Month: August 2016

Ask questions for the next episode of the Ask Biz Show here: http://bit.ly/askbizshow

Last Thursday, was the two-year anniversary of putting in my resignation at my last ‘real’ job. While reflecting on that event, I celebrated by taking my wife out to lunch and thought of a few take aways.

#1. Bring the boat closer to the dock.

One of the most valuable pieces of advice I can give to someone who wants to start their own business is to bring the boat closer to the dock. What do I mean by that? Two things:

1. Test the market: Will someone really pay you for your business idea? Lots of people will say, “That’s a good idea!” or “I would buy one”, and never follow through. Start selling before you quit any current incoming producing activity. And sell to people you do not know. In so doing you can help prove the concept and make sure that you have pricing right.
2. Build up business: I am a pretty fiscally conservative person, so I encourage people to work like crazy and build up their side business a lot and get it close to replacing your income before you make the jump. I was not able to do this because the situation at my previous employment had become so toxic. Ideally, I would have dedicated the next few months of my free time to building up the business then making the jump. Instead, we had to dig into our emergency fund to keep things afloat while the business started generating revenue. Though we knew before Christmas that this would be successful, it really took about 6 months to cross that line for my business.

#2. The dip is real.

This is a phrase made famous by Seth Godin. The dip is the time period between excitement and success. On StartUp, previously one of my favorite podcasts, (season one is the best) they call it the “trough of sorrows”. This is a real phenomenon. The excitement of starting a business or even a giant new business deal can quickly be replaced by the reality of needing another deal to maintain that success. Some businesses like mine ebb and flow. The flow is easy to keep motivated and stay productive, but the flow times can be a more challenging. My advice, know this is coming and be ready to share those feelings with other entrepreneurs you know.

#3. “The answer is Yes”

One of my favorite quotes I kept harping to myself as I started this journey, and still do today, is my Leonard Bernstein.

“I’m no longer quite sure what the question is, but I do know that the answer is Yes.”

As an early state entrepreneur, the answer is always ‘Yes’ to your clients. Can you do this? Yes. Can you do that? Yes. Unless something is morally questionable, which has been asked of me, the answer is yes. Make yourself indispensable to your clients and you will also find more ways to make money. Sometimes you don’t know what will come of those projects. Video was something I did not anticipate being as big of a revenue generator for me as it has been. I am sure glad I said yes when those projects started coming!

Are you looking to get started with your business, lets chat.

I recently read a book called FREE by Chris Anderson. 

This book is a summary of the marketing technique and economic force of FREE! Chris believes so much in the concept of free that he in fact has offer his book for free online, you can view it here.

Chris starts with a history of free and then goes into how free is becoming more and more prevalent in our society today.  Chris breaks down free and how it works for companies like Google and their free gmail and google docs.

Here are some of the key thoughts:

1. Somethings are too cheap to matter. As society progresses, many things like technology become cheaper and cheaper. Moore’s Law  shows that technology doubles every two years. As technology moves closer and closer to costing nothing, giving away a free Ebook or an email account costs almost nothing. It costs a small amount of electricity and data, but that amount is so small, its too cheap to matter.
2. The Freemium model of mostly free users is something that will become more prevalent. What is Freemium? Its a model where many of the users, maybe even as much as 80% use the product for free. The 20% of users who are paid, pay enough to develop the product. This is possible becuase the cost of a user using an app is almost zero. This creates a huge marketing funnel.
3. Real world models of free. One of the fun things about this book is that throughout the book, there are examples of how a free model might work out. One of my favorite examples is of how a text book might be free.  The model allows for a free digital copy of the book, but then charging for printed copies, or printable copies. This also allows authors to make updates over time without having a huge capital costs. While the upfront profit is not as great, at the six year point, one companies authors starting making more money. It increases the lifespan of the income. Here is a picture of the revenue model:
   
   This book is worth the read for no other reason than it helps you get a grasp on how the economy is developing. But other reason would be to help you think through new concepts on how to help your business develop using Free.

During the last episode of the AskBizShow someone asked: How do you know what your lifetime customer value is? This was a great question and one I needed to look deeper into.

But first, why do you need to know what your customer lifetime value is? The biggest reason is to know how much to invest into the average customer. The higher the value of the customer, the more time and attention is worth spending on them. But your customer value could differ greatly from business to business.

Here is a simple formula for coming up with the lifetime value of your customer:

(Average Value of the Sale)X(Average number of repeat transactions)X(Lifespan of customers).

Now to come up with all of these numbers will take some time and research. Look at your sales reports or your CRM tools to see how many customers you are working with and what the average transaction price is. This value may vary based on the products they buy from your company.

For example, someone who orders some laser cut products from me is a much smaller transaction value or someone who buys a website. But there are fewer websites sold becuase they are an investment. Spend some time investigating this number, interview some customers to find out about their habits.

The more you know the more accurate a number you can come up with. When you have that number, you can then look at ways of either scaling up or scaling down the things you do to retain customers. Retaining customers is almost always cheaper than finding new ones. You may also reveal a need to increase your prices to make sure you are profitable. More information is valuable to your business!

https://www.entrepreneur.com/article/224153