Frequently Asked Questions

ANSWERS TO FREQUENTLY ASKED QUESTIONS (FAQs)

… AS WELL AS ANSWERS TO MANY QUESTIONS THAT ARE NOT ASKED VERY FREQUENTLY

 

Hello; Graham here. Thanks for stopping by at my FAQ page.

The fact that you are here on this FAQ page tells me that you are seeking some information that perhaps you weren’t able to easily find elsewhere in my website. If you still cannot find the information or advice you are seeking in the answers to the questions compiled below, I am really sorry.

I would therefore be grateful if you would email all your questions directly to me. I will respond to you personally as quickly as I can. This will usually be within 48 hours. The frequently asked questions, and the other questions, have been split up into a number of categories to help you more easily find the information you seek.

About Chiron! the business doctor.™

Who IS Chiron! the business doctor.™?

Chiron! the business doctor’s™ alter ego is Graham Segal, an Australian sole-proprietor small and mid-size business consultant. As Chiron! the business doctor.™, I conduct a confidential & trustworthy, ethical & principled, reliable & dependable small and mid-size business consultancy that focuses primarily on helping companies to raise equity capital for business development and expansion purposes.

To do this job, my skills, knowledge and experience reflect the fact that I started my working life at 15 years of age as an apprentice tradesman and rose to become the Chief Executive of companies employing over 200 staff. Along this career path, I lead a team of industrial advocates who provided an Australia-wide industrial relations information, advisory, consultative and representational service to a national industry group of 2,500+ companies that employed well over 100,000 persons.

I have also successfully fulfilled appointments as an Executive Director of public (unlisted) companies and proprietary companies in both Australia and Malaysia.

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Does Chiron! the business doctor.™ have a Code of Ethics?

Yes. I have a very detailed Code of Professional Conduct and Ethical Standards. See webpage The Chiron Code of Ethics.

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Why the name Chiron?

The name ‘Chiron’ comes from Greek mythology. The name has nothing to do with the astrological sign ‘Chiron’. The original Chiron was a centaur who had the respect of the Gods because he was astute, shrewd, judicious, reliable and trustworthy. Over time, Chiron became renowned for his knowledge of medicine, commerce and war strategy, as well as his wisdom and sense of justice. Except for the medical knowledge aspect, which has been utilised in my marketing strategy, all of the characteristics attributed to Chiron are characteristics either necessary or desirable in an effective, modern-day business consultant. There’s more information on webpage Why Chiron? A Curious Name

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What does Chiron! the business doctor.™ do, actually?

As Chiron! the business doctor.™, I help client companies to achieve commercial success by improving  the five components of their business health: viz., their cash flow, productivity, international competitiveness, profitability and shareholder value. I do this by:

  • helping the business expansion of client companies through equity capital to enable them to expand their factories, develop new products and services or enter new markets, particularly export markets,
  • helping client companies in trouble or distress to return to profitability,
  • helping client companies to establish and implement a crisis management plan,
  • helping client companies to boost their bottom lines and uncover hidden and untapped profits,
  • helping client companies to determine the most appropriate pricing policies to achieve their profit objectives,
  • helping client companies with all aspects of their people management activities,
  • helping client companies to control their electronic communications so as to limit their legal liabilities in the event of deliberate or accidental abuse or misuse of a company’s communications equipment, systems or business networks, and
  • helping client companies from countries that do not use English as the language of daily use to produce business documents in good business English by providing their senior executive staff with a reliable, confidential, anonymous and trustworthy business English drafting and editing service.

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Growing Your Business

How can Chiron! the business doctor.™ help me to grow my business?

I help clients who need equity capital for business development and expansion purposes to become ‘investment ready’ and ‘investor friendly’ and then coordinate the action required by client companies to raise the equity capital necessary. I can do this because under ASIC Class Order 02/273, which is a set of official regulations issued by the Australian Securities & Investments Commission (ASIC), I have a personal exemption from certain of the fund raising restrictions of the Corporations Act 2001 that permits me to easily and legally help clients to seek equity capital from the public.

