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Decision time

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in March 2012 and is posted here by their kind permission.

 

A business with no sales needs to change or close

 

Challenge

This entrepreneur started a model and artist management company and signed up models, planning to take a commission of their earnings. But there have been few castings and very little income. E-mails to potential clients go unanswered. She asks if she should change her way of finding clients.

Response

This entrepreneur is faced with a three way choice right now. She can persevere, working hard to make a break through, she can quit, or she can change strategy and tactics. When potential buyers do not buy a product or service as expected businesspeople either become bewildered, as is this entrepreneur, or frustrated and angry at the buyers ‘illogical’ refusal to buy. This is naive; the buyer has no obligation to buy from the entrepreneur.

The key question to ask is ‘why would they buy from my business?’ Are the models more talented, or less expensive? Are my services superior to those of others? Users of models have an enormous choice, and will have their favourites. They know what to expect and the like the look of the models they use. If they want a fresh look there will be a large choice from their current agency. So why would they switch from the known and liked to an unknown agency and model? Continue reading

Risky business

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in February 2012 and is posted here by their kind permission.

 

Having one large customer is wonderful – until something bad happens

 

 

The Challenge

This entrepreneur has printed training manuals for a large national company for 18 months. He purchased additional machinery for their work, although there was no contract in place. Recently the orders have dwindled and the new machinery stands idle. The buyer now places orders with a friend. The entrepreneur asks if there is any way he can complain about cronyism.

Our response

Most small businesses dream of having at least one really large company as a customer. Big orders mean rapid growth and the cost of sale is lower than dealing with many small businesses. But there are disadvantages – entrepreneurs entering deals with very large organisations should consider Porter’s ‘Five Forces’ model, where the power of customer is identified as a competitive force. Continue reading

A test of customer relations

This article was first published as a Sanlam Cobalt Business Tips article. Sanlam great resources for entrepreneurs – I suggest you subscribe.

Take this light-hearted, but important test to see how your business is doing in providing great customer care.

 

 

  1. Do you have a written customer relations statement in any form – pledge, values, mission statement, incentive scheme, policy document or any other format?
    1. If yes, progress to question 2.
    2. If not, write down your understanding of the values and actions that your organisation believes in, or should believe in, then progress to question 2.
    3. Approach five random staff members or managers and ask them to tell you what is on the written document or in your notes. They do not need to be word perfect.
      1. If all of them get all or most of it right – full marks.
      2. If more than two of them get most of it right – half marks.
      3. If two or less of them get less than half of it right – fail.  You may have failed the grade. Go back  and start instilling a common culture of customer service in your organisation. Continue reading

Finding start up capital is a challenge

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in November 2011 and is posted here by their kind permission.

 

Entrepreneurs need to think creatively about their capital needs
 

The challenge

My challenge is finding capital. I am a full time mom with no income or assets, so a bank loan is out. I’ve consulted family members with my business plan without success.

My business idea is to supply a niche market with, latest technology imported equipment. I’ve done market research this business seems very promising.  But where do I obtain initial capital?

Our response

Getting finance to start a business is very difficult. Whether the investors are family members, finance houses, venture capitalists or angel funders, start up capital is scarce and difficult to secure. This gets worse if the would-be entrepreneur his little or no surety, has not previously run their own business or has no relevant business experience. But good entrepreneurs are a hardy lot, and used to finding solutions to intractable problems, so they do find ways to start businesses despite these problems.

Before answering this potential entrepreneur’s question I would like to pose one of my own: If she had sufficient money to start this business would she commit the funds, even if it was all she had? How sure is she that the business idea will work? If there are question marks then the entrepreneur should go back to the business plan and research more and test the concept to reduce the risk of failure. Few funders will finance a business where the entrepreneur would not risk her own funds. Continue reading

What is the real need?

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in October 2011 and is posted here by their kind permission.

 

The answer to insufficient sales may be more money invested, but there are other opportunities

By Ed Hatton

 

The challenge

I have just started a college with a unique range of course offerings. Enrolment numbers are poor due to a low advertising budget. How do we get investors involved without having surety?

