrounding profit expectations and I introduced you to the lower profit expectations trap in Business Owners & Managers - Profit Expectations.

Today I am going to consider what it is that an individual business owner or entrepreneur brings to a business.

Common Mistake Made By Entrepreneurs

Business owners think they have a job.

Michael Gerber covers this issue extensively in his book, the E Myth Revisited when he revealed that too often entrepreneurs create a job for themselves working IN the business rather than focusing on creating a profitable business which can be sold by working ON the business.

Michael Gerber went further by splitting the business owner into three different roles, the technician (who does the work of the business), the manager (who manages other people doing the work) and the entrepreneur (who builds the business).

What Does An Entrepreneur Bring To A Business?

Every business is different but there are at least five essential components to entrepreneurship:

1. Ideas - a clear vision of the future and ideas for turning the dream into reality
    
2. Management skills - the ideas need to be implemented effectively and efficiently
    
3. Time and commitment - the focused time the entrepreneur is prepared to invest in the business.
    
4. Money - it often requires an initial investment to build a business to a level where it can generate cash on an ongoing basis and the entrepreneur needs to be able to provide or raise the cash.
    
5. Relationships and reputation

You may be tired of hearing that 50% of small businesses fail within the first two years and 80% within five years (source Michael Gerber) but each of these factors play a role in contributing to the failure rates.

The Power Of Ideas

If the idea is not good the business will not get off the ground. In the UK, the BBC has a TV show called "The Apprentice" as a group of wannabees compete to have a £100k a year job with entrepreneur Sir Alan Sugar.

Last week's show featured a particularly bad idea. The two teams were asked to create a new celebration day for the greetings card industry and one team came up with the Environmental Awareness day when we were also supposed to send people we know a paper card encouraging them to conserve the world's natural resources.

The Apprentice team thought we should use resources to encourage people not to use resources!

Not exactly sensible and not fun either with the lecturing tone of the cards they designed.

But other ideas are great.

For example, who cannot admire the idea of Starbucks which totally changed the concept of coffee and has swept across the globe. I don't get the Starbucks concept myself but I admire the idea which has inspired so many people to spend a small fortune on coffee.

Management Skills

In Business Failure and Bad Management, I explained that insolvency experts believe the overwhelming cause for business failure is that the management team is just not up to the task. Too much talk, too little action. Too many bad decisions and not enough good ideas.

Management skills make a huge difference and that's why the business management support industry is thriving from the thousands of books through to extensive ongoing coaching and consultancy programs.

Time and Commitment

Many business owners I talk to are amazed just how much there is to do when you are starting a new business and how many hours it needs to do everything that must be done.

Better management skills and experience can make life easier (you waste less timing making mistakes and then having to recover) but clear goals, prioritisation and time management discipline are essential.

But you can outsource tasks which are outside your strengths and you should delegate to any staff you have so that your hours are kept within reasonable limits.

Money

It seems that you need money to make money and it is certainly much easier to spend than it is to earn.

Many businesses make a loss in their first year although it is a concept I am not keen to encourage. If you plan for a loss, it creates a ready-made reason for you to lose money.

More justifiable is that a growing business usually needs cash to finance the business. You may need to buy equipment and stock and your customers are probably going to expect to pay you after your suppliers expect to be paid. The bigger your business gets, the more "working capital" is needed and that's why fast growing businesses are often profitable but need to keep raising extra finance. (See Secrets Of Getting Your Bank Manager To Say Yes if you need a bank loan)

Relationships and Reputation

I thought about separating out relationships and reputation but your reputation is at the very centre of your ability to build strong relationships with customers, suppliers and other people who can help you to build your business.

Both Jay Abraham and Jay Conrad Levinson (Guerrilla Marketing) emphasise the importance of working with other people.

Competitor Performance - Public Benchmarking Unavailable

The best way to look at business in terms of likely potential would be to be able to compare your key performance measures to your main competitors.

Imagine learning that an average competitor makes £100k profit per year before owners remuneration but your business only makes £30k. Imagine the power of knowing that the best competitors have sales of £150k per employee while your business generates £65k per employee.

That would make you think hard about your business and the methods you use in your business wouldn't it?

Unfortunately this information isn't publicly available in the UK which I regard as a disgrace. I don't agree with the abbreviated accounts that can be put on public record because it means that one business can't find out how another business is performing. Some people regard this confidentiality as a benefit but I see it as a curse.

Sometimes a trade association will carry out a benchmarking study and I urge you to take part.

The Principles Of Opportunity Cost and Alternative Cost

My views on how much you should earn from your business are based on the cost of opportunities and alternatives.

The opportunity cost of doing A is usually defined as the gain you have foregone from the next best alternative.

The alternative cost is the cost of providing the same product or service from a different source.

So how does this work?

Well if you are working 60 hours a week on your business but you could go out and get a job which would pay you £60k per year then if you follow the opportunity cost principle, you need to be thinking of your business generating more than £60k.

Even if you appreciate the fringe benefits of "being your own boss" you should start putting values on how much you are "prepared to pay.

Next is the alternative cost approach and the acceptance of the 80/20 rule. In virtually all situations 80% of the results come from 20% of the efforts.

Entrepreneurs should focus on what they are good at and do more of that and delegate/outsource the routine tasks that clutter up the day.

So if you are doing your own invoicing and book-keeping but it's taking 10 hours of those 60 hours per week you work then you have a choice.

You can spend about £8k per year and release those 10 hours, either to give you a better work life balance or reinvest them in your sales and marketing.

Or if you keep doing those 10 hours of book-keeping, you have to accept that you don't deserve to be paid any more than the £8k alternative cost.

These principles ripple through the other areas as well.

In the money section, you can use your own money, borrow from a bank or if the business is seen as too risky, raise it through a business angel. But these alternative sources give you an alternative cost to include in your own expectations.

You can hire a manager to build the business but you have to be prepared to pay for the right quality, you can hire a business coach and commit the personal time to develop your business building skills or you can accept that your business will be limited by your own management skills.

