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Business advice

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A better year ahead

Photo by JESHOOTS.com from Pexels

 

This year has been a bad year for many companies – here is how to make sure 2017 is better

 

This article was originally published on the Sanlam blog in December 2016 It is a great blog to subscribe to if you are an entrepreneur

 

The past 12 months have not been a great time for many businesses. It started with the economy struggling to recover from the effects of the double change in finance ministers, was threatened by potential downgrades to sub investment grade by the rating agencies and characterised by shocks like Brexit, the Trump victory in America, local government elections, the #feesmustfall movement and the State Capture report. The serious drought saw food prices rocket and water restrictions added to the difficulty of doing business. All these issues make buyers nervous, and nervous buyers will delay all but essential purchases.

On top of all this the South African national pastime of sharing bad news brought a mood of pessimism and resignation. We know that water restrictions and high food prices will continue well into 2017 and the ruling party will have an elective conference which could be abrasive in the coming year. What, you may ask will make this year any better than the previous one? One of the answer to that question is you. There are many things you can do to shield your business from negative external events, and to seek the opportunities that any adverse event brings. Continue reading

Incentivising sales people

 

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in October 2016 and is posted here by their kind permission

 

 

How do you keep sales people motivated when clients aren’t spending?

 

 

Salespeople are by nature risk takers. Their success or failure, and significant parts of their income if they are commission earners, are in their hands. Sales is one of the very few job categories where performance is instantly measurable, and usually linked to rewards and threats. So what happens when outside factors reduce demand?  How do you keep them motivated and rewarded when customers reduce spending?

Being fair is important. If you have reduced forecasts because of the economic climate it follows that you are expecting your salespeople to make less sales. By then continuing to incentivize your sales team based on the original quotas you will be condemning at least some of them to reduced income and failure to make target, however hard they sell. You are likely to build resentment and damage motivation which is the last thing you want to do in a reduced market. Consider reducing quotas in proportion to your reduction of forecast, even if that means that some salespeople will earn more for selling less. Listen to their concerns and suggestions, provide training and coaching where it will improve performance. Continue reading

Owner’s involvement in sales

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2016 and is posted here by their kind permission

 

 

Where should business owners fit in to the sale process?

 

 

Buyers like dealing directly with the boss, and some large organisations insist on the business owner as their primary contact. When your business was a start-up you may have done all or most of the selling, and still have the sales relationship with customers. The problem is that the owner’s involvement in sales is seldom a defined role and this can create uncertainties and inefficiencies, so it is worthwhile examining just what your role should be.

If you have a very small business or if you have a single large customer you will probably have to be the account manager or salesperson. You may find it difficult to delegate sales responsibilities involving customers you have personally dealt with for years. Then there is the awkward transition period between the owners doing all the selling and having a fully-fledged sales force. The usual first step is to hire one or two salespeople and expecting them to generate new business with as much drive and knowledge as you apply. That is unlikely to happen. Rather approach delegation of sales responsibility and development of a sales force as projects, with appropriate funding, training, systems, measurements and processes in place.

Education

If you must continue in sales attend a course or otherwise educate yourself about sales skills and tactics. That might seem strange when you have been selling successfully for years, but unless you understand solution based selling you will not know what additional business you could be getting. Then get an understudy to shadow you and take over at least the routine work. Free up time to manage the business otherwise you will not grow. Continue reading

Why market in a tight economy?

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in September 2016 and is posted here by their kind permission

 

 

Times are tough, sales are down, is marketing the best way to spend scarce cash?

 

 

The economy is limping along and lower sales means having to save costs. The marketing budget is a tempting target for cuts. Developing the company and product brands is a long term investment, and it is difficult to show returns on expenditure. Even lead generating marketing has a time lag between spending marketing funds and bringing in cash from sales. Cost cutting is usually driven by accountants who may have little understanding of customer needs or branding.

Should you cut marketing expenditure? Only as a last resort to ensure survival and then for a defined time, otherwise emphatically no. There are better ways to cut costs. See the July 2016 My Mentor column in Entrepreneur “Cutting Costs”

There is plenty of evidence to suggest that cutting marketing spend in a recession is a seriously bad idea. A Wall Street Journal study of the last recession showed that companies which cut back on marketing lost sales and market share, while those that held their marketing increased profits compared to those which reduced marketing. Repeated studies going as far back as the Great Depression have shown the same results. Savings you make from reduced marketing may be more than wiped out by lower sales. You need every sale and every customer you can get in these times. Some studies have shown that it even pays to increase marketing in bad times. Recessions can be a great time to go on the offensive, to grab customers and market share from competitors. Continue reading

Making sales when nobody is buying

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2016 and is posted here by their kind permission

 

 

Buyers are scarce and highly selective. How do you get a share of their business?

