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Startup Coach

logo Ed is a columnist for the South African edition of Entrepreneur magazine, South Africa’s No. 1 award winning business magazine. His column under the title The Start Up Coach was published from April 2010 for three years before the column title changed to My Mentor. the original format was my answers to questions readers submitted about issues around starting up businesses or early stages of new enterprises. Articles about start ups are listed on this page, those that deal more with developing and growing established businesses are listed on the My Mentor page.

Articles are posted on this blog three months after they have been published in the magazine – hey we want you to go out and buy the current one! Or even better subscribe to the mag – it really is a great publication for entrepreneurs. And I am most grateful to Entrepreneur Media SA (Pty) Ltd., the publishers of Entrepreneur Magazine for allowing me to post these articles which were written for and published by Entrepreneur Media SA (Pty) Ltd. and all rights are owned by them. Thanks folks, I appreciate you letting me showcase this work.

Readers should take note of and abide by the copyright notice at the end of each of these articles, OK?

So now to the articles.

2014_SeptemberFrom the September 2014 edition

Tenders – timewaster or business generator?

Should you tender or stay away? Some basic rules

 

In this My Mentor column we consider tenders and whether to submit or not. Ed suggest you must have a different technology, expertise or way of doing business to increase the chances of succeeding with a tender bid. He notes that tender submissions are time consuming and expensive, and the effort may be better utilised in other sales efforts. He warns about the risks of fixed price long term bid submissions and trying to compete with politically connected tendepreneurs.

The full article is on the main blog page.

 

 

2014_JuneFrom the June 2014 edition

SME sales force

Managing a small sales force is challenging

In this My Mentor column we examine the pitfalls and opportunities in entrepreneurial business with small sales forces. Ed advises how to recruit and manage the correct type of salesperson for your business, and warns against inappropriate sales management by the entrepreneur. We also discuss the need for sales support in many forms and why investing in these generates additional profit.

The full article is on the main blog page.

 

13 Nov CoverFrom the November 2013 edition

Marketing on a tiny budget

You have to tell potential customers what you offer – even with no money

In this My Mentor column we examine the all-too-frequent situation of the entrepreneur with a great business idea or product and no money to tell anyone about it. Ed gives suggestion on how marketing with little money can get messages to the target audience and how to use alliances, barter and the internet to maximise marketing effects with little or no money.

The full article is on the main blog page.

 

13 Sept CoverFrom the September 2013 edition

From the September 2013 edition

Start-up sales

Early sales are vital for start-ups, early bad sales are dangerous

Start up businesses need early sales to build cash flow and customers. This My Mentor column advises on strategies to build both retail and B2B business in the early stages by making it easy for customers to identify advantages of buying from the start-up. The article cautions against taking complicated orders where your obligations are not clear – a lethal combination for new businesses.

The full article is on the main blog page.

 

13 August CoverFrom the August 2014 edition

Which business should I open?

What is the right type of a new business for young people?

This My Mentor column responds to a question from a young relative asking what sort of business he should open.  The column examines the opportunities that exist for young people, cautions against going into businesses which need special skills to run and gives tips to build successful start-ups. It also looks at the advantages young people have in starting new businesses.

The full article is on the main blog page.

 

13 May CoverFrom the May 2013 edition

Staring at failure

That terrible time when it looks like the business cannot continue

In this column Ed discusses a common and terrible moment in the life of most start-up businesses when it looks like the business has been a huge mistake and cannot continue. He examines how to think rationally in the face of emotional turmoil, look for root causes of the problem and find solutions.

The full article is on the main blog page

 

From the April 2013 edition

13 April coverThe subject expert entrepreneur

You have the expertise but where are the customers?

The challenge this month is from a security expert who set up his own security business after 26 years of security experience, but has been unable to attract customers.

The Start up Coach advises him that if he simply offers the same services as larger and more established businesses he is unlikely to draw satisfied customers away from the existing supplier. He needs to find ways to capitalise on his expertise and the agility of small businesses to design and communicate the differences between his business and larger more established competitors.

The full article can be read on the main blog page.

 

13 March coverFrom the March 2013 edition

What do they want to hear?

The subject must be important to potential buyers

The challenge this month is from a remarkable person, who although he was seriously brain damaged in a motor accident, gained several tertiary qualifications. He wants to start a career as a motivational speaker.

The Start up Coach reminds the questioner that audiences will want to listen to topics that they find interesting and valuable. Although he is extremely passionate about his recovery this does not mean others will share his passion. Instead he should seek out those audiences who would be vitally interested in his story. The Coach gives some ideas on how he could get started, including the use of free ‘samples’. The full article is available on the main blog page.

 

13 Feb coverFrom the February 2013 edition

Talents and weaknesses

Capitalising on strengths and overcoming problems are essential entrepreneurial abilities

The challenge this month comes from an entrepreneur who asks if it is advisable to open a clothing business without the ability to draw designs.

The Start up Coach notes her strength in spotting trends and understanding the manufacturing process, and applauds her for recognising her key weakness, before plunging into a business in the hopes it will be overcome. We explore various options of getting around the weakness including looking at her business model and revising it if necessary.

The full article is available on the main blog page.

 

 

 

12 November coverFrom the November 2012 edition

The very first thing

The first actions can turn a dream into a business – or a nightmare

The challenge this month is from an entrepreneur who has an idea of starting a new magazine which he believes will be viable. He asks what should be the very first thing he should do.

The Start up Coach believes that there are two equally important first steps: ensuring that there is real passion to launch and run a business, and checking the commercial viability of the idea. Entrepreneurship is not easy and needs real passion to overcome the difficulties. We give ideas on how to check the commercial viability, considering issues like volumes, costs, capital required and experience.

