I have this unrelenting suspicion that people deeply, innately, in every fiber of ourselves need to be connected. Radical, I know.

I recently went back to Princeton for my college reunion and spent 48 hours either with people I hadn’t seen or spoken to in many years and yet because of Facebook and LinkedIn still felt oddly knowledgeable about, or with people I had actually never met but again felt oddly knowledgeable about through the sheer quantity and intensity of the virtual communications we shared. As inevitably strange situations and new sensations came and went at my reunion (because reunions are kind of wonderfully odd), I couldn’t escape constant little reminders of how the new technologies we’ve so quickly become immersed in, are playing a role not only in our need but also our ability to be connected.

While I was on campus, I gave a lecture on social media marketing (and giving a “lecture” at my alma mater was certainly odd for me in so many ways). We looked at the Susan Boyle phenomenon. Note that according to The Telegraph the episode of “Britain’s Got Talent” in which Susan Boyle debuted (it was the show’s season premiere) had was viewed on television by 11.8 million people. But in just a few days, the video of that same show on YouTube had generated more than 80 million views. That’s TV 11.8 million, YouTube 80 million. Anyone who grew up with television as the quintessential mass medium may need to take a moment just to absorb that fundamental shift.

And more and more people have a nagging suspicion that things like Susan’s YouTube video are stark examples that social media tools really are changing the way that we communicate, and wondering what to do about it.

I agree with this suspicion because I think such change is inevitable.

What we now call “social media” are just the latest in a long and continuing evolution of communication tools. From smoke signals to Morse code to radio to television, each new tool we invent changes the way we communicate.

If you imagine with me for a moment, communication tools shifting over time in four respects:

1. who sends the communication
2. who receives the communication
3. the ease of communication
4. what’s in the communication

we seemed to have had a long progression toward an ever increasing number of recipients from tools like Morse code (only a few people can send complex messages to a few other people, so presumably senders and recipients are chosen carefully as are the messages they send) to tools like television (once the infrastructure is built, a few people can send messages to massive quantities of people relatively easily and so senders are chosen carefully while the recipients not so much & the messages can be drivel or not).

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But Social Media seems to have taken this progress on a new path where we are growing not just in the numbers of recipients but also of senders. Large numbers of people can now relatively easily reach large numbers of people, as if we are each our own publishing house.

But the tools go beyond that too. In the past large numbers of recipients meant one-directional messages — you could reach lots of people but they were passive recipients of your information. Now, these large numbers are also interactive. You can reach out to lots of people and every single one of them can immediately reach back. Instead of controlled, one-directional messaging, these tools enable a constantly evolving, living dialogue on a huge scale.

In it’s novelty, just the fact that the power to create large scale dialogue is in the hands of individual people is kind of amazing. As a business owner though, the fact that you can now communicate interactively and regularly with 10 or 1,000 times more people can seem overwhelming.

There is a middle ground.

In the 1970’s a sociologist named Mark Granovetter introduced a concept called “the strength of weak ties.” It is the idea that as we reach beyond our closest friends and families, we have “weak” but vitally important ties that connect us to other people and their networks and the important information and opportunities that those networks hold. It is far more often through the networks of our “weak ties” for example, that we get referrals for business and find opportunities for new jobs.

What’s amazing for small business owners about these new social media tools is that they are incredibly good at empowering individual people to efficiently and inexpensively maintain a far larger number of “weak ties”.

Half the battle of being a successful business is just making sure people remember your business and what you offer when it’s time to make a purchase or a referral. Through social media tools, a business can stay connected to a larger number of “weak ties” and the networks they belong to, have access to the information and opportunities in those networks, and do it better and faster.

By helping you maximize those weak ties Social Media Marketing provides small businesses with a powerful tool that doesn’t need an overwhelming amount of complexity to be useful. Its power is based on the simple human desire to be connected and the tools that now exist to enable you, as an individual to fill that desire.

Here are a few steps for how to maintain your sanity while using social media tools effectively.

1. Learn the differences, know what each tool is good for
   Each social media tool has its own personality, its own community of enthusiasts, its own speed and frequency. Take the time to learn them. Log on, create a personal profile and “lurk” for a while. Invite a few close friends and start to interact. Join groups that are of personal interest to you and watch how people share information. Learn first-hand how the tool is used by others before using it for your business.
2. Stay focused on your goals and know your audience
   While social media tools can reach millions of people as they did with the Susan Boyle video and for the Obama campaign, for most small businesses, reaching millions of people is just not the point. Don’t get sucked into the hype and forget that. Perhaps you need to find and build a few key relationships, or reach a few tens of thousands depending on the scale of your business. Figure out who & what you’re looking for and stay focused.
3. Don’t reinvent the wheel (yet)
   What’s already working for you? You don’t necessarily need to use social media in a completely different way if you’re not trying to reach a completely different audience. If you know what works with your audience now, start by figuring out how to achieve similar results but within the context of these new tools.
4. Don’t spread yourself too thin
   You don’t necessarily need to be active in all places at once. While Facebook, LinkedIn and Twitter are the hot spots of the moment, spend some time figuring out which ones will give you the greatest access to your audience and start there.
5. Don’t sweat it and don’t rush it
   Honestly everyone is still figuring out the best way to use social media tools. Heck, the sudden explosion of these tools themselves shows that people are still figuring out how best to use the Internet! Don’t give in to the feeling that you’ve missed the boat and rush into something that you’ll have to back pedal on later. Take the time to learn and do what’s right for you and your business.

