One of the challenges of any business is understanding the sales cycle, assuming there is one. Now obviously, some business are seasonal, or can anticipate increased sales volumes for certain times. Christmas is going to increase catalog, retail, and online sales, all of which will increase the amount of traffic for FedEx, UPS, and the US Postal Service. But what about your small business? Is there a semi predictable cycle? In my opinion, even if there is, predicting numbers is still like throwing nails at a dart board. In other words, wildly inaccurate.
However, to an extent, I have learned that dips are far more predictable than peaks. Here are a few examples, and it is all driven by customer reaction.
In late 2008, the world crashed. The markets crashed, sales crashed, credit crashed. Hell in a handbasket. Through the first three quarters of the year, we were up in sales, and looking great. Fourth quarter hit, and we saw a fifty percent decrease in sales from the previous fourth quarter. Now, fourth quarter is generally our slowest with holidays and such in there, but occasionally it surprises us with some end-of-fiscal-year bumps. However, fourth quarter 2008 nearly called for layoffs, and I admit, it wasn't something I saw coming. Having experienced it once though, I now know to be on the lookout for it again. As a plus though, because the UIU saves customers a tremendous amount of time and money, 2009 turned out our best year to date, which very few companies could say. So again, I now have a historical piece of data to work with in the future.
Another example for us has been associated with the release of a new Microsoft operating system. When Vista was close to release, our sales slowed or were delayed because customers didn't know exactly what to expect from Vista. Rumor had it that UIU would be unnecessary. Well, that was obviously incorrect, as sales continued to increase, but it was understandable. Consequently, when Windows 7 was announced, we fully expected the same thing. Customers would delay purchases while reviewing their environment. Windows 7 would cure all their problems. We had several customers not renew their UIU licenses as they were positive they didn't need us. Well, 2011 proved that wrong, with record sales and several customers coming back to the UIU. But, because of our experience with Vista, the Windows 7 hit and subsequent rebound was predictable.
The third scenario we have run into is with our own product updates. It was not uncommon to hear that a customer wasn't going to purchase or renew until we had released a new version - something compatible with Vista, Window 7, containing certain drivers or fixes, etc. The customer always wants assurances that it's going to work in their environment, and despite years of proving our commitment, fear still reigns. Not much you can do, but understand that the process will take time. So, when we heard customers were leaving us for Microsoft's SCCM, because it would do everything they needed (see point two), we listened and waited, and soon those customers started asking if the UIU was SCCM compatible. As those requests grew, we realized we needed a new product that would integrate with SCCM (UIUSD), which we just released in April. That release though has caused a slow down in sales and renewals because for existing customers moving, or considering moving, to SCCM, they now had to do the research and evaluate their environment. And so while sales fell dramatically in April, I was able to warn my sales and marketing staff that it would likely happen. No one is happy about having such a terrible April, but the interest in UIUSD has been awesome, and we can fully expect the corresponding increase in sales shortly.
I don't think business is tremendously predictable, as far as set numbers. We would all like to increase sales by a certain amount every year, but can we predict that with any accuracy or certainty? I don't believe so. What I can do though, is be somewhat predictive as to when sales may increase or decrease based on certain outside events or perceptions. The more cycles you go through the better a predictor you should become, as long as you learn to recognize the patterns.
Businesses, at their most basic, fall into two categories - either providing a product or a service. The two are often interchanged, and arguably a service is a product, but not the other way around. FedEx's "product," for example, is the shipping service they provide, not the packaging the customers use.
When starting a business, whether a one man shop, or growing into a small business, this distinction is something to keep in mind, specifically when it comes to your brand. Unfortunately, I did not realize the importance of this until several years after Big Bang released the Universal Imaging Utility (UIU), and it has likely cost us.
The advantage a FedEx, or any other "service" oriented business, is that their name is synonymous with the service they provide. If truly successful, it even becomes a verb. It's not unusual to hear someone will FedEx a package. It's what they do and who they are.
On the other hand, consider Research In Motion, or RIM if you prefer. Now most technically savvy readers will know who RIM is and what they do. The rest of the known world knows them as BlackBerry. Their product branding is so strong, that most users of BlackBerry devices likely don't know that Research In Motion is the company behind the product.
