Depending on whom you ask social media phenomenon of the last few years has either been a great boon to small business owners or a complete nightmare. No matter which side of the fence you are on, one thing is certain – small business owners can no longer ignore social media these days. Number of savvy owners has been using social media in innovative ways to improve different aspects of their business leading to higher sales and improved profit. Despite this fact, there are some who are fearful of delving into social media due to lack of knowledge or for fear of getting into quagmire.

Fear no more, friends!! The 3-step approach we have described below will navigate you through the challenging road to conquer the social media battle. We do not promise that you will become next Mark Zuckerberg with this approach, but we do believe that you will be able to overcome your social media fears and use it to the benefit of your business.

1. Explore – The first and foremost step you need to take to overcome the social media anxiety is to find out what is already being said about your business in social media circles. You will be amazed to find out what your customers are talking about whether you like or not! This step alone should prompt you to brush off your fears and do something about it. To learn what customers are talking about your business put an alert on Google so that you can monitor it on a regular basis. In addition, go to site like Yelp and CitySearch to find out how your business is being perceived and discussed. This is where your potential customers are going before deciding if they want to give you the business.
2. Establish – Once you know what is being discussed about your business and how it is perceived it is time to take control of your online reputation. The social media landscape is still Wild West. It is your responsibility to ensure that the information that is out there is fair and accurate representation of your business. If you don’t control your reputation on social media someone else will and that may not be to your liking. Sites like Yelp and others let you, the business owner, create a free account by which you can provide accurate information about your business. Make sure you contact them and ask to update any information that is not accurate.
3. Engage – Once you recognize the need for social media and set the records straight about your business on various sites, it is now time to go on the offense and get engaged with your customers. Engagement is the hallmark of social media. Just lurking around and passively watching the show will not get you much further with your customers. You need to actively converse with those who are giving feedback and opinion about your business. Don’t be afraid of negative reviews. They are your opportunity to learn about your business reputation and make it better. You will want to acknowledge the mistakes, if they are genuine, and offer an apology along with an offer to make it better on their next visit. The more you engage in social media, the better your reputation will become over time.

This 3-step approach should make you comfortable with the social media. In addition, you need to be aware of dos and don’ts of social media to take full advantage. We will discuss it in the next meeting.

In the meantime, we would love to hear about experience with social media. How did you get started and overcome early fears?

When small business owners hear about social media their attention immediately goes to Facebook and Twitter. They think of social media as a place where customers go to gossip and complain about their businesses or where business owners can go to publicize their products. This limited view doesn’t do full justice to the potential social media holds for small businesses. There is lot more to social media than just Facebook postings and Twitter broadcasts. We showed how you can use other interesting social media tools as well as some emerging social media tools in earlier posts. In this post we will review how you can use those and other tools in interesting ways to improve your business.

1. Customer Service – We all know customers are using social media tools to share their experience and complain about your business. But, do you know you can turn the table on them and use those same tools to improve customer service? When a customer is complaining on sites like Yelp you can respond to legitimate complaints and offer to make things right for them. Now, you have not only addressed the customer complaint and gained a satisfied customer, but others will also see the attention you are providing to customer service and improve the perception they hold about your business.
2. Marketing – This is how many small businesses use social media these days. You can set up a Facebook page, create a Twitter account and show off your business brand in various settings. In addition to those standard tools you should also look into creating your own blog and discussion forum where you can maintain better control of the situation.
3. Industry Research – Customers are talking about their likes and dislikes on social media sites all the time. This is also the place where you can see how leading edge consumers see future of products in your business. Is there a growing trend towards healthier food? Are greasy burgers and pizza on their way out? By monitoring discussions about your industry you can comprehend the impact these trends will have on your business and position it to benefit from them. This is how McDonald’s transformed itself from purveyor of burgers to healthy salads and smoothies and enjoyed tremendous success in the last 5 years.
4. Competitive Analysis – Just as customers are talking about your business on social media they are doing the same for your competitors. Are you listening to what they have to say about them? If they are raving about their new products and marketing you know you have a serious challenge ahead. On the other hand, if the complaints against them have increased lately you can take advantage of the situation and invite those dissatisfied customers to your business.
5. Product Testing – Social media is the best place to test new products before launching them. While you cannot run expensive focus groups in the same fashion as large competitors you can invite your Facebook fans and customers to vote on new features. This is a low-cost way of trying new things before taking on bigger risk. The software developers do this all the time with the release of their product to limited group of people in “Beat Testing”.
6. Product Improvement – You can take testing one step further and seek customers’ help in improving your product. Many customers are already providing their unsolicited input in various sites such as YouTube. Why not monitor those sites and learn from them? Even better, why not provide them a platform where they can regularly provide improvement suggestions directly to you?
7. Financing – This is perhaps newest and most overlooked benefit of social media. A number of sites have been launched recently where individuals and small business owners ask others for loans with what is called peer-to-peer lending. In this difficult economic times, when banks have reduced small business lending significantly, these sites can help you get the money from other individuals who are willing to lend. Look for companies such as Prosper or Lendio to help with your financing.