Maisha Walker is the Founder & President of message medium, a 10-year old New York City Internet Strategy firm that focuses exclusively on Small Businesses. You can follow Maisha on Twitter or learn about her upcoming Web site and Internet Marketing Classes.

That is a scary question for lots, if not all businesses. We spend so much time focused on getting our businesses started, and then successfully running our businesses, that we give very little thought to disaster recovery planning. Really, planning for disaster sounds like we are betting on failure. Betting against ourselves. Yet we think nothing of getting health insurance and auto insurance and home insurance — betting against ourselves, betting that something bad is going to befall us.

So, why aren’t you betting against your business, as it were? Let’s change the view. Your disaster recovery plan is betting ON your business. You’re now going to bet that regardless of what disaster (natural or man-made) comes your way, you and your business are so successful that you are going to pull through and keep right on going.

Now, when I say disaster, do you immediately go to Hurricane Katrina? Mississippi River flooding? Santa Anna wind-fed wildfires? Yes, certainly you need to have your financials backed up off-site, maybe on a different server, or on some tape drives. Tax records for current and past years should be saved, and supplier and distributor contact information recorded somewhere besides your desktop computer.

But what about the small disasters? Last winter the Northeast states were frozen solid and without power after an ice storm. Here in Eugene in the heart of the Willamette Valley, three inches of new snow and temperatures in the low teens have almost locked up the city because only the skiers have snow tires and know how to drive in this stuff. The rest of us are a hazard. Just a simple thing that we so casually depend on – driving to work – can be a minor ‘disaster’ for our businesses.

Fifty years ago, if we were blanketed by an ice storm we didn’t expect every business in town to be open. We were all in the same boat and knew it. In today’s global Internet economy we expect everybody to be open, busy, and available to us 24 hours a day, 7 days a week. How are you going to handle your business needs in times of minor crisis?

As an example, several years ago a summer windstorm blew over many trees around our office which brought down all the power lines. No power to our building at all. No computers, no phones, no lights, no tech support, no customer care for several days. Yet our Internet sales from our off-site servers kept up with business. We ended up buying a portable generator to get just enough electricity to run our phone system to play a specially recorded a message for incoming calls explaining why we weren’t there and available to them.

Small businesses can be just as hard hit if a key employee has a car or bicycle crash and ends up in the hospital, uncommunicative, for days, or if all 3 or 4 employees get the flu at the same time. You don’t want your business operations to slam to a halt because people weren’t cross-trained or no one else knew procedures.

One step you can take is to institute a system of transparent communications in your company, so that incoming and outgoing email communications continue smoothly. With Email Center Pro, email management for businesses, you can manage all of your email queues from one location and efficiently route email from one mailbox to another and from one user to another. Email is securely saved off-site, and, in the absence of an employee, someone else in your company picks up the communications thread immediately.

What would you do to backstop your business if calamity should strike? Give some thought to protecting and recovering your company, your records, your business and your customers in the event of disasters, both large and small.

I was fascinated by the analysis of the Obama campaign. In many ways, Obama’s campaign and its success is a big, bright, “LCD sign” of the times. New media has come of age in a very public way.

Most people seem to agree that the campaign used a number of techniques to capture an audience and even inspire those traditionally lacking enthusiasm for politics. Some of my favorite attributes are:

Audacity – the fact that Obama wasn’t afraid to “redefine his target audience” and go after states like Indiana who this November voted for a Democrat for the first time in 44 years.

Mobilizing Large Numbers and doing it “Grass Roots” – unprecedented fundraising success by generating large numbers of small donations rather than small numbers of large donations to raise more than an estimated $600 million (McCain raised an estimated $250 million).

The Message Consistency – the message never wavered from the idea of being an “antidote” to the status quo.

But perhaps the most obvious and (to a techie like me) inspiring elements of witnessing this campaign was its focus on social technology to support and propel all of the other techniques.

The use of “new media”, from friend building on Friendster to the seemingly simple text message, proved to be a powerhouse for the campaign, as it extended the concept of “Team Obama” far beyond campaign headquarters literally into the hands of millions of Americans who voted and vocalized with their typing fingers.

For all the small business owners who couldn’t help wondering, wow – can I do that? My answer is Yes you can! (Sorry couldn’t help myself).

