When you walk into a McDonald’s you know what it will look like. Even when your interstate you know exactly what to expect even before you take your first bite. There are no surprises here, nothing to say “wow that was fantastic” or “how horrible was that?” Your expectations are met day in day out without fail and that’s brilliant.

This consistency is what makes places like McDonald’s so successful. It may not be the quality of the food but the fact that your expectations are met every time, no exceptions. This is the McDonald’s value offering which is taken for granted, something that McDonald’s actually  expects and wants you to do. Don’t think about it, eat, enjoy, leave and come back soon.

For McDonald’s without this consistency they would not be who they are today. The product is not exceptional enough to allow for slack or lee-way when it comes to the output. The day you walk into a McDonald’s and there are no napkins available, the food tastes oddly different to what you expect and a sign is a bit torn and tattered, you run for the hills. That establishment has lost you as it did not meet your expectations even though it may only be that one time. That’s all it takes. Why do you think they have such strict measures and processes? McDonald’s understand the power of expectation.

The advantage that entrepreneurs have is that if you can provide a product which is extraordinary, these small idiosyncrasies will not be as prevalent as long as it does not affect the quality of your output. For example when you buy an exceptional car such as a Ferrari you know that each Ferrari is hand build and each one will differ slightly. You expect it and almost want it. If you want mass market expectation then go Toyota, it’s non exceptional, purposeful and will meet your expectation day in day out. Its brilliant, just like McDonald’s. Do professional sportsman use run of the mill equipment? No, they need exceptional so they require variation and customisation.

So what is your offering? Do you really need to meet mass market expectation and leverage the power of expectation? It is extremely difficult to master however if you offer an exceptional product which appeals to the set few of early adopters and hardcore industry fanatics then luckily, you may not have to. Keep it specialised, keep it exceptional and allow yourself some invaluable elasticity among your followers.

How much do you want to make this year? $50,000? $100,000? $500,000? $1,000,000? Whatever it may be you get to some point where it just doesn’t seem achievable. It seems too hard, too out there and too big of a number for little you to fathom. Well that’s the first and most important step to not reaching your financial goals, believing you won’t. What if the goal seems so far fetched, so hard to believe that you feel your only kidding yourself when you set yourself the target?

The reason it feels so overwhelming is that your focusing too much on the bigger picture, that big number which right now, is just a little bit too big. I believe it is vitally important to focus on the bigger picture and set yourself a target but there is something you can do that will make this goal much easier to get your head around. Break it down.

Thinking of big numbers can get overwhelming so try thinking about little numbers, little numbers that make up your big number. You often hear people discuss what they need to earn monthly to achieve their desired level of income or that target financial goal. I think a month is way too long and that number in itself can get a little too big for comfort. Want a million bucks? Well get prepared to set yourself a target of over $80,000 per month and that’s a lot of cash. Then financial vertigo kicks in and you revise that number down to $10,000… no actually make that $5,000.. ah that’s better.

Well before you start culling your dreams try breaking it down a little more. I mean right down, not per week or day, even per hour. Go right down to the moment, try breaking it down per second. To make a million dollars a year it will require you to make about 3.17c per second. Wouldn’t you say this is much easier to imagine that saying you need to make $100,000 per month? With today’s automated business systems it’s quite standard to set up a revenue stream 24hrs per day so that part is not really a big deal.

For example, If you have a website where revenue is generated through Adsense ads or similar, try to imagine a visitor clicking every 5-6 seconds (15cents per click roughly?). Aim for those clicks, not the monthly $100,000 or yearly million. Bring it right down to basics and immediately the task ahead won’t seem so daunting, shifting your mindset from being totally overwhelmed to saying “hang on, that’s not so bad”. Even 1c per second which is about 1 click every 10-15 seconds equates to $864 per day, $25,920 per month or $315,360 per year. That’s only 1c per second or a click every 15 seconds or so. If you get a click every few minutes then it’s not so hard to imagine building the traffic to eventually hitting your broken down goal.