 

 

The business climate has been bad for several years. The mining sector is in decline, manufacturing has been shrinking and consumer spending has reduced. In tight economic times buying patterns change; projects are postponed, companies are reluctant to replace machinery, individuals stop buying nice-to-have things and financial managers slash budgets. Cutbacks like these can affect suppliers seriously, even fatally. Buyers become much more selective when they do buy. They negotiate harder and look for better deals, so competition increases for the little business remaining.

While this is going on you need to keep your sales at a profitable level. It is too risky to plan to break even; the tough times are likely to continue and your costs will increase so you risk making losses. Loss making companies do not survive bad times very well.

Attitude

How do you maintain or even increase sales? A good starting point is your attitude. In my experience entrepreneurs who focus on how bad things are will often see their fears come true. Those who ignore doom-and-gloom conversations and show determination often succeed in making sales despite the economy. It is also crucial to put the downturn into perspective. The majority of buying continues. All of the savings and deferred expenditure makes up a small portion of all purchases. Even depressed economic sectors, like mining, spend billions of Rand on goods and services. Your challenge is to be a supplier who gets a slice of the buying that still takes place. Continue reading

How important is your brand?

 

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in May 2016 and is posted here by their kind permission

 

What does brand really mean to SMEs?

 

 

 

Brands and branding have become the focus of much marketing attention and some hype. Hands up all who recognise all or most of these brands: PrivateProperty™; Sorbet™; Rocking the Daisies™; Turrito Networks™; GetSmarter™; The Creative Counsel™; MiX Telematics™ and Paycorp™? These are all highly successful fast growing businesses which have featured as success stories in Entrepreneur in the past twelve months. Their chosen markets must have valued their brand for them to have achieved such remarkable successes, and yet they are far from household names. So just how important is your brand to your entrepreneurial business? Who should be familiar with it? What values should it portray?

Back to basics

A brand derives from the brand mark burned on livestock to mark ownership. Technically it is a trademark for a company or product, but in the modern sense it is the value which consumers place on the advantages or qualities of the person, company or product. There are many definitions of brand and branding and this adds to the confusion about what to do about branding your business and products. This is a good one: “Brand is the image people have of your company or product. It’s who people think you are.” Anne Handley with CC Chapman. Continue reading

Good mentors worth their weight in gold

This article was published in a Business Partners newsletter of 24 November 2015, and appears here as a guest post by Christo Botes, then Executive Director of Business Partners Ltd. Business Partners Ltd is an African risk based Finance house and Venture capitalist focused on SME’s. The company has a mentors arm staffed by experienced specialists, and co-manages the South African SME toolkit.

 

There is no shortage of business advice in the world. It comes in the form of consultants, coaches, advisors, professors, management gurus and self-help celebrities. Each has its place, but for Christo Botes, executive director of Business Partners Limited (BUSINESS/PARTNERS), there is a special breed of business adviser who are worth their weight in gold: the business mentor.

 

For Botes, the distinction between a business mentor and other forms of business advisers is subtle, because a mentor can play any number of roles, sometimes that of strategic adviser, technical expert or business consultant, and sometimes all of them at once. But the key characteristics of a mentor has to do with their experience, attitude and approach. They practice the science and the art of business, not merely the science, says Botes.

An ordinary business consultant usually has a clinical approach, coming into a business to solve a specific problem and impart formal, defined pieces of knowledge or procedural know-how. A mentor can do this, but also strives to impart wisdom based not on textbook learning but on his or her experience.

The ordinary consultant keeps within his scope of work, and his interest stretches as far as the settlement of his invoice. A mentor can also work with a defined plan and for a fee, but gains his satisfaction from seeing his client succeed as a result of his work. Even if he is brought in to implement a technical process in a business, he does so with passion, and with a broader view to empowering the entrepreneur and the business.

