The Value Equation

2009 New Year’s Resolutions for Every Entrepreneur

As we begin 2009 thoughts turn toward New Year’s Resolutions, some firms may resolve to Go Green, streamline costs, or expand into new markets; however I challenge every fast-growth enterprise to make the following ten New Year’s Resolutions. Over the next few weeks, we’ll expand on how-to make each resolution effective and stick.

1. Make Your Company Goals a Reality. Once goals are created make sure your employees know the goals, and more importantly enable them to reach them. Repetitiously over-communicating is enhanced with routine measurement and metrics meetings. It is one thing to make your goals transparent by sticking them on the walls and your employees’ PCs, but it’s even more important to provide weekly and monthly targets that are actionable. Experts agree, that what gets measured gets done. So measure, report, and discuss.
   
2. Evaluate Your Strategic Alternatives. Perhaps it makes financial cents as well as common sense to merge given the state of your industry or financial outlook. For others it may be time to seek out a strategic alliance to enhance distribution capabilities or find a strategic investment partner.
   
3. Create a ‘Prospective Buyer Pool.’ Obviously, not every prospect is ready to buy at the time when you meet them. A ‘Prospective Buyer Pool’ is an email database of qualified prospects that becomes a community of active sales prospects the more they are nurtured. Firms that utilize a Prospective Buyer Pool have on average a 10% higher close ratio for all sales opportunities (what is the financial impact of an extra 10% on your firm?) Common nurturing techniques include a monthly or quarterly newsletter, seminars or webinars, and surveys or polls.
   
4. Use Surveys to cost-effectively identify high probability customers, gaps, and opportunities.
   1. Survey prospects to rank them in probability of buying order to focus sales personnel on the highest probability prospects.
   2. Survey your customers to measure your brand equities, additional revenue opportunities, and as a source of innovation.
   3. Have executives survey lost opportunities to reengage them in your sales process or to provide training for sales personnel.
      
5. Build Your Brand Equities with Thought-Leadership. How do buyers know you are credible? Beyond providing references one of the basic pillars to creating interest and shortening sales cycles is building recognition and credibility by being viewed by your prospects and partners as a ‘thought- leader’ in your specialty. How do you cost-effectively promote your thought-leadership? Use some of these techniques and these marketing tactics.
   
6. Delegate or Outsource All Non-Core Responsibilities. Many small business owners opt out of hiring outside help (albeit an advisor, operating partner, outsourcing provider, coach, or consultant) for their business believing they can do it all themselves. This is not prudent given the pricing, resource constraints, and other pressures that companies face. Did you know that the majority of fast-growth enterprises outsource payroll, accounting, finance, and marketing? At least 25% of small businesses outsource IT and Human Resources as well. Nearly 40% of SMEs utilize subscription services for technology and tools beyond Quickbooks and payroll.
   
7. Differentiate Yourself From The Competition (or substitutes if you don’t believe you have competition). Has your company defined what ‘Service Excellence’ means? Do your front line employees, service staff, and accounting/billing tell your customers the same thing?  Regardless of a down economy buyers will always be looking to eat, drink, and save time and money. What daily actions support your service mantra? A few example ‘service mantras’ for you to consider:
• Go the extra mile.
• Under promise and overdeliver.
• Actions count, not words.
  
8. Discuss Monthly Operating Metrics With Your Managers. Operating metrics are not financial metrics, but rather are performance indicators that highlight activity levels and results. Sample common operating metrics for service or technology providers are highlighted in the table below:
   
   
   
   
   
9. Promote Yourself. What activities can team members take-on? Your time will always be your most expensive cost to the business.
   
10. Improve Employee Motivation. (aka Retention, Productivity, and Utilization!)
• Implement productivity tools such as CRM, Wikis, web conferencing.
• Here are a few retention ideas:
• Develop and communicate clear promotion pathways and milestones.
• Develop a career development plan and/or reimburse employees for earning additional certifications/skills or attending industry conferences.
• Motivation bonuses include Paid-Time-Off, flexible work schedules for good performance, sales and performance contests, or implement employee recognition programs.
• Search through your LinkedIn and find contacts that can provide discounted services to your employees such as tune-ups, dry cleaning, spas, gyms, etc.

My advice on realizing your New Year’s Resolutions is two-fold:

1. Changing habits typically is only possible one habit at a time; and
2. Make your resolution known and determine who and what will hold you accountable in future months.

 

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Brand Scorecard for Fast-Growth Enterprises

Building your Brand Equities will:

1. Generate “Gravity Demand Generation” (i.e. Pull Marketing) as opposed to always having to push with direct sales campaigns.
2. Shorten the sales cycles as the brand brings credibility and reassurance to decision makers.
3. Position you apart from the herd.
4. Increase customer loyalties and mitigate competitive threats.

