The Billy Index


I hesitate to write about current affairs, given that last week I devoted 700 words to the Budget on Tuesday, only for the Chancellor to change his mind – and cause a re-write – on Wednesday. But the P in the PEST analysis seems to be impinging on all our lives and businesses so much at the moment that you can’t ignore it.

According to one of the Sunday papers there was going to be a snap General Election: Comment Central followed up with the same story on Monday. Downing Street swiftly dismissed the idea as ‘nonsense.’

If you’re planning a holiday the rumoured date is May 4th – just six weeks away: and just about when we find out if France is going to follow Holland down the path of common sense, or whether Marine le Pen will be in the Elysee Palace. In which case, ‘cry havoc and let slip the dogs of war’ as Shakespeare wrote.

Over the next few weeks and months I suspect we’re all going to spend more time with the news bulletins than we’d like to – especially after Wednesday’s tragic events. So let’s turn to something lighter this week; specifically, Ikea’s Billy bookcase.

bookcases

In our time we’ve all shopped at Ikea: for beds, sofas, desks for our office and yes, a bookcase that even I can put together on a Saturday morning. The ubiquitous Billy bookcase: dreamed up in 1978 by a designer called Gillis Lundgren and sketched on the back of a napkin in case he forgot it.

There are now more than 60 million Billy bookcases scattered around the world – in very round figures, one for every 100 people on the planet. And so common – and far-flung – is the Billy Bookcase that Bloomberg use them to compare purchasing power. For example, a Billy costs £79 in Egypt: just £31 in Slovakia.

And thinking about the Billy Bookcase Index set me wondering: what other unusual economic indicators are there?

So let’s start with another tick in the ‘never say never’ column. I never thought I’d use the phrase ‘bodice ripper’ in this blog but yes, bodice ripping romance novels fly off the shelves in tough times. Sales were up 32% in 2008, the year of the economic crash. And the ‘high heel index’ confirms that heels also get higher during a recession.

Another indicator of tough economic times – sales of men’s underwear fall sharply, as we look to economise in areas that won’t be noticed. Hopefully… And, of course, more people grow their own fruit and veg: the number of households growing their own fruit, veg and herbs was up 19% in 2009.

What other indicators of the economy tanking are there? Fortunately we’re past this stage but a key indicator is the ‘Diaper rash index.’ During hard times parents try and save money by changing their babies’ nappies (yes, diapers to my American colleagues) less often – so sales of nappy rash cream increase.

Moving through life’s journey, there is an increase in first dates during a recession as people look to brighten the gloom. Match.com reported that the second quarter of 2008 was its busiest period for seven years.

And sadly, long after the mystery of the first date, there is an increase in the re-sale of burial plots when the economy is struggling, as people decide that cremation will be a cheaper option.

But my favourite indicator of hard times (literally) is the ‘marine intensity index.’ With the economy in trouble, more and more people apply to join the US marines. So to discourage applications from anyone who’s not 100% committed the Marine Corps toughen up their ads. Fast forward four years and if you see a marine wearing swimming trunks, carrying a 40lb pack and wading through Arctic water you’ll know that Trump’s economic reforms haven’t worked out too well…

What’s the best indicator that the economy is doing well? Garbage, rubbish, trash… As we produce and consume more, so there’s more rubbish. An analysis by Bloomberg put the correlation between volume of rubbish and the health of the economy as high as 82%.

As we might expect, we’re more willing to get divorced as the economy improves and the Swiss watch index soars into the stratosphere.

More worryingly (given my new role) the New HQ index also rises as the economy improves. Companies are more ready to spend the money on a new headquarters – not always with successful results. There’s an old stock market saw that says sell your stock when the MD or CEO announces an expensive new HQ and recently The New York Times, AOL and Time Warner have all fallen victim to the curse.

It is therefore with great pleasure that I can announce that TAB UK will still be at 15 Hornbeam Square next week – and I’ll be back with a post on ‘agile leadership…’

The 6p Café – and the question You Should Really Ask


Just a note before I start this week: I’ve written more than 300 posts on this blog, but last week’s was much the most personal. I’d like to say thank you for all the comments and replies: some of them were touching, some heartfelt and some even more personal than the original post. One in particular buoyed me for the whole weekend: so thank you again.

