3 LITTLE THINGS THAT KILL BRANDS

I am sure you know Coca-Cola even if you don't drink it. You might use a computer made by another company but you sure do know Apple. Some of us don't even have a McDonald in our towns but this surely isn't your first time of hearing that name. Although these businesses have different interests, they've all got one thing in common...a great brand.

Whether you are a business veteran or you're just dabbling into your first venture, we all have heard about branding; which can be simply said to be the complete identity of an entity. Your brand is the outward appearance of your core internal values.

The Coca-Cola brand name in itself is said to be worth more than its entire product line. This is an example which portrays the value of a brand. Over the years, many businesses have failed because of failure to define or manage their brand properly.

Unknown to many, the brand is very much attached to the core of the business. A failing brand cannot be revived by pumping in money because money has very little influence on a brand. On the other hand, issues that are seemingly insignificant are what determines the strength of a brand more than any other. Your brand is your value, you brand is your message, it also is your promise.
Amidst many others, here are three little things that kill brands.

1. FAIL ON YOUR PROMISE: People buy from great brands not necessarily because they make a great product, but because they constantly deliver on their brand promise. For example, Walmart's promise is cheapest prices, Apple promises innovative designs, Virgin's promise is the best customer service. These businesses have succeeded because they have built a business structure that consistently delivers on their brand promise.
Customers patronize you because they expect something from you that your competitor doesn't offer. The moment you fail to deliver on that promise, they will begin to look elsewhere. So if you really want to build a strong brand, define your brand message, and build a business model that helps to consistently deliver that promise.

2. INCONSISTENCY: As with many other endeavours, consistency is pivotal to sustaining a brand. It is what gives first time customers the confidence to become repeat customers, and it is what makes repeat customers become your advocates. Consistency is the ability to maintain your core brand values amidst the turmoil of the ever-changing business environment. It means complete and continuous alignment of actions with expectations. Coca-Cola has been around for over a century, it has gone through several recessions and wars, its made many errors, but its brand values have remained the same.
Entrepreneurs who focus on trying everything will burn out fast. Know your strengths, build systems that leverage your strengths, and stick to it.

3. LACK OF ACCOUNTABILITY: We have emphasized the need to consistently deliver on your brand promise. However, that doesn't mean you must become "failproof". Even the big brands have had blips along the way. But in order to keep growing your brand, when those blips happen, be accountable to your customers. When many businesses run into problems (if you stay long enough in business, its inevitable), they try to gloss over it or sweep it under the carpet. Your brand is a promise, if for unforseen reasons that promise fails, own up to it and restore the confidence of your customers. People want to know that you care about them; so you should get in front of the customer, be accountable, and be sincere in your efforts to correct the wrong. That puts everyone at rest, restores confidence, and strengthens the bond between your brand and your customers.

Understanding the dynamics of a thing teaches you how best to deal with it. A brand is vital to the sustainability of any business; these lessons are vital to the sustainability of any brand. Business is easy, just understand it.

Customer Acquisition Cost: An essential metric for Startups and SMEs

One out of ten businesses fail in their first year of operation! If you are familiar with the SME world, this is no news.

Inadequate funding, wrong pricing, and poor cash flow management are some of the factors responsible! Again this is no news to most of us.

Customer Acquisition Cost is one major metric that determines the success or failure of many businesses! Wait a minute, what on earth is Customer Acquisition Cost?
Not many of us have heard of Customer Acquisition Cost before now. Nevertheless, it remains a major determinant of business success or failure.

Customer Acquisition Cost (CAC) is an important metric which calculates how much it costs a business to convert prospects into paying customers over a specified period of time. It takes into cognisance, every cost related to acquiring a customer such as marketing and sales figures (which is quite obvious), and the time spent on nurturing prospects. You might argue that the time spent on nurturing prospects is not a cost; however if your business grows large, you will have to pay someone to do that.
CAC is calculated by simply dividing the total cost incurred in attracting new customers over a period by the total number of customers gotten during that same period.
For example, if your costs for a year totalled $50,000, and you got 500 new customers during that period, your CAC is $50,000÷500 = $100.

However, for effectiveness, the CAC is used alongside another related metric called Lifetime Value (LTV), which measures the lifetime value of a customer to the business. LTV is the gross margin expected from each customer over the course of your business relationship. This takes customer retention efforts into consideration as well.

Simply put, business success is when CAC is less than LTV. So if it cost you $100 to acquire a one time customer who earns you a $30 profit, you are experimenting with an unsustainable business model. If however the customer earns you $400, then you business is poised for growth.

If this is the case, then the action point for any business is to seek ways to reduce CAC and increase LTV. This however should not be done by slashing your marketing budget (as most business owners do) as this will not reduce the CAC. From the previous example, if the cost is cut in half to $25,000, it will most likely result in  an equal reduction in new customers acquired (250) which leaves the CAC at $100 still.
What should be done instead is to identify the most effective marketing medium, and then redirect funds towards the identified efforts. This is just one of many ways of reducing CAC. You may also improve LTV by learning to retain your customers. LTV is measured on repeat business so we should seek ways to ensure that. Encouraging your customers to become your advocate is another major way of bringing your CAC down.

Understanding CAC is of great importance to any business as it helps to focus your marketing efforts. For startups, CAC is even more important for its role in defining the business model, and its role in cash flow analysis and revenue projections. Investors also look out for this metric because it helps determine the safety of their investment.

In conclusion, it is recommended that your LTV is 3 times your CAC. This maintains your business equilibrium, and creates the platform upon which the growth of your business is based.