The full article is on the main blog page.

 

12 October coverFrom the October 2012 edition

What is the right price?

Focusing on pricing will pay dividends to start up entrepreneurs

The challenge this month is from an entrepreneur who needs guidance on determining the price of digital media.

The Start up Coach remarks on the importance of pricing as a part of the marketing mix, which sometimes gets less attention than other part of the ‘4Ps’ which is not right. The column sets out some of the more common pricing strategies including cost plus, pricing to position the service against competitors and perceived value pricing and sets out the pros and cons of each.

The full article is on the main blog page.

 

12 September coverFrom the September 2012 edition

Starting alone

Leaving the security of the corporate world to start your own business requires more thought than expected

This IT specialist would like to leave the corporate world and start on his own, but does not have funds to sustain himself in the early stages.

The Start up Coach advises the would-be entrepreneur to be very clear why he want to start his own business rather than change jobs. He needs to structure a lean lifestyle and build savings to allow him to build up the business without family pressure to return to the corporate world. He should try to leave his employer on good terms, getting whatever assistance he can from them and ideally an initial contract for work. He is cautioned that although he can get business from friends and family, he needs to be competitive in the market to survive.

Read the full article on the main blog page

 

12 August coverFrom the August 2012 edition

Getting started

Turning an idea into a viable business is not as difficult as it seems

This column considers the problems frequently faced by potential entrepreneurs who have an idea, but are not sure how to turn that into a viable business. The questioner asks how he can be commercialise his idea.

The column advises that the first step is to develop a business model and identify the type and source of income. Potential customer groups must be identified and the communications, pricing, channel methods and breakeven point. Competitors must be identified and the entrepreneur needs to consider why customers would shift from current suppliers. Finally the entrepreneur is advised to prepare the start up with financing, premises, marketing materials, staff and assets. The key concern must be to make the first sales.

Read the full column on the main blog page

 

12 July coverFrom the July 2012 edition

The risk of innovation

How to turn an idea into a business without someone stealing it

An entrepreneur has a business idea from which he believes he can build a growing business. He is afraid that service providers and other business partners he approaches with his idea will use it to build their own businesses and asks about intellectual property protection.

The column gives some background to the patents, trademarks and copyright and offers tips from a partner of a major intellectual property law firm.

The Start up Coach advises the entrepreneur on methods he could use to protect his idea including non disclosure agreements, and also advises that new entrepreneurs often seek out business partners and financiers when they could develop the services and fund the business internally with dedication and effort. The best option is to launch with immediate and visible benefits to consumers so his service becomes the standard.

Read the full column on the main blog page

 

 

From the May 2012 edition

 

Marketing in the digital world

Getting a response from initial e-mails is a challenge

 

An entrepreneur has a start up company which sells a digital advertising service. He has used e-mail promotions to gain initial prospects but has not had a response.

The column is all about target marketing and advises him to focus on the benefits users of his service will give, and gives tips on structuring e-mails and subject lines to generate curiosity and interest.  He needs to understand the customers’ needs and opportunities before offering a service otherwise he risks promoting benefits that prospective customers do not see as beneficial. His communications need to talk more about ‘you’ than ‘our’. The column wraps up with advice on e-mail opt in requirements and how to get there.

Read the full column on the main blog page.

 

From the April 2012 edition

Penetrating the market

Start ups in small towns need excellent marketing strategies

A young black entrepreneur asks for advice on marketing strategies to start up an event and wedding management business in a predominantly older white community in this month’s challenge.

The column focuses on how to identify a unique selling proposition which will excite and interest prospective customers, and then to find effective ways of communicating these advantages to the market. Although most potential customers resist sales approaches from unknown companies, they are probably always on the lookout for new and interesting products and services, and will have unmet needs. Communicating the right solutions to such people in an absorbing manner is the real marketing challenge, rather than focusing on selling to a demographic.

The full article is on the main blog page

 

 From the March 2012 edition

 

Decision time

A business with no sales needs to change or close

The challenge this month id from an entrepreneur with a new model agency who has signed up models but is getting very little work for them. She asks if she should change her marketing methods.

Our response is to set out three choices for the entrepreneur: Find a way of being different and better than established agencies, persevere and hope for a breakthrough if financial and emotional resources will allow that, or quit. No entrepreneur likes to throw in the towel, but sometimes it wise to do so, and come back stronger another day. We examine how she could identify ways of doing things others are unable to, and look at creativity in communicating with event managers and agencies.

The full article is on the main blog page

From the February 2012 edition

 

Risky business

Having one large customer is wonderful – until something bad happens

The challenge this month is from a printer of training manuals who has lost his only very large customer, and asks if he can complain about the orders now going to a new buyers friend.

Our response is to suggest that he may not gain by complaining – the customer has no obligation to buy from him. The column goes on to examine how entrepreneurs can develop relations with customers, and especially large customers to such a point that the customer would never think of going elsewhere, by finding unique ways of making their offering superior to others, to the point that the customer would feel a lot of pain if those benefits were no longer there.

The full article is on the main blog page.

 

From the November 2011 edition

 

Finding start up capital is a challenge

 

Entrepreneurs need to think creatively about their capital needs

The challenge this month is from an entrepreneur who wants to start a nice technology import business, but does not have capital or the means to raise finance.

The column first asks how sure she is that the idea will work? How passionate and committed is she? If she had her own money would she invest it all in the business? If she would not commit then investors will not either.

