Why Scotland can succeed with Small Business Values

small biz scotland

 

Thursday 18th September is a monumental day for the people of Scotland – The simple question is “Should Scotland be an Independent Country?” I shall omit political views and focus this article on how Scotland can become a great wee nation by applying the values of a successful small business. I’m an advocate for Small Business and believe smaller companies have advantages over larger ones, such as the ability to connect 1:2:1 with their customer base, long term sustainable growth and specialising in key business functions – after all Small Business is Good Business.

Decentralisation

The centralisation of power in a company and country grants that power to a select few. In business individual departments have less control over their budgets, management have less influence on how to operate with decisions being made by the higher echelons of a company whom have little to no local or specialist knowledge of those departments.

A fairer distribution of powers is surely more conducive in the hands of local authorities. How is it possible for someone in Westminster to know what the people & businesses in schemes of Glasgow & Edinburgh really need? Who hears those voices, listens to their concerns they air on a daily basis? Regardless of the party in power, surely it’s local Councillors and Authorities who should be in control of distributing budgets, setting policies and delivering what everyday voters desire?

Borrowing

Borrowing facilitates growth, but only by assuming increased risks. You may achieve growth quicker, but you’ll pay more. The UK like most of the developed world managed to create a boom & bust situation by excessive borrowing. Smaller nations must control borrowing, by doing so you reduce the interest payments and decrease risk. There’s no requirement for small nations to be the biggest and best, growing sustainably over the long term should always be the solution over short-term rapid growth.

Harness strengths in Key Local Industries

A Small Business has infinitely more knowledge about say women’s fashion that a supermarket has – they’re not generalists, they specialise in knowing the needs & trends of their market segment, materials and styles. Scotland is undeniably a world leader in industries such as Science, Renewables and Oil & Gas. Take Oil as an example, as each day passes that natural resource depletes, this has created an emphasis on renewable energy like wind, solar and tidal energy.  Michael Porter’s Diamond model emphasises the benefits of comparative advantage such as:

  • Enhanced knowledge base & skilled labour
  • Condensed rivalry resulting in innovation & increased investment
  • Increased government investment (such as renewable energy)
  • Growth in related & supporting industries

An independent Scotland doesn’t need to become successful via economies of scale. By simply focusing resources like labour, money & government support into key Industries a competitive advantage can clearly be achieved. Just look at Aberdeen’s Oil & Gas sector (now including renewable energy) or the Bush Estate for Science in Edinburgh, localised specialism’s in flourishing industries can be created – but only through efficient utilisation of resources and enhanced powers for local authorities.

It’s simple Economics, with overall budgets being squeezed due to austerity cuts the laws of opportunity cost dictate that you can only buy A or B, never both.  Being small isn’t a disadvantage, although big companies will tell you otherwise. Instead of biting off more than you can chew, do the small things well and success will follow.

Marketing Automation vs Personalisation

personalisation

The question of automation vs personalisation for a company is all about saving time and money whilst increasing efficiency. Whereas the perspective of the customer is about receiving good customer service and feeling valued.  So the question is “What does your business value more? – Costs or Customers?”

Advantages and Disadvantages

I’d pick personalisation over automation every time, but as a business grows they must consider all options on how to communicate effectively with their customers. Here’s some of the advantages and disadvantages of automation and personalisation:

Automation benefits:

  • Cost reduction
  • Saves time
  • Reaches a high volume of customers

Automation negatives:

  • Error prone
  • No human contact
  • No personalisation
  • Just another number

Personalisation benefits:

  • Customer service
  • Individual attention
  • Deliver bespoke products/services
  • Increases chances of repeat business

Personalisation negatives:

  • Time consuming
  • Costly to scale

Automation vs Personalisation is simply the choice between quantity over quality. I always like to place myself in the shoes of the customer – what type of service do they expect? Customers are individuals and expect to be treated accordingly, how special do you feel knowing you’re just another number receiving generic marketing communications?

Small Business vs Big Business

How can big businesses connect with a vast volume of customers without using automation? – More often than not, they simply can’t. Can you imagine the amount of money, time & employees that would be needed for a company with thousands/millions of customers to connect on a 1:2:1 basis? But that’s acceptable, as long as time and money are being saved – the customer is last on the list of priorities.

