Yes, but simpler - Part 1: Your Offerings

August 26, 2015 Lindsey

Original photo by Death To The Stock Photo.

Simplicity has value because time is our most precious resource. The simpler something is, the faster we can understand it and make a decision about it.**

When I see a business that has a simple, easy-to-understand concept, I can quickly assess its value to me and whether I’m going to buy-in or not. On the other hand, if a business has an overly complicated concept, I might become unsure about its focus and what it actually does. At the very minimum this will delay my decision to buy in, at the worst, the complexity would deter me completely.

In this series, we’re going to look at making our businesses simpler. But why should we want to simplify our businesses? The motivation for decisions in our business should always be the same: sustainably serving others. So, for this series, I offer this as our core motivator:

To serve customers excellently by saving them time, mental energy and potentially money.

Now that we have our motivation clear, let’s focus on today’s task - simplifying our offerings.

Making decisions is exhausting. And it takes time. The easier and faster the decision, the better. What is one way to make decisions easier? Decrease the options.

So we can serve our customers better by making our offerings simpler. Maybe you have a fully customizable service right now. That may serve some of your customers well, but others may appreciate a tiered service or preset packages.

A while ago, I was making wedding cakes for friends and family. During the planning process, I would ask them so many open-ended questions to make sure I was making exactly what they wanted. I soon realized that the questions themselves were a burden. It would have been much better if I had some preset ideas written down and let them choose between them.

Think about when you go to a restaurant - sometimes you want to build your own burger and sometimes you just want to defer to their best seller. Having pre-packaged options saves customers time and mental energy. An great example of this is the Blaze Pizza menu. It offers a simplified concept with preset “signature” pizzas as well as a build-your-own feature. This allows customers to easily select a signature option or decide if they want to put in the extra effort and build their own. Not only does this simplified concept serve the customer well, it also allows a streamlined process for those serving customers.

The most gratifying work we can do is that which serves others. So let’s examine our offerings and thoughtfully package up some options for customers. It will serve customers by saving them time and mental energy. And if we complete the service well, I think they’ll be more likely to come back too…

**Note this thought process shouldn’t be applied to people. We are not simple. We are complex wonders that shouldn’t be treated as simplified objects to be used. Simplifying people --> dehumanizing and/or stereotyping --> devaluing others

For more on simplicity:

Not sure less is more? Too Many Choices: A Problem That Can Paralyze is a great NYT article that may convince you.
Just starting out and you don't want to simplify but rather you want to do all the things? Hold up - You Can Always Expand.

Let's Talk: Managing Profit Margin for More Working Capital

June 10, 2015 Lindsey

Original photo by Death to the Stock Photo.

Disclaimer: I am not a financial advisor or accountant. This article is for informational purposes only. Please use the info at your discretion.

If you’re starting out your business and you're selling through every channel you can, you might be doing it wrong.

You know what profit margin (PM) is, right?

It’s especially important that you focus on the highest profit margin products when you're starting out and trying to grow your business.

You only have so much time and product. You have limited resources. You need to use them to get the biggest bang for your buck (and minute).

This is simple. It makes sense. But we get distracted by opportunities for cash. When you start out, not all selling is “good”. We get excited that people like our product and think we should take on every opportunity to make cash. But we shouldn’t (as Isa Seminega testified to in this post).

Let’s look at a real-life example (specifics modified/removed for privacy) -

My friend runs a business where she makes and sells handmade items. When she started out, she went through the traditional wholesale channels to sell her product. She went with the traditional pricing as well (without really looking at her numbers) - she marked up her product for about 2x what it cost her. And the wholesaler marked it up 2x what it costs them.

She also sells her items online for the full retail price (plus shipping), so she’s making about 4x her costs on those sales (as opposed to 2x the cost on wholesale).

In a fairly short time, my friend found that there was significant demand for her product. So much so that she is having a hard time keeping up with demand. Now she’s gotten into a terrible pinch where she barely has enough working capital to pour into the business in order to keep up with demand.

How did this happen? Simple - precious product and time was frittered away on very low PM wholesale accounts.

After looking at the numbers, my friend isn’t making 2x her cost on wholesale after all, because the cost only included the variable costs, not her overhead costs. In fact, she may have just been breaking even on some of it. Also, by continually selling most of her products through wholesale, she lost the opportunity to sell it online for the higher PM. It became a cycle where her lower PM wholesale accounts were tying up her product, which kept her from making enough working capital to keep up with demand.

