What or Why

In this article we are going to look at possibly the most important concept and key performance indicator in any business, the customer lifetime value (CLV).

You will see the concept also referred to as:

• The lifetime value of a customer (LVC)
• The marginal net worth of a customer (MNW)

The Definitions Of Customer Lifetime Value

It is a KPI that explains how much a customer on average is worth to a business of its entire relationship.

You will see some people refer to it in terms of sales revenue.

This is wrong and misleading. It can cause you to make the wrong decisions about attracting and retaining customers. [continue reading…]

It’s easy to see why strategy is important for big businesses but why is it important for business owners as well?

What is Strategy?

In the article:

>>> What Is Strategy And Strategic Positioning?

I defined strategy as:

“How you achieve your own objectives by winning the hearts, minds and business of customers by out-thinking and outmanoeuvring competitors.”

This puts the emphasis on:

• your objectives
• winning and then delighting customers
• whilst having competitors trying to stop you.

Hidden from view but still important is the fact that you have to do this in a wider economic, political and social environment that may help or may inhibit what you want to achieve.

Boom times make it easier to achieve your objectives. Recessions force you and your customers to up their game or risk finding that they can no longer afford to play it.

Why Is Strategy Important To Big Businesses?

Before looking at why owner-managers need to take the time crafting a strategy, I think it’s worth looking at the benefits of strategy to big businesses. [continue reading…]

Many people say your employees are your greatest asset and encourage you to be a great manager and evenly more importantly, a great leader.

That begs a question.

What Is The Definition Of A Leader?

What is a leader? What is the definition of a leader?

Is it one of those difficult to describe notions but obvious when you see it?

I’m sure you’ve had bosses who have inspired you to go above and beyond the call of duty. These are the leaders. Others can have the opposite effect and make doing the basics am unpleasant daily grind.

What is The Dictionary Definitions Of Leaders and Leadership?

The Merriam Webster dictionary says that a leader is “a person who leads”.

It then goes on to say that a leader is “a person who has commanding authority or influence”.

That doesn’t describe the notion of leadership for me. It’s not very helpful at all. [continue reading…]

The Margin of Safety is a very useful measure that should be used together with break even point calculations.

The break even point identifies the sales volume or value where a business neither makes a profit or loss in the period.

>>> Why Break Even Point Analysis Is Important

>>> The Cost Volume Profit Relationship

>>> How To Calculate The Break Even Point Of A Business

What Is The Margin Of Safety?

The margin of safety is the extra sales value or volume the business has sold in a period in excess of the break event point.

Here is a quick example. [continue reading…]

In this article I’m going to explain why cash and cash flow are very important.

What Are Cash And Cash Flow?

When businessmen and bankers talk about cash they are generally referring to your bank balance rather than what’s in your petty cash tin.

Cash (and bank) balance is a snapshot picture at a moment in time that you will see on your Balance Sheet.

Cash flow is the movement between two balances during a period of time. A cash inflow means that you get more in than you pay out, an outflow means that you’ve paid out more than you’ve received.

A Short Cash Flow Example For One Week

[continue reading…]

The irresistible offer is an idea popularised by Mark Joyner in his book, “The Irresistible Offer: How To Sell Your Product Or Service In Three Seconds Or Less”

It builds on the old concept of the USP (standing for unique selling proposition or unique selling point).

What Is The Irresistible Offer?

According to the book… [continue reading…]

Off all the different topics in business, this one about the USP is one of them I find most fascinating and strangely, it can be one that business owners struggle with in particular.

Before we get into details about answering the question “What is a USP” I should explain the difference in the interpretation of the acronym.

In the USA, USP stands for Unique Selling Proposition.

In the UK, USP is sometimes translated as Unique Selling Point yet the UK based Chartered Institute of Marketers says that USP is the unique selling proposition

I have no idea why there is a difference and I tend to use both interchangeably. However in this article below I develop a personal opinion to suggest that a selling proposition is the overall differentiation concept whilst a unique selling point can be an individual point of difference.

Are Unique Selling Propositions And Unique Selling Points The Same?

The Origins Of The USP [continue reading…]

Strategy? It’s obvious what is strategy, isn’t it?

Perhaps not.

What is Strategy?

My personal definition of strategy is:

“Strategy is how you achieve your own objectives by winning the hearts, minds and business of customers by out-thinking and outmanoeuvring competitors.”

Professors Johnson and Scholes, authors of the MBA text Exploring Corporate Strategy say:

“Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations”.

Professor Henry Mintzberg from McGill University defines strategy as

“a pattern in a stream of decisions”.

He wanted to get away from the idea that to have a strategy, you have to do strategic planning or have a strategic plan. He argues that strategy emerges from decisions and actions rather than as a result of planning activities.

The Fit Between Positioning & Capabilities

Strategy is about providing a consistent match (or what is called strategic fit) between two words – your positioning and your capabilities. [continue reading…]

I don’t expect business owners and entrepreneurs to turn themselves into accountants and finance experts but I do believe that there are two financial concepts that they must understand to be consistently successful.

The Two Critical Finance Issues Every Business Owner Must Understand

1. Break even point analysis
2. Cash flow forecasting, management and control

These will make sure that the owner is managing for profit and cash. [continue reading…]