Recently in this column, I’ve delved into some of the most common challenges many small businesses face. Today, I’d like to share another pervasive business hurdle – one best exemplified by Makino’s effect on the manufacturing industry.

What is Makino, and why should I care?

Makino is a CNC machine tool manufacturer – and years ago, was one of the first to combine precision technology with software, engineering and automation. A Makino machine was (and is) an amazing piece of equipment, capable of manufacturing parts faster and more accurately than previously thought possible.

It represented a substantial capital investment for small manufacturing businesses, but it paid for itself over and over again by bringing a degree of productivity and quality never before seen on most shop floors. Manufacturers that purchased these machines when they were first developed were massively more successful than others using manual machines or older equipment. (Some, in fact, were Kinesis clients.)

For a little while, any company that had invested in this equipment had an obvious and immediate advantage in the marketplace. They were the best, by every measurable Key Performance Indicator. Customers flocked. Revenue skyrocketed. Business was good.

But then, as with all good things, word got out.

Over time, more and more companies started buying this magic-making equipment. Within just a few short years, what was once a unique and remarkable competitive advantage became commonplace – a baseline expectation, a table stake.

And if every company touts the same equipment and technical capabilities, how do customers make their decision?

You guessed it – price.

Beyond Makino: questions to ask yourself

If you’re a professional service business operator, or a contractor in the built space, you may think this problem doesn’t apply to you. Unfortunately, this is far from the truth.

For example, you might believe that your delivery times are remarkable – but what happens when your competition can offer the same project timelines? You may believe your customer service sets you apart – but what if your peers are touting the same thing?

The truth is, no one is immune – any product or service can be commoditized. But that doesn’t mean you have to compete on price.

If your industry is driven by commoditization, there are still steps you can take to differentiate your company. Here are some questions you can ask yourself to begin preparing for this journey:

• Is your business protected by an unbreachable moat?

When Warren Buffett was asked his philosophy for selecting companies to invest in, he reportedly responded, “In business, I look for economic castles protected by unbreachable moats.” In other words, he values a business by the competitive advantage that protects it. Does your organization have such a protective barrier?

• What makes your company remarkable?

A good start to this exercise is to determine where you’re currently hanging your hat when it comes to remarkable differentiation. If a customer were on the fence about choosing you or a competitor, what would you say to sway them? (Hint: It can’t be price … and probably shouldn’t be equipment or lead times either.)

• Do you have a proprietary way of doing business?

Put simply, this is where purpose, people and process overlap to solve a real challenge in a remarkable way. If you operate in a commoditized market, provide your customers with a meaningful choice between you and your competition by confidently telling them that “we do things this way.”

• Who are your best-fit clients?

As mentioned above, one path toward differentiation is specialization – and identifying the core customer base for whom you can do your best work. One way to start is to determine who these customers are, so you can carve out a niche to serve them the best.

• Do you have a strong company culture?

Differentiation doesn’t just apply to your external customer. The way you recruit, hire, retain, engage, grow and support your internal team is just as important in creating something remarkable in your organization. How much attention are you currently devoting to this?

The takeaway

While finding ways to differentiate in a commoditized market can be challenging, it’s far from impossible. If your business has made it this far, it’s probably a result of remarkable people and processes – now it’s just a matter of defining that remarkability, and telling your story in a way that differentiates you from the rest of your industry. With the right preparation and resources, you, too, can move beyond the “Makino” in your business – and rise head and shoulders above the rest of your commoditized market.

Shawn Busse is founder and CEO of Kinesis. Contact him at 503-922-2289 or shawn@kinesisinc.com.

The post OP-ED: Business in 2020: why a Makino machine isn’t enough appeared first on Daily Journal of Commerce.

Jane Brown has been at the top of her game for a long time. She built a remarkable electrical contracting business – driven by a good idea and powered by capable people.

And yet, it seems like nobody has ever heard of the business.

How to tell if you’re a best-kept secret

While Jane recognizes that something needs to change, she can’t immediately identify the issue – and some of the common symptoms sound deceptively positive:

• Most of her new business comes from word of mouth / referrals.
• Her internal culture is strong – employees are energized, engaged, and like what they do.
• She has low client attrition – once a client is in the door, she’s gained a loyal fan for life.

But there’s a shadowy side to these early indicators, and when you dig a little deeper they become problematic:

• Historically, referrals and word of mouth marketing have been a reliable source of new business – but that network has started to become saturated.
• She has a strong internal culture, which is something to be proud of – but nobody else knows about it and she struggles to find new candidates.
• Her client turnover is low, but the problem is gaining new clients.
  We call this being a best-kept secret.

