If Brexit happens, what then?

Brexit

The phony war is over, the real war has begun. On Friday, the first official day of campaigning started with those that favour UK leaving or remaining in the European Union making their opening arguments.

Prime Minister Cameron, coming off a difficult week thanks to the Panama Papers and findings around his father’s money, is arguing for the country to remain “in a reformed, modern EU”. His adversary, Boris Johnson, Mayor of London, and fellow Tory, speaks about “a glorious alternative” where Britain takes back control of its own destiny.

The UK referendum is still 2 months away (June 23rd) and polls show it is on a knife edge ~ the latest one showing a tie or there being one point in it. Considered wisdom seems to be that the most likely result is a small majority to remain in the EU, but this is not guaranteed at all, and even if this happens, things will have to change. A ‘leave’ vote could precipitate a change in Prime Minister, and then 2 years of negotiation of hundreds of trade agreements and arrangements.

What is the EU?

12 years after the end of the second world war, the Treaty of Rome was signed by 6 countries (Belgium, France, Italy, Luxembourg, the Netherlands and West Germany) which led to the creation, on 1 January 1958, of the EEC (the European Economic Community). The UK was not a part of this, and requested to join (along with Norway, Ireland and Denamrk) twice during the 1960s, only to be blocked by then French President de Gaulle (who feared growing US influence through a UK admission). With a new President (Pompidou) in France in 1967, the admissions were agreed, but Norway subsequently voted in a referendum not to join. Years of negotiation then took place, and on 1 January 1973 the UK, Denmark and Ireland joined to become 9 countries in the EEC. In 1975, UK held a referendum on whether to stay in, and by a vote of 2 to 1 voted ‘Yes’ to the EEC (or ‘common market’ as it was referred to in UK).

The 70s

I remember the admission to the EEC and that referendum. The choice (for my 10 year old intellect) seemed to be about ‘joining Europe’ in order to ensure peace and friendship with our European allies, along with wider access to goods and services (before this time we only ever had grapes if we were on holidays “on the continent”). After admission, the range of fruit in supermarkets exploded. Good times. I’d only ever known apples and oranges before this.

The 80s

Greece, Portugal and Spain joined in the 1980s, and by then I was at university studying economics. Pretty much everything I read about the EEC was in favour. The massive benefits of open trade, reduced barriers, free movement of labour, closer monetary integration… in a single market of 350 million made sense to me, and I was all for it. Intellectually it made sense, and we were benefiting from a massive market, with free and open access of labour, goods and services.

The 90s

In 1993, the community became known as the EU (European Union) with more developments around monetary union and a single currency (the Euro) which came into effect (virtually) on 1 January 1999. It had always been a goal of European proponents in the 1960s (and even in the 1920s) to a closer and closer economic integration, with a single European wide interest rate and a single currency. The Deutschmark, the Franc, the Lire… 22 currencies in all disappeared in 2002, all rolled into one.

Meanwhile, the UK had started to lag behind all this ‘integration’. Never signing up for economic integration, and never for the Euro, the British pound remained outside the Eurozone. Various sputtering attempts were made to keep in line with the European Monetary System (EMS), with Black Friday and other events demonstrating the difficulties for the Pound (a petro currency) being forced to move the same way as various others. Meanwhile, the centre right Conservative party contained members of parliament vehemently opposed to the growing powers of the EU (the so-called Eurosceptics) and in the early 2000s, a new party, UKIP, was formed to contest elections on an anti-Europe (and often anti-immigrant) hard right platform. By 2014, it had attracted the largest vote in the European elections in the UK. Oh the irony.

Today

Fast forward to 2016.

There are 28 countries in the EU, enjoying the central 4 Fs (freedoms) – freedom of movement of money, products, services and people. The EU now covers 500m people, and a $18tr economy has been struggling. We’ve had periods where Greece, Portugal, Ireland and others have had to be helped to remain in the EU, post the GFC and the repercussions that ensued.

UK industry and the EU are now inextricably linked. 45% of UK exports are to EU.

In the 2015 Conservative manifesto, there was a promise to  hold an “IN OUT” national referendum on the issue of EU, if the Conservatives won the election outright, which they did. This ploy was designed to pull away UKIP supporters, and to some degree it worked. To the amazement of many, including all the polls, Cameron’s party duly won the election outright.

So on June 23rd there is a referendum on this issue. The polls are close. A leave vote gives the UK government the right to negotiate a leave agreement over 2 years. No one the size of the UK has ever left the EU, so this is a unique situation.

Assume UK leave…

The post leave vote position is very uncertain, and solutions would be found, but it would be very complex.

There are alternative models – such as a European Economic Area, which has Norway in it – and the EEA has bilateral agreements with EU but all EU regulations without seat at the table. This is unlikely to be acceptable to UK, having voted to leave mainly because of the subjugation of powers to Brussels.

The EFTA (Euopean Free Trade Area) model with countries like Switzerland exist, but again this open border model is not going to suitable be for UK.

So it would be a new model for UK if they leave.

It has been argued that 40% financial services business would move to EU; as UK is used as a place to get into Europe due to their being in the EU. The City of London has become a global financial services centre as a result.

Large new tariff barriers would be in place (the EU has massive common external tariffs around its borders), and all these need to be reorganized. There would be hundreds to renegotiate. It could be done, but it would take time.

Among the larger countries, UK has the strongest economy in the EU currently, so as the EU is client to UK (UK imports more from EU than it exports) so there would be a compulsion to put in place trade agreements. France and Germany alone make up over 20% of UK exports and imports. A new agreement with China and US and EU would all need rearranging with UK.

The U.K. has Commonwealth, so will not be alone and might increase trade there. The $10tr economy of Commonwealth (53 countries) is predicted to rise, whereas the $18tr EU economy is stagnating presently and has less upside.

Mood for change?

