The “Money Problem”

There aren’t many scenarios in which people are repulsed by money…except of course, in the world of business. As a new business owner, conversations about money can be intimidating, uncomfortable and condescending. In a discourse where the exchange of service for currency is inevitable, it’s hard to conceptualize such a fear, but most business owners are able to recount instances where having to pick up the phone and discuss payment was a nerve-wracking as pulling teeth.  

There are three primary factors that are attributable to the money problem:

·         Value - Entrepreneurs struggle to accurately assert a price that is complimentary to the value of the service they offer. In some instances business owners quote clients/customers fees that are much lower than the product value because they fear that the consumer will not recognize the worth; the opposite is also true.  Pricing comes with a warranted level of sensitivity because quite often it dictates how well a business will perform in the respective market.  Consequently, talking about it can result in gaining clients or losing clients and some entrepreneurs are not willing to take that risk.

·         Cultural taboo - Cultures discourage discussions about money. Unfortunately, some entrepreneurs allow that inter-generational value to seep into the discourse of business. Where it is unacceptable to talk about money in the familiar institution, it is equally disrespectful in a financial one.  The symptoms of this cultural taboo are evident in scenarios where business owners are complacent in obtaining late fees, outstanding balances, and unpaid debts. Instead, they carry on quietly and accept the loss, notwithstanding instances where the obtainable amount is not of “significant” value.

·         Social Psychology, “A need to be right, and a need to be liked” - This explanation is quite simple: business owners and people in general, want to be liked and want to be right. When a conversation of money begins to occur, the rigidity of these two qualities is threatened. Consequently, a client may refuse business on such premise.

Talking about money can be uncomfortable, but it is necessary. The following strategies have been effective in relieving conversational tension on this hot topic.

·         Market Comparisons - Compare your prices to your competitors’ prices. Although this may require a little bit of research, the effort is worth the outcome. Pinpoint noticeable financial trends and assess your business on a similar spectrum. If there are businesses that price their services above average fees, evaluate their company to see why. Some businesses may offer additional services, have more qualified professionals, or may have simply capitalized on effective branding.  When you refer to your prices, quoting some of the prices of your competitors will reassure your client that they are not being lowballed. If your business is above average, make the same comparisons, but emphasize what you are offering that warrants a departure from the status quo.

·         Managing Your Motive - Why are you talking about money? How important is the conversation you’re about to engage in? These two questions are fundamental in shaping your thinking about money in business. If both responses yield a matter of urgency and your business will suffer if the matter is not addressed, it is imperative to have the conversation. On the other hand, if your sole motive is to get more money without providing a service that matches same, you’re better off not mentioning it.

·         Formal Non-verbal Communication - Talking on the phone or over a meal in a meeting may work for some business professionals, but it is not ideal for everyone.  Send an email outlining the details of pricing and be clear and direct. Not only does this alleviate some of the burden, but it also functions as binding documentation of exchange between you and the client. Further, emails accommodate, what are otherwise, high-intensity negotiations.

      

      In closing, the infamous expression, “money talks” is misleading, because money cannot talk until someone else does. And the reality is: if you cannot get rid of the money problem, it may result in a “non-existing business” problem. 

The Opportunity of a Low Loonie

If you’ve been following Canadian financial news lately, you’ll appreciate that the loonie has been slumping against the greenback. In mid-July, our currency fell to 77 cents U.S., its lowest level since 2009. A number of factors are contributing to this decline, but perhaps the most important is long-term weakness in certain commodities, especially crude oil.

Canada’s economy relies on the extraction of raw materials more than most others in the industrialized world. A slump in commodity prices diminishes the incentive for investment in those sectors from abroad, reducing demand for our currency. The sluggishness of the loonie also explains why we’ve seen a small pick-up in inflation across the country since June, even though Canada is in an economic downturn, the price of oil is still relatively low, and the Harper government has promised to balance its budget despite the slump (all of which tend to put a damper on inflation). A low loonie means that the price of imports into our country, including many food products and manufactures, has risen.

