Business | Property | Leadership

Month: August 2021

Fee Systems

Imagine taking time off from your business to go on holiday and during that time, you and your business keep earning and receiving fees from subscriptions, commissions and repeat orders?

Or what if you only need 2 or 3 clients a month paying high value fees for your specialist/niche service?

Or perhaps you have a systemised manufacturing process that, when operating, requires little further input other than basic monitoring from a small number of staff?

Business trading, in its simplest form, is the exchange of an item or service for money. If you’re a heating engineer, then you might sell a boiler service for, say, £90 – that’s great but you need to keep doing boiler servicing, maintenance, call-outs and installations to earn money. If you don’t go out to work, then you don’t get paid.

What if the boiler engineer sells a warranty service after he/she’s provided a service? Let’s say £15/month in exchange for a free call out and 1st hour of labour? This might be quite a nice idea for some clients. Now the engineer is earning money when he/she is not working.

Ok – I admit this is a simple example, and the sums need to add up to be viable. But you get my point.

The holy grail for many entreprenurs is subscription payments or/and advertising revenue derived from online content. So perhaps the heating engineer can create online content with self-help videos for common problems – if the client can’t resolve their problem via a self-help video then they complete an internet support for diagnosis, pay a fixed fee for repair/call out and the heating engineer then sub-contracts the ‘easy fixes’ to a mutual competitor whilst making a profit from the fee. If the repair looks difficult then perhaps he tackles it her/himself. Individual losses may be encountered but when all losses and gains are aggregated together, an overall profit is made.

Ok – that’s enough of the heating engineer analagy. I’ll finish with a few final thoughts: what’s better – a million items sold for a £1? Or 1 item sold £1million? The profit might be the same, but what was involved in terms of workload, logisitics and effort? And which has the best future and liklihood of repeat/return customers?

What’s better – a million items sold for a £1? Or 1 item sold £1million?

It’s a deliberately open question without parameters – have a think about this idea for your business idea – will you be able to build scale into your business as you grow and develop? Will you be able to create monetised aspects of your business that take advantage of different fee systems. An entrepreneur with a “constrained business” might reach max headroom before they reach the scale required to make their business viable… not good when that realisation comes after 2 or 3 years of effort.

Spend money on the systems or processes that help achieve scale and monetisation

What does this have to do with ‘spend or save’?

Spend money on the systems or processes that help achieve scale and monetisation, but you need to calculate the cost versus benefits. Perhaps spending is needed for a production/manufacturing method or it might be an app/software to undertake computer tasks that would be otherwise time-consuming. And when you employ staff, are you doing it simply to reduce your/staff workload? How do you know that the workload is not the result of inefficiency that could be resolved with a technological/software solution? Perhaps, frankly, your lack of skills with a computer is creating inefficiency and unnecessary costs?

Next article ‘Time Rich – learn to use a computer’.

Are you being stupid?

I recently received the following article from an acquaintance – it was topical as his organisation were undergoing a seemingly bizarre restructuring process which, to employees on the ‘shop floor’, seemed to be arriving at some odd conclusions in the context of their operational output:

https://psyche.co/ideas/why-some-of-the-smartest-people-can-be-so-very-stupid

The main point of the article is that smart people can be stupid when they lack the correct ‘conceptual tools’ as a result of culture, ethos or specific pressures within their organisational group.

However, is the article fair? It’s a bit like accident investigation: no one consciously decides to do a bad job; no one consciously wants to cock it all up; actually, people/teams make a decision(s) that makes sense to them at the time, and which factors in the pressures, aims and objectives in their immediate world – it’s not possible to select new conceptual tools when you think you already have the right conceptual tools.

it’s not possible to select new conceptual tools when you think you already have the right conceptual tools.

Which is why good leadership should also be humble and garner opinion, thoughts and advice from a wide variety of areas. And it’s why people on the outside-looking-in should be forthcoming and, in a constructive way, question and query ‘stupidity’ when it arises.  