This can be used for any business. If you sell ice-cream. Sit down and work out the profit margin for each ice-cream sold. Set yourself your yearly or monthly profit target then break it down. How many ice-creams do you need to sell per hour? Once you have worked that out it may seem a little easier to build a marketing strategy and business model to support your broken down target.

Remember what your are doing here is shifting your mindset and taking a different perspective of your desired outcome to tell yourself it is achievable. This will lead to the genuine belief that it can be done and that’s the biggest step you can take towards achieving any goal.

We hear of companies going under all the time, especially now when everyone is riding the economic crisis bandwagon. Let’s shift back a few years when things seemed more rosy, business was good and the poor were given more money than they could handle (literally). Companies filing for bankruptcy or going through liquidation were less frequent and therefore came under more scrutiny as to why things went so horribly wrong.

If you were deciding on a new start up of the head of an existing one, what would you do if you witnessed a company go bust? Remember things are good, m0ney is being spent freely and discretionary spend was in abundance. Would you look at the company going bust and see it as a lesson to be learn’t, stay away? Or  would you see it as an opportunity to move into a misrepresented and misunderstood market where you can make it work? What is the market size, competition, pricing structure, marketing, target market and could you really make it work?

Take example Sumolounge, an over-sized bean bag chair company. I just read about their foray into the Australian market in Yaro Starak’s blog. Interesting product but I find it fascinating that a company would move into a market that had been so unforgiving during the previous attempt of LoveSac to take control of the over-sized bean bag market (I really struggle to say that seriously… ‘over-sized bean bag market’). What was wrong with LoveSac and why did it fail? Well first of all, winning “The Rebel Billionaire” doesn’t necessarily lead to success in your entrepreneurial endeavors, even if you do have the blessing of Sir Richard. Not sure if the concept of revenue and assets needing to be higher than debt was completely understood by LoveSac management but hey, it was fun!

Did Sumolounge do their research and genuinely think that the market is still demanding over-sized bean bag furniture, especially the conservative Australian market where the innovators and early adopters aren’t as abundant as they are in say North America and Europe. I’ll probably get some backlash about how much I underestimate the Australian population but I from my experiences the take-up rate compared to other nations is quite slow. We love our security down under and liken new alien products like adding pasta strips on Pizza, if a bunch of others around me are having some then I’ll give it a go.

So will Australia embrace another big bean furniture company or will the wait for the early adopters to take charge take too long, exhausting the company’s resources. The thing is there was not too much wrong with LoveSac’s product offering. The bean bags were super comfortable, they looks great and there was plenty of marketing to back it up. Quite often you would see celebrities sitting on these bags and TV shows being aired with the presenters lying on them, talking it up. The LoveSac retail outlets were equally as impressive as the furniture itself, very plush and more like a massive rumpus room than a store built to facilitate commerce.

I won’t get into detail but I personally worked closely with some of these stores and the turnover was alarming, no one was buying. What was wrong? First of all the asking price for these bags was phenomenal. Starting at about $400 already put off many potential buyers. Secondly, did LoveSac offer its customers too much in-store that the incentive to buy was never really there? People would go into a LoveSac store, jump (seriously, people would take off from the closest and highest ledge) on the beanbags, read a bit, speak to the assistant and leave with very little intention to purchase any of the bags, ever. The feeling that was promoted was more similar to what you might see in an amusement arcade. People come in, have a play and then leave. It’s the same scenario for LoveSac, however they were trying sell the machines. It just didn’t work.

I’d be very interested in finding out more about the strategy of Sumolounge and how they plan to tackle the market. I already see that the price is almost half of what LoveSac was asking. That’s a start.

Sony has really moved forward with the Sony HOME on the PS3. For those of you not too sure what it is, Sony HOME is Sony’s take on Second Life. To access it you need a PS3 as it is accessible directly through Sony’s XrossMediaBar and you need to be linked to online play. It’s extremely simple to access and once your in, there are a whole host of things that you can do.