Older people are more for leaving than younger, but apart from that this the question is splitting people in the UK on every level. Everyone has an opinion. It’s not split on north south or rich poor, it is divisive all round.

Conservatives are for staying except for some high profile ministers. Labour are for staying. SNP for staying. The Telegraph and Mail newspapers are for leaving, Guardian for remaining; The Times is undecided. Big businesses are for remaining, smaller business are for leaving.

Referendums don’t often vote for change; most people in Australia want an Aussie head of state, yet when given the opportunity arose in 1999 they firmly voted against it. Same too with day light saving.

Could it be that when the Brits get in the voting booth, they will stick ‘with the devil they know’? As the Scots did in 2014? Is it that the ‘heart says go, but the head says remain’ and in the end the head will prevail? Maybe.

On the EU side, Europeans feel a mixture of dismay, irritation and growing apprehension around Brexit.  If UK leaves, Spain would probably next. If the UK stays, Holland and others may demand the same exceptions that UK has won.

And for Australia, there will be implications. Australia and UK are major trade partners, and Aussie and British firms have subsidiaries in each others’ countries. People move between them, and Australia is a #1 destination for non European emigration from the UK.

Either way, the EU is not going to be the same, and will evolve in some shape or another in the next few years.

Digital disruption and women – opportunities and threats

Last week I delivered a talk to the WA public sector forum for women on the topic of whether digital disruption is delivering opportunities or threats to women in the workplace.

The news is that it’s a mixed bag.

You can view my slides here, (or if the embedding has worked on your device, view them above and click through them.)

Here’s the summary:

  • I’ve been living and breathing digital disruption since 1999, with my own startup, then reiwa.com and now at Business News
  • Great things happen slowly – the overnight fad fades quickly – the changes wrought by digital disruption seem to happen fast, but have probably been building for years. Either get on board and change, or be changed
  • At Business News, our digital advertising has tripled in 3 years; our web traffic has never been higher, despite being behind a pay wall; our subscription renewal rates have never been higher
  • Disruption can happen to anyone, anytime, anywhere
    • 25% of WA GDP under attack over the next decade, from digital businesses like LinkedIN, Uber, AirBnB & Facebook … and who knows who else?
    • Are we getting behind our own tech startups in WA and Australia?
  • The “always on” worker is feeling under attack; never switching off; what kind of parenting is going on? How are we handling stress?
  • Disruption offers new opportunities (to shave costs, gather new revenue) and challenges
  • 61% women are in the workforce (men 77%) yet men earn 18% more (in WA, it’s 25% more)
  • 12% of Board appointments are women, only 3% of CEOs are women … yet women make up 50.8% of population (the majority!)
  • This underutilisation of a key asset is estimated to cost the Australian economy 20% of its GDP every year, or $300bn/year
  • 1.4 million women face physical violence, and many more some kind of domestic violence
  • There are 4,300+ violence restraining orders (Source: WA women, 2015)
  • Only 31.7% of senior executive roles in WA public sector are held by women
  • 59% of law students are women (in WA) … but only 15% of legal partners & barristers are women … and 20-40% judges (Source: Women’s Report Card 2015)
  • Paid parental leave for all … what’s happened to that?
  • Returning to work
    • there should be a need for experienced, mature workers, who’d like to work 9.30am-2.30pm, 3-4 days
    • we need to allow top level execs to be part-time – why not?
  • Most of the jobs to be disrupted over the next decade are more heavily associated with women workers = a threat
  • Look at

Despite some improvements made in recent years, this makes quite startling reading – we have a long way to go to achieve gender equality in WA, and digital disruption offers some opportunities, but also some threats, especially towards female workers.

Let them eat cake

Asking for startup money

Legend has it the wife of King Louis XVI of France, Marie Antionette, uttered the words “let them eat cake” on hearing the starving peasants were in revolt against bread shortages. We’re talking late 18th century, and although the Queen would have probably said the words in French (something like ‘Qu’ils mangent de la brioche‘) there’s no evidence that she actually said this at all. The saying actually predates her birth.

But the attribution persists, and has been used to show how out of touch the nobility were at the time, resulting in the French Revolution, and King Louis losing his head.

The words rung in my head this week as I indulged in a discussion I’d had many times before, relating to Perth’s burgeoning startup sector. The weight of opinion agreed that there’s not enough early stage funding deals going on. As to why, there was a distinct divergence of views.

I’d like to explode a few myths if I can …

Myth 1 – If they were good deals, they’d get funded

I hear this one a lot. If they were good deals, the argument goes, then eventually (or even swiftly) they would get funded, as an investor would see the opportunity was too good to miss. Some may pass, but eventually a good startup business would attract money.

However, this argument rests on the Perth market for startup funding acting perfectly, which (let an old economist like me remind you) only exists where there are a large number of buyers and sellers, such that no one buyer or seller can influence price. Perfect markets also rely on a perfect spread of information, freely available to all, and homogeneous (exactly the same) products.

Perth’s startup sector is no perfect market. While there are a good number of startups to choose from (300 at last count?), there are a very limited number of private investors willing to back them. There is one VC fund (and that’s already fully invested, 2/3rds in biotech) and one angel group which meets 4 times a year and maybe does 5 or 6 deals annually. Meanwhile, there are plenty of potential investors dripping with (business, mining or property) money removed from startupland.

Neither is there a perfect spread of information, with only a privileged few getting in front of the investors, and as they are all very different, each startup investment opportunity needs to be considered individually, one by one, a bit like buying an investment property. It’s time consuming, uneven and sporadic, at best.

I have no idea what makes a good startup investment (well, I have some idea, but I am not arrogant enough to say I know which one will be a unicorn and which will fade to nothing), but I believe there are many more out there worth a $25,000 or $50,000 investment that are currently being funded. I am seeing too many move away from Perth for funding (and securing funds) and too little getting funded here; and yet, Perth has far more high net worth individuals per capita than anywhere in Australia, and is one of the top places in the world for multi-millionaires.