The Start up Coach advises her to be creative in her search for a way to start the business, and discusses starting very small, known as bootstrapping, getting help from suppliers or customers and possibly entering some form of partnership or shared cost arrangement with a non-competitive importer. The column continues with examining the options for crowd funding, joint ventures and obtaining enterprise development assistance from a major company.

The full article is on the main blog page.

From the October 2011 edition

What is the real need?

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

An entrepreneur has opened a college with unique courses, but enrolments are low. He asks how he can attract investor funds, without having surety.

The Start up Coach opens by challenging the assumption that the right solution is to spend a lot of somebody else’s money on advertising. Advertising is expensive and uncertain, and investors will put their money into projects with likely returns.

A better strategy is by checking the basics, especially about the needs and behaviours of his target audience, to ensure that the courses on offer are needed by them, not simply his idea of what they should like.  The he can get messages to the market by media that is appropriate to their lifestyles, whether that be internet advertising, blogging, posters or group discussions.

The full article is on the main blog page.

From the September 2012 edition

Growing to profitability

A new entrepreneur faces a steep learning curve with no mentoring

The challenge is from an entrepreneur in a rural area who has started a website to allow businesses to seek business opportunities and to list staff needs, and unemployed young people to look for employment or internship. He has had to learn IT, Web publishing, marketing, finance and operational management and has no mentor. Generating profit is a challenge.

The Start Up Coach advises this eager young entrepreneur to seek out the free training, education and advice first, and to do whatever he can to ensure that the business basics are in place. He needs to make his site attractive to advertisers by chasing up the number of visitors, and to do this he must be providing a service that is valued by its users. He needs to plan the required actions and projections and only then approach respected businesspeople in his area to ask them to check his assumptions and plans.

Marketing is best done by internet and SMS promotions. He needs to increase the content of his site by taking syndicated links from sites advertising job or business opportunities, and use the free e-books and blogs to learn how to drive traffic to his site.

The full article is on the main blog page.

 

From the August 2011 edition

What do customers need?

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

The challenge this month is from an entrepreneur who has developed a product for the health and beauty industry and asks how best to marketing it locally and internationally.

The Start up Coach advises her to research thoroughly. She should test her concept with people outside her circle of friends, and especially whether they would be likely to buy, and at what price. A key question is to determine where they would expect to find the product – in health stores, gyms or supermarkets.

She needs to talk to potential resellers to see if they would carry the product and the prices they would regard as sustainable. She also needs to plan the marketing promotions she will use so that target customers become aware of the product.

The full article is on the main blog page.

From the July 2011 edition
Competing with giants
Start ups must respond to aggressive and bullying tactics to survive

The challenge this month is from a small manufacturer of concrete pipes in the Eastern Cape which set up a factory so that local manufacturing would mean lower costs and better service for customers. They immediately came under aggressive price competition from giants in the industry. Their question is how they can compete.

The Start up Coach advises them to consider if this is fair and open competition, in which case they must compete on their merits or abuse of a dominant position. In either case the suggestion is to fight back on multiple fronts. The large competitor will have weaknesses and the entrepreneur is urged to look for these and then offer customers the answers. He needs to communicate with customers at CEO level, and involve any relevant body in his fight, from journalists to the local municipality, and be aware that just as he has a limitation on how long he can go with sharply reduced sales, so the large competitor also faces a ticking clock. Monthly and quarterly results showing an extended run of reduced or absent profits will make someone start to query the tactics. The full article is on the main blog page.

From the June 2011 edition

Capital growth for a new venture

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

In this month’s challenge an entrepreneur with very little entrepreneurial or economic background asks what growth in capital he needs to make his start up cattle farming venture sustainable and give him room for further development and growth.

The Start up Coach advises him to recognise that this is a business like any other and that his starting point must be his business plan and his income needs. He needs to consider both his start up and operational costs to be able to handle the volume needed to make
targeted revenues, and to include the time from investment to income in his calculations.

He will need to manage the risk of farming and risk management should be a part of his costing and planning.  To ensure sustainability he  must be sure that he does not fall into the trap of assuming that this year’s surplus will be the same in future years.
That would assume that all the factors that created the surplus will be the same or better in the future, and that is unlikely. He is advised to invest to cater for adverse years. The full article in on the main blog page.

 

From the May 2011 edition

Starting over

Moving a business to a new location can be like starting all over again

 

In this month’s challenge an entrepreneur moved his event management and wedding planner business to a new province and found that he struggled to generate sales. Nobody knew him and his efforts to generate enquiries by distributing pamphlets have been unsuccessful. He does not know what to do next.

The Start up Coach advises him to realise he is in effect starting his business all over again, but with a lot of expertise earned in the former province. He needs to look at his strengths and then capitalise on them to compete with locally established competitors. The Coach also advised him on how to gain the attention of his target markets by
fishing where the fish are likely to be; for instance where are brides-to-be likely to be found? He advises the entrepreneur on strategies to gain attention of both the businesspeople and communities in which he lives and on adding value
to his clients by continual improvement to his services.

The full article in on the main blog page

From the April 2011 edition

Find your niche to sell online advertising

 

Securing advertising income in a massively competitive environment
requires smart strategy and good delivery

 

The challenge posed this month is by an entrepreneur who has built an internet directory of businesses to a point where he has a number of visitors to the site, but he needs businesses to buy advertising to make the site commercially viable.

The Start up Coach advises him to focus on the real issue affecting the decision of a business to list or advertise – will they generate business benefits from doing so? All the statistics in the world are meaningless if there are no resulting enquiries or sales. He is also advised to consider carefully how he can survive and prosper in this intensely competitive area, and this means finding and using defensive market niches or product differentials. The Coach reminds him that sustainability is crucial, and that he should not pursue the idea if it is not sustainable.

