Anchor and Nooses: Two Big Drains on Your Business

Business is a tough game. Continually we need to operate in three areas to ensure we produce consistent outcomes. The businesses we work with are challenged to:

  • Tend to the business. We operate our business daily, tend to the issues and the pressing needs as they arise.
  • Prune the business. At times we all need to prune. Whether it is a process, a product or a person, this is a needed part of ensuring that you obtain the best result and investment is made in what is best in your business.
  • Grow the business. We continually need to look for ways to grow our business. This can be growing your core business or sowing new seeds.

To work these areas, our owners progress through a process to reflect and review. We take them “out of their business” to work on their business. We acknowledge that we all need to be in the business, but we need to have time ongoing to work on the business.

All businesses are unique, however, we find a few things in common. We find most businesses have anchors and nooses. Let me explain.

Anchors

Anchors hold businesses (and people) back. They are wide and varied but the common ones are listed here.

  • A business relationship that takes too much resources relative to the level of business.
  • A product line that the business has emotional investment in, but is now not providing the return for it’s current level of investment.
  • A team that is failing to see the link between sustainable business and their positions.

These are the main three, although we do see more. On every occasion we create a strategy to release the anchor and start the business moving again.

The biggest part is to be able to identify the anchor and work through a process to cut the chain.

Nooses

Nooses are, similarly, an impediment to business growth, but this time the business is impacted by a tightening pressure. Often this is due to the following:

  • Unreasonable supplier or customer terms creating unnecessary pressure on cash flow.
  • Inadequate planning, be it business, financial or marketing which pressure ongoing investment in these areas.
  • Constant complaints from customers on service or product quality.
  • Pro-bono or special consideration business taking resources away from your best customers.

The key, again, is to identify it, and then work to achieve a strategy to reduce the pressure and then eliminate.

Strategy

We work with clients to build strategy to help them gain control and bring growth back to their business. Once awareness is gained from the business owner, the strategy starts to form. Having a fresh set of eyes helping you through this maze.

Some businesses simply don’t ask for help. Often it’s a lack of awareness of the situation and of a feeling of normality, as they have become comfortable with the situation.

It is important to gauge the situation, once you have become aware of it, with a set of fresh eyes. In the words of Einstein:

“We cannot solve our problems with the same level of thinking that created them”

Don’t be afraid to ask for help. We do see pride get in the way with some businesses. Don’t be the proudest person in the morgue.

What Comes First: Business Strategy or Tax Strategy?

Any business advisor will tell you the answer, but what’s happening in the real world?

Here are a few examples:

VAT

When Jeanne started her exercise class business, she decided after taking advice that she wouldn’t register for VAT. It makes sense. If you want to compete with everyone else then you can’t charge 20% higher prices to include VAT. But now she’s stuck. She can’t grow the business beyond the VAT threshold because she would have to increase her prices or take a significant reduction in margin. Now she’s contemplating setting up separate businesses to boost her earnings. It’s quickly going to get complicated – she can do without all the distraction of doubling the admin work.

Five years in to running his hair salon, Scott takes a day off a week and shuts early some days just to limit his takings to keep them below the VAT threshold. But he’s living hand-to-mouth.

Which came first in these two cases: tax strategy or business strategy? The payoff of course is that both businesses reduce their tax bill, but at what cost?

I’m sure this isn’t what was intended when a VAT registration threshold was included in the VAT legislation created in 1973.

Income Tax

John runs a sole-tradership and draws money from the business as he needs it and, more importantly, when it’s available during the year. His accountant then finds the most tax efficient way at the year-end to distribute his drawings between salary, expenses and dividends. Cashflow is not managed proactively, so while John knows what’s in the bank he doesn’t keep track of every due payment or receipt so he sometimes draws too much and leaves the business short of cash. This regularly causes him to have sleepless nights.

Norman runs a limited company and runs it the same way. He takes no salary as such and reinvests most of the profits into the business to fund growth. He restricts his drawings to pay as little tax as possible. He’s looking to exit the business in 3-5 years. Unfortunately, because he’s not taking any kind of salary, let alone a market rate salary, he has no idea how profitable the business truly is and is complicating things for himself when he eventually come to sell.

Ken is looking to buy a new vehicle for his business, that he will use personally too, in order to reduce his tax bill. However, his tax savings are less than savings he’ll make obtaining a vehicle this way compared to some of the alternatives.