There is a distinct disconnect between those that might have spare money to invest and those that could do with a decent little early stage investment that could give them 6 to 9 months of road, get them to market and revenues to see if there is something viable there.

Myth 2 – They shouldn’t be raising money anyway

This argument goes that startups should forget about raising money anyway (far too many think the capital raise IS the end game, clearly it is not) and should start pitching to customers instead. Get to minimum viable product (MVP), get early clients on board, earn revenues, and maybe they’ll find that they won’t even need investors at all, or if they do, they’d secure a better price, be able to raise more money and give away less equity in the bargain.

Bingo – I agree 100%.

However, most startups are either doing exactly that (out of necessity) or cannot get any further without something else investing upfront. They’ve piled in their own cash, savings, credit card debt, taken money from family and friends, spent months on the idea, with no pay back, giving it their all. They have got somewhere, and now are looking for some extra help.

Some ideas just need money to get off the ground. You have to spend something to build it, you have to get out there to see if it works, and this may take $50k or more beyond the funds available to the founders.

Most successful startups have had early stage money. Very few are profitable or cash flow positive from day one (or after the family and friends money has gone). Often there are dead ends, false starts, wasted attempts, and this is all the cost of learning. If you’re doing something very new, disruptive and game changing (surely what the investors want to see?) then it simply takes some funds upfront. Like buying the investment property.

It also takes time. The successful ones will tell you it took 5 or more years to make money. It certainly took my startup this length of time, and others like realestate.com.au, carsales.com.au and others took 7 or 8 before profits appeared.

Mel and Cliff from Canva understood this. There they are today, smiling out at us from the front page of the local weekend paper. They’ve raised millions and millions of funds  – are they profitable, or cash flow positive yet? They were helped off with a cool $3 million raise a few years ago, which took them away from Perth to Sydney, and have since raised many millions more. Nick and Al from Simply Wall Street could not raise money in Perth, but have successfully raised $750k from angel investors, also in Sydney (why not in Perth?). Talking to their lead angel at a lunch function a few months ago, he told me that in their case, they had an idea so disruptive, “you just had to give it a go to see if it worked.”

Exactly.

Not all startups deserve money, some may not be at the right stage, but somewhere along the line, many do, and the vast majority of these simply aren’t getting the funds they need, despite there being ample in our city. Water water everywhere, nor any drop to drink.

Myth 3 – The entrepreneurs are unrealistic 

Sure, owners of anything are unrealistic about their valuation. I think my property is worth more than it is, and also my car. The price is determined only when someone is willing to pay for it what I am willing to sell it for.

But with a limited number of genuine local startup investors the power is weighted heavily on the buy side, such that in some cases the negotiation is more like staged bullying (running down the efforts of the down trodden entrepreneur, and finding all sorts of reasons not to invest). Meanwhile, the poor startup trudges back to their lean canvas to see if they can eke out another month or two.

Perth investors have grown fat on the ability to exit their investment through an ASX-listed entity. We have seen 60 ‘back door’ listings announced over the last 2 years, as the mining downturn takes hold and now empty shell companies look to evolve into a tech company. This is a highly expensive and dangerous way for a genuine startup to raise funds. While potentially fine for a commercialised organisation with revenues and a clear growth path, it is clearly not suitable for the early stage venture (or only in very rare cases – FMG was in fact a back door listing, but I wouldn’t classify that as a tech startup.)

Sure entrepreneurs are unrealistic, but so are investors. You can’t have it both ways, you can’t have your cake (or bread) and eat it. It’s a punt. It’s a riverboat gamble. It’s like betting on the horses. You will probably not see that money again. Yes, it’s probably illiquid, for years. But if you win, you win big, so it’s best to make a few bets, to cover yourself. The more you make, the more you spread your risk. You may say ‘no’ to 20 before saying ‘yes’ to your first. But you might do 2 or 3 a year.

Myth 4 – It’s good they get money elsewhere & leave

The argument goes that we should not worry about our best and brightest startup ideas leaving our shores to get funded elsewhere. Sometimes they just need to spread their wings, bless them, and once they make their money they will return and help our ecosystem back here.

OK, maybe. But why can perfectly good Perth ideas get funded in Sydney, Singapore or San Francisco and not here? Why should they have to leave to get funded when we have so much money in the hands of private individuals in our fair city (and come July a nice little tax deduction too)? Why should they have to leave our great lifestyle, family and friends… unless they really want to?

To me, this argument is lazy. While it’s perfectly fine for businesses to go wherever they want (fly my darlings fly), it is not fine to have so few early stage funding deals that jobs and income that could have been created here (and stayed here) are exported to other cities or countries. We are competing in a global marketplace, the gloves are off, it’s either get nimble and innovative, disrupt your own market or someone else will do it for you. Where is the post mining diversification we so badly crave? Even during the boom, people were worried about us becoming a one trick pony. Now that pony has well and truly run its race, where are the up and coming industries? They need to be backed. We have no idea what great businesses might flourish and grow unless we give them a helping hand.

~~

Startup investment is not for the faint hearted. It’s not a slam dunk. It’s not for your nest egg, it’s play money. Many thousands of high net worths in Perth could make two or three $25k to $50k investments a year, and not even notice it. Conservatively, that’s $250 to $500 million of available funds a year, that would make a tiny fraction of a dent in the portfolios of many, yet revolutionise our local economy.

Perth could become a regional tech startup sector, offering a great lifestyle, climate and investment funds to plucky entrepreneurs who want to cash in on a place that just happens to sit in the same time zone as 60% of the world’s population.

It would be almost criminal (and certainly negligible) if we don’t do this.

Why a tech startup? Because the best ones have highly scalable business models. Those guys and gals down at Spacecubed hammering away at their idea on a laptop could have $100 million businesses in a few years (just as Canva does today after a relatively short 4 year journey). This type of growth is hard to do with traditional bricks and mortar businesses.