This exemption is vital because clients, whether they are an individual person or a company, are not permitted by law to raise equity capital from the public unless they first register an expensive prospectus with ASIC. Prospectuses can cost upwards of $AUD 100,000 to produce and this cost excludes the costs associated with listing even on a small second-level stock exchange, which can easily add another $AUD 100,000 to the bill. I therefore provide my clients with three crucial imperatives:

  • the opportunity to raise the equity capital funds required by selling securities such as shares in the client’s company to investors,
  • the appropriate framework to raise the equity capital funds without breaking the law, and
  • the ability to raise the equity capital funds required at modest cost. 

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What is equity capital?

Equity capital is money invested in a company by one or more investors in return for a share of ownership in the company and other agreed benefits in the expectation of a capital gain on their investment. From the investee companies’ point of view, equity capital is valuable because it is not repaid and it does not attract interest payments.

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Can anyone raise equity capital funds?

No. In Australia, the Corporations’ Act 2001 prescribes the process to raise equity capital. Under the Corporations Act 2001, it is illegal for individuals or companies to raise equity capital from the public without first registering an expensive prospectus or product disclosure statement with the Australian Securities and Investments Commission (ASIC). Prospectuses can cost upwards of $AUD 100,000 to produce and this cost excludes the costs associated with listing even on a small second-level stock exchange, which can easily add another $AUD 100,000 to the bill. Companies that wish to raise equity capital without incurring this high cost therefore must do so through a person who has an official exemption from that Corporations’ Act requirement.

I have such an exemption from that Corporations’ Act requirement and can help client companies that wish to raise equity capital at a modest cost that is many, many times less than the expected cost referred above.

Be warned, courts have imposed hefty fines on persons who have breached the fund raising provisions of the Australian Corporations Act 2001.

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If I decide to seek equity capital, how quickly will I get my money?

An important point needs making here first. There are no guarantees in any equity capital raising program that investors will contribute funds to a particular project. The competition for available investment funds is quite fierce and intense. As well, there is often an element of luck involved in business owners and entrepreneurs being in the right place at the right time.

That is because venture capital firms and individual private investors do not always have investment funds available at the specific time that a business owner or entrepreneur submits a funding proposal. That of course is not a valid reason not to seek equity capital funds, when business development or expansion requires them.

The process of raising capital generally takes from four to six months, depending upon the nature of the project, but there are examples of ventures that have taken longer to obtain equity capital.

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If I want to raise equity capital, what will Chiron! the business doctor.™ do for me?

From an operational perspective, when you retain me to help you raise equity capital, I perform the following tasks:

  • I prepare a comprehensive business plan (a substantial document that can run to 60 or more pages),
  • I prepare a Class Order Compliant Document, a company’s official Offer Information Statement (a document of 20 to 25 pages),
  • I prepare a Shareholder (Investor) Agreement (a document of 20 to 25 pages),
  • I complete (on your behalf) ‘Venture Appraisal Questionnaires’ that may be required by investors (these are generally comprehensive questionnaires submitted by investors that can run to 25 pages or more of information. Venture Appraisal Questionnaires should not be unexpected as it is quite natural that investors will want to know a great deal about the team to whom they will be entrusting substantial investment funds),
  • I help you respond to Investor ‘Term Sheets’, which set out investors’ initial offers under which they might contribute funds to your venture. Term Sheets set out the framework for future discussions that may lead to the settlement of a Shareholders’ Agreement.
  • I coordinate an action plan to approach potential investors on your behalf, and
  • I help you with your negotiations with venture capital firms and individual private investors.

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What is a Class Order Compliant Document?

A Class Order Compliant Document is the official offer information statement prepared and issued (i.e. published) by me pursuant to my responsibilities under ASIC Class Order 02/273 to help client companies raise equity capital. I issue the Class Order Compliant Document under my own authority and not the authority of the client company. That is because I have an official personal exemption from certain of the fund raising provisions of the Corporations Act 2001 that allows me to raise equity capital directly from the public to assist client companies. Client companies do not have this exemption.

A Class Order Compliant Document sets out details of the client company, its’ business objectives and how they will be achieved, the anticipated financial returns and details of the equity offer. It identifies for investors the company’s corporate structure and commercial governance requirements, and includes other important information such as board representation, senior management experience and financial performance.

