The price of doing the same old thing is far higher than the price of change. Bill Clinton. No one would dispute that Covid 19 has changed to the world of business in every part of the world. The rules have changed – the way business is conducted is different – the rule of adapt or die has been ruthlessly enforced The need to be agile, transformational, adaptive which ever word you use will continue in 2022. Changes that have occurred in 2020 and 2021 will impact how we businesses operate in 2022. Remote working will continue The rapid adoption of technologies to connect employees has shown that employees do not need to be in the same space to get things done. This includes creative work. More patents were issued in the US and UK in 2020 than in 2019. As an employer you need to consider your employees opinions about the transition from WFH to the office. Review what has worked and what has not worked. How remote working can be improved. Ergonomic issues may come to the fore. This is your opportunity to source talent globally. It is well known there is a lot of IT talent in India but many Asian countries has a pool of expertise – Vietnam, Indonesia, Thailand just to name a few. Your Customer Service Rep could be in the Philippines With 5G being rolled out around the world connectivity will be even easier. Mobile Commerce becomes even more important. Your customers are out there, and they are on their phones. They are less likely to return to physical shopping for basic needs. A level of trust has been achieved making consumers much more willing to buy online As a SME you can improve the degree of trust consumers place on you by using some of e-retail platforms that are available. Find the one most appropriate for your business. Your competition has become more sophisticated in their online marketing you need to as well. Sloppy websites will not cut it. This is an area you should consider spending money. If you are in a niche segment, consider your company as a publisher of information. Micro and nano influencers often carry more weight with a targeted audience Rural consumers are a relatively untapped market Facebook still supports 2G – low data usage Offer expanded payment options. Consumers often abandon their shopping cart if their preferred payment option is not available Do not neglect cyber security. Consumers will increasingly demand social responsibility from their suppliers Social media means this is no longer a tick the box exercise Millennials and Gen Z will be the largest consumer group by 2030 and they will demand good governance Be conscious of what you say, do and post. A social media backlash can kill profits Any hint of discrimination against a minority group must be avoided Even more diversity will be demanded. VC funding is still heavily skewed to men. Funding for female founded startups was reported as being a low as 9% in 2019, Black entrepreneurs struggle to get access to capital Opportunities for eco friendly companies will grow rapidly. Cop 26 has shown that the world does worry about the environment – especially the younger generations. Although there is still a gap between people say they want and how they vote will their wallet. Focus on the environment will be good for your business and may open opportunities for growth. From the World Economic Forum: 4 Questions you should be asking yourself What does my market look like in a net-zero world? What is my business model for succeeding in that market? What changes should I make now to prepare for success? What supporting conditions will I also need and how do I go about winning them Those who act early can capture major opportunities and build a competitive advantage.

A penny saved is a penny earned – Benjamin Franklin Ensure you know your burn rate and track it frequently – I would suggest a monthly at a minimum This means a monthly cash flow statement Set up controls to ensure spending commitments are properly authorized Consider the use of credit cards – giving you the ability to check spending online at any time Insist on receipts Avoid petty cash Structure your organization to reflect where you are in your business growth cycle. If you are still designing your product offering it is too early to be paying for sales and marketing personnel If you have only a few employees an in-house HR resource is probably unnecessary Have a hiring plan. Identify your core competence and outsource the rest What is your secret sauce? What is going to make your company successful? Manage your working capital (the necessary evil) intensely Negotiated extended terms with suppliers or attractive discounts for early payment. Ensure your systems enable you to take advantage of the discounts available and prevent duplicate payments Clearly set payment terms with customers at the outset This is the time to have that frank conversation. Avoid invoicing errors – consider e-invoicing Invoice promptly Keep inventories to a minimum. Keep that warehouse small Track inventories to avoid losses due to shelf life or obsolescence. If you have unwanted inventory – sell it! Not only will this generate some income it will avoid disposal costs Avoid long term commitments to maximize flexibility Short term leases – co working spaces Use contract employees for specific tasks Use IT solutions to help visualize your cash position. License rather than buy. Locate a service provider who already has a license Avoid staff churn – replacing staff is expensive, slows down progress and impacts morale Tap into every resource that is available to you: If boot strapping, call on ex colleagues with skills you need If VC backed they may have experts that can help for free or at modest rates.

