3 Ideas From Business Process Management Your Lean Startup Should Implement

Business Process Management (BPM) is a broad discipline which, in essence, aims to improve corporate performance by discovering, modeling, analyzing, measuring, improving, optimizing and automating the business’s processes. Basically, we use a systematic approach to find out what works for our business, then endeavor to efficiently repeat this success.

Unfortunately, many popular current startup approaches abhor process, which is seen as overly bureaucratic and wasteful, and focus on quick and informal (though educated) decisions. The truth is, process takes time to research, design, implement and maintain, and above all, be repeatable — which, according to the book Repeatability by strategists from Bain & Co., is one of the most important traits of a business process. Entrepreneurs can learn from the BPM-related concepts here to begin to achieve that repeatability.

1. Design

The design phase includes determining what steps you should take to define your startup’s business processes, such as how to provide a service more cost-efficiently but still effectively, or how to hire new employees or contractors. These steps might include identifying the problem, researching solutions and gathering resources in order to put the entire system together. This is an important, formal phase many startups skip, only to end up with a business process that doesn’t quite meet their needs.

2. Create

This step, often labeled the Implementation or Execution phase, is the stage we all want to jump to because it entails actually completing the steps of the process. For example, if you’re selling shirts, you want to start printing and selling them to your customers. This step can be expensive, though, so do not start until you have completed the Design phase. Pay attention to the steps you are taking and document everything, because you (or someone else) will have to follow these steps later. Included in your documentation should be answers to question such as: What are the challenges you faced while executing? and How were they resolved?

3. Improve

After you’ve designed and implemented your process, you’ll want to ensure its repeatability by monitoring, optimizing and/or re-engineering the steps as needed. The goal is to continue improving by noting how the decisions we made while designing and creating have affected our service and product outputs using empirical observations, not just hunches.

This is a lot to take in, since BPM is usually associated with more established companies. But successful startups also need repeatable and profitable processes, and these ideas can help you begin to create your business plans and “recipes” while documenting and updating as you go along. Eventually you can use this experience to better your entire system by instituting structure and repeatability without expensive BPM software and formal processes. You can also improve your business process by incorporating ours — contact us to find out more.

3 Inexpensive Types of Market Research for Budget-Conscious Startups

As a startup, when you’re trying to determine the best market segment or niche to pursue, market research can be invaluable. Unfortunately, on a limited marketing budget, primary market data and research can be expensive to purchase, and even more expensive to undertake. Secondary research, which stems from available data, is also very useful and can be less expensive and more accessible. However, I have found that sometimes it’s worth it to just go out there and collect the data myself, especially if I need a very specific piece of information about a very specific demographic or behavioral segment, and third-party bids are prohibitively expensive. Here, then, are three types of inexpensive market research that you can conduct on a limited budget.

Surveys

Depending on how they are done, surveys can be inexpensive. You can use a free online survey service, such as Google or Office 365 forms, and use qualifying questions to filter out unfit respondents. If you haven’t collected your own customer contact data, the majority of your expenses may result from using clean, third-party or verifiable data to target your survey to the correct audience. Always include an incentive, but to be more cost effective, offer one large incentive via a drawing rather than a small incentive to everyone who participates. The downside to surveys is that the responses can be very subjective, since you’re often asking the respondent for their opinions or recollections of their behaviors, which can be biased. But you will still end up with more information than you had before.

Product/Service Testing or “Anchor Contracts”

Another option is to select a smaller target audience than a survey but conduct much more in-depth research. By offering your product or service to a select client or audience for free or at a discount, you can track customer demographics and behaviors against market conditions — and your own metrics — over an entire customer life cycle. This will provide real-time data which you can then apply when marketing to other potential customers.