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What does ‘investment ready’ mean, and why is it important?

When a company is categorised as ‘investment ready’, it means that the company is ready to discuss its’ investment offer with investors from a position of authority, confidence and knowledge. To become investment ready, the company:

  • will have prepared a comprehensive business plan based on conservative assumptions with achievable revenue and expenditure forecasts and projections,
  • will have prepared a Class Order Compliant Document,
  • will have restructured its corporate organisation where necessary to provide a structure that gives both confidence and protection to investors,
  • will have organised its Board of Directors and senior management team to cover the expertise required in all the business disciplines necessary for the business to operate at optimum performance levels,
  • will have undertaken thorough and systematic research to identify its target markets and target customers,
  • will have compiled suitable responses to possible questions set out in a template Term Sheet so that company negotiators will not be caught out by difficult questions thrown at them by investors, and
  • will have prepared a draft Shareholder Agreement for presentation to investors if negotiations for an investment agreement appear to be successful.

Given that framework, the importance of being ‘investment ready’ is self-evident.

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What does ‘investor friendly’ mean, and why is it important?

A company becomes ‘investor friendly’ when it has a corporate structure that can provide confidence and protection to an investor. In simple terms, a company seeking equity capital provides confidence and protection to an investor by establishing organisational structures and managerial systems and procedures that will safeguard the investor’s funds to the highest degree possible and ensures that the investment funds are only spent in accordance with the terms of the Shareholder Agreement. The importance therefore is self-evident. No investor will invest substantial funds in a project without such protection.

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What is an ‘investment friendly’ corporate structure?

To initiate the private equity raising process it is preferable that the company that will have control rights over the venture has a corporate structure that conforms to some minimum standards suggested by ASIC. Compliance with these requirements helps to allay investor fears. In that respect, the public (unlisted) company is the preferred ‘investor friendly’ structure, because it:

  • has a more appropriate format for the capital growth of a company than does the proprietary company (i.e. companies identified by having Pty Ltd after their name) structure,
  • allows for an easy transfer of shares,
  • generally has no restriction on the transfer of shares,
  • has at least three directors,
  • is required to be regularly audited, and
  • gives experience to company officers as a ‘reportable’ entity.

ASIC does not consider that proprietary companies (i.e. Pty Ltd companies) are suitable vehicles for the capital growth of a company.I explain why in my webpage Be Investor Friendly.

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What or who are ‘Foundation Shareholders’ or more simply ‘Founders’?

Founders, or to give them their correct title, Foundation Shareholders, are the (usually small) group of people who seize upon a good idea, invention, product or service, work it up into a viable business plan and then get the business up and running by successfully commercialising the products or services.

Foundation shareholders are sometimes called original shareholders.

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Can foundation shareholders be financially rewarded for the ‘blood, sweat and tears’ that they put into their venture?

Equity funding is the only funding process that allows foundation shareholders to receive a monetary premium for the ‘blood, sweat and tears’ that they put into a venture’s development and evolution. This premium is contained in the value of the shares allocated to the foundation shareholders at the point where a first allocation of shares are sold to one or more investors in return for a contribution of equity capital.

Traditional business funding through bank, finance company or private sources borrowing will not give foundation shareholders any financial benefits or credit for their development efforts. Bank or finance company borrowing is of course based on concepts of ‘bricks and mortar’ collateral, and entrepreneurial companies in their early stages of growth generally do not have much to offer by way of physical assets that can be used as collateral for loans.

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What is an Exclusive Authority to Act Agreement?

ASIC Class Order 02/273, the regulations that govern my work in raising equity capital on behalf of clients, imposes a number of duties and responsibilities on me. Those duties and responsibilities include the fact that I must accept accountability for ensuring that the conduct of the equity raising activities in which I am involved are lawful. In order to carry out equity raising activities effectively therefore, I must have actual and genuine control of the equity raising process.

This means that all clients who request me to help them raise equity capital must give me an Exclusive Appointment to Act Authority. In formal terms, this Exclusive Appointment to Act Authority appoints me as the client’s consultant to prepare a COCOD for the issue of the securities (shares), and then to undertake the subsequent marketing of the equity offer to potential investors.