  • If you’re a business owner, do you consult with your team with a genuine desire to get ideas and fresh inspiration for business development?
  • Does your business/organisation have a genuine and real forum for allowing constructive criticism?
  • If you’re a lower/middle-manager, do you have the confidence to constructively comment and advise your senior management on business processes?

And it’s why people on the outside-looking-in should be forthcoming and, in a constructive way, question and query ‘stupidity’ when it arises.  

You can be stupid – just allow other people to tell you when you are! And if they do, then take heed.

Starting a business? Then get a job!

That might seem like odd advice…

Everyone’s business plan is different – and different businesses will have different start-up costs. However, there are a few golden rules that I think apply to anyone:

  • Don’t spend your life savings
  • Don’t risk the home you own and live in.
  • Avoid borrowing/debt, if you can.

Unfortunately, viewers of Dragon’s Den would be forgiven for thinking that setting up a business requires many thousands of pounds. And all the banks are all too keen to lend money. I bet there is a business banking rep in the networking group that you recently joined? Yep – people starting a business are vulnerable to tempting, but possibly unnecessary offers.

I bet there is a business banking rep in the networking group that you recently joined? Yep – people starting a business are vulnerable to tempting, but possibly unnecessary offers.

But many businesses can be started with a very low initial outlay.

My big tip is to get a job! A part-time, regular, paid job to help support yourself in the early days of running your business. Or alterntively perhaps you’re wanting to leave your regular career job – if that’s the case, then try and start and run your business part-time concurrent with the last few months in your regular job. That might be difficult but, whatever, try and create a consistent source of income to suport yourself and your family in the early days. But you MUST also create a payment model for yourself, from your business, as soon you can.

It’s hard – I was lucky, when I left the Navy I had already spent a couple of years getting my business idea primed and ready – then, when I left, I was able to work in my old job as a part-time reservist. Which meant I didn’t have to dip into the gratuity payout sat in my bank account (I invested that in property but I’ll talk about that another time).

Don’t spend or pay yourself from your savings!! Savings take a long time to accumulate – and a big lump of money is useful for a big investment (like a house) or an urgent unforeseen need etc (what if your boiler breaksdown at home? or your roof gets damaged?). Your early business costs will probably be intangible and/or be spent on items that depreciate to nil value in very little time – eg, office furniture or PC equipment etc. Don’t convert a really useful lump of money into useless office tat!

Don’t convert a really useful lump of money into useless office tat!

Get a job… pay for the basics and essentials… and reinvest any profits into developing and growing your business. Borrow only for what you really need.  

Next article: ‘Fee Systems’

Spend or Save?

I never ceased to be amazed by how keen people are to spend money when they start a business! You hear people say crazy things like: ‘You’ve got to spend money to earn money’ or ‘it’s ok, it’s all included in my business plan projections’ or ‘it’s a business expense and I’ll write it off against tax’… or even ‘I’m expecting to make a loss in my first year’ ?!? That expensive iPad tablet… the really nice ‘company’ car… the high end website and expensive graphic design… these are all eroding your profits and you need money for the really important stuff or unforeseen problems. Think carefully about what you spend money on – and, if you’re smart and willing to learn a few extra skills, there are lots of things you can do yourself instead of outsourcing – when you first start, you are time-rich! Use the time well.

and, if you’re smart and willing to learn a few extra skills, there are lots of things you can do yourself .

I was going to write a single post on money and what not to do in the early days of starting your business. Then, as I thought it through, I realised that this could become many posts and I’ve even created a new post category ‘Spend or save’.

There is no ‘one size fits all’ when it comes to money and budgets etc – if you’ve designed a physical thing that requires manufacturing then you need machining, production, packaging, storage etc and all their associated costs. And to be honest, my background is in services and property investment. So these posts really are aimed at people who are providing services. The next few posts will cover the following topics

  • Starting a business? Then get a job…
  • Fee systems – what systems do you want and need
  • Time rich, cash poor – Learn to use a computer
  • Website, graphics, logos, social media
  • Advertising and marketing costs – set a budget
  • Accreditation and Trade/Industry trust
  • Accounting systems
  • CRM, Database management systems

Next article – ‘Starting a business? then get a job’

Have you got what it takes?