Which came first in these cases – business strategy or tax strategy? Again, the payoff is a lower tax bill, but at what cost in terms of business growth and equity?

These examples are not rare. Many micro-businesses and SMEs are operated in a way that minimises tax liabilities. Their business strategy is defined by their tax strategy. In the real world, it seems, tax strategy more often takes priority over business strategy.

And in every case described it is stunting the growth potential of the business. That may be OK in some cases, where the owner doesn’t want to grow. However, where they do it is holding them back. In any case, all businesses should be looking to grow at least a little just to overcome the effects of inflation!

So what’s the solution? Some say that the government should change the tax rules to benefit SMEs even more. Others might point out that accountants are well placed to help business owners put business strategy before tax strategy. However, both of these “solutions” abdicate responsibility. Governments will forever tinker with tax rules, shaving a bit here and adding a bit there. The overall result is added complexity, confusion and probably a ligher wallet. Tax advisers will prioritise minimising the tax bill because that’s their job and the tangible, immediate benefits show how good they are at it.

The solution then is for business owners to recognise that a successful business should pay taxes. That a successful person contributes to society by paying taxes. And to be successful means developing and implementing a business strategy that will achieve their goals not minimise tax.

With a business strategy in place, then a tax strategy can be applied to mimimise the tax liability of that strategy without strangling business growth.

So how do you create a business strategy? There are books written on the subject, but here are the essentials:

  1. Define what you want to achieve, or start with the end in mind as they say. I don’t believe anyone really starts out wanting to build a sub-£78,000 turnover business. Many settle for that, but few start with that ambition. Starting with the end in mind allows you to pre-think what the business needs to look like in terms of turnover, profits, headcount, infrastructure, etc.
  2. Look at what’s already available in the market and come up with something different. That might be a different target market, or a different way of delivering what you offer. But to avoid competing on price (like Jeanne) you must have something different to offer your target market, not just a little better, or smaller, or bigger, or faster, or whiter, but completely different.
  3. Figure out which people would want to buy that difference and why they would buy it – why should they care enough to part with their hard-earned cash?
  4. Figure out how to tell people about it and how they can get hold of it most easily.
  5. Then create a plan to help you understand how the cashflow will be generated to achieve your goal. Too few business plans are written to aid understanding of the specific steps involved in achieving a goal and the risks associated with those steps. Write yours with those two things in mind.
  6. Follow the plan step by step and adapt it regularly as you gather real world data to support or otherwise your business idea.
  7. Discuss with your tax advisor/accountant how to minimise the tax liability of the plan and impress upon them that changing the plan is not an option.

If you’re already in business, it’s not too late to figure out a more effective strategy to achieve your goals. The best time to start is today.

7 Steps to Writing an Effective One-Page Business Plan

Writing a business plan doesn’t have to be boring or complicated.

And it certainly doesn’t have to be long.

In fact, the longer your business plan, the less likely you will use it.

A business plan is meant to be used. It’s meant for you to make use of and revisit often. It’s not something you create once and store in some remote part of your hard drive.

If you have been avoiding creating a business plan because you find it overwhelming, tedious and time consuming, then I want to introduce you to the simple 7 steps to writing a business plan on a single page.

Yes, a one-page business plan.

Writing your business plan on a single page can be much less daunting and something you can easily use and modify as needed.

It’s a much more efficient and faster way of writing a business plan – one that you will actually use – and won’t take a lot of time or effort on your part as a traditional business plan.

So don’t waste too much time starting a business plan, and start with the following 7-step plan to developing a business plan from scratch for your online business.

Step 1: Know Your Target Audience

If you’re going to create a product or service that people want to buy, then you’re going to have to first understand the needs of your customer – their fears, frustrations, challenges and desires.

If your customer doesn’t have a need for your product, then there is no point in creating it in the first place.

But that is exactly what many aspiring entrepreneurs will do. They will often spend months and sometimes even years developing a product or service that no one has any interesting in buying. This is probably the most inefficient way to create a sustainable business that will create real results.

Instead, it’s better to get input and feedback from your customer while developing your product.

First ask at least 5-10 prospective customers or clients what challenges they are facing and if they have a need for your solution. If not, keep digging deeper until you have something they might be interested in buying.

Armed with this knowledge you will find it much easier to develop your solution.

Step 1b: Create an Ideal Customer Profile

You probably already know the importance of demographics (age, gender, location, etc.), but what many entrepreneurs often overlook are factors like customer interests, buying behavior, etc. Knowing these things may seem trivial, but it’s extremely insightful to have this data at your disposal.