Advertising Testing via Local Offers

Admittedly, while online advertising can start out as inexpensive, costs can quickly escalate, since it is often auction-based and costs-per-click skyrocket as soon as advertisers begin to see return on their investment. However, valuable awareness research can be done with a small testing budget on the appropriate platform. For example, ad testing on LinkedIn has been historically pricey, but you may be able to afford light testing of offers on Facebook or your local business paper. For this kind of research and testing to be inexpensive, it’s important to find an advertising platform that’s the right mix of effective targeting, available metrics for experiment design and cost.

Whatever primary research methods you choose, stick with them if you believe they will return long-term gains to your business. Research does get easier as you become more experienced, and we are always available to help. To continue the conversation, contact us for more information.

3 Data-Driven Ways to Find Your Marketing Niche

Ever heard the term “A jack of all trades is a master of none”? I learned the hard way a while ago that this is especially true with small business marketing. I spent a lot of money advertising to market segments that were clearly dominated by large corporate competitors — my complete investment was a drop in the bucket for them. I was especially de-motivated when marketing firms told me that my entire advertising budget was almost a reasonable “testing” budget! The better strategy would have been to focus my limited resources on a more specific market niche.

The first question, then, is: What is a market niche? It’s simply a subset or segment of a product or service’s market, taking into account the product or service’s features, quality, demographics and price range. For example, most attorneys don’t practice all types of law; they choose a niche such as family law or criminal defense. This reduces competition and allow the attorney to become an expert in a particular segment.

The second question is: How do I find my marketing niche? This question can be answered in two ways. One is to rely on your feelings and instincts, informed by your personal style and your goals for yourself and business. Another is to use more objective or data-driven approaches to find evidence of the market niche that best suits you. Here are three data-driven ways to find your marketing niche.

Market Segmentation

When you segment your market, you divide your existing and potential customers into sub-groups (segments) based on shared characteristics. You can use free advertising tools such as Facebook Business Manager to segment your market, which allows you to see the sizes of the segments and adjust them if they are too small or too large, or determine how many segments you need. This also allows you to see useful features of your demographics that you may not have previously taken into consideration, such as what locations will do well, or if location is more important than industry, for example.

Market Surveys

Once you have segmented your market, you can use demographic data and attributes from advertising platforms such as Facebook to reach out to a cross-section of potential customers and gauge their interest in your product or services. Surveys let you talk directly to prospective clients, getting valuable one-on-one time with prospects, and offering a small token such as a gift card is a popular incentive for participation.

Trial and Error or “Testing”

Another method is to review your demographic and behavorial market segments in order to identify an “anchor contract” to pursue for testing purposes. You may offer heavily discounted or free products or services to this anchor customer in order to track core demographic data and build marketing “personas” to use in future marketing. Be careful, though, because free may not be considered “credible” in your target market. Partner marketing or referrals are very effective here if you can get them.

Niche marketing is a powerful tool for small, underfunded or bootstrapped startups, and using data helps focus your limited resources in the most suitable areas. Whatever your niche, let us help you succeed within it.

3 Benefits You Should Consider When Choosing Your Business’s Legal Structure

Starting your own company is hard enough; selecting the most appropriate legal structure for your business can be confusing as well. There are many business entity forms to choose from — each having its own set of benefits and caveats — so you must decide wisely, since these are essentially the legal rules and processes under which you and your business will be operating.

This affects your taxes, legal liability, and how you share ownership in your company, among other things. So if you’re just starting off, we think you should keep these benefits in mind. This list is by no means exhaustive, but is a good starting point. Of course, please confirm all advice with your accountant.

1. Sole Proprietor

If you’re a one-person shop, sole proprietorship is normally the simplest and cheapest structure to start, though that doesn’t mean it’s the cheapest to maintain (especially during tax season). It also comes with unlimited liability, which can be worrisome. Still, in many states you simply apply for a license to do business, and report profit/income on your personal taxes. I’ve never used sole proprietorship as a legal structure simply because, even as a contractor, my personal tax situation was better served by other forms. Plus, you can avoid unlimited personal liability by using an alternate legal form.