Looking at it from a business point of view I wasn’t particularly interested in conversing with other characters online or customising my avatar, I wanted to have a look around this virtual world. I downloaded the Red Bull Air-Race virtual island to give it a go. Red Bull is the first advertiser to create a virtual environment in the Sony HOME portal and I am duly impressed, although it did take me a good 20 minutes to figure out how to get it started! Not only is the game itself extremely addictive and quite fun its the environment that gained most of my attention. Its is crisp, runs smoothly and looks stunning. This is an example of a company doing something quite extraordinary, getting in first, creating excitement and getting players to interact directly with the brand. They have done their homework too, considering their target market also makes up the majority of core-gamers using the PS3 console and network, specifically young males, 18-34, the same market not interested in watching an out-dated medium such as TV and aren’t particularly impressed with any advertising you throw at them. But not this, this was hook, line and sinker.

A little more environment searching led me to stumble upon the shopping mall complex. I understand that these concepts are not new as this has been seen in other virtual world’s such as second life. There are brands in here such as Diesel and they actually SELL virtual products, where the user opts into buying a particular item of clothing (priced from about $1-$2) which is then deducted from their account details stored in the Sony network. 2 things amaze me here. The first is that people are actually BUYING (with real money!) virtual clothing. Secondly, the people buying these products are the obsessed, the dedicated and early risk takers. These are the exact people every company wants, actually needs, to sell their product to.

Will we be seeing dedicated virtual furniture companies appear to take advantage of this demand? Where else can you sell 30,000 couches and $4.95 each and make a profit? Where else would people actually buy them? Will Sony rent out virtual space in their virtual shopping mall or take a percentage of what is sold in the network? How will they control the demand and what limitations will be in place?

Again I’m not interested in the specific environment details so please don’t point out the little nuances as I’m sure there are may. The reason I think this would create amazing opportunities is because you are not selling to the masses here. You are dealing with the small minority and the early adopters who would purchase such products. What gets me bug eyed is the fact that you don’t even need to search for the early adopters, they are already there, buying! These are the people which companies hunt down to sell to because they talk and spread the message. Now Sony has done the hard work and successfully rounded up this bunch and plonked them into a massive online environment. Can Sony charge a premium? For sure. Would it still be worth it? You bet!

The more I live an entrepreneurial life, the less inclined I am to consider new business ideas that use advertising as the key revenue generator. Advertising in general has proven to be an extremely fickle industry, duly rocked by any signs of economic uncertainty.

Recently Mark Cuban put up a challenge on his blog which he referred to as open source funding. Top line stuff.. post your business ideas on the blog and he will consider funding it. However there was an interesting catch, one of the prerequisites was that the business could not generate its revenue from advertising. There was a backlash (albeit sycophantic ones.. err excuse me sir.. umm please… type of thing) in the blog comments about why they can’t use advertising. Mr Cuban put it there for a reason, he knows the pitfalls and hurdles of using advertising as revenue.

Advertising as revenue is very temperamental and difficult to sustain but most notably it’s a very long hard slog to get it to a profitable stage. Anyone who has a website or a blog knows that generating traffic is not particularly easy, let alone generating enough traffic to make it profitable. These same people also know that you don’t generate traffic overnight and it takes years and years of picking away at it to get to decent traffic levels.

The advertising supporting a business businesses is not viral, their offering is viral. So why not sell the object that is viral in the first place? Now that would be profitable. As Seth Godin would put it, ‘the sneezers’ for a good product, sneeze loud and clear and people listen. Who sneezes after using a good advertising portal? Is a good advertising portal sneezable? Remember your dealing companies and business who are competing for the same market, if they find a good advertising medium they would most probably keep it to themselves. So what that means is that you as a company director, as a salesman, need to contact, pitch, negotiate and sell to as many advertisers as possible, one to one, to get business trickling in. Their is little assistance from word of mouth so the rate of growth is directly proportional to the hours you put in and the numbers of potential clients you have been able to speak to. If you had found an effective advertising medium would you tell your find to your competitors? So forget about a group of loyal and happy customers spreading the word. Reaching critical mass with this model is an excruciating and drawn out process.