For example, if you do any sort of advertising on Facebook, then knowing your audience’s interests can help you target the right people. If you are going solely on basic demographics, then you won’t be targeting your ideal customer and will end up paying more for traffic.

To find out who your ideal target audience is you can use tools such as quantcast.com and Facebook graph search. These tools will give you little known insights about your consumer – their interests, household income, purchasing behaviour, etc.

Once you create a basic profile of your target audience, then you will be in much better position to create a solution that they will be interesting in buying.

Step 2: Know Your Competitors

If you don’t know who your competitors are, then it’ll likely be an uphill battle to become relevant in your industry.

One of the most important first steps you can take is to identify your top 5 competitors and study their business – their products, services, pricing, sales funnel etc.

Once you’ve identified your primary competitors, then it’ll be much easier to find a way to differentiate yourself from them (step 4), as well as knowing how to price your products, what solutions to develop and creating your sales funnel.

There is no point in re-inventing the wheel if something is already working for your competitors. All you need to do is create better products and services, offer something they aren’t offering (such as a better guarantee, lower prices, more value, etc.).

This way you’ll be much more likely to create a business that has been proven to work and your job is to develop the best possible products and services for your clients and prospects.

Step 3: Develop a Simple Solution

If you’re going to develop a product (solution) centered around customer’s problems or needs, then it’ll be much more useful to think about creating your solution with the bare minimum features that will solve their problem.

It’s important to realize that you won’t build a perfect product the first time around. And you certainly won’t develop a perfect product without any input from your ideal customer.

So when developing your product or service, first focus on creating a minimum viable product (MVP), which is a bare minimum product that your customers be willing to pay you for (even if it doesn’t have all the bells and whistles).

Once you create and test your MVP in the market place, you will know if there is demand for your product or service, and you can go onto developing version 2.0, 3.0 and so on. By the 3rd or 4th iteration your product will start to look much more polished and something your customers will be lining up to buy (they’re the ones that helped you build it!)

So initially, when writing down your solution on your business plan, think of the top 1-3 features that your product will have that will solve the problem.

For example, if many of your prospective customers problem are finding it challenging to stay motivated and consistent with their diet and exercise routine, then you can create a solution that includes an online community or personal online coach that will help them stay on track and break through any barriers when they lose focus.

It important to create your solution around their needs and only include the minimum set of features that will capture their interest in trying out your services. As you learn more about your customers and get their feedback, you can start to add more features if needed as your product or service develops.

Step 4: Create your USP

The reason why many startup entrepreneurs fail to gain any traction in a competitive marketplace is because they don’t have anything that differentiates them from their competition. Too often they are simply copying what’s already out there, instead of uniquely position themselves to give themselves an upper hand on their competition.

You can do create this unique positioning by creating what’s known as a unique selling proposition. It’s the answer to the question, “what do you do differently then your competition?”.

A lot of entrepreneurs will simply say things like, “we’re better, we’re faster, we’re high quality, etc”. But anyone can claim that they are better, faster and higher quality. It’s not enough to call yourself these things.

Instead, it’s much more effective to offer something that your competition won’t be able to copy that easily. And if they do, it may affect their bottom line since they can’t offer it the way that you do.

For example, many business owners won’t give a money-back guarantee if the customer isn’t satisfied. And even if they do, it will only be for 30 days. So if everyone in your market place is offering a 30 day guarantee, then why not offer 60 days, 90 days, or even 365 days?

A lot of entrepreneurs would fear that they will lose money because a customer has more time to refund their products, but in fact the opposite is true. If you create a quality product that actually delivers results for the customer or client, then they will most likely stick around long term. They will appreciate that you have placed enough trust in them to provide them with that sort of guarantee and in turn will trust you even more.

So when creating your USP, think in terms of what you can do differently than what’s already being done by every other competitor out there.

Is there something they are not offering that you can offer? Can you deliver results faster than your competition? Is your customer service experience better than theirs in terms of quality and responsiveness (I.e available 24/7 or with reply within 3 hours?)

Step 5: Know Your Pricing

When creating your first product or service, it can be challenging to know how to price it. A lot of times entrepreneurs will simply guess what is the ideal price point for their product and will pricing it accordingly.

However, instead of guessing, why not first see what prices your competitors are using, and then use that as a starting point.

