Use probability to forecast your sales

Today's online edition of Canadian Business magazine features an article by Dominic Rubino on the importance of accurate sales forecasting. The premise is simple: rather than forecasting sales based on purchase orders (using the example given by the author), factor in the probability of each value-adding scenario and multiply it to the value of the order. Tallying these figures up will then give you a more accurate forecast and as a result you'll waste less time, money and real esate space on excess inventory that couldn't sell.

Read the complete article, "The Crystal Ball of Sales."

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Leveraging your core competencies

Here's a great example of using your core competencies and leveraging your supply chain to your advantage. An interesting article entitled 'How Crocs Rakes In Revenues From Ugly Shoes,' describes how Crocs Inc.-- the company responsible for the popular but aesthetically displeasing Crocs footwear -- managed to earn over $800 million in revenues last year, and project to grow by 10 to 15 percent this year. Their secret? Having a product (the CrosLite resin used to make the footwear) that's versatile enough to be made into a large variety of products, and more importantly, having a tight control of their supply chain by purchasing the supplier of the resin material as well as the factories that make the shoes.

Read more about it here.

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Reduce Your Business Expenses

If you’re running your own business, perhaps there’s no better time than the present to look for ways in which you can reduce your total expenses, without sacrificing the quality of your products or services.

The Entrepreneur website has listed 50 ways to save money by way of traditional and web marketing expenditures, location expenses, office overhead and insurance costs, and even tax and financial tips.

Some examples:

13. Buy recycled printer cartridges. Check Google or your Yellow Pages for a local recycled printer cartridge supplier;

25. Use independent contractors. Employers generally don't have to withhold or pay any taxes on payments to independent contractors. But be very careful that your independent contractors fit the definition provided by the IRS or you could face penalties, and;

48. Time your payments. Ask suppliers if they give discounts for early payment. If not, it's to your advantage to pay your bills-including utilities, taxes and suppliers-as late as possible without incurring a fee.

Read all of the tips here.

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Is Facebook Bad for Business?

Many businesses today are turning to social networking websites such as Facebook or LinkedIn to reach out to new customers and market their products and services in new ways. Websites such as Facebook have even tried to make it easier for businesses by opening their network and providing direct access to the websites 60 million or so users.

Numerous articles have been written on the potential for companies to profit from social networking, but do these companies really understand how to do this? Most use social websites to market their products and services and try to send them off of sites such as Facebook and onto their own websites. According to Facebook Senior Platform Manager, Dave Morin in an interview with BusinessWeek says the business applications that are the most profitable "are the ones that integrate seamlessly into Facebook" and generate revenue from within the Facebook site. Surely websites such as these would prefer your potential customers connect with your on their sites and not yours. The users after all, are theirs to begin with.

But are companies better off by connecting with potential customers on their own websites? Would the company be better off by creating a blog to connect with and gather input from customers and make the business more accessible, thereby giving it a real 'face' to the customers?

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How to Protect Your Business During a Recession

The lagging U.S. dollar, soaring energy prices and the current credit crisis have no doubt had an impact on the worldwide economy. In such turbulent times it's helpful to understand some ways in which you can protect your business. Today's edition of the National Post offers some tips on how to make your business recession-proof. Among the key suggestions are:

• Offer a discount on your accounts receivables in order to receive payment more quickly;

• If you are on the other side of this equation and are offered a discount to make your payments more quickly, it may make sense to take out a line of credit to do so, (but of course you'll want to make sure your cash flow is steady enough that you can pay off the line of credit);

• Another suggestion made is to negotiate a lower interest rate with your bank if you've consistently been on time with your bank payments.
  

Here is the link to the full article.

What other things can be done to protect your business during such turbulent times?

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Startup: Get the Business Plan Right

Most aspiring entrepreneurs fail to recognize the importance of the business plan. If you want to be successful in business and in life, you need to be able to define your goals and targets and measure your progress as you aim to achieve them. For entrepreneurs, this is where the business plan comes in. Getting this important first step right will help to give you the focus you need as you grow your business and it makes it easier for potential customers to understand who you are and what needs you're fulfilling.

