The Boston Consulting Group matrix is a classic business tool, taught in business schools and MBA courses all over the world. I was writing about the things I learnt on my MBA course and if any of these are of use in the world of small business, and I thought of a version of the BCG matrix I use all the time with clients. If you want to know whether I think an MBA is useful for running a small business, read this, and here is the classic version of the BCG matrix, as this is a highly distorted Julia version.

The point of this little picture I draw for clients is to illustrate how different services or products bring in cash at different times for the business. And the most important factor in running a small business is cash flow, because without good cash flow you are stressed or dead.

This is a picture of the cash generated by a business which sells three things – cats, llamas and hippos. Every month, the business sells lots of cats. The blue section of the graph shows that cats are a good, regular seller, bringing in regular amounts of lovely money. In BCG terms, they are cash cows. Apologies for mixing my animal metaphors here.

Every few months, the business sells some llamas and some hippos. These are higher priced animals, so they’re good for cash flow, but we can’t rely on these sales as we can do with the cats.

My point is that your business needs both types of sales. You need the regular cat sales, even though this doesn’t bring in the big bucks. But the solid cash flow from the cats allows you the time to develop your sales of the llamas and the hippos, which top up your sales.

Which ones are your cats, llamas and hippos?

Many years ago I started doing my MBA course. I was working full time, setting up and running social enterprises in Edinburgh, and I had to work lots of evenings. I didn’t want to give up my friends and my social life, and I still wanted to go to the pub. I knew that I was going to have to study 10-12 hours per week, on top of the 50-60 I was already working. Something had to give.

Photo by Vicky Townshend

I asked around other MBA students who were already doing the course. One woman told me she got up at 5am to do 2 hours studying before getting her kids to school and then going to work. I knew this wasn’t going to be for me. A couple said that they spent all weekend studying – again, I knew that I wasn’t going to be able to resist going out to play, but that I could spend Sunday afternoons (the most boring time of the week) on the books.

And then someone said that they’d given up TV, and it had freed up enough time to study. So I looked at how I spent my week, and thought about what programmes I actually enjoyed watching. I decided that I would tape those programmes; this was a while ago, so I was recording ER and the West Wing on video tape.

And I’ve hardly ever watched live TV ever again. I have no idea what happens in East Enders, and I run away from the living room shrieking if I know Come Dine With Me is on. I record (now on my DVR) some quality drama, comedy to cheer me up, and some films. When you include films, I probably watch about 5-10 hours of TV a week, but it’s all things I actually want to watch, and I’ll actively enjoy.

Apparently, average TV viewing in the UK is 30 hours per week. I’ll leave it to you to decide how much of my extra time I spend on running my business, how much on reading novels and business books, and how long I spend in the pub……

One of the charming commentators on my blog in the Brighton Argus said that I was jargon ridden. I looked over some of my blog posts and couldn’t see any business jargon, so I thought I’d put some in here to keep him happy.

So here are some of the juicy jargon words I’ve noticed myself using recently with my business advice clients, with definitions of what they mean in plain English for real people who happen to run businesses.

Opportunity Cost

This is the cost of choosing to do one thing over another. If you spend 5k on making a new website to promote your business that’s 5k you don’t have to spend on other opportunities. Maybe you’ve decided to do the website rather than a direct mail campaign (usually the right decision) but doing one thing can often mean you can’t do something else.

Opportunity costs don’t have to be financial – maybe you’ve committed to spending 30 minutes per day on Twitter to build relationships with potential clients. The opportunity cost is all the other things on which you might have spent that 30 minutes per day.

Often in business, we make decisions based on weighing up the pros and cons of different things to do. The opportunity cost, or what you’re missing out on, can be a big part of that decision.

Scalability

Image by Vicky Townshend

I use this one all the time. I look at businesses in terms of whether they are scalable, and in what way.

Scalability means the ability to make the business into something much bigger. If you are a one person business which needs you to make the thing that you sell, such as many consultancy or craft based businesses, scalability can be quite difficult. On the other hand, if you can teach other people quite easily how to make the thing you sell, you can grow your business much more easily just by bringing in more people. You’re scalable.

As I work with businesses to help them to grow and make more money, one of my first jobs is to work out how a company can be made to be more scalable, as this is one of the key success factors you need to be a winner.

Here are some other articles where I talk about scalability issues for small businesses:

Key success factors

From freelancer to grown up business

Scaling up your business

Marketing Collateral

Fancy name for all the things you use to get your marketing name across, such as business cards, website, leaflets. We think of collateral mainly as security for a loan, but it also means “in support of” in this version.

Your Favourites

What are your favourite business jargon terms?

Part 2 of business jargon definitions covers sensitivity analysis, KPI’s

Part 3 gives definitions of discounted cashflow and return on investment (ROI)

Many of the business owners I advise are sponges – and I encourage you all to mop up less.