Tags: How to start a business, achieve start up success, burn rate, cash management, expense control, working capital, the successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.” Mr. Micawber in David Copperfield (1850) Written by Charles Dickens ​ JIM SCHLECKSER the CEO of Inc. magazine’s CEO Project wrote in a 2017 article that when asked by a budding entrepreneur for three pieces of advice he replied. The first thing I told was not to run out of money. The second thing was not to run out money. And third, wait for it, was not to run out of money. Burn rate is another name for negative cash flow. When money is going out of your bank account faster than it is coming in. Its important to understand that you can be profitable but still have a negative cash flow. More businesses have failed due to lack of cash than have failed due to lack of profits – the growth to bankruptcy syndrome. Burn rate cannot be calculated from your Profit and Loss. Many uses of your cash will not appear on your P&L such as capital investments, build up in inventories and accounts receivable. Beware of confusing advice – I read this line in an article about burn rate: “Put simply, you can’t go bankrupt if you make more money than you spend”. It’s true but you do need understand what you are making and what you are spending Burn rate is your monthly outgoings. Note that many articles describe your burn rate as your monthly operating expenses This is not the whole picture – if you are buying equipment, building up inventories these need to be included in your burn rate Cash runway is your cash available divided by the burn rate, If you have $200,000 and are spending at the rate of $40,000 per month your cash runway in 5 months. At launch it would be prudent to have at least 12 months of cash runway. This will give you time to build and test your MVP – Minimum Viable Product Generate initial sales: Note if you are using a penetration strategy, initial sales may not generate much margin and require you to invest in inventories. If you are selling on credit the money may not come in until later. If you are selling on 30-day terms you can expect that payment will likely be 45 days later. You will book the sale in the month it is made but the cash may not arrive until the next or even the second month. What is an acceptable burn rate? There is no one size fits all answer. In the first half of 2019 WeWork Revenues were $1.5 Billion and expenses were $2.9 billion. Some analysts were predicting that without further funding WeWork would run out of cash by the end of the year. If boot strapping you business you have finite funds and your burn rate must match your anticipated time to breakeven cash flow. And then some! If you are being funded then your cash runway should be long enough to at least prove your MVP and generate sales If you feel you may run out of cash talk to your investors early. Are they willing to put more cash into the business? Be prepared to justify your burn rate.

Tags: How to start a business, Achieve start up success, burn rate, cash management, expense control, working capital, the successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

There is never a time in a company's history when cost control can be relegated to the back burner, but for a startup company, keeping costs low is a vital necessity.

Felix Dennis English publisher, poet, spoken-word performer and philanthropist. The day you run out of money is the day your business closes. Time to break even will likely take longer than you thought There is always the unexpected Until then you will have a negative burn rate – money is going out of your bank account faster than it is going in. The smaller you can make this difference the longer you can keep going to overcome obstacles, modify your objectives and improve your business proposition. Set the right culture from day one rather than wait until you are facing a brick wall. Walmart – a winning strategy Control your expenses better than your competition. This is where you can always find the competitive advantage. You can make a lot of different mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you're too inefficient. Make sure this is ingrained into your business Check your assumptions about what is needed. Colin’s story – Setting up his own investment company he believed he needed a prestigious office to attract wealthy clients. In fact, the opulent surrounding turned clients off. Do not allow others to convince you to spend money. It’s your dollar. Know your budget and stick to it. It’s too easy to convince yourself that the next addition will pay off eventually You may go out of business before eventually arrives. Consider how others may see your spending. Impact on potential clients The reaction of your employees Is it clear that spending is for the long-term benefit of the business? Focus spending on strengthening your company’s core competence Walk the talk Make sure that your actions reflect your spending strategy Avoid vanity projects

