Last week we talked about an operations process – namely, what it was. As you may have guessed, the operations process of product and service businesses differ in a few important ways.

Operations process for service vs product businesses

In last week’s post, we looked at the operations process for a flower shop. The owner Lauren’s main “output” is flowers, a product. But what if your business is, for example, a consulting business – a service?

Inconsistency of output

The first major difference is that services have the possibility of inconsistency of output with a service. We’ve all had a bad haircut – perhaps the stylist didn’t have much experience, knowledge or skill, was just having a bad day, or truly wasn’t cut out (sorry) for this line of work. The result? A hood, scarf, paper bag until your hair grows back – a bad customer experience. It’s very challenging in a service business to make sure that each and every customer experience is the same. All the more reason to carefully and thoroughly train your staff and hold them accountable for producing the standard of excellence in service delivery that you’ve set for your business.

Service intangibility

Another difference between product and service operation processes is that customers can’t see, touch, feel, evaluate, or experience the service prior to it being produced. This is known as service intangibility. With a product, you can pick it up, roll it around, evaluate it, decide if you like it before you buy it. You can’t check out that new ‘do, however, until it’s too late. Thanks to website technology, new hairstyle websites allow you to upload a photo of yourself and drag and drop different hairstyles onto your head in the photograph – a “try before you buy” approach. This reduces the intangibility of services, and helps service businesses achieve the right customer experience.

The problem of inventory

Unlike product companies, service businesses don’t carry inventory. You can’t put a haircut on a shelf and hope it will finally sell tomorrow. Service businesses must learn to level out demand during off-peak hours to maximize the efficiency of their operations. For example, if a hair salon noticed that very few customers came in for a haircut between 9:00am and 11:00am, the shop could offer “early bird” discounts or senior’s discounts to encourage those who might be more available to travel to the salon at that time of day.

Inseparability of services

In a product business, the manufacture of the product was likely performed somewhere else, by someone else. With a service business, the service provider is the business. The hairstylist who performs haircuts really is the business. It won’t matter much to you, walking out with a paper bag over your head after a bad haircut, that the receptionist was friendly, that the coffee was good, or that there was lots of parking. The impact of incompetent or rude service providers is felt directly by the customer. You may not get a second chance with customer experience.

If you’re planning to run a service business, you’ll need to bear these differences in mind. As you review your customer experience and operations process models, think about how will you handle intangibility, inconsistency, lack of inventory, and inseparability of services. Think about how you will handle these differences, while ensuring that your customer experience is the best it can be.

Our word of advice – always put yourself in your customer’s shoes. Will it make sense to the customer? What would the customer think? WWTCT?

At GoForth Institute, we’re entrepreneurs too. We’ve been through it all, and many of us have had more than a couple of small businesses. We know that entrepreneurship can be an invigorating, freeing journey, but we also know that it can be one of the toughest things you can do.

The downsides of small business ownership aren’t often discussed honestly, and many of us can sometimes be unwilling to admit that our particular entrepreneurship journey might be at an end. Of course, we’d want everyone to love their small business, but we know that sometimes that love can run out. So, how can you tell if it might be time to end your small business? Here are some signs:

• You’re hemorrhaging money. It can take up to three years for a small business to turn a profit, but if you’ve tried everything and still see your money slipping away faster than it’s coming in, it could be a sign.
• Your relationships are suffering. If you’re so stressed that you’re taking it out on your loved ones, or work so much that you never see them, it could also be an indication that it’s time to close up shop. However, it could also be an indication that you need to hire some help!
• You’re bored. When you started your small business, you were thrilled by it and spent every waking hour dreaming and planning. Now, though, you have no more ideas and are just running on fumes. Could you benefit from outside help with planning?
• You dread going to work. If the thought of another work day makes you feel miserable, that’s not a good sign. Analyze this feeling. Would a new direction for the business help? Some new employees to take the load off? Think about what it would take to make you love your small business again, and plan out all options.
• Your health is taking a turn for the worse. If the pressure and stress you’re feeling about your small business is taking a toll on your health, then something’s not right.

If you answered ‘yes’ to one or two of these things, you may have a problem – but that doesn’t mean closing the business is the only solution. This problem could be solved by new staff, for example. And as we said above, most businesses don’t become profitable until about the third year of business, so we usually don’t advise throwing in the towel after, say, 14 months. However, if you’re starting to feel like maybe you want out, take it seriously. Take time to analyze all options available to you, to make very sure this is the best course of action. If you haven’t already done so, plan your exit strategy and tie up all loose ends. And once that’s all finished, regroup, reflect, and plan for your next small business!

No matter what stage of business you’re in, comprehensive small business education, like the kind offered by us at GoForth Institute, may help you find success. Knowledge is power!

When we talk about operations management in a small business, we’re talking about a lot of moving parts. So what is operations management? It refers to all the activities, processes and controls a small business uses to produce its products and services. The components of operations management include:

• New product or service development
• Inventory management
• Purchasing
• Manufacturing
• Distribution
• Logistics

Whether your small business is in retail sales, manufacturing or a service company – or anything in between – you need an operations management plan. Of course, the operations plan for a hair salon won’t be quite the same as that of a small manufacturing business, but a plan is vital. How will you source your suppliers? How will your inventory get to your location? Who will control purchasing? Is it the same person who will control distribution? The list goes on! The components of operations management are interlinked, so a well-crafted operations management plan will ensure you are prepared.

Sounds complicated, but there’s a silver lining – entrepreneurs and small start-ups can design and implement new and innovative operations processes without having to overcome outdated ways of doing things. Older, larger businesses are always looking for ways to cut costs and improve operations. Small firms are fast and flexible, and can quickly gain the upper hand over the competition if they can deliver more efficiently too.

Have more questions about operations management? See what questions have already been answered in our Ask an Expert – Operations Management section. If you don’t see your question there – ask! We love talking operations management with fellow entrepreneurs.

Marketing isn’t a one-size-fits-all thing for any small business. In fact, we bet you’ve tried or mulled over several different marketing techniques and strategies to help you grow your business. How many of them worked? Have you wondered what you could be doing differently?

In our experience, there are some marketing mistakes that are quite common among entrepreneurs. Don’t feel badly if your latest idea is on this list! Entrepreneurship is ever-evolving.

Not knowing your market

Although you may think you want to market your product or service to everyone, we all have different needs and experiences. Instead, narrow down one to four specific customer groups that will be most profitable and accessible to target. Consider these major elements when dividing up your segments:

• Demographics: Age, income, gender, education, family status, income level, occupation, social class, ethnicity.
• Geographics: Cultural, climate, regional and national differences, population density, population growth rate.
• Psychographics: Lifestyle, personalities, attitudes, opinions, behaviours, values.
• Behaviours: Buying patterns, usage rate, price sensitivity, brand loyalty, benefits wanted.

Porsche and Ferrari clearly target those in high social classes that have high incomes as well as lots of money to spend. Lifestyles of this target market are very luxurious and probably value products that demonstrate status. On the other hand, who does Wal-Mart target? This segment is very different – probably middle-aged parents who are cost-conscious or not concerned with status symbols.

Take some time to draw out what your typical customer would look like and where their lifestyle, age and social class fit in to their buying patterns. All this research will really show in your marketing. Your customers will feel that they are understood and their needs catered to.

Not making a marketing plan

A sound, clear marketing plan is necessary for small business success. How well have your family vacations worked without a map, or a daily set of goals and outcomes? Small business is no different. Your marketing plan can evolve, but setting your strategy down is a vital step that mustn’t be overlooked. Who do you want to market to? How? When? Why? Are your marketing ideas cohesive with your company’s values? Is a blog really a good marketing tool for your business, or is Facebook better? You may have all the great marketing ideas in the world, but putting them into a plan will help you find holes and better ideas you may not have previously thought of.

Once you have developed a clear plan for the branding and marketing of your company, it’s important to implement it correctly. Be sure that your marketing plan is clear and understood by all of your staff so that it’s properly used through all activities. Monitor and track your plan to identify strengths, weaknesses and opportunities for improvement. Have your plan written out and refer back to it frequently.

Being seduced by the latest marketing trend

Social media is here to stay, and it seems like a new outlet is making headlines all the time. But what’s the signal to noise ratio? We mentioned Facebook earlier, and many small businesses are also turning to Twitter for marketing. There’s also LinkedIn, YouTube, Vimeo, Google+ – we could go on. I’s enough to make your head spin. And that doesn’t even cover marketing trends outside the social space.

We have all been dazzled by a new marketing idea, one that seems perfect and guaranteed to increase sales; especially if it appears that everyone else is doing it. But what if the new marketing trend is actually terrible for your business? Let’s look at Facebook again. It’s great for engaging customers, sharing news and having conversations. But what if your business is very “niche” or provides a service that doesn’t often get repeat business (like a paving company)? You may never have enough people on your Facebook page to talk to, or you may have nothing to talk about on a regular basis. Here, Facebook may not be the best marketing idea for you. Instead, offering educational tools for free on your website, such as white papers, may be a better marketing tactic.

We love new ideas as much as the next person, but it’s important to keep your wits about you in the midst of all the hype. Otherwise, your marketing focus can be stretched too thin, making it seem to customers that you have no focus at all.

Not getting marketing help once it’s necessary

You don’t have to tell us twice – your small business is your baby. Entrepreneurs are nothing if not tenacious, and that applies to our marketing as well. You probably created the marketing plan, researched all the social media outlets and maybe even had a hand in designing your business’ logo. And all your work has paid off. Your sales are increasing in leaps and bounds and your to-do list is as long as your arm. Great! That’s the sign of a successful small business.

Except, when was the last time you looked at what your customers were asking you on Twitter? Or updated the menu on your website? Maybe it’s time to release your grip on your marketing and delegate to someone who can really concentrate on it. Now, this person doesn’t need to do marketing full-time, but he or she should be able to focus on moving your marketing plan forward seamlessly, aligning with your business’ goals, vision and culture. We know that delegating can sometimes be very difficult for entrepreneurs, but it’s a sign of business growth. And anyway, all babies become teenagers eventually, right?

Do you have experience with these four marketing mistakes? Do you know of one we didn’t include here? Let us know!

Yesterday, CBC’s Marketplace aired an episode called “Canada’s Worst Customer Service: Store Edition.” The episode is geared towards large chains, but we strongly recommend that every entrepreneur brews a cup of coffee and takes some time to watch it. The episode is full of wonderful cautionary tales we can all use about how not to treat customers, and just how hard it is to get them back once they’re upset. I’ve highlighted a few of the main points I took away from the episode.  You can watch the full Marketplace customer service episode here.

• Ensure all customers are at least acknowledged in stores. Your employees don’t have to be experts on every product you sell, but they should be willing to personally make sure the customer is taken care of – even if it is by a different employee. No customer should be told simply, “I don’t know.” They should be given options and advice.
• Don’t fall under the misconception that no complaints = satisfied customers. In the video, we can see customers more willing to just walk out instead of complain. And you can be sure their friends would have heard all about their poor customer service experience if they’d gotten the chance to walk out.
• If something does go awry and a customer is dissatisfied, don’t barrage them with self-promoting marketingspeak (especially if it’s about how important customer service is to your company – oh, the irony!). Just do whatever is necessary to make them feel like they’ve been heard and understood. Make it right for them.
• Give all employees the power to take the right steps if a customer is unhappy. They may not be able to offer discounts or give gift cards, but they can certainly listen, empathize and then take the proper course of action. This could even be as simple as giving the customer contact info for a manager, or you. Simple as that!
• Never forget that low prices aren’t the only factor that draws customers to do business with you. If your prices are great, but customers are given the runaround by employees or ignored, how often do you think they’ll return?
• If your business does use social media, monitor it regularly. You never know who’s counting on your attention.

Did you watch the Marketplace customer service episode? What did you get out of it?

Well, we did it! Another year of the entrepreneurial journey is coming to a close for everyone. To commemorate the end of the year, we thought we’d take a look back at some of our own small business blog posts we especially enjoyed in 2011. We hope that these posts, and others, were of some value to you this year, and we hope you join us for more fun in 2012. May you have a safe, happy and prosperous new year!

• Thinking like both a business owner and a venture capitalist – and how it affects a pitch
• Are you recording your entrepreneurship memories? Will you be ready when Oprah calls?
• Are you a business accelerator?
• Understanding your prime time for small business productivity
• White rabbits: Target marketing
• Do you have to be an expert to start a small business?
• The challenge for young entrepreneurs: proving yourself
• How has your lifestyle changed since becoming an entrepreneur?

It’s the time of year when you’re likely looking forward to cozy nights with a hot drink or fun with family and friends. These are wonderful things, but don’t forget to pay attention to your small business empire before you get too settled in. It won’t be long until we’re ringing in the new year – what kind of shape will you be in?

The holiday season is actually a great time to get organized – to close out this year and to plan, strategically and financially – for what’s around the corner. There are some simple things you can do to wind down your business year properly, and get set for 2012 so you can hit the ground running in January. Nothing feels better than being prepared – not even eggnog!

Get your financial records house in order for 2011

Your accountant or bookkeeper will love you forever if you present well-organized and documented files and records soon after your fiscal year end. Sounds like a headache, but the “shoebox” method of filing receipts just doesn’t cut it – shoe boxes are for shoes, not your financial records. And there are likely other areas you could spruce up too.

Here’s our list of five things to tackle between holiday festivities:

1. Update your payroll records, report all 2011 paycheques on T4 slips, and make sure all your other deductions are in order.

2. Organize your accounting files, records and receipts to get ready for income tax season. This includes completing inventory records and putting expense receipts into categories by month.

3. Streamline your contacts list – remove old contacts and duplicate records, and update current contacts, adding to your professional networks such as LinkedIn.

4. Update your personal productivity and technology tools – download updates and templates and make sure your current apps are still working for you.

5. Create a to-do list for the first week of January and make appointments now with key advisors, especially your bookkeeper and accountant – before they get booked up.

Hit the ground running in 2012

Winter can be a slow time for many businesses, especially at the end of the year. But, by taking this downtime to prepare your business for what lies ahead, you’ll start 2012 refreshed, prepared and ready for anything.

Five more things to keep you busy and out of trouble:

1. Review your 2011 business goals. What worked well and what didn’t? In 2012, do more of what worked in 2011. Simple.

2. Develop a strategic plan – a roadmap for getting from point A to point B. If you don’t have a strategic plan, create one – and follow it. We’ve got a one-page business plan template at our website.

3. Take a close look at your marketing, human resources management, financing and operations. Is there anything you could do better? (The answer is yes – there’s always room for improvement!) Get working on some ideas to become more effective.

4. Confess if you’re in the dark about how social media can help promote your business. And make a decision to learn more about at least one of these tools. Read some business blogs or tweets as a first step – your grandchild can show you how. Or Google for a “how-to” guide.

5. Clean up your act! Delete old files, get rid of spam, back up your business records onto a disc, memory stick, cloud server or hire a company to do it for you on a regular basis. Set up a good online file folder system so you don’t have to scroll through 347 inbox emails to find something your accountant wants.

Have questions about year-end preparation? Ask a GoForth Expert online any time. Not only will your question be answered by one of our experts, we’ll post it on our website. You’ll be helping other entrepreneurs who may be wondering the same thing. How charitable of you – perfect for the holiday season!

