Truth in the Face of Authority

I’m often called upon by clients to solve a problem. An outsider’s impartial point of view is helpful when solutions aren’t being developed in-house, usually because the stakeholders are too close to or vested in the problem to see the solution.

Sometimes, when I consult, the problem is small enough to be fixed quickly – another step in a procedure or a streamlined, digital content management system networked to outside sales personal. So, step one when meeting with a client is to define the players and gather their views on the cause, scope and solution to fixing the problem. Invariably, during this discovery phase I hear all sides of all issues. I also hear statements that are made in the “strictest confidence.”

Other times, I’m called to assess and solve a problem that has progressed to the stage of jeopardizing the company’s viability. These are “life-preserver” situations where a quick solution is the only answer. In these cases, I interview owners, managers and employees, again, to gather various points of view, sometimes in “strictest confidence; don’t use my name.”

The Two Causes of 99% of All Business Problems 

Read the rest of this article here.

What the US dollar means to Australian companies

Like most Australian business people I keep a close watch on the A$ - US$ exchange rate.

We’ve seen the American dollar take a beating in foreign exchange markets around the world so how does this work to the benefit of Australian businesses – especially those doing business in the US?

First let’s look at the local benefits.

The Price of Commodities

The cost of raw materials is measured in US dollars. The cost of a barrel of oil, for example, is measured in US dollars. So, as the dollar shrinks in value, the cost of those raw materials – everything from pork bellies to petrol will continue to increase in price.

Small companies that rely on raw materials can expect to see higher prices, not simply because of rising demand (the increase in the price of a barrel of oil is not driven by supply and demand – demand for oil in the US has dropped in recent months), but expect to see the cost of goods increase as the dollar continues to weaken against most foreign currencies, including our own dollar.

The Cost of Doing Business With US Companies

Our Australian dollars grow in value against the US dollar so we get a bigger bang for our buck when converting Australian into US dollars. However, what happens if the Federal Reserve Bank moves in to shore up the US dollar? Will that help the Australian economy? Not in the least. Take a look at the US stock market reaction to the Fed propping up Freddie and Fannie (Mac, that is).

Buying US Debt

Wars in Iraq and Afghanistan, the mortgage meltdown and the uncertainty of who the next US president will be (the race between Obama and McCain is still too close to call) have all taken down the US dollar.

Consider the Euro – one of the most important currencies on the world market. On July 11, 2008, 0.62901 € bought $1.00 USD. No wonder Europeans are flocking to the US this year. It’s almost a bargain. But before you fly off to LA for a little shopping spree, expect to see changes in the coming months.

Ben Bernanke, Fed Chair, has already indicated that rate cuts for the US dollar are in stalled mode and the bank buzz is that the Fed is actually planning to raise interest rates. This, will of course, prop up the dollar’s value by making borrowing more expensive. But it’s going to have a negative effect on American consumers with adjustable rate mortgages and credit cards. US dollars become more expensive, Americans spend less. Want proof?

Petrol consumption in the US dropped 11% since the price per gallon topped US$4.00. So, as money becomes more expensive, Americans spend less on non-essentials, and that’s NOT good for Australian businesses that export goods and services to the States.

And, as the world economy sees the US take action (as politically painful as it will most certainly be for the next US president) to prop up the American dollar, we should see commodities actually drop in price – deflation at the expense of the American consumer.

Your Bottom Line

If you’re an Australian business owner, this is one of those good news-bad news scenarios. If your business base is almost exclusively Australian, you’ll see improved margins as commodity prices stabilize with the stronger dollar. Of course, this assumes your business purchases raw materials on world exchanges.

On the other hand, if you export services or goods to US consumers, expect to see a pullback in consumer spending in the US. Heating oil prices in the US have almost doubled and Americans will be spending whatever earnings they bring in on heating their homes, driving to work and putting food on the table.

This week’s rise in the US stock market doesn’t hide the fact that the US is in what prognosticators call a “technical recession.” I wonder how American homeowners facing foreclosure feel.

It’s not a technical recession when you’re about to lose your home. 

Pay-Per-Click: Scam or Gold Mine?

