What’s the deal with having a niche?

If you think back to just about every business adviser since the flood they have all said “You need a niche” and then they leave it at that other than some general statements about it being good for business.

Here’s a link to an article I wrote on another site about what having a niche means for your business, and it also tells you why they say you need to identify your market. I hope you enjoy it, and that you get some profit from it.

Why do I need a niche?

Is Your Finance Department Working Against You?

It might sound strange, but your Finance Department (even if that’s you after normal working hours) might be holding your business back. Having the right financial environment assists your business to survive and thrive, having the wrong one can close it down.

It can be as simple as having the right bank accounts. What does your business really need? A Trading Account, of course, and what else? At a point in your business growth you will also need some form of investment or interest bearing account. Exactly what you need is best decided between you and your financial advisors at the time, but there is obviously no real point having all your money just sitting around at the bank for free.

Your business may benefit from ready access to liquid funds – a bargain that has to be accepted immediately for example. Having a credit card or debit card may be the solution you need (Debit cards have much the same function as a credit card but use only your own money, so they generally cost less).

Would your business benefit from accepting card payments? That obviously allows you to minimise the risk of having cash on hand. Some stores have recently opened that do not accept cash at all, including a local coffee shop! You also open up the possibility of online trading when you can accept card payment, and that opens up a wider geographic range for your business.

If you trade online then you might consider using an online currency. That’s a real currency that only exists as an automated payment. There are no coins or notes, only electronic payments (including your card as a means of making electronic payments). Bitcoin is probably the most famous, however some Reserve banks are considering launching their own version.

Maybe you need a hierarchy of accounts for different levels of manager, or different geographic locations. If nothing else that prevents a store manager somewhere taking all your money and disappearing overseas with it – at least they can only clean out a local account.

Your financial history has a lot to do with what you can or can’t do – ask anybody who is bankrupt about the limitations they face. That said: nothing lasts forever, and may very wealthy people are ex-bankrupts. Don’t let your past performance dictate your future. Instead: learn from your mistake and do it better next time.

Convincing people to invest in your business requires you to provide financial projections. Any accountant can do that – they take your current financial position, add any expected investment funds and sales income – allowing for any credit period you might offer for payment, subtract expenses and that gives a prediction of the financial position of your company for each month for as long as you care to project it. But that’s only half the story. To convince someone to invest you also need to demonstrate to them that you have the capability to deliver on your promise. You tell them not only what you will do, how much income that will generate, but you describe you and your team’s experience. That just means that finance is ore than just the money you earn and spend, it is the way you do it too.

Your cash flow is the life blood of your business, if you don’t already then you need to start treating it with the respect it deserves.

Secure Your Website

We all know about the people who think it is great fun to break into other people’s space – their email, their data, their website and so on. Most of us think it won’t happen to us.

In fact it is happening to you. Probably every day. You might just be unaware of it.

I have set my site up to record who attempts to login, and then tell me. Every day there is at least one attempt to login as ‘Admin’ or the site URL as the login id. When I see the notification I permanently ban that IP address.

The point is: if you have a ‘standard’ name for any of your login ids then you are playing Russian Roulette with your website. It is in your own best interest to change that now.

Ramp Up Your Cash Flow (Blockage #7)

There will come a time where you just cannot increase the efficiency of your current business any more than it already is. You just can’t grow it any faster, no matter what you do. Your sales are generating the cash flow you need to buy assets that strengthen your financial position, and your business is secure – but that isn’t enough. Now you need to look at additional income streams.

Until now you have earned an income based on things that you own: product to sell or knowledge to consult with. There is, however, another way. You can generate income from assets that you don’t own.

Imagine a typical scenario where the Smith family are renting a home. They are living in a property they don’t own. They have a Landlord who is paid the rent – but they might not own the property either! The Landlord’s bank most likely actually owns the property. The bank is paid the mortgage and the Landlord is paid the rent. That means the Landlord is generating an income from assets that they do not own.

