Aaron Hoos

I work with a lot of entrepreneurs who are trying to start something completely from scratch. Sometimes they’re tempted by the project because they want the income; sometimes they’re tempted by the project because they want to quit their job; sometimes they’re tempted by the project because they want to create a future for themselves.

Blogger Scott H. Young gives us an interesting and inspiring direction for building something. (Yes, he’s speaking to a broader audience than entrepreneurs, but that’s where I’m intersecting with the article so that’s what I’m focusing on). To summarize Young, if you want enjoy something and be successful at it, you need to build something interesting.

What a great idea! Read more about building cool things at Young’s blog.

There are SO many areas in the life of an entrepreneur that this applies to. And if we think of other successful entrepreneurs who have gone before, the blog post is true: Only those who have done something quite interesting are the ones who have been successful.

In a Harvard Business Review blog post, Ron Ashkenas asked the question “Can a Big Company Innovate Like a Start-up?”.

At the time the post was written (a month ago), Google’s Eric Schmidt was stepping down as CEO and Google’s co-founder Larry Page was taking the role instead. Based on the official statements that followed, it became clear that Google was trying to get back to a place of nimble innovation that it once occupied.

On the HBR blog, Ashkenas wondered if it was possible for large companies to achieve the fast, bleeding-edge innovation that start-ups are more commonly known for. And he correctly points out that employees of big businesses probably don’t innovate as often because they have a different set of risk/reward measurements.

WHY SMALL BUSINESSES INNOVATE MORE SUCCESSFULLY THAN BIG BUSINESSES
I see this all the time in the companies of my own clients: The small business entrepreneurs and start-ups are passionate about the business and totally bought-in to the opportunities that exist through innovation. On the other hand, the big business employees are more focused on success in their own specific functions, and in job security, and the CEOs of these companies are often insulated from the innovative side of the business.

As companies grow, they become risk-averse, partly because their employees are no longer bought in to the company in the same way that the early start-up employees were. I’ve been part of start-ups and we were willing to work around-the-clock for next-to-nothing to see the company succeed. There was something thrilling about being part of that creation process. I’ve also been part of big, entrenched companies, and that just doesn’t exist.

Big companies also become risk-averse because their brand has much more equity, and a wound from negative press can cut deeply. Compare that to the start-up that has a brand but very little brand equity. They can make mistakes and they know they’ll get over those bumps.

In the HBR blog post, Ashkenas offers three pieces of advice for big businesses that want to innovate like small businesses: He says they should (1) Set up a venture group, (2) Carve off skunk-works, and (3) Hold innovation contests. (You can read the blog post here: Can a Big Company Innovate Like a Start-up?.)

ADDITIONAL OPPORTUNITIES FOR BIG BUSINESS TO INNOVATE LIKE A SMALL BUSINESS
I think those are great ideas but I also think that big businesses can do so much more: It starts with revising the corporate culture so that all employees are motivated to see the company as a whole succeed but are also willing to accept risk to a greater degree. To make this cultural change, HR’s hiring processes and payroll metrics will need to change. In other words, don’t hire “lifers” who want a salary; hire aggressive entrepreneurs who would prefer to shine while also enjoying a greater degree of control over their remuneration. (I’ve seen this work very successfully in a multi-billion dollar organization).

Another opportunity where big businesses can change is in decision-making. In many of my big-business clients’ hierarchies, decisions rest at the managerial level and the worker-bees end up focusing on job security because they don’t have the authority to take action on innovation opportunities. Grass-roots innovation (the best kind of innovation!) can take place when people have the authority to act quickly.

Which leads me to my next idea: Big businesses need to define innovation appropriately: We tend to think of innovation at the product/service level. However, innovation opportunities exist everywhere. If a front-line staffer discovers a faster way to do their job, they can save the company a small amount of money. But if that innovation is shared among other front-line staff, the company can enjoy larger savings. And that’s just one example. Businesses can innovate in their processes, in their sales funnel, in their technology, and so much more. People will naturally innovate to find ways to make their jobs better; a large organization just needs to pay attention to what its staff is already doing.