Anyway – on to business. And a simple question: how much did you pay for your last latte? I’d guess anywhere from £2.40 to £2.90: that’s the going rate and it is, of course, completely ridiculous. Invest not-all-that-much in the right equipment and you can stay in your kitchen and make a coffee that’s equally good for a fraction of the price.

But that’s not the point is it? Because as we all know, Nero, Starbucks and your local coffee n’ cake shop don’t sell coffee. They sell something else entirely.

…And now a café has started charging for it.

Let me introduce you to Ziferblat, a café in Manchester that charges 6p a minute. That’s right, 6p a minute. Stay as long as you want; eat and drink as much as you want and use the Wi-Fi. 30 minutes costs £1.80 and an hour is £3.60.

ziferblat

At first glance that seems remarkably cheap: why do you need to pay rent on an office? An eight hour day at Ziferblat costs £28.80 with no need to go out for a sandwich at lunchtime. Well, they make a profit and the chain is expanding. But it’s not their balance sheet I want to discuss; it’s their willingness to look at an established concept in a wholly new way.

I have plenty of my meetings in various Costas, Starbucks and Neros around North Yorkshire. Am I paying for the coffee? No. That’s the last thing on my mind. I’m paying for convenience, for somewhere to meet, for thirty minutes with a friend, Board member or potential client.

I’m buying the coffee in order to rent a convenient meeting space for thirty minutes. The owners of Ziferblat have recognised this: as one of them says in the video, “Everything is free, except the time that you spend.”

Some of you may remember a post I wrote early in 2014: it was about American restaurants charging different prices for their food depending on when you ate. Re-reading the original piece – and thinking about ‘the 6p café’ – that still seems entirely logical to me.

The reason I make these points is simple. We’re now well into ‘making plans for next year’ season and there’s a fundamental question to ask yourself: what do I really sell?

Do you sell coffee? Or do you sell the convenience, the surroundings and the meeting place?

Quite rightly, you’re now turning the question round and asking, ‘Fair enough, Ed. What do you really sell?’

Let me answer that, because it illustrates the point exactly.

Do I really sell 1 to 1 meetings and peer-to-peer coaching? No, of course I don’t. So let’s look at the reasons entrepreneurs ‘buy’ TAB York:

  • They want to solve a problem and/or address some pain
  • They don’t want to feel isolated/lonely any more
  • They want a fresh perspective on their business
  • They’re stuck in a rut
  • They know they’re ready to ‘take the next steps.’ But they don’t know how to do it, and may not even know what the next steps are

So TAB York sells solutions to specific problems, an end to loneliness, a new way of looking at problems and opportunities, motivation and – as I wrote two weeks – a glimpse of what life and business could be like: ‘permission to dream’ as I termed it.

Clearly, TAB York sells different things to different people – and that doesn’t change even after someone becomes a member. The reasons why entrepreneurs continue as Board members can be very different to the reasons why they joined:

  • The Board meetings are an insurance policy against things going wrong
  • The routine of the monthly meetings forces members to work ‘on the business’ not ‘in the business’
  • It’s the only place they can really talk about their business with people who absolutely understand…
  • Who’ll give absolutely impartial advice…
  • And who care about your success and the success of your business

So in no way am I selling the monthly meetings: I’m selling reassurance, a framework, and the experience, objectivity and commitment of the other Board members. And ‘commitment’ is the right word: members of TAB York have an emotional investment in each other’s businesses.

All the above points have come from Board members over the years – and yes, when entrepreneurs ‘buy’ for so many reasons it makes it difficult to define what my colleagues and I ‘sell.’

The same may very well be true for you and your business. But take your time to define exactly what you do sell – and don’t be afraid to emulate ‘The 6p Café’ and think a long way outside the box. It’s a really worthwhile exercise and the answer may well surprise you – and have a significant impact on next year.