The full article is on the main blog page.
March 2011 Start up Coach

Find a gap in the market – and meet it

Responding to a need is a great way to start a business, but it is not as simple as it seems

In this month’s challenge a prospective entrepreneur has identified a substantial need for improved performance in creditor payments
government departments and other large organisations. She has the skills to implement policies and train people to improve but lacks a sales and promotion
strategy.

The Start up Coach first considers the vital question of who has the need which could be satisfied by her services. In this case the creditors have the need but the government would be the one paying for her services so she needs to tread warily. We identify strategies for finding the right potential clients and making an approach.

The full article is on the main blog page

February 2011 Start up Coach

Advice for the lifestyle
entrepreneur

Growing a business in a
niche market

needs a strong understanding
of your clients.

In this month’s challenge an entrepreneur asks how to
attract the attention of other entrepreneurs to her service as a lifestyle
personal PA service. She targets the busy high flying entrepreneurs who do not
have time for many personal tasks, from gifts and pets to paying bills and
issuing invitations to dinner parties.

The Start Up Coach advises her to ‘fish where the fish are’
by tightly identifying her target customers and then setting up networks by
which she can get her message across. She is advised how to move in circles
where she could interact with potential clients and why she should not rely on
advertising to bring business.

The full article is on the main blog page.

From the January 2011 edition:

Thinking Outside the box

A company specialising in the rental of re-useable sturdy plastic boxes (as an alternative to cardboard box purchases) wants to break into other channels. However as a start-up company the entrepreneur Eric Njuguna of Rentabox does not have a large amount of capital to work with.

Answered by Ed Hatton

If you have a great idea, as this entrepreneur did, it is relatively easy to make the first sales directly. In this case families moving home were the initial customers, and loved the service. Good word of mouth generated more sales.

However even their most satisfied customer would know very few other families who were moving house, so the business would not grow from that source alone. Then the company did a great job of internet advertising, getting many enquiries from search engines, which generated more sales. Lately this source of sales leads has become less effective. The company believes its best market opportunity is in company relocations and new branch establishment.

Finding new channels

There may be two main target types of office removals:

  • The large company which has regular moves of business units, or opens new outlets frequently. Examples are government departments, very large organisations and  franchisors;
  • Organisations for which relocation may only happen every few years. For instance growing small and medium companies.

The most desirable target market appears to be the big organisation with regular removals. The entrepreneur would get a steady income and spread his rentals across the month. However this is also the most competitive market so prices will be low and there will be existing favoured suppliers. Some of those suppliers will be very dependent on one or a few large organisations and will fight fiercely to protect their interests. Replacing existing suppliers is always difficult.

Shine through top performance

Most start up business will look for organisations that are unhappy with their current suppliers, and then try to replace them. I suggest this entrepreneur should NOT go down that road. By doing so he is suggesting that a large and powerful organisation is stupidly continuing to deal with an underperforming supplier. This is insulting and a bad way to start a sales cycle. Where organisations do replace a bad supplier they will usually look for a safe option as a replacement and a start-up with few references is unlikely to be regarded as a safe option.

A better approach is guerrilla marketing. Firstly the entrepreneur acknowledges that the large organisation has good relationships with suppliers who satisfy their needs. Then he gets agreement from them that no supplier is perfect; there will always be difficult tasks which even the best companies will fail to do well. Then he bids for only the difficult ones, the tasks that the established supplier does not want and does badly. Then he performs spectacularly well. So he gains a foothold, which grows as the definition of a ’difficult task’ widens as the newcomer outperforms the established supplier.

Form a partnership

To gain a reasonable share of the occasional relocation market he will have to ensure that his service is known to small and medium companies when they start to think about a move. He could do this inexpensively by internet marketing, but as he has found out this is a fast moving target. A few months ago his company showed near the top of search enquiries, but now others have taken that place. Search engine optimisation (SEO) has become a highly developed skill and the rules change by the hour, so to rely on this marketing tool he should get help from really professional SEO experts.

He should also think about forming strategic liaisons with other organisations like small load removal companies, letting agents and business park developers. When setting up liaisons like these he must find a way for the partner to benefit as much as he does from the liaison. Unequal partnerships rarely work well.

ED HATTON is the owner of The Marketing Director. He co-authored an entrepreneurship textbook and is passionate about the topic. For more info go to www.themarketingdirector.co.za

© copyright Entrepreneur Media SA (Pty) Ltd. All rights reserved. No part of this article may be reproduced, stored in a retrieval system or transmitted in any form without prior permission of Entrepreneur Media (Pty) Ltd.  Permission is only deemed valid if approval is in writing.

 

From the December 2010 edition:

Taking the first few steps

Starting a business while you are employed can be tricky – but very rewarding if you get it right.

BY ED HATTON

The Challenge:

A young entrepreneur has an excellent business idea but is permanently employed – and unable to quit his job at this time. The service he wants to offer requires him to market his idea, but due to his full-time job, he does not have the luxury of time to build a network.

Making a choice

Starting a new business while employed full time reduces risk and proves the business concept while the entrepreneur earns a salary, but there are disadvantages. Ideally he would like to put all his energies into the start-up but that would mean neglecting his full time job, so he needs to work twice as hard and this can put strains on his family life.

