The business concept: The distribution channel

By Samantha Garner | November 22, 2014

Next in our business concept discussion: The distribution channel.

Your small business’ distribution channel is the way your product or service will physically be distributed to the customer. There are two kinds of distribution channels:

  • Direct channel – the product or service is sold directly to the end user.
  • Indirect channel – third-party intermediaries help to move the product from the manufacturer to the end user. Using intermediaries to get products to market is known as market coverage. Thanks to an intermediary’s own contacts and distribution channels, your product may reach a wider market.

What distribution channel should you choose?

Speed and reliability are factors to consider. Today’s customers expect products to be delivered more quickly than before, and they also expect instant access to information. Small business owners will be relying on intermediaries to “deliver” and sell their products to the end user. Some see this as a loss of control, since they have to count on others to make their end users happy.

The ideal distribution channel for your small business is the one that best meets your customers’ expectations about where and how your product or service should be sold. Most services are delivered directly to the customer. However, products usually use intermediaries like wholesalers or retailers.

However you intend to deliver your product and service to your customer, it’s a critical part of your business operations and your business concept. It’ll help you to learn and understand your market, potential suppliers and competitors.

Further reading:

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The business concept: The product or service definition

By Samantha Garner | November 15, 2014

product_or_service_definitionNext up in our examination of the business concept – the product or service definition.

Most small businesses today are part product and part service. Defining exactly what your product or service is, and what’s unique or special about it, is key to creating a strong business concept.

What exactly are you offering? What need are you satisfying? What problems are you solving? The product or service definition outlines what you’re offering, highlighting the benefits.

Here’s an example:

Maria is thinking of starting a bicycle shop. She and her friends often talk about how useful it’d be to call up a bike shop and ask someone to come out to fix their flat tires or other bike issues, just like with roadside assistance for cars. She thinks a lot of cyclists would love it. Maria’s bike shop business solves a problem because her employees would be bicycle experts, and therefore fully qualified to ride out to the other end of the city and do whatever replacements are needed to get cyclists on the move again. Customers can either buy a yearly membership or pay a fee each time they get a repair done. No hassle, and no dragging a broken bike across town to get it fixed.

Maria describes her business through the eyes of the customer:

“Maria’s Mobile Bike Doctors will rush to your location and fix your broken bike. We can get anywhere in the city in 35 minutes or less, and our bike experts can perform any bike repair quickly and with a smile. It’s quick, convenient, affordable and safe. Our customers will be on the road again in less time than it would take to find the nearest bike shop and get their bicycle there for repairs.”

Once you know who your target customer is and what they’re looking for, you can come up with a better product or service definition. This adds to a complete, well-rounded, and effective business model.

(Oh, one other thing: if your product or service is proprietary, it should be included with the product or service definition.)

Further reading:

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The business concept: Value proposition and the compelling story

By Samantha Garner | November 9, 2014

Last week, we talked about the first part of the business concept: The question, “Who will buy?” Today, let’s talk about the value proposition and the compelling story.

Value proposition

The value proposition is a clear statement of the benefits your customer will get from your product or service. It should explain in about 10 words or less why the customer should do business with you. This reason usually involves achieving a dream or solving a pain. The more specific you can make your value proposition, the better.

Before we look at what makes a great value proposition, let’s look at three weak ones.

  • “We make your life better.”
  • “Our products were rated best by our customers.”
  • “This is the best system on the market today.”

You’re probably saying, “Yeah, so what? A hundred companies can tell me that.” That’s how most people react to a weak value proposition.

So how do you create a strong value proposition? You should deliver actual promises to the customer, like increased revenue, decreased costs, improved health, improved efficiency, fewer errors, unique solutions in less time or better customer loyalty. These are the clearly identifiable things that will actually benefit your customers, and the reasons they’ll be drawn to your business.

Examples of effective value propositions include Wal-Mart’s “Everyday low prices,” and MasterCard’s “For everything, there’s MasterCard.” These demonstrate the value and benefits these companies promise to offer.

The compelling story

No value proposition is complete without a compelling story that’ll make people sit up and take notice of your business. A strong value proposition identifies the need in the marketplace that led you to start your business, and offers your solution to the problem. When you have a clear understanding of the value your customers will get, and a background story that’ll appeal to them, you can really help your business stand out from the crowd.

Further reading:

The business concept: Who will buy?

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The business concept: Who will buy?

By Samantha Garner | November 1, 2014

A business concept is simply a short, clear statement of your business opportunity which contains five important elements:

  • Who will buy?
  • Value proposition
  • The product or service itself
  • The distribution channel
  • The business concept statement

Let’s look at the first component: the question Who Will Buy?

It takes more than a good product or service to make a business successful. It takes customers! But many entrepreneurs can’t describe their customers. Generally, your customers might be other businesses (a business to business market, or B2B market) or your customers might be consumers (a business to consumer, or B2C market).  Your customers might even be both.

Sometimes your customer isn’t the person or business who will actually use your product or service. This is why it’s important for you to know both your customers and the end users of your products or services. Let’s say you want to import antique furniture. You buy your antiques, import them into the country, and sell them to local dealers who then sell them to the public. So the antique dealer is your customer, and the consumer (or end user) is the one who buys the 19th-century writing desk and shows it off to their friends. You might have to convince the antique dealer that there’s a market out there for your finds. When you understand who will buy and who will use, you’ll have a better understanding of your business’ chances of success.

Defining your target customer is a very important step in creating your business concept. A clear understanding of who will buy your product will help you figure out the value you’re adding, or the problem you’re solving for your customer.

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Three responsibilities for employers to keep in mind

By Samantha Garner | October 25, 2014

When you’re an employer in your small business, there are many responsibilities you have to be aware of. Today, we’ll talk about Employment Assistance, Employment Standards, and Workers’ Compensation.

Employment Assistance

If your budget won’t let you hire new employees, be sure to check out your company’s eligibility for the Employment Assistance Services offered by Service Canada. You might be able to get funding as a sponsor or coordinator, which will cover expenses related to offering employment assistance services to unemployed people. For more information on this program, click here.

Employment Standards

Legal employment standards differ by province and industry. Make sure you’re familiar with the required standards as an employer so that you don’t run into any difficulties during CRA’s employer visits, and to avoid any legal issues.

There are many rules when it comes to your employees’ working conditions, including work hours, overtime and meal breaks to Sunday closings, whistleblower protection and mandatory retirement. Of course, minimum wage and minimum daily wage requirements, statutory holidays, equal pay policies and severance pay also apply. It’s a lot, but it’s all important!

The Canada Revenue Agency has strict guidelines that distinguish employees from self-employed contractors. This is important for you as an employer, because you’ll need to figure out the right deductions and policies to follow with payroll. For example, with employees, you’ll deduct Employment Insurance Premiums (EI), Canada Pension Plan contributions (CPP) and income tax when paying payroll.

Workers’ Compensation

Workers’ compensation programs protect employees from work-related injuries or illnesses. Policies are different province to province. In Alberta, for example, newly incorporated companies have to contact the Workers’ Compensation Board within 15 days of hiring workers, to figure out whether or not an account is needed. Accounts can be set up online and, after paying annual premiums, employers get no fault insurance to protect them in any lawsuits by injured workers.

Directors should contact the Workers’ Compensation Board to learn about personal coverage, because the corporation is protected from lawsuits, but directors remain open to personal lawsuit. Personal coverage may be a smart option for many business owners, even if there are no employed workers.

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