But as you may have inferred from the title of this post, there is good news too: namely, the returns on our exports will also tend to rise, since those exports will become less expensive (and thus more attractive) to foreign customers. Tourism and associated industries may also see fringe benefits, as the prospect of a Canadian vacation becomes more affordable to foreign travelers. In other words, a low loonie translates into business opportunities abroad. If you haven’t done so already, now is a great time to concentrate on online marketing and distribution to foreign markets, particularly the U.S., China, Brazil, Germany, and Australia.

As with any new market, do your homework first.

Is there a demand for your product or service, or an unfulfilled need that you can help to satisfy? Are prospective customers with disposable income willing to shell out for whatever you have to offer? What do you bring to the table that incumbent firms do not?

Before you embark on a venture into overseas markets, you should be able to answer these questions definitively. Getting there simply requires due diligence. Start with some research on the internet, and identify organizations that can help you glean insight into the target market, including government data on income levels and spending habits. Aim to picture your typical client in the target market, the environment in which s/he lives and works, the amount of free time s/he has, and the recreational activities s/he enjoys.

Connect with foreign customers online.

Although overseas branches are nice to have, they’re also a luxury that most small and medium-sized firms don’t enjoy. This is where a robust online presence, including a website accessible in multiple languages, comes in handy. If you don’t have the budget to invest in a sleek, sophisticated website, there’s also a variety of existing online gateways—including eBay and other auction sites—that allow you to 1) broaden your international reach on a budget and 2) dip your toe into the waters of your target market before your dive in.

As the internet increasingly evolves from a stationary, plugged-in medium to a mobile, wireless one, more and more industries are prioritizing compatibility with mobile devices in their website design strategy. You’d be well advised to follow suit as you strive to reach foreign customers.

Choose distributors and payment processors wisely.

Select the most reputable, reliable distributor and most secure international payments system you can find. (Favour dependability even if the price is slightly higher, and investigate the record of candidate distributors and payments processors well in advance.) If customers know they can count on these aspects of your business, they’ll keep coming back, and recommend your company to their friends and associates. But if something goes wrong, even if a subcontractor is to blame, your business’ reputation could be in jeopardy.

For more on how you can take advantage of a feeble loonie, see this piece in the Globe and Mail’s business section by e-commerce expert Cameron Schmidt.           

Investors Have Given You Money For Your Business. What's Next?

After working diligently on your business plan and targeting potential investors, you’ve managed to snag some much-needed capital.

Good work. Now what?

Essentially, you have to live up to the promise of your pitch and deliver the goods. How you involve your investors in the early phase of your startup will set the tone for the rest of your relationship.

The goal is to make sure you can remain on solid ground with the money people. This will help improve your relationships throughout the business community and open up the possibility to return to those investors for expansion down the road. Before you get there, consider these proactive steps for involving your investors:

Set a board meeting calendar. By setting a board-meeting calendar you're letting your investors know that you're serious about the business and about getting their input. You should actually set the schedule for the entire year. You might have to rearrange some future meetings but at least your calendar will be a start for this process.

Have an investor dinner. Before the first official board meeting, you might want to think about having an informal gathering over dinner for all of your investors and board members. This is a great opportunity for everyone to get to know each other. Then when you head into those board meetings you can dispense with the small talk and introductions and get right down to business.

Plan an offsite meeting. This should be a full-day affair. You can break up the day with some recreation like playing golf at a hotel but most of the time you'll be in conference to discuss all the matters pertaining to the company and the direction it is headed. You should save this marathon meeting for the third or fourth meeting of the year. During this meeting you can also have members of your staff come by to make reports or presentations about the growth of the company and problem areas to work through.

Schedule one-on-one meetings. Hopefully your board of investors will be frank and honest at all of the company meetings. However, there might be a huge benefit from maintaining these relationships outside of the boardroom. The occasional one-on-one lunch or dinner meeting is the perfect opportunity to keep those lines of communication open and uncover any "hidden agenda" issues.

Stay out in front of bad news. It's not all going to be "rainbows and unicorns." You'll have some dark days ahead. When trouble happens don't try to bury it in a company report. Get out in front of the bad news and let your investors know you're in top of things. No matter how bad it might be they would rather hear it from you then from Twitter!

Overall you want your investors to feel that are a vital part of your company's success. That's not a stretch. All you have to do is honor their commitment with honest communication.