It’s the most speculative investment these investors will make, but for many of them, it’s the best fun they can have. They can add some value to the startup (sharing hard won advice on commercialisation, open some doors) and it can give them plenty of dinner party conversation.

If we can throw enough darts at the dart board here in Perth, we will hit some bulls eyes. It’s a numbers game. It’s a funders’ game.

So, let them eat bread. Cake will come later. Perhaps.

Photo Credit: Flickr.com, Heather Katsoulis

Encouraging women entrepreneurs

Springboard-panel
It is a sad fact that today in 2016, you are more likely to meet a board chair called “Peter” than a female board chair. Only 22% of Board appointees are women, although this has increased from 9% a few years ago. In Australia, a recent report showed that men in full time jobs were paid 15.4% more than women in full time jobs. In Western Australia, another report showed the gender pay gap is 25.3%, the worst state in Australia.

Achieving equality in the workplace is not just the right thing to do, it makes economic sense. Above and beyond the obvious and outrageous discrimination (systemic, implied, institutional, cultural…) is a case that we are only “fishing in shallow waters” if we ignore and keep down the majority (now 50.8%) of the population – women. The GDP foregone every year in Australia is assessed to be 20%, or around $300 billion.

This week I listened to the former Sex Discrimination Commissioner (and former lawyer and NSW Businesswoman of the Year) Elizabeth Broderick talk on these issues.

“In Australia today,” she says, “there are 1.4 million women suffering physical violence at home.”

1.4 million women. Domestic violence, which also includes exclusion, continual verbal and emoitonal attacks affects an even larger.

One solution? Get the people with the power (men) to act.

Male Champions of Change is an attempt to do just that. Men champion the changes in the home and at work, because this needs to be as much as male movement as a women one…

I also attended the launch of Springboard this week, a US-based accelerator for women entrepreneurs. It’s been going 4 years in Australia, and 3 in WA, and some of the excellent people who have taken part in recent years were interviewed about their experiences since going through the Springboard program (see photo above).

Most have either raised money or are in the process of doing so, and have had their businesses accelerate dramatically since leaving the program. Sharon Grosser from SEQTA and Louise Daw from MiPlan were on the program in 2013, and I remember they graced the cover of Business News along with Wanida from MagnePath, being the first time 3 women made the cover in its 23 year history. I’ve been following their progress with interest every since.

A 3-month accelerator for women in (mainly) tech startups is a great way to get women more actively involved and promoted. All other accelerators I’ve been too have had, by sheer weight of numbers, a preponderance of men, usually single and their 20s and 30s.

At Springboard, only 8 women are selected from across Australia every year (WA has been well represented recently with 5 in the last 2 years alone) and more information on 2016 applications can be found here or here. Applications are now open, and close on March 30th. The Bootcamp itself is run in Sydney and will take place from 16 – 18 May 2016 followed by 8 weeks of mentoring before the accelerator culminates in a pitch night for investors. { If anyone requires more information, they can contact Sheryl Frame  or the CEO in Sydney Elisa-Marie Dumas.}

Whether it’s tech startups, boards or any type of business, we have to do far more to encourage women to reach the upper levels of organisations. My best two managers (by far) over my 30 year career have both been women. Women tend to have less ego, are more nurturing of their teams, but can be as steely and tough as the next man. In study after study, women leaders come out on top. A 2012 Harvard Business Review report showed women are better business leaders than men on pretty much all elements, not just traditionally ‘female’ ones.

It’s time to make some changes.

When I look at my own organisation, I see the top CEO is male (me), but 60% of our executive team are female as are half the managers, half the sales teams, and all the corporate services team.

We can’t lose!

Inside Sales Management

To understand sales, you need some psychology

To understand sales, you need some psychology

There are loads of books out there about sales. I was fortunate last year to have breakfast with the author of the best selling sales book of all time, Jeff Gitomer, who wrote ‘The Little Red Book of Selling‘. Jeff has an awesome ego, as one might expect, and was wonderful company. He cooked me a mean breakfast, and took the mickey out of me because I took milk in my coffee. He was exactly as I had expected, multiplied by six (as Megamind might say.)

Books on how to sell – there are a plenty. But there are few books on how to manage sales people inside a business. The best of these is Mark Wilensky’s 2006 ‘Inside Sales Management‘. Wilensky’s techniques explain how best to manage the sales manager, the team, and how they should respond to clients. Much of it is formed from the study of psychology.

Mark’s main point is that you need to grow your sales team to grow sales. Training in this never stops.

We start with a premise that we have three states – Parent, Adult or Child. We flit between these in nano seconds, and how we respond in various situations is governed (and explained) by which ‘state’ we are in.

  •      Parents say things like ‘you should
  •      Adults say ‘I think’
  •      Children say ‘I feel

You don’t want your sales people to be in the child state. A child can either be rebellious (manipulative, shrewd), natural (wants to play) or adapted (changes behaviour to fit in).

Nurturing parents are liked, but don’t close many sales.

The best sales managers know when to use their ‘critical parent’, ‘adult’, and their ‘nurturing parent’ state. If you want your sales team to grow, stay out of the ‘critical parent’.

Example – a client makes your sales person feel threatened, that sales person may fall into their ‘child’ state. It’s important the sales person stays in the adult, as the child can get stressed, whereas the adult skilfully navigates the otherwise stressful situation. There’s no such thing as a stressful situation, says Wilensky, there are only stressful or non stressful reactions.

The worst sales person blames the outside world (the economy, the competitor, the client…). It’s a childlike response. It’s commonplace. The best sales people realise they can affect change. When talking to a stressed out sales person, make the conversation adult to adult. What do you think? Keep away from emotions (child), stay rational (adult). If they get defensive, they are in their child, so snap them out of it. If they notice you getting critical (parent), then they must stop you!

