Norm Brodsky's The Knack: Good Resource for Entrepreneurs

I'm still reading and liking Inc. columnist Norm Brodsky's new book, "The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up."

In the "Decision to Grow," Brodsky makes the following points:

• Business is a means to an end. Entrepreneurs should do a life plan -- figure out where they want to be -- before developing a business plan (after the business has been in operation for a while). His point: growing a business through acquisition may not actually help you achieve your personal goals. (One friend expanded his store, which increased revenue, but he leveraged himself in doing so that he ended up making less money, after paying off loans and higher rents.)
• When trying to move to the next level, don't assume you know all the factors that led to your success. It can be easier to understand what went wrong than it is understand what went right.
• Before deciding to grow a business, make sure you know what you want to do and why you're pursuing growth. At one of my earlier jobs, the CEO met with different teams to let them know his plans for growing the business. I asked him why growth was so important, why not keep doing the things that had enabled the company to double in a few years -- which is great -- rather than push for even more growth. The result of the push for rapid growth:
  

1. a lot of people from the "old days" mourned the transformation of the company culture.
2. We pursued businesses we shouldn't have. (We went from Fortune 500 clients to pursuing dot-coms.)
3. We saw a lot of churn in the clients we did sign. I remember one client that spent $35,000 per month for the first three months, and then stopped paying because they ran out of funds. Apparently, they thought the $100,000 PR budget would help them close another VC round within 90 days.

• The agency ultimately survived, but personally, I am not convinced that growth for growth's sake always makes sense. It certainly not always in the interest of the customer.
• Bigger is not always better. Small companies, Brodsky says, have some advantages over large companies.

Some interesting points to consider. Now I know that many still feel the recession, and that any growth would feel good. I'm saying this because I do think we'll see a recovery, or at least less of a decline. I'm sure some businesses will make the mistake of the last two recoveries, and grab as much business as possible, even if they can't manage it well. I believe in growth, but it's got to make sense for us and our current clients. Anyway, interesting chapter.

Value Charts, Pricing & Cash Flow: Three Aspects to Focus on in the New Normal

To succeed in the "new normal," i.e. that period after the economic recovery, businesses are going to have to make new assumptions and take new approaches to their businesses. Media properties, for example, can't expect that a recovery will lift them back to the good ol' days of 2006-2007.

That's certainly true when it comes to the strategies and tactics companies should deploy as part of their PR initiatives.

While I generally address the media and PR, in this post I thought I'd quickly address three critical success factors for companies that want to survive in the new normal.

First ideas came from Norm Brodsky's excellent book, The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up. Brodsky is a serial entrepreneur -- actually a concurrent entrepreneur, running several businesses at the same time -- and a columnist for Inc. Magazine. According to Brodsky:

• Protect your capital. Spend it only on things you're certain will generate positive cash flow in the short term.
• Maintain the highest monthly gross-profit margin you are capable of achieving. Do no go after low-margin sales. It's too much work and costs too much money to chase low-margin customers.
• Spend time developing relationships with your highest-margin customers. Let low-margin customers come to you, and negotiate the price up.
• Balance the need to make the sale with an understanding of the risks and costs involved.

I subsequently found a blog posting from LeveragePoint, a Cambridge consultancy that helps its clients evolve their marketing strategies, about Value Charts.

We've met with LeveragePoint, and are impressed with their intelligence and insight. Its blog on Value Chart brings an interesting perspective on developing "value models that clearly show how much economic value your customers get" from using your offerings. The article, "Using Value Charts to Plot Pricing Strategy," looks at four key scenarios:

• Premium Strategy: in which the customer is "willing to pay more because they perceive higher economic use value." This can help you achieve Brodsky's goal of selling at the highest margins you can achieve.
  
• Penetration or Discount Strategy: in which the company decides to aggressively grab market share with a low price.
• Neutral Strategy: In which the company selected a price equal to its competitor with the goal "to be the preferred vendor because of better differentiation."
• Low Cost Leader: "essentially a more extreme form of Penetration Pricing... Obviously this strategy can only be sustained with a significant cost advantage."

For more insight on this topics, check out Brodsky's book and LeveragePoint's blog.