In fact it’s something we could cover at a 1 to 1: maybe over a meal. I’ll drop an e-mail to the Star Inn the City and offer them 6p a minute…

Business Lessons from a $10,000 Bag


I’d like you to treat yourself over Easter. Take 16 minutes, somewhere comfortable, no interruptions, maybe a glass of wine – and watch two videos.

The first one is the making of an axe: the second another craftsman, this time making kitchen knives. Both of them are things of absolute beauty – and I was reminded of them last week when I read this story about a $10,000 bag.

No-one needs a $10,000 bag as hand luggage. A couple of weeks after Children in Need you might well argue that paying $10,000 for a bag is simply immoral.

Then again, there are plenty of people who’ll pay that much for a hand-made, everything-sourced-in-America, unique piece of luggage. Is making those bags a viable business model? Absolutely.

But I think it goes deeper than a simple argument about whether anyone should pay that much for a bag – or whether the Chicago entrepreneur behind the bags is going to make his fortune.

We live in a global economy. If I’m setting up a new business I can hop on to Fiverr and hire a web designer in India, a copywriter in the Philippines and an SEO expert in Russia. And yet if there’s one word that gives a client or a customer confidence, then increasingly I think that word is ‘local.’

As you might expect, over the course of my business career I’ve spent a few nights in hotels. Name a chain, I’ve stayed in it – quite possibly twenty or thirty times. Some of the experiences have been excellent: some really well-managed hotels that catered for everything the business traveller could want. So why do I now go out of my way to avoid hotel chains? It’s because I want a personal, local experience – and so do millions of other people. Just look at the success of a site like airbnb. I want to stay somewhere I can talk to the owner and where I know ‘all our food sourced locally’ doesn’t mean a weekly drive to the cash and carry.

Let me give you another example: supermarkets. About a year ago I watched the white foam ooze out of the bacon I was grilling and thought, ‘no more.’ Ever since, I’ve bought our meat from the local butcher – and it’s one of the best decisions I’ve made. Yes, it costs a little more, but I can look at the blackboard hanging up in the shop and see exactly where my meat is from and when it was slaughtered.

And yet the nation’s supermarkets insist on competing on price. Live better for less. Every little helps. Did they ever think that just once an ad saying, No, they’re not the cheapest. But they’re 100% pure beef might work? I refer you to McDonald’s vs. Shake Shack, ladies and gentlemen.

But ‘local’ and ‘handmade’ are all very well if you’re a B&B or a butcher – and I’m fairly certain that no members of TAB York have a sideline making axes or kitchen knives. So what do I mean – and how can you benefit – if you’re a PR company or an accountant or a corporate lawyer? There are three main points:

  • In an increasingly impersonal world personal is more important than ever. For me ‘local’ means personal. People still want to buy from people and, if possible, they’d like to talk to the boss at some point. As the old cliché goes, they don’t care how much you know until they know how much you care.
  • The beliefs and values of your company are increasingly crucial. What shines through with the axe, the knives and the $10,000 bag is the absolute passion of the people involved. It’s not a business, it’s a calling. So make sure that clients and customers know your company stands for something: make sure they know the story of why you believe.
  • Finally, don’t be afraid: if you’re providing a premium service or making a premium product, don’t be afraid to charge a premium price. It’s easy to think ‘the market in North Yorkshire won’t stand it.’ You’ll be surprised – and there’s a whole world beyond North Yorkshire that’s been waiting for you…

With that, I’m off to enjoy Easter. Make sure you do the same: have a brilliant weekend and the blog will be back on Friday 10th.

Learning from the big Apple


The numbers are quite simply staggering. $18bn profit for the last quarter of 2014 – that’s roughly £1bn a week. 74.4m iPhones sold – that’s 34,000 every hour – with sales up 70% in China. I’m obviously talking about Apple, the company that sits on a cash pile of $178bn – more than we spend every year on the NHS and education.

But there’s one more stat that I’m struggling to take in. According to the truly terrifying world population clock the number of people on Planet Earth is 7.3bn. Apple sold 74.4m iPhones. That means that in the last quarter of last year 1 in every 100 people on the planet bought an iPhone. Just one product – in the last three months of the year. I’m stunned.