Small businesses on the other hand don’t have the resources to connect with a high volume of customers, personalisation is necessary.  Let’s take email software as an example, rather than sending 1,000 generic emails with a 1-2% response rate, try studying 10 customers and sending personalised emails with bespoke offerings relating to those individual/business needs. Guaranteed your ROI improves, your responses will increase and you’ll develop a reputation for being a customer-centric business. If more small businesses take the time to connect with each individual customer, rather than applying a mass-market approach, then this can be used as a distinct competitive advantage.

Achieving economies of scale isn’t the holy grail of business, growth must be accomplished over a longer period of time, growing too big too fast can and will destroy many businesses. Focus on what you have now, your strengths, your weaknesses and most importantly your customers. By being a customer-centric business you can personalise almost all Marketing communications which results in customer retention, recommendations and an increase in overall customer value. Perhaps customers of larger companies wouldn’t be so keen to move to competitors if they feel valued – personalisation over automation every time.  🙂

Why Growth can Destroy your Small Business

Chart going through the floor

 

Small Businesses have a desire to grow – grow their sales, customer numbers and enter new markets. However unless you have adequate resources and a clearly defined strategy, then growth can lead to the demise of your small business.

There are many fine examples of small businesses that’ve exploded in size as they possess high growth potential. Angels invest, banks lend, crowds fund and external resources are ploughed into helping those companies achieve their growth potential – but not every small business has such significant growth potential. So before you contemplate growing your company, consider the following advice.

Resources

Resources are one of the key factors to consider when growing a small business which include:

  • Money
  • Manpower
  • Skills
  • Premises
  • Machinery & Technology

The obvious considerations are money, manpower, premises and equipment – but one factor often overlooked is the skills required to achieve growth. As a company grows the hierarchy, management and positions change so you need to consider if you have the staff with the right skill set to take on new roles. What skills do you need?  Can you train existing staff? Where can you find the staff with these skills and how much will it cost you?

Draw a list of all the above 5 key resource areas and calculate what resources you need if you achieve a certain level of growth – you’ll often find that right now you simply don’t have the resources available to facilitate your growth plans.

Existing Customers

Remember where you come from and who helped your company get to where it is – your existing customers. As a small business you can afford to dedicate more time and attention on each individual customer, but as you grow your time will be spent elsewhere.

To achieve growth you might want to explore new markets and offer new products in an attempt to grow your customer base. Stop and think about why you won those customers in the first place, what attracted them to you and why do they continue to be loyal customers?

Launching new products to new markets leads to a fundamental shift in your business model, so be mindful not to alienate your core customers at the expense of obtaining new ones.

Sustainable Growth

Grow too big too quick and you’re gone – you must grow sustainably. If that means it takes you longer to achieve your growth objectives then so be it.

To borrow or not to borrow? I have this romantic notion that commerce would be far more sustainable if companies didn’t borrow, but the reality of the situation often slaps me in the face. Borrowing is often the only way small businesses can fund new machinery, employ new talent or make essential repairs. However if you can avoid borrowing and achieve the finances you need over a longer time period, always choose sustainable organic growth.

You need to pay interest – every month and on time which increases the overall amount you pay to achieve the same results. An element of borrowing is outside your control. Interest rates may be at a record low but they will increase in the next year or 2 – yet again increasing the risk and cost of borrowing.

Do you think my advice hinders or helps growth?

The Importance of a Database in Marketing for Micro-Businesses

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Who exactly is your customer? This is one question many small businesses struggle to answer. What age are they? Where do they come from? What are their characteristics & lifestyles? These are all fairly easy questions to answer, if you have a database.

The Importance of a Database

When someone enquires about your products/services via email, Facebook, your website or any other channel you’ll naturally respond to those people using the channel they made the enquiry from. You’re correct to respond to your customers using the channel they use, but it’s also important to collect as much information as possible about each individual person or company. If they phone you then ask for their email address, if they email you ask for their Facebook profiles. If you want to know who your customers are, then you must collect as much relevant details as possible so you can begin to understand exactly who your target market is. When I see an advert with only a phone number, it’s dead. Unless I need to call that company immediately their potential to sell to me has been lost. If that advert had a Facebook page, a website or email address then I can make an enquiry in my own time.