In taking a closer look, the technologies used form a rather familiar list:

• Official Web site: http://www.barakobama.com and http://my.barakobama.com
• Text messaging strategy – enabled via collecting phone numbers on a mass scale
• LinkedIn: http://www.linkedin.com/in/barackobama
• Flickr: http://www.flickr.com/photos/barackobamadotcom/
• Facebook: http://www.facebook.com/barackobama
• Twitter: http://twitter.com/BarackObama
• YouTube: http://www.youtube.com/user/BarackObamadotcom
• Meetup.com: http://barackobama.meetup.com/

The list reads like a “who’s who” of social media marketing.

But the real power in these technologies is understanding that the goal is not just to “set up” one tool or another, but to understand each tool’s potential. That potential in the Obama campaign was brought to fruition by:

• Having a consistent message
• Providing free and open access to “making a connection”
• *Always* keeping the tool up to date
• Providing pertinent digestible bytes of information that could be read, downloaded, passed on
• Leveraging the sheer quantity of enthusiasts and supporters on each tool to disperse messages almost instantly across an unbelievably wide, new network of venues and communities that hasn’t been seen since the invention of television.

Think about the leverage that a database of 948,000 people on MySpace and 3.1 million people on Facebook provides when you have a message to communicate (and consider that vs. McCain’s 221,000 on MySpace and 600,000 on Facebook).

As you think about your business and consider the challenge to build brand, generate buzz and stay on the radar as a small business owner with limited time and a limited budget, there are some very simple lessons to learn here:

1. Everybody needs a team. Whether you’re trying to build a team of millions of voters or a few thousand supporters of your business, build a team by building a venue for them to get involved. Even the simplest involvement can be powerful.
2. Email, the Web, and cellular technology have created an unprecedented venue for that involvement. Know who should be on your team and know the different ways they like to be involved.
3. Use wisely. Learn how these technologies work and learn by example how they can be leveraged to build a community of supporters for you.

This is an advantage that won’t last forever. As businesses gain competency in these techniques and learn to invest wisely, these techniques will slowly become standards rather than competitive advantages.

But it is possible for a growing small business to build a strategic, cost-effective and impactful social media campaign. As “Team Obama” has shown – yes, you can.

Maisha Walker is the Founder & President of message medium, a 10-year old New York City Internet Strategy firm that focuses exclusively on Small Businesses.  You can follow Maisha on Twitter or learn about her upcoming Web site and Internet Marketing Classes.

by Cidnee Stephen of Strategies for Success, www.strategiesforsuccess.ca

Let’s face it, at some point in our businesses we are faced with at least one insurmountable obstacle – one that challenges our passion, taps out our resources, and pulls us far, far out of our comfort zone. Many business owners give up at this point, wave the white flag on entrepreneurship and return to the working world. Others settle into a comfortable life of mediocrity.

But perhaps you are looking for more. Deep down you know that you and your business have more potential. You truly believe that what you are doing serves an important purpose and is your special way of making a difference, of helping others, the economy, the environment, etc.

So what does it take for you to get your business to the next level, to grow it to where you have reached your definition of success, and/or to leave a legacy or success story that others can tell?

Why not look to a mortician? Not just any mortician, but one who has left such a legacy. Some of you may have already come across his work. It’s located outside of Boswell, British Columbia and it is a dwelling called the Glass House. I took my son there recently, because I felt it was important he see it. He is, after all, partially named after this mortician – his great grandfather David Brown. As my step-aunt Diane (who still runs the Glass House with my step-uncle Eldon) regaled us once more with the story of how it came about, I couldn’t help but find myself in awe of what my grandfather had created and left for so many to enjoy. The beauty is not so much in the house, but rather in the story of how it came about.

Here is my version of what it takes to achieve success.

Seizing an Opportunity – David Brown was a mortician. He and my great-uncles ran the funeral home in Red Deer, Alberta. Being a very creative man by nature, he felt that there must be something that could be done with all the embalming fluid bottles that went to waste in funeral homes. Call him a re-cycler or environmentalist before his time; he saw within this problem, an opportunity.

Is there an opportunity that others in your field are missing?

Something Unique – I wish I could tell you how he came up with the idea of using the embalming fluid bottles to build his retirement home, but I haven’t a clue. The how doesn’t really matter. What does matter is that he came up with something very unique. A dwelling that, to this day, over 50 years later, still attracts the attention of passers-by to the point that they will stop and spend some time to have a closer look.

Finding your difference in the marketplace is essential for long-term success and can save you a fortune in lost revenues and unnecessary promotional costs.

Planning – My grandfather spent a lot of time planning his development. He required approximately 500,000 bottles for a start. Additionally, he knew he would need to test how the bottles would stand up to heat in the summer and cold in the winter. So the experiments began. Mini-structures were built and heated, others were built and frozen. Finally he found the right combination of bottles and mortar that would work.

It’s common to think things out at 50,000 feet. But attention to detail and planning for eventualities is worth its weight in gold.

Location – David Brown knew that his structure couldn’t withstand Alberta winters. He also needed a location where the building would experience very little shifting. So he chose a piece of bedrock in the milder climate of BC as the final destination for his glass house. This piece of bedrock happened to be located on a major thoroughfare to Vancouver in its day, so the traffic was tremendous!

They say in marketing only three things really matter – location, location, location. Look at your business at this moment; is it possible that better positioning or a different distribution channel could be what you really need to achieve success?

Hard Work – There is a great picture of David Brown at the Glass House. He is sitting down and on the bottom of his shoe is very big hole. He didn’t sit down very often (a trait my mother definitely inherited). He worked hard. He was not a builder, nor was he an architect. He was a mortician, but he built a large majority of the house by himself. It took simple “grit.”

What else can I say about this? Chances are you already know that being a business owner is a lot harder than working for someone else. The good news is hard work WILL pay off!

Vision, Patience, Passion and Determination – Across the road from the glass house is the side of a hill. David used to sit up there, sometimes for hours and simply imagine what his final dwelling would look like. His plans came from this vision and his vision came from his passion and the end result came from his patience and the determination to see that final outcome. Even after the house was completed, he continued to add to his dream.

When the going gets rough, there can be times when the only thing that keeps us on track to success is our vision, patience, passion and determination that what we are doing is the right choice.

Know When You Need Outside Help – While my grandfather was comfortable in building the external structure, he was not going to chance the electrical, plumbing or stone work to his own volition. It was in areas like these that he called in the experts.

Do you know when you need external help and do you know the right talent to bring in?

Savvy Business Sense – While my grandfather was building the house, curious passersby stopped to see the odd structure. If you go, you will see notes inside some of the bottles that people left as the house was being built. In a way, the glass house is like a big time bottle. Eventually the traffic became so great that David Brown decided to start charging for visits. Because the house was on a major road, the revenue became enough for a sustainable business. Soon thereafter, he moved to a house next door, and turned his masterpiece into a tourist attraction.

His unique product was featured in an architectural magazine and other publications and of course it continued to attract the attention of passers-by. David began working on the grounds to enhance the experience, until he passed away in the early 1970s.

Sometimes success can be as easy as simply re-writing your business plan, raising your prices or changing your marketing strategy. What can you do to improve your business processes?

Succession Planning – Before he passed away, David Brown offered the business to his children. As I mentioned earlier, Eldon and his wife Diane have been running it ever since. They have continued to add to the attraction and the grounds so that my grandfather’s legacy is still open to the public to enjoy. If you’re ever in the area, stop by and say hi.

Is your business structured so that others can purchase it and run it when you are ready to leave? What is your exit strategy?

About the Author…
Cidnee Stephen is the owner of Strategies for Success – a marketing company that focuses on the needs of budget-minded small businesses and professional services. She has helped hundreds of small businesses get out of their peak and valley ruts to finally achieve that next vital level of success. Cidnee is also a sought-after speaker, writer, and blogger on marketing topics that affect small businesses and B2B service based operations. Subscribe for Free to her bi-weekly marketing tips for small businesses and also receive a special report on the 7 Steps of Marketing Success.

This is hard to write about, and hard for business owners to accept. It seems so negative. Still, it seems like we all need a fresh reminder. Bill Cosby said it well: “I don’t know the secret to success, but I do know that the secret to failure is trying to please everybody.”

This reminds me, brilliantly, of how important it is to understand . . .

1. You need customers. The first thing you need to start a business, maybe even the only thing you really need, is customers. It all starts with at least one customer.
2. Who is your target customer. In detail. Not just generalities and demographics, not even just psychographics, but who is this person, what drives her, what does she really want from you, what does she like to read, eat, watch? Where does he live, and with whom? What does he drive?
3. Who isn’t your customer. Sometimes the secret to success is who isn’t your customer.

I was in a panel presentation not long ago alongside an expert in customer service. At one point, after she’d dizzied us with stories of Nordstrom retail clerks changing customers’ tires and taking as returns products that Nordstrom had never carried, somebody asked, with just a hint of exasperation, “But how does a company stay in business like that? How do they make money? Who pays for all that?”

At which point, after a beautifully-timed pause, the expert said: “Yes, that is the question, isn’t it . . . and pay attention, because this is the most important thing I’ll say all night . . . you have to understand that not everybody is a customer.”

John Jantsch, in Duct Tape Marketing, recommends that you start by profiling your ideal customer. Focus for a while on one person, whether he or she is your customer directly or the decision-maker for a business customer. Give that person age, gender, income level, likes, dislikes, favorite movies, songs, magazines, restaurants. Know that person.

If you’ve been in business, you can think of that customer fairly easily. Maybe it’s a composite of several real customers.

A clear example of knowing who is and who isn’t your customer can be found in the automobile industry. In theory, everyone who is over 16 years old and has a valid driver’s license could be considered the target customer. But, if you take time to appreciate the ads for different vehicles you’ll see that the marketing efforts are precisely pitched to narrow target markets.