Giving away discounts too easily smacks of need for approval (nurturing parent). Help them move together. Fear of cold calling is akin to a child’s fear of strangers, so reward them after they have done their cold calling. Take the emotion (fear) away.

Managing your ‘child’ sales people is a matter of identifying who is who. The ‘rebellious child’ is creative and manipulative. You can have fun with them, but there’s a limit. They are after short term wins, and will bend the rules. They could be playing you. It’s the most challenging personality type to manage. But they can get great results, although rarely long term.

Generally, a nurturing parent is better than a critical one, and a rebellious child is better than an adaptive one.

There’s a continuum from being too weak (wimp) in sales and going too far (overly aggressive, putting off clients and sales). On this continuum, you want your sales team to be nudging the ‘going too far‘ end of the spectrum, without going over the line. What seems ‘too far’ today may be perfectly normal tomorrow. Moving to the ‘too far’ end is the direction you should be taking them. Remember what you were doing 5 years ago, and where you were? What about 5 years before that? Could you have imagined 10 years ago where you’d be 5 or 10 years on? You need to keep pushing to get progress, says Wilensky.

The client will always throw things back at your staff, and you can train them to give better answers so they retain their poise when, say, the price is objected to, or the disadvantages of your solution, or the strengths of a competitor or some misinformation about your own services. Spend time in workshops talking these through.

Excuses prevent growth.

Often the client will sell an excuse to the salesperson, who in turn sells it on to the sales manager, who then sells it to top management. Excuses come from the child, not the adult.

Example – the client says they do not have the budget. Your reply is then, ‘Imagine you had the budget, would you then buy the solution?‘. This takes the client out of their child and gets them firmly into adult (thinking). From there it’s a short step to ‘Well yes, of course I’d love to do it, if I had the budget’ and your reply ‘Well, if you see value in our solution, then it’s just a matter of finding the budget and we’re there.’ Reiterate the benefits, get them thinking about the purchase having been made, and the benefits that would accrue, and the growth they would enjoy as a result. Job done.

All growth takes place in the adult state. If you’re a child, you cannot grow. It’s recognising these states, making the change, and then the sale becomes easier. Stop taking excuses, they are outside your control and come from the child. Be firm.

Run through meetings your sales members had with clients. Ask them what they think happened. What went right and what went wrong? Ask why? (how do you know?) Keep them in the adult at all times. Thinking, not critical, no excuses, no judgement. Finish with lessons learned.

Practice this with the team, use role play. How can you deal with tough questions and stay calm? In the adult. Sales people will either show real signs of growth or fade. Poor ones need to be dropped if they can’t change and grow. Medium ones might be worth the investment and time. If the C & D performers can becomes Bs and maybe even As, then morale in the team and whole company improves.

Practice has to be brutal, they have to fail in front of you, almost fall apart, and then be put back together. It will make them better for the tougher questions and clients. Role playing has to be seen as preparing to win. Let’s learn together. It’s OK to be uncomfortable. That’s why we practice. Practice leads to success. (Most will never do this, consistently, so by doing it you are already way ahead of the norm.)

When you are recruiting new salespeople, you need to find someone who can take control, knows the market and product and can prospect. Before you hire, you have to gauge their mindset. They always bring their child with them. You need to find someone who can sell with their intellect (adult), and stays out of their feelings (child). Important characteristics will be poise, strength, can handle rejection, control, dealing with excuses, and is a logical presenter.

Your sales team must has SMART goals (specific, measurable, achievable, realistic, time-framed). These must be tracked, probably within a CRM on dashboards. We can all see them; there are the KPIs around activity (calls, meetings, proposals) and results (closes). If you don’t track or measure it, it won’t get done. Goals are about the future. Forget the past, it’s over!

The most important information you can glean from clients is why they buy from you.

Every time they buy, it’s because there is a gap between where they are now and where they want to be.

When a prospect does not see a gap, they do not buy. Salespeople solve problems, they fill these gaps. So they need to know where the client wants to be, where they are going, or planning, or are wishing to go.

The client has to have a problem (step 1), and they need to be sure that they believe this problem exists (step 2) and want to solve it (step 3).

Too many sales people rush to solve the problem, being the consultant, without establishing that the problem exists and ensuring the client wants to act.

Without steps 1 or 2, your proposal will fall on deaf ears.

Your sales calls and meetings should be all about finding these gaps, and then persuading the client to act to bridge them.

Adult to adult:  (facts)

  • what’s the biggest challenge you face at the moment?
  • what’s your biggest opportunity to grow?
  • who is responsible?

Nurturing parent to adult:   (conversations)

  • how does <this> affect your department?
  • what impact would <this> have on your growth?

Nurturing parent to child:   (feelings)

  • if we implemented <this> how would it affect you?
  • that’s an ambitious target, what happens if you don’t achieve it?

Parent to parent:    (should, ought)

  • how will top management view <this>?
  • if you went for a cheaper option, would you still consider it?

You need to uncover the information in a few of these states, and the sales person does less talking than the client.

Ideally, the client asks for a proposal (you don’t ask to send them one), tells you clearly what their budget is, and when and who will be making the decision.

It’s easy to buy things. Anyone can go out and buy. And when they buy, usually all 3 ego states are used: Parent (we should buy this, it’s the responsible thing to do), Adult (it makes sense for our company) and Child (I like the idea of owning it).

When talking to buyers, it should be a dialogue (50:50 talking each) not a monologue (sales person 80 : 20 client). Often there is a trade off between price, quality and service. It’s unlikely you’ll ever get high quality, the best service and lowest price together. Find out which of these things are most important, so you can trade off the other. If your client says “I guess you get what you pay for” they are there. It’s much better than the salesperson saying it.

Why always drives what. The best salespeople uncovers the client’s why.

Prospecting never ends, and good sales people never stop topping up their pipeline. The rebellious child will put off cold calling, but the adult realises it’s the only way. And it’s not that bad really.