She could have avoided some of this pinch by going with the highest PM sales channels to begin with. However, it may be that her wholesale accounts were the reason for her increased demand and so they’re not to be vilified. The numbers should have simply been hammered out before setting the wholesale price to ensure she had enough working capital to keep up with and grow her business.

It may not always be as simple as cutting the low PM sales and focusing on the high ones. There are other factors to take into account - maybe you want to give some work away because there’s a decent chance you’ll get repeat business from it, maybe you have some accounts that depend on lower PM services, maybe the only way to get a higher PM right now is to sacrifice quality (and that’s not something you’re willing to do).

The bottom line is, you need to pay attention to your profit margin.

If not, you can get pinched for working capital and when that happens, the life-size Jenga that is your business can become unfortunately unstable. Not to worry though, because now that you know this, you can start making changes now to sure up your business for the long haul.

I'm so glad each moment is new, aren't you?

How To Make Decisions Easier

May 11, 2015 Lindsey

When you know what matters most to you, it's easy to make decisions. Or at least it should be.

It's only difficult to make decisions when you lose sight of what matters most to you. It's difficult to make decisions when you start taking projects out of fear and only for the money. Or when you start trying to be or do what everyone else wants.

You lose you then. You lose what matters most to you. Your actions cause internal friction against your values. We all struggle with it.

But we can all come back. We can change our decisions. We can remind ourselves of our priorities and get back to them. Then the decisions are easier.

When decisions are hard, just remember what your values are and decide accordingly.

This reminds me of James Clear's post Let Your Values Drive Your Choices that I put on This Week's Gold last month.

How Transparent Should You Be In Your Business?

April 3, 2015 Lindsey

Original photo by Ryan McGuire.

Last week, I said we’d talk this week about understanding the value your business offers. Here we are.

I’m a huge fan of transparency in business. The more transparent a business is, the more I can trust them and support them. But I also recognize that sharing the recipe for your secret sauce could jeopardize your business health.

So we want to maximize transparency, but keep our proprietary info under lock and key. How do we draw the line to determine how much we share?

To draw the line - you have to understand the value that your business offers.

When you understand the value your business offers, you can easily tell where you should and shouldn’t be transparent.

Here’s what I’m talking about:

A small drum cymbal artisan makes an amazing custom cymbal. Should he share a video of his process or not?

It all depends on the value that he offers. Let’s say the value that he offers customers are his custom, handmade cymbals. His cymbals are his art. If people knew his process, does he need to worry that he’d lose customers because of it? No, he doesn’t. Because his customers come to him to own a piece of his art.

Is there a chance that someone may try to replicate his process because they see the video? Yes, of course. But the potential risk is small compared to the return of potential buyers trusting and supporting him more.

However, if the value he offered was cymbals that sounded completely different than every other cymbal on the market because of his special process, then he shouldn’t share the video. But if he still wanted to be transparent and if he used an ordinary metal composition for the cymbals, he could shoot a video sharing that information and discuss how metal composition affects cymbals. (Can you tell Mike’s in the market for new cymbals? I’m learning via diffusion.)

Ultimately it all comes down to the value you offer. You have to know why customers buy from you specifically. When you know why they do - don’t share that secret sauce. If your location is the strong suit of your business - don’t give away the landlord’s number and your rent price. If your product is why people come - don’t give away the recipe. If your speed of service is paramount - don’t share the process.

But share whatever is not essential to the value you offer. Give it away. Be open, honest and vulnerable about why you do your business the way you do. People are attracted to authentic vulnerability because they can see you through it. They can know you better and trust you more.

When you understand the unique value you offer, you know what to share and what not to share. Not everything in your business is proprietary. You don’t need to hold everything back out of fear. Examine your strong suits, hold those cards tight and give the rest away.

For more on why you should be transparent (in case you need some convincing):

Why You Have To Be Transparent In Business by Mandy Edwards
Let's Be Real: Why Transparency in Business Should Be the Norm by Robert Craven

To: Business Owners

Let’s look at a real-life example (specifics modified/removed for privacy) -

Here’s what I’m talking about: