small business advice – GoForth Institute Blog | Canadian Entrepreneur Training

Will your business add value for your customers?

You’re starting a small business so that you can exchange a product or service you create with a customer who wants what you’re selling – you’re exchanging value with one another. But creating value is really the essence of business.

Sometimes it’s easy to lose sight of what “value” really means to us or to our customers. We can turn it into an abstract concept – and when we do, we lose that tangible sense of what actually creates value in our small business. The truth is, value is something quite real and quite concrete.

How can you create value for your customers?

If you want to understand how to create value in your business, think about being of service. All products of real value are embedded with specific ways of serving customers. Through that service, value is created. That which serves, creates value.

Let’s try a little exercise. Stop for a moment and think of something you own that you really value. Take off your business hat and see yourself as someone else’s customer. It may be a great pen that fits perfectly in your hand and doesn’t smudge, the satisfaction you get from your latest piece of tech, or the joy you get from your mountain bike. It doesn’t matter what it is, just so long as it’s something you would be really sorry to lose. Without it, there would be a small hole in your life – nothing like the loss of a friend or loved one, of course – but still, you would feel its absence. Now, in just a few words, write out exactly what you’d miss most about that possession.

We want your customers to feel that way about your products or services if they weren’t available to them. We’d want them to be a little sad without them. Perhaps there would be a little hole in their lives where your products or services once were. That’s value. And that’s the magic we’re trying to create for your customers.

For more about creating value for your customers, read about the elements of a value proposition.

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How to calculate your business’ cost of goods sold (COGS)

Cost of good sold (COGS) is an important figure to know. Cost of goods sold is the price that your business paid to acquire the products that you’ll sell to your customers in retail/wholesale businesses, or the cost of the raw materials, labour and supplies in manufacturing businesses.

Why should you know your business’ cost of goods sold? It’s important to know so that you can better understand your business – your profits, and where you might be able to improve efficiencies.

How to calculate cost of goods sold

Most small businesses use the following formula to calculate their COGS expense:

Value of goods inventory at the beginning of the period
+
Value of any goods purchased for resale during the period
–
Value of goods inventory at the end of the period
=
The cost of goods sold during the period

And there you have it! Calculating your cost of goods sold is another tool you can use to help your small business succeed.

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How to tell if you’re ready for entrepreneurship

It’s the start of a new year, and if you’re like many Canadians, you may have resolved to finally start your entrepreneurship journey this year.

But wait – not so fast. We know it’s exciting to finally start your small business, but there are many things to know beforehand. Here are some things that, in our years of educating entrepreneurs, we’ve identified as some of the most important questions prospective entrepreneurs should ask themselves before starting a small business.

Are you ready to start a small business?

What is most important to me in running a small business – making money or doing what I love?
Do I have management or technical experience in a business similar to the business I want to start?
Do I have any accounting or bookkeeping knowledge?
How well do I handle risk?
How do I cope with stress?
Are my finances strong enough to support me if my small business doesn’t see income immediately?
Do I have the support of my family and friends?
Am I willing to work longer than usual to start my small business?
How well do I lead or manage others?
How adaptable am I?
How do I make difficult decisions?
Do I have a long-term plan for my small business?
Do I have a business model?

If you’ve answered “no” to any of these questions, no problem! It’s actually a good thing. Knowing what you don’t know is important, and can help you find – and fix – critical gaps in your knowledge. Small business training will increase your odds of success. Nearly half of all small Canadian businesses fail within two years, so getting essential small business skills is really important.

How can you find out if you’re ready to be an entrepreneur?

Download our free Self-Assessment for Entrepreneurs to take an honest look at your situation right now. Take your time and do as much research and training as you can before you start your small business – it may make all the difference to your success.

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The Empathy Map and entrepreneurship

We use the term empathy in business to reflect our understanding of our customers – who they are, what they like and don’t like, what motivates them to buy something or not, and what pains we can solve for them.

Why is empathy important in business?

When we show empathy for our customers, we understand them from their perspective and, as business owners, we produce better services and products for them. Having empathy allows us to understand what needs our customers have (pains) and helps us estimate the value our products or services will create for our customers (gains).

Many small business owners get too focused on solving a particular problem that’s important to them, but maybe not to their customers. This is why developing an Empathy Map is so critical when designing or launching a new venture. You will be able to identify insights about your potential customers that you did not know were there. You’ll be able to make products or services that stick by taking the time to understand your customer, and developing empathy for them.

The Empathy Map and entrepreneurship

The Empathy Map, shown above, was created by David Grey, of XPLANE and author of The Connected Company and Gamestorming. This tool has been used by millions of small business owners and their teams to develop deep, shared understanding and empathy for their customers.

1. Start with the Goal section, by defining who will be the subject of the Empathy Map and what you want them to do. This should be framed in terms of new and observable behaviour.

2. Once you have clarified the goal, work your way clockwise around the canvas, until you have covered See, Say, Do, and Hear. The reason for this is that the process of focusing on observable phenomena (things that they see, say, do and hear) is like walking a mile in your customer’s shoes. It gives us a chance to imagine what their experiences might be like, to give us a sense of what it “feels like to be them.”

3. Only after you have made the circuit of outside elements do you focus on what’s going on inside your customer’s head. The large head in the centre is one of the most important aspects of the map’s design. The whole idea is to imagine what it’s like to be inside someone else’s head.

For more about the Empathy Map and how it can help your small business, check out Class 3 of our 100 Essential Small Business Skills^TM program!

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