Photo by tonipieleanu

What are you going on about Julia?

What I find myself and other owners of small businesses doing is mopping up after everyone else. Your employees do their thing, and then go home at 5.30, whether they’ve finished their to do list or not. While you stay on, or come in at the weekend to make sure that everything is finished off.

And the spongy business owner does all the things that it’s not clear whose job it is. Mrs Sponge notices when we’re out of post it notes, and picks some up in Sainsbury’s when she does her food shopping. Mr Sponge will also do everyone else’s expenses, empty the bins and sweep the snow away in the car park.

Sound familiar?

Business owners are leaders

Now all of this is just you stepping up and taking responsibility for sorting things out. Getting into action is a sign of a leader; followers expect someone else (maybe a magic elf?) to take care of all of these things.

Which is good. But is doing this stuff actually the best use of your time? Might you be better concentrating on all the things you’re really good at, such as sales, product development, looking after your top customers? You’ll notice that these are the things which will add value to your company. Emptying the bins does not increase turnover.

And of course what you’re probably doing is emptying the bins in the evening in addition to everything else, so you spend too much time at work doing the dull things and not enough time enjoying the fruits of your labours and relaxing.

How to stop being a sponge

Draw up a job description for yourself. What is your role in the company? This is a very revealing exercise, as most of us have started from a position where we had to do everything, and we continue to do everything.

Decide who else should do all those little things which eat up your time. You can spread this round the team, e.g. everyone empties their own bin, Sonia does the expenses and Simon is in charge of stationery ordering. Or you can make one person office manager, on top of their usual role.

One successful entrepreneur I worked with had a no touch policy. He was determined to concentrate on what he was good at (in his case, sales) so he gave absolutely everything he could to everyone else, even if it was just photocopying a sheet of paper. He loved to sell, so he just wanted to get out there and meet potential customers.

While this might seem extreme, and of course, needs a good team around you, there are some lessons for the rest of us. Often we fail to delegate because it seems like too much trouble, or because we don’t like to boss people around. Or because we’re afraid to ask. Or we’re afraid to be seen as the boss at the top of the hierarchy.

My advice here would be to ask people nicely, say thank you, and remember that even if you have a very flat structure, and want to empower everyone around you, you are the boss and people will expect you to tell them what to do. That’s part of being a leader as well.

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I like to share some of my bag of tips and tricks which I use to advise my clients, so here’s one which I suggest regularly.

The 10 minute team meeting

Looking after customers, chasing suppliers, paying the bills, updating the website…… does this sound like anyone you know? Many of the business owners I work with are so busy running their businesses that they don’t have time to let their staff know what’s going on. Unfortunately, this can be a recipe for disaster.

If staff don’t know what the business is doing on a strategic level, they’re not going to be able to help out. If they don’t know about the new service you want to develop, they won’t be able to tell customers that it’s on its way, so you’ll miss out on potential sales.

If staff don’t know what each other is doing, you’ll get two people doing the same thing, often in very different ways or Maggie will assume that Tom is doing it, and vice versa. Or no-one will do it.

Unless you tell staff what your sales target is for the week, how do they know whether they’ve done a good job? And if you want to sell a lot of red things this month because red things have got a better gross profit margin, you need to be able to tell everyone else to sell red, because otherwise they’ll be focussed on the orange things.

Emailing people is not enough

You might think that you’re mentioned the new products or the great margin on red things. But in reality, people don’t remember everything they’re told about, especially in our world of constant emails and potential information overload. People need to hear the important things from you – you can’t get your passion for red things over in an email. The power of thanking someone for a job well done is raised exponentially if you thank them in front of everyone else.

Why people don’t have team meetings

• “We were busy that week so we didn’t bother.”
• “Morag was in late, so we skipped the team meeting.”
• “Everyone’s so busy.”
• “We used to have them, and they were really useful, but we got out of the habit somehow.”

Rules of the 10 minute team meeting

Most of the meetings we have in a company are a waste of time. But this one is important. Here are some suggested rules to make it work:

1. A 10 minute team meeting takes 10 minutes. No more.
2. Have the meeting standing up. People are less likely to blether.
3. Talk about the same things each time – maybe you could pick a couple of these to have as regular agenda items:
   • Targets
   • did we meet last week’s target? What are we aiming at this week?
   • Special things to look out for, such as red things, or people who are interested in buying the new apricot flavour we’re trialling.
   • Things that are going well. This is where you get to say “well done” to people and make them smile.
   • Things that are not going so well. Do not identify or blame individuals here.
   • Holidays / people who are going to be out of the office.

Try it, and let me know how you get on.

And by the way, if you’re reading this and thinking, “Oh, that’s all very well and good, but there’s only me and the cat in my company”, you could try having a 10 minute meeting on your own (or with the cat) and see if it helps clarify your thinking. I bet it will.