The problem, and when it matters

Of course, there are times when best-kept secrets are desirable – like when you’re traveling and seeking a destination off the beaten path.

Take, for instance, a gelato shop in the back streets of Rome. When the shop was founded, it was probably with a vision for producing handmade, artisanal ice cream with only the purest, locally sourced ingredients. For a lifestyle business like this, being a best-kept secret might actually be preferable.

But for many other businesses, the opposite is true: Jane doesn’t want to be tucked away in a quaint, cobbled alleyway. She wants to be front and center – so that anyone who could benefit from her service has visibility and access.

Why leaders struggle to get the word out

This issue boils down to two main challenges: 1, You know you have something special, but struggle to articulate exactly what sets your business apart, or 2, you have a strong value proposition, but need to get the message out.

It’s possible that business leaders are hesitant to share their secret because they’re afraid of growth – that it will force them to compromise the values that brought them this far. (I’m sure the aforementioned gelato shop owner wouldn’t want to dilute his product to become the next Baskin-Robbins.)

That said, there is a happy medium to be found. Take Salt & Straw – a Portland-based artisanal ice cream company that has found ways to scale its core identity: rather than compromise its value of locally sourced ingredients, the company sources locally in each new city it enters. Leaders have stayed true to what makes them remarkable, while also building a sustainable, controllable business. If you’re familiar with Salt & Straw, you know this strategy has worked: there is often a line out the door at every location.

Spilling the beans on a best-kept secret

If you, too, want Salt & Straw-like success, there is a path forward. Start by asking yourself the following questions.

1. Are you tracking the right marketing metrics?

Part of not being the best-kept secret means getting the word out – and one way to measure the success of that effort is to track performance via marketing metrics.

2. Have you grown your network of referrers?

Formalize and systematize your referral program to encourage even more word of mouth.

3. How successful are your recruitment efforts?

Look for ways to re-energize your recruiting program so that prospective candidates know how great it would be to work for you.

4. Do you have a strong value proposition?

Why would your ideal customer purchase from you rather than your competition? Think about what sets you apart, and then be ready to shout it from the rooftops.

The takeaway

While this problem is a pervasive one affecting many small businesses, the good news is that it’s entirely fixable. If your business has made it this far, it’s probably because you’re doing something worth sharing – congratulations!

Now, with the right preparation and resources, you can take your organization from being the best-kept secret into being the next best thing.

Shawn Busse is founder and CEO of Kinesis. Contact him at 503-922-2289 or shawn@kinesisinc.com.

The post OP-ED: Why a best-kept secret isn’t as delicious as it sounds appeared first on Daily Journal of Commerce.

John Smith should’ve been on top of the world – he was the owner of a highly profitable electrical contracting company. So why did he wake up once a week in a cold sweat, dreading the inevitable?

Because he knew that locked up in his office was Fluffy, an 800-pound gorilla poised to wreak havoc on everything he’d built.

What is the 800-pound gorilla?

The 800-pound gorilla metaphor was born of a decades-old riddle:

Q: Where does an 800-pound gorilla sit?
A: Anywhere it wants to.

That’s because an 800-pound gorilla is so powerful that it can act without regard to anyone else. 800-pound gorillas come in many shapes in the construction industry – from an “irreplaceable employee,” to a customer base that rises and falls at the same time. (We all saw how that worked out in 2008.)

In John’s case, the gargantuan primate plaguing his dreams came in the form of a client commanding more than 50 percent of company revenue.

What’s wrong with the 800-pound gorilla?

If you’re failing to see the problem here, you’re not alone. Many business owners would probably be thrilled (initially, at least) at the prospect of such a large revenue opportunity.

But that would change when Fluffy sits down wherever it wants.

The problem with having one client commanding so much of your revenue is that it knows it has you in a chokehold and operates accordingly. You will probably have very little say over pricing or project timelines. When times get hard for Fluffy, he passes that pain onto you – by pulling projects, paying more slowly, becoming more demanding, etc.

Suddenly the gorilla you were initially so thrilled to capture is tearing your business apart limb by limb.

The hidden dangers of housing Fluffy

The obvious solution here is to find ways to make this relationship more sustainable – but for most businesses, this is vastly easier said than done.

For starters, you’ve built your business around Fluffy. You staffed up the organization and purchased new equipment based on the assumption that Fluffy would remain soft and cuddly for years to come.