Response

Existing entrepreneurs reading this will probably be smiling wryly. Cynics say the first two laws of start-ups are:

  1. However brilliant the product or service, initial sales will be much lower than expected;
  2. The only easy way to get finance is to prove you don’t need it.

In this case the entrepreneur has assumed that the only way to increase enrolment is to put a lot of somebody else’s money into advertising. There are a couple of issues with this proposed solution.

Firstly investors put funds into businesses because they believe they will make a good return. So this entrepreneur will have to demonstrate that the project will make money, despite the fact that early enrolments are poor. Facts, figures and hard information are needed, not just self belief and enthusiasm. Continue reading

Growing to profitability

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in August 2011 and is posted here by their kind permission.

 

A new entrepreneur faces a steep learning curve with no mentoring

 

 

The challenge

An entrepreneur started a website to provide youth with a free service for employment and small business opportunities. The income comes from web publishing and affiliate programs. He has no IT background and has to learn operations, marketing, finance and everything at once. He also doesn’t have anyone to bounce new ideas off.

Response

This entrepreneur, operating in a rural area, wanted to make a difference to young people and small businesses. The web site breaks even but he is frustrated at the slow growth and his own lack of knowledge. This is a near-universal problem with new businesses, the learning curve is both steep and multi-disciplined. Affordable advisors are hard to identify.

Learning and getting advice

Finding appropriate learning opportunities and information while running a new business is a challenge. There are many courses advertised and choosing the right one is crucial for entrepreneurs on tight budgets and with limited free time.

Start with the free information on the internet. Entrepreneur magazine’s website at www.entrepreurmag.co.za is a valuable resource, so is the SME Toolkit (www.southgafrica.smetoolkit.org) and many others. There are many great business blogs which starts ups can follow at no cost including my own at http://marketingstrategy.co.za. It takes time and patience to search for good information, but this is time very well spent.

Entrepreneurs should not be afraid to ask for advice, but only when they have done the basics. Many business people are happy to help but don’t expect them to come up with answers when the entrepreneur has been too lazy to investigate options. Start with a successful business nearby that is not in competition with yours and then ask the managers for assistance. This works well in the internet world, where free advice is a part of life. Coaches and mentors are available for a fee, but set the expectations and budget in advance. Continue reading

What do customers need?

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in August 2011 and is posted here by their kind permission.

Starting a new business to supply an innovative solution needs lots of research

By Ed Hatton

 

 

The challenge

I have been developing a product for the health and beauty industry for the past 2 years. How do I sell and market my product both nationally and internationally?

Response

Many wonderful inventions never see commercial reality, let alone international success so the questioner is wise to ask for advice on the way forward. If the market does not see the value of a new creative concept it will not sell. The inventor may get excited about something that solves one of her own problems, but before launching a start up business she needs to be sure that the market has the same need and sees the value of her product in addressing that need. Continue reading

Cutting prices

Image courtesy of xedos4 at Freedigitalphotos.net

This article was written by Ed Hatton and appeared in the October November edition of Destiny Man magazine

The economy is uncertain, business is slow and your competitors have slashed prices. Should you follow suit?

The simple answer is yes if that increases profit or improves cash flow through more sales. Also yes as a defensive move to retain irreplaceable market share and that retention is worth sacrificing profit for. Be careful of emotions here. Clinging to things that should go can kill your business.

No if your products are price inelastic, so a price reduction does not materially increase sales. Also no if it would be more profitable to reposition and increase prices and value to your customers, and take higher margins for lower sales. Continue reading

Competing with giants

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in July 2011 and is posted here by their kind permission.

Start ups must respond to aggressive and bullying tactics to survive
By Ed Hatton

The challenge
A small concrete pipe manufacturer with great customer service opened a factory in East London to support the local demand from local contractors and government. This reduced the cost and delays in transporting pipes and was an immediate success; turnover increased rapidly. The large and powerful manufacturers in this industry lost market share and reacted by slashing prices dramatically, absorbing reduced or negative margins with their substantial resources to attack the upstart. The new factory cannot match these prices and there is no product differentiation. Their question: how do they compete?