In essence you need to be setting the target of earnings based on:

1. A return as an employee for the technical tasks that you haven't out sourced or delegated
    
2. A return as a manager for the time spent managing your team and the business
    
3. A return on the money invested and the risk you have taken based on what it would cost you to raise that finance elsewhere
    
4. Your entrepreneurial premium or discount

And bounded by your own opportunity cost of what you can earn elsewhere.

The challenge then is whether you have a business which can meet these earnings targets, how you are going to improve the business so that it does and what you will do if the business is unlikely to meet the target.

It could be that you have to accept that your current business is wrong for you.

There Is No Substitute For Good Ideas

The true making of an entrepreneur and the element that is difficult to put a value on is the premium for seeing the good idea and having the courage to take advantage of the opportunity.

It doesn't take a great idea to build a reasonable business. There are many "me too" businesses that have little differentiation from their competitors but are just that little bit better in the important areas. A little better at building relationships and closing sales. A little bit more efficient. A little but ahead of the main market in anticipating new trends.

But it takes a great idea to build a great business. It is the ability to come up with ideas which create new areas of customer value and commit to their implementation which turns entrepreneurs into millionaires and billionaires

Everything else can be bought in but there is no substitute for the ideas. Tomorrow I will look at how you can find ideas to create a business that is differentiated.

To Your Success

Paul Simister

Your Profit Coach, business coaching for customer focused entrepreneurs

© Planning & Control Solutions Ltd 2008 All Rights Reserved

Business Owners & Managers - Profit Expectations

A question I am often asked is "How much profit should a business owner-manager make from their business?"

There are no hard fast answers but there are a few guidelines which I use to help people base their expectations for profit.

Why Are Profit Expectations Important?

The simple answer is feedback.

Having a clear expectation of how much profit you expect to make from a business gives you as the owner-manager the opportunity to answer the following question:

"How am I doing? Am I performing up to standard?

There are two vital reasons why every business owner should ask themselves this question:

1. By being brutally honest with yourself it forces you to address your strengths and weaknesses.
   
   Can you make better use of your strengths and make them even stronger?
   
   Can you find a way around your weaknesses (delegation or outsourcing) or can you correct a fundamental weakness?
   
   It can even make you question whether a "strength" is really a competitive strength. You may believe you are a good sales person and rate selling skills as a key strength but are you better than your competitors?
   
   You may be good but if they are better, good is not good enough. It is only through reflection that you recognise that a personal strength is a competitive weakness.
    
2. The question breaks the lower profit expectations trap.
   
   You are told to set goals by guru after guru and while some emphasise that they should be achievable, the general view is that they should stretch you rather than be easy to achieve.
   
   This sets you up to accept goal failure as the normal way of life.
   
   It does make sense although it may sound crazy.
   
   Let us assume that you are about to launch a new product on the Internet. You are pretty certain that you can sell 100 in the first year. You calculate that if you can get 500 leads and convert 20%, then that would give you your 100 sales.
   
   So you could set 100 as your goal and just do what you are planning to do.
   
   Or you could set 120 as a little more demanding goal. It puts you under a bit more pressure but you believe that with a fair wind it is achievable.
   
   It would only take 600 leads instead of 500 or a conversion rate of 24% rather than 20%.
   
   So at the end of year 1 if you sell 114 you can look back and think "That's not bad at all. I didn't make my goal but I sold more than I thought I would. It's time for a celebration."
   
   I can't criticise this performance. You deserve to celebrate but you haven't "maxed out" and perhaps you should be critical of yourself.
   
   Now suppose you set a goal of 250 sales in the first year.
   
   You look at it and you know that there is no way you can possibly achieve 250 sales with the plans that you have.
   
   So you start thinking about other ways that you can generate extra leads. Perhaps you start a pay per click campaign on the Internet. Perhaps you create an affiliate program to reward other people for selling your service.
   
   But then you also start thinking that if you are improving your lead generation, you could also improve your lead conversion.
   
   So you buy a book on copywriting and you learn how important the headline is, how you need to talk to one person at a time about their issues and solutions and how you need make a compelling offer and reduce the risk of the purchase.
   
   After reading the book, you know much more about good copywriting and you now have the confidence to hire a copywriter and make it clear what you expect.
   
   With these improvements in place, you are sure that the 500 leads originally expected is much lower than it could be so you set your target at 1,000. Since your sales letter is much more compelling you raise your lead conversion forecast to 25%.
   
   Now you set the goal of selling 250 and believe this is achievable.
   
   At the end of the year, you find that you have sold 235 copies. Still below your new goal of 250 but a whopping 135% above your original goal because you have stretched your expectations and opened your mind to other ways of working.
   
   Unfortunately many small business owners don't thing like this.
   
   They don't identify the drivers of their performance (in this case leads and conversion rates). Many owners of small businesses focus more on problems than opportunities and possibilities but this creates lower profit expectations.
   
   I hear things like "It's been tough this year and next year will be even worse. [insert reason for lower expectations]. Hopefully we can make the same profit."
   
   The reasons for the lower expectations can vary.
   
   Now the easy excuse is "It's the economy. I think we're heading for a recession." but it could just as easily be "XYZ competitor has brought out a new product" or "Andy our best salesperson has left and it's going to take the new guy Steve some months to get up to speed."
   
   At the end of the year, it's no surprise but the "goal" of matching the current performance hasn't been met. It may have only been missed by 10% but these 10% compound over the years.
   
   In Year 0 profit = 100%
   In Year 1 profit = 90%
   In year 2 profit = 81%
   In year 3 profit = 72%...
   
   It is these lower expectations (the profit expectations trap) which condemn many small business owners to working at near to subsistence levels. Because they don't aim higher, they don't open up their minds to new ways of working.

So What Can Be Done About Changing Expectations?

I will be looking at this in tomorrow's article Entrepreneurs How Much Should You Earn [someone told me that my postings were much too long so I'm not trying to find convenient break points].