To make matters worse, you also haven’t put forth any energy toward sales, business development or marketing. As a result, you’ve become out of touch with the marketplace and have no relationships to build upon to replace Fluffy. Moreover, since your P&L reflects artificially low marketing and sales investments, your business’ profits create a deceptively positive financial model.

In other words, you’ve been so preoccupied with serving your 800-pound gorilla that the real, long-term threats to your business have gone unnoticed and unattended.

Taming your 800-pound gorilla

Fortunately, there is a solution to the Fluffy problem. Here are some questions you can ask yourself to begin preparing your company for this shift:

• How diverse is your client base?

This won’t happen overnight, but step No. 1 will be to better understand your current client mix – what it looks like today, and how you’d like to see it change. This means evaluating not just 800-pound customers, but also type of work, services, industries and locations.

• How sophisticated is your marketing infrastructure?

If business has been booming, you’ve probably been riding on the coattails of outdated marketing strategies or an old website for far too long. It’s time to dust off your old marketing plan and put forth a new strategy that will get your company back off the ground.

• How strong is your sales team?

With the right marketing infrastructure in place, it probably makes sense to add someone to support your business development efforts. Be sure to vet thoroughly and budget accordingly.

• Are you looking around the corner?

Client concentration isn’t the only threat to your business. Many others – like regulatory pressure or generational shifts in the workforce – could impact your company in an equally profound way. Successful business owners are constantly on the lookout for these trends and pivot their organizations to shoulder the impact.

The takeaway

While parting ways with an 800-pound gorilla will never be easy, it is far from impossible. Kinesis has worked with a number of clients for whom one customer comprised 50, 70 or even 90 percent of revenue and found their way out.

With the right preparation and resources, you too can transform Fluffy from a King-Kong-style nightmare into a friendly organ grinder sidekick.

Shawn Busse is founder and CEO of Kinesis. Contact him at 503-922-2289 or shawn@kinesisinc.com.

The post OP-ED: Wicked problem No. 1: the 800-pound gorilla appeared first on Daily Journal of Commerce.

If you run a professional services firm, or manufacture products to client specifications, I’m guessing you know what I mean when I say, “managing revenue is a challenge.”

Isn’t “challenge” really just a nice way to say “pain in the butt?”

The problem faced by most service providers is that their business models don’t scale well; adding more clients usually means adding more staff. And, as you know, adding more people means adding more direct expenses (salaries, benefits) as well as many indirect expenses (training, mistakes, cultural disruption).

We call this the “Sell-Do Trap.”

A perfect snare, in four steps

Several years ago, I coined the term “Sell-Do” as a quick way to describe businesses whose owners were responsible for delivering the work (they “sell” the work, then “do” the work).

• Stage 1: sales-fueled growth. In the first phase, growth is fueled by a focused sales effort. For small businesses, this typically means the owner is out hustling up new work and generating opportunities. It’s time-consuming, but as the volume of work increases, things feel good.
• Stage 2: too busy. Right about the time the owner thinks he or she has it all figured out, signs of trouble begin to emerge. Expenses creep up. Employees lose efficiency and focus as 40 hours turn into 50 and 60. The owner spends more and more of his or her precious time managing projects and exhausted employees.
• Stage 3: hiring. Adding new blood brings some relief to the beleaguered staff, but also creates challenges because they need to be brought up to speed. Internal priorities continue to be placed on the back burner, and the owner must juggle team leadership, client happiness and delivery of product. From a business-development standpoint, marketing and sales crawl to a halt.
• Stage 4: the crash. Expenses are now at their highest, and because the owner was so preoccupied in stages 2 and 3, he or she hasn’t had time to generate new business. Profits come crashing back down, and over several months there is slow growth or none at all. Jumping back into “sales mode,” the owner pushes hard to create new work – except it’s even harder this time around, because operating expenses are higher than ever.

How to ‘Houdini’ the Sell-Do Trap

To overcome the Sell-Do Trap, I’ve developed a few key strategies to help owners escape the frustration and financial pitfalls associated with selling/doing:

1. Delegate like your life depends on it: Structure your team so that your pipeline is filled by someone not responsible for doing the work. If you’re unable to extract yourself from the sales process (since owners can sell better than most salespeople), look for ways to delegate the delivery of your services or products.
2. Systematize your sales process: If you do bring in sales support, segment your sales process so that everyone involved can play to their strengths. That may mean recruiting a natural networker to rustle up the opportunities, while you focus on closing the deal.
3. Create a sales and marketing infrastructure: In addition to bringing in team support, implement a Customer Relationship Management (CRM) software to standardize and track your funnel metrics. This will help you more accurately forecast sales and marketing needs.
4. Market consistently, not sporadically: Many businesses consider marketing when revenues drop; typically, this is too little, too late. Instead, owners should look at marketing as an ongoing lead-generation process, rather than a fire to be put out.
5. Restructure your offering: Look for ways to provide services that can be offered as on ongoing revenue stream. If you can build a service that your buyer can engage repeatedly and easily, you can reduce your sales investment.
6. Transform services into products: Ask yourself, “Are there certain services that can be branded and sold over and over again, with little customization?” If so, give these new “products” a name, and sell them at a fixed rate.