The Solution
Voltaire wrote that “God is on the side of the big battalions”, but I wonder if the Almighty would want to be associated with some competitive practices of large and predatory organisations. Entrepreneurs starting new ventures in competition with powerful organisation often face the kind of threats experienced by this questioner. The competition may be price based as in this case or it could be massive increases in marketing spend, cornering the raw materials supply, buying key staff from the start up and others. Many believe that free competition and entrepreneurship are the best routes to more employment, but sadly practices on the ground are often very different.

How can this entrepreneur compete? Continue reading

The Somali lessons

image courtesy of Freeimages.co.uk

Humble shopkeepers can give lessons in marketing strategy

I recently read an article about the lives of Somali shop owners operating in a Cape Town township. They lived a very stressful life, with the continual fear of xenophobic attacks from community members, and the criminals who used the simmering xenophobia to provoke attacks and loot their stores. Insurance is not an option for them.

They described how they chose their location in the poorest sections of the communities. Residents have almost no income, and so travelling to a distant shop consumed too much of their discretionary spend, and they wanted the lowest prices for staples. Unit sales were small values, and at times a shopper would appear with a single coin. All he could buy with that would be one cigarette or a sweet. And he made the most of his purchase – choosing a sweet then changing his mind for a cigarette then rejecting the cigarette and choosing some gum.

The Somali shopkeepers treated him with dignity and patience, knowing that shopping was a rare treat for him. Many local shopowners would have chased him away. Going to a supermarket was simply not possible for this customer.

Lesson 1

They chose their target market location carefully, selecting areas which put them in considerable danger and not very pleasant circumstances, but free of competition, and better able to service their customers. And then they gave wonderful customer service to even the least significant customer, treating him like a millionaire. How many entrepreneurs have been as visionary, and how many can say hand on heart that they treat all customers with equal respect and service? Continue reading

Capital growth for a new venture

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in June 2011 and is posted here by their kind permission.

All start-up entrepreneurs should understand their business finances before they launch

By Ed Hatton

 

Challenge:

An entrepreneur is planning to start cattle farming, but has very little economic or entrepreneurial background as he works in the medicine field. He wants to know what the growth in capital ia that is needed by a business during its first year to sustain further development and growth.

Solution

This is question all start-up entrepreneurs should ask themselves. The focus is usually on the initial capital needed to start operations, but sustaining the business past the first year is equally important.

To answer the question we need to take a step back to the business plan for the new venture. This should start with how much the entrepreneur wants from the venture as a monthly income and / or capital gain. That will tell him how many calves he will have to sell each year if he makes assumptions of the sale price and cost of breeding, rearing and sale. The estimated yield will tell him how many breeding cows he will need. The size of the breeding herd and the capacity of the land to produce grazing and fodder will tell him how much land, labour and infrastructure he needs. These factors will determine his start up capital needs Then he needs to do the cash conversion cycle (from when cash is laid out to produce stock to the time cash is paid as a result of sales) and work out the operating cost of running the business during that period to establish his working capital needs.

This is a business like any other. The entrepreneur has to identify his target market and see what it needs, decide how to compete, then get the right product (breed and quantity) and distribution channel to sell his breeding stock, find the right production facility (land and infrastructure) and identify the right labour and management to handle the required volume. Continue reading

Marketing with a limited budget

pic courtesy of imageafter.com

How do you get noticed if you have no money?

 Imagine a business with expenses rising, the turnover static or falling. The entrepreneur realises that the business simply has to find new customers, but there is  little or no money available for marketing. What should the business do next? In desperation maybe the entrepreneur has thought of doing something like:

  • Agreeing to place an advert in a supplement of a publication which will be relevant to their products;
  • Printing flyers and putting them in post boxes;
  • Hiring a new web designer to make the website more attractive.