Lastly, employees in big businesses are scared of innovating because it could risk their job security. (“What happens if the manager walks by and sees me doing my job this way? It accomplishes the same thing faster but it’s not how I’ve been told to do my job… AND my manager doesn’t have the patience or foresight to allow me to explain why I’m doing it this way”). What businesses need to do is create a framework for evaluating innovation successes and failures in order to empower employees to make changes without fear of reprisal (within reason, of course).

Big businesses can be innovative, and I think they can be as innovative as small businesses. Unfortunately, it requires such a massive cultural shift, I suspect it is next to impossible to achieve.

As entrepreneurs start up their businesses, they quickly learn one of the most challenging aspects of business ownership: How to price a product or service so that it is attractive to customers but still profitable for the business.

Pricing is like a tug-of-war: All customers want to pay as little as possible for a product or service; all businesses want to charge as much as possible for a product or service. Somewhere in the middle is the right answer — a price that is attractive and fair to the customer and a price that is profitable and fair to the business.

Here is a collection of some of my best advice on pricing.

HOW TO PRICE A PRODUCT OR SERVICE
Understand how prices and pricing works: One of the first things you’ll need to do is understand how pricing products and services actually works. It’s not a matter of randomly assigning a dollar value! There is an actual science to the creation of a product’s or service’s price. There are two key elements that go into any price, and there are three kinds of price-based businesses. Read more about it in my blog post Prices and pricing strategies: How to price your offerings more effectively. (Don’t miss the pricing tactics at the bottom of that post).

How to monetize digital content: If your business is selling digital content, it is critical to understand how content monetization works. The web has enabled new business models to be developed so that people can earn money in various ways, but not all of these business models require pricing services or products. There are 5 ways to monetize your content and only 2 of them require pricing. Read more about the 5 levels of online content monetization.

Competing with low-price providers: One problem in many industries is the problem of low-price providers who enter quickly and undercut your prices. It’s a problem for everyone because most of these low-price/low-cost providers will only compete for a short time before they run out of money and have to fold. But along the way, they may potentially do a lot of damage to your business. If you find yourself competing with low-priced providers, check out my blog post: Pricing your sales funnel: How to avoid competing with low-cost providers.

A competitive analysis tool to find the best price for your product or service: What entrepreneurs need most is a way that they can use to find the best price for a product a service. By doing some simple competitive research, business owners can find the best price for their products or services in comparison to their competitors’ offerings. I’ve developed a tool for entrepreneurs to find the best price for their offering. Read about it at How to easily discover the best price for your product or service.

A customer-based, needs-analysis tool to find the best price for all of the products or services in your sales funnel: I’ve also reated another tool to help you know how to price your products and services while you are developing your products, based on what your customers are wanting to buy. By mapping out your products and services against customer needs, you’ll easily see how to price your products and services in the context of your sales funnel — pricing “entry” products for brand new Customers and then pricing follow-up products or existing Customers. In my blog post, you’ll read how product development, pricing, and sales funnels all work together to create a very profitable business! Read more about it at Product development, pricing, and sales funnel strategy made easy.

A friend of mine wants to start a business. She’s successful at work but isn’t earning what she is worth. Like a lot of people I’ve met, she really wants to start a business but here’s the conundrum:

It’s hard start a business when you’re busy with a “regular” job. On the other hand, it’s hard to quit your job then start a business.

Here’s what I recommend:

START HERE

1. Choose what you want your business to be about. Even if you don’t yet know WHAT you want to sell, you probably have some idea about the topic. Are you a mechanic and want to (eventually) run a business that is mechanical in nature? Do you love jewelery and (eventually) want to do something in that field? It doesn’t matter yet what you sell, but choose your topic. It can be fairly broad.
2. Start a blog. Spend 20-30 minutes a day writing a blog post. Do it every single day. Build up a body of knowledge on the topic. (Okay, if “every day” is too much, then start off a little less — say 3 times a week — and slowly increase over time until you’ve developed a good habit of daily blogging). Aim for high quality, insightful posts that help to advance your reader’s knowledge of the topic.