The ‘fear of missing out’ (FOMO) is one of the cold caller’s best lines. People may be busy, they’ve been interrupted, but can they really risk missing out on the information you might impart that could close the gap between where they want to be and where they are now?

Those on the end of line want to know 2 things

  1. What is this about?
  2. Can this benefit me (close any gaps)?

The answers you provide to these will determine whether they will spend the time with you (now or later). Don’t wimp out. Explain the benefits they would miss out on. Hone in on the gaps that will remain if they pass on this opportunity to learn more.

Don’t forget, some of your best prospects might be your existing clients. Have you provided them with all the benefits you can offer? Might there be some gaps here?

Good salespeople who operate from their adult are great at listening, not interrupting, and allow silences for thought. Child salespeople want to talk and talk, and interrupt the adult to get attention. Adult salespeople hear resistance from the client and listen, take it on board, and think. They do not try to score points, they determine what the issue is.

Resistance from prospects means they have either not understood the benefits, or something you’ve said, or are not OK with how you made your point or a combination of these. Good salespeople think ‘how did I allow this to happen?‘ and do not blame the client. They analyse what they said immediately before the objective arose, and their own body language and how they responded.

The worst thing to do is respond with ‘But’ or ‘However’.   Rather than saying, “Yes, our price is high, however…” (which is telling the client they are wrong), you could respond with “Yes, our price is high, and I bet even if price was more in line with your expectations, there would be other reasons that stand in the way, would I be right?”

We’re not trying to prove the client wrong. The client has their own reasons, values and beliefs, which we need to uncover so we can direct our efforts better. The client will resist if you get argumentative, and will feel manipulated. So get on their side, be the nurturing parent in this case. The client may even open up a bit. Once you’ve dug down on the reasons, and answered those in an adult manner, perhaps the price now does not look so bad.

The final point Wilensky makes is that everyone is different, so don’t try the same lines on everyone. Some are more open that others, some are more direct than others.

  1. Bulls (closed/direct) – are domaneering types (critical parents), so keep things concise, on message, demonstrate bottom line results. If you have a 30 minute meeting, take no more than 27. Allow questions, listen. Don’t take any brusqueness personally. Lambs (not great salespeople) can’t sell to Bulls (big ego CEOs and C-suite types).
  2. Owls (closed/indirect) – are cautious and analytical, so be rational, don’t make sweeping generalisations, don’t touch anything on their desk (they’re private), give balance, don’t force a decision, give detail, it’s OK to say you don’t know (but find out the answer and provide it in a timely fashion). Tigers (usual sales types) find Owls (usual technical buyer types) hard to sell to.
  3. Lambs (open/indirect) – are nurturing parents, so listen patiently, empathise, provide solutions that don’t ‘rock the boat’, be soft in closing and indirect (‘your entire company will benefit‘), they may compliment but still not buy, they don’t like to say no. Tell them it’s OK to say no. There are a lot of lambs out there.
  4. Tigers (closed/direct) – are natural extroverts, so make conversation stimulating, they like to talk about themselves, so stories and name dropping works better than analytical reasoning. Allow them the glory of the solution, get them dreaming, but close quickly as their concentration is limited.

So, where are we?

From now on,

  • Consider the psychology of your clients
  • Never present the same way again to all
  • Move people out of their states, as relevant
  • Don’t fall into the wrong state yourself
  • Practice, practice, practice
  • Stop buying excuses
  • Start coaching
  • Set goals
  • Turn sales meetings into psychological workshops
  • Role play constantly, and, most of all
  • Enjoy growing your sales people and your business.

Promoting the positive force of business people

Australians of the Year

For the past 55 years, every Australia Day, the ‘Australian of the Year’ is announced, usually by the Prime Minister in a ceremony outside Parliament House. It’s become a major occasion, and is televised.

The Award was originally designed to bring some deeper meaning and a focal point to Australia Day itself. These days the winner is picked by the National Australia Day Council (NADC), in order to honour the Australians who make us proud to be Australian.

Glancing down the list of 59 (no doubt worthy) recipients, we see a distinct skew towards Science and Sport ~ with 15 Scientists and 14 Sportspeople honoured. That’s half the total list. 9 politicans & activitists and 9 entertainers make them quite a common category as well … then it’s a bit of a drop off to 4 business people, 3 military personnel, an artist, an author, a Bishop, a Cardinal and a judge. There are only 9 women, so it’s 85% male.

I love my sport like the next guy or gal, but surely they get enough recognition already? And not to mention their many accolades, wages, endorsements and everything else. When 4 win it in a 7 year stretch from 1998-2004 you think things have gone a bit over the top, even considering the sports mad Prime Minister we had at the time. How can you really compare the spray on skin brilliance of a Prof Fiona Wood with a tennis player, or an Indigenous leader with a cricketer?  And why so few women?

If we are trying to inspire our kids, then whose example are we trying to promote? Science is for boys and sports are so important the best ones are to be placed on another pedestal?

All hail Rosie Batty, the 2015 recipient and a campaigner against domestic violence. I’d like to see far more women, and more business people honoured too.

The first business person was Alan Bond in 1978 (oops!), then Dick Smith in 1986. Recently there has been a bit of a rush on  with Simon McKeon (2001) and Ita Buttrose (2013), who were honoured more for their post business work than what they did in business.

4 business people in 60 years? Slim pickings you might say.

Is this the tall poppy syndrome rearing its ugly head? Is it somehow ‘dirty’ to be successful in business? Are we only interested in what James Packer is up to with Mariah Carey, or Clive Palmer’s latest absurd remark? Are there no other admirable people in business who have served their organisations and communities well, creating jobs, wealth and happiness for tens of thousands? Well, yes there are, and I could name plenty. I’ve found the higher up you go and meet people, the more impressive they are. Not show offs, but working people, working hard, with the right attitude to their staff, clients and the community in which they operate. Most of them quietly get on with it. They give back in bucket loads. They pay a lot of tax, as do their companies. They pay dividends.