Once you have your starting price, the next step would be to test 3 different price points for each product. This way you can determine which price point is ideal and settle on the sweet spot.

It’s important to note that your pricing also depends on how well you position your product and build value on your sales pages. If you don’t do a good job of building value and interest, then it won’t matter how low you price your products – people simply won’t buy them.

But if you do a good job of conveying that value on your sales pages, then you may even be able to price your products much higher than your competition – especially if you do things they don’t as described in Step 3.

Step 6: Choose a Marketing Channel

Knowing which platforms you’re going to use to create awareness about your products and services is very important when launching your business.

There are many ways to market your product, so it’s important to pick the one best suited for your business.

Choosing the right marketing channel doesn’t have to be complicated. You simply need to find out where your ideal target audience congregates or hangs out (as determined in Step 2), and use that as your starting point.

It’s usually a good idea to start marketing on one platform before moving on to the next. You don’t need to be on all platforms. For example, if you’re primary channel is social media, then pick one (Twitter, LinkedIn, Facebook, etc.). If you find that most of your customers are on Facebook, then create a Facebook Page and start using this platform as your primary marketing medium.

Here’s a list of some marketing channels:

  1. SEO
  2. Social Media
  3. Ads (Google AdWords, Facebook Ads, Bing Ads)
  4. Guest Posts
  5. Banners
  6. Joint Ventures

Step 7: Know Your Business Model

When starting your business, it’s important to know how you’re going to monetize. Knowing your business model answers the question, “how do I make money?”

There are many business models to choose from, but it’s important to identify and select the one that will make the most sense for you and has the greatest ROI.

For example, if you’re an online instructor, then it make sense to utilize the membership/subscription model as your primary business model.

Or if you’re going to be blogging, then it might make sense to use advertisements and affiliate marketing.

And if you’re going to be podcasting, then it will make sense to get businesses to sponsor your show.

Here are some business models that you can integrate into your business:

  1. Membership Site
  2. Software
  3. Done-For-You Service
  4. Email Series
  5. Newsletters
  6. Group Coaching Calls
  7. Teleseminars
  8. Webinars
  9. Coaching/Consulting
  10. Service
  11. Affiliate Marketing
  12. Ads
  13. Subscription/Membership
  14. Software/App/Tools/Templates
  15. Speaking
  16. E-commerce
  17. Physical Products
  18. Books
  19. Mastermind Programs

So as you can see, creating a business plan doesn’t have to be long and arduous. If you follow these 7 steps and write everything down on a single page you will have a business plan that will be easy to use. Once you go through these 7 steps, you’ll find that you not only have a solid business plan, but something you can use again and again.

The Single and Most Powerful Asset Your Business Can Ever Have

I’m betting you’re thinking that it’s your credibility in your respective niche or the people who work for you. Maybe even your products or services, even your intelligence or something no business can succeed without – money!

Well the answer is a resounding no on all accounts. In fact by all accounts it is your own attitude or more specifically your mindset that decides the fate of your business. How many times have you read or heard that if you want to create a $1 BILLION company you have to think like someone who already runs a $1BILLION company – you must already be that person.

Or at least have the same mindset.

I know what you’re probably thinking – here we go again – more “mind over matter”, “you are what you think”, “what the mind can conceive you can achieve ” or ” it all starts with the mind “- but the fact of the matter is that is precisely where it all starts.

The difficulty is in transferring that thought into a series of specific actions that lead to you running a $1 BILLION business. Let’s face it, only the very few do!

Here are 7 mindset principles that are crucial to building such a business. If you are serious about it and you devote just a few minutes a day to adjusting your mindset towards this goal then it is the best investment you can make in that business.

But be aware that this will take time – you will, in all probability, have to do it in stages. First get to a $100,000 company, then a $1 million one and so on. Once you get to $10 million, according to the people who have done it, it gets easier!

1. The Principle of Defining your Grand Purpose

Great business leaders and their companies do great things that leave a legacy, leaving the world a better place for it. These leaders create a cause, not just a business. They become philanthropists who use their incredible position and wealth to the good.

Their businesses became more than just a business – they became a conduit to something bigger than just a business, bigger than the leaders themselves and their self-interests.

I quote Victor Frankl a renowned Austrian psychiatrist ” Success, like happiness, cannot be pursued, it must ensue… as the unintended side effect of one’s personal dedication to a cause greater than oneself “

What is your business’s Grand Purpose or cause? How can your business help enhance your customers’ lives?

