By value, I mean what it is about your business products, services or offerings that potential customers care about and (ideally) are willing to pay for.  

You probably have your own theories about the value you deliver to customers. I’ll go out on a limb and say that you’re probably wrong. Or at least not totally correct. 

Case Study

Let me share with you a real-life story about customer value.

A client of mine sells online assessment products. One is a simple summary report, which shows your scores;  another is a full report, which includes not just your scores but also practical advice and strategies on how to improve. 

In my client’s mind, the real value lies in the practical strategies, not the scores. These strategies were hard-won insights from over a decade of consulting and coaching. After all, it is the practical strategies that help you achieve tangible improvements, not simply knowing your score. 

But they were wrong. We did a little marketing experiment on pricing, and learned a surprising lesson that many customers had a different view on where the value was.

Here’s how it worked. We gave some people a free summary report and followed up with a special offer to upgrade to the full report. By varying the upgrade price offered to different people, we expected to see the conversion rate change and work out how many people would pay how much extra for the coaching strategies.

However, the conversion rate was (1) much lower than expected (2) very similar across all price points.

This told us that many customers had already received what they saw as valuable: namely, their scores. And those people who valued the coaching strategies were relatively indifferent to price. 

Conclusion

It’s an important lesson: You may think something is valuable but your customers are the ultimate judge. 

Do you really know what your customers value? Have you asked them? Or more importantly, did you observe how they behave? (Actions speak louder than words!)

Has your company run its own experiments to systematically explore what your customers value? If so, feel free to share your story below. If not, what are you waiting for?

SoftwareShortlist helps small businesses find the best software for their needs.

How does it work? Well, rather than you scouring the web for information and spending days or weeks assessing whether particular software solutions meet your needs … now you can quickly build your own customised shortlist of the most relevant software. Software Shortlist provides free and independent recommendations, side-by-side comparisons, software reviews, plus a wealth of information and articles.

We believe it is going to change the way small businesses find software.

Timesheet software (also known as time tracking software) is the initial niche we have focused on for the beta launch. After reviewing over 60 different solutions, we have hand-picked the very best ones across various price points and customer segments. A few more additions are in progress to round out the offering, but the core service is up and running.

Coming soon on Software Shortlist will be some of the big software categories such as Accounting and CRM software, as well as many industry-specific niches such as livestock recordkeeping software for farmers. We will be partnering with experts and industry associations to help review software in a broad range of areas.

I’d love to hear what you think – feel free to comment below (or contact me via email)

Cultural Entrepreneurs 

Melbourne is widely regarded as the most cultured and European of Australian cities. Arts, fashion, food, events, culture – it’s about enjoying the good life, rather than worrying about who has the faster car or bigger TV. 

By providing an online service to help bands and musicians get themselves organised, Band Manager helps support and grow the wonderful cultural life in Melbourne.  And like many cultural entrepreneurs, the business grew out of the passion and experience of the founders – they were solving a problem they had personally encountered in managing indie bands. 

The Band Manager Toolkit

That solution took the form of a calendar-based application to help organise (notoriously disorganised) bands. Around that core platform they have built a range of simple yet powerful tools for bands – including updating the band’s website, keeping track of their playlists, distributing their music online, and managing their fan database, including sending emails and SMS messages about upcoming gigs. They even help bands claim their live performance returns from APRA (which few typically get around to doing otherwise!)

That’s not to say that Band Manager is perfect. For one thing, I’d like to see them shift their revenue model towards ‘pay as you go’ services (like email and SMS delivery) and remove the setup fee that creates an unnecessary barrier to trial. But at least they know their customers and have developed a product that solves a real and valuable set of needs.

Other Cultural Entrepreneurs

The good news is that Melbourne has many entrepreneurs pursuing opportunities that enrich the cultural life of the city. 

RedBubble is one example, an online art gallery and creative community that is among the more successful of Australia’s web 2.0 startups. Chocolateria San Churro is another, bringing the joys of Spanish chocolate culture to locations around town.  The Rooftop Cinema in Swanston St and Moonlight Cinema in the Botanical Gardens have become popular destinations for film-lovers and anyone who likes a good outing. And an interesting startup to look out for is Laneway Magazine, an online publication (coming soon) which will celebrate Melbourne culture and lifestyle.

No doubt there are plenty more out there. Feel free to add to the list!

As Thomas Friedman points out in The World Is Flat there are powerful forces at work ‘flattening’ the world – i.e. connecting and empowering individuals and companies globally, and enabling even the smallest to serve a global audience.

For entrepreneurs, this has many intriguing implications, one of which is that bootstrapping your startup has never been easier. And with the global credit crunch going on, it is worth considering the full range of financing options.

"Pulling yourself up by your bootstraps"

Bootstrapping involves the founders contributing a modest amount of capital and then using the cash flow from customers to fund the business.  It is an alternative to the more heavily publicised path of raising money from angel investors and venture capitalists.