To Your Success

Paul Simister

Your Profit Coach, business coaching for customer focused entrepreneurs

© Planning & Control Solutions Ltd 2008 All Rights Reserved

Where Can I Find Marketing Coaching For My Business?

"Paul I have a small business selling cutlery, crystal, silverware and gift-ware and I need some marketing advice. Can you help me?"

This is just the call I like and especially from a business that I can relate to easily. As a Certified Guerrilla Marketing Coach I should have been jumping for joy.

Unfortunately my coaching services are only for UK based businesses - professional indemnity insurance and liability issues stop me expanding overseas. I don't have the time or resources to do the proper investigation and the UK offers more than enough opportunity for my coaching business.

That led to the obvious question.

"Where Can I Find Marketing Coaching For My Business?"

I explained that there were two solutions:

1. Buy a recommended marketing development program which provides a structured approach to learning with guidance on how to develop your marketing skills.
    
2. Find a marketing coach and, biased as I am, I believe the best small business marketing coaches are Certified Guerrilla Marketing Coaches.

Marketing Development Programs

I recommend three programs that offer high impact marketing advice at a low cost.

1. Guerrilla Marketing Toolkit - a great multi-media six week program to help you to kick-start your marketing the Guerrilla Marketing way.
    
2. The Guerrilla Marketing Association - this is not a structured program but a massive resource of small business marketing advice, audio recordings and videos of the Guerrilla Marketing boot camp.
    
3. The Small Business Growth Club - a great development program that allows you to follow a structured program or an ad-hoc as required, priority based approach from Scott Hallman. This program also offers advice across a wider range of business issues.

If you have a bigger business and you can afford to spend four figures, I recommend that you also consider programs from Peter Thomson, Rich Schefren (for internet marketers), Chet Holmes and Michael Port (if you provide professional services).

Finding a Guerrilla Marketing Coach

If you want or need the personal one to one attention and accountability that a coach provides, then this will cost more but for some, it is the way that they can achieve the most.

I have emailed my associates on my Guerrilla Marketing Course to make sure that I have their details on file and there is a special Guerrilla Marketing Coaches forum where I could post opportunities

I am also happy to list Certified Guerrilla Marketing Coaches on this page so if you would like to email me at paul@plancs.co.uk, we can put the arrangements in place.

How Much Are Good Ideas Worth?

Some people are shocked by the idea of spending a large amount of money on training and personal development but just one idea or a different way of looking at your business could make a massive difference to your income.

To Your Success

Your Profit Coach

Paul Simister

Business coaching for customer focused entrepreneurs

Tips To Start A Home Based Business

Yesterday I received an email.

"Hi Paul,

I found your site whilst searching for information about...  Currently I work as a teacher and am thinking about a career change...Your advice would be greatly appreciated.

Kind regards

Alison"

Now that got me thinking.

Where do people go if they are bored with their current jobs, they are tempted by the lure of self employment, being their own boss and want to be an "entrepreneur"?

And in particular where do people go if they are not sure what they want to do but they know they want to start a home based business?

It's one thing to have become fired up with passion to right a wrong that you believe represents a opportunity to do good and make a large amount of money. These are the people that Michael Gerber wants to help in his "Awaken the Entrepreneur Within" book due in March 2008.

But what do people do who want to move on to something new but aren't sure of what it is that they really want to do.

Finding The Right Opportunity For You

A few weeks ago I posted an item about ideas for starting a new business so it's worth taking a look at that to see if any of the items listed appeal or inspire you.

But you don't want to have one of those "out of the frying pan, into the fire" moments.

Yes you are bored with your current job, but if you are going to cope with all the uncertainties of being self employed after enjoying a nice reliable salary, then you need to find something that you love.

Take a good look at your skills, abilities and talents.

I was reading a Business Summaries review of "Discover Your Sales Strengths" last night (blog posting will appear soon) and one of the key questions for success was asking yourself how much you agree with this next statement:

      At work I get to do what I do best every day

It's only natural to enjoy doing what you do best and to do best what you enjoy.

It doesn't always work but if you have passion, commitment and belief in what you do, it will shine through in every contact you have with any customer, prospective customer or potential referrer of customers.

I'm sure that you have noticed that I love business and understanding what makes a business tick and how it can be improved. It's no chore for me to read a well written business book.

Investigating the Business Opportunities

Hopefully you have identified a few things that you enjoy doing and that you can do much better than the average person.

The next stage is to discover whether there is any money to be made. You don't want to find yourself trying to sell snow to the Eskimos and being surprised to learn that they are over-supplied and didn't really have a demand for it anyway.

The article I wrote on preparing for the Dragons Den is a very useful guide for assessing business opportunities as it asks you to look at the business opportunities in terms of three main risks:

• Is there strong customer demand? If no one wants to buy what you sell, the business is not going to succeed.
     
• How strong are the competitors? With the massive presence of Amazon, it's probably not the time to think about starting a book or music website unless you can find a really specialised group of people where their wants and needs are not catered for.
     
• Do you have the capabilities to succeed? In Michael Gerber's legendary book, "The E Myth Revisited" he talks about the problem of waking up with an entrepreneurial seizure (a compelling desire to start a business) when you know how to do the work but you don't know how to build a business.
     
  My Eight Pillars Of Business Prosperity coaching model outlines the areas that you need to do well to succeed but on top you have the burden of all the compliance issues (accounts, tax, health & safety, business law, employment law...the list seems endless).
  
  But it's not just about capabilities. It's also about commitment, your health, the support of your family and friends and your own pig-headed determination to make it happen.

What Next?

OK you've found an opportunity and you've checked it in terms of demand, competition and your own capabilities and you still want to go ahead but what do you do next?

First stop and take a deep breath.

Calm down.

I can feel the pent-up emotions of excitement and fear from here but don't you feel so alive after being repressed by that dull job that paid the mortgage but didn't give you much challenge or satisfaction?

You are about to start on a journey that could make or break you.

Thousands of people every year launch a new business that is the start of a major success, many more build nice life style businesses - fewer hours, more convenient working times, avoiding the rush hour and a reasonable income but some go badly wrong.