Let me explain how the branding has worked for Big Bang and how it has affected us. When Big Bang first released the UIU, we distributed it through Binary Research International, the original creators of the Symantec Ghost product. It was a natural choice. We worked with them providing Symantec Ghost training services, they were still involved with Symantec and selling Ghost world wide, and they had a huge database of existing Ghost customers. Our experience was in supporting the software. Their experience was in selling software. Perfect!
Because distribution and sales was not our expertise, we relied very heavily on Binary to market the UIU, and they did that very well. However, we did not insist they market Big Bang, and to an extent, that was a mistake. Their job, as a company that specialized in bringing products to market, was to promote the product to increase sales... and to promote themselves in order to obtain more products. This caused us two issues.
First, our customers, the end users implementing our Universal Imaging Utility software, did not know who Big Bang was. We did not do nearly a strong enough job of getting our name out there. Rather, the UIU was the focus. So, like RIM and BlackBerry, we have created a situation where there is a disconnect between our product and the company. While the business was first taking off, no one thought anything of it. However, as we grow and look to release new products, we don't have the name recognition we would like as a company. Our UIU "Power Button" logo is far more recognized than the Big Bang logo, which has caused our marketing team no end of problems. How do we want our customers to identify us, by product or by brand name?
The other issue that arose with our distribution and marketing model, is that customers associated the UIU with Binary Research, not Big Bang. I can't begin to tell you how many times we have contacted a customer only to be told, "We only deal with the manufacturer." We are the manufacturer! But as I said before, Binary's job was to sell themselves as well as our software. To this day, despite the hassles, I do not begrudge them this. That's how their business as designed, and in order to grow and thrive, they wanted more products to bring to market. It makes perfect sense - for them. We didn't realize early on though what a problem it would cause for us down the road. We have spent the last year trying to educate our customers about who Big Bang is. In some cases, these customers have been using our UIU software and support for years! It has been a hard lesson to learn.
Consequently, my lack of foresight regarding "product" branding versus "company" branding has cost Big Bang a considerable amount of marketing equity. It's something to consider during all the excitement of bringing your first product to market - hopefully there will be a second product! I can only apologize to my sales and marketing staff, and hope they will forgive me.
In the next few weeks we will be releasing a new product to the world. We’ve spent almost a year on development.
It’s going to be a great product, and bring real value to our future customers.
In order for me to type that last sentence confidently, a great deal of work had to go into not just the creation of this new software, but in determining market need, saleability, and perhaps almost as important as the quality of the product – who my target market is and how to get them to buy it.
Needless to say, the market need for the Universal Imaging Utility System Deploy Plug-in (UIUSD), after speaking with quite a few Microsoft System Center Configuration Manager (SCCM) admins, is pretty ripe. The software is priced competitively, and we feel that reception will be overwhelmingly positive.
The biggest issue?
Our target market is almost too defined.
You read correctly, I did just declare that we know EXACTLY who our target audience is and where to find them, and I made it read like it actually might be a slightly negative thing.
The reason I feel this way is due to the extremely specific, and small number of individuals to whom I need to market.
As an illustration, the advantage of our existing product is that target messaging carries with it secondary, and even tertiary possibilities depending on the interaction. For example, our current product, the UIU, is designed to work with any operating system cloning and deployment solution to reduce the number of OS images an organization needs to maintain down to ONE by, among other features, handling all the drivers needed for any hardware component. The messaging is such that any entry-level help desk individual, IT Manager, all the way up to CTO or CIO of any company utilizing anything like Ghost, Altiris, Zenworks, , Acronis, FOG, ImageX, etc., can be made aware of the time-saving benefits.
In contrast however, the UIUSD is a plug-in specifically for SCCM and as such, our target market is limited to SCCM admins only in Enterprise environments actually utilizing SCCM. In addition, the innate complexities of the robust SCCM platform greatly reduce the likelihood that anyone in the organization not intimately familiar with SCCM would benefit from the kind of targeted messaging able to generate quality leads.
So on one hand my job with our new product is easy when defining my ideal prospect, but on the other hand, quite a bit more difficult in planning campaigns that reach the exact right person at the exact right time.
Won’t stop me from selling the heck out of our awesome new product though.
Have you ever had a target market that was too specific?
The first part of this post briefly delved into the financial part of hiring your first employee. Basically, is the math there to consider moving from independent consultant to small business owner with employees. My feeling on it was that the bottom line should forecast revenue increase with any early hire.