How else have you used social media to improve your business? Let us know in the comments below.

Daily deals facilitated by companies like Groupon and Living Social are double-edged swords for businesses. On one hand, they help you get new customers and improve sales. On the other hand, you end up with high operating expenses and dissatisfied customers, if not done right. Reading the horror stories that some businesses experienced you might think that it is never a good idea to work with daily deal companies. While this reaction is understandable, it may be extreme and may result in you losing out on the benefits offered by daily deals. We think with the right approach and proper planning you can make daily deals work for your business. Below we provide tips on how to do it.

• Perform detailed cost-benefit analysis. It costs a lot to run daily deals. You not only have to fork out almost 40-50% of sales to the company facilitating the deals, but you also need to provide substantial discount to attract customers. Make sure you add up all the costs, including additional labor, material and opportunity cost of foregoing profit. Compare that against the future benefit you expect to receive in terms of new, recurring customers and brand recognition. If the benefits do not outweigh cost it doesn’t make sense to run the deal.
• Offer incentive for customers to come back. One of the primary complaints about daily deals heard from businesses is that the customers come for the deal one-time only and never show up again. To alleviate this problem make sure you provide them incentives to come back to your business. You can give them additional coupon for future purchases or enroll them in loyalty program for frequent purchases.
• Set appropriate terms. Daily deal campaigns can get out of hand in terms of cost and customer service if not handled properly. To ensure you don’t end up in the same situation as other businesses with horror stories be sure to set appropriate terms and conditions. You should think about maximum number of customers who can purchase the deal, minimum purchase required, time and day when it is valid (don’t accept them during busiest time of the day/week) and products that are eligible. Without clearly specifying these conditions you run the risk of daily deals gone wild and incur large loss.
• Plan to handle the rush. Depending on how many people purchase daily deal you can expect a big surge in customers. You should prepare your business operations, including employees and raw material, to ensure you can handle the rush. Otherwise, you run the risk of facing customer backlash and hurting your business as opposed to helping it.
• Negotiate with sales people. It used to be that Groupon was the only game in town in the early days of daily deals. Now, many other businesses have jumped into the bandwagon. This has helped bring down the commission businesses have to pay – from 50% in the early days to as low as 30-40%. Don’t accept the terms proposed by the salesperson at face value. You can negotiate the commission as well as the terms of the deal to your liking.

So there you have it. Hope you can take advantage of these tips and run successful daily deal campaigns. Happy marketing!!!

Daily deals have proliferated in the last year like dandelions during spring time. I am receiving at least 4-5 deals from one well-known daily deal company alone. Are you feeling left out because you still have not run any daily deal yet? While many businesses and consumers have taken advantage of this latest marketing tactic, I don’t think you need to feel sorry if you have not jumped on this bandwagon. This is because for every business that has seen great success with daily deals, there is another one who can share horror story from his experience. Just look at the experience of one particular business.

