Creating your own ecosystem

Do you have your own audience? If you don’t, you will have hard time as I do. We often want to drive short and long term performance, we normally do this through campaigns or promotions. When we have offers, the next thing we need is who to send the offers to. In my case, we have to pay for other companies’ audience. It’s expensive and is not effective. That’s why we start to create our own audience or ecosystem.

We use Hubspot as a CRM system. We invite customers to join our environment with content. We nurture them with content. And, from time to time, we offer them promotions. We still have a long way to go. Maintaining meaningful and engaging ecosystem is not easy. It requires a lot of things to be right e.g. content, segmentation, etc.

If you are interested to create your own audience, you can start with a Facebook group. It’s free and easy to setup. Please understand though, there are a zillion Facebook groups out there. You must ensure that your group add value to group members.

Having your own ecosystem is rewarding. But, it requires a different thinking. I encourage you to to do it.

Apivut

Old vs new economies

I am in Thailand visiting family at the moment. There is a common trend here in the news and social media that the Thai economy is going downward. Some people complain it’s hard to make money and the economy in general is very bad. Is it true?

I cannot say I know the answer of this economic question. Instead of answering it, I ask myself another question. Is the economy bad or does consumer behavior change? I have one silly example. I like to read Japanese cartoon books. I had to go to the cartoon book shops every time I came back to Bangkok. What different this year is I don’t. I now buy cartoon books from a book shop app. It is convenient and I don’t have to carry 10+ cartoon books. I just carry an iPad (with 10+ books in it). I was told later that those book shops were closed.

I still buy those cartoon books i.e. I still spend money. I just don’t buy them in a printed format anymore. Does it mean the economy is bad? Not necessarily. But, one thing for sure is my consuming behavior has changed. If you cannot adapt to the new wave of the changes, you will struggle to earn revenue in the same way.

You cannot blame anyone else but yourself. We are in a different world now.

Apivut

Why a financial plan is important to your small business

Do you agree that having a financial plan with forecast is a good thing to do for your small business? If you do, do you have one? My guess is not many small business owners devote their busy schedule to work on a financial plan. One of the reasons of not having a financial plan is about a perception, that it’s time-consuming and boring. Additionally, many small business owners might not know how to do it. In this article, I would like to offer a simple explanation and an easy way to do a financial plan.

Why is it important for small business owners to have a financial plan? Put simply, a good plan would tell you your current financial status and your future business trend, financial wise. A plan doesn’t have to be complicated. It only requires that you spend a few minutes to read and understand this article and you develop some sort of discipline to track your revenue and your expenses, you are good to go. There are two simple concepts that you need to know for your financial plan – one is business cash flow, and the other is a concept of time value of money. Let deep into these 2 concepts.

 Let start with the cash flow. Your cash flow is simply the movement of cash of your business. The major goal of the cash flow management is you need to ensure that you have enough cash to pay all of obligations that keep your business running. You also have to understand that being profitable is not the same thing as having a good cash flow management. This is because even though you are profitable, you may not have enough cash in a particular month to pay suppliers if you don’t plan well. What you should be doing is to create a discipline of recording or tracking your revenue and expenses. The first step is to record all “current” in and out of your cash. It will help you understand your financial status. Then, you have to do a “forecast” of your cash flow. It’s the same practice of having a budget for big corporations. You can use this template to record your cash flow. 

I don’t have to explain much why knowing your cash flow situation – the past, the present, and the future – is very important to your business. You certainly need to know what your spent and whether those expenses were absolutely necessary. You also need to ensure that you have enough cash to fulfil your current and incoming commitments. And, most importantly, having an idea of your future cash flow helps you do business more effectively. The next concept that you should know is “time value of money”.

What is time value of money (let call it TVOM)? It doesn’t sound like fun. I think it’s a good concept for you to know even though you may not have to actually do the calculation like banks or investors. Why? The concept of TVOM tells you that the same amount of money your receive today is worth more than the same amount in the future. This is because the amount in hand today can be invested to turn into more money in the future. The key difference between the today’s and the future’s money is “interest or rate of return”. Suppose that a customer offers to pay you $1,000 today or $1,100 one year from today. This promise comes from the customer that you trust very much, and thus you do not believe there is any risk that you will not be paid. Which option would you choose?

It all depends on the return you can earn on this amount. If you can earn 6% on your money, for instance, then you should accept the $1,000 today. If invested for one year, it would grow to $1,060, beating the option of receiving $1,050 one year from now. However, if you can only earn a 4% return on your money, you should accept the offer of $1,050 paid one year from now. If you accept the $1,000 and invest it at a 4% return, it will only grow to $1,040 in one year, compared to receiving $1,050 after one year from this customer. I cannot talk about the TVOM concept without showing you the formula (sorry).

The basic formula for the time value of money is as follows:

PV = FV ÷ (1+I)^N, where:

PV is the present value

FV is the future value

I is the required return

N is the number of time periods before receiving the money

The good news is you don’t have to do the calculation yourself. When I was studying, I had to do a manual calculation myself and it wasn’t fun. There are a number of websites that offer a TVOM calculator. I suggest this one because it’s simple and straight forward.