Far too many businesses fail every year.

For some people it just means that their income wasn't as high as they wanted and they needed to live on their savings.

For others, who made big investments or commitments, it means that their life savings are wiped out and possibly things became so bad that they had to sell their homes and become bankrupt. Fortunately this is unlikely in a low cost home based business.

It's Time For A Business Plan

Boring and predictable that I should say that it's time for you to start a business plan but in my view it's absolutely essential.

It's far better to lose money on paper than in real life.

I recommend that you take a look at the business plan resources on this blog.

If you are worried about the numbers then either

a) buy some software like Business Plan Pro (UK or US versions - remember things like VAT/sales taxes are different) or

b) try to find someone with some formal accounts training who can help you. I did the numbers for my Dad's business plan when I was a first year chartered accountancy trainee.

Try to keep things fairly simple but you do need to produce a profit forecast starting with your sales, a cash flow forecast and a balance sheet forecast (it may mean more to your bank manager than to you but it checks that the other two forecasts are consistent).

At this stage it is important that you don't get bogged down in the numbers and concentrate on planning the other aspects of your business:

• What customers are you targeting? Why do they buy or why should they buy? How much do they buy? What price are they prepared to pay?
     
• What do you need to provide the product or service? What equipment including a computer? A vehicle? What materials and do you need to stock anything? Where can you buy from at the best combination of price, service and credit? How much space do you need?
     
• Who else needs to be involved? Can you run this business idea on your own or do you need to take on a partner or staff?
     
• How are you going to promote your business?
     
• What risks are you prepared to take to grow quickly or if you need to borrow money? There is no point planning big if you need to borrow but you are not prepared to put your personal assets and those of your loved ones on the line.

Until you answer these questions, your numbers won't make much sense and until you've got your first happy, satisfied customer you can't show that you have a business that could work.

Whatever you do, don't make your numbers fit. It's easy to make money on paper.

By this I mean don't fall into the changing assumptions trap. Instead of three new customers in month three, you plan to get five in month two. Instead of a first order for £100, customers buy £250. Instead of waiting six months before they come back and buy again, they will return after three months.

Hey presto! A flourishing business and you're on your way to be the next Richard Branson...or perhaps not.

Keep your targets achievable and make sure you believe them and are committed to making them happen.

Financial modelling is useful for understanding how sensitive performance is to your key variables. It helps you to focus and set priorities but please don't fool yourself.

Managing Your Finances

First I recommend that you get your own personal finances in order.

It will take time for your new business to get up and running and you don't want to be wasting money paying high interest rates on credit cards and store cards.

Look closely at what you spend and see what you can stop. While you were an employee living on a guaranteed salary you could splash out on all those little luxuries because you knew where the next pay cheque was coming from. As a small business owner, you have new responsibilities and aspirations and it has to stop.

Don't get me wrong.

You can still have the luxuries but you need to take the approach that you will be spending from profits that you have earned rather than spending your future earnings.

It is often tough at the start. It takes longer to get those first few customers or so that you get a track record you may decide to do some jobs at a low price or even free. You need to be prepared to see your personal spending go down before it goes up.

On the business finance side you need to do three things:

1. Record everything - Book-keeping is dull but it is essential and you don't want to find that you have spent your own money but you can't remember what it went on and therefore you can't claim it back from the taxman. Consider finding a virtual book-keeper if you really can't face doing it yourself or you know that your time is better spent elsewhere.
      
2. Measure and report everything - If you know your numbers, you know your business. Understand where customer leads come from, calculate how much it costs in time and effort to generate leads from each source, monitor your sales against your business plan, know how much money you've got in the bank and chase your customers for payment.
      
3. Question everything - You will find that it is much easier to spend money than earn it so be your own Finance Director. Ask yourself whether you really need to spend that much money now or whether you can spend less or spend later. Be prepared to say "No" to yourself. Focus on the consequences - the technical term is cost benefit analysis - and the likelihood of success and any guarantees attached to the spending.
   
   One of the biggest traps when you are starting is printing costs which reduce sharply as volumes increase. However it is an easy mistake to order large quantities because you've convinced yourself that you are saving money only to find that you throw most of it away unused. I'd recommend that you delay everything other than some nice quality business cards until you are sure about your marketing message and you have proven that customers are willing to pay the price you want.

For further guidance on Finance and what not to do, I recommend that you read my posting 8 Common Finance Mistakes That Could Cost You A Fortune.

You will see that I have strong views about the myth that all small businesses lose money in the first year. Think like that and you give yourself an easy excuse for poor performance.

One of the critical advantages about working from home is that it keeps your costs down and the closer the relationship between sales and profit the better.

Don't rush into renting an office even if you would like a posh address. You can have meetings with prospective clients in hotel lounges and coffee bars. Be proud of the fact that you are working from home because it is a sign that you are determined to make your business succeed.

The legal compliance issues of accounting and tax is complex but important. Find yourself a good local accountant and he will help you set up your business in the best way including whether you should be a sole trader or form your own limited company. I will be posting an article about how to find an accountant soon.

Marketing Your Home Based Business

A few weeks ago I wrote an extended article with marketing tips for a home based business.

Just like this article it was started by someone asking me a question. I spent about 90 minutes on the phone to her with follow up emails - all for free - before I decided that I needed a top quality article for small business marketing to point people at.

Just click on the marketing tips link to read it.

You will see that I do recommend several high value, low price marketing programsyou need to spend money to save money because I believe that this is an area where .

I have commented on someone else's blog today when he asked which was more important - market planning or market action?

• Planning without action will mean that there are no results. Nothing happens.
     
• Action without planning means that you could be wasting a lot of money trying to tell the wrong prospective customers about the wrong products in the wrong way and at the wrong time.

As a start up business, your resources are likely to be small and you can't waste them so you don't have a choice - you have to focus on proper marketing planning and effective action. It was Peter Thomson who reminded me that "proper planning prevents particularly poor performance".

Your marketing will generate leads or prospective customers to contact you but the next stage is turning those leads into orders.

