Jola Cloud Solutions' Blog

 1. Catch people doing things right 

Constructive criticism is a myth and an oxymoron. Nobody likes to be criticised and for self-preservation many will erect their esteem barrier as soon as they see it coming. Try this experiment for a week and see what happens. You are only allowed to catch people doing positive things, you must be precise and you cannot use the terms ‘good’ or ‘bad’. It doesn’t even have to be exceptional. For example, you walk past someone talking on the phone and when they have finished you make a point of taking them aside. You say something like “If I was the customer on the other end of that phone I would feel welcome, and comfortable that you have the skill and ability to resolve my issue”. Explain exactly why and leave it at that. Don’t finish with clichés like “keep it up” or “well done” and definitely don’t try and balance the feedback by commenting on a weakness (“yes…but”).

2. Focus on strengths 

If you spend all your time trying to improve your weakness then all you are likely to end up with is strong weaknesses. You are the boss and you decide what you are going to do. If you find spreadsheets tedious and time consuming then stop building your own business plans, forecasts and ROI models. There are potential employees coming out of university now that can use spreadsheets ten times quicker than you and at a fraction of your cost. Spend your time on activities for which you have a passion and that only you can do. Instil this in your managers and staff. If someone has a weakness that is core to their job then ‘zoom-out’ and find a way to focus them on their strengths. I once had a salesperson who knew the products backwards, he was smart and asked great questions. Customers loved him and he worked really hard. However, he had a real problem with rejection and when he failed to get an order or was knocked-back by a prospect he was miserable. Being in sales he was miserable a lot. I persuaded him to apply for a product managers job. He was reluctant because the salary was less than his OTE as a salesperson but he accepted the fact that he was unhappy and ended up taking the job. He now runs his own business. Obviously if you have a salesperson that has a problem with rejection and they also are lazy and disorganised, you don’t move them into product management just because they understand the products.

Consumerisation is affecting Terms and Conditions and unscrupulous business suppliers are taking advantage.

According to the government-backed Money Advice Centre, 84% of consumers do not read Terms and Conditions online, before they sign contracts. With some Terms and Conditions exceeding 30,000 words (the length of a novel) this is not surprising and Ombudsmen are starting to side with consumers when disputes arise.

However, there is little sympathy for company directors when they take their consumer behaviour into work. As a fiduciary officer of your company, a leader and captain of industry you have a legal and moral obligation to read contracts before you sign them. If you don’t have time then have somebody else read them. Small companies cannot afford to ask a solicitor to read every contract but most of the contractual traps used these days are obvious and a magnifying glass, not a corporate lawyer, is all that is needed.

If it relates to a technical subject, like telecommunications, ask your IT company to read it for you. If they know they are going to have to support whatever it is you’re buying they probably won’t mind and they are likely to be aware of the common traps.

Most frustrating is the company that starts a tender process, thinking they are out of contract with their current supplier, when they are not. If they have fallen-out with the supplier they may not even ask them to bid and they don’t find out until the end of the process. If they do ask them to bid the incumbent will hope they can win the deal and sign them up to another onerous contract without ever having to reveal the original terms.

Jola recently worked on a bid with a partner that lasted around 12 weeks. It involved meetings, demonstrations, proposals and references. We won the deal against three other suppliers, including the incumbent. When the customer gave the incumbent supplier the bad news they pointed out that breaking the contract would cost £40,000. The customer had to reluctantly re-sign with their existing supplier but before they did we were given the original contract to see if there was a loophole. The customer had signed to have their call charges fixed for seven years, in a market where the cost of telephone calls drops every few months.

Most articles that talk about customer service, concentrate on how well a company reacts when things go wrong. Of course this is important but has become a ‘given’ and tells only part of the story. Companies that focus on the optimal end-to-end customer experience, make it easy for customers to do business with them. Done properly this builds loyalty and, most importantly for rapid growth, means that variable costs do not need to increase at the same rate as customer acquisition and revenue. Recruiting people and upgrading infrastructure are expensive and difficult. These days the most successful rapid-growth organisations use the cloud whenever possible and avoid building their own infrastructure. They identify and invest in the points where human interaction is key and for all other aspects of their customers’ journey, they automate. This is especially important when customers need to interact with you very regularly, for example when you operate through a network of dealers and resellers.