Most people think it is the OWNERSHIP of an asset that enables income to be generated – it isn’t. Income is generated because of the CONTROL of an asset. By arranging a mortgage the Landlord is able to control the property, and therefore generate an income.

Maybe a business that builds homes needs a digger to establish the foundations of a new home. If the business owns the digger than once that’s done it would sit idle until the remainder of the house is built. That could mean buying one isn’t financially sensible, but hiring one for a week or two at a time every couple of months makes perfect sense.

So does arranging a loan to buy the digger and rent it out to several construction companies as required. That’s exactly the same as the Landlord does with houses. In this case the rental company doesn’t actually own the digger, yet they generate income – above the loan repayments – by being able to control access to the equipment.

Car hire companies do the same thing. You can hire aeroplanes, yachts, ships, in fact you can hire almost anything in this way, and all from someone who probably doesn’t actually own it.

What problems are you aware of that exist only because some people don’t have access to a particular resource? Are there enough people and is their need spread so that one of that resource could be shared? If those people are prepared to hire the resource then it means you now have the opportunity to acquire control via a loan and rent that resource to those that need it.

AirBNB doesn’t own any property, but by controlling access via their application that connects available rooms and people who need somewhere to sleep they generate an income. Likewise Uber and all the other ‘application based’ businesses.

What resources can you control and then use to generate an income?

Do You Have Business Rhythm? (Blockage #5)

When we see great dancers we see multiple things happening in unison, everything happens at just the right time. The dancers sway, move apart, come together and all to a rhythm that may or may not be obvious to everyone else. A few years ago there was an audio fail during an ice skating competition – the skaters continued, and later when their music was synced onto the video they finished on exactly the right note!

Timing is important in business too. We all know that in stock trading that profits are made by “Buying low, selling high”, or in other words timing your purchase and sales times to maximize the difference (and therefore your profit).

Every business has time or timing implications. Having too much stock means it may not be quite so saleable after a while – it might rot or it might just become “Last season’s fashion” but it will drop in value if it hangs around too long. Or maybe there is an optimal amount of stock that you can accept, store and sell in your current premises. Ignoring the implications of timing will just cost you money.

Let’s look at where we are in the journey – you know the concept works, your sales are progressing according to plan, you have the right team in place to manage the business and you have suppliers that deliver what you need, where and when you need it. Now you need to sharpen your pencil a little.

So let’s look at your money – have you negotiated the best deal? Don’t be afraid to go back to your supplier and discuss a new deal – after all guaranteed additional orders may be exactly what they want in order to grow their business, even if that means sharing some of their profit with you.

It means looking at what you charge and adjusting your prices to maximise your return. If you set your prices too high your sales will drop and so will your profit, if you set them too low your sales will increase but your profit will be lower than they perhaps should be.

The optimum spot is where your prices are at the top of what your customers’ believe is good value. They value your offer, your standard service and your additional services more than they value their money. You don’t want to be the low-cost supplier to your clients, you don’t need to be the Rolls Royce in your industry and geography, but you do want to be considered the best value for money (and you do need to be the best at something, and we’ll talk more about that later).

There is another deal that you might want to negotiate (and I have run businesses with exactly this arrangement). Let’s start with the assumption that you are a small business that wants to grow, and that you have a supply arrangement with a company that has a tiered price list. That might be a 5% discount for purchasing 10 or more, 10% for 30 or more and so on.

Ask them if they would rather be paid in 30 or 60 days or be paid “Today”? Obviously most will say that they would like instant payment – then tell them that if they give you the price with the biggest discount that you will pay cash on delivery. You might have to remind them that they provide that discount to the biggest stores and have to wait to get paid, so your deal is better for them than the one they already offer.

The real point is that as your business grows you must ensure that your purchases evolve with you, and provide the best financial bang for your buck. Your profits improve not only by buying at the right price, but by buying the right amount at the right time.

That just means you also need to consider things like Economic Order Quantity and Just In Time Delivery. You can maximise your financial return by ordering the optimal quantity and have it delivered at the optimum time.

That may not sound very sexy, but it will improve your bottom line, and isn’t that what counts?