Why the importance of monitoring cash has risen among small businesses

Square Card Reader
Credit / Debit Card Readers like this one from Square have accelerated how businesses receive payments from customers. But they also introduce urgency in managing cash flow in a business, one in which new entrepreneurs may not have faced before in their own personal experience
When small businesses are launched, owners are taught that cash is an important lifeblood for survival.  However small business owners are also consumers, and these days consumers are less concerned about retaining cash than they have ever been.

A Pew Institute report confirms this notion. 4 out of 10 Americans do not save cash.

This perspective describes consumers, rather than small business owners. But many  small business owners are consumers, and that non-saving tendency is why setting aside the consumer mindset when launching a business is critical.  Businesses need to think about how they spend on items within the business that reduces their capital or ties it up too much into an asset.

The rise of BOPIS (Buy Online Pay In Store)  and BORIS (Buy Online Return In Store), in which customers shop at home and then pick up their item (or return it), are another reason business need to think about their spend more critically.  Customer transactions are occurring faster, with digital options such as paying online at a portal and mobile payment readers from Square, Paypal, and other providers.  The faster rate means businesses must think about how to time their revenue and payments and ride herd how cash is flowing in a business over time.

A lot of times business owners try to purchase items for availability rather than examining how those items are really used in daily operations.  Having assets sitting around is bad, but so is not having those assets to provide a product or services to customers.   Striking a balance between scenarios is not easy, yet business owners must be wary of having too much capital tied into an asset. Doing so can prevent a owners from making strategic decisions with cash quickly.

The current decline with Sears is a great example that small businesses can learn from. Much of Sears’ parent company invested into real estate owned by the stores rather than the operations or products/services that Sears. While real estate is valuable, it requires upkeep to be made valuable and it can not be sold as quickly as stock. That can make converting into cash difficult to do, especially when time is limited to make a deal or purchase.

Ultimately businesses must figure out a number of ways of saving cash within the business, so that options become better.  One factor that must be kept in mind is making investments that customers ultimately see and feel when engaging a business through its products or services.

Should Your Business Buy or Develop Analytics Capability? A look through the lens of the Amazon-Whole Foods deal

“It’s our recognition that if you go to bed as an industrial company, you’re going to wake up as a software company,” declared Jeffrey Immelt, Chairman and CEO of General Electric (GE) at a Gartner conference back in 2015. He was trying to note that companies should seek to disrupt themselves, making a nod to his own, GE.

Well, he certainly did not imagine making a nod to Amazon, but that comment is so apt given what Amazon did with its bid on  Whole Foods Markets.

Amazon’s acquisition of Whole Foods Markets represents an unprecedented technological investment in the grocery retail industry.  The milestone also signals an unprecedented moment for analytics being seen as a catalyst for long-term business value.

Whole Food Markets Chicago
This Whole Foods Market in Chicago is bustling with customers. The Amazon acquisition promises to help the chain refine its customer relationship through analytics.
A look at an industry and its margins

Grocers like Krogers and Safeway have sold food items and associated services with thin profit margins.  This meant goods would have to be sold at high volume for a grocery chain to be profitable.

When Whole Foods Market started, however, it developed and maintained a margin advantage over other grocery chains through its focus on offering organic foods.  Organic foods command higher prices; thus a high product margin is possible.  Whole Foods Market established a strategic advantage with its organic food focus.  In fact Whole Foods Market is the first grocer to certify its food as organic according to the Wikipedia page on the company.

In recent years, Wal-Mart and Target have begun to offer grocery, increasing competition against traditional grocery chains.  But the most striking tactic has been to offer organic foods alongside those .  Wal-Mart and other low-cost grocers drawing customers seeking bargains away from Whole Foods.

The plan has worked.  Whole Foods reported six quarters of declining sales as a result. Moreover, Whole Foods gained a consumer nick-name “Whole Paycheck”   that references the price concerns people have about its produce.

How Analytics Becomes Essential To Business Growth
Enter Amazon and its potential to give Whole Foods a leg up.

Amazon has a number of analytic solutions that benefit Amazon Web Services (AWS), a set of cloud and services for databases and hosting.  These cloud services have been geared towards either supporting Amazon services or for specific needs of the tech community.  But with the Whole Food acquisition, Amazon has an opportunity to demonstrate tangent value to a industry that consumers and Wall Street analysts naturally understand.  Consumers can see more personalized marketing, which will boost sales.

An effort to provide more value may even challenge that consumer nick-name “Whole Paycheck” nickname.

The Amazon-Whole Food deal creates a transformation for a retail business model: a retailer that has been regularly limited by margins suddenly can determine where to focus on growing customer experience and ultimately retain customers.  It can do so through applied machine learning.  A simple concept behind machine learning is applying computation software to a dataset and providing meaningful results such as personalized service for customers.  A complimentary predictive analytics model can be built to adjust operational support for that personalization service.  Ultimately Amazon can leverage discoveries from machine learning initiatives into meaningful customer and business value.