I can’t stress enough why being on top of your business’ financial is super important. If you feel like this is not your forte, you can always seek help. However, I would encourage you to at least start small with a good record keeping for your revenue and expenses. Once you have a very good tracking system, the rest is super easy.

Apivut

How to incorporate good strategy in a business plan for solo business owners

As a solo business owner, would preparing a business plan be on a top list of your priority? Based on the common challenges for many solo entrepreneurs (aka solopreneurs), preparing a business plan is not something that many solopreneurs do. Why is that? I come up with two main reasons – firstly, the word business plan sounds daunting, i.e. there seems to involve a lot of time-consuming work. Secondly, many solopreneurs think they have everything in their heads. Besides, many think their business models are straight forward – buy or create products and sell those products to someone else. How hard could it be?

Well, I do agree that the word business plan sounds daunting because I also don’t like to do it. However, it is important to have a plan for any business. Even you don’t require funding from a bank, having a plan and even better, a plan with a good, solid strategy, could make your business successful and increase a chance of success in a long term (by the way, did you know that more than 90% of new business failed?). Many sources suggest certain formats for a business plan. The structures are very similar. For example, an Australian Government website suggests having the following format:

  • Title page – This describes what the plan is for and includes general information on your business.
  • Business Summary – A one-page overview written after your business plan is finalised.
  • About your business – It covers details about your business including structure, registrations, location and premises, staff, and products/services.
  • About your market – This is the marketing plan. It should outline your marketing analysis of the industry you are entering, your customers and your competitors.
  • About your future – This section covers your plans for the future and can include a vision statement, business goals, and key business milestones.
  • About your finances – The financial plan includes how you’ll finance your business, costing and financial projections.
  • Supporting documentation – List all of your attachments under this heading in your plan for referral.

Some sources such as National Australia Bank (NAB) suggests focusing more details on a sales and marketing component and including a pricing strategy. I think the bank wants to ensure that solopreneurs are clear about how they generate revenue. 

My formula is slightly different. I am a big fan of having a clear strategy in mind. And, it’s always a good practice to put the strategy in the plan. Why? Writing strategy down is a great way to organise your thinking process. It also means that you have done your homework before you write the strategy down. Below is my recommended structure of a business plan for any solopreneurs.

Executive Summary

Have you heard about an elevator pitch? If you have under 1 minute to explain about your business compellingly, how would you do that? My suggestion is that you include the following components in your pitch:

  • Our business notice there is a gap in [xxxxxxx], and we can offer a perfect product or service to fulfill that gap
  • We will do it by [xxxxxxx]
  • The following will be happening in the next months

Demand Gap Analysis

This is the most important part of my business plan. You have to find out if there is unfulfilled demand in a product or an industry that you are interested in doing business. If you are selling the product that many people are already selling, it would be hard to differentiate yourself from the crowd. I don’t say that it’s not possible, I say it would be hard. In this case, you will have to ask yourself – why would customers want to buy from you? Is it because your product is cheaper or better? How can you tell customers that your product is better?  

Business solution

Once you identify the demand gap, now it’s the right time to explain about your product or service. Below are the good questions that should give you an idea on how to write in this section.

  • What is the product or the service?
  • How is it going to fulfill the demand gap?
  • Are there a number of businesses selling or offering the same product/service?
  • If there are, how is your product/service different from those businesses?

Sales and Marketing plan

This section is to use the analysis from the business solution section above and add how you would tell customers about your product or service. Imagine that no one is aware of your offer. You will have to explain how you will let people know. And, it’s not just letting them know about your product/service. You will have to give them good reasons to buy from you. You also need to think about communication channels. The common online channels to consider are:

  • Social media
  • Email
  • Search Engine
  • Website – to me, it is necessary to have a proper, professional looked website. The first impression is very important.

Financial plan and forecast

Your financial plan and forecast don’t have to be complicated. Chances are you will rely on personal financial sources anyway. What you have to bear in mind though is that you have to split your limited budget in different bucket carefully. The main buckets are:

  • Product-related budget
  • Sales & Marketing budget
  • Contingency budget

Remember this – you should always have enough money as a backup.

Future Plan

You should try to think and explain what could possibly happen in the next two to three years. Of course, you wouldn’t know for sure. However, this exercise encourages you to think beyond the next six months. My assumption is you want your business to last as long as you want it to be, correct? It doesn’t have to be complex. You could only ask the following “what if” questions:

  • What if my customer’s preferences change next year?
  • What if my suppliers increase prices by 10-20% next year?
  • What if there are 5-10 people selling the same product next year?
  • Or, what if my business work so well that I have to add more staff?

I hope the above plan doesn’t sound too daunting. I strongly recommend that if you plan to launch a new business, you should spend a few hours to prepare the above plan. I can guarantee that it will save a lot of your time and money.

Apivut