Identify your most common customer types and put yourself in their shoes. If you are trying to develop a channel, consider all their decision points and think about how you can ‘in-fill’ with knowledge and resource. If an IT company wants to get into hosted telephony and mobile they will need sales support, contracts, training, collateral, billing, technical support and products that are easy to sell and manage. You need a formal process for collecting feedback and using it to improve your proposition. Consider setting up a User Group and involve them in the product development process. At the very least, if you solicit feedback from your customers, make sure you act upon it beyond a standard response email. Show how you have considered suggestions and if you have discarded them, explain why.

When drafting a business plan, you need to be clear about your objectives. Who are you writing the business plan for? What questions does it need to answer? Typically plans are drafted to cover one, three or five year objectives and strategies to achieve them. Writing a plan allows you to identify priorities and the plan itself can be used as a benchmark to measure success. By involving key individuals when drafting the plan, you can often build an engaged and motivated team, working to achieve common objectives. Two key areas of the business plan are the financials and competitive analysis.

Financials

Some entrepreneurs only put together a business plan if they are trying to raise money but not to run their business. Your financial forecast is your dashboard and you should be re-forecasting (not re-budgeting) every quarter. As much as you might think you know instinctively how your business is going, without a proper financial plan, you probably don’t. 

When deciding on your business model remember that recurring revenues are usually more valuable than non-recurring, especially if you can sign customers up on longer term contracts. Consider a plan where your customers rent a product or service from you rather than buying it up front. Most companies prefer to spend capital on growing their business rather than on overheads and a regular and growing stream of recurring revenue de-risks your business. 

Competitive analysis

I have read hundreds of business plans and usually the poorest section is entitled “Competition”. I was regularly told “well, there isn’t really any competition” which usually means; 

• You haven’t done your homework or
• No other companies see any value in doing something similar to your idea or
• There will never be any demand for your product or
• There is latent demand for your product and it will take an enormous investment in marketing to change people’s behaviour and make them buy it

Understanding the competition can help you to estimate the potential market and demand for your products. By comparing and contrasting products and services, you can get a real feel for your own USPs and how you might position them to attract business from the competition or target a slightly different market. Analysing how the competition may react to a new entrant also helps to form the sales and marketing strategy.

Important business decisions are not restricted to business expansion or new products – strategy, employment, security, regulation and ethics all need careful consideration. Some business owners make rash decisions as they believe that mistakes can be easily rectified. Carelessness in recruitment and supplier-selection is common, where the true cost of bad decisions is often misunderstood. Managers believe they can easily correct mistakes simply by firing/rehiring and switching suppliers. Of course, it is not always that easy. Depending on tenure and management, under-performers can be hard to move on – and costly to productivity in the meantime. With suppliers, relationships are established and systems integrated. Migrating customers can be difficult, expensive and even legally problematic, especially if you only skimmed the MSA before you signed it. Running multiple suppliers of core products presents significant operational difficulties (provisioning, billing, support) and you risk loyalty bonuses and volume discounts.

2. Analysis Paralysis

Some business owners go back and forth with inquiries while trying to make perfect decisions. They listen to new specialists and new points of view. They hold meetings and watch presentations. They hear arguments from all sides. They spend countless hours on Google then conclude that they do not have enough information to make the decision. Making no decision, or deciding to do nothing, also carries risk, often more so than making a minor misstep.

The best professional poker players are not gamblers. In fact those that are, cannot win in the medium/long term - the same is true of entrepreneurs. Entrepreneurs that make instinctive, rather than calculated decisions are destined to fail. Proper and appropriate risk assessment must be applied to every decision - otherwise one mistake or piece of bad luck can be disastrous.

The uninformed will tell you that poker is a game of chance – I do not agree. Some of the keenest minds in the world, chess masters, mathematicians and scientists are professional poker players and there are many successful entrepreneurs who are also semi-professional poker players.

Probability

In poker and business, understanding probability is important. In poker this is well defined whereas calculating probable outcomes in business is more subjective. Whilst most businessmen will not construct complex mathematical models before taking a decision they will usually pass important decisions through a rudimentary risk assessment model. For example, before launching a new product they will consider the size of the prospective market and the probability of winning a percentage of it. They will turn this into a prediction of revenue and profit, which they will set against the cost (and opportunity cost) of development, sales and marketing. They will calculate a hurdle rate that the return on investment must clear before being given the green light to proceed. This hurdle rate will include the cost of money, inflation and a risk premium that reflects the range of potential outcomes.