If he keeps what he is doing secret from his employers he will be very restricted in developing his new venture and he risks being found out, disciplined and losing the trust of his employer.  If he does tell them some employers will reward his honesty and he will eventually leave on good terms, but others will react badly and pass him over for promotion and training and manage him with suspicion. On balance it is probably better to tell, but he must ensure that his work for his employer does not suffer

Getting started

There is a temptation to treat part time start ups as informal businesses but doing so will delay the development of the business. Planning the future is important. He will need realistic business objectives, projections of sales and costs and estimates of what resources he needs including time and money. He needs to identify his target market, decide how he can approach them and develop the marketing collateral he needs to make those approaches.

Above all he needs a clear understanding of what value proposition his service offers and how to communicate that message.

Marketing

Marketing a new venture while employed elsewhere is challenging. A start is a great website that holds peoples interest and is easily found by potential customers. Search Engine Optimisation and a campaign to get people to visit the site are fundamental requirements.

Networking is powerful, and can be done out of business hours. Business associations, internet sites like LinkedIn, and interest groups like Toastmasters or the Black Management Forum provide opportunities for networking. He needs business cards and he should not be shy about handing them out. Judicious use of personalised e-mail can generate enquiries and there are many advantages of using social media as a business development method.

Initially at least most new customers will be signed up as a result of personal approaches so he must be prepared to canvass, and get used to rejection. Canvassing is not a fun activity, but it is essential.

The best marketing method is the secure one or more initial customers, even if they are not profitable so that he has reference sites. With references he can approach other organisations in the same line of business, ask his customers for referrals and use story of their success in his approach.

Be honest

Juggling two jobs and a family is difficult. So is the decision on when to leave employment, and how to give full value to both his employer and the new business. There will be a temptation to cut corners, to hang on to his salary while his successful new business takes up more of his time.

He needs to be fair to everyone – his customers, employers and family, and make difficult decisions when they are necessary – and never forget to enjoy the excitement of creating his own business.

 

© copyright Entrepreneur Media SA (Pty) Ltd. All rights reserved. No part of this article may be reproduced, stored in a retrieval system or transmitted in any form without prior permission of Entrepreneur Media (Pty) Ltd.  Permission is only deemed valid if approval is in writing.

From the November 2010 edition

Don’t let your staff bring you down

Combating staff challenges one step at a time

BY ED HATTON

The Challenge

Three years ago a young entrepreneur started a biltong shop. The shop cannot yet sustain her, so she maintains her full-time job and employs people to run the shop for her. Unfortunately, because she is not in-store herself, her staff steal from her and do not run the store efficiently.

Solution

The entrepreneur started this venture with the most noble of ideals; to provide employment to someone with a disability. She did her homework, taking time to consider opportunities before selecting a biltong franchise and set up shop in a mall.

Unexpected issues arose. The shop could not be manned by one person – the hours required in the mall were too long. A succession of staff drawn from people desperately needing jobs saw the business continuing to make losses or stay at breakeven. The stock count never seemed to reconcile, banking was erratic and the point of sale system was not used. Finally the real situation became clear – stock and money were disappearing at an alarming rate.  When the entrepreneur fired the people concerned they sought and got compensation for illegal dismissal.

For all the careful investigation this entrepreneur had done she had failed to realise that biltong is a very portable commodity, sold mainly for cash and an absent owner and weak systems add to the temptation.

At start up

Let’s go back to the beginning and examine what could have been done then – and must be done now to avoid further expensive lessons:

A key decision is the business model. A franchise is desirable if the entrepreneur wants to reduce risk, have national marketing, product quality and consistency and get established systems and support. In this case control systems and support for labour procedures were either not available or not used, and despite anticipated reduced risk the company made losses. A franchise may be the right choice but it is not the only choice, and if it is selected then back-up must exist and be used.

The right premises are important. Franchisors will mainly be interested in high traffic counts to boost volumes o products supplied. This means large malls with compulsory extended opening hours and two employee shifts. But smaller volumes and reduced staff costs in lower traffic premises may make a more profitable and less risky business.

I salute this entrepreneur for helping a person to regain the dignity of employment, but to extend this charity to several unknown people is too risky. The company needs the right staff and every staff member must have clear and agreed instructions of what is expected of them and rules of conduct. This is particularly relevant in a retail environment where appearance and manner will affect the image of the business.

Accountability

Staff terms of reference should cover cash and stock reconciliation and the recognition that these returns will be checked and discrepancies investigated. Staff must be held accountable and be aware of this requirement. An old proverb says that a padlock is there to keep the ‘honest’ people out and not having the equivalent of padlocks on the cash and stock management is dangerous.

Processes must be enforced and checked routinely and cash banked daily. Spot checks are desirable and shopkeeper neighbours can provide useful feedback – as in this case where the entrepreneur later discovered that student friends of a staff member routinely took large packets of biltong away. CCTV cameras may provide answers if theft is suspected.

Owners of even very small businesses need to be familiar with labour law especially as it applies to disciplinary matters or dismissal.  There are too many horror stories of entrepreneurs being obliged to pay compensation to employees dismissed unprocedurally. If they are reasonably suspected of theft or fraud this hurts badly.

Focus on marketing

And finally the entrepreneur should again focus on marketing. This difficult when the enterprise struggles for survival and incurs massive losses, but marketing should never be ignored. An increase in sales will provide more profit to invest in systems, staff development, supervision and marketing promotions. The entrepreneur should go back to the start up time, when flyers handed out by enthusiastic students and samples of the products attracted customers to visit the mall for their biltong. Retailers in shopping malls can become over reliant on passing traffic, but customer loyalty is far more desirable. Work with the franchisor to increase demand for the products, and over time the very expensive ‘school fees’ paid by this entrepreneur could well be recovered. And that would be wonderful for this caring entrepreneur.

