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.
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
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in June 2016 and is posted here by their kind permission
Which channel will achieve the best returns for your business?
You face many choices of how best to get your products and services sold. The most common channels include a field or counter direct sales force, various models of reseller from freelance agents to sub distributors with their own resellers. E-Commerce is becoming a significant channel and self-service in stores has been around for years. Inbound and outbound telesales offers very wide reach; exhibition and catalogue sales work in many sectors like spare parts and curios. Then there are many mixed models; telemarketing followed up by salespeople is one example. For some the best or only channel may be defined by the product. High end cars need a network of showrooms and salespeople so branches or resellers are required, but music is distributed primarily over the internet. For most entrepreneurs making the right choice is difficult and may come with some risk; many companies stay with traditional methods even if that is not the best model for them.
Generally there is a trade-off between cost and control so if you want tight control be prepared to pay for it. Continue reading
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
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
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.
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
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2015 and is posted here by their kind permission
Turn your whole company into an enthusiastic unit that aids and promotes your sales
It is in the interests of any employee to do anything they can to ensure the business makes sales, or at least not put sales at risk. Aside from loyalty to their employer, a healthy and growing business means everyone is better off and has improved prospects for promotion. Strangely there are employees, and some managers too, who damage the company through carelessness, incompetence or deliberate obstruction. They are hurting themselves as much as their employer.
Contrast that situation with companies where everyone is customer centric, and frequently attract praise from customers they have been in contact with. There are typically no unresolved complaints on consumer forums, and every employee seems to know why customers should buy.
To build a company like them, some introspection may be a good idea. Do you really deliver goods and services that meet customer expectations, or have customers had to lower their expectations to your standards? Think of the grudge purchases you make, or the times you have been distressed but did not change supplier after a bad experience. You cannot expect your employees to be champions if your company supplies shoddy products, uses untrained technicians and seldom delivers on its promises. Fix the real problems and you will be pleasantly surprised by the change in your staff. Continue reading
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in July 2015 and is posted here by their kind permission
Sensible outcomes from disputes
“The customer is always right” was originally coined in 1909 as a way of differentiating Selfridges Department Store from competitors. It was revolutionary at the time, when misrepresentation by retailers was common and “caveat emptor’ (let the buyer beware) was the usual response to customer complaints.
Customer disputes happen in any business. Unresolved disputes may result in loss of customers or groups of customers, refusal to pay, widespread and often biased bad publicity, loss of repute, legal action, and even damage to property and public protest. Minor disputes can quickly escalate into anger, recriminations, threats and violence. Staff complaints about abusive and unreasonable customers is another source of dispute.
Where does it start?
Customer perceptions of broken promises or products not living up to expectations are at the heart of many disputes. Rude, uncaring or incompetent service from employees is another frequent cause. You may initiate a dispute relating to slow or non-payment, unreasonable or bullying customers or continual changes to requirements but unwillingness to pay for changes.
Arguments will escalate quickly if either party feels they are not being listened to by the other. A simple request can grow to a blazing row when either party ignores the other or scorns their view. Many serious disputes could have been resolved easily if they were attended to sensibly, courteously and early. Continue reading
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in April 2015 and is posted here by their kind permission
Opportunities and risks of getting the biggest deal ever
What do you do if you get the opportunity of a huge sale, one bigger than anything you have done so far, maybe bigger than your entire business? This is a potential game changer, the opportunity to grow spectacularly. At the same time it is scary. Will you be able to continue to supply regular customers? How will you finance this deal, what will happen if you do not get paid? Can you deliver? The opportunity opens up dreams; all the wished for things you will be able to afford for the business and your family, security for you and your workers…
Best and worst
The best things that can happen are really good. If you make reasonable margins on the huge turnover increase the extra cash can be used to increase competitiveness with additional resources, creative marketing, better buying terms and the best information systems. Once you have executed a large deal successfully, you attract other large deals. Big organisations like to deal with suppliers who other big organisations use, so your business may be at the start of an incredible growth curve.
The worst things that could happen are very bad indeed. Many suppliers have gone insolvent because large customers persisted with unreasonable demands or did not pay. You may not be able to deliver to specification or on time and have penalty or cancellation clauses invoked. If you have personal guarantees to any supplier your lifestyle can be at risk too. Continue reading
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in February 2015 and is posted here by their kind permission
Planning and executing real growth strategies
The year 2015 stretches ahead, and many entrepreneurs I speak to are still cautious. This is understandable, 2014 was a horror year of violent strikes, power cuts, limited postal service, slow economic growth and uncertainty. The temptation to proceed with caution into 2015 is very strong.
Beware though, caution can become a habit, business plans showing a modest growth on last year can become the norm. The company does not invest in new products, markets or channels, research, marketing and training are put on hold and the company develops a culture where innovation becomes too risky “for now”.
Breaking out from the limited growth habit can be a challenge, but a very worthwhile challenge, if only as a defensive move to stop competitors getting bigger and threatening you. Continue reading
Last year was a bad year for many companies – here is how to make sure 2015 is better
A variant of this article was published as the Sanlam Business Tips for Business Owners January 2015 edition. This publication is a great resource for entrepreneurs, well worth subscribing.
Last year was one of the most difficult for businesses in recent times. The strike in the platinum mining sector started in January and was only settled in June. Losses to the mines and their workers were enormous, but the trickle-down effect of the mines not buying meant suppliers were badly affected. That in turn affected their supply chains, down to tax consultants of managers of third tier suppliers. Only a week after platinum strike settlement the metalworkers strike paralysed industry for a month. The post office did not deliver mail for months in some areas, new power stations again experienced construction delays, the radical EFF appeared on the stage and the e-toll saga developed in Gauteng.