1. Don’t get hung up on inventing something new

How many entrepreneurs have made money by inventing a brand new product or service? You need investment to build prototypes and to protect your invention through patents and copyright. Patenting is difficult, expensive and can take years. All of this assumes that you have invented something people need and will pay for. If they haven’t already realised they have a need, then you must convince them and this takes money.

The most successful entrepreneurs have taken an existing business need and found a way to serve it better or cheaper with a pre-existing technology or set of products and services. 

For example, there are hundreds of millionaires in communications and IT, with companies that did not invent anything. Many of them don’t make products, own any infrastructure or even hold stock.

2. Don’t assume that all sectors are the same

People say ‘stick to what you know’ which is good advice. You need to be passionate about what you do, however if your knowledge or expertise is not specific to a particular industry, you should consider choosing a sector with a high intrinsic value. 

If you look at the price/earning ratios for different sectors you will see that they vary. The p/e ratio of a company is simply the price per share divided by the earnings (profits) per share over a period of time. Stocks and sectors with high ratios tend to be those that the market thinks will grow in the future. As a general rule those sectors that have the potential to positively affect other sectors’ productivity (e.g. software and technology) will have higher p/e ratios. 

This feeds through to the valuation of a company for raising money or disposal since a common method of valuing a business that is not publicly traded is on a multiple of the profit it generates. 

Choose a sector that meets this criteria and you should find it easier to raise money. Also you should get more for your business when you decide to sell it. Think about how your business is positioned right now. For example, the telecom service sector (e.g. phone systems) has a p/e ratio of around 20 but the applications software sector (e.g. the cloud) is up around 60. 

Start trading before you seek external funding

In 2001 I founded an investment management company and recruited 14 entrepreneurs with time and money to invest. Hundreds of start-ups sent us their business plans and for 60% of them that’s all their business was – an idea and a spreadsheet. We would often ask ourselves “if you cannot persuade family and friends to invest seed money or put in cash yourself to test the concept and financial assumptions, why would we?” Is there a market for this product? Is this the right price? Can I make the revenues, margins and profits in the plan? These are questions you can only really answer once you have started trading.

Don’t just trust 

Don’t put people in a position where they have to make a choice between doing the right thing and their own self-interest. Example: A and B start a business together on the basis of equal shares but legally all the shares belong to A. They are very successful and 5 years later they are offered £20m for the business. A may still give B the £10m but that’s not the point. If you are B and you have let this situation evolve it is your mistake. Don’t simply trust people to avoid confrontation or the legwork to negotiate a proper deal from the outset. 

The first priority of a Director is to do what is right for the business. Don’t put yourself in the position of relying on verbal agreements. Even the most fair-minded and decent of people can be prone to mis-remembering when significant amounts of money are involved. 

This trust principle extends to professionals. Too often we trust doctors, lawyers and accountants because we don’t really understand what they do. We assume that because they have had to go through years of training that they are all equally qualified to advise us. 

Voice and data companies can improve ARPU by supplying new products to loyal customers. Research shows that SMEs prefer to buy from existing suppliers, they trust. Until there is sufficient demand to justify investment in support, billing and marketing, the supplier will often partner with a specialist on an introduction and commission basis. Moving from a dealer to a reseller model provides better control and improved margins, however there are challenges along the way;

1. No Reseller Programme

If your supplier only has a dealer programme you will be forced to find a new supplier if you want to become a reseller. This introduces delay and risk and will ultimately put you in competition with your existing supplier. Before you take on a product as a dealer make sure potential partners offer reseller schemes too. Compare their reseller and dealer pricing.

2. Forecasts, targets and contract terms

Existing suppliers may offer reseller schemes but discourage dealers from becoming resellers through unrealistic targets or onerous contract terms. Read the reseller agreement as well as the dealer contract before you sign and ask to speak to one of their partners that has made the transition.

3. Billing

This can be especially problematic for IT companies that want to start reselling fixed, mobile and hosted telephony products. Alongside monthly service charges they will need to process monthly CDRs (Call Data Records), rating each call type and producing itemised bills and variable invoices. It is difficult and risky to try and adapt existing in-house billing systems and purchasing and managing specialist billing software is not always feasible.

There are some good third-party billing products available, however the set-up fees, monthly standing charge and billing percentages mean the reseller often has to take several orders before the margin covers the monthly cost of billing. Some of the more sophisticated suppliers offer white-label billing for their products and will even bill products and services the reseller buys from other suppliers. This can be a cheaper and less risky alternative.