For instance, the rich, deep, saturated colors, focus on high-quality features and refined accessories, the calm and quiet voice, and the sense of genteel conviviality of the Lincoln Town Car speaks directly to the well-heeled buyer. On the other hand, the spinning tires, clouds of smoke, screaming engine and 150 images a minute visual stimulation of an 800 horsepower, street-legal hot-rod TV spot is crafted especially for the hyper-active, quadruple-shot-enhanced-caffeine-energy-drink-quaffing youth.

Other industries segment their target markets. Some restaurants appeal to people in a hurry, or people on a budget, or people looking for a romantic rendezvous, or people who appreciate and seek out the taste treats presented by culinary masters. Every successful restaurant has carefully decided who their target customers are, and who they are not, and then manage their marketing efforts accordingly.

Whole Foods Market and PC Market of Choice are both grocery stores which specialize in organic prepared foods and locally grown organic fruits and vegetables. Their target market customers choose to spend more when buying groceries to get the benefits from healthier foods. Safeway or Kroger or Publix stores on the other hand focus on selling national brands, and target a different, often budget conscious, segment of the population.

Consider the Trunk Club, Joanna Van Vleck’s interesting startup described in “Startup Success Story: The Trunk Club” in Up and Running at upandrunning.entrepreneur.com. How important is it that she understands who isn’t her customer? She told me this herself:

• I realized that although I thought my target was women, women are normally closer to style. In general. So they aren’t as likely to pay money for style consulting.
• Men have less ego invested. Some, in fact, pride themselves on not knowing style. In general.
• The metrosexual man is not my customer. He loves his own style and spends his own time and effort finding it.
• The man whose partner in a relationship likes to shop for his clothes is not my customer. She wants to do it. She doesn’t want me to.
• The younger men on a budget aren’t my customer. They can’t afford me.

Notice how the “isn’t my customer” routine helps define and position your marketing better.

A fast-food restaurant knows that the relatively well-to-do baby boomer empty nesters aren’t their customers. On average. The sushi restaurant knows that the construction worker driving a pickup truck who eats at the Texas barbecue drive-through isn’t its customer.

Consider Jolt cola. All the sugar and twice the caffeine. How important is understanding who isn’t the customer.

Your blog, if you’re doing a blog as a business, needs a focus. People don’t care about your inner angst, but there are specialty niche areas all over the place. Old Volkswagen maintenance. Arranging dry flowers. The narrower you cut it the better. Sure there are some general blogs that work, but they started years before you did. Nowadays you need to focus.

It is imperative that you know your customers, and do adequate market research.

Ask yourself: Who is my customer? Who isn’t my customer? Then focus your marketing efforts to reach your target customers most effectively.

–Includes, excerpts from upandrunning.entrepreneur.com, and Plan-As-You-Go Business Planning.

If you travel by car for business or to commute to and from work, you are probably looking for ways to cut the costs of traveling. An article on eHow.com gives tips on how to maximize fuel efficiency when you travel. Here are a few tips from this article:

Plan the trip so as to avoid metropolitan-area rush hours when stop-and-go traffic will affect fuel efficiency.
Learn of, and plan around, areas of major highway construction. For unavoidable construction zones, plan the trip so as to avoid specific hours of construction.
Use cruise control to achieve further fuel efficiency.

Learning to be more aware of our fuel consumption can have a broader impact on the economy and the environment. The U.S. Department of Energy hosts a website, www.fueleconomy.gov, which provides a variety of articles and tools:

• Why is fuel economy important? This section describes ways that your driving habits can help you save money, conserve resources and protect the environment.
• Gas Mileage Tips includes statistics and chart examples of how much money you can save by driving sensibly, removing excess weight in your vehicle caused by carrying items you don’t need, and driving within the speed limit. For example, “…each 5 mph you drive over 60 mph is like paying an additional $0.24 per gallon for gas.”
• Choosing a fuel-efficient vehicle: Choose your current vehicle by model year and manufacturer to see its fuel-efficiency rating. You can substitute your annual mileage and miles per gallon into the calculations. If you want to see how your vehicle compares to another, you can choose to do a ‘side-by-side comparison‘ of the two. For a comparison example, check out the Fuel Efficiency post on the Business in General blog.
• Alternative Fuels: Thinking of buying a hybrid vehicle? See how it compares to other models. Pick the first vehicle based on year and model, choose to compare hybrids side by side.
• Top 10 Green Car Upgrades: MSN Autos online included this page from Treehugger.com on their pick of the Top 10 upgrades car drivers can do to help improve their car’s fuel efficiency.

EXAMPLE: Even older-model cars (like my 15-year old Jeep Cherokee) will benefit from many of these suggestions. One that caught my eye was to remove unnecessary items from the car to reduce the overall weight. During the winter months in Oregon, I resort to carrying two 50-pound bags of rock salt in back to help load the rear tires (living by the lake produces several days of icy conditions for my commute).