On top of all this the South African national pastime of sharing bad news brought a mood of pessimism and resignation. Already in 2015 we have seen threatened strikes, load shedding xenophobic violence. 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
Five ideas you can implement quickly and inexpensively
All businesses need an occasional profit boost and very few would have the luxury of saying they were already making more than they dreamed of. Here are five relatively painless and inexpensive strategies to improve your business.
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2014 and is posted here by their kind permission
November and December offer many opportunities for alert entrepreneurs
You will all have experienced it – the dreaded November slowdown, with many anticipating the year-end holidays before South Africa shuts down sometime in December. Entrepreneurs complain that it is impossible to sell at this time of the year. Many can’t wait for the start of the holidays.
How much are you contributing to this business slowdown? Are you demotivated by decisions being deferred to next year? Have you gone into pre-holiday slowdown mode, and repeated that this is an impossible time of year for marketing or sales? If you have then you are part of the problem, and this is a self-inflicted limitation on doing business.
Can you really afford to have one quarter of the year, from the beginning on November to the end of January as a time of minimal sales? Is it really true that nobody buys at this time of the year? The truth is there is an enormous volume of business available at this time, but it will not come to you if you ignore the opportunity.
There is an old saying that “everything comes to him (or her) who hustles while they wait”. Many successful entrepreneurs have had great successes during the slowdown by catching competitors napping in preparation for the holiday, or being the only bidder for profitable business. Tenders are published now to limit the number of bidders – really awake entrepreneurs take advantage. To get a slice of the millions spent in the next couple of months you must be alert, work hard and look for opportunities. You should also plan and execute an assertive sales campaign. Continue reading
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in October 2014 and is posted here by their kind permission
Sales to huge organisations can be wonderful, but there are risks
Making a breakthrough into a giant corporate or a part of government is like finding the pot of gold for many entrepreneurs. If you have secured a contract rather than a single sale the excitement is even greater; the long-term profit generated allows the business to fund growth and regulates the cash flow. Beware though, this kind of business comes with some risks, and entrepreneurs should be aware that such contracts have destroyed businesses, and cost entrepreneurs everything they owned.
Making the sale
Large organisations, from government departments to mines are required to buy from small businesses, especially black empowered ones. We expect them to seek out entrepreneurial companies as suppliers, but it does not work that way. Little businesses have to fight hard to become suppliers. Large organisations are driven by budgets and the key performance objectives (KPIs) of the business unit which needs the product or service, so they will buy the products that fit the specification they prepared to suit those needs. This may not be the best product offered to them. Giants are risk averse and bureaucratic.
To win their trust you need to be aware of their style and needs and prepare your company and products to meet those. Pitch your sale in a way that will help the end users to do their job better. If there is ever a case of selling to the customer needs then this is it – you want to stand out from competitors and show why your company should become the supplier. Once you make the sale you must execute flawlessly all the time, and be instantly available to them at all hours. Continue reading
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2014 and is posted here by their kind permission
Is this only for the big corporates?
Large IT companies spend millions on market research to see how they stack up against their competitors and use this information to figure out how to be different and better than them. Automotive manufacturers and importers watch every move competitors make, being first-to-market with a new fashion trend can mean the difference between a clothing brand outselling its competitors or disappearing. Even cities position themselves against other cities to attract tourists and businesses. Why should competitive strategy, a vital part of marketing strategy only be relevant to very large organisations? Why not your business?
Being competitive is a core requirement for all businesses irrespective of size. Not-for-profit organisations like charities, schools and religious organisations compete for funds, members and media attention. Very small business and start-ups must wrench business away from competitors or alternatives just to survive. Without a compelling message about what advantages they offer over others many of these organisations will fail as consumers take the easy route of buying the most popular, the most accessible or the most familiar.
More than 30 years ago Michael Porter defined competitive strategy as “The plan for how a firm will compete, formulated after evaluating how its strengths and weaknesses compare to those of its competitors”. This plan should be focused on getting a sustainable advantage over competitors so it is much more than simply reducing price or having a special offer. Continue reading
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in July 2014 and is posted here by their kind permission
Are you paying enough attention to this profit generator?
The difference between turnover and cost of sales is the starting point of profitability. Entrepreneurs drive their sales aggressively and manage operational costs tightly, but seldom pay as much attention to the crucial issue of margin. This is missing an opportunity to increase profit substantially with a little additional work.
Margin (or gross profit) is the difference between turnover and cost of sales, and it often comes from a simple percentage mark-up on all cost prices. This is a lazy way of setting the amount of gross profit your business will secure, and ultimately the net profit. You can do a lot better than that.
There are at least four opportunities to increase the total gross profit: More sales, higher prices, lower cost of sales and changing the product mix to increase the percentage of high margin products or services sold. Naturally this last one only works if you do not have a one-margin-fits-all lazy margin strategy. A tip to sell more is to increase the average number of items sold per order. Even a tiny percentage increase can make a significant difference to total margin. Look at the example of burger franchises which invite you to add a slice of cheese to the burger. If just 10% of all customers buy that very high margin slice of cheese they make significant extra profit with minimal effort, and it is so simple. What can you do to increase the items per order? Extended warranties, service contracts and training all offer opportunities. Continue reading