Sadly the outcome is likely to be a poorer and sad entrepreneur. One time advertising may bring a few enquiries occasionally but is almost always a waste of money. The post is probably collected by a messenger who will discard the flyer, and a prettier web site will not bring more enquiries if nobody visits the site.

A smarter way is for the entrepreneur to realise that if he has limited funds, he needs to reach the people likely to buy from him as efficiently as possible; he cannot afford to market to people who will never be his customers. It is amazing that this simple piece of logic is so often ignored. The very first step is to identify who his most likely customers are, and then to figure out the best way he can communicate a marketing message to them. For most businesses in this situation this will be a highly focused message, getting to the right people with as little as possible waste. Sometimes this may be as simple as forming an alliance with a non competitive supplier to the target market. This would apply to photographers, event managers, courier companies and many more – maybe almost every business. To make this work the alliance must benefit both parties. The allies could agree to introduce each other to their customers, share exhibition or other marketing costs or offer bundled products. Continue reading

Starting over

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in May 2011 and is posted here by their kind permission.

 Moving a business to a new location can be like starting all over again. By Ed Hatton

Challenge

An entrepreneur moved his event management and wedding planner business to a new province where no-one knows his business. He needs to attract clients but isn’t sure where to begin. He has been distributing pamphlets, but so far no-one has gotten back to him.

Solution

This entrepreneur had a thriving business doing wedding planning, parties and corporate event management and then he moved to a different province. When he started operations in his new location he realised just how much personal reputation and word of mouth had meant. In the new location he is unknown and potential clients are wary of entrusting important events to him.

The business must be started again in the new location. As before, he has to build a client base and a solid reputation to provide a platform for growth. He has the advantage of being experienced in running events and weddings, so he does not start quite as ‘cold’ as he did originally. Against this are a number of part-time wedding planners and event managers who are established and compete with him for business. Continue reading

Find your niche to sell online advertising

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in April 2011 and is posted here by their kind permission.

Securing advertising income in a massively competitive environment requires smart strategy and good delivery – by Ed Hatton

 The Challenge

An entrepreneur wants to approach businesses to advertise on his free business listing website. He has all the stats of how many visitors he has to his site but he doesn’t know what angles to use.

 Solution

This entrepreneur has chosen the online sector for his new business. One of the key issues is the speed of development; new innovations change the landscape all the time. Another risk is the extent of the competition. There are thousands of directories, and hundreds of search engines, all trying to attract people searching for information or potential suppliers.

In this heated environment it is easy to focus on the measures that the industry uses – page impressions, unique visitors and click-throughs. But these are only measurements of traffic. The entrepreneur’s business must find and address a need profitably if it is to survive and prosper. All the visitors in the world mean nothing unless visitors use the information from the directory to buy or enquire about services. Similarly companies listing on his directory are there to source new enquiries which they can turn into business opportunities.

So now the question becomes ‘how can this directory generate business opportunities for the business listed?’ This must be done in a highly competitive environment with industry giants and thousands of small competitors trying to do the same. Continue reading

Does your advertising generate sales?

 

Image courtesy of imageafter.com

Your sales force has a major impact on the success of your advertising

Every business spends time and money on marketing promotions and advertising, even if it is only signage or business cards. The objective is to make customers and potential customers aware of your company and its products and services. Most advertising also has the objective of inviting prospective buyers to approach
your company and either enquire or buy items.  When the advertising succeeds and a customer engages with one of your salespeople, you should get value for your money spent on advertising by making a sale – but it does not always work out that way.

Prospective customers may not buy if the salespeople ignore them, if the product is not in stock, or not at the price advertised. Sometimes making the sale will depend on the salespersons product knowledge or their ability to really to a customer’s requirements. Are they able to match specific products to address customer needs or are they restricted to reciting (or reading) specifications and prices?

 A lost sale

Some time  ago I looked for a new device to heat a room in my home. There were many types of heaters and airconditioners to choose from.  I had seen an advert for a type of heater that seemed to satisfy my needs and I had been attracted to the special price, so I visited the store. There was a display of the heaters on promotion near the entrance to the appliance store, with several neatly uniformed salespeople poised. Continue reading