The Gas Mileage Tips article estimates that carrying an extra 100 lbs. reduces miles per gallon by 2%. That means a drop from 21 mpg to approximately 20.5 mpg for my Jeep. Since I travel approximately 700 miles a month, that’s an extra gallon a month in gas to travel the same distance to and from work during the winter months. So, this winter I may consider storing the bags in the garage and only using them on the days I need, not for the entire winter. A simple change.

Did you know that problems with your products are not necessarily going to make your customers dissatisfied? At least, not in the long run. Instead, they can provide an opportunity to turn customers into evangelists for your customer service.

Think about this common scenario: you boot up your computer, ready to work (or play a game, or send an email – we won’t tell), and before you can start whatever you were planning to do, your anti-virus software tells you it needs to update its virus definitions.

Is your first reaction anger or disappointment that their software wasn’t already preventing these viruses? More likely, it’s minor irritation at the interruption, mitigated by reassurance that the software will now do an *even better* job of protecting your computer. You feel safer, and the anti-virus software company has associated its brand name, right there at your workstation, with that feeling of security. This kind of software-as-a-service (SaaS) actually makes real-time technical solutions to customer problems part of its competitive edge.

Service recovery paradox

While no business benefits from deliberately allowing flaws in its products, consider how your business would change if you started treating every customer complaint as an opportunity to shine. Service researchers call this the “service recovery paradox.” In some situations, customers will actually feel more loyal, satisfied, and willing to recommend your company to others after a successfully resolved failure than they do with a perfectly functioning product.

Recent research suggests that there are two spheres that influence whether a failure will lead to a more or less satisfied customer:

• The nature of the problem (severe or minor) and whether it suggests a pattern of problems with your organization
• The reaction of the organization to the customer’s complaint, and whether the problem is resolved

The problem itself

In a 2007 study, Magnini et. al. found several issues were critical to whether a problem was likely to be resolved well, in the customer’s view:

• Was the failure or problem severe, or minor?
• Was this the first problem the customer encountered with your organization, or the latest in a series of problems?
• Was the failure caused by something within the control of your organization?

Minor, anomalous problems which were outside the control of the organization were least likely to cause customer dissatisfaction with the company, even if they could not be completely resolved. Severe problems, repeated problems, and problems caused by something endemic to the company’s way of doing business, on the other hand, were most likely to increase customer dissatisfaction, regardless of whether the problem itself got resolved.

Your company’s response

What does it mean to resolve a customer’s problem? Usually, we think in terms of fixing the technical problem that originated the complaint. But that’s just “fixing” the problem – resolving it means that your customer gets closure.

Specifically, the customer wants to feel that someone has listened to him sympathetically and respectfully, attempted to resolve his problem, and that his problem is taken seriously by the company.

Your front-line employees need to be trained and encouraged to do anything possible to work towards this resolution, from showing empathy, acknowledging and owning the problem, and providing compensation, in addition to actually fixing the problem. This means educating them, empowering them to make quick decisions, and backing them up when they follow through.

It’s been said that, “life is ten percent what happens to you and ninety percent what you do with it.” Replace “life” with “customer service” and you have a great mantra for business success.

Sources cited:
VP Magnini et. al., “The service recovery paradox: justifiable theory or smoldering myth?,” Journal of Services Marketing 21, no. 3 (2007): 213-225.

Cash flow is how much money is coming in to your business, generally sales, and how much is going out, as bills paid. Cash balance is how much money you have in your business checking account. If there is no cash in the company coffers to pay the bills, the payroll, or the taxes, you are broke.

How to use the Cash Flow Calculator

This Cash Flow Calculator will work equally well for a start-up venture or an existing business. There are five key-in fields and seven mouse-drag sliders to enter your numbers. Double click in the key-in fields and type your numbers or click and drag the blue circle right and left on the slider bars.

As you replace the default numbers, watch how the chart changes. If the red bars (the cash balance) fall below zero, you are running out of cash, and have problems. You must change your business assumptions and operations to bring the cash balance back into the positive range.

Starting Cash: Money in your business checking account at the start of this analysis, or on the day you open for business.

First Month’s Sales: Enter how much you think you will sell in the first month.

Cost of Goods Sold (% of Sales): This is the direct cost of purchasing what you sell, such as buying manufactured merchandise, toys as an example, or food if you are a restaurant. If you are a service business and don’t carry any inventory, you can set this to zero.

Monthly Sales Growth: Here you estimate how fast your sales will grow each month, as a percentage.

Sales on Credit: This is the percentage of your customers who wait a month or more to pay your invoice. Most business-to-business sales are made on credit, with the most common terms as Net 30 days. Watch how the chart changes as the percentage of Sales on Credit customers goes up or down. (NOTE: Sales by credit card, check, or cash are all considered cash sales, not Sales on Credit.)

Collection Days: This is the average number of days it takes for your Sales on Credit customers to pay you. Typically businesses invoice with Net-30-day terms, but many companies pay in installments or take two or three months to completely pay an invoice.

Profitability (% of Sales): This is the percentage of sales that you will take in as profit. In this calculator, this percentage is also used to calculate your expenses and taxes.