“Where do I get the money to start my business?” is perhaps the most common question entrepreneurs ask. Of course, this question assumes that they know how much money they need to start their business in the first place.

Develop a plan that outlines funding sources for your small business

Where you go for funding can be different for every small business. Several factors influence the type, cost and suitability of financing for your small business, including:

• Stage of the venture process. Are you in the start-up phase? Are you growing your small business? Is your business well-established?
• Your small business’ achievements and financial performance to date
• The state of the industry your business is in
• The type of technology your business is based on (if any)
• Potential growth of your venture
• Number of years before an exit strategy is available for investors
• Investors’ required rate of return on their money
• Amount of money you need
• What your company is worth
• Your goals for your company
• Investors’ terms and conditions

There are many other factors that will come into play when it comes to choosing the most appropriate sources of funding for your business.

Generally, a new small business can be funded in one of two ways: equity (ownership) or debt (loan). With equity financing, you exchange a piece of ownership of your business for the investment capital – you’re giving up part of your company to receive money to start or grow. The amount of your company you give up is negotiable, but it’s related to the size of the investment and the value of your company. If you fail, investors lose their money – you’re under no obligation to repay the investment. With debt financing, you borrow money and repay it over time to the lender. If you fail, you’re still obligated to repay the loan in full.

Money is just one factor of a successful small business

Most new entrepreneurs believe that if they have enough money, they can make any business model into a successful business. Sadly, there is nothing further from the truth. A bad idea is a bad idea is a bad idea, no matter how much money you throw at it.

The reality is sufficient start-up capital is only one element of a successful new business. Research shows that the small business owner’s reputation and depth of their social network are important to securing financial help. Not all businesses need start-up capital – but for most, the need for money comes at some point in their business’ life. So, develop a solid financial strategy, but remember that money is but one pillar of a strong small business.

Ah, sales proposals. Some love them, some struggle with them, but they are always crucial to business. A good sales proposal clearly outlines what  you’ll offer your client and what they will get out of it. It also clearly spells out all the terms, conditions and fees of the sale. Sales proposals are important for both your small business and your prospective client’s peace of mind.

Make sure you take the time to discuss the situation with the potential client beforehand, so you’re crystal clear on their specific needs. If having a one-on-one conversation with the client isn’t an option, be sure to conduct plenty of research before getting started. Anything you’ve missed (which shouldn’t be earth-shatteringly large) can be fixed when you go over the proposal with your client. And don’t forget – it’s important to write clearly and concisely if you want your proposal to be taken seriously.

Here are the seven elements that must be included to develop a winning sales proposal.

1. Introduction

The introduction can be either in the form of a short paragraph at the beginning of the proposal, or a cover letter attached. Here, you’ll address the client and outline your reasons for contacting them. Explain how you discovered this opportunity, followed by a brief description of the potential sale. Be sure to show the client that you understand their needs and wants. Recognize the importance of this sale, and show the client that you understand the significance of working for them. Like a résumé’s cover letter, the introduction to a proposal outlines your intent, shows you’ve done your research and gets your prospective client interested.

2. Client’s Background and Situation

Here, you’ll point out the specific areas of the client’s business that will be impacted by this sale. Point out the current status of their company, including any current challenges that this sale will improve. Respectfully list the effects that these issues are having on the company and emphasize why the problem must be fixed. Show that you understand the problem their company is facing and that your goals are aligned with theirs.

3. Desired Results and Objectives

After listing the negative effects of the company’s problem, use this section to help your client envision the changes and improvements that will be made. When reading through piles of proposals, the client doesn’t want to waste time – state the results early on in the proposal and leave the details of how it will happen for later. Include a list of objectives that shows your prospective client what you’re going to do. This can be used as a checklist later on to be sure that all of the requirements are met.