Think Facebook. Think Myspace. Think Twitter. What do we know about their revenue model? It has been well documented that these guys simply can’t find a way to tap into their massive user base and turn it into cash. More important to note is that their service of social networking spread like mad because they offered an extraordinary service. The advertising isn’t extraordinary. Tapping into the advertiser market doesn’t come as freely, even with hundreds of millions of users and impressions. But of course the word is being spread, its just not the words they really want to hear.

Capital. Capital can be likened to life giving blood of any business. Like any body, in order to become strong, a business needs capital to foster growth. Without it, the business may simply become weak, continuing to shrivel up until it dies.

However like a living body, you simply can’t keep pumping capital and expecting that same type of growth. There is a point when you will reach critical mass where any further injections will do little for sustainability. If you feel that you continually need to pump more cash into your business to sustain it, then the model is fundamentally flawed.

Capital needs to be treated simply as a means by which to get to a stage where your business is self sustainable. With the exception of expansion, where a business is run correctly, with a sound business model and a product or service that adds great value, should in most cases not require continued injections of capital in order to keep it going.

So back to the issue at hand here, do you VC or not VC? Are you happy to go through the the process of searching and working with a venture capitalist, giving up much of the autonomy that attracted you to getting into business in the first place. I am not against using a VC to raise funding however I look at it a different way. If a VC gives you $300k in funding I guarantee you that you will spend every cent and may or may not achieve your desired outcome. But even though you spent every cent I don’t believe you really needed the funds you thought you did.

How much do you think you need? Again lets try using Pareto’s Principle (the 80:20 principle mentioned in previous post) and apply it to this scenario. If you are after $300k to get a product from concept to something fully functional and marketable, according to this principle you will use $60k to make 80% of the final outcome. So out of that 300k, 240K of it is used to make up 20% of your final outcome. For example you may spend 20k on a decent office fit-out however only really use your phone and PC (roughly $4k?) to make you your money. Sure impressing prospective clients and feeling comfortable in your environment helps but I’m guessing its effect would site around that 20% mark. This is a broad example but it does put the concept into light.

If you are after a VC’s money first ask yourself if you really need it now and determine whether you can raise your own start up capital. By doing the calculations you will be very surprised how far a bit of frugality will take you. The great bi-product of this approach is that if you find you need the assistance of a VC later down the track, your previous signs of efficiency and discipline would certainly not go unnoticed by any potential investor, further increasing your chances of getting someone on-board.

Want to know a few guys who started out with next to nothing? Visit Business Pundit and see.

Acceptable. Understandable. Tolerable.

This describes the current sentiment when you witness company after company slashing jobs and restructuring their businesses in order to ensure survival in these turbulent times. After all business is bad and who has the nerve to question any organisation making any harsh moves? Who questions a company when profits and valuations sink to new lows? Not many. It’s to be expected. Times are tough.

So who’s bluffing? Who is playing their hand knowing that no one is going to call them on it? This week saw the announcement of 1850 jobs slashed from Pacific Brands, one of Australia’s iconic companies. These jobs were slashed with the hopes of improving profits by outsourcing manufacturing to Asia. Acceptable. Understandable. Tolerable. What happens when, just after announcing job cuts, the board are also found to have given themselves considerable pay raises?

This really gets the thinking juices flowing. Is the laying off of staff something that they have wanted to do for a while yet it would have been so socially wrong it could have brought their iconic brands into disrepute? Is the timing of such a move really only that, good timing. Picking a time where ditching almost 2000 Australian jobs is actually considered acceptable. Everyone knows at least one person who has been made redundant, so for the 1850 its simply joining the long growing queue which is now not such a big shock. Was this another good reason for Pacific Brands execs to let go as the timing also minimises chances of an internal backlash?

Pacific Brands have certainly been called on their bluff. Now lets see if the public will stop accepting things on face value and learn to question motives as corporations try to sneak under the “GEC” radar.