I’ve received a handful of emails from friends and clients asking about whether they should add a PPC (pay-per-click) program to boost site revenues. I’ve studied PPC programs and learned a great deal about them – enough that I can warn my clients and you away from this form of on-line advertising.

Google AdWords and AdSense

Perhaps the best known of the PPC programs, Google AdWords and AdSense appear as the 60-character blocks on the right hand side of SERPs and web sites. They’re ubiquitous and, in my opinion, all but invisible they’re so commonplace. But that’s not the only problem I have with PPC programs, and Google’s AdWords and AdSense in particular.

With AdWords, you create those blue-cube links to your site. You bid against others (often deep-pockets bidders) for the most highly-used keywords which will, naturally, come up more frequently and consequently deliver more impressions. Now, AdWords, according to Google, are supposed to be placed contextually. For example…

…if your site sells wine accessories on-line, your AdWords cube would organically appear on oenophile (somebody who has a passionate interest in wine)  websites. At least that’s the way it’s supposed to be. However, I discovered numerous complaints from AdWords buyers that their links appeared on sites that had nothing to do with the topicality of their sites – a cruise ship link on a site leasing oil and gas rigs. Huh?

But it gets worse. I also discovered more than a few AdWords users who actually discovered their links on foreign language web sites. Would you click on a link written in Chinese? Or Russian? Well, neither are the Chinese or Russians going to click on a link in English so what good do these impressions do the AdWords subscribers. None, even though they’ve bid on keywords that are supposed to be related to the subject of their sites. Instead, your car parts store site link appears on an Armenia site selling combines.

AdSense is the reverse of AdWords. You agree to allow Google to place AdWords on your site and you earn revenue each time there’s a click through. Sounds like a good idea.

I don’t agree. I think those AdWords skyscrapers in the fourth column right give any site a low-rent, carnival midway look. Imagine logging on to the site of a law firm and seeing a stack of PPC blocks running across the top of the page, or down the side or across the bottom of every page. This is a law firm interested in generating revenues not helping clients, ergo, not the law firm for you.

PPC Fraud

One of the positives of PPC advertising is that you only get charged per click. No clicks, no charge. You can also set a limit of advertising outlay over a certain period of time, you can prevent cubes from direct competitors appearing on your site and, in fact, define what are acceptable AdWords for your site.

However, PPC click fraud can very quickly gobble up any AdWords budget and despite protests to the contrary, Google has yet to take an pro-active stance against this burgeoning problem. Frankly, there isn’t a great deal of motivation to take action on Google’s part because: (1) they are the biggest PPC purveyors with the most expansive reach and (2) Google gets paid for the click whether it’s legit or fraudulent.

PPC fraud is simple. A competitor site owner and all of his friends click on your PPC links at 50 cents per click. It won’t take long for your $20 PPC budget to disappear. And not a single sale.

Ah, but the plot thickens. There are actually gangs engaged in click fraud. Sweat shop workers are paid a penny a click each time they click on a PPC ad that appears on their “client” list.

There are PPC fraud programs that change IP addresses so all the clicks don’t come from the same competitor’s IP address. Too easy, but technology makes it possible to scramble IP addresses with each click.

Now Google promises to return revenues derived from click fraud but it’s up to the victim to prove the fraud! Like I said, Google isn’t really motivated to crack down on click fraud.

Is PPC Good for Small Australian Service Providers?

No. I wouldn’t recommend it for a couple of reasons.

First there’s the fraud problem and Google’s apparent apathy concerning an immediate fix (though fixes are in the works, we’re told).

There’s the expense, especially when you’re competing against deep-pockets competitors for the most popular keywords. You could easily spend $5 - $10 per click. Easily. And there’s no guarantee that the site visitor is qualified or “just looking around.” In other words, they have yet to be converted to buyers.

Third, small service providers are looking for regional business and with Google’s track record of contextual AdWords placement, your link may end up on the site of a Finnish ski resort. Not exactly a placement to drive traffic.

I think young e-businesses should spend time establishing links with similar but non-competing sites. Time should also be taken to optimize every site page and to employ guerrilla tactics to pick up some pixels and get a little link love.

There may come a time when PPC makes sense and there are actually companies that track your site’s PPC activity for signs of fraud, which shows you how widespread the problem is, but they are effective and worth the expense if you add Google’s AdWords to your marketing arsenal.