​Link to article with photo of Jeff Bezos starting out. There is no luxury there!

https://www.indiatoday.in/technology/features/story/jeff-bezos-delivered-books-in-his-car-when-he-started-amazon-now-he-is-retiring-as-ceo-1765399-2021-02-03

Tags: How to start a business, achieve start up success, burn rate, cash management, expense control, working capital, the successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

Episode 24 – On thin ice? Ten signs that your start up maybe beginning to fail. Based on a Forbes Inc article by Geoge Deeb published May 2021 Lost Focus on Primary Goal For some startups, their focus can divert to unimportant factors than the primary goal at hand. A successful startup learns to prioritize its efforts and stay religiously focused on that end goal. Poor or Slow Execution There are startups that begin with innovative concepts but cannot execute them properly. This can be due to a number of reasons—lack of relevant resources, lack of motivation or poor working habits Lack of Customer Engagement A lack of customer engagement is something many early-stage startups face. There are a many possible scenarios in which customers might lose interest in a product or service. Maybe the startup didn't properly research the market to ensure meaningful demand? Poor Teamwork Sometimes, perfectly capable and promising startups begin descending into failure because of differences among team members or lack of effective teamwork. High Employee Turnover Rate If the employee turnover rate is high and recurring, it could be an indicator of a failing startup. There could be a number of reasons why the turnover rate is high. For one, a startup’s culture plays a strong role. Lack of Adaptability Any startup that says it is immune to changes in the market is setting itself up for failure. External market forces ultimately dictate how your startup will fare against changing trends and competitors in the industry. No New Product Development For a startup to stay relevant, it needs to constantly be reinventing itself. Your product development efforts are never done, you should always be striving to improve from version 1 to version 2 to version 3 over time. Unaware of Finances Every good startup should always be aware of its financial situation. But you would be surprised how many entrepreneurs have no clue about their finances, and hence cannot easily predict they are about ready to slam into a brick wall. Creative Block or Stubbornness Oftentimes, a startup’s team gets hung up on a particular perspective or approach to an issue. When things are not going well, it is important to push the team to change their perspective and try something new and creative to solve the problem. Boredom The team getting bored with what they are working on can surely be a startup killer. Early in the startup’s life, the team is motivated, as the venture is exciting to work on, and the team enjoys working towards the success of a startup. Hence, everyone works with dedication and puts in long hours. But the reality is, after the euphoria wears off, it is easy for the team to get bored with their work.

Tags: How to start a business; Achieve start up success, Signs of startup failure, Business on thin ice, Watch for these signs, The successful entrepreneur; business common mistakes; small business startup; avoid these common mistakes of business; mistakes in business; IBGR.network; Jeremy Gray; Practical Solutions to Difficult Problems

Link to Forbes Article https://www.forbes.com/sites/georgedeeb/2021/05/03/top-10-warning-signs-your-startup-will-fail/?sh=65175ebb3549