Brand Scorecard for Fast Growth Enterprises:

Brand Measures	Description	Target
Recognition	What is the breadth and depth of your prospect market awareness? i.e. how distinguished is your brand? This is a summary indicator of the current customer, account and product penetration of major customers, along with annual goals (i.e. brand penetration).	> Percentage of target market that “knows” you?
Perception	Gravity Pull: - What percent of qualified leads are you converting by channel, and how long is the sales cycle? - Is your brand “premium” or “economy”? Does your brand express the brand type adequately? Is your brand recognizable and memorable? How legally protectable is your brand?	> How does your brand perception impact you?
Brand Value	Valuation Impact: - Customer retention & net lifetime value: The primary factor affecting customer profitability is retention as generally, the longer a customer stays with you, the more profitable they become. Therefore, customer profitability measured above benchmarked industry average is your brand price premium. - Customer loyalty: A variety of indicators can be used here, but the most common one is the number of referrals.	> What financial impact does the brand provide? (Normal profit *Price premium * Sales) + (Retention impact + Referral Impact)

Getting Started: Brand Measurement Process:

Generally, Ephor Group recommends surveying your brand value, perception attributes, and market recognition yearly and online brand equities being measured as part of your standard monthly sales and operations reporting package.

A yearly snapshot of your current brand value and other brand-related metrics sets a stake in the ground. Whether your goal is to assess the value of two brands for a merger or perhaps, to improve C-level awareness, brand measurement needs to be monitored to demonstrate improvement.

Online Brand Equities Scorecard

Online Brand Equity Measures	Month Over Month Change	Target Goal
Web Traffic	+12%	10% a month improvement
Interactions	-2%	10% a month improvement
Page Rankings	#1 for top 3 phrases	#1 for top 5 phrases
Cost-Per-Click	-29%	>$144 per prospect capture

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At Ephor Group, We’ve Got 10,000 Hours of Experience Growing Businesses

Malcolm Gladwell’s new book “Outlier,” which is already #1 on the New York Times best-seller list, sheds light on what it takes to be super successful; which is ultimately hard work. Mixed in among intriguing narrative stories and statistics, Gladwell espouses that it takes 10,000 hours to become an expert in a domain.

Excerpt from ESPN interview with Gladwell: “I go into something called the 10,000 rule, which is this finding by psychologists that in any kind of complex activity mastery cannot be attained without at least 10,000 hours of practice. That's true of being a grand master in chess, and being a great radiologist, and also of hitting a curveball. And the critical thing about 10,000 hours is that it takes roughly 10 years to put in that much preparation.” More book excerpts available on Gladwell’s website.

In addition to hard work, Gladwell points to social context and cultural background as two factors that also explain why select few excel in business.

Over the past few years, combined the Ephor Group team has more than 10,000 hours of hard work experiences as we have:

• Conducted primary research on more than 400 emerging enterprises annually.
• Evaluated more than 600 technology products and implemented more than a fifty solutions across various business functions (Human Resources, Management, Sales & Marketing, ERP, BI, workforce management, etc.)
• Performed detailed assessment and due diligence for more than two dozen companies annually.
• Created operating and sales models for more than a dozen enterprises annually.
• Surveyed more than 20,000 small business owners and executives on their needs, trends, buying habits, and perceptions.

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Question: Evaluating & Selecting Your Marketing Service Provider

A quality marketing services provider that acts as an extension of your management and sales team can help you achieve any or all of the following: a) create a consistent and predictable sales pipeline, b) reduce your customer acquisition costs on a per unit basis, c) increase your brand equities, and d) create credibility for your organization and product or services in the marketplace (thought-leadership for B2B which reduces sales cycle time and increases average sales price).

Determining the best partner for your particular situation is a three part answer that includes:

I. Evaluating Marketing Service Providers: Before discussing goals, measurements, and objectives in a formal proposal or presentation process; first assign a point or rating scale to each of the categories below and rank the competition:

1. Vendor Credibility - How long have they been around, how many customers, are they financially stable, do you trust them, who are their references?
2. Target Audience Fit - How many of your competitors and substitutes have they worked with? If none, you do not want to be their guinea pig
3. Subject Matter Expertise - Are the services they provide part of their core expertise or peripheral?
4. Methodology - What is the best practice process the provider will follow and implement?
5. Solutions Fit - Does the proposed methodology, technology, and tools fit and integrate with your existing infrastructure? Will these tools increase results and decrease spend?
6. Analytics and Reporting - What weekly and monthly reports and metrics will you receive?
7. Cost and Time Estimates - What is the ROI? What are the key milestones and timelines?

All of the above vendor criteria should be prerequisites to evaluating your short-list of two or three finalists.

II. Ensuring Results: Measurement and metrics are at the core of any successful partnership. If you hire a marketing provider to create a monthly eNewsletter or webinar series, but do not clearly specify which measurements equal success then the relationship is doomed to fail in the long-term regardless of short-term results or WOW deliverables. Rather than hope that your marketing services provider generates magic it is better to mutually agree on success ranges. Example measures include:

1. Brand Equity – How is your brand is perceived against your competition and substitutes? This can be tracked and improved over time. 
   