4. Scope of Deliverables

This is your chance to knock your client’s socks off and prove to them that you’ll meet their needs. Clearly explain what will be delivered in your sale and why it will be beneficial. Include implementation plans, available support, and guarantees. If possible, outline your relevant experience as well as reasons why you’re able to offer a better solution than others (remain professional, though!).Give examples of previous success. Identify changes that will be made and use this section to validate and rationalize the sale.

5. Down to Details – Decision Criteria, Time Frame and Budgets

List all of the criteria that your client will use to make their decision. Include the client’s responsibilities and requirements. Also list detailed information on the time frame of this exchange and estimations of fees and budgets. Be sure that your expectations for time and money are consistent with your client’s. Include detailed information on payment terms. Be clear about where the sale ends, in order to avoid an exchange lasting longer than you had expected.

6. Next Steps – The Action Plan

Include information on the steps that will follow, as well as expected time frames, after the proposal has been received. Again, this section will help to ensure consistency between you and the client. Clearly articulate the value the client will get from this sale. Work in facts and figures specific to the client and highlight the return on investment and improvements to their bottom line. Prove to the client that the sale is worth it.

7. Closing

Include a concluding paragraph that summarizes the current situation, how the situation will change, and why this sale will benefit the client. This paragraph should be compelling, powerful, and motivating for the client. Thank them for their attention and end with an action statement of what can be done next in order to move forward with the sale.

Of course, with proposals come sales negotiations. We’ve got you covered there, too! Read what our GoForth Experts have to say about sales negotiations.

Recently, our GoForth Expert Dawn McCooey was asked the question, “How do I handle clients more concerned with my age than my experience?” It’s a question we get asked often by young entrepreneurs – who we consider to be small business owners under the age of 35.

As we’ve discussed before, young entrepreneurs bring a wealth of positives to the table – endless energy, fresh ideas and adaptability to new technologies. However, there will always be a few people who might cast a wary gaze upon you when you enter the boardroom. But fear not! There are several ways you, as a young entrepreneur, can impress even the most skeptical of prospective clients.

Model behaviours you want to receive

As Dawn says in her answer to the question above, “You’re going to be the one to dictate people’s impression of you.” It’s especially true for young entrepreneurs. Be impressive. Be professional. Be well-spoken. Be honest. Be courteous. Be confident. When your clients leave the meeting room, make sure they remember you as a capable and intelligent person they’d be happy to do business with, and your age won’t cross their minds.

Have confidence in your work

No entrepreneur is infallible or completely confident at all times. We all doubt certain aspects of our careers. But for young entrepreneurs, it can be a little easier to let doubt creep in when the very people you want to work with don’t seem to trust what you are. Here’s the upside: These people are few and far between. Most people care about the end result more than how many grey hairs you have (or don’t). So go forth with confidence and stand behind your business, your pricing, your method and your strategy. After all, it’s the result of hours of planning and research – why undermine it?

Get great experience, and show it off

Say you’re exchanging emails with a prospective client who is focusing less on your long list of completed projects and more on the fact that you graduated university last year. Ease his or her concerns – provide testimonials, give samples and show case studies to increase your credibility. If you’re the right person for the job, prove it – as early and as often as possible.

We should mention that experience doesn’t need to be of the paid variety. Of course, we want you to get paid, but look for other avenues to meet people in your industry, make a difference and also prove your credibility: advisory boards, committees and mentorships are great options.

Know when to back away

This last point might seem counterintuitive for an entrepreneur – I mean, you’re in this to feed yourself, right? But consider a scenario where all above options have failed despite your best efforts, and your prospective client is still not able to get past your age. Ask yourself honestly – is this a person you want to enter into a working relationship with and deal with on a regular basis? A healthy work/life state is a critical function of successful entrepreneurship; one not to be ignored. There is absolutely no shame in knowing when to cut your losses, and moving on to a client who will jump at the chance to work with you and respect you while doing so.

Do you have any other ways young entrepreneurs can prove that success isn’t just about age?