Initial Inventory Balance: This is the amount of inventory that you purchase before you start selling.

Months of Inventory Kept on Hand: This is the number of months of inventory that you have in stock at all times. Restaurants may have only a week of food inventory on hand, while the toy store may have a two, three or four months supply. The more inventory you buy, the less cash you have for other expenses. Make sure you know what inventory purchases will do to your cash balance.

Starting Receivables: This is the amount of money already owed to you when you start this cash flow analysis – for most start-ups, this will be $0. This money will be calculated based on your Collection Days entry.

Starting Payables: This is the amount of money you already owe to vendors, contractors and suppliers as you start this analysis.

Payment Days: The opposite of Collection Days (above), this one measures how long YOU wait to pay your bills. Naturally, your suppliers want you to pay Net in 30 days or sooner, but your average may be higher.

Variables that affect Cash Flow

There are many variables which can affect your cash balance. The big three are usually accounts receivable, accounts payable, and inventory purchases (stock on-hand).

You have accounts receivable if you sell on credit. This means you deliver a product or service to the customer, send an invoice to the customer and then wait for them to pay you at a later date, preferably somewhere between 30 and 60 days.

You have accounts payable if you buy products or materials or supplies from another business, and then you pay them at a later date. They too prefer that you pay somewhere between 30 and 60 days.

Inventory/Stock on-hand costs a business lots of cash. Suppose you are a toy store. You have to start acquiring merchandise in September and October in order to be well stocked for the holiday buying binge in November and December. You won’t get paid for these toys until they are purchased, but the toy makers want to get paid now. So you pay your bills, and you have merchandise, but less cash on hand to pay your store employees and the electric company.

The Cash Flow analysis helps you forecast how much you will have to pay when, and how much you will take in…and when. If your forecast shows you run out of cash before sales revenue roll in, you have a problem. Knowing this ahead of time gives you the chance to change your financial circumstances. You might get a line of credit from your bank, or get some new investment, or negotiate with your suppliers to delay your payments from 30 to 45 or 60 days.

Run several cash-flow scenarios. Try the best case. Then imagine the worst possible case. You don’t want to be surprised by a zero cash balance. That means you’re bouncing checks.

Time flies. Thirteen months ago I posted Economic Dark Clouds on Small Business Trends. Back then I said “the economic news is clustering now,” but my point was essentially sticking to the fundamentals …

With some notable exceptions, your business moves up and down far more because of very-micro specifics of what you and your team and your customers do. Your specific marketing programs, your new product release, your email campaign, your pay-per-click keyword decisions, your product development, your word of mouth … it’s what you do with your business that moves it up and down, not what happens in the headlines.

… but at that point I really had no idea how bad this whole thing was going to get.

Today, 13 months later, this one now looks to me like the worst of my lifetime.  I’m 60 years old, and I’ve seen some recessions. I was looking for my first real job during the recession of 1971. I started my first business during the recession of the early 1980s. I moved that company from California to Oregon during the recession of 1992. I laid off five people in a single day during the recession of 2001. This looks worse.

Fine. So what do we do about it? Specifically, what do we as business owners, managers, and entrepreneurs, do about it? I see this question and good and bad answers everywhere, so for this post I’ll stick to my expertise, which is business planning.

Let’s review how we go back to the fundamentals of business planning. What exactly are the fundamentals?

1. It’s the planning, not just the plan. That’s critical and we all see it now as sudden unexpected changes — the black swan — blow our plans up. No worry, business plans are always wrong, so it’s always been the planning process that makes them worthwhile. Planning means plan and review, revise, and correct, and review and revise and correct again. Watch how the assumptions change. This is absolutely fundamental to planning.
2. Shorten the cycle. You’re using planning to steer your business now, and the road is curvy and bumpy and unpredictable, so you pay closer attention and concentrate more carefully. Review your numbers frequently. Watch for changes, surprises, and the unexpected. It’s about early warnings. Watch the short-term closely. Use your planning as an early warning system.
3. Sharpen the focus. Narrow it down. Make sure you’re close to your best customers. Sharpen the marketing message, and review where it’s going and how. Avoid wasted resources.
4. Watch the cash flow. As the kids would say, “no duh.” But even if it’s obvious, I can’t leave it out of the fundamentals. Please remember that profits aren’t cash, and watch for changes in the cash cycle, like your business customers waiting longer to pay their bills. A business-to-business company needs extra financing worth a month of sales for every 30 days longer that customers hold off their payments.
5. Watch the metrics. Remember, you’re looking for early warning systems. Obviously sales, costs, and expenses are metrics, but measure wherever you can, and watch for changes. Phone calls in and out? Time per call? Presentations? Inquiries? Metrics work for early warning.
6. Communicate better than ever. Do you have something to say to your customers, or your employees, or vendors? Stay close. If you have to pay your bills more slowly than you’d like, make sure your vendors know they are still going to get paid. If you have to focus more efforts on your best customers, make sure they know it. Don’t let people guess wrong about what you’re doing or what you’re thinking.
7. Your business plan is always wrong, but vital. See point number 1.
8. Your business plan is never done. See point number 1.