Clearly Apple are doing plenty of things right: the key question is, what can we learn? Or is there simply too much difference between Apple – headquartered in Cupertino, California and dominating the world – and our businesses in North Yorkshire? So much difference that you can’t make worthwhile comparisons? I don’t think so: I think there are four very distinct lessons we can all learn from Apple.

  • First off, Apple make brilliant products that simply work. I remember getting my first iPhone out of the box. ‘Where’s the instruction book?’ I thought. There wasn’t one – because you didn’t need one. It just worked. I always come back to Simon Sinek’s TED talk when I think about Apple: many companies understand what they do and how they do it. Very few understand why they do it. That’s what sets Apple apart and it’s what can set your business apart. Apple give a brilliant customer experience and make fantastic products: they just happen to be computers and mobile devices.
  • Secondly, attention to detail. As the old cliché goes, good enough isn’t good enough. Or as one of the Michelin-starred chefs put it on Masterchef, “the difference between a good dish and a great dish is a pinch of salt.” You can never pay too much attention to detail, whether it’s design, function or customer service. In the long run, it always pays off.
  • Offer a complete package – and don’t underestimate what you know. I’ve seen two or three articles suggesting that Apple make more money from their after sales service and their cut of the apps than they do from their basic product line. Don’t underestimate the value of support, maintenance, updates, training and consultancy. Your knowledge can be as valuable as your products.
  • Lastly, don’t be afraid to charge what you’re worth. An iPhone isn’t cheap – but people pay for the perceived value. There’s a tendency in the North to say, ‘the market won’t stand it. The price is too high.’ It will: the price isn’t too high if the customer perceives the value he’s getting. Don’t ever be afraid to charge what you’re worth – or to say, ‘I’m sorry, that’s the price. No, I won’t negotiate or ‘do you a deal.’’ Sometimes you’ll need to be brave and walk away – but trust me, it works.

Of course, the cynics will say that Apple’s success won’t last. They may be right. When I started in business there was a saying: ‘No-one ever got fired for buying an IBM.’ Does anyone know anyone who’s bought an IBM recently?

But as long as Apple stay committed to the ‘why’ and – as Simon Sinek says – working from the inside out, then they’ve a great chance of staying ahead of the game. And let me chance my arm and make one prediction. The potential health benefits from your smart phone and developments like the iWatch are simply astonishing. Ten years from now monitoring your health – especially things like glucose levels – using a smart device should be routine.

Whether the NHS will be brave enough to embrace these potential benefits I don’t know. But clearly that’s enough from me for this week: still three months to go and I’m straying dangerously close to politics.

Have a great weekend – and remember the lessons from Apple. You might not be sitting on a billion dollar cash pile by the end of the year: but you can definitely have made a difference.

Pricing – The Final Word


The comments on this blog are something very special. But I think I’m going to strike my first medal and award it to Sarah Shafi. Thank you for your comment last week, Sarah – I strongly suspect there have been shorter dissertations.

(And as an aside, how many people clicked through to Sarah’s website? Intelligent, reasoned comments on blogs work.)

OK, back to the grindstone, and the final part of the trilogy. Return of Son of How Much Should You Charge?

I finished last week with four key points on pricing. To save you going back a page, in summary they were:

1. Be consistent: define what you do, what you offer, who your target market is – and stick with it
2. Have faith in yourself – as the saying goes, you’re worth it
3. Have faith in your pricing as well: discounts and loss-leaders rarely work in the long term
4. Perception, position and ‘message’ are vital. Everything needs to support your core business proposition.

Let’s look at those four points in more detail.

1. First of all, what do you do and who’s your target market? Every really successful business I’ve ever dealt with, worked for or sold to could say neatly and precisely what they did and who they were doing it for. I’ve quoted this before but I always come back to this one: “I’m a fitness coach for pregnant women.”