Rachel Brown, who runs a small bakery in London, UK, offered a deal with 75 percent discount on a dozen cupcakes last year. She expected about hundred people to sign up. Instead she was inundated with thousands of people willing to take her up on the offer with more still waiting when she cut off the deal at 8,500 customers. Now, this is the business that normally filled about 100 cupcake orders per month. Instead she was faced with making 102,000 cupcakes! She had to hire 25 extra workers incurring $19,500 in extra cost and lost the entire year’s profit in that deal. Just imagine her reaction when a sales person stops by to pitch another daily deal!

To be fair, not all businesses have this type of horrible experience with daily deals. As with many things in life, daily deals offer both benefits and drawbacks. As a business owner, you should know both sides of the coin before making a decision. Below we highlight them in the hope that you will be able to make the right decision.

Benefits

• Daily deals are great at bringing in new customers. Companies such as Groupon and Living Social have large database of potential new customers, who will jump at the great deal your business offers.
• These deals serve as good marketing tool and can build a great brand for your business.
• If done right, they can help you sell slow-moving items that are not selling well in your business. After all, people are getting really good deals on them, aren’t they?
• Customers have to pay ahead of time for the deals. That means you get your money upfront. There is also a side benefit of this arrangement in that inevitably there will be some who forget to use their deals (I know, I have been there), which means extra money in your pocket.
• While many customers will settle for buying only the items included in the deal, there will be many others who will end up buying more items at full price bringing extra sales and profit to you.
• When you look at all the benefits mentioned above, we believe daily deals provide especially good value to new businesses who are trying to get their name out and bring in new customers.

Drawbacks

• While daily deals do bring in new customers many of those customers will come for the deal and never show up for follow-up purchases, which is one of the main reasons you signed up for the deal.
• You end up paying a lot for these deals. Not only do you have to offer a large discount to customers, the companies running the campaign for you will take a sizable cut from the sales, sometimes as high as 50%.
• It can increase your labor and other operational costs significantly, sometimes incurring you heavy losses as you saw in the experience of Rachel Brown earlier.
• It can also become an operational nightmare and result in pissed off customers, which is bound to happen when you have to serve so many customers in a short time.
• Even with all good intentions your business reputation and brand may suffer as a result of these problems.

So, what is the final verdict? Are daily deals good for your business?

Well, It depends. As shown earlier it can help, but also potentially hurt your business. You have to know what you are getting into and plan your deals right.

We will show how you can do this in the next post. In the meantime, if you have any stories to share, good or bad, do let us know in the comments below.

In the previous post we discussed why failing is so important for all businesses. If you haven’t failed, you haven’t tried hard enough. And if you haven’t tried hard enough, you have lost the battle even before it has begun! In this sense, failure is closely tied to risk-taking. Only those who are willing to take risks are going to possibly fail. But then only those stand any chance of becoming successful.

Not all failures are created equal. There are some who will never recover from their first ever failure. And there are others, like Thomas Edison, who can fail 10,000 times but come up with life-changing innovation at the end. So, is it possible to approach risk-taking to improve your odds of success at the end? We think the answer is YES as shown in the following bullets.

• Fail Early – The longer you spend on the project before failure, the higher price you will pay for it. That’s why it is important to take the risk early on and face the consequences rather than avoiding it for as long as you can. Remember, avoiding the risk doesn’t make it go away; it just stretches the time before the inevitable happens.
• Fail Small –This is somewhat related to previous item. It is better to test your idea or products while it is still in infancy rather than waiting till it is fully developed. That is why Google and other software companies launch “beta” version of their products. The purpose is to get feedback from end users and customers while the product is still being shaped. This way even if the product fails you don’t have much to lose.
• Fail Often – You cannot expect things to succeed in the first try. That’s called being lucky! All successful entrepreneurs have ability to rise from the failures again and again. How many times has Donald Trump filed bankruptcy? The key is to not get discouraged from failures and not to treat failure as evidence of your incompetence. Just consider it as part of the process and move on.
• Learn from Failures – Successful people are able to look back at their failures and analyze what they need to do differently in their next endeavor. The definition of a stupidity is to keep trying the same thing over and over and expect to get different result. After you have failed you should spend time talking to your colleagues to understand what went wrong and why. Only after you have learned from your experience can you expect to have success in the next round.
• Make failure part of the company culture – As a leader it is your responsibility to encourage people to take risk and not be afraid of failure. If you punish people for taking risk and failing people will be afraid to bring ideas forward. And there are lot of ideas out there in your employees’ minds. Successful companies allow, even encourage, employees to try new approaches without having to worry about the consequences of failure.