This ‘Exclusive Appointment to Act’ is vital. Its importance lies in the fact that it is the key document that provides me with the exemption from having to comply with the Corporations Act in respect of raising capital for the client. It is the document that I would have to produce to ASIC if there was a challenge to my fund raising activities or ASIC conducted an audit of my activities.

Giving me an Exclusive Appointment to Act Authority does not mean that you or your friends and colleagues cannot assist in the fundraising process; it just means that everyone has to work together under my co-ordination to ensure compliance with all the rules.

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What is a ‘Business Introduction Service’?

Business Introduction Services are persons or organisations that are accredited pursuant to ASIC Class Order 02/273 to bring companies seeking equity capital into contact with investors seeking investment opportunities with growth companies. Operators of Business Introduction Services are often called ‘business matchmakers’.

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Are their any restrictions on a Business Introduction Service’s ability to raise equity capital from the public?

Yes. The first restriction is that under ASIC Class Order 02/273, I cannot make judgements on or provide recommendations about the commercial viability of any specific project.

The second restriction is that under the ASIC Class Order, I cannot raise more than $AUD 5 million dollars from more than twenty private investors in any rolling twelve-month period. This reference to 20 private investors however refers to ‘modest’ private investors who generally only invest small amounts. It does not include ‘sophisticated’ investors or ‘professional’ investors.

‘Sophisticated’ investors and ‘professional’ investors are defined officially as investors who have the ability to respectively invest $AUD 500,000 or more in any one investment or who control a defined minimum level of assets.

In the normal course of my work, I deal primarily with venture capital funds or high net worth individuals, so this ASIC restriction has never created any operational or administrative difficulties.

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What are Class Order Warnings?

The Australian Securities and Investments Commission (ASIC) require Investor Warnings (Class Order Warnings) to be brought to the attention of persons who may be considering investing in growth companies. Typical growth companies are those who have their equity offers published in the Chiron VC Private Placement Network™. In essence, the Class Order Warnings advise that investment in new businesses carry high risks and are highly speculative.

The Class Order Warnings further advise that before investing in any project about which information is given, prospective investors should take appropriate professional advice before trading cash and other benefits for an issue or sale of securities. If you are an investor, or want to become an investor, this is good advice. Heed it!

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What are debt security capital funds?

Debt security capital funds are loan funds accepted by a company in return for the issue of certain securities. The company will repay the loan funds to the investor in accordance with a pre-agreed arrangement that is freely negotiated between the company and the investor. Debt security repayments are usually subject to an interest payment (often called the ‘coupon rate’). The usual debt securities are redeemable shares, convertible shares, debentures and promissory notes. Convertible shares and redeemable shares are often combined for convenience.

In practical effect, debt securities act like commercial loans without the red tape, onerous rules and bureaucratic administrative processes that usually accompany loans from commercial lending institutions. Debt securities often have conditions attached that will permit the re-classification of the debt securities as Ordinary Shares in certain predetermined circumstances. Check out more detailed information in webpage Debt Securities.

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Survival Strategies for Distressed Companies

How does Chiron help companies in trouble or distress?

I help companies in trouble or distress situations to manage for survival in tough times. That is, I help troubled or distressed companies by applying a two-stage business survival strategy. The first strategy applied resuscitates the troubled or distressed company while the second strategy then resurrects the company so that the company’s vital economic health signs can return to normal. While that sounds easy, in practice it is very difficult. That is because most troubled or distressed companies leave it too late to seek help, and consequently, insufficient time is available to permit survival action to take effect. The time element in survival management is critical.

You have probably often seen the legal term in business contracts that says ‘time is of the essence’. This is where that phrase has a true and deadly meaning in the reality of business life. In practical terms, ‘time is of the essence’ means that if a distressed company is to survive, somehow I must establish an adequate cash flow to keep the business alive for a few days. Generally, in this company resuscitation phase, all you can expect is a few days grace, but this time is vital if a base for the company’s resurrection is to be found. It is a self-evident truism that all survival management activities are subject to intense time-based pressure. If you ever need a survival manager, and let’s hope you don’t, then call me urgently on (+61) 0404 631 230 and remember the golden rule: act quickly, act decisively, protect your cash flow.