© copyright Entrepreneur Media SA (Pty) Ltd. All rights reserved. No part of this article may be reproduced, stored in a retrieval system or transmitted in any form without prior permission of Entrepreneur Media (Pty) Ltd.  Permission is only deemed valid if approval is in writing.

From the October 2010 edition

Make your competition irrelevant

Use the right strategies to deliver on customer needs.

By Ed Hatton

 

Challenge

Alistair Davis, sales and marketing director and part owner of Green Power Solar Systems, a fledgling solar water heating company,  is looking to differentiate his company from the myriads of other ‘renewable’ energy companies currently springing up. He needs to manage his company’s growth and build a value proposition that works as a differentiator.

Solution

Solar is indeed a hot topic, and many see this field as a path to riches. The market is immature, with customers being relatively ignorant of the differences in technology. There are lots of small suppliers and limited thinking about long term customer and supplier relationships. Eskom lists over 200 accredited suppliers, ranging from industry giants with national footprints to local plumbers. How do these entrepreneurs grow their new business and differentiate themselves from the horde of ‘me-too’ suppliers in this industry? Ideally how to they develop a strategy to make competition irrelevant?

Customer concerns

The first key is to identify prospective customers and understand their needs, reservations, appreciation of value concepts and pain points. This sounds too simple – everybody knows about uncovering customer needs. But how many really do find out? Not just surface needs but issues like reservations about technologies and products, affordability levels, the basis of decision making, perceived value and all the other factors of a buying decision? How many businesses promote their own idea of what the customers should need rather than listening?

Understanding customers does not have to be either particularly difficult or expensive.  Using a professional market research company is ideal, but simply plugging into appropriate chat forums and monitoring consumer columns and websites is a good start. Asking customers by way of questionnaires or even better by just talking to them is the best – train your people to do this and record results.

New opportunities

Once these issues are really understood the entrepreneurs could look for non-customers and new markets. In solar heating the traditional markets have been seen as existing residential and commercial properties and new developments. There are probably many opportunities waiting to be uncovered by canny marketers who are able to understand why those noncustomers are not in the market, and develop offers to attract them.

Some of these opportunities may be relatively simple, like focussing on long term cost of ownership rather than price, or developing systems for particular segments like flat roofed houses or washing bays. Others will be more subtle and require lots of creative thinking and a visionary approach.

This creativity does not only embrace technologies and markets. Innovative distribution channels, pricing systems and customer communications can be created to develop new opportunities. Take for instance the technology-savvy individual buying an IT product for his or her own use. He or she learns about products through magazines, discussions with peers and questions in technical forums. Advertising (other than price and availability) is deeply mistrusted, and the role of the salesperson is to be a peer nerd and discuss the latest reviews rather than to persuade the customer to buy the product. So a whole new way of selling has been created by increased customer education.

Communicating with prospects

Creativity should definitely include how the entrepreneur communicates with prospective customers. If for instance saving money by reducing escalating electricity costs is the primary need (remember to ask them), why do so many solar heating companies communicate with advertisements that show ugly technology spoiling the aesthetics of a building? Point-of-sale displays are the same. Look around – it is difficult to tell one supplier from another. There are better ways of communicating solutions to customer needs.

If the customer need is for cost saving, then what about synergistic products? Perhaps bundling the solar heater with more efficient swimming pool pumps, electricity use monitors or water saving shower heads could add to the customer’s perception of the value of the offer.

And lastly, remember that Kim and Mauborgne, the authors of Blue Ocean Strategy suggested that a blue ocean state would mean that both low cost and highly differentiated products and service would be offered to the consumer.  This means running a very tight ship to keep costs down and customer satisfaction high. There is no place for ignorant or uncaring employees or inefficient processes in this scenario. By contrast the rewards for motivated and creative employees and entrepreneurs are potentially enormous.

© copyright Entrepreneur Media SA (Pty) Ltd. All rights reserved. No part of this article may be reproduced, stored in a retrieval system or transmitted in any form without prior permission of Entrepreneur Media (Pty) Ltd.  Permission is only deemed valid if approval is in writing.

From the September 2010 edition

THE ART OF GROWING A START UP

 

Smart thinking will help you grow your business – even under adverse conditions – by Ed Hatton

QUESTION:

A young entrepreneur who holds a full time job while trying to launch his stationery distribution company is experiencing difficulty increasing his sales without increasing costs.

RESPONSE

This entrepreneur asks a question, but at the same time teaches us valuable lessons – this is wonderful!

He has set up a part-time business supplying stationery. He uncovered a need within educational institutions for an ongoing supply of pens for sale to the learners, and in internet businesses a sporadic demand for printer paper. He supplies and delivers to them as they require. Lesson one: He is providing the customer with a solution more than a product. They could go off to a large stationer and buy cheaper, but he offers the convenience of delivery when required. We keep saying “find a need and then satisfy it” but how many businesses are doing it as well as this entrepreneur?

Because he works full time he supplies customers on the route between his home and work. Lesson two: Don’t drive past potential customers to get to others. How many entrepreneurs can say hand on heart that they have canvassed every potential customer around them or on their delivery routes? How many times do entrepreneurs drive to the airport heading to another city while passing hundreds of businesses who don’t even know their company exists? Take a lesson from this smart entrepreneur.

How to grow the business

So now to his problem – he has to grow the business for it to become self sustaining. His costs for delivery are high if he cannot supply on his way to or from his office, while his volumes and margins are small. How does he grow the business within the limitations of it being a part time activity, and with very limited funds for marketing? He can’t even canvass during the working day.