What other advice do you have from you experience on succeeding from failures?

What is it about failure that brings different reactions from people? Just look at the way two types of people talk about how they failed. You can figure out who is going to make it big eventually and who will continue to toil for a long time. The first one will go something like – “Oh, what fun it was to work on that business!! Yes, we had to close the business eventually, but the thrill and experience we got from it we will never forget.” Now, compare this to what the second type of people are saying – “Boy, I would never go through that type of experience again. Not only did I lose everything I had, but, most importantly, I have lost desire to try something new again. Wish I had not got into it in the first place.” Guess who is going to be the successful business person?

Why is it important to fail?

It’s simple. If you haven’t failed, you haven’t tried hard enough. And if you haven’t tried hard enough, you have lost the battle even before it has begun! Winston Churchill famously said – “Success consists of going from failure to failure without loss of enthusiasm.” Therein lies the secret sauce of success. It is immaterial that you have failed at something, what is important is what you have done after that.

Thomas Edison, the greatest inventor ever, held 1,000 patents in many diverse areas. He was responsible for changing the lives of humanity in many different ways. But did you know that it took him 10,000 trials before he was successful at making the light bulb. Just imagine what would have happened if he had given up after 9,999 tries! How many of us have the patience to persevere for so long?

Why are so many people afraid of failure? Many people equate their failure to incompetence. This is a wrong analogy. If that was the case, Edison would not have thousands of patents in his name after failing so many times. The correct analogy for failure is risk taking. The reason you are failing is because you are willing to take risk. The person who is standing on the shore of a raging river will never experience the thrill of that ride, and more importantly he will never get to the other side of the river. You only have hope for success if you are willing to fail (read take risk) and learn from it.

Going back to our opening paragraph, are some people wired to not take risk and fail? Can you teach someone to be more risk taker than he normally is? I think the answer is yes as long as you can show him clear path and provide guidelines for risk taking. There are ways by which you can take risk, fail multiple times, and be successful eventually without losing everything. We will show how you can approach this and learn to fail (succeed) in the next post.

Till then tell us about your failures and what you learned from it in comments below.

Is there such a thing as “right” business for you? It is a fact that not everyone is suitable to become a small business owner. There are signs that tell you whether you will succeed in owning a small business. But once you know that you have what it takes to be a small business owner, can you take it one step further and figure out which type of business will be a good fit? I think the answer is YES.

Some people would argue that all businesses will make money as long as you work hard. No doubt, this is true. It necessary but not sufficient condition for owning a business. There is more to running a small business than just working hard and making money. First and foremost, you have to enjoy what you are doing especially when you spend 10-15 hours a day for 7 seven days a week. If you are not having fun and do not enjoy what you are doing, you will run out of gas sooner or later and will end up hurting your business. On the flip side, when you are passionate about your business you will want to give it everything you have and make it a success. At the end of the day, passion will always win over simple love of money.

So, how do you go about finding the type of business is right for you? There are several dimensions to this question and looking at each of them will help you narrow down your choices and move a step closer to your final decision.

• How much money do you have to invest? Not having enough money should not stop you from starting a business. You may have to scale down your vision and start small. Look for businesses that require low initial investment. You can look at these tips on how to start business with little money.
• How much time do you have? If you already have a job and do not want to let go immediately to work full-time on the business you will want to look for businesses that you can start on a part-time basis and do not require you to be on-site physically. Owning an E-Commerce business (think EBay) that you can operate from anywhere is ideally suited for this situation. Don’t forget to read the tips on how to succeed when you are only working part-time on the business.
• Are you skilled in a particular area? If so, you should study successful businesses such as photography studio or bakery. Think about how you can translate your love for this sought after skill into money making business. At the same time, keep in mind that there is lot more to running a business than just baking cakes.
• Do you have prior experience? If you have never owned a small business, I strongly encourage you to purchase an existing business, preferably a franchise one, instead of starting from ground up. Starting a new business is lot more challenging than you would think, especially when you don’t have experience.
• Do you want the comfort of well-defined systems and processes? If this is the case you should look for a franchise business where the franchisor has taken care of many aspects the business operation for you. This is also suitable for someone who has never owned a business as mentioned in the previous bullet.