More information is available in my webpage Survival Management.

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Crisis Management

What is a crisis and why should I worry about one?

From the corporate business perspective, a crisis is the arrival, generally unexpected, of a set of circumstances that, if not addressed promptly, has the capacity to cause financial ruin to a company. Consequently, crisis management concerns the steps that a company must be take to resolve the crisis.

In a perfect world, companies would never have to face a crisis. Unfortunately, we don’t live in a perfect world. The reality therefore is that on the balance of probabilities, your company will undoubtedly face a crisis at some stage. The crisis will inevitably occur without warning. It is this element of surprise that makes crises difficult to predict and difficult to manage.

While we may not be able to predict when a crisis will happen, we can take proactive action to control and mitigate its adverse effects. This is the key to crisis management because a serious freewheeling crisis has the capacity to render your company helpless and vulnerable with almost certain fatal consequences. Crisis management therefore is designed to protect your company’s prosperity, success, public image and goodwill.

In essence, crisis management is about ensuring your company’s survival, thus ensuring continued protection of your employees, customers, clients and suppliers. Webpage Are You Crisis Ready? has more detailed information about crisis management.

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The Chiron Bottom Line Boost

How does Chiron improve business performance?

I help companies that are not operating at optimum or peak levels of efficiency or profitability because of adverse external factors that are not always obvious and need either removing or modifying. I therefore apply a profit revival strategy to the company based on a comprehensive analysis of the company’s performance.

That analysis will lead to the improvement of the company’s vital economic health signs through the application of contemporary change management policies that reflect an appropriate combination of enterprise restructuring strategies, process improvement objectives and performance management techniques. See webpage Chiron’s Profit Revival Program for more details.

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People Management

What is Chiron’s guiding philosophy in industrial relations management?

The guiding philosophy in my approach to industrial relations management is that there are two methods of dealing with industrial relations issues. One is by removing the causes, and the other is by controlling the effects. In Australia, we have historically tended to give prominence to the latter; that is, whenever we talk about industrial relations, we tend to talk about conciliation and arbitration and the legalistic framework that surrounds it. But we cannot get away from the fact that the effectiveness of industrial relations policies is related to people and aspects of their total working environment.

Consequently, my focus is to place a much greater emphasis on finding the answers to your people management problems by dealing directly with the issues and the personnel involved. This is a much more preferable way to resolve difficulties and disagreements.

My experience has shown me that in the resolution of disputes and disagreements, companies should not be reliant upon the decisions of a legally-appointed ‘referee’ who has no real interest in your company’s long term business objectives. Prevention after all is much more palatable than a distasteful cure supplied by an industrial tribunal acting as referee. Webpage People Management, where I make the point that your people are your profit, has more detailed information about people management.

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Pricing for Results

Why is price so important?

Nothing influences your bottom line as much as the prices for which you sell your products and services. Sure, there are many considerations to take into account when you set your prices, but the result is always that the prices at which you do sell will have a profound effect on your company’s profitability and long-term viability. As a sidebar effect, your prices also strongly influence the public perception of your company and its’ products and services.

Pricing is the most dynamic of all the variables in a company’s marketing mix. That simply reflects the fact that pricing is the variable that is most subject to external forces such as competitive pressures, economic developments and demand fluctuations. From another perspective however (one that goes beyond the recognition of pricing as a dynamic element in the marketing mix), pricing is the unique variable in the marketing mix.

Why is pricing the unique variable in the marketing mix? Pricing is the unique variable because it is the only variable that does not involve any expenditure and it is the only variable that can directly increase revenue.

The uniqueness of pricing provides flexibility to companies to change their prices more quickly and more frequently than is possible with other marketing mix variables. Other marketing mix variables (advertising, sales promotions, packaging, product design, product development and distribution) all involve a financial cost to a greater or lesser degree.

