Marketing on a Shoestring for SME’s

April 29, 2010

When you are an SME with limited financial resources, you may have a huge passion and belief that you need to commit time to marketing. So what can you do to make your business really fly?

I gave a presentation about this, yesterday, at a Chamber of Commerce Safari event and these are my thoughts on the topic.

The first challenge is to be very clear about what your competitive advantage is and the second, to have processes in place that make sure you can measure the response to each marketing campaign that you run.

Fail to do either of these and you are potentially wasting both time and money. You won’t know what works and what doesn’t; and you will never get to the heart of why customers buy from you.

Here are my top ten tips for successful marketing on a shoestring.

1. Look at your business using a fresh pair of eyes. Act like a customer and take a long hard critical look at every aspect; from phone answering to the impression your Reception first gives. Get help with this from your employees, suppliers and advisers, record what you find so that you can make future comparisons

2. Identify the key benefits of buying from your organisation, really get under the skin of your product or service. And remember, a benefit is something that directly gives the customer something; saves money, saves time, provides emotional satisfaction etc

3 Check that the key benefits you have identified are actually ones that customers want! Now you can establish your competitive advantage. Compare your key benefits with those offered by your competitors. Your competitive advantage lies where you provide benefits that they don’t. This should form the heart of your marketing message

4 Become a customer in your own market place, buy something from two or three competitors and document the pros and cons of the process. If you can’t do this because they know you, get someone else to be the ‘Mystery Shopper’ on your behalf

5 Visit the MD of five customers on a ‘Boss to Boss’ basis, without any of your sales people. Ask them about their business and find ways you can work together to help them (and don’t make this a sales pitch)

6 Look for projects where you can work together at an early stage and give real ‘Added Value’ to your customers. This way you can ‘freeze’ out the competition

7 Understand and analyse how to create unique marketing ‘Hooks’ that will give enquirers a strong ‘Call to Action’. Get ideas from the networking events you attend and research what are your competitors are up to. Explore other markets to find transferable ideas

8 Create a variety of ‘Hooks’ that you can test through the different marketing channels you use. These might be price, buy one get one free; extended warranty; bundled product; extended warranty; free technical back-up; discount off next order or low rate finance. Alternatively purchase could be linked with a promotion or competition. Link these ‘Hooks’ with a Social Networking Strategy to build advocates for your organisation

9 Measure enquiries generated and conversion ratio to sales achieved from each channel you use. Stop anything that doesn’t perform until you can identify the reasons why

10 Remember that all of this is a continuous cycle that constantly needs updating, so make sure that you allocate the appropriate time on a monthly basis. This way you will get better and better at the marketing you do

These are all ideas that I have used to build my business.

They worked for me, so I know that they can work for you too.

Good luck!

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Why is a ‘Business Plan’ important to the Venture Capitalist?

April 6, 2010

There are more clichés and misunderstandings surrounding business plans than any other part of the capital raising process. These range from the belief that plans are not needed because my concept is so good that it ‘sells itself’, to the ‘thicker the better’ school of business plans.

The failure of both of these approaches stems from a misunderstanding of the role of the business plan in the venture capital world. Unlike ‘Dragon’s Den’, no venture capital firm or angel (defined as persons who invest their own money in businesses) hears a presentation or reads a plan and then writes a cheque on the spot.

An angel is no different than a capital venture firm in his or her desire to make a prudent investment. They want experienced management, collateral, growth industries and significant returns on their investment for the least amount of risk.

People sometimes think that angel investors suspend all prudent business practices and just throw money at any project presented by entrepreneurs. Nothing can be further from the truth. Generally speaking each venture capital source must present the plan to a committee or advisors to determine the next steps. The business plan is the door opener, if the plan is favourably received the firm or individual will proceed to the next step, if not then the potential investment stops right there.

So, what does the venture capital community want to see in a business plan? The projects that move forward are selected because they have a ‘business comfort level’ that encourages further pursuit. If a project or business is inherently unsound, a skilfully drafted plan does not cure the flaws, nor does a poorly written plan automatically condemn an excellent company’s chances for financing, however it does make it significantly more difficult.

Most proposals fall in between these two options, and this demonstrates just how crucial the business plan is.

Venture Capital sources want to see the following 7 key questions answered in the plan:

1. What is unique about this company or project? Not necessarily a unique product, but one with growth potential that sets it apart from other industry members or from other proposals received

2. What does the company do? They must effectively communicate the company’s product and services and the operations of the company

3. How does or will the company attain profitability? This area entails discussion of the market and competition as well an analysis of areas such as revenue and profit margins

4. What benefit will be derived from a capital infusion? In other words how will the proceeds of the financing be utilised and what results benefiting the investor will be achieved. This should translate into increased revenues and profits and an excellent return on investment

5. Is management capable of implementing the business plan? Many investors consider this the most important element of a business plan. An investor must be comfortable with the experience and abilities of the management team. An outstanding management team may have the ability to overcome other deficiencies in the plan

6. Do the financial projections make sense? Over optimistic projections reflects on management’s judgment. Projections can be aggressive, but must be within the realm of the real business world

7. Is there an exit strategy for the investor? Does this business have the potential to merge, be acquired, go public or buy out the investor? This is important, since one of the most popular venture capital vehicles is the convertible debenture. The investor must be confident that either the debt payments can be sustained or that their stock conversion rights have great potential.

If the business plan effectively answers these seven questions, then it has served its purpose.

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