It’s not bad to be successful, and we should applaud those that are. Those that have worked hard over many decades, created the backbone of the economy, and have made this country the one that simply has the best lifestyle in the world. No exaggeration, even our cities get in the best places to live. And Australia gets even better when you step out of the cities!

So, come on NADC. Let’s see some positive reinforcement of the excellent business people out there. Women and men. Good people who can inspire the young of today, show them they can get out there and do it. Show them that they don’t need to settle. They can build up a  great company themselves. Yes, they can do science and maybe sport or entertain, but equally they can create a whole organisation, or go into one and transform it, building wealth for many (yes, including themselves) in the process.

Maybe not Clive Palmer. But perhaps Michael Chaney, Gail Kelly, Scott Farquhar, Jack Cowin, Stan Perron, Janine Allis, Radik Sali, Carla Zampatti … and many more besides. If you look, you will find thousands to choose from.

Being slightly behind can be a winning situation

Churchill

So it’s half time. You are behind by a goal (or a basket, or a stroke …). You take a breather, reassess your situation and fire yourself up for the second half. And what happens? More than likely, you end up winning.

Much has been spoken of the emotional half time Churchillian speech from the coach, an inspired substitution or reorganisation… but the simple fact is that if a team or a group or an individual believes it is just behind, but with enough time left (such as half the game) they can refocus and be motivated to play better and get over the line.

It doesn’t work if you’re way behind. Invariably, people give up – it’s just too hopeless. 5-0 down isn’t much fun. It’s demotivating. But if you’re just behind, there’s a chance, and things can be turned around. You can sense victory, within reach.

Intuitively, this makes sense. We’ve all been in situations (or seen them) when teams have come back afresh in the second half, 1-0 down, to win, say 2-1. There have been (rarer) instances of teams being 4-0 up at half time and then losing it. Ouch. Although I read that Man City has not won a game in 20 years having been down at half time. (Quiet hurray!)

So, the theory is that a team is more likely to be motivated, play better, and end up winning if they are only just behind at half time. In other words, you’d almost prefer the team to be in this situation. Unless their opponents are hopeless or the gap in abilities too wide, teams that are just ahead can stutter, their nerves a-jangle, they make mistakes, play too defensively, and forget what put them ahead in the first place.

So what does the research say? It concurs. Jonah Berger (he of the ‘STEPPS’ Contagious findings) and Devin Pope found in 2011 that if teams thought they were just behind at half time they had a slightly higher chance of winning in the end. Studying 18,000 professional basketball games, they found teams that were 1 point behind won more games that teams that were 1 point ahead. They found that being behind at half time was only half as advantageous as playing at home. And we all know playing at home can be a massive advantage.

Berger found the same results when he put people into a competitive typing situation telling certain groups they were slightly ahead, another they were even, and another they were slightly behind. It did not matter where these people were in fact. What mattered was where they thought they were, compared to the other groups. Those told they were slightly behind massively increased their keystrokes per minute (their increase was higher by a factor of three.)

So, here we are near the end of the calendar year, half way through the Australian financial year. If you’re slightly behind to budget, be fired up for the second half. Spend some time relaxing, getting away from things, and then come roaring back in January to June.

Merry Christmas.

Bootstrap yes, but don’t skimp on a good lawyer or accountant

Google don't like lawyers

Google “I like lawyers” and the top results are articles such as “Why do people hate lawyers so much?” and “People like lawyers less than you think”.

Even Google can’t find a positive result.

It might be easy to knock them, but finding a good lawyer or accountant is critical to the success of any business. I wonder why they get such a bad rap? Perhaps its the legalese and financialese that some find perplexing, or the $100’s per hour fees charged in 6-minute blocks that wrangle.

While it’s important to conserve cash when starting (and running) a business, as my wise business professor used to say: “Never skimp on a good lawyer or accountant; doing so will be a false economy. Find a good one, and these people will save you tens of thousands of dollars in the end.”

I can certainly attest to that…

When our fledgling online business was still in ‘bare survival mode’ in the early 2000s, I became aware of a relatively new government scheme called the ‘R&D Tax Rebate*’ (or ‘R&D Tax Incentive‘ as it’s now known). I remember asking our existing accountant (twice) whether we qualified, and being told unequivocably that we did not. At the networking function around this time, I got talking to a city accountant who had been at the same uni as me, and he mentioned that we would definitely qualify. I followed up with him, and not only did he manage to get us over $50,000 cash back that year, he backdated the process (as we’d missed out in its first year of operation, the year before) so we duly won two years worth of rebate, over $100,000 in cash. At the time, this was the difference between sink or swim.

We changed our accountant.

[* The scheme allows businesses investing heavily in R&D to convert a portion of their losses into cash back from the ATO. Once profitable, you can use it to minimise tax. I would estimate this scheme returned us half a million dollar benefit over the course of the subsequent 7 years.] 

Also around this time, we were made aware that a rival website was taking data from our site, and displaying it as if it was theirs. I became perplexed as to how this could be legal, but various lawyers I spoke to did not seem to know if we even had a case. Until I met a brilliant IP lawyer, who had used our site before (so he was a fan, which was nice), and seemed confident that we were in the right, and they were in the wrong. The upshot of his work was that other site shut themselves down.  You can read the ensuing media coverage of this case here.

I have used this same IP lawyer ever since.

I can tell you that both the accountant and lawyer mentioned above were extremely reasonable with their charges, and sensitive to the fact that we were but a small startup with limited funds. It felt good to have some experts on your side, and to get good outcomes as a result. I could not have done any of this alone.

So, do not skimp on a good accountant or lawyer. But bootstrap your startup. It sounds paradoxical, but it’s probably the best advice I can give you.

Innovation, the new buzz word

Einstein thinking

Since new PM Malcolm Turnbull, in his first address to the nation, challenged Australians to embrace change and innovate, everyone seems to be talking about ‘innovation.’