What is your experience? Do you agree with this assessment?

“What business are you in?” This is one of my favorite questions to ask when we meet with small business owners and entrepreneurs. On surface this appears to be a very simple question. If you are a pizza business owner, of course you are in the business of selling pizza or food. But, think about it in terms of what value are you bringing to your customers rather than what you are selling. Are your customers really craving for pizza or are they looking for the convenience of no cooking and pizza happens to be one of the choices? Are they ordering pizza to feed bunch of kids at a birthday party? Are they looking to satisfy their hunger after late night partying without having to drive to your store? As you can see, how you look at your business can have a significant impact on how you run your business. In fact, it can determine the success or failure of your business down the road.

Many aspects of your business depend on how you answer this question, including product you sell, target customer base, marketing, pricing plan and your competitors. In short, your entire business model depends on this question!!!

You want to proof? Just look the success Southwest Airlines had since it started its operation out of small airport in Texas with just few planes. They didn’t think of themselves as airlines in a classic sense. They looked at themselves as providing efficient transportation service to customers who were looking for an alternative to bus service. They did not even consider large carriers such as American Airlines as their competition. This meant that Southwest had to be low cost (charge similar fair as bus service), efficient (board and depart the plane quickly) and innovative (provide fun experience). They also had to settle for small airport instead of the large hub that American Airlines was using. Out of this, however, emerged a formidable business that turned the airline business model over its head and drove many competitors, including bus operators and airlines, run for the cover.

So how do you go about answering the question – “what business are you in?” You need to break it down in several sub-questions to get the most value out of your answer. Here are the sub-questions you need to ponder.

• What are you selling? Auto manufacturers used to think they sell cars. However, the new generation of buyers doesn’t want the hassle of owning a car, but they still have a need to go from point A to point B. So now auto manufacturers think of themselves as selling transportation needs rather than just cars.
• Who are you selling to? Car salesmen might think that they are selling to the husband, who may be writing the check, but behind him might be other influencers – wife and kids – who could be real decision makers.
• How are you selling? Music industry executives and artists clung to their old way of selling music through CDs for a long time, but Apple showed them customers really wanted to get their music digitally on their iPods. Look at the success Lady Gaga has, who was one of the early converts.
• Who is your competitor? Think about Southwest example we talked about earlier.
• Why are your customers buying from you? Kraft thought customers were buying cream cheese to spread on the bagels, until they found out how customers were using it in many innovative ways. This prompted them to change their marketing campaign to emphasize these alternate uses, helping boost their sales.

At the end of the day, you need to provide your answer to this question in a very simple fashion. As Einstein famously said – “If you can’t explain it simply, you don’t understand it well enough.”

Majority of small businesses fail in the first three years. As remarkable as this statistic is, it doesn’t stop number of aspiring entrepreneurs from pursuing their dream of owning a business. They think about their idea as the best thing since sliced bread was invented and are convinced that there is a huge untapped market out there that nobody as cracked. They have run their idea by close confidants and got their endorsement. Uncle Bob likes their product and Aunt Ann can’t wait to get her hand on it. There is only one problem. It is still an idea in your head!!!

So how do you go past this “pie in the sky” idea stage and make it a reality? Even more important, how do you know that this idea will succeed and will not leave you with agony and angst when it’s all over?

While there is nothing wrong with pursuing your dream – in fact, it should really be encouraged – you need to make sure you have covered all bases in terms of research before jumping in the water. After all, the end result could haunt you for a long time if it doesn’t work out as planned.

We believe you need to go through 4-step evaluation process before making a go / no-go decision on your business idea. They amount to understanding different pieces of the puzzle and making sure they fit well so that the end result will be a nice piece of art instead of jumbled mess.