Until then, cash is king. Don’t waste it or lose it to scammers. 

The Obama Effect

American politics are more complicated than a Rubik’s Cube. There are delegates, pledge delegates, super delegates, unseated delegates – and we haven’t even started to think about the presidential election in November. To those of us in the rest of the world, it’s weird.

The U.S. Economy and Small Business

The U.S. economy has become a bellwether for the state of world economics due to the sheer size of the country’s GDP. The U.S. produces more than Germany, Japan and the UK combined.

During the Bush administration, we saw economic good times for a few years with the Dow just peaking out at the 14K level but since then it’s been down significantly.

The dollar continues to weaken against foreign currencies – especially the Euro – the sub-prime mortgage disaster is draining equity from U.S. homes (80% of assets owned by Americans are in their homes), commodities markets are reaching new highs on oil, corn, wheat and precious metals, which in turn fuels the U.S. inflation rate, currently running at 4%.

It has been clear the Americans want a change from the failed economic policies of the Bush administration – from Greenspan’s devaluation of U.S. currency (at one point available to institutions at 1%) to Bernanke’s Chinese water torture approach to economy management. Despite a couple of drops in U.S. lending rates (including one of 50 basis points) the U.S. economy is in the dumps.

Which leads me to:

Barack Obama – Economist’s Rookie of the Year 

Read the rest of this article here:

http://strategies.com.au/art0806.html

“Sinister Evil” Lurks in Under the Surface

June 3 was Australia’s “will they or won’t they” day. The day each month when the Australian Reserve Bank announces whether they are to raise official interest rates (allegedly to keep inflation in check).

Just one day earlier I happened to catch a compelling report from CNN’s financial analyst, Erin Burnett, on what she described as a “sinister evil” in world economies: inflation.

This spine-tingling report sent me straight to Google to review my understanding of the role global inflation plays in the activities of local and regional service providers.

The research pointed to some startling conclusions. First, the numbers:

Inflation Rates in Key Economies

As inflation nibbles away at the service providers’ margins, often these small business owners are at a distinct disadvantage – especially when conducting business in some of the key world economies:

Economy                                    Inflation Rate YTD

Australia                                              4.1% (according to the RBA)

Europe                                                 3.6%

United States                                       4.0%

Russia                                                14.0%

Thailand                                              6.0%

Malaysia                                             10.0%

Now, many of us do business in at least one of these economies, and as competitors in a marketplace, we have to deal with rising inflation on a global scale.

Americans are squealing at $4.00 a gallon gasoline. That’s going to change business activities in the U.S. As such, if you conduct business with an American firm, you have to take into account a 4.0% inflation rate in the States AND an Australian inflation rate of 4.1%. In fact, small service providers are often hit first and hit hardest when inflation – the sinister evil – reveals itself at these high levels.

The Impact of Global Inflation on Small Businesses

Significant, on-going and growing more troublesome each quarter.

Let’s start with the cost of money. The Australian Reserve Bank’s traditional economic wisdom declares that to fight inflation, lenders increase interest rates, making money more expensive to borrow. By slowing economic growth, inflation declines. However, according to my research, it’s not at all unusual for inflation rates to remain high as long as six quarters after an interest rate increase based on production already in the pipeline. That’s what makes inflation “sinister.” It’s always hiding within economic growth – until you begin to smart a little. So, impact #1: slimmer margins on delivered services.

Chances are, to remain competitive in any local market, your company will have to “eat” some of that 4.1% inflation rate we see in our Australian economy. And, if your business works with companies in high-inflation states, Russia, for example, the ability of Russian companies to borrow for growth will be severely limited. In this case, it might be time to examine other markets where local inflation still allows your business to grow more profitable.

Impact #2: Higher operating costs. Assume Australia’s inflation rate remains at 4.1% for the foreseeable future (and 5% is more likely). Your business buying power decreases accordingly. It shouldn’t be too hard to do the math. Look at your figures from last year, deduct 4.1% and you’ll have a general indication of where you’ll be at the end of ’08.

Solutions

Apart from increasing prices (which perpetuates the problem) here are a few cost cutting measures small businesses can consider.

Be your own bank. If the company has reserves, use them to continue business expansion rather than paying interest on inflated currency.