Yes, it rules plenty of people out but it still leaves a significant market: there were over 700,000 live births in the UK last year (just in case anyone in North Yorkshire fancies a change of direction…)

So job number one is to apply the FCPW test to your business – if you can do that it will underpin and define what you charge. (Not to mention preventing the business running off down several blind alleys.)

2. It can be tough to keep faith in yourself when a few people have said no and I don’t know many successful businesses where there hasn’t been a moment – or several moments – of self-doubt. Even if you’ve got a success rate of 50% it won’t be win-lose-win-lose. There wouldn’t be casinos if black couldn’t come up ten times in a row.

3. And once you’ve decided on a price – stick with it. To paraphrase Desiderata, there will always be persons charging greater and lesser amounts than yourself. I am always astonished by the amount some online ‘consultants’ charge when the only wisdom they have is the wisdom to believe in themselves.

As I said last week, I have very strict rules if I’m giving a discount on my consulting services. Sometimes you can appear heartless doing this, but I have to say that it has never let me down. Everyone in business knows that you have to harden your heart from time to time. ‘That’s why it’s called show business,’ as the saying goes. ‘Not show friends.’

4. Finally, as we’ve discussed many times, everything has to support your core business proposition. From your business cards to your website to your appearance – and above all to your clients. I’m sure many of you have read Michael Port’s highly successful Book Yourself Solid. In it he talks about the “velvet rope” – the one that marks out the VIP area. Try that approach – define your ideal client and only take clients that meet the criteria you’re looking for. Yes, it will be hard and yes, you need faith in yourself. But how good would it be to only work with clients who met your ideal criteria?

So what should you charge? Something that makes you a profit, something that values your time, something that makes you feel worthwhile. But above all, something that makes you feel ever-so-slightly uncomfortable. And then go out and earn it…

Battered Fiestas, Bazaars and Brilliant Ideas


Thank you. A great response to last week’s post with some really helpful comments and e-mails. Most of them were concerned with what to charge when you’re supplying a service – thoughts on manufacturing widgets were thin on the ground…

I wrote last week about the importance of perception in pricing – and about the power of ‘9.’ Winner of the ‘first to comment’ award was Rory Ryan :

I have sent out fee quotes for €2,300, €4,450 etc. Should I switch to €2,299 and €4,449?

I suspect this might have been a little tongue-in-cheek from Rory, but it illustrates an interesting point. An eight-year-old Fiesta with 60,000 miles on the clock might well be €2,299: a quotation from one of Dublin’s leading architects is – and always should be – €2,300. Perception again. If Rory sent out a quote at €2,299 what does it say? To me it says, ‘We’re desperate for business.’

This leads neatly on to discounting. Dick Jennings made the point that many people quote a high (or very high) hourly rate so that they can then ‘discount’ and make the client/buyer feel good. I have one big objection to this strategy – it takes away a lot of trust. As Dick pointed out, it is exactly like a Middle Eastern bazaar and I’m not sure that haggling over something you’re now mentally comparing to a carpet is the best basis for a professional relationship.

So should you never discount? No, I wouldn’t say that. I will discount my consultancy rates for two reasons:

• To help an established client who’s going through a particularly tough time
• To help a new client who I think will become a very good client in the future

But equally, there are two rules that I’ve learned from long experience:

• The discount has to be for a limited period of time and you need to agree that time at the outset
• And the discount cannot be ridiculous: if you charge £100 an hour discount to £30 an hour at your peril. I’ll tell you here and now that you’ll never get back to £100 an hour with that client.

Doug Adamson wrote about how good advice and great ideas can transform businesses. Spot on, Doug. Somewhere there are the guys who came up with Compare the Meerkat, Red Bull gives you wings and at the dawn of time, A Mars a Day Helps You Work, Rest and Play. Are these gentlemen now relaxing on their private islands in the Caribbean? I doubt it. Because as we’ve repeatedly discussed on this blog, success comes from ideas plus action. The oft-quoted ratio, ‘1% inspiration and 99% perspiration’ is depressingly true. Without the concept, the animation, all the other promotional work and the millions that Dietrich Mateschitz has ploughed back into it, Red Bull gives you wings might well have stayed a nice idea on a copywriter’s notepad.