2. C Corporation

A corporation, or C corp, separates the business entity from its owners, which provides strong protection from personal liability. And unlike many other legal structures, a C corp can sell shares to non-U.S. residents, making it easier to accept foreign investors. But a C corp also comes with double-taxation; that is, the business profits are taxed, then you are taxed again as a shareholder on dividends paid. So unless you are planning on selling the business or taking it public, the LLC form may be better for you.

3. LLC

Limited Liability Company, or LLC, is a good hybrid of the two forms discussed above. LLCs keep the limited liability benefits of a corporation while avoiding double taxation, and there are several “elections” you can make with the IRS to change the cost of filing at the end of the year. Most accountants I’ve worked with charge for your business and personal filings separately if you own an LLC, which is important for sidegig-style startups that are low on cash.

We use LLC and see a lot of LLCs in small, bootstrapped startups. But every business is different, so do your research and read up on the benefits of each structure, so that you’re prepared for discussions with your accountant and/or tax professional (especially if you’re being billed by the hour). We can also help you find the right incorporation service, as well as provide other assistance — reach out and we’ll tell you how.

Service vs Product: 5 Points to Keep in Mind When Deciding on a Startup Type

If you want to start a business and are looking for ideas, both services and products can be very profitable. Each type, however, can also present many unique obstacles along the way. For example, if offering a service, you’ll need to consider what types of clients you’ll serve, the frequency of client interaction, your pricing model, etc. If selling a product, considerations include cost of development, overseas or onshore production, cost of inventory, and marketing, for starters. As a novice entrepreneur, it’s very important to understand all aspects of both services and products before making a final decision. Here are a few points to keep in mind.

1. Investment

A small service business can be relatively inexpensive to start, especially if you’re providing the service yourself. Think of a kid starting a lawnmowing business with just a mower and some grit. Even growing that business can be fairly easy, especially in today’s “gig” or freelance economy. A product, on the other hand, typically requires a bit more investment on things like prototype design, development, production, and initial inventory, not to mention storage and distribution. These are generalities, of course, as it always depends on the type of service and product, but entrepreneurs usually spend more time and resources launching a product.

2. Marketing

The marketing of a product or service is usually different for a larger company than for a small startup like ours, and also depends on if you will be marketing to consumers (B2C), businesses (B2B), or both. For example, if you build a supermop, you can sell to homeowners and shopowners alike, although ideally you will optimize your marketing to focus on one or the other. Service marketing, especially for very small startups, tends to be more about the entrepreneur and his or her personal brand, which these days is accomplished more and more via social media.

3. Inventory

A product-based business requires manufacturing or purchasing inventory, which must first be stored and later, possibly liquidated – all of which can be expensive. Storage costs can be minimized if you keep the product in your home or garage at first, or if it is produced on demand. With a service-based business, you may not have a physical product, but the hours spent providing and honing your service become your inventory, and should be treated accordingly.

4. Expansion

While the “gig” economy and increased freelancing have made it easier to offer and market your services, expanding your service-based startup can be tough, especially if you are the only one providing the service. As the saying goes, there are only so many hours in a day. For the most part, a product-based business is easier to expand by simply placing a larger order with your supplier or ramping up production. Unless, of course, you are making the product yourself, in which case, see above.

5. Pivoting

It’s almost inevitable that at some point as an entrepreneur, you’ll find your business model just isn’t working and you’ll need to pivot in a different direction. If you’ve already invested heavily in product development and production, this pivot probably won’t be as easy as it would be for a small service startup.

While all of these points are factual, they are also somewhat subjective. And although they seem to lean toward choosing services over products, don’t underestimate the power of the fourth point. A product can quickly make wealthy an entrepreneur who has the resources and has perfected the art of expansion.

If you need help growing your product or service business, please contact us. Let us put our startup experience to work with your startup experience and increase your chances for success.