The business plan articulates your business idea and your reason for being. It includes an analysis of who's in your target market, who your competitors and potential competitors are, what sorts of laws and regulations you must consider, and of course how you plan on financing your operations (and why you think your venture is worthwhile in the first place!)

Yet, why do most small businesses fail to accomplish this important first step? Is it that they're put off by this "extra" work? The point is, articulating what your business is and how it will remain profitable and sustainable shouldn't be considered an extra workload, but rather a necessary part of your business strategy. Furthermore, you should periodically re-assess your plans to determine if the internal (resources, capacity, targets) and external (competitive, governmental) factors have changed since your last assessment.

If you want to give your business more focus and learn how to create your own business plan, you'll probably find some examples helpful to get you started. There are some free business plan samples available at BPlans.com, a resource which also features tips on how to improve and refine your business plans and grow your business in the way you intended. If you're still at a loss for creating a business plan that suits your particular business, post your comments below, or e-mail me at web (at) dilawri.com and I'll be happy to help.

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Bridging the Strategy and Operations Gap

A challenge for business leaders is the ability to connect their company's strategy with the operational side of their business. The shortfall, in most cases, is the inability of leaders to break down the organizational strategy far enough to be able to understand the details needed for the higher level plans to work.

In an interview conducted last year with Strategy+Business, Jack Stahl, former CEO of Coca-Cola suggested that situational leadership is the key leadership component that can help bridge the gap between strategy and the operational details.

Situational leadership is, as the name would suggest, a form of leadership which states that different circumstances call for different types of leadership. This type of leadership, proposed by Paul Hersey and Ken Blanchard, suggests that there are four different types of leadership styles, each best suited to its own set of circumstances:

1. "Telling" - these leaders outline the roles and responsibilities of their subordinates and manage them closely. This is perhaps the most common of the four leadership styles.
   
   
2. "Selling" - these leaders engage their subordinates more than the telling-types, and while the decision ultimately rests with the leader, the leader is also receptive to input from the staff.
   
   
3. "Participating" - these leaders delegate all of the decision-making responsibilities to their subordinates, and only act as a participator or facilitator of the discussions.
   
   
4. "Delegating" - as with the participating types, these leaders delegate the decision-making responsibilities to their subordinates; unlike the participating types however, these leaders do not participate in or guide the direction of the the discussions.

Surely, the telling-types are the most common examples of leadership, and the selling-types perhaps the most inspirational, but can a case be made for either of the last two leadership styles, the more hands-off participating and delegating styles?

Stahl seems to think so. CEOs must have a thorough and detailed level of knowledge of their business, and their company leaders must have a more thorough picture of the operational aspects of the business. To bridge the gap between the organization's high-level strategy and its detailed-level operations, leaders must be able to recognize which of the four styles of leadership will work for any given situation. Having leaders who have the ability to connect the strategy to the details is paramount, and having them be able to adapt to any circumstance and employ the appropriate style of leadership is equally as important.

Read the full interview.
Learn more about Situational leadership.

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Use your core competencies to your advantage

If an outsider to your business were to ask you what your core competencies are, would you be able to list them? Core competencies are the key aspects of your business; the things that you do really well and if understood properly, can transform your business and even your industry.

Too often, when leaders think of the key skills and functions of their organization, they list things that are either too detailed or too task- or product-specific and miss out on the bigger picture. Your core competencies are not merely the things that you do well right now, but are the things that can be leveraged in the future to further expand your business to new levels.

In his 2006 article, Competing for the Future, management expert C.K. Prahalad gives the example of Sony, famous for initially pioneering transistor radios, but whose real core competency lie in miniaturization. Sony's ability to realize this key strength helped enable them to expand their business by continually creating new products to miniaturize. This is a great example of how a company can use its true core strengths to its advantage by expanding its business and building market share in industries it didn't even initially compete in!

When thinking about your own set of core competencies, try to think of the bigger picture. What processes have you put in place which help you conduct business right now? How can you leverage those processes to improve the way your conduct your business or develop new products that appeal to your core set of customers or even new ones? By thinking more broadly about the key skills of your business and having open and candid discussions about these "real" skills with your employees, your organization will be much better positioned to grow and thrive in an ever-changing business environment.