That’s it. That’s all you have to do in the beginning. If you’re at this stage — a sort of “dreaming the entrepreneurial dream” stage — then this is all you need to do. Don’t worry about search engine optimization, blog design, social media, etc. (That’s good stuff, but it’s not the point right now).

Eventually, you can take it further and turn your blog into a business (as I’ll describe in a minute), but your top priority should be consistent, compelling blog posts every day.

What you want to do is build a body of knowledge, which will:

• Position you as an expert.
• Help you explore the depths of the subject
• Teach you things you didn’t know
• Build an audience (and they’ll be more likely to listen and respect you because you don’t have an agenda of selling them anything)
• Create an asset of information that you can later draw from

FAST FORWARD TO QUITTING TIME
Let’s say you stay with your company for another couple of years. You don’t love it, but the income is nice and the health care pays for your knee operation, but now you find yourself transferred to a department with a boss you don’t like. You can see yourself quitting in a month or so.

The good news is, you have been consistently positioning yourself as an expert for the past couple of years. You have 600+ blog posts and an audience of faithful readers.

Here’s what to do next:

1. Decide what you are going to sell. A product? A service? There are lots of options. Pick one or two that you can do now and shelve the rest for later.
2. Create your sales funnel. Describe the contacts at each stage of your sales funnel and how you’ll engage them at that stage and then move them forward. (Download this Sales Funnel Quick Reference Guide to get you started).
3. Implement the contact-engaging marketing that you’ve just outlined in the above step to engage and market to your Audience, your Leads, and your Prospects.
4. Quit your job. Woohoo!
5. Implement the contact-engaging content that you outlined a couple of steps above.

Thanks to your consistent effort, you have positioned yourself as an expert long before you made the leap out of your job into the world of business ownership.

ADDITIONAL TIPS TO MAKE THIS WORK

• Pick a topic you love and know something about and can spend years doing. Otherwise, it’s not worth it.
• This only works if you are consistent. I’ve seen people do this and succeed. I’ve seen people not do this and struggle. It really does work. Set an alarm, brainstorm some topics, and be relentless. Consider it an investment into your escape hatch. (Check out this blog post about blogging frequency and check out this blog post to discover what you should never, ever do).
• I mentioned earlier that you shouldn’t worry about search engine optimization (SEO) at this point. There are probably some SEO aficionados that are rolling in their graves right now but my reason is this: I want it to be a fun and simple effort. And search engine benefits will still be present in your blog, it just won’t be an intentional thing that you’ll do right away. You can always integrate that in later.
• Don’t fret about what you’ll sell while you’re working. That will work itself out, trust me. Here is a blog post about 5 different types of content monetization to get you started. There are other things to sell, too, but content monetization is an easy first step. If you can’t figure out what to sell, send me an email and we’ll talk about it.

Like anything that is effective, this method takes some effort. There will be days when you want to quit. But this is, in my opinion, the most effective way to start a business when you want to start a business someday but aren’t ready to quit your job just yet.

Starting businesses is fun. Growing them is also fun but it’s hard work too, especially if you want to grow them profitably.

One client of mine, who is a serial entrepreneur, has a handful of businesses in various stages of start-up and operation. But they were running out of time and money, worn ragged by demands of each business and unable to eke out growing profitability because they couldn’t focus on a single thing. Although I was initially focused on their sales funnel for two of their businesses (obviously), we ended up looking at the bigger picture of ALL of their business(es) to find ways to make them all more profitable.

Here’s a chart I put together to help my client analyze the demands of his time and attention on each new or existing business.

UNDERSTANDING THE TIME-AND-ATTENTION DEMANDS CHART
Across the top, the chart lists three key functions of the business: Administration, Marketing, and Deliverables. The three functions are divided up into 5 segments with “P” for passive on one side and “A” for active on the other. Down the left, are the businesses, business ideas, or projects/initiatives that are being analyzed.

For our purposes, let’s use the following broad definitions:

• Administration includes the various “housekeeping” functions that keep a business running.
• Marketing includes all of the sales and marketing efforts to move your contact through the sales funnel to the point of purchase.
• Deliverables include the things a business does to provide the products or services it sells, such as manufacturing, assembling, shipping, analysis, etc.