All of which reinforces the point Dick made: that it’s very difficult to measure – and therefore to charge for – ‘value-added.’ Charging by the hour may not be exciting and may not have the potential to hit the jackpot, but everyone at least knows where they stand at the outset. And there’s probably a lot less potential litigation down the road…

Adding my own experience to your insights and comments, four key pricing principles emerged from last week. I’ll develop them fully in next week’s post and hopefully include some more comments. But in brief they were:

• Perception, positioning and message are vital. If your business is about providing a top-quality product or service, then everything about your business has to say that
• Attractive as discounting and offering a loss-leader might seem, they’re fraught with danger – and in my experience, rarely work in the long run
• You must have faith in yourself: it might be hard when a few people say ‘no’ but hang in there. To quote another ad, You’re worth it.
• And be consistent. You can’t be offering a premium service one week and competing on price the next. Define your message, and stick with it.

Have a great weekend – and let’s hope it’s finally time for the key principles of lighting the barbecue…

How much should you charge?


This week the blog takes a slightly new direction. For the first time there’s a subject which I think is so detailed – and so important – that I’m splitting it over two weeks, hopefully with a good dose of your feedback in between weeks one and two. The subject of what will effectively be a 1,200 word ‘special report’ as opposed to a blog post is simple – pricing.

If you’re running a business – especially a service – ‘how much should I charge’ is a perennial question. Too low and you miss out on profits; too high and you miss out on sales.

But how do you settle on what to charge? And with more and more products and services being sold online, does modern research on pricing shed any new light on the subject?

This week I’m going to have a look at some long accepted wisdom – and some of the new research that’s been done on pricing. Next week I’ll bring it closer to home – just what should you charge for your product or service? And how do you make sure that you’re correctly positioned in the marketplace?

Probably the one thing that everyone knows about pricing is the “power of 9.” Why do we constantly see goods marked at £1.99, subscriptions at $19 a month and even houses for sale at £199,950? We all know that there’s virtually no difference between those prices and £2, $20 or £200,000.

So why, when I was selling wine for Diageo, did I have such a battle – so often – with Threshers off-licence chain? Every time there was a budget we’d have an argument about the extra 4p duty that had been imposed on a bottle of wine. Was I going to take the hit or were they? Because one way or another that bottle of wine was going to stay on sale at £4.99. Sell it at £5.03? You must be mad. Sales would have plummeted.

Here’s an interesting study that was done in the USA. An identical product was put into three separate catalogues and sent to three demographically-identical audiences. In one catalogue it was priced at $34. In another it was priced at $39 and then $44 in the last one. More sales were made at $39 than either of the other two prices.

Remember too that price isn’t just about the product. After all, a bottle of San Miguel is a bottle of San Miguel. It doesn’t matter whether you buy it from your local corner shop or from a trendy café bar in the centre of Leeds – it’s still San Miguel.

Now obviously, I know that the café bar in central Leeds has far higher overheads than the corner shop, so I should expect to pay more for my beer. But why is it that people will still pay more for a beer from an upmarket hotel, even when the beer is going to be drunk on a Spanish beach, and even when there’s a cheaper alternative thanks to the kiosk across the road?

Price isn’t just about product: price is about perception as well.

After all, how did Starbucks build a business selling coffee for $3 when everyone else had been selling it for $1? Because you weren’t buying a coffee any more – you were buying a Caramel Macchiato with a double shot.

Nothing is cheap or expensive by itself: everything is relative – to the competition, to the benefit your customer will get from it and (as Starbucks showed) to the perception of the product.

I’d welcome your views on all aspects of pricing, but let me leave you with one question: can your product or service be too cheap? After all, as Sybil Fawlty constantly reminds us, “Why is it cheap? Because it’s no good.”

If you’re selling an hour’s consultancy for $49 can it possibly be any good? Some people on the internet are charging – and getting – $1,000 an hour. Maybe the guy at $450 looks like good value in comparison. But $49? Does he know anything at all?

With that, I’ll look forward to your views and be back with part II next week.