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Formulas for success in business can be misleading

In his most recent article, "Forget Formulas: How Managers are Fooled in their Search for Success," author Phil Rosenzweig writes of the over-importance many business leaders place in following cookbook style recipes for success offered by well-regarded books such as Built to Last and Good to Great.

Rosenzweig writes of the example of K-Mart in the early 1990s; the company had met most of it's own performance measures such as improving its inventory turns, making better use of central purchasing to reduce its costs, using point-of-sale information technology and making its supply chain management more efficient. And yet, despite these improvements and K-Mart's focus on its own performance metrics, the company had faltered by the end of the 1990s, losing its market share to rivals Wal-Mart and Target.

Following formulas for business success can never ensure high performance because they "treat performance as if it were absolute rather than relative (to one's competitors)." In order to truly achieve high performance, companies (and their leaders) must be willing to take risks in order to do things better than their rivals.

True, there is a need for having a clear focus, strong values, and a concern for customer needs. But when it comes to building a high-performance, profitable company, these dimensions should never overshadow the "vital dimension" of competition.

Read the full article in PDF form here.

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Useful tips for entrepreneurs

The Wall Street Journal online has some great advice for budding entrepreneurs. In the article, "The Essential Balance: From 15 People Who Know," you'll get to read some interesting tips on how to succeed in growing your business and on some key attributes which make a great leader. It sounds so simple and straightforward, but too often many of these tips just aren't followed or executed properly. Read the full article here.

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The best business books of the year

If the holidays have given you a chance to catch up on some reading, and you have no idea where to start, the 800-CEO-Read-Blog website has put together a list of the top business books of 2006. In addition to being able to vote for your favourite title at the website, you might also find a great title among the list that you hadn't previously heard of.

Selections include popular titles such as "The Long Tail: Why the Future of Business is Selling Less of More," and "The Wal-Mart Effect: How the World's Most Powerful Company Really Works" in addition to nearly twenty other titles from which to choose and vote on.

If you're looking for a great business book to read during the holidays, be sure to visit the site and vote.

Happy holidays and a joyous and successful new year to all! I will be back in early January.

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How to price your products and services

In the article "The Secret to Small Business Success," by Fire Wheel Design, the author makes a case for why small business owners must not be afraid to raise their rates. The author Josh, explains how he has successfully used what is known as cost-plus pricing in determining the rates for the products and services offered by his website and says that other small business owners should use this method for determining exactly how much they should charge.

Although not mentioned by the article, the alternative to this form of pricing is what is known as demand-based pricing. This is a form of pricing that uses consumer-based demand in order to determine and set the rates. In my opinion, it would be well worth a small business owner's time to consider both approaches before determining the prices of their products. By neglecting consumer demand, business owners are effectively allowing their competitors to seize the opportunity of appropriately positioning their products in the minds (or the "perceptual maps") of consumers.

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Achieve success (by breaking the rules)

Here's an interesting article from Fortune discussing some of the myths about success that companies routinely believe in, and how, by abandoning these myths and breaking with convention, organizations can achieve real success.

According to the article, there are five ways that organizations can shake things up by either reinventing their businesses (or even their entire industries, ala the CEO of Nike, Phil Knight). They are:

• Hire new voices
• Have new conversations
• Have new perspectives
• Have new passions
• Experiment!

The article mentions how Nokia helped to shake things within its organization by providing its employees with fresh new perspectives:

"For example, Nokia, a Finnish company that makes cellular phones and is based at the edge of the Arctic, may be ill-positioned to track lifestyle trends on the other side of the planet-trends that could ultimately redefine its industry. One possible solution-send Finnish engineers to Venice Beach in California, down Kings Road in London, or to other places on the planet where new lifestyle trends get set. Immerse those engineers in the new cultural milieu; change their experience base. Mining the world for ideas has helped Nokia invent new approaches. One example: Nokia engineers devised the idea of colorful -- bright red, yellow, and blue -- phones, which opened a whole new market for the company."

Read the full article here.

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