A consultant can be a fresh-faced graduate with an MBA. A mentor can also have an MBA, but can only be someone with experience, or “scars and medals” earned in the real business world, says Botes. Continue reading

Plan for a better year ahead

This year has been a bad year for many companies – here is how to make sure 2017 is better

 

 

The past 12 months have not been a great time for many businesses. It started with the economy struggling to recover from the effects of the double change in finance ministers, was threatened by potential downgrades to sub investment grade by the rating agencies and characterised by shocks like Brexit, the Trump victory in America, local government elections, the #feesmustfall movement and the State Capture report. The serious drought saw food prices rocket and water restrictions added to the difficulty of doing business. All these issues make buyers nervous, and nervous buyers will delay all but essential purchases.

On top of all this the South African national pastime of sharing bad news brought a mood of pessimism and resignation. We know that water restrictions and high food prices will continue well into 2017 and the ruling party will have an elective conference which could be abrasive in the coming year. What, you may ask will make this year any better than the previous one? One of the answer to that question is you. There are many things you can do to shield your business from negative external events, and to seek the opportunities that any adverse event brings. Continue reading

Strategic competitive positioning

 

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in April 2016 and is posted here by their kind permission

 

Attack, defend, innovate or do nothing

 

 

We know that 2016 will continue to be a difficult year. Entrepreneurs I speak to believe competitive pressures are increasing as businesses chase shrinking markets. Price cutting is common as competitors do anything they can to get a slice of the limited business available. Some entrepreneurs may respond to this situation by assuming there will be less income and cutting costs to remain at least marginally profitable. Others will look for new markets or slash prices, and some will simply hope things do not become catastrophic. The problem with all these plans is that almost all competitors will to do similar things, so competitive pressures will be unchanged.

This is a good time to think strategically about positioning your business to get through bad times while increasing your competitive advantage. I suggest you take a deliberate competitive position and I have listed three possible strategies for your consideration, and a fourth which you could fall into if you do nothing. Continue reading

Managing hidden expenses

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in March 2016 and is posted here by their kind permission

 

The costs you don’t get invoices for

 

A potential customer walks away without buying after a bad experience with one of your employees. Your deliveryman cannot find the address so he returns with the customer’s order. Inventory at the back of the storeroom lies unused and unsaleable. A manufactured item fails a quality check and has to be remade. Clerks spend large parts of the day reconstructing lost information. These and many other failures cost your company a large amount of money, and yet the cost is almost invisible. These are the intangible costs for which you do not get invoices. They are typically a substantial part of the total costs of running a business.

Intangible costs include overstaffing, overtime, overstocking, excessive transport costs, scrapped material, excessive rent and loss of profit from lost customers and lost sales which should have been made. Few raise alarms or are subject to intensive cost cutting drives, simply because unlike direct costs nothing highlights their existence. To illustrate this point image a scene where every lost sale generated an invoice for the loss of profit. There would be a predictable response to improve competitiveness and service, but the lack of visibility of lost sales makes this response unlikely. The loss of profit is as real as the cost of wasted stationery, but seldom gets as much attention. Continue reading

Are you driving your business or is it driving you?

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in February 2016 and is posted here by their kind permission

 

 

Why so many strategies fail to deliver and what can be done about it

 

 

It is almost a caricature. The executives go away on a strategy planning weekend. They have a successful think tank and come back fired up with great strategies and enormous enthusiasm. Then the day-to-day tasks demand attention and three months later nothing has changed. The idea may still be discussed in management meetings but this is becoming embarrassing. Why did it all go wrong?

It is a lot easier to think about how to grasp opportunities and solve problems than it is to implement the plans. A central problem of implementing new strategy is that it usually relies on people who already have busy jobs with little time or energy to execute additional demanding tasks. The planning session seldom takes this factor into account so strategy implementation remains project-based and dependant on spare time availability within the busy management team. Nothing changes and the company drifts on as it always has.

Entrepreneur style

The style of many entrepreneurs may also be the root cause behind failure to implement strategy. The phrase ‘working in your business instead of on your business’ is almost universal. Entrepreneurs naturally fix problems, manage people on a daily basis, sell, manage the finances, pacify irate customers and liaise with suppliers because they have always done so, and are now very good at these tasks. They work long hours doing things that others would be less effective at doing. Working in the business becomes a comfort zone, and the area they gravitate to when the business faces problems. Continue reading

Taking stock of your performance

 

This article was first published in the Sanlam Business Tips for Business Owners newsletter of December 2015, an excellent resource for entrepreneurs distributed free by a wonderful company. Entrepreneurs would do well to subscribe to this newsletter.