“Cut smart, Cut with a plan, and Cut with help” Jason Goldberg - Fab

If the viability of your start up is in question its time to take action. Do not wait, the earlier the treatment the easier the cure Staff costs are a major cost and there is a temptation to cut drastically. Cut Fast Cut Deep is often quoted, Reflecting on the failure of his start up Fab’s Jason Goldberg regretted imposing massive layoffs in Europe and reducing the US team from four hundred to eighty five employees. He criticizes himself for being too quick to focus on slashing costs and narrowing scope versus taking a step back and devising a plan that could preserve value for the shareholders. Communicate openly with your staff about the situation Often concerns that if you tell employees that the business needs corrective action that they will leave More likely to leave if you take action without explaining why. Give them a voice. If you have hired right and focused on retention, they may be willing to accept changes in their employment Overtime: A good place to start is to look at overtime. Overtime can quickly become institutionalized. Employees can quickly get used to their overtime pay and become to rely on it. So, they slow down on the job so they can put another couple of hours on the clock before they leave. Or rather then finishing some work on a Friday they come in over the weekend to get the job done. Determine the main cause of overtime hours in your workplace and think about how you can reduce it. It could be as simple as optimizing staff schedules or reevaluating an outdated process. Alternatively, if the overtime is both necessary and temporary, consider waiting it out instead of hiring a new full-time employee. Sometimes overtime costs are temporary based on deadlines or quirks of the workflow but hiring a new staff member is a longer — and more costly — commitment. Improve Workflows Bottlenecks, disorganization, and lack of structure cause inefficiency that can waste time and money. Simply reviewing your business’s processes and workflows could save you a significant amount of money and foster more productive and effective employees. Eliminate unnecessary work. Its likely that some work is being done that does not deliver a lot of value. Free up employees to do more productive added value work. Outsource low value added but essential routine work Particularly useful in you are in high wage economy Many free lancers are available at a low cost to do this type of work Be ready to go through a number of candidates before you find a reliable quality worker Offer flexible hours, remote working, shorter working weeks Employees may be willing to trade a better work/life balance for a lower salary The improved engagement can lead to same work being done in less time. Restructuring fixed salaries sounds more ominous than it really is. Instead of simply reducing your employees’ salaries, which will cause disengagement, demotivation, and even turnover, consider offering performance bonuses and commissions instead. This ensures staff members are only paid additional amounts when your company is profitable. For example, let’s say you have a salesperson who has a base salary as well as a 5% commission on the sales they make. Ask them if they’re willing to take a lower base salary in exchange for a higher commission, like 10%. That way, you’re paying them more when they bring money into the company, instead of all the time. Alternatively, introduce performance bonuses to other full-time employees in lieu of salary increases or in exchange for a lower salary. Set goals for them to meet that are based on the profitability of their role or department, whether it’s reducing costs or increasing sales, and reward them based on whether they meet their goals. This way, you’re rewarding staff for a job well done when the company is doing well. If you must cut, Who?

Episode 22 Employee turnover costs you money. – Retention is the key “We cannot stop employees leaving unless we have a plan to them stay”. Hiring replacement employees is expensive. Recruitment costs Lost productivity Reduced institutional knowledge Stress on remaining employees Onboarding and training costs Loss of morale It’s expensive Built In reports the average costs to replace an employee in the US are: $1,500 for hourly employees 100 to 150% of an employee’s salary for technical positions Up to 213% of an employee’s salary for C-suite positions Why do employees leave? Robert Half cite the following reasons: Inadequate salary and benefits Feeling overworked and/or unsupported Limited opportunities for career advancement A need for better work-life balance Lack of recognition Boredom Unhappiness with management Concerns about the company’s direction or financial health Dissatisfaction with the company culture The desire to make a change This can be summed up – employees leave when they do not feel valued. Retention starts with recruitment: The interview stage is as much about them liking you as it is about you liking them. It’s also about sharing realistic expectations of what the role entails and having a mutual understanding of what both parties bring to the table. Consider the future: The candidate might be a perfect fit now but what about in two or five years’ time? You’re looking for loyalty and longevity to reduce the likelihood of the right person leaving sooner than you’d like. And ultimately, whether the individual fits your company culture and will work well with the rest of the team. Are they familiar with startup culture? After all, a startup is a very different beast to a large corp. The best person for the job on paper isn’t always the right person for the job. What one person may lack in experience, they make up for in aptitude and attitude. Instill a positive Company culture: Retention is about cultivating an environment where people can do their best work,” Nick Francis, CEO of Help Scout. A startup with great company culture will not only attract new talent but also help to retain talent. Fundamentally, positive company culture should: Align teams behind a clear mission Drive the business forward Set expectations for behavior, communication, and collaboration Promote work/life balance and positive wellbeing Acknowledge everyone’s contribution to the bigger picture Invest in training and development: As time passes and the new hire’s contribution increases, be sure to schedule regular catchups to see how they’re feeling, if they’re meeting objectives or if they need further support or training. Regular one-to-ones are also an opportunity to ask the employee for honest feedback regarding onboarding, training as well as general processes and workflows. Being a startup is that core processes can be improved as the company grows. You can set the culture for your company Financial rewards: As a start up you may not be able to match larger companies Employees can recognize potential income – stock options, incentive programs based on success, profit sharing. Tags: How to start a business; Achieve start up success, Employee recruitment, Employee Retention, Training, Company Culture, Cost Management, The successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