Database Benefits

The importance of capturing as much information as possible about your customers is essential to ensure future marketing activities are more relevant to the people who’re receiving them. With a richly populated database you will be able to understand:

• How much it’s cost you to generate a lead (Cost Per Lead)
• Cost Per Sale
• Conversion Ratios – Enquiries to Sales
• Customer trends & habits
• Your typical customer location
• Your typical customer demographics
• The typical lifestyles your customers share

Measurement & Segmentation

Measuring the effectiveness & ROI of your marketing efforts cannot be achieved unless you capture, store and utilise the information from your database. There’s no point in having details about your customers in a range of locations like a diary, email list, pieces of paper and social media accounts. Your customer details must be in one place so they’re easily accessible for speed and accuracy with the ability to collate and measure that data. From here you can target smaller segments of customers based on a range of variables and tailor marketing communications to those smaller more unique groups of people. See – Why Small Is Good in Segmentation.

What Database?

What database do I use? Good question to ask. There are a multitude of database options available for small businesses and using Microsoft Excel or Access is a good place to start. Once your database and company begins to grow then you might consider upgrading to paying for CRM (Customer Relationship Management) systems which will incorporate all your back office processes. CRM systems are advantageous over the likes of Excel & Access with superior capabilities, but it would be advisable to use simple free databases in the early stages of your business and reconsider your database options as you experience growth.

Don’t underestimate the importance and power of the database to your business, because from here you will truly be able to understand exactly who your customers are and how to reach them.

Why Small Business is Better than Big

Every business starts off small, some stagnate, some grow moderately and some grow into the multi-nationals that we’re all familiar with today. Obvious benefits arise as a result of being a large business such as a high volume of customers, increased capital, brand awareness and achieving economies of scale. However being a big business doesn’t make you the best in the business, it simply makes you big. The Department for Trade & Industry in the UK define a large business as having more than 250 employees and a turnover of greater than £11.2 million.

Now I must begin by stating that not all big businesses are bad, but I firmly believe that most of them result in more negative than positive factors and here’s why:

Shareholders

Big companies too often prioritise shareholders as the most important stakeholder by striving to generate increased year on year profits aimed at distributing dividend payments. With CEO’s and Directors all receiving a vast portion of their remuneration packages in shares, shareholders form an elite club as the most important stakeholders in a business. It should always be the customer!

Greed

An unhealthy focus on shareholder satisfaction is one example of greed, but there are countless examples of greed – banks, no further explanation required here! The bonus culture is crass, think about how useful that money could be to employees, customers, product development and securing a company’s future. Lord Sugar is a famous advocate for large remuneration and bonus packages insisting that it’s necessary to attract the top global talent. If a Director is willing to accept tens of millions in bonuses then are they really the right people to have at the top? Is such a grossly huge salary best for customers and employees? Opportunity cost doesn’t enter the equation here. John Lewis offer £500,000 as their top salary and more companies should follow their exemplary lead.

Homogenisation

I own an i-Phone, I love it but I’m not unique and don’t stand out. Walk down any high street in any town or village and you’ll see the same shops, people wearing the same clothes all communicating on the same types of phones. We now live in a homogenised world with homogenised goods and services and that’s not healthy for the consumer or for free market competition. Customer service also becomes homogenised, how many times have you spoken to a call centre with people programmed to ask the same questions in the same tone all day every day? Now consistency is important to maintain quality standards, but as a customer I know I’m just a number on a database who must be rushed off the phone as quickly as possible to satisfy call handling times. Even employees are becoming homogenised, programmed to think “the company way”.

Company structure

How flexible can a big business really be? How do they respond to changes in consumer demand and market forces? A decision from Director/Managerial level cannot effectively be distributed across numerous countries, departments and cultures. The time taken in a big business to respond to market changes simply cannot occur immediately and the very nature of being large ensures that inflexibility is a major flaw of the big firms.

Achieving a higher volume of customers comes at the expense of the quality time a big company can dedicate to each individual customer. Striving to achieve economies of scale often results in diseconomies of scale, with a failure to understand cultures and scalability. Money breeds greed and greed breeds failure all because you want to be big. Being a big business is over-rated, there’s nothing wrong with being small because – Small Is Good.