 When the uniqueness of price is aligned with its revenue creating ability, the inevitable conclusion is that price lies at the very heart of every exchange relationship. No exchange ever takes place between a seller and a buyer without a pre-agreed price. Whether that price is declared in cash or in kind, it is still a price; and that price will be a key determinant as to whether or not customers will purchase the product or service, how much they will purchase, and whether they will be satisfied with their purchase.

My webpage Pricing for Success has more detailed information about pricing management and how I can help you to establish an effective pricing policy.

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Electronic Communications: friend or foe

What’s the big deal if my employees occasionally access the company email for personal use?

If your employees have access to your company’s email and social & business networking programs for personal use (whether with or without your approval or close supervision) there are two realities for you to face. The first reality is that when you permit your employees to access your company’s email and social & business networking programs, you put your company’s assets, future and reputation at risk. The second reality is that for your own protection and the protection of your company, you must control this risk.

When employees access your company’s email and social & business networking programs, you inherit a legal liability. If an employee accidental misuses or intentionally abuses your company’s email and social & business networking programs, it can, and too often does, create very expensive legal headaches for companies. The consequence of this is that you must control everything that enters and leaves your computers, telephones, mobile phones, smart phones, tablets and pads at any time of the day or night.

If you are not effectively controlling everything that enters and leaves your premises and equipment electronically, no matter what the time of day, then I would suggest that you have an exceptionally serious problem. Forewarned is forearmed; see webpage Social Media: friend or foe?.

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Business as War

If business is war, what does that mean for my company?

Have you noticed the increasing trend over the past few years to compare business with war? Let’s examine this ‘business-as-war’ philosophy more closely. This business philosophy means that you are in combat with all your competitors. No surprise there, but if business is war, then it means that you have to have weapons that are more powerful in the marketplace battlefield than those of your competitors, if you are to win the war.

If business is war, then the practical reality is that, as in war, there will be casualties and fatalities; collateral damage is the common euphemism used. That means that some businesses will be defeated. They will fail. My role as your consultant is to help you to prevent that happening.

Many businesses get into trouble or distress and fail for various reasons. That is a quite normal business situation. The reasons that businesses get into trouble or distress include bad management, bad marketing or bad products and services. It is this latter point that is the focus of concern here because products and services are the true marketplace battlefield weapons of war. Whatever the reason however, the reality is that business failure is everywhere around us. Business failure therefore is both endemic, rife and yes, normal.

Of course, this is as it should be in a free economy in a democratic country. One of the fundamental rights of a free economy is the right to fail. Think about that for a moment. After all, is it not the purpose of business competition and competitive business strategy to eliminate or at least substantially reduce competition so that customers and clients will only turn to your products and services to satisfy their wants and needs?

Doesn’t business competition and competitive business strategy mean that some businesses will fail to ensure the success of others?

The combination of history and experience confirms that the large number of business failures resulting from defeat on the marketplace battlefield rests upon the fact that a company’s new products or new services could not match the firepower of competitors’ products or services. Therefore, the reality is yes; you do need to get superior marketplace battlefield weapons to avoid defeat and retreat into oblivion.

Consequently, in practical terms, you need to have a proactive process in place that can take an idea, develop it into a saleable product or service that is better than your competitors’ products and services, and launch it to the market in ways that limit your competitors’ ability to  respond in any effective way. You can learn how to do that here.

 

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Chiron's Business English

What is the Chiron Business English Drafting & Editing Service?

English is the international language of business. In many companies, particularly those in countries that do not use English as the language of daily use, company directors and senior managers have difficulty writing complicated business letters, reports, tender bids, submissions to government, project proposals, annual reports, webpages and advertisements in ‘good’ business English. I offer a reliable, confidential, anonymous and trustworthy service to help company directors and senior managers to prepare English language documents. This service focuses on international companies and is conducted completely on-line.

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… end faqs

Yours sincerely,

Graham  Segal

Chiron! the business doctor.™ ... relieves business pain!™ 

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Contact Information:

© Graham Segal, Author. March 2013. All Rights Reserved

Creative Commons Licence:

Creative Commons License

This website and the associated webpages content are produced by Graham Segal trading as Chiron! the business doctor.™. They are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License based on Graham's work at http://chironthebusinessdoctor.com.

Date this webpage was last reviewed/updated: 5 May 2013

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