Many business owners are stuck in a never-ending Sell-Do trap cycle (I’ve been there!). While many service providers think this is simply a natural part of business, most are surprised that the path to freedom isn’t nearly so far away.

Wendy Maynard and I discuss this at length in our recently-released book, “Marketing From the Inside Out.” For more information on how to escape the Sell-Do Trap and turn your marketing into an engine for growth, visit kinesisinc.com.

Shawn Busse is founder and CEO of Kinesis. Contact him at 503-922-2289 or shawn@kinesisinc.com.

The post OP-ED: Become aware of a business pitfall: the Sell-Do Trap appeared first on Daily Journal of Commerce.

Like many business owners, I’m skeptical of social media marketing claims. For many of the B2B (business-to-business) organizations we work with, Twitter and Facebook have proven to be high-effort/low-return marketing channels.

Despite this challenge, it’s no secret that social media offers a unique opportunity for businesses to network on a global scale … and unlike Twitter and Facebook, LinkedIn presents a particularly appealing option for B2B companies. With nearly 259 million members, LinkedIn hosts profiles for nearly half of the world’s professionals and provides a level of targeting not seen elsewhere.

That is why, if you’re in the B2B space (and ESPECIALLY if you provide a service), I’m advocating that your first social move should be LinkedIn.

The power of LinkedIn

As the world’s largest professional network, LinkedIn is like one giant cocktail party where everyone is passing out business cards (and NOT sharing cat videos).

While being on LinkedIn is relatively easy (create a profile, accept invitations), marketing in this space requires much more effort and discipline. It means building both a personal page and a company one; it means writing recommendations and giving endorsements; it means commenting on what others are doing, and celebrating your network’s business wins and work anniversaries. In short, marketing on LinkedIn requires engagement.

So, what’s in it for you?

For starters, by engaging in LinkedIn, you will grow your network. And, if you do this right, you’ll grow your network of relevant connections – people who can help you, buy from you, and grow your business and career. Marketing through LinkedIn helps establish you and your business as a thought leader…someone top of mind when your network needs your services or is looking to make a career move.

But as you grow your networks, remember one caution: do so thoughtfully. My own experience has been to only connect with people I knew well or with whom I had a strong business or personal relationship. I steadfastly ignore invitations from people I don’t know or for which there was no apparent reason to connect (these, by the way, are mostly salespeople and recruiters).

This strategy has worked wonders: I’ve successfully used LinkedIn to generate new business, hire top-notch employees and grow Kinesis’ brand.

The downsides

There are, however, some drawbacks. For starters, LinkedIn only provides limited analytics on who has shared your content. Even worse, your status updates have an expiration date; after about two weeks, your updates simply disappear, and you can no longer reference or point people directly to them. This last piece in particular highlights why it’s critical to own your content and house it on a company blog, rather than rely entirely on social media (but that’s the subject of another article).

Guiding principles

In summary, there’s simply no better way for B2B companies to leverage social media than on LinkedIn. I leave you with these final tips:

• Company pages provide analytics, but personal updates often have greater network penetration.

• Relevant connections matter most. Ten valuable contacts will do a lot more good than 100 miscellaneous ones.

• Time isn’t on your side. Keep the two-week expiration date in mind as you post status updates, and consider which posts might make more sense for your company page or blog.

• Get ready for the slog. Like anything else, LinkedIn requires effort – and that means devoting time to creating highly valuable content for your audience.

• What works today probably won’t work tomorrow. This is true of most marketing tactics – keep an eye on what’s working, and be ready for a new trend to rise from the shadows just as you get the hang of this one.

Shawn Busse is the owner of Kinesis, a Portland agency that provides marketing strategy and branding expertise for B2B companies. Learn more at www.kinesisinc.com. Busse and his team are longtime supporters of American Marketing Association PDX. Learn more at www.ama-pdx.org.

The post OP-ED: Why LinkedIn matters for B2B companies appeared first on Daily Journal of Commerce.