He needs to apply the same smart thinking to these challenges as he did in setting up originally. For instance if he can’t canvass during the day, can he find potential customers which are active after hours or weekends? Think of any facility where people write, fill in forms or print which is which is open outside business hours.

A great way to grow any business is to look for the ‘neighbours’. These prospects are found by asking the question “which businesses are most closely connected to, or closely resemble my current customers” and then approaching them.  So for instance if he was supplying the trader who sells pens at a licensing office he would ask himself ‘where else are there lots of people filling out forms who may have arrived without a pen?’  The opportunities are obvious.

More sales

The second immediate growth opportunity is to sell more products to the same customers. He may find the educational institutions also need erasing fluid, inexpensive calculators or highlighters. But he also should not wear blinkers and confine himself to stationery – perhaps there are needs like tissues, shoelaces, tennis balls or memory sticks? In order to grow using this concept he needs to talk to his customers to find out what products they need, but find it inconvenient to send someone to buy. Then he should help the customer to develop demand for the products and advertise availability to increase sales. Simple posters or display stands may be all he needs.

Lastly he needs to build word of mouth for his business. He should get professionally printed business cards and print small glossy brochures which showcase his great service. He should ask all his customers and friends to give them to everyone they know who is in the right area.

Delivering the goods

Deliveries will continue to be a challenge unless he can grow the business to the point where he can run it full time. A possible solution may be to piggyback on deliveries going to his customers anyway, or to hire a scooter driver on a demand basis. But in this case he needs to check out the legalities and any license issues.

Finally, and I hate saying this, but some business problems will never be fixed by trying to ramp up sales. If this proves to be the case here, he may need to think of restructuring the business for instance by letting someone run it full time while he takes a share of the profit.

© copyright Entrepreneur Media SA (Pty) Ltd. All rights reserved. No part of this article may be reproduced, stored in a retrieval system or transmitted in any form without prior permission of Entrepreneur Media (Pty) Ltd.  Permission is only deemed valid if approval is in writing

From the August 2010 edition:

Fostering Loyal Employees

Stop managers from leaving and launching competitor businesses with incentives and tight contracts by Ed Hatton

Challenge

A local funeral manager looking to grow his company with the right staff is struggling to find employees who can carry his vision to the next level. Instead he finds that employees in whom he has invested time and money are willing to leave his employ and take his ideas with them.

Solution

This entrepreneur has stated a problem that will be recognised by many business owners with businesses in the early stages of development. When he launches his company he becomes responsible for marketing, finance, customer service, technical expertise and many other roles. Eventually he sees the opportunity to grow out of the start-up phase and expand the business, but cannot do so because he is already working to his capacity – and has probably compromised his family life and learned to sleep a lot less while doing so. Some entrepreneurs never get out of this trap and stay in the start-up phase. Not a lot of fun.

In this case the entrepreneur runs a funeral parlour and recruited potential managers to expand the business geographically. He trained them in the formula which had allowed his start-up to succeed, only to find that as soon as they believed they knew enough about the business to start their own parlours they resigned and attempted to go into competition with him. To compound this problem ex managers opening their own businesses will frequently compete on price and try to lure customers from their former employer. By so doing they will reduce the price expectation among potential customers. Although many such offshoot businesses either do not get off the ground or fail early, but the lower price perception remains.

Entrepreneurs in many fields, PR agencies, small parcel delivery services and IT specialists among them will immediately recognise this problem. Staff members leave to go into competition and then fail after causing turmoil in the market. Why do they fail? It is a part of a fundamental problem of would-be entrepreneurs convincing themselves that technical expertise in the chosen field and a lower price than the current suppliers are all that are needed. Of course that is far from enough. Entrepreneurship requires quick thinking, ruthless financial management, excellent salesmanship, capital, attention to detail, the ability to compete other than on price and a host of other attributes.

For an ambitious employee who wants a greater share of the action it may be better to talk to the business owner about setting up a subsidiary or franchised operation rather than going into competition.

Recruiting the right staff

To return to the question posed by the entrepreneur – how does he escape the trap of recruiting and training potential managers so that he can grow his business, only to see them leave and open competitive funeral parlours in his target growth areas? He has made a good start by recognising the problem and asking for advice on how to address it.

Next he should define the type of managerial assistance he needs. In this case he has assumed that the right way to go is by having branch managers to open and run satellite branches, but he should also consider other models. For instance a business development director to supervise the growth and manage branch managers could be more effective.

If he does go the route of branch managers he should recognise that they will become reasonably senior people. He must be sure exactly what responsibilities and authority they will have, and therefore what qualifications and personality types he needs before commencing recruitment.

Risk vs Reward

The next steps could be both carrot and stick, to keep the potential manager on board and motivate him to help the business to grow.

The carrot part could consist of bonuses, incentives (travel, prizes, business training or others), profit share or even shareholding options or franchise ownership on achievement of key performance indicators. Clearly both short and long term objectives and incentives must apply to ensure extended employment.

The stick part should definitely be a restraint of trade agreement with all potential senior employees. He should not skimp on the preparation of this agreement; rather pay some legal fees now than argue through the courts later.

Anyone planning to open their own business could reduce future stress levels by recognising the potential limitations brought about by being the only executive and having no more bandwidth. They should factor solutions to the risk of getting locked in to start up phase into their business plan.  And like this entrepreneur, never be afraid to ask for help if they need it.