My conclusion? Now, as 13 months ago. This is from that economic dark clouds post (sorry to quote myself, but hey, at least I’m consistent), but I think it holds up now more than ever. Stick to fundamentals, and get back to work:

Thoughtful economic analysis is readily available, fascinating, and scary. I don’t know about you, but for me some measure of future fear is a good thing. As president of a small company, being fearful is part of my job. Then I finish my coffee, go to my email, and get back to work.

(Note: this article by Tim Berry was originally posted on Small Business Trends, in a slightly different version, with the title 7 Business Planning Fundamentals.)

You know it when you see it
More years ago than I care to say, as a vice president with Creative Strategies International, I gave up trying to define strategy. During the years I was in that business, I discovered, slowly, that most people believe they are naturally good at strategy. They may not be able to define it, draw it in business diagrams, but they understand it. I think I’ve seen that most of strategy development is intuitive.

• People generally understand that strategy involves focusing on priorities, and why that’s good for a business.
• People generally understand that strategy involves playing towards strengths, and away from weaknesses.

So, whether or not you can define strategy, you know it when you see it. That’s what I’ve seen through the years.

The real problems with strategy
In one of my long-term consulting relationships, a large and very successful company would send groups of managers to 2- and 3-day offsite meetings to develop strategy. I watched in wonder as groups of very bright young managers developed brilliant strategies at these meetings, but failed, year after year, to implement them. The ideas that energized the offsite meetings were lost back in the office, drowned in the daily routine, putting out fires, answering the telephone, solving the every day problems.

I learned the hard way that the problem with strategy isn’t as much developing good strategy as it is in implementing strategy. Not that we should underestimate the importance of strategy, but we should at least be cynical about how much of business strategy remains in the realm of ideas only, and doesn’t really change a business.

Strategic conceptual models
I’ve worked with many different conceptual models used to diagram and dissect strategy. Several of them are discussed on this site, in the references below. I use more than that with seminars about strategy development. The Strategy Pyramid^TM is probably my favorite, first because it emphasizes implementation, and also, of course, because it is my own work, my own service mark.

However, I really think that many different conceptual models are valuable, and the choice of the model doesn’t matter that much. People think in different ways. If a model works to help you see through the cloud, focus, and develop your strategy, then it is a good thing. Somebody else will use a different conceptual diagram and arrive and the same place, or at an equally good place. Some models work better for some people, and anything that helps you visualize and understand reality is a big step forward.

General principles of small business strategy
This is not an academic exercise and I can’t claim results of research. The following principles are based on what I’ve seen over 29 years of consulting and research, plus my Stanford MBA, and a lot of wisdom contributed by some very smart clients.

1. Strategy is focus: Allocate resources where they will do the most good. Work towards your strengths and away from your weaknesses. Develop the company by doing the most important things, according to your long-term objectives.
2. Strategy is consistent over the long term: Better a mediocre strategy consistently applied over several years, than a series of brilliant strategies. It takes time to develop and implement a strategy, more time for the world to react and turn in the right direction. It’s very hard to stick with a strategy, because the people executing the strategy tire of it long before the rest of the world does.
3. Your business’ strategy is unique: Context is everything. Formulas and generalizations don’t apply. Understand your situation, both external and internal, and develop your strategy to work towards your strengths and away from your weaknesses.Understand your situation, where you are, and what knobs you can turn. Imagine yourself sitting in the driver’s seat of a vehicle, and recognize that your controls are limited. You have controls for faster and slower, but not for up and down. Look at your business in the same way, understanding what you can do, and what you can’t do.
4. Understand the problem of displacement: Strategy is subject to displacement, meaning that everything you do rules out something else that you can’t do. Drop a brick into a full pail of water and watch what happens: splashing. That’s displacement. Small business strategy has to deal with displacement.

Main elements of the strategic plan
A strategic plan should probably include some or all of the following main points:

1. High-level strategy: Strategy is focus. It guides your growth. Strategy assigns priorities. Of the whole range of possible market segments, and the whole range of services and possible sales and marketing activities, which are your main priorities? Strategy is often a matter of understanding when and how to say no, selecting among opportunities.
2. Tactical foundations of strategy: In the real world, strategy by itself isn’t enough. It’s just too easy to develop strategy and then forget about it. A strategic plan should base its strategy on specific tactics that make that strategy realistic, implementable, and trackable. The articles on the Strategy Pyramid is cited below in Related Articles.
3. Specific responsibilities, activities, deadlines, and budgets: We call these Milestones. They are the bricks and mortar of business planning, critical to business success.
4. Financial plan: One of the most important gains from an annual plan is the financial plan, which of course hinges on cash flow. A business needs to stress its priorities by making sure they get the right amount of money. Growth costs cash.