This scenario is an analytical environment that can benefit Whole Foods against fierce competitors like Target and Wal-Mart, which are already using analytic initiatives of their own.

Decide whether to build software or acquire another company’s 

The decision to acquire a company is no small feat – Amazon’s all-cash acquisition is its largest to date.   But this news places a strategy spotlight on the value of analytics.

Amazon’s growth, albeit with debate about its scale at its start, reflects a trend that scaling a business profitably is part of business growth.  Business leaders are beginning to understand analytics can become a factor for unlocking long term value.  More importantly, they are putting that understanding into action.

The growing appreciation also raises the question – should a business look to acquire a business with analytics capability or should it develop its own in-house analytic services? This dilemma is a significant twist from a classic business question – to develop in-house capability or to integrate another company capabilities that has been honed and refined.

So should companies build software as a response to competitive pressure, or should they acquire it?  There is no panacea for an answer.

Many business owners believe business growth means increasing in physical size.  But doing so increases the demand for capital, and can start a never-ending spiral to induce volume sales.

Analytics can provide the right approach to scale, a variation on Immelt’s thought regarding self-disruption.  But it can take a large costly and timely effort to implement the right solutions.

But no matter what choice managers make, companies have to analyze their strategic activity and determine how to best create solutions that customers appreciate.

How web analytics can cut your business costs in 2014

Many businesses understandably believe that web analytics solution only address the functionality of a website. However this is no longer true in most cases.  Why?  Because consumers and vendors alike rely on the web in the same manner as any other utility – electricity, water, television.  Online has become the first place where people search for information, be it the products and services you offer to your business.

Analytics does impact revenue when analyze correctly. Google Analytics reported how Amari Hotels used mull-channel reports to increase revenue by 44%. Yet not every business invests in analytics well. An eConsultancy report in July 2013 indicated that 26% of surveyed firms did not have a dedicated person conducting the analysis .

Add this all up, and the end result is that a website becomes the face of a business and demand the proper investment to drive results.

As a further result a business must understand the benefits possible.  Read about how those benefits affect the bottom line.

1. Analytics prevents deploying your online marketing too thinly
Marketing is an important activity for building customer awareness of products and services. But advertising on multiple networks can cost money and effort.   Because when you only advertise a little bit on one media, a smidgeon on another, the message will have little chance of customers finding it.   You end up paying a lot for advertising that will vary rarely pay off. Instead, you might want to consider focusing more of your efforts on a smaller number of communities and networks first and build core sources of traffic. Analytics can show which media are trending to warrant further investment.

2. Analytic results can guide the budget for your offline resources 
When Ford introduced its subcompact car Fiesta, the automaker was able to shift its advertising budget to social media. This resulted in a 90% budget savings. Netflix used analytics to focus its movie delivery on its most profitable segments.   Omniture  (now part of Adobe) created a case study that indicates that Dave Ramsey site experienced a 55% increase in online sales and even a 20% increase in offline sales.  All of these results were possible with an analytic process in place.

3. Analytics can prevent unnecessary website repairs
One activity that can end up costing you money is constantly trying to fix website features that may nit be the true cause of client dissatisfaction. To determine fixes many businesses uses a heatmap to understand what a visitor sees, then confirms the success of the change through A/B and multivariate testing.  Monitoring your site performance can also give an overview to what steps .

4. Analytics prevent overspending through ignoring data
Ignoring data can also make you poor for the simple fact that the metrics contain valuable information about your business performance. The data trends indicate what internet marketing strategies are effective and what strategies are not working. Failing to act on the data you might misdirect the business on activities that are unrelated to business goals.  A business can discover if an offering online is not effective simply by examining the conversion rate for the product page.

5. A data-based business drives a faster response to money-making activities
Another costly mistake that often puts internet marketers in the poor house is not creating points where customers can complete transactions faster.   Creating faster transactions permits more revenue and recommendations to come into the business, creating more opportunities to focus on strategic opportunities.

The New Math: Product + Process = Service

Despite the straightforward definitions of margins and breakeven analysis, the math that can go into profitably offering a product or service can be an unusual calculus.  This post, originally written for the UBM Tech site, Business Agility, notes how businesses are finding ways to transform their products into services. Incorporating business process in the delivery, however, remains the true answer to the arithmetic of creating profits

Much of transformation has come courtesy of businesses attempting to build on the success of the open source business model. Many businesses have offered no or low cost software and applications. Offering services to maintain those applications generates revenue.

The end result is an increased dynamic of digital assets that were once passive tools.  Websites are an example.  Advanced techniques with programming language have changed websites from passive documents presented from a server to platforms that can provide simple services to customers.