Episode 21 Start up hiring is different. Here is why you need a hiring plan. Recruiting talent is no different than any other challenge a start-up faces. It’s all about selling.” – Vivek Wadhwa

Staff expenses are likely to a major cost to your P&L. In labor intensive industries they can be as high as 70% of your total costs. The term labor intensive conjures up a vision of old-fashioned manual labor but in the service sector most of your costs will be labor. A business such as SaaS will be labor intensive, Often, they are less but they will be significant so they will be an important component of your cash flow forecast so you need to plan what positions you will hire, when you expect to hire them and at what cost. Costs go beyond salaries, you may incur payroll taxes, statutory benefits and industry standard benefits. Also, you need to assess holiday pay, sick pay and possibly overtime. These can add 30% to the salary number. You may need to supply tools such as computers, screens, workspace etc. A start up is different because often you are hiring your executive team first. Unlike an established business that hires to replace gaps or to expand. Assess your skills and identify gaps that must be filled before launch. Be honest – you cannot do it all yourself. Industry knowledge should be acquired if needed. Assess when the skills will be needed and factor in hiring time. Hire talent but manage the costs. Start ups are hard work. You need folks who are willing to pitch in and do whatever is necessary to get the business off the grounds Beware of corporate types who have been used to having a support network. Pay for the talent you need but get creative in packages. Base plus incentive. Consider people embarking on a second career Sell your business to candidates. Tell them of your business plan, vision, values, and culture. Show your enthusiasm for your business. Work backwards to establish your executive payroll and when costs will be incurred. Identify essential workers – production staff, programmers, waiters. This will vary by the type of business Research costs for your market and availability. These roles often have market rate As a start up the future is uncertain – you may have to pay a premium to encourage staff to join you. Especially if skills are in high demand. Incentive plans may be appropriate Your hiring plan should reflect your planned organizational structure. Does it fit? Quantify your employee costs and timing. Essential part of your cash flow. Tags: How to start a business, Achieve start up success, Hiring, Organizational structure, employee costs, The successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