Improving Your Selling Skills

Accountant, marketer, now salesperson. Is there no end to the skills that you will have to master to make your business the success you want it to be?

Don't expect to convert every contact into a paying customer at the first contact.

If you do, it probably means that your prices are too low but you do need to make sure that some of your contacts turn into customers on a regular and predictable basis.

You do that by strengthening your selling skills and through persistent follow up.

First ditch everything you think you know about the stereotype of a salesman - a smooth and fast talking manipulator, liar and cheat, only after one thing and determined to get it.

The best sales people do more listening than talking. They build relationships. They know that the profit comes from repeat business rather than a one-off deal and that only happens when the customer is happy.

Take a look at my Sales Training pages and in particular the sales training: the best sales system. You need to find a sales approach that you feel comfortable with.

It All Depends On You

When you were employed you probably had a team to share the load but now your business success depends on you. Luck may help or hinder you but the main determinant of your success will be you, your attitude and commitment.

Please see my articles posted about Personal Improvement.

In particular you need to be clear about your goals and your priority actions to reach those goals. Next you should plan the use of your time around those priorities and be very disciplined about sticking to your plan.

There are many things that you could do, a lot that you should do, some that you must do because it's the law and some that will determine whether you succeed. Those are the ones that you need to focus on, but often these important activities seem less urgent. You must make time for them.

I find that the best way to think about priorities is to ask yourself about the consequences of doing or not doing something and the time it takes:

• "If I do this it should bring me three new clients?" That sounds like worth doing but ask yourself about the probabilities of success and the time required.
     
• "If I don't do this it will cost me £1,000." Do it if it will take 3 hours, don't do it if it will take three months of solid work. Some times you are better off spending more to earn more.

Conclusion

Starting and running a small business is very hard working but if you are successful, it will be among the most rewarding things you can do.

This is your chance to create something special out of nothing.

Please do have a good look around the blog. It is growing quickly, sign up to the newsletter and come back regularly to see what else you can learn.

I am committed to bringing you the best possible advice and helping you to build a bigger, better business with more profit.

Good luck.

To Your Success

Your Profit Coach

Paul Simister

Business coaching for customer focused entrepreneurs

Marketing Tips For A Home Based Business

Last Friday the phone rang.

"Paul I am trying to expand my home based business providing office services. I've spent a lot of money on Yellow Pages adverts but the telephone isn't ringing. What can I do to market my business? Do you have any marketing tips for me"

Now I realise that there are different types of home based businesses but if you provide part time services and you only charge £10 to £20 an hour then you know that money is tight and you can't spend a lot of money for traditional marketing activities.

This guide is intended to help and give you some direction so that you can learn more about marketing.

Download Marketing_Tips_For_A_Home_Based_Business.pdf

"But I don't want to learn about marketing"

Sorry but if you want to be successful; you probably don't have a choice.

Being good at marketing isn't a "nice-if" but a "must have."

It's a bit of a Catch-22.

If you don't master marketing then, unless you are lucky, you are probably not likely to earn enough to be able to pay a professional marketing coach or consultant to do it for you.

If you don't learn about marketing and what makes good marketing effective and bad marketing a waste of money, you are likely to fall victim to the "sell on hope" salespeople.

These are the people who promote various advertising and sales promotion techniques where it sounds good but there is little likelihood of success and no follow up to make sure that you do get the results you need.

Marketing isn't difficult but you have to find a way to combine increasing your understanding with effective action.

I will say more later but I know that for many home based businesses, your funds are limited so I have two superstar names for you with programs designed to fit your pocket.

• Jay Conrad Levinson & Guerrilla Marketing
     
• Scott Hallman & the Small Business Growth Club

But first let's go through the pointers that I can give you quickly.

These tips could make a world of difference to your business on their own.

Marketing Starts With Your Current Customers

1. Make sure that you provide the best service you can for your current customers.
   
   Set high standards and have an absolute commitment to providing what they think they are buying and a commitment to giving your customers great value for money.
      
2. Can your current customers buy more?
   
   This is not spinning out existing work for longer so that they pay you more. That would be naughty and cause you to lose a good client.
   
   Instead I am talking about finding out if there are other tasks that you can do for them. Ask if there are other areas related to your work that give them problems.
   
   This may be something that they are doing for themselves, something that they should be doing but don't at the moment or something that other people are doing but you can do it better or cheaper.
      
3. Ask your customers to give you a glowing testimonial.
   
   The best testimonials start with the problem your customer had before you started, go on to explain how easy it is to work with you and then explain the benefits that they have received from your work.
   
   The testimonials should also be clearly named - "Mr J, London" doesn't create the same impact as a real name, company name, telephone number or even a photograph and audio/video testimonial.
   
   The aim is to give new prospective customers and clients a reference that connects with how they are feeling at the moment (the problem and all the bad issues connected to it), how easy it is to change and all the good things that will happened when they too become a customer.
   
   You will find that people are much more receptive to people saying something like:
   
   "I didn't know where to turn before I contacted Paul. But it was so easy to start the coaching, and now that I have been coached for six months he really keeps me focused on what I have to do and my profits have already jumped 85% after years of struggling to earn enough to pay for the bare necessities."
   
   than
   
   "Paul is great and can help you to increase your profits."
   
   It's even worse if there are no testimonials so that you are saying "I am great..."
   
   I recommend that you also ask your customers if they are prepared to back up their testimonial with a telephone reference for any serious potential customer. Don't worry, because you've done a great job and provide real value for money, the vast majority of your customers will want to support you.
      
4. Ask your customers for referrals
   
   People often know people like themselves. A graphic designer will know other graphic designers, an accountant knows other accountants and small business owners know other owners of small businesses.
   
   If your customer says that you have done a great job for them, it makes it an easy introduction to people they know who may have similar problems.
   
   Can you find a way to reward a customer who gives you a referral that turns into business?
   
   It depends on the value and frequency but a thank you is always appreciated and it's excellent practice to tell the person who gave you the referral how you got on.
   