(Yes, there are other ways to divide up the business but this provides a quick-and-dirty thumbnail sketch that is suitable for our purposes.)

An example of a passive business:
A business might be passive in the Administration section if everything is outsourced and automated. A business might be passive in the Marketing section if they have a lot of word-of-mouth marketing or advertising that is running without much input from them. A business might be passive in the Deliverable section if they sell digital content.

An example of an active business
A business might be active in the Administration section if it requires a lot of hands-on delegation and management. A business might be active in the Marketing section if they have a lot of social media marketing that requires constant participation and engagement. A business might be active in the Deliverable section if they provide services that require the full attention of the owner – like consulting, freelance writing, or graphic design

I’ve created the above 2 fake examples below:

Now that you know what the chart is about, it’s just a matter of figuring out where the time is being spent for YOUR business. (Or, in the case of business ideas, it’s just a matter of figuring out where the time is GOING to be spent).

These are just estimates to get a general idea of your time. This isn’t an exact science but it is still revealing. Think of each of the five “P” to “A” segments as something like:

ANALYZING THE TIME-AND-ATTENTION DEMANDS OF MY CLIENT’S BUSINESSES
First we drew the chart for his 8 businesses (actually, businesses 1-5 exist and businesses 6-8 are in progress). In the example below, I have removed the names of my client’s businesses and just numbered them.

Then we went through each business and figured out how much time he was spending on Administration, Marketing, and Deliverables.

Administratively, he’s getting his business in order by trying to consolidate and automate his administrative functions. Unfortunately, it’s his marketing and deliverables that are killing him. He’s marketing almost all of these as separate brands with little cross-over or overlap. That means 8 different identities on Twitter, 8 different Facebook pages, 8 different identities in other marketing channels. And on the deliverable side, he’s spending A LOT of time delivering his services, with each business demanding his full attention to provide paid services.

This amount of active administration, marketing, and deliverables might be fine for a business that employs several people or is able to outsource more, but my client is an entrepreneur with some outsourced administration, but he loves to market his businesses himself, and it’s his expertise that is being hired. That means a lot of HIS time in marketing and deliverables.

I’ve highlighted the two key problem areas – he’s spending so much time trying to market and deliver services for 8 different brands.

No wonder he’s feel like he’s running around, and no wonder his profitability is suffering!

Of course, this time-spent is only one side of the equation. Cash flow and profitability should also be taken into account. Businesses that provide more cash flow or profitability to the business owner should be allowed to take more time and attention than those that do not.

So, here’s what we did to solve it this serial entrepreneur’s problem:

Businesses 1 and 2 provide the most cash flow and profitability. Those ones are going to be the key. We also determined that Business 4 could have a positive impact on cash flow and profitability in the near future.

Our goal there was to find ways to reduce the active demands of Administration and Marketing. (You can see our results where I’ve grayed out the previous demand and put the new one in blue. It’s not always possible but it can be done.

Next, we explored some ideas about consolidation. Business 3 is closely linked to Business 2 so there was an opportunity to combine them together. Both Business 2 and Business 3 had a lot of deliverable demands, and my client was worried about losing the income, but since he didn’t have a lot of time to provide the deliverable anyway, we don’t think he’ll see a significant drop. I think he’ll actually see an increase income because he can focus. Business 8 could also be consolidated into the Business 7 brand.

Then, we had a brainstorming session to explore how his new businesses should be focused more on passive administration and passive deliverables. And even if they required some initially active marketing in the beginning, the goal should be in the near-term to make the marketing as passive as possible, too.

The result? My client has gone from 8 businesses that were requiring a lot of his time to 6 businesses that are requiring moderate amounts of his time. This is not a perfect picture but it’s a step in the right direction.

The goal for every business is to move toward the passive side of each of these business functions. That doesn’t necessarily mean that the perfect business requires NO effort for administration, marketing, and deliverables, but rather that these are managed in a way that take less and less time and attention with the goal of providing greater profitability.

Tomorrow, I’ll give some ideas about how your business can increase the “passivity” of each of these three business functions.