Cut expenses. If you haven’t used it in the past six months, you don’t need it. Cutting operating expenses may require downsizing your staff. Make sure that you maintain marketing staff, especially in inflationary times. The best way to beat inflation is by expanding your client base and for that, you need marketing.

Pay down business debt. If you’re operating at net 30 with interest accruing on day 31, you’re tossing money out the window. Pay your vendors and contractors on time.

Eliminate Variable Rate Credit Cards. Do the research to avoid variable rate company credit cards. Lock into the lowest rate you can and remember – interest rates are negotiable on credit cards. The credit industry is one of the most competitive in the world so American Express or Visa may lock you in at a lower rate simply by asking them to.

Only borrow at fixed rates. This does a couple of things. First, you can calculate your monthly expenses going forward. Second, if inflation continues you’ll pay off that fixed debt with inflated dollars that actually have less buying power. You’re paying back less and less in buying power each year as inflation rises.

Inflation isn’t on the horizon. It’s here, now. If you aren’t feeling the pinch just yet, wait a few months. It’s going to get worse as the demand for money around the world increases, creating increasing levels of inflation.

Take steps today to ensure a solid business foundation for the future.

Oil Closes at $200 A Barrel, Is Your Business Ready?

Oil closed at USD$120 today for the first time. Also for the first time, I heard these talking head prognosticators projecting USD$200 a barrel oil.

I was thinking about the impact this might have on my clients when my usual airline passed rising fuel prices on to passengers, yet again.

What can you do if your business involves travel – getting yourself, your message, your goods and services from Point A to Point B?

Is Your Business Ready for Higher Costs?

Raw material prices will rise as the cost of transporting these goods rises. So, even if you don’t maintain a fleet of delivery vans, your business is going to feel the pinch one way or another.

So what can you do to survive in a climate of rising fuel costs that are fueling inflation of all goods and services?

Seven Tips to Help Your Business Survive a Big Oil Crunch

1. If your business employs a number of people, organize a carpool to defray the costs of getting to and from the office.

2. Allow employees to tele-commute. Security encryption software ensures even sensitive data moves seamlessly from home work station to office network.

3. Order early. Whatever your office needs, order early and use the lowest shipping priority available. This is also true of shipping items. Offer clients or customers a slower but lower-cost means of shipment.

4. Use the back office of your company web site to create a Project Board – a page listing all current projects, to whom they’re assigned, uploaded research, message boards – a virtual office. This content management software enables you to track progress on projects from anywhere.

5. Outsource. It’s an ugly word to many small business owners but these are desperate times. And small businesses are going to take the hit first. You can outsource any task – legal, administrative, clerical – whatever the task, someone will do it for less than you’re paying now. If this sounds cruel, consider the alternative.

6. Expand your margins – slowly. Avoid creating “sticker shock” among clients and customers by expanding margins gradually rather than in one big price jump. Increase cost of goods and services slowly – below the level of inflation to create a more stable and accepting client base.

7. Open a VoIP account. Skype, for example, enables you to talk to clients around the world free. It doesn’t replace face time but it’s always good to stay in touch with your regulars, regardless of where they’re located.

The price of fuel may be hurting your business now. Chances are, it’s only going to get worse in the months and years ahead. Now’s the time to reconfigure your business to manage higher fuel prices, higher salaries, insurance, rents, airline tickets and lunch.

Yahoo Walks Away Leaving $47.5 Billion On the Table

Like many business people I have been watching the Microsoft / Yahoo saga with interest.

On May 5^th, 2008, Jerry Yang, CEO of Yahoo, and his band of accountants, negotiators and consultants walked away from Microsoft’s $47.5 billion offer to acquire the second most popular search engine/portal site in the world.

Interestingly, despite prognosticators dire predictions of a 30% drop in Yahoo share price, May 6^th revealed investors had pumped up Yahoo’s share price by 6%. Indeed, there are Yahoo shareholders still holding out hope for some sort of buy-out on the part of Microsoft, and though the software giant is known to play hardball in negotiations, Yang knows a thing or two about search engines. He knows even more about content – and plenty of it.