   If you won the business the thank you makes the referrer feel good. If it was the wrong type of lead, it gives you the chance to still thank them but also to teach them  more about the right kind of potential customer for you in the future.
    

Contacting Your Old Customers

I would like you think about your old customers as a potential source of profitable opportunities (assuming that you didn't part on bad terms).

According to Jay Abraham, there are only three reasons why customers stop buying:

1. They have out-grown your products or moved away.
      
2. They had a disappointing experience and were upset with how you treated them. This opened the door for a competitor to sneak in. It may have looked like a price-based switch but deep down, poor service or a feeling that you didn't care was probably the real cause.
      
3. Something broke your former customer's routine and they lost the habit of buying from you.

The first kind may not be the obvious source for extra business but they could be a great source of referrals.

Remember, they were very happy with your service but they stopped buying because they no longer had a need for what you sell. That doesn't stop them knowing other people who do want and need your services.

Another Jay Abraham concept is called the moving parade. Basically you have to recognise that people's needs change and a "No not now" is not a "No not ever".

Suppose you sell telemarketing services to professionals and one of your consultants stops buying for the simple reason that he has taken on a very big project. He doesn't need any more leads so he stops buying telemarketing from you.

But that big contract will come to an end in six months, one year or two years time. At that stage the consultant has a choice - come back to you or look for someone new.

Don't you think that he's more likely to stay loyal if you have kept in contact and shown that you are interested in his well-being?

The second reason people stop buying from you is because they are unhappy with your service.

This may be due to a misunderstanding, an unfortunate incident that was out of your control or you may not even recognise that you have fallen below their unspoken expectations.

You are unlikely to hear anything but you don't want to let an unhappy customer stay an unhappy customer.

First they are likely to tell far too many people.

Unfortunately people are likely to complain to friends and colleagues far more readily than they will tell you that a problem even exists.

This can make these dissatisfied customers very difficult to identify unless you keep a very close eye on who is buying and who has stopped. When you have identified that someone has stopped buying, contact them. Show them that you care enough to find out why.

There is a surprising benefit to having a customer with a service problem although I don't recommend that you deliberately create issues for people to complain about.

When a customer has a service problem, you have the chance to show the quality of your guarantee and your commitment to customer service. Done well you can turn a problem into a major benefit.

To a prospective customer, guarantees are just nice sounding words until you have to use them.

But when something goes wrong and you try to take up the guarantee, you really find out what the company is like.

A problem solved can turn your customer into a raving fan and advocate. Your word and guarantee have been proven in practice. There is a good chance that you will get their business back and they may even recommend you widely to their circle of associates.

Unfortunately it doesn't always work but by recognising any issues, apologising and offering to make amends the worst you can do is to turn a bad situation into a neutral position. No gain but no pain either.

Understand Your Market

If you need to find new customers for your home based business then you need to take a good hard look at your prospective clients and understand

• Just what the common problems are,
   
• How it affects them,
     
• How willing they are to pay to have the problems taken away,
     
• How much they are prepared to pay,
     
• What services you can provide,
     
• How you can communicate effectively

While I believe that you should learn from your own buying patterns, motivations and issues, one of the worst things you can do is to assume that your customers are just like you.

First of all you are an expert in what you do so what seems easy and obvious to you may seem very complex or daunting to a potential customer.

You know that you are committed to doing a great job, they don't.

People worry about buying help that makes them even worse off. To help reassure these prospects you should look for ways that you can take on the risk. If thee are problems you bear the cost rather than your customer.

I recommend that you look at how other businesses use a risk reversal strategy and see how they guarantee customer satisfaction. Try to learn from your own emotions when you see a money back guarantee or a free trial offer. Does it make you more willing to buy?

Other market research questions include:

• What type of people or businesses are your typical customers?
   
• Where do they live and where do they go regularly?

Look at your local competitors:

• What do they offer? Is it better, worse or the same as you?
     
• How do your competitor's prices compare with yours?
     
• Do they specialise in particular services or types of customers?
     
• How does their geographical coverage compare to yours?

Your aim during your market research is to find out exactly what it is that your customers want but also to find the easy opportunities in areas where there is less competition or where your weaker competitors are based.

Once you've identified who you will target and where they are you can move into your two main marketing strategies:

1. Helping target customers to find you when they are looking for the service you offer.
      
2. Creating the need or desire for your service if people aren't actively looking.

Helping Your Prospective Customers Find You

Ask yourself where do people look and how can you encourage them to call you and not your competitors?

• Yellow Pages?
  
  How can you make your advert stand out and encourage a prospect to call you? Your advert is surrounded by all your competitors, all shouting for attention so it has to connect with what your customers want.
  
  Analyse the existing adverts. How big are they? How many are in colour? What information do they include? Which advert appeals to you most.
  
  Now go and take a look at other services that you don't know every much about and imagine that you were a customer. Try to identify what attracts you to a particular advert. Which do you read or which do you pass over? Which do you read and reject and which would you call? Look for reasons why. Ask your friends to do the same exercise and compare results.
  
  Take notice of whether your competitors are advertising and if possible go back over several years and look at their adverts. If your competitors regularly advertise, then the Yellow Pages looks to be a great source of leads. If they don't advertise then it's probably not an opportunity for you. Believe me, businesses will have tried it and if it worked, they would still be advertising.
     
• Local newspapers?
  
  Tests show that regular small adverts are better than the occasional big advert. People will see your advert when they don't even realise and over time it gradually creates name recognition.
  
  Then, when they are looking for your service, they will see your advert and think "I've heard of them so I'll give them a call."
     
• The Internet?
  
  Make sure that your website can be found on the front page of the popular word searches. This is quite a complicated area but the basics are simple. Unfortunately too many website designers aren't interested in helping your website to be discovered. Take a look at Nikki Pilkington's book 299 Steps To Website Heaven as an easy to read guide.
     
• Headlines and copy
  
  You have two requirements - to attract the attention of your prospects and then to persuade them to contact you.
  
  You attract their attention by using a great headline.
  
