Lockdown-How to battle through to a ￡1m+ business

As it looks increasingly likely that 20% or more SME’s will have shut for good by the end of the summer, along with a number of high street names as well… so why is this an opportunity?

Well… the population remains the same, has the same requirements (maybe a little less travelling and smaller office needs with more working from home) and still need the business services and infrastructure to support normal life. As for businesses, the weaker ones and many of the low margin ones will fall by the wayside - leaving gaps for others to fill. The opportunity is to have a strategy and plan to make the most of the gap(s) before existing competitors (and the many likely new start-ups) get there first.

But… The businesses that rake the rewards are going to be those that can keep their risk factor down and the potential rewards up. The goal is to quickly build up reserves in order to:-

• Protect against any further upheavals or 2nd round lockdown and,  
• Have the available capital to take advantage of any other business opportunities that may arise
• Scale up the business as soon as it becomes obvious that its working (i.e showing a good profit %)

Of course, you need an idea (and the skills) to build a business on (or a new part of your business), which means you need set criteria to determine what ideas are worth taking forward and which ones can wait (or be forgotten). Also you need to look at the risk factor i.e capital costs against net profit. 

For example, assume you are looking at setting up a gym… you expect around ￡300k potential income and say ￡150k overheads (salaries, rents etc) so a possible net of ￡150k, but the set up costs are ￡100k — your risk factor is therefore 66 (150 divided by 100) at best (higher if your income takes longer to build up). But an e-commerce store selling gym equipment etc may give a net profit of ￡150k with just ￡30k of set up costs, being a risk factor of just 30. A far safer bet.

What you don’t need however is a unique business… ignore the “you need a USP” (unique selling point) … advice, you don’t. What you do need is good marketing, excellent customer service and the ability to constantly over-deliver.

Let me explain by what I mean to “over-deliver” … This doesn’t mean to add extra’s to the order, it simply means that you “under promise” on delivery time… if a client asks you how long a job will take, and you expect it to take 2 days, then tell them it would normally take 4, but you’ll push it forward for them and try to get it done quicker… if you have any unexpected delays you can still meet your promise, if not then you finish the work ahead of schedule and you get a very pleased client, who will probably mention you to someone else — and THAT is the marketing you want to get in to … OPC (other peoples conversations) positive OPC can make a business, negative OPC can sink it.

To gain positive OPC you need to

1. Always aim to outperform expectations (over-deliver, try and beat promises etc)
2. Apologise in full for any mistakes, and if you find a mistake before the client… let them know and apologise to them (anyone can make a mistake, but getting in there first will send their trust of you through the roof)
3. NEVER make a promise to a client that you cannot be certain you will be able to keep
4. NEVER try and hide a mistake

There are a great many factors that can be considered when looking at a new venture, but I find the following ones have worked best for me, and the many ￡1m+ businesses I have built (or helped build)

My ￡1million business building criteria:-

1. Is the business idea within my skillset? or, if not, within the skillset of someone I know, trust and can work with.
2. Does it require a fairly low amount of capital to get off the ground, and do I have that capital available (or can I get it without high interest or equity costs)
3. Is the business scaleable without need for significant additional capital
4. Can the business deliver a reasonable profit rate (you should be looking for 25% net profit or higher (that is your total costs added together should not be more than 75% of the total sales income)
5. Is the risk factor below 25 (you can choose whatever level you are comfortable with, but I don’t recommend anything higher than 40)
6. Can a high level of service/client engagement be maintained

Once you have determined what business idea is likely to work for you, you will still have homework to do… Firstly, a strategic plan. This is not a business plan, it’s not for the bank and does not need guesswork figures and spreadsheets. This is harder and far more important for the success of the business… it’s your roadmap to making ￡1m+, literally. The only great reason for starting a business is to bring financial security to you and your family and, quite simply, that means building a business that can make you into a millionaire if you want.

So, the strategic plan… Forget everything you may have heard or read about planning, your strategic plan is your time machine. Picture where (and what) you want to be in 10 years time and write the two (or maybe 3) main things (multi-millionaire, winter villa in Bermuda etc) you want to have/achieve and thats your 10 year goal(s). Now comes the harder part - Imagine yourself there in 10 years, looking back - what 4-5 things had you achieved 5 years previously (5 years from now) to get there? i.e what do you have to achieve within the next 5 years to reach your 10 year goal(s)? … you then repeat the exercise for 3 years targets (notice I’ve said targets, not goals - these are major milestones needed to reach your 5 year goals).

When you have worked your way down to 3 years you can then set your short term targets (1 year and 6 monthly targets or, if you’re feeling brave 1 year and 3 monthly targets). When all this is done and your business is underway you should revisit your strategic plan on a 6 monthly basis (or 3 months if you’ve chosen 3 monthly targets)… your 10 year goal(s) should rarely need to change, and the same applies to the 5 yearly (hopefully they will only ever need bringing forward). The only regular change is likely to be to the 6 month and 1 year targets, and perhaps occasionally to the 3 year targets.

With all of this in place you are ready to go, just one last thing to add, and that is a marketing plan. Every business “sells” something to someone… even if you sell to companies you are, in reality, selling to the person who makes buying decisions at that company. This means you need your product/service to be attractive to that person, and you also need to ensure your advertising/marketing is targeted at that person.

I won’t go into depth on the requirements of a good marketing plan (after all, this is an article not a book) but I will say that a good marketing plan is every bit as necessary as a good strategic plan and needs to be carefully targeted if you want to build a business that is going to provide real wealth for you.

Of all of the numerous ￡1m+ businesses (and 11 ￡multi-million businesses) I’ve built over the last 30 years I can safely say that not one has had a large capital requirement in order to start and not one has worked on "scatter gun" type marketing (if marketing is not targeted then you are wasting your money and time).

I hope the above has given you some good guidelines on building your business coming out of lockdown… if you’d like any advice then feel free to contact me.

Good luck to you

Les Robinson