Do you have the qualities for running a business?

Why do people want to start a business? Typically, the answer will be one or some of the following:

  • I’ve got a great idea that will make money
  • I want to manage my own time and have freedom
  • I don’t want to be an employee anymore
  • I think I can do a better job than the current provider

Do you ever hear people give the following reasons?:

  • I want to be a leader
  • I want to be an employer
  • I want to solve awkward problems most days
  • I want to support the economy

That second set of answers is the reality. It really is the reality – you may make money and, in time, you may get your freedom and I will discuss this in future blog posts. But ultimately, if your business is successful then you will definitely need to be a leader! Even if you’re a sole trader you will need to lead and guide your clients. If you become an employer then you will need to expend deliberate and conscious effort just setting an example everyday, in addition to all the employer responsibilities and headaches such as training, auditing, staff absences, sick leave, disciplinary proceedings etc!

If you cut corners then eventually standards will slip and the correct examples will not be set to others – your business will go bad!

And to be a leader and an employer, you will need integrity. If you don’t have integrity then eventually you’ll come unstuck because your product, services, employees and clients require consistent and persistent professional standards all the time! If you cut corners then eventually standards will slip and the correct examples will not be set to others – your business will go bad!

A businesspersons without integrity are the Del-Boys, rogues and back street wheeler-dealers. You won’t be able to bluff your way through for very long.

Here is a great example of what integrity is:

https://www.linkedin.com/pulse/supermarket-trolley-etiquette-could-test-your-tony-furniss/

Constrained or Unconstrained?

What type of business do you want? Products or services? Online or High Street? etc. You may already have your awesome business idea but think about this:

I think of business as either being ‘constrained’ or ‘unconstrained’. By this I mean their inherent capcity for growth. When I started my business, I didn’t want constraints – I wanted to grow and have unlimited opportunities. But, an open-ended business that sells bespoke and flexible services can become fatiguing – there is a sense that you never get “on top” of things because ideas, services and clients’ needs are ever changing and developing. What is your personaility type? If you like things to be controlled, ordered, sequenced and to fit into a ‘pigeon-hole’ then do you want to be selling, for example, graphic design services via the internet? If you crave variety and wish to create innovative solutions for a range of client types then do you really want a business selling mass-produced widgets in a small commercial factory?

Here are examples of businesses local to me that I really admire:

Surestart Autos (Product = repaired cars): a car garage providing servicing, repairs and MOTs. This is a constrained by its location. The clients’ visit the premises, the staff all work at the premises, all deliveries come to the premises and it’s all neatly contained. It’s also constrained by time – ie, there are only a finite number of cars that can be serviced in one day.

Tamburino Italian Restaurant (Product = eat-in meals): this place is always busy – it’s a constrained business and there is a finite amount of time and space for providing meals.

All Green (Product = recycling materials): this is a wholesale provider of recycling materials – eg food waste bags. It’s constrained by its premises – eg, there is a finite amount of space for stock but their products are sold online via Amazon – the client-base is potentially every household in the country; that’s unconstrained.

Guitar Tuition Somerset (services): This is a tutor providng 1-to-1 guitar lessons – it is constrained by time because there are only a fixed number of slots available in the week.

Proudhouse Property Management (management services): Lettings and Property Management – this is mostly unconstrained because the number of potential clients, locally and regional, is very high (there are 5 million rental properties in the UK).

When you’re starting a business, think about what you really want and where your awesome business idea fits in.

When you’re starting a business, think about what you really want and where your awesome business idea fits in. Sure, any business can develop – the restaurant owner can open a second restaurant; the guitar tutor can create online video content, the wholesaler can obtain larger premises etc – but the inherent constraints of your business idea should be considered carefully before committing your savings, business loan etc. Make sure the inherent constraints of your business idea fit with your goals, ambition and personality type.

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