When someone starts out in business they often want a set of rules to follow that will make them successful. But according to Street Smarts: An All-Purpose Tool Kit for Entrepreneurs, a business strategy book written by Norm Brodsky and Bo Burlingham, columnists for INC. magazine, there aren’t any. Instead, they say that there is a way of thinking that people can develop to help them deal with different situations and take advantage of different opportunities.
Part of what makes this such a good book is that the authors do a good job avoiding abstract ideas. It is written in a simple candid tone that makes the reader feel like he is sitting down and chatting with you about his life and is full of real stories, examples and details that explain how to apply the ideas in real-life situations.
There are many helpful ideas and concepts in Street Smarts. Though it is written with entrepreneurs who are starting new business ventures in mind, the ideas are ones that can be applied to managing any business. The following are just a few of the best ideas.
Having a sales mentality is dangerous. A sales mentality is “the idea that you should focus all your attention on making sales,” which results in ignoring profits. The authors see this as dangerous because “sales do not equal cash, and cash is what you need to survive.” If you ignore your gross profits and focus only on making sales, you will often make low-margin sales that result in you not being able to cover expenses without dipping into your capital.
Being first is not necessarily a good thing and having a lot of competitors can be a good thing. “I never want to be first in a market, and I always like to have a lot of competitors. Yes, I want to be different from them, but the more people who are making money in an industry, the better I feel about going into it,” the authors wrote. They said that having an established concept that has been around for a long time is important because that removes the need to educate the market, which is expensive, and also because it means that most companies are not up-to-date on what customers want.
You can build relationships with customers by helping them become smarter buyers. “They want to cut costs, and you’re in a unique position to show them where they can find savings…You know where they lose – or waste – money. You know how they can cut costs by operating a little differently,” wrote Brodsky and Burlingham. Though this could result in lower sales in the short-term, the long-term payback is loyal customers that stay even when competitors offer lower prices.
Treat established customers like new prospects. Because there’s a natural tendency to treat customers differently after they’ve been around for a while, it is easy for your focus to shift from making a sale to getting a better deal. This is an easy way to lose customers. “You leave yourself wide open to competitors who are looking at the customer the way you did when you were starting out,” commented the authors.
Make small price increases on a regular basis. Being suddenly hit with a large price increase is something that all customers hate. By making small and regular price increases, you can avoid this unpleasant surprise as well as damaging your business in other ways. Because there are always “creeping expenses” waiting to raise prices will cause shrinking profit margins. And you can also undermine both the perceived and real value of your business.
Your life plan should come before your business plan. Many people start businesses with goals of what they want the business to do without stopping to think about why they have those goals or how what they want their lives to look like several years down the road. “Business is just a means to an end. The question is – what’s the end? Where do you want to go in your life?” wrote Brodsky and Burlingham. By first deciding what you want your life to look like – how much you want to earn, how much time you want to take – you can then create business goals that help you fulfill your life goals.
Before growing your company, make sure you know why you’re doing it. Many business owners want to grow their company, often for no other reason but that it is what they think they are supposed to do. But whether or not to grow is a matter of choice, the authors said. “You don’t have to grow at all if you don’t want to… there’s no rule of business that says you must.” And growing can actually end up undermining a company’s success because the reasons for that success may be difficult to pinpoint.
A company’s culture is one of the most important factors in its ability to build a great team. When workers are proud of their company’s culture, it will result in a loyalty that no financial incentive can buy. Brodsky and Burlingham wrote that building such a culture requires three essential ingredients.
1. Mutual trust: “People need to know what is expected of them and what they can expect in return.”
2. Appreciation for employees’ contributions: “You have to recognize that all the good things you get from the business come as a result of the efforts of others, and you need to show gratitude.”
3. Feeling part of a community:
“I want people to feel that they are part of something bigger than themselves, that their work has a higher purpose. To be sure, part of that purpose is to provide excellent service to our customers, but…I also want people to believe that they belong to a community, and that their community is doing good in the world.”
Never risk your core business for another opportunity. The authors said that no opportunity is worth going after if it jeopardizes your core business. And that goes beyond the financial side of it, because you have a limited amount of time. They suggest asking two questions about any new opportunity. “Will it keep me from putting in the time required to build or maintain my core business? And, if the opportunity turns in to a financial disaster, will my core business be crippled? If the answer to either question is yes, you probably should rethink whether or not this is a good opportunity.”
This quick review just scratched the surface of the business wisdom in Street Smarts. This certainly a book to pick up and read as you continually evaluate your business.
Top Quotes from Street Smart
“Cash is hard to get and easy to spend. Make it before you spend it.”
“In my opinion, gross profit is the single most important number in any new business. It determines everything else about your business – the amount of capital you need, the volume of sales, the overhead you can afford, the time it will take to determine viability, even viability itself.”
“Small customers are the backbone of a solid, stable, profitable business – especially a service business.”
“Your company is probably your most valuable personal asset. Don’t undermine its value by letting your margins erode.”
“Whatever your company does, you need to believe in your gut that it’s the most interesting, exciting, worthwhile enterprise you could be engaged in at that moment, or you’re going to have a hard time convincing anyone else – employees, customers, investors, whoever – to make commitments to you.”