So, whether yours is a startup operating from your garage, or you have 20 people employed in your stores, as long as you desire to be profitable, as long as you desire to scale your business, you MUST identify and (rightly) balance your CAC and LTV.

HOW WELL CAN YOUR BUSINESS SURVIVE WITHOUT YOU?

Let’s face it, we entrepreneurs want to be at liberty to travel the world and explore all the goodies life has to offer without having to worry about the possibility of a failing business. We want to build a business empire that outlasts us. However, for most entrepreneurs, the reality of our attachment to our businesses is far from these luxurious dreams. Some people are self-employed in the guise of running a business, while most who actually have built businesses have such businesses revolve completely around them.

Kevin O’Leary’s (of Shark Tank fame) is famous for his quip, “what happens to my investment if you stepped out onto the road and a car crushes you into road pizza?” This is the reality with most entrepreneurs as they have working ideas which simply cannot function without them. This strategy is counterproductive to the growth potential of our businesses. Entrepreneurs need to build systems not chores!

It is not uncommon to find entrepreneurs who make all the decisions across all areas of their business; which renders their business ineffective without them. Conversely, what we should learn to do as entrepreneurs is to build systems that we run, but can as well function without us. The best way to prepare your business for success is to run it like a success. Celebrated businesses have specific goals, time frames, processes, and strategies that are distinct in nature, small businesses should have those too.
No matter how small your business is, your ability to create functional business flows is vital to your ability to scale.

Of course you’ve not got all the money and the manpower of a large corporation, nevertheless a simple yet functional system can be created even with your very limited resources. This is where entrepreneurs should leverage the power of digital devices, the internet, social media, and the very concept of outsourcing (where applicable).

Keep in mind that the brand culture of any business is not established when they made their first million; the effort necessary to achieve your business objectives must be applied from the earliest stage. The foundation for a sustainable business begins by creating autonomous systems that merely needs to be monitored.

As entrepreneurs, lots of things compete for our time; none of which should be neglected if we will have the balanced life we all desire. Therefore there is a need for us to create business systems which ensures a steady growth for our business, and also gives us the time to indulge all the pleasurable experiences life offers us…including that Caribbean cruise.

Should you need more help with how to create bespoke systems for your business, feel free to drop me a message at daviesokeowo@gmail.com

TOP 5 LESSONS FROM SHARK TANK

We all watch TV, but the choice of what we watch is based on who we are. Being an entrepreneur, one of the TV shows I love the most is Shark Tank, the American version of the global Dragons’ Den franchise.

 

Shark Tank features a panel of investors called “Sharks” that considers offers from aspiring entrepreneurs who seek investment for their business. The entrepreneurs featured on the show may win or lose but for those of us watching, the lessons learnt should serve as pointers towards success. Here are my biggest take-aways thus far:

1. PROVE YOUR VALUE HYPOTHESIS: There are many reasons why an entrepreneur may think his idea is the best thing since slice bread. However, one of the major drivers of the decision to commercialize an idea is the assumption that the product/service will deliver value to the customer, and the customers will be willing to pay to have it. Evidence from Shark Tank however proves that this isn’t always the case. From an entrepreneur who assumed people will be willing to undergo surgery to implant a Bluetooth devise in their head to avoid Bluetooth earpieces falling off, to another who created a sticky-pad for sticky-notes to be stuck unto your computer, tons of entrepreneurs have based their business on flawed assumptions. This proof-of-concept failure has led many “wantapreneurs” to an economic abyss, therefore we must all learn to avoid it. Test your idea for feasibility and value proposition, only after this should you invest time and money into further development.
2. PROVE YOUR GROWTH HYPOTHESIS: Investors want to take a young $100,000 company and grow it into a $10,000,000 company; thus for an investor, the scalability of your idea is inherently fundamental.  So if you desire to grow your business into a large company (or you seek investment to expand) make sure your idea is scalable. A typical example of this is Tim Gavern whose business basically was selling ice-cream on mopeds; a concept which he wanted to franchise. For a business that buys its stock from other businesses, and can be easily copied, there was simply no way it could scale-up. Obviously he got no investment.
3. DO YOUR HOMEWORK: It’s easy for us to condemn entrepreneurs who fail in this regard, but as a Start-up consultant, I have met many entrepreneurs who do not know what they should (market size, the customer, their financials…basics). No matter what the idea is, investors want to know that you have invested sweat and blood equity and the best way to prove this is to show a vast knowledge of your entire business concept. Do not design a product which will excite kids but annoy parents; the kids are not your customers, the one who buys is the parent.
4. ONCE IT’S SOLD, STOP SELLING: When entrepreneurs come on the show, they want to make sure that all investors want their business; so it is not unusual to see entrepreneurs trying to sell their business to another investor even when they already have an offer from one investor. This occasionally pays off but more often than not, it backfires. Once an investors show interest in your product, it means they already understand what you’re proposing and are willing to take a punt on you. Entrepreneurs at this point should try to get themselves a good deal and then close instead of trying to convince others (thereby undermining the interest of the willing investor) who will most likely decline still.
5. YOU ARE THE BRAND: This is the most important lesson ever from the show; every other thing can be excused if your persona appeals to the investor. They are willing to excuse your errors just because they believe in you as a person. Therefore, before you invest everything in commercializing your idea, invest in yourself. Be the best you can be because the success or failure of a business depends on the humans who run it.

What lessons did I miss out on? Share yours below.