2. Online Brand Equities – Create a point measurement system where the formula includes website traffic, search engine page rankings, and conversion percentages. 
   
3. Demand Generation (Cost, quality, and conversion rate of each of the following):
• Interactions (number of webpage conversions, downloads, interactions, online inquiries, clicks, etc.)
• Phone appointments
• Face-to-face appointments

The benefit of agreeing upon measurement target ranges is that the responsibility and accountability is placed upon the service provider to act as a trusted advisor and ensure that they bring their full expertise to your engagement regardless of the barriers that will show up.

III. Ensuring Economic Efficiency: At the core, all marketing decisions should be based on risk and spend cost-benefit analysis. The goal of any services, technology, or outsourcing provider should be 20 percent cost of customer acquisition or less on a per unit basis.

All marketing and PR can be measured, contact Ephor Group if you need to measure any of your marketing spend of if you need help calculating your customer acquisition cost, of want to know your industry sector’s average customer acquisition cost.

Did you know that many of your larger competitors and/or substitutes can afford to outspend you to acquire new customers?  Valuation arbitrage mechanics may enable your competitors to outspend or directly buy revenue at a higher price than you and still be better off!  More on this topic later this month.

 

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Marketing Services Provider RFP

First, have the management and sales team signoff on the revenue and/or brand objectives, measurement target ranges, and target audience.

A Marketing Services Provider RFP Questionnaire should include the following categories (listed below are sample illustrative questions).  For each category below assign a percentage of 100% to create your RFP scorecard. 

VENDOR CREDIBILITY (Provider Overview)

• Please provide information of any use, alliance or affiliation with your partners (e.g., tools/ technology/software suppliers and delivery partners/contractors)
• Please provide a company statistical overview including number of full-time employees, clients by industry, company highlights, management team, etc.
• Please provide information of your organization’s performance against others in the industry
• Please provide three references with whom you have worked with within the past 18 months (we will only contact references if you are selected)

TARGET AUDIENCE FIT

• What clients have you worked with that targeted our prospects? Our partners and influencers?
• Briefly describe the results:

SUBJECT MATTER EXPERTISE

• Features and functionality match to our specific needs
• Breadth of solution covering current and future needs
• Best practices for your recommended solution

METHODOLOGY

• Please describe your methodology:

SOLUTIONS FIT

• Technology – what system, software, analytics, and tools are utilized?
• Providers – What other 3^rd parties are used?
• Please describe your program, needs, and requirements:

ANALYTICS AND REPORTING

• Please provide examples of all relevant ROI, metrics, and analytics reports
• Detail the process for testing and measuring results

COST AND TIME ESTIMATES

• Cost-benefit analysis of costs versus outcomes (ROI)
• Please detail your service level agreement
• Please provide detailed timeline and corresponding roles and responsibilities

CONTRACTUAL OBLIGATIONS

• To be added by you

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Taking Advantage of Opportunities in a Bear Economy

For entrepreneurs, the de-leveraging that continues in the financial markets means a weaker economy for 2009. The good news is that when it comes to decision making and execution, crisis forces us to eliminate waste and focus on what is truly important.

The following is a list of ten sizable opportunities that come from a bear economy:

1. The opportunity to weed out mediocre employees from your organization. When examining your employee base make cuts with surgical precision within functions and departments not an axe, but only cut once, and cut deeper than you think.
   
2. There is an opportunity for negotiating on everything from prices and contract lengths, to flexible payment terms. Try bartering as well.
   
3. Use this opportunity to reinforce your brand attributers, vision, mission, and corporate objectives. Over-communicate with everyone from suppliers to employees as well as investors, partners and particularly customers.
   
4. Use this opportunity to train everyone in your organization from the receptionist to the board room on how-to sell. Be sure to make it easy for employees to introduce sales opportunities and generate referrals. Incentives and rewards will help.
   
5. Teach employees to treat cash as precious: stretch your resources and dollars with social media programs, re-focus on referrals and networking, turn every staff member into a marketer, eliminate internal non-revenue producing functions, and/or evaluate 3^rd party outsourcing providers.
   
6. Recruit more than your fair share of star performers. Start by comparing the talent at your competitors or substitutes against your own.
   
7. In years of economic slowdowns top performing companies streamline operations, reduce costs and increase efficiencies. You now have a reason (“excuse”) with employees and partners and thus an opportunity for performance improvement initiatives so ACT NOW.
   
8. Invest in ways to and extend your capabilities through corporate acquisitions.
   
9. Expand your distribution with partnering and by forming strategic alliances. Look for cross-selling and up-selling opportunities.
   
10. And one final item to be thankful for in a bear economy: less holiday work parties.

In a tough economic climate, the strong will become stronger (at least in terms of market position) as the weak struggle.  Competitors and substitutes that squander precious capital have little margin for error and can be purchased at discount prices.  Others will fail altogether.  For top performing companies, a sluggish economy might be the recipe for long-term success.

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