But what does it mean, and why’s it so important?

Technically, ‘innovation’ means ‘new’, as in a new method, a new way of doing something, or a new invention. It’s synonymous with being clever, successful and on the cutting edge. Turnbull, a successful businessman in his own right, has experience in these things. He went from lawyer to investment banker to IT entrepreneur and made multi millions in the process.

Rabbiting on about innovation is not enough, but grasping the challenge, seeing the positive and actually doing some different things, is important. As Albert Einstein reminded us – “we cannot solve our problems with the same thinking we used when we created them.” He also famously said that the definition of ‘madness’ was trying the same thing over and over and expecting a different result.

We have to try new things. You get points for trying. Seriously, you do. Because you learn, and no one will forsake you if you give something new a try. The Finnish company Rovio Entertainment spent 6 years and laboured over 51 failed games before their smash app hit Angry Birds came out in late 2009. Since then, its been downloaded 3 billion times – 3 billion! – plus various spin offs such as multiple versions, merchandise, a TV series, a movie and several theme parks. From an app. From a multiple-failed game developer. In Finland. If that’s not inspiring, I don’t know what is.

Six years on, even Rovio cannot rest and is having to innovate further. They’ve recently laid off a third of their workforce, mirroring staff cuts at Zynga (who make the Facebook game Farmville) and King (Candy Crush). The more successful you get, the more imitators and competitors try to knock you off your pedestal. You knocked others off to get there. That’s how the world works.

Nice though Australia’s resources base is (many countries would kill for this, and, often, do start wars over this stuff), we are not a cheap place to do business, and need to occupy the technological heights if we are to remain competitive and continue living the life we’ve had so good for so long. 23 years of uninterrupted economic growth is under threat. It’s no time to rest on our laurels, or pretend that new things aren’t changing how the world works, fast. As the PM says, we need to embrace technological change “as our friend“.

Consider the following:

  • In latest Global innovation rankings, Australia is 17th, no change from our 2014 position. Sweden, Switzerland and the UK occupy the top 3. The US is 5th, Singapore is 7th … Germany and New Zealand sit above Australia
  • According to a Deloitte Report (2015) one third of Australian companies face imminent and substantial disruption by digital technology and new business models
  • Another report from 2014 suggests 25% of Australian GDP is under attack in next 10 years
  • San Francisco-based Uber has taken 9% of Aus taxi industry ($450m of $5bn) from a standing start inside 2 years (~ consider how well entrenched, regulated and supported this industry thought it was pre-2013)
  • In the Crossroads’ economic complexity map, Australia ranked 74th in world – we are just too reliant on too few traditional industries. Sweden is one of the most diverse.
  • In 2014, $47bn was invested in Australian resources while $1.5bn was invested in tech
  • In the last 5 years, Australian startups added 1.5m jobs. Meanwhile, large businesses are culling staff numbers. In the US 80% of new jobs (in a run lasting now 67 consecutive months of net job creation) have come from new/small business.

Consider further…

  • Singapore has allocated $14bn over next 5 years for investment in startups/tech
    – funded 15 incubators
    – matching funds 85% to 15%
  • Israeli government supports 22 incubators, invests ~ 85% of their budgets
    – has led to 5x private investment in follow on funding
  • Meanwhile, our WA government invested $6.9bn in royalties for regions, and $20m into tech startups
  • Other States in Australia have a Minister for Innovation, but not WA

We’ve got a way to go to catch up, but perhaps the message will get through. To the innovative belongs the future. It’s always been thus.

Can someone develop a complete car parking app please?

traffic warden

I try not to drive my car around the city for meetings; often it’s much easier to walk, take a CAT bus or use Uber. But sometimes, an event may be on the other side of the city in the late afternoon or evening, from which I want to get home afterwards. My only option is the car, and finding a nearby car park or spot on a side road.

Which got me thinking the other day – why can’t I park, and an app tell me how much I have to pay, with payment taken at the end of my time based on how long I was there for? (The ‘Uber of car parking’, if you like.) The app would estimate the charge for the time. Even if overshoot my time (say, the event goes on longer than expected), it need not matter as I would be charged when leaving (the app could let me know the new total charge – and I could decide to stay on or leave). The phone would know where I was, when I arrived and left the parking spot and therefore how much to charge. The funds would then be taken automatically, and go to the local council, or Wilson, or whoever (private car bays could be used as well). The app would take a small % as a enabling fee.

It wouldn’t be that hard to develop. Most of the effort would be in getting all the car bays loaded on, and the permission of those that owned them. You’d get the larger car bay companies and councils on board first (explaining how this was going to save them costs and ensure all bays were paid for, making them more revenue). Private car bay owners could then have an uploading and admin system built for them.

No more overdue tickets, no more fines, no more paying more for what you use, no more fumbling around for coins at the nearest ticket meter in the rain. Indeed, no more parking meters or ticket inspectors. (There would be a transition period during which you’d still have the existing system but overtime the old would be phased out, and we’d wonder why we ever had them.) If you tried to park without paying, you’d get a warning, and if you did not agree to the ticket you would be fined. Appropriate warnings would come as notifications.

A central command would know where possible bays are, and could guide you to them. They’d know who’s parked where, who’s paid and who has not. Totally efficient, no one would get away with not paying, indeed no one need be be fined. All done on an app, every time.

Over time, an efficient use of all car bays would make for better use of vehicles on roads, less time wasted trawling around for car park spaces, less angst, and a better use of all space available.

There are many car parking apps out there, but none of them do this. Some find car bays that are on their system, some try to hook you up (AirBnB style) with private spaces for hire, and some know how many bays are available in real time in the larger city parking spots. But no one pulls it altogether. Someone will, one day.

P.S. No, I have not been fined recently (!); I’ve just been mulling this over. Now, over to you…

Photo: Dom Joly’s Traffic War