  Don't try to be clever or cryptic. It only take a second to decide whether you will look at something and read it in detail or move along to the next option.
  
  Shout out the main benefit ("Debt problems solved") or the problem ("Chronic back pain!") Your job is to make sure that people in your target market notice the advert in the split second they scan the page and then read it.
  
  Once you have their attention then your copy needs to answer the question "what's in it for me if I contact you?"
  
  Explain how someone will benefit from buying your product or service and what makes you better than your competitors?
  
  Your copy should be written from you to just one person. While hopefully many people will read your advert, each person read it as an individual.
  
  Write about your customer and not just about you. It's important to build credibility but your prospective customers are interested in what you can do for them and not how great you are.
  
  Don't leave it up to your prospective customers to turn features into benefits. You may have great qualifications but what does it mean to a customer? Do you have special skills so that you can do something others can't or perhaps it means that by buying from you, a customer is making a more reassuring and safer purchase?
  
  Imagine seeing a surgeon for a relatively minor operation. Can you see how much more reassuring it is if the surgeon says that he is the local expert and performs 10 to 15 of these procedures every week.
   
• Make it easy for people to contact you
  
  This is so obvious but many people get it wrong.
  
  There is no point having a great advert if you are out when people ring and the telephone isn't answered. Make sure that you have a manned answering service and that you are available reasonable hours. Many people won't leave a message on an answering machine but will if they believe they are talking to your secretary or assistant.
  
  I enjoy travelling and I get frustrated with holiday companies who advertise in the weekend papers but don't even have an answer-phone service beyond 9 to 5, Monday to Friday. They also drive me crazy if I ring up and tell me that they will post a brochure to me...but it will take three weeks...and it never arrives.
  
  If you miss the first contact opportunity, you may miss the lead. People are busy and will move on to the next potential supplier.
  
  One final point on this section, please follow up on leads. You won't know where they will take you so even if something doesn't look promising, act professionally and you may be referred on.

Reaching Out To Your Target Customers

If you have done your market research you should be in a good position to start a proactive marketing campaign to contact your target customers.

The two main methods are:

• Direct mail (including email)
     
• Telemarketing

You may not like receiving either of these because they waste your time but don't rule out the two options too quickly.

Large numbers of businesses, large and small, use them for one simple reason - they work. They generate more profitable business than the cost incurred generating the leads.

In both cases you can have a general campaign (perhaps subcontracted to another home based business in the form of a virtual assistant or telemarketer) or a personalised campaign.

In a general campaign, you are catering for your generic target markets without knowing the people in detail.

I covered the importance of your headline (or opening statement if on the telephone) and the copy (or script) when talking about advertising. It's the same principle again with direct marketing.

You just have to think AIDA!

• A = Attention - make sure that you attract their attention
     
• I = Interest - raise their interest - they are busy so tell them what's in it for them.
     
• D = Desire - create desire - make them really want your product or service or to at least want to do something about their problem that you can solve.
     
• A = Action - include a call for action. Give them a reason to do something now (a special offer, limited supplies) and make sure that you tell them what to do.
  
  Tests show that by saying the equivalent of "Ring 0121 554 4057 now to find out how business coaching can boost your profit", it is much more successful than just hoping for any interested recipient to find your telephone number or email address on your stationery.

In a personalised campaign you are making contact with someone you already know. If you call them, your conversation will be unique but the same applies to your personal letter. Think about how you can show that this letter is written to them and only to them.

I would encourage you to look at the marketing efforts people make to try to persuade you to buy.

What works on you?

I bet it's not "I am great and I can do this and this and this..." but you will see that type of letter sent to you. It goes straight into the waste paper bin.

You are not going to make that mistake because you are going to talk about your prospective customers about their problems, how you can help and then provide social proof through testimonials.

In your direct marketing campaign you need to be clear on what it is that you want people to do.

Mail order focuses on people buying when they've read the copy. They give you all the information needed to make a decision and then it's a simple "Yes I want it. Here's my money, send me the product." or "No thanks."

But many home based businesses offer services and may have a two or three step selling process.

I know that for my own business coaching, my first objectives are to:

1. Persuade people to go to one of my websites and encourage them to sign up to my newsletter (you can sign up here - the newsletter is full of tips on how you can make your business bigger, better and more profitable).
    
2. Give me a call.

Both give me a chance to start building the relationship without rushing into a premature close that could scare anyone away.

Finally on direct marketing, think follow up.

How often have you received something when you have been busy, thought that you'd get in contact, desperately needed help but because you are rushing around, just not done anything.

It's the same with your prospective clients. Some aren't interested but others will start thinking about what you could do but they need a few more prompts to take action.

Networking and Associates

You may not be a networking natural but it's important to get out and about and mix with different people.

Partly that's because running a home based business can be lonely. You may be on your own for many hours at a time so it's good to build up a support system.

So who should you network with?

• People who do the same type of work as you - they may be able to sub-contract work to you if they are busy or pass on leads that don't suit their skills but are great for you.
     
• People who sell to the same type of customers as you do - who knows when one of their customers will ask "You don't know some who does a great job at...do you?"
     
• General small business owners and staff - we all know how important referrals are and we all like to help out if we are convinced that you are good at what you do.
  
  There are many breakfast networking clubs, other networking clubs that meet later in the day or you could try Internet networking. You will have heard of MySpace and Facebook but did you know that there are business networking sites like Ecademy and Linkedin.
  
  I like Ecademy and you can find out more about me on my profile. Ecademy is international and I have made some good contacts through it. Take a closer look here.
  
  Don't tell anyone but it is also very good for promoting your services in the Internet search engines if you write a well defined profile, create links back to your main website and contribute to the community through blogging.

Conclusion

You have just read through my marketing tips for home based businesses.

I hope you have found them interesting and informative and that you can see a marketing system at work:

• Start with your current customers;
     
• Next move to your past customers;
     
• Then look at understanding what it is that your potential new customers might want, why they want it and what problems they have;
     
• Fourth make it easy for your target customers to find you;
     
• Reach out to you target market through a direct marketing campaign;
     
• Network with people and form close two way relationships with those who can recommend you.

