The “deadly entrepreneurial trap” and other takeaways from the Maggie Fox interview
Maggie Fox brought forth some essential business planning issues in her recent interview with Springboarders. Here are my top three takeaways:
1. “You need to understand who the competition is and align your value proposition against weaknesses in the competitive offer.”
It’s interesting how SMG has broken down the social media competitive landscape and positioned themselves as a ‘one-stop’ social media shop with end-to-end capabilities. This is a great example of how new companies create new market space, especially during technologically disruptive times. Here’s what SMG has done, based on what Maggie told us:
Whether you’re starting a business or growing one, it helps to break down the competitive landscape in a way that makes it easy to assess the positions of the various market players. If you can do this in your head, there’s no need for a graph. But if you’d like to present your thoughts to others, a graph like this helps. Notice the X and Y axes in this analysis. Maggie has chosen ‘relationship’ and ‘build/creative’ capabilities as the key benefits/value proposition that current market players – PR firms and Ad agencies – offer. In essence, SMG is an amalgamation of these two types of companies, with ’strategic consulting’ services added to the mix. You could argue that SMG is ‘all over the map’ and not focused, since it offers both strategic and tactical services. However, the common thread that binds all of these services is social media. So, in all fairness, SMG’s offering is pretty focused since it is essentially a ‘one-stop shop’ solution to help clients navigate the social web.
A broad view of the competitive landscape also helps when you’re looking for ways to grow your company; an analysis like the one above lays out the terrain clearly. It will be interesting to see which path SMG takes to grow organically. My bet is their growth path largely involves market development rather than product development, given their product offering is already broad. For an exhaustive list of organic growth paths, read my analysis of the Rahim Fazal interview.
2. “You need to have a really good handle on the basics – costs, revenues, profitability across projects, across the organization and across practice groups.”
A young, growing company needs to keep a close eye on its cash flow – that’s critical. For the first one or two years, forget about profitability and concentrate on making sure you have enough cash to survive. However, once you’ve ensured you have a steady flow of cash to keep your business going, turn your attention to maximizing profit. Business is all about maximizing shareholder value and to do that, you need to maximize profit. As Maggie mentioned, keeping constant tabs on how profitable you are across projects, across the organization and/or across practice groups is key to a company’s success. Here’s an example of how to perform a profitability analysis (by product):
An analysis such as the one above will help you identify which products are the most profitable. Notice that in the example above, while Product C constitutes just 6% of your business, it has an individual Operating Profit of 31%. You could never obtain such an insight without analyzing profitability across product groups. There’s a caveat here, however. Don’t make conclusions about which products you should continue to produce solely based on analyzing profitability. You analysis should be holistic – that means you should include insights about the market as well – insights such as growth rates, trends, competition, etc. Only a holistic analysis will help you figure out which products or services are likely to be profitable in the long run.
3. “I think the biggest challenge is that you’re growing so fast that you need to take the time to do the ‘important’ versus the ‘urgent’…this kind of thing is really a deadly trap. I think it’s very important to not get too caught up in the ‘right here, right now’ and to achieve the balance between those two things.”
The classic entrepreneurial trap – the important versus the urgent. To really increase the level of control you have over getting the important tasks done, you need an Action Plan. Believe me, you will save dollars and time if you’ve got a documented plan that states what needs to get done. ‘Getting it done’ matters. The essence of Springboarders’ offering is to help entrepreneurial companies get things done. The way we do this is by first developing your strategy and second, by deconstructing your strategy into prioritized tasks, complete with deadlines, budgets and teams. Here’s an example of what a Springboarders Action Plan looks like:
An Action Plan must be a dynamic document, i.e. you should constantly review the plan and assess what’s been completed. You will often find that the plan needs to be updated in order to reflect changes in your business strategy. An Action Plan also helps your team remain accountable for their assigned tasks, since their names are listed against the tasks. Once you get into the habit of managing the important tasks with an Action Plan, you will find that you are able to bring your business plan to life with ease.
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