 Successful bootstrapping requires that you:

• Start with a narrow & well-defined focus
• Keep your startup and ongoing costs low
• Get cash flowing ASAP
• Invest revenue back in the business to fund growth

Bootstrapping works best in industries where growth does not require much extra working capital (e.g. for physical stock, accounts receivable, etc). In other words, the nature of your business model affects your ability to bootstrap.

Making use of a flat world 

Eliminate activity that is not essential, focus your effort on high value work that you can do best, and outsource the rest to others whose expertise, systems or circumstances enable them to do it better, cheaper and faster than you. And remember to look globally for supplier options.

For example, I am currently working with an internet-based startup that is taking the bootstrap option. In the short term they have had to say "No" (or at least "Not Now") to various opportunities in order to focus on their initial niche. And they have eliminated the need for external setup funding by using the flat-world phenomenon to eliminate 60 to 90% of key startup costs:

1. Incorporating a company:   Typical cost is $1500 to $3000 for a stock-standard company incorporation. Most lawyers and accountants have templates they recycle and get junior staff to do the customisation. But services like Cleardocs have set up highly automated systems to get the cost down to a bit over $500 while keeping quality as high if not higher than traditional alternatives.  Saving = 67% to 83%
2. Brand development:  Traditional brand agencies quote between $3,000 to $10,000 for developing a logo and stationery kit for a start-up business venture.  But $700 on Elance  got us 8 concepts (2 concepts each from 4 designers) plus considerable time with our preferred designer to refine and finalise the design. Saving = 77% to 93%
3. Website development:  In-house development requires considerable attention to people and process issues, and might cost $100,000 to $200,000 for this project. Outsourcing to a custom development house could cost $250,000+ while developers that customise around standard modules quoted $25,000 to $50,000. But if you’ve got a well-defined project, it’s hard to go past low-cost, highly-skilled people in India, Russia, and elsewhere (which you can find on sites like Elance ) to deliver a major, customised website for $10,000 to $20,000.  Saving = 60% to 92%

The Net Result 

Bootstrapping in a flat world is about using connectivity and global reach to find ways to minimise the upfront costs, get your product to market quickly and keep you focused on the key activities that you do best. Once the cash starts flowing, you can then invest that revenue stream back into growing the business.

Note that bootstrapping doesn’t exclude seeking outside funding later on. You should be able to get a decent valuation on the back of an existing business with real customers, compared to just a business plan with a bunch of assumptions.

Further Reading 

Whether bootstrapping is right for your venture is something only you (and your professional advisors) can decide, but I hope the above at least gets you thinking. If you need further encouragement, bootstrapping success stories include eBay, Microsoft, Oracle, SAP, and Remember the Milk.

For other comments on bootstrapping, check out the articles here, here , here and here
 

• Purpose
• Values
• Strategy

So here are some of Richard’s insights, mixed in with a few of my own reflections…

Purpose

Be clear on why your business exists. For Wesfarmers, it’s about delivering a satisfactory return to shareholders in a sustainable way.

(Ironically, I have previously argued against this sort of purpose, but I think Wesfarmers is one of the few that actually manages to make this work. And with a business as diversified as theirs – from hardware to insurance to coal to supermarkets – it’s hard to have any other unifying purpose).

Interestingly, Wesfarmers talk about ‘satisfactory return’, not ‘maximising the return’. This objective measure (as opposed to a relative one) frees them up to run their own race, rather than comparing themselves endlessly to others.

Values

Be clear on your values, and continually challenge yourself about how well you are living up to them. It is only by standing up for them (and sacrificing something else – like comfort, opportunities, money, etc) that you demonstrate they are actually values not just nice-sounding words. And over the long term your values are a powerful asset and guide.

Wesfarmers has four values …which could in fact suit any entrepreneurial business:

• Integrity – "because without this you’ve got nothing"
• Openness – "make sure bad news travels just as quickly as good"
• Accountability – "deliver on your promises"
• Boldness – "think and act boldly, don’t let success breed complacency or conservatism"

Strategy

 Know how you will get where you want to be. For Wesfarmer’s there are four basic strategies …and these have remained constant for many many years.

1. Ensure operational excellence in existing businesses
2. Pursue entrepreneurial opportunities in existing businesses
3. Consider value-adding acquisitions
4. Invest in developing your people and capabilities

Whatever your business, the above four strategies are critical. Some startups fall over by going after entrepreneurial opportunities while neglecting operational excellence or their people. And many established businesses get so focused on running their existing businesses, they fail to grab hold of the future. It’s a balance (and a difficult one at that), but every business needs to be investing some time in all of the above.

Final words 

On reflection, I think I found Richard’s comments relevant to the startup environment in particular because (i) boldness is one of their values (ii) they focus relentlessly on entrepreneurial opportunities. It’s also a timely reminder that entrepreneurship is not just about startup ventures, but a critical part of any business however large or established.