Before pointing you to extra resources, there is one final point that I must make.

When marketing is done right, it is an investment. To do it right and to be sure that you are getting the highest and best return, you have to be prepared to try, test and measure.

See what works and if it works, keep doing it but also try to improve around the fringes. When you find something that tests better, switch your main marketing to the new improved method. Stop doing anything that isn't working.

I believe that marketing is essential for your home business.

In fact you have to think of it in these terms:

No customers = no business

I recommend that you take the time to learn more about marketing because I am confident that the small investment in money and time will repay itself many times over the life of your home based business.

Recommended Marketing Resources For Home Based Businesses

I would recommend that you take a very close look at two high calibre, comprehensive programs that come from two of the Business Development Superstars featured on the Business Coaching Blog which are available at a very reasonable price.

Option 1 - Guerrilla Marketing

The first is Guerrilla Marketing (created by Jay Conrad Levinson) and in particular the Guerrilla Marketing Toolkit (or the Guerrilla Marketing Jumpstart program as it is also known.)

Guerrilla Marketing is the leading brand for marketing advice for small businesses. The Guerrilla Marketing series of books have now sold over 14 million copies.

I am a Certified Guerrilla Marketing Coach and I was tempted into the fold by one simple phrase:

"It's for people with big dreams but tiny budgets."

It worked on me and the Guerrilla Marketing Toolkit is a great mix of multi media learning. As you complete the work exercises for the week, you assess your marketing skills and attributes, then improve and finally put what you learn into practice.

The program has been designed by Jay Conrad Levinson and Mitch Meyerson to be a practical course where you work through your marketing plan over a six week period. You learn to apply the Guerrilla Marketing techniques to your business as you learn about Guerrilla Marketing.

There is a special offer on at the moment (6 December 2007) where you can save 33% of the price but I don't know how long it will last. There is also a full money back guarantee if for any reason that you are not happy.

I have been through the Guerrilla Marketing Toolkit as part of the introduction to my Guerrilla Marketing Coaching course. I recommend that you take a good look at it here.

But because marketing is so important and you can't learn everything you need in six weeks I recommend that you don't stop there.

Instead sign up to the Guerrilla Marketing Association.

This is Jay Conrad Levinson's way of keeping you up-to-date with all the latest developments in the Guerrilla Marketing techniques. Even better is that it has a massive resource bank of past recordings with interviews with experts for you to tap into on just about every subject.

Why pay a marketing consultant or suffer from a lack of marketing skills before you have tried this great resources?

Best of all you get a 30 day trial free. That way you see for yourself just how good the Guerrilla Marketing Association really is. Go on, just click here and sign up to your free trial.

Option 2 - the Small Business Growth Club

If for some reason you are hesitant about the Guerrilla Marketing approach (although I can't imagine why), then I recommend that you take a look at another one of the Business Development Superstars - Scott Hallman.

Scott has worked with Jay Conrad Levinson on major courses so his ideas are complementary but where Scott excels, is on the implementation of the profit improvement ideas.

To help very small businesses with limited resources Scott has created the Small Business Growth Club.

This has been designed to be a very flexible approach to business development that allows you to follow a set program, work on a particular area of your business or focus on particular applications or strategies.

It is very clever the way it has been put together to be structured but flexible to your particular current needs.

Just like the Guerrilla Marketing above, I have invested my own money in Scott and his Small Business Growth Club so I'm not suggesting that you do anything that I haven't done.

Just click here to learn more about Scott Hallman and his Small Business Growth Club.

You could do both but I wouldn't recommend that you do them together. One after each other yes, but not together.

It is better to follow one program, commit to making it work and then see how much your results can improve.

If you still want more sales and more profit, perhaps because your ambitions for your business have expanded, you can move to the second program to give yourself a boost up to the next level.

I also recommend that you take a look at my tribute to Michael Port Marketing Professional Services on Squidoo since many professionals are able to work from home.

How Much Are You Willing To Pay To Have The Business You Want?

The two resources that I have just listed, Guerrilla Marketing (through the Guerrilla Marketing Toolkit and the Guerrilla Marketing Association) and the Small Business Growth Club are both excellent low cost training/business development programs.

To put the cost into perspective you have to look at the current "cost" of your poor marketing.

How much extra could you earn if your marketing generates extra leads that you convert into new customers and orders but you still only work the hours that you want to?

Is that worth spending the equivalent of about a pound a day?

Let me simplify it and make the numbers smaller.

Are you prepared to pay £2 to effectively swap it for £10 this year and another £10 next year...or are you going to miss this opportunity to improve your marketing skills and miss out on the £10 recurring income stream?

If you would like to introduce an element of coaching and personal accountability into your learning, then I would be delighted to help out so give me a call on 0121 554 4057 or email me at paul@plancs.co.uk (UK businesses only).

Even if I can't help you then through my network of Guerrilla Marketing Coaches I am sure that I can find someone who could.

If you are prepared to take a slower road to marketing success or you can't afford to buy either of these two programs then work off the list of actions above, buy yourself a book - Guerrilla Marketing by Jay Conrad Levinson and use the other resources on The Business Coaching Blog.

For example I am building up free resources on copywriting that will teach you the tricks of the trade.

I recommend that you build up a reserve of money and then come back to these programs. I am confident that you won't regret it.

If money is no object

I know that some home businesses are not constrained by money because they don't just sell time for money at a fixed rate.

These businesses include highly paid professionals and the Internet entrepreneurs who have found their own profitable niche or would-be Internet entrepreneurs.

For you I have something different.

Option 3 - For People Prepared To Really Invest In Their Home Based Business - the Business Growth System

I would like to introduce you to Rich Schefren of Strategic Profits - business coach and guru to the Internet gurus.

Rich has coached a who's who of the Internet and since March 2007 he has been my coach.

Now Rich's prices make the two above look very modest but Rich is the thought leader in the Internet Age. You don't get to where he is and build up a reputation like he has without delivering the goods.

I'm just going to point y