2 The Principle Of Thinking with Clarity

“As Man Thinketh” is a very famous book written by James Allen who spent 25 years interviewing famous and successful people of his time trying to figure out exactly what was different about them that made them successful.

He deduced that it was all down to their thoughts and acting on them.

If you focus on any particular problem you end up with more of the same problem. However if you focus on the solution you will find that solution and very probably other different and potentially profitable solutions will appear as a bonus!

What are you focusing on now in your business? The problems or a solution? Clarify your problem and then start thinking with clarity about solving it. Thinking with clarity sounds easy but it takes practise. People who run $Billion businesses do this – frequently.

3. The Principle of Attraction.

What you think can often be attracted. This doesn’t mean that if you constantly dream of winning the lottery you will win – dreaming or wishing isn’t the same as considered thought. In business and very often in life, what you seriously think carefully about you can and very often do, attract

I’ve also read that the big difference between dreaming or hoping is the feeling that comes with it. Strong emotions help speed up the process. Don’t just dream – really feel what having whatever it is you want would be like, live it! You are only restricted by your imagination – let rip!

Do you only seem to attract difficult customers or ones that produce a low income for you? If so then you almost certainly believe that’s all you’re worthy of – at least subconciously.

Paul McKenna, a renowned hypnotist, was trying to help a client make his business more successful. The man sold his services by seminars and by doing so could only work for so many days and with so many clients a year thus capping his income. He felt he couldn’t charge any more than say $1,000 a client as in his own mind this seemed a fair but high price.

Paul asked him why he couldn’t charge more and the man answered that he felt no-one would pay more. So Paul asked him to imagine charging the client $120,00 for his services. The man obviously could not consider it even if he thought anyone would pay it but then Paul began to drop the price first to £6,000 and then to $5,000 and then to £2,500 at which point he asked the man if he thought that was a fair price to which the man replied it was. Why? Because the man thought that compared to $12,000 it was a bargain!

This is a prime example of how someone running their own business can change his business around almost immediately by changing the way he thought about his business and what he could do for the client. The man changed his pricing structure, ended up with more clients than he could handle and has since raised his prices again.

Apparently your business is always a mirror of your inner thoughts. What do you have to do to get better prices? What needs attention in your business to enable this? What does your business need to get to the next stage?

4. The Principle of Commitment and Creation

So you want to create a $Billion business. On their own your thoughts, hopes and dreams are not enough – you have to do something. Albert Einstein was quoted as saying ” Nothing moves until something happens “

You have to make something happen and you do that by being 100% committed to your goal. No matter what, you will take your business to the next level.

Once you are 100% committed and focused on your goal then magic seems to happen. You find the right people and resources to support you, the right opportunities will appear as if out of nowhere. It’s called synchronicity.

Are you still dreaming or have you done something – are you 100% committed and focused?

5. The Principle of Perception

When you market your product try to see it from customers point of view. How do you perceive your product. I once worked for a company selling a high priced product but in reality it wasn’t that dear to buy. However the general view from our customers was that it was an expensive product and they expected to pay a lot for it – so they did!

How you market your product is crucial to how your customer will perceive it’s value to them. What are you doing in your business to create perceived value? Can you change it?

6. The Principle of Consequence.

“Every action has an opposite and equal reaction” or so my physics teacher taught me at school. If this is one of Einstein’s unbreakable laws then it stands to reason that any action you take will have a consequence.

You may not be able to fully control the consequence or outcome but you can control your reaction to it. If you want a different outcome you must change your actions that brought it in the first place.

If you want to increase your business from $100k a year to $10million then you have to take different actions than you are already. So what are they?

7. The Principle of A Rich Mind

It is your mental attitude that will determine your success. As I hinted at the beginning of this article “if you can believe, you can achieve and so shall you receive”

Imagine how you would run a $Billion business – or even a $1million one. How different would it be to the way you run things now? How different would you have to be?

Finally.

To change the way we think can be extremely difficult for some and almost natural for others – it’s the same in all walks of life. But if you are committed and focused by following these principles and practising them even if only for a few minutes each day you can shift even the most deeply embedded thinking to new level.

It’s all in the mind as they say!

Grateful thanks to Denise Corcoran for the above. I found an article she wrote back in 2001 a few days ago looking through some old files when I was trying to think of a what to write a new post about. Did someone mention synchronicity? I’ve changed it somewhat to include my own insights into mental wealth but I’m grateful nonetheless.