The Marriage Between Google and YouTube

In ’07, Google bought fledgling YouTube (founded in 2005) for $1.65 billion, making instant millionaires out of the two college roommates who thought it would be fun to post funny videos. This corporate alliance changed the way people use the web.

Google quickly integrated the thousands of video clips from its acquisition into Google’s SERPs. Now, to watch a video clip, you Google the subject, Google generates the SERPs and links to the video are provided right there on the SERPs. You, the searcher, never leave Google. Google comes to you. With content. Stupid content, poignant content, political content, how-tos – it’s endless.

This marriage between search engine and content developer showed the synergies that can be created between SEs and good stuff to watch or read.

That’s Why Bill Gates Wants Yahoo

Microsoft owns the OS market. Certainly in the home and small business worlds. However, Microsoft doesn’t have a search engine (MSN employs Inktomi) and it doesn’t have much good content. The company’s online presence, MSN is a perpetual also-ran with a short life expectancy.

Microsoft, to maintain its pre-eminent position at the apex of computing and information dissemination, needs content and a means of accessing that content.

Today, Yahoo closed up on the NASDAQ. Let’s see if Microsoft comes back to the bargaining table. From my perspective, Gates and company don’t have much choice and Yahoo knows it. Yang wants more, and don’t be surprised if this hard-headed negotiator gets what he wants – a bigger payout for Yahoo shareholders. 

How a Country Motel creates a Point of Difference

Driving from Canberra to Adelaide this week I spent the night at the Saltbush Motor Inn (http://www.saltbushmotorinn.com.au/) in Hay NSW.
(http://www.visithay.com.au/)

I have stayed here three times now and here’s why:

* The rooms are spotlessly clean
* The beds are comfortable
* The hot water is hot and plentiful

I can hear you saying so what, that’s what you expect everywhere. But they also:

* Have free Internet in every room (common in the US but usually cost $25.00 a day in Australia). Australian hotels seem determined to build Telstra’s portable modem business.
* Give every guest a little pack of delicious home made cookies (and yes they have the standard free biscuits in every room)

What is your point of difference?

You Don’t Know What You Don’t Know!

I was preparing a presentation titled “The Winning Edge” for a group of insurance brokers and I was thinking about the importance of data.

A small company of 20 or 30 employees generates a lot of important data – data critical to making fundamental business decisions, to determining the company’s course and to increasing productivity.

Unfortunately, much of the data is never collected and that which is received by mid- and upper-tier management is virtually useless. Why?

Because too often data is collated and reported by IT professionals for IT boffins.

Even in the boardrooms of enterprise-grade corporations, each individual board member has a different level of understanding of the information contained in a report. For example, it’s unlikely that the Head of Marketing will understand the consequences of downstream cash flow on R & D based on 200 pages of numbers, charts, graphs, circles and arrows. It’s still gibberish to that executive.

Read the rest here

Lights, Camera, Action

It has been a couple of weeks since my last post. During that time I have been to Alice Springs in Australia’s outback. 

For some time I have believed that “immersion” events, where the whole audience is immersed in a single conference theme is a more effective learning model than the traditional company or association conference where speaker after speaker rise to deliver their standard PowerPoint presentation.

Financial advisory group Synchron were brave enough to try my concept at their bi-annual advisers conference held in Alice Springs (in Australia’s Outback).

In brief, the conference was designed as an estate-planning scenario that reflected on a number of “real life” situations as they emerged in the life of Alice Springs trucking business owner Richard (Dicky) Goer.

In the opening scene, Dicky attends a meeting with Financial Adviser Mick Madden (played by me) following a suggestion from his wife Amanda.

Over the scenes that follow:

• Dicky is in an accident and is hospitalised
• Dicky dies and there is a funeral
• At the will reading the wife discovers that he has a very pregnant girlfriend (and they have a wonderful fight in the lawyers office)
• Dicky rises from the dead (misdiagnosed)
• Attendees present their advice based on the facts revealed as on-stage presentations.

 At each stage various “experts” are called in to give professional advice about ares such as:

• Business structures
• Powers of attorney
• Investments
• Insurance
• Insurance claims management
• Retirement funding
• Wills 

Maybe I have found a new career.

The Main Players

After the Accident - Dicky with Adviser (Yours Truly - red tie) and Lawyer

 The Funeral 

Rising from the dead