1. Value-Based Pricing Strategy A value-based pricing strategy is when companies price their products or services based the price that the customer is willing to pay for a product. How you establish what a customer is willing to pay can be challenging and is a reason why many companies shy away from value-based pricing and revert to cost plus pricing. If how much money you can save your customer can be estimated in dollar terms this can used as a basis for value-based pricing. It is harder to value time saved, sometimes it is clear, sometimes it is not. When your product or service saves you customer money. Say you estimate that your product will save your customer $100. An economist may argue that you could sell your product for $99 as this would still benefit your customer to the tune of $1. Of course, this is nonsense, although mathematically it might make sense no customer is going to spend $99 to save a dollar. Maybe you could charge $50 for your product and split the savings with your customer. Maybe, if there were no switching costs and your customers was 100% convinced that the projected savings could be achieved. But there are always switching costs and always some doubt that the product and service will deliver the savings projected. Research has shown that customers are more likely to switch if they can see a four or five fold advantage in switching. So, for the $100 savings you can deliver you will probably be able to charge $20 to $25. Seems unfair doesn’t it the customer gets $75 or $80 of savings, and you get a miserable 20 or 25 bucks. Never mind once the value of your product is proven you will be able to raise your price but it’s unlikely you will ever get to a 50/50 split. The same applies where time savings are quantifiable. If the cost of a construction crew is $500 per hour and you can save them two hours the benefit of your product or service is $1,000. Probably you could sell your product for around $200 to $250. For most products and services, it is impossible to quantify the value in the eyes or mind of your customer. So how do we go about determining how much the customer is willing to pay? You have to focus on a specific segment. If you are a B2B company you may have to focus down to a single customer, as the price customer A is willing to pay may be different to the price customer B is willing to pay. Compare your product offering with next best alternative. What would my customer buy if my product was not available? Singapore Airlines might compare their business class service to Ho Chi Minh City with Vietnam Airlines direct flight from Singapore to Ho Chi Minh, or Malaysia Air service via Kuala Lumpur. You should then need to figure out what is features in your product offering are unique, what differentiates your offering from your competitors. Maybe Singapore airlines are flying planes with a more recently upgraded business class seating that is superior the Vietnam airlines, maybe their food and drink offerings are better quality and a more extensive range of choices. Finally place a dollar value on the differentiation. How much is the superior Singapore business class interior and better food, and drink is worth versus Vietnam Airlines offering. More accurately we are trying to estimate how much more is a passenger willing to pay for the more comfortable surroundings and the higher quality of catering. Some of the misconceptions about value-based pricing. Value based pricing will lead to success every time. Sadly, this is not always true, remember in every strategy or tactic you follow your competitors gets a vote. If your competitor markets their product or service at a price well below what the customer is willing to pay there is no way you will be able to achieve the true value of your offering. If you are lucky, you have smart competitors that understand the value.

Skimming Pricing Strategy A skimming pricing strategy is when companies charge the highest possible price for a new product to early adopters of new technology and then lower the price over time to attract later adopters and a product cost decrease due to efficiencies and economy of scale. I can recall when digital watches were first introduced in the early 1970’s their prices were the equivalent of an expensive analogue watch. Prices quickly fell and today a digital watch can be a throw away fashion item. A couple of disadvantages of a skimming strategy are it can upset customers who paid a higher price for an item only to see it offered a much lower price soon after they purchased the item and secondly if the high price is held too long it can create a margin umbrella for a competitor to enter the market and take away your leadership position. Penetration Pricing Strategy Contrasted with skimming pricing, a penetration pricing strategy is when companies enter the market with an extremely low price, effectively drawing attention (and revenue) away from higher-priced competitors. This pricing method works best for brand new businesses looking for customers or for businesses that are breaking into an existing, competitive market. The strategy is all about disruption and temporary loss … and hoping that your initial customers stick around as you eventually raise prices. A challenge to businesses that follow a penetration pricing is that it invites a price war with the incumbent businesses. Your more established competitors may drop their prices with the intention of preventing you from gaining a foothold in their market. The second problem is ensuring you have the valuation proposition to allow you to raise prices and keep the customers you have gained with your low-price offering Premium Pricing Strategy Also known as premium pricing and luxury pricing, a prestige pricing strategy is when companies price their products high to present the image that their products are high-value, luxury, or premium. Prestige pricing focuses on the perceived value of a product rather than the actual value or production cost. Prestige pricing is a direct function of brand awareness and brand perception. Brands who apply this pricing method are known for providing value and status through their products — which is why they’re priced higher than other competitors. Fashion and technology are often priced using this strategy because they can be marketed as luxurious, exclusive, and rare. Dynamic Pricing Strategy Dynamic pricing is also known as surge pricing, demand pricing, or time-based pricing. It’s a flexible pricing strategy where prices fluctuate based on market and customer demand. The best-known global example is Uber. Or here in Singapore Grab – Example of closing of bars at 10:30