1. Know Yourself – Before doing any type of business the first question you need to ask is – “Do I have what it takes to be a successful small business owner?” Failing to understand this can wreak havoc on your personal life and financials. In addition, you need to make sure all your family members are on board with your decision. While there are number of myths out there about owning a small business, running a small business takes a heavy toll on your close friends and families. Failing to get their approval will result in either hurting your family or business or both.
2. Know your Business – Not everyone is fit to operate every type of business. While there are certain management skills required for all businesses you do need specialized skills to operate certain types of business. For example, it takes different set of skills to operate a restaurant versus automotive repair business. You have to ask yourself – “Am I in the right business that matches my background, experience, skills and personality?”
3. Know your Market – The goal of any business is to sell the right product, to right customer, at the right price so that you will make acceptable return on your investment. For this to happen you have to understand if the product you plan to sell has a market, what types of customers will want to buy it, how the competition stacks up for these products and how and at what price you will sell them. Without having a clear understanding of your product and market there will not be enough customers for your products, leaving you with pile of invoices to be paid, but not enough revenue to support them.
4. Know your Finances – Finally, once you are convinced that you have the right product and customer base and you will succeed in making proper return on your investment you need to look at your financial situation to see if you can afford the upfront investment. How much money will you need as initial investment? Can you start the business with as little money as possible? How long will you need to continue putting the money in the business before it start generating positive cash flow? Who will you go to if you cannot come up with the entire investment need?

As you can see, all the questions raised are meant to provide you with opportunity to do self-assessment before jumping in. It helps to prepare a business plan that will answer many of these questions. Be sure to prepare, at least preliminary version, yourself rather than asking for a professional help. Here is a sample business plan to get you started.

If you have been following business news in the last few months you know that Netflix is going through rough times. Their loyal customers are cancelling accounts in droves and the stock price that was around $300 just 6 months ago is now hovering around $70, wiping out almost $10 Billion in market value. Ouch!!

So what happened? Well, everything that could go wrong did. On one hand, the business of movie rental is going through massive shift – from DVD to streaming video and the competition is increasing with large companies including Apple, Amazon and Google entering the market. On the other hand, Netflix picked wrong time to make changes to their business model and made big gaffes in communicating to their customers.

Make no mistake. Netflix was and still remains one of the most innovative companies. After all, they disrupted the movie rental business and drove Blockbuster, along with smaller rivals, into bankruptcy. What happened to them could happen to any company if they are not careful. But there are important lessons to be learned from their mistakes to ensure you don’t end up in similar situation. Let’s look at them one at a time.

• Run a pilot with focus group before making large-scale changes, especially the ones that directly impact your customers. It is a known fact that we humans don’t like changes to our established routine. When the changes are of the scale that impact large swath of your customer base it is paramount to run a pilot to understand what your customers think and where resistance is coming from.
• Prepare your customers for big changes. Granted that you cannot solely let customer focus groups determine direction of your business. However, if you do decide to move forward with the changes it is important to plan it well in advance and prepare them for the upcoming changes. Do not drop the bomb on them without advance warning.
• Do not make too many changes at once. Do small incremental ones and see how customers react. In short span of few days Netflix announced separation of DVD rental and streaming plans, increased the price and decided to split the company into two. Changes of this magnitude left their customers bewildered as to what the company they loved so much was up to.
• Communicate, Communicate, Communicate. We cannot emphasize the importance of communication during times of upheaval. When customers are in the dark about what your company’s plans are they will assume the worst and start abandoning you.
• Be prepared to apologize and take back the changes if there is a large backlash. Netflix did rolled back changes after learning about customer revolt, albeit only partially. Do not hesitate to swallow your pride, accept your mistakes and backtrack. History is rife with companies doing this. Remember the new logo Gap rolled out in 2010. How about New Coke fiasco that Coca-cola went through.
• Finally, under promise and over deliver. Netflix gave made its name by giving customers more than they had expected in terms of movie selection and customer experience. With the new plans and site the customers felt they were getting less, while paying more. Small business owners should never end up in this situation.

What do you think? What lessons can be learned from Netflix?