Companies are scrambling to compete with those who have successfully adopted open source approached into their business model. The economics are still being studied, but most pundits agree that the trend will continue.  Neil Gandel, a professor of Economics and Head, School of Government and Policy at Tel Aviv University noted on Vox, a Centre for Economic Policy Research (CERP.org) website showcasing global economic studies, that “many proprietary firms now use a mixed-source model…a model in which some of their products are proprietary and are distributed under traditional licenses, while some of their products are open source and distributed under an open source license. Such a mixed-source strategy enables firms to benefit from the advantages of both open source and proprietary development.“

One example of a business transforming its business model to include more comprehensive services occurred from a former grad school friend of mine.  Garrison Atkisson, founder of broadAngle and a past Zimana client, emailed me on the change his company made from being a producer of a video platform to a broad provider of platform services.

 “We started broadAngle in late 2007 with the intent to develop and market a product that helped corporate clients manage and deliver video content using a custom branded player.  The economic crisis of 2008 made this very difficult for us.  We found ourselves in a position where we needed to re-evaluate our strengths and the needs of the market to find a more viable business model.  We had assembled a great development team for our own product development, and pivoting the business to provide their development services to our clients was a natural fit.  It was much easier to demonstrate value with a services-based strategy that it was trying to create a new market for our product.”

Despite notable successes, the math of a business plus software is not a straightforward answer to success.  Longevity and profitability lies in creating unique business process management practices that enhance the services that serve open source programs.

Developing the service systems can lead a business to providing even greater value than simply offering the product itself. Many experts, in varying degrees, believe such value is attainable. Jonathan Byrnes in his book Islands of Profit In a Sea of Red Ink notes that the “Selling more products can give a vendor additional leverage with customers, but selling the right related services can give vendor a new strategic position and a host of valuable benefits.”  Indeed Garrison states that broadAngle has made such gains. “We’ve built solutions that integrate SaaS services to add customer relationship or salesforce management functionality to custom applications that otherwise would have been out of scope due to time or budget constraints.”

Businesses that incorporate business process management may want to examine its content management and business analytics practices to optimize service delivery opportunities. Doing so adopts the economic benefits of open source-based business model into the right mix of incremental related services that outweigh any potential initial costs.

Gaining more by adding the right business process management approaches is a math I can live with.





Good Online Resources to Learn More About Website Code

No business owner can be an expert at every programming language – nor should they be. The rate of increasing language uses and coding techniques overwhelms even the most experienced programmers.

But a small business owner should have a basic understanding of website functionality. Knowing just a little about how sites can be structured lets small business owners better frame their questions when talking to developers.  It also helps organize the effort needed to make corrections and really get things done. The end result is avoiding cost overruns.

A few sites show what the basics are and how those basics work.  All do so with a low cost or free resources, and each have a varied degree of expertise.  Below are a few with some background on how they work.

Udemy – this site provides presentations and course material from instructors on a number of topics.  Many topics teach programming and software usage such as Excel, but there are also some great topics on website dos and don’t.  Some courses are free, others have fees of varying prices, with Udemy offer occasional coupons.  Regardless of course prices, you’ll find the site worthwhile.

AppSumo – This video-focused site provides online courses, and like Udemy, many are app-related programing and development.  But a few also show how to use software.  Many courses are offered with an occasional discount and snarky humor.  It’s a great site for growing an understanding of how extensive an internet presence maintenance can be.

Webdesigner Depot – This blog shares the latest tricks and ideas from web designers across the world and of varying experience.  It a great site in learning a few techniques that can update a site and not just delay

Lynda – There are basic courses available for everything ranging from using Microsoft office to basic programming at $25 per month.  These courses contain light material treatment that fits well for beginners and new internet users.

The material in Lynda contrasts with the scope often shown at O’Reilly, which is an excellent resource on programming languages and lessons. O’Reilly, however, aims its courses for more ardent developers.  There are certification training programs and webinars, as well as manuals and books that run the gamut of application and database development.

Peachpit – is part of Pearson Publication through its Safari publications.   Peachpit provides subscriptions to its video library in addition to specific blogs posts and books sold.  It’s pretty similar to O’Reilly, but its audience leans more for creatives, so its more design emphasis that developer audience O’reilly attracts.

YouTube – Type website development or any topic you are researching, and you’ll find a plethora of online video snippets.  I discovered a YouTube channel from Adobe that is great for web development.  Most designers and developers offer a series of videos, but many have differing quality in terms of speaking style or are using outdated tools, so weigh carefully against curated sites such as Udemy and Webdesigner Depot.

W3C SchoolsThis site has been the Wikipedia of web design, a standard go-to site for learning the difference between Javascript and Java. Users get to view the results of a code element change to HTML, CSS, PHP, SQL, and plenty of other programming syntax.

Tutorials Point – Similar in layout to W3C Schools, Tutorials Point provides great coverage on PHP, Javascript, Java, MySQL, and other programming languages.