 

Comparing actual performance against planned results pays dividends

 

At year end many companies take stock of all inventory items. Taking stock of how your company performed against your plan is even more important. Pull out the business plan you completed earlier and make a comparison between what was planned and what actually happened. Of course if you never did a business plan cannot do this, and you should take note of Dave Ramsay’s wise words “A goal without a plan is just a dream”. Stop dreaming, plan and implement

The easiest way to do this is to develop a spreadsheet or table with the targets from the plan listed. Be as comprehensive as you can be. Obvious items are sales, profitability and cash flow forecasts, customer and staff retention, staff and management development, customer service levels, planned marketing campaigns, planned product development / improvement and competition monitoring and reaction. If those were not in your plan take this as a good reminder about what should be included when you do your plan for the following year. Now you should enter the actual results and show variances.

When you compare actuals to plan be brutally honest. If your plan had a non measureable goal like “give great customer service” assess honestly how well or badly you did, ask a few customers, and not only the friendly ones. Continue reading

Customer base or new business?


This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2015 and is posted here by their kind permission

 

 

How should you deploy limited resources for best returns?

 

 

Entrepreneurs know that they do not have unlimited sales and marketing resources. You face the question of how to get the maximum output from what you have. Should your energies be directed at more sales to customers, or more customers? Is it wise to split your resources between these?

A partial answer can be found in the nature of the business. If you sell things that customers buy very seldom like flooring or wedding facilities, your effort should go towards positioning your brand as one to consider and delivering beyond expectations to grow word-of-mouth and referral business. Similarly if your product set is applicable only to a small total market and you are the major supplier you want to ensure that all customers use as much as possible of your product range.

In cases where you offer highly differentiated products or have a unique market focus your priority should be new business before imitators become a problem. Where you have a ‘me too’ product set, very similar to that of your competitors your first priority should be to ensure loyalty of your customers and differentiate by excellent service.

Some new business is essential. Customer attrition will come through closures, relocation and competitive attack. Costs will increase and without new business you will have to cover this increase with price hikes, which make you less competitive. Continue reading

The power of focus

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in October 2015 and is posted here by their kind permission

 

 

Concentrate your resources on the target to improve performance

 

 

It seems logical to spread your net as wide as possible, to develop all available sales opportunities and markets if you want to grow. This makes sense if you are the dominant player in the market with an abundance of resources, one who can afford to waste resources on loss making sales simply to deny them to competitors. For everyone else it is a bad idea. Military strategist von Clausewitz wrote “Where absolute superiority is not obtainable, you must produce a relative one at the decisive point by making skilful use of what you have”, echoing the much earlier Sun Tzu maxim of concentrating your forces where the enemy is weak.

This military strategy applies equally to business. If you concentrate your resources and focus on a particular target, you gain many advantages: Sales costs reduce, sales become easier through customer referrals. Salespeople become expert in the area and competitors recognise your expertise and go elsewhere, so your strike rate increases. Customer support and administration costs fall and service levels increase. Your company becomes the go to company in that market.

Alternative choices

By contrast trying to hit everything that moves is costly; implementation and procurement complexity increases, as does the risk of cancelled sales. Your people become frustrated because they continually need to learn new industries and seldom re-use their expertise. Poor customer service is frequently an outcome and you lose the power of relevant reference customers. Continue reading

Tenders – timewaster or business generator?

2015-september

 

 

This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in September 2014 and is posted here by their kind permission

 

 

Should you tender or stay away? Some basic rules

 

 

Tenders are used by all levels of government and many companies to buy goods and services and issue contracts. The total value of tender business is enormous, so an immediate reaction is to get involved. There is a downside as many small businesses and start-ups have experienced. It is entirely possible to submit many, many tenders without success. The direct cost of preparing a tender is high, but the opportunity cost of conventional sales you could have made instead is higher.

Me too

I call these ‘me too’ tender submissions, where you have nothing special to offer, and the company never heard of you. Among the bidders will be existing suppliers, those having specialist skills in the area and those bidding the lowest price because they can. Your chances of success are almost zero. Instead of wasting your time, develop a specific niche expertise or technology then tell potential buyers about it. Your chances of winning subsequent tenders increases dramatically. Continue reading

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