I would argue that issues like customer support, product development, etc. will help drive later hires, but the profitability should already be there and the finances of any hire must still make sense. However, employee number ten has far less of an impact from a percentage basis than does employee number one, and as a business owner, both the specific numbers ($40,000 salary) and the percentages are important to pay attention to. We sometimes get caught up on one or the other.
So, for that first employee, the math may be that as one person, you make $100,000.00, and 100% of the revenue (after expenses) goes to you. Adding that first employee at $40,000.00 (which costs you $60,000.00 really), needs to increase sales to $200,000.00 in my mind. That means that as the owner your percentage decreases to 70%, and honestly some people have a terrible time adjusting to that idea. Of course, you also make $140,000.00 now, so it's good math. Trust me when I say that 15% of $1,000,000.00 and ten employees will give you far more personal time and satisfaction than busting your ass for sixty to eighty hours a week for $100,000.00!
But the idea of the first employee really is incredibly difficult for some people. It was for me. Again, without having children of my own, I can only hypothesize, but I liken it to the first child a couple has. You read the books, you talk to people, you plan and plan and plan, and then the baby comes, and it's nothing like you expected or planned for. Perhaps your first employee isn't quite as disruptive, but the planning and fear and excitement and trepidation is all there. Which means you need to decide whether you are ready because here's a few examples of how it will change your life - both from a personal and business standpoint.
Do you communicate well? You will need to identify what you want that new person to do, and perhaps not do, and be able to explain it clearly and quickly.
Can you delegate? You haven't had to so far. Can you give up some responsibilities and duties? Micro managing one person is an easy trap to fall into. So is letting them run free. Neither is a good idea.
What will this person be responsible for? Like with planning for the baby, the plan will change Day 1, but do you at least have something in place for what you want this person to do and why. Are you giving up aspects of the business you don't like or are not your strengths? Are you planning to give up areas that are your strengths or passions in order to focus on another part of the business? Are you strategically planning how to best utilize this person?
Can you share? Delegating is one thing, but you may well need to share a lot of information that many business owners consider personal. How much are you billing? What are the business expenses? Even if you don't advertise your salary or profitability, the savvy employee will likely have some idea. Some people are incredibly uncomfortable with that idea.
Are you patient? When I hired my first employee, I had been training and consulting on Symantec Ghost for three years, and had spent several months working on development of the UIU. I understood it, but I had to have the patience to let my new employee catch up.
Can you handle the responsibility? I've said it before, but this was the scariest thing I've done because I would now be responsible for someone's livelihood. You should be nervous, but if it keeps you up a night with a bleeding ulcer, it's a bad decision! And if you're flippant about it with a "someone can always get another job" mentality, I think you would do an injustice to your employee.
Can you let someone else be responsible for you? That's essentially what employees do. How they interact with customers or develop your product will directly impact you in so many ways. If you are fiercely independent, an employee may be an incredibly difficult thing for you to accept.
Do you have the rest of your business in order to accommodate an employee? Have you talked to an accountant about expenses and taxes? What about benefits? Do you have a lawyer that you've discussed an employment contract with, if it's necessary? How will you handle payroll? I started using Paychex with my first hire so as to ensure his paycheck was always there for him regardless of whether I was in the office or traveling around the country.
This list can go on and on, and as the business grows, the list will change. At this stage in the game for Big Bang, adding an employee now brings little if any stress associated with that individual hire. However, Big Bang is nearing the point where I won't have as much of a direct connection with new employees as I once did, and that's my next horizon of fear and trepidation. Of course, it also means exciting opportunities and growth for the business as well as for my employees and that's hard to ignore.
What it comes down to though, is that hiring requires a lot of thought and reflection. Each person has brought something to the company that has made it better, and I am so very thankful that I took that step. But it's not a step to be taken lightly, nor is it a step everyone should take. Think long and hard about whether you are ready.
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|About Adam Murphy -
Adam is the President and Owner of Big Bang LLC and espouses a pretty progressive small business philosophy based primarily around hiring the right people and getting the hell out of their way.
|About Nate Bauer -
Nate is the Marketing Director for Big Bang LLC and pretty much spends his days tip-toeing on the pinnacle of how to most effectively implement strategy given the wide open cookie jar of small business marketing possibilities.
|About Kelley Burian - @kelleyburian
Kelley is the Sales Director for Big Bang LLC. Responsible for everything from GSA contracts, resellers and international customers, she has her hands full doing whatever she can to make sure our valued clients are thrilled with our fantastic products.