The Data Effect

I’m sure you have seen the movie “Moneyball”, it is almost unbelievable how much statistics changed the game of baseball. It is almost uncomfortable to think that a winning team can be built based on analyzing data.

Has it ever happened to you that you googled a product, then the next time you went on Facebook the same exact item was advertised in the sidebar?

Certainly major league sports, big trading companies and online retailers have a lot of money to invest in data analysis. So much so, that small business owner often feel disadvantaged, and think they have no chance to make it in today’s economy.

You, as a small business owner have something unique, something that big companies find hard to achieve. You can build personal relationships with your clients.

Just because you don’t have the resources to build custom data mining software doesn’t mean that you should do nothing!

Recently a business owner came to us, and after a short talk we realized he had no idea how his business performed financially over the year before. Basically he’s been flying in the dark for over a year without knowing how much he spent on what. He didn’t even know if he made a profit or not.

Starting a small business doesn’t mean you have to be in a disadvantaged position.

Michael Lewis said “People… operate with beliefs and biases. To the extent you can eliminate both and replace them with data, you gain a clear advantage”

To gain advantage, first you should find a qualified bookkeeper, or CPA, and ask for monthly or biweekly financial statements. Then please spend some time and analyze the information presented to you. Numbers by themselves mean nothing; you have the story that can be built around the data.

You would be surprised how much of a difference this simple exercise makes. This could be the difference between competing with your peers or dominating them!

The Magic of Working Capital

While working with successful (and some not so successful) law firms, I realized the importance of having sufficient working capital in a business. I always knew the theory, but seeing it in action is more convincing.

Cash is King! When you have money, you have options! And having options is the ultimate freedom. It means you get the chance to shape your business into something that you envisioned when you decided to start your business the first place.

Too often I see entrepreneurs starting off with high hopes, than getting disillusioned because they end up a slave to their own “baby”.

A client from the west coast keeps more than sufficient cash around. An investment advisor would say that she misses out on potential investment income, than I saw it in action why she chooses to keep her firm liquid. When a new opportunity presented itself, she was able to take advantage of it immediately, and open up a completely functioning satellite office within days.

I know you don’t get to open up a new office, and expand this visually every day. But don’t ignore the effect of being able to make “smaller” choices every day! For example you can filter you clients, and start leading a happier, more profitable business.

I bet when you started your business, having options was on the top of your list. Don’t give up your ability to make choices!

Don’t be afraid to make plans again. Managing cash flow effectively will give you options you thought you lost a long time ago.

Pick Your Clients!

Pick your clients; don’t just wait to be picked by somebody who wants to work with you!

This post was inspired by the idea promoted by Seth Godin. Seth talks about picking yourself, rather than waiting to be picked by an employer or client. You should not ask for permission from your employer to start initiating your idea. Just start executing, even though it means you have to accept the consequences.

You have the option to pick your clients on multiple levels:

  • Filter your current and prospective clients. According to the Pareto Principle 80% of the value comes from 20% of your clients. “Value” received isn’t limited to just profits, but may include satisfaction, personal growth from challenging work, etc.
  • Also, 80% of complaints come from 20% of your clients. You might want to take a closer look at these people first, and evaluate if it is worth for you to continue the relationship.
  • Literally Pick your clients! Don’t wait for people to just come in to your office, even if you advertise. If you see someone with a question or need that you have a solution for, don’t hesitate to let him/her know that you have a solution for their problem. This way you can specifically target people who have a need for what you offer.

Start by “picking yourself”, give yourself permission to seek out people, who you can build a relationship with. Provide quality and valuable services. Competing on low cost is definitely not the future.