© copyright Entrepreneur Media SA (Pty) Ltd. All rights reserved. No part of this article may be reproduced, stored in a retrieval system or transmitted in any form without prior permission of Entrepreneur Media (Pty) Ltd.  Permission is only deemed valid if approval is in writing

From the July 2010 edition:

Differentiate from the competition

The best marketing strategy identifies unmet needs, and then delivers on them. By Ed Hatton

Question

A young entrepreneur who is starting a business in the IT project management market is experiencing difficulties in getting his business off the ground. He has not been able to attract clients and senses that this may be due to his marketing strategy or market research.

Response

This is a very common problem.  Many professionals often in IT, accounting, HR or marketing would like to open their own businesses rather than work for big companies.

The questioner thinks that his market research or marketing strategy may be at fault and he is probably right. Many people in his position will ask friends and contacts if they will consider using their services if they start their own business, and they get positive answers. But this is no guarantee that there will be enough work from these sources when they do take the plunge.

In classic marketing theory the questioner needs to uncover unmet needs, and then provide products and services to meet those needs. So instead of asking colleagues if they will support him he should ask them what they are not getting from their current suppliers, and then plan to plug those gaps. This also tells him where his target markets could be, such as organisations like those his contacts work for, where there are unsatisfied needs.

His initial customers will be whoever will buy from him, because the business needs an income. But getting out of the survival phase will mean going after the customers most likely to require his services. That implies identifying the target markets and then developing promotional plans to make them aware of his company and inviting them to do business.

Marketing promotions need not be expensive. His best opportunities will come from networking with people in his target markets, both in person and on the Internet using forums like LinkedIn and other social media. He needs a well written profile, a web site and business cards, and he should take every opportunity to talk to groups of people – giving them free advice when he does so.

He needs to consider that there are thousands of IT companies, and most of them offer similar products and services.  He must differentiate his business from competitors, and I suggest he does not simply say that he will give better service than others, because everyone claims that– it is not a differentiator. He can set himself apart by unique products and services or by superior customer relationships and I suggest this is the area he should focus on.

Most start-up businesses will rely on the technical expertise of the founder, hoping to grow by gaining business through word of mouth. A better plan is to learn the skills he will need to identify, sell to and retain customers. Yes, I am suggesting that this professional takes a sales course or buys some good books on sales and account management.

He needs to learn how to find prospects to talk to, how to make an approach, write a proposal, present his value proposition, uncover unmet needs, close a deal and all the other techniques of a skilled salesperson. Then he needs to learn about account management and customer relationships – it may sound like heresy to him right now but these may be more important skills for his business than his technical expertise in his field.

At some point he will be confronted with the awkward question of whether go it alone immediately or build up his business part-time while remaining employed. If he decides to dive right in he should make sure he has a lean lifestyle or a big savings account to cater for the bad months. Get rid of the gas guzzler with the expensive repayments, pay off debt and pay the mortgage bond in advance. There will be tough times ahead.

If on the other hand he decides to start gradually I suggest he should discuss it with his employers. This is not how most people would work, but it usually pays to be honest. He will have to make sure that his work for the employer is not affected by his start-up; by contrast he should redouble his efforts on behalf of his employer, so that he becomes even more valuable. Then when he does leave the employer will give good references, and possibly even become a customer.

And lastly I would urge him to take this plunge. The world of entrepreneurship is uniquely exciting, challenging, scary and fulfilling, and he will only experience this wonderful feeling by joining in!

© copyright Entrepreneur Media SA (Pty) Ltd. All rights reserved. No part of this article may be reproduced, stored in a retrieval system or transmitted in any form without prior permission of Entrepreneur Media (Pty) Ltd.  Permission is only deemed valid if approval is in writing.

From the June 2010 edition

This month’s Challenge:

A hard working and dedicated sole proprietor with a successful PR, events and hospitality business that has been operating for almost four years plans to take on a full time employee. The potential employee, who offers specialist skills in graphic design, has expressed an interest in investing in the business to become a significant minority partner.

Our Advice

The entrepreneur has been approached to sell part of her business to a potential employee who would then become her partner. She has requested advice on whether she should agree to this approach or explore other partnership options which would allow her to retain her ownership and achieve growth for both parties.

There are a number of key issues the entrepreneur should consider before reaching a decision.

For instance what are her reasons for looking for someone to join the business? She is clearly a successful and extremely hard working business owner. The business is entirely dependent on her knowledge, skills and repute right now. This means that she cannot expand because she has run out of time to do so. So I assume that she wants someone to take part of the work load and provide room for the business to expand.

If expanding the business is a part of the plan, then what type of growth is desirable? For instance:

  • More clients of the same type as she has now? And if so will they be local, national or international?
  • Adding new services to offer to existing clients, so that the per-client income increases?
  • Diversification into new market sectors with new services?
  • Some other expansion concept?

Once she has cleared all these issues in her mind, and preferably put them down in a plan, she can consider what resources she needs to achieve her goals.  Incidentally the plan should show how much, from which source, in what time frame and all the other measurable projections that a good plan would include.

For example if one of the goals is to expand the business by adding new services, then the person she takes on board should have the skills to add new services for the clients. Equally if her goal is to expand to more clients then incoming person or people should be able to form relationships and deliver the services she offers today – and probably have a similar work ethic to the entrepreneur.

Design your business structure to fit the strategy

About 50 years ago Alfred Chandler proposed a construct that suggested that the road to business success was Environment → Strategy → Structure → Economic Efficiency. The emphasis was on strategy fitting the environment in which the business operated and structure designed to fit the strategy. While Chandler was thinking about large corporations there is still merit today in entrepreneurial business following his construct. Once the strategy to grow has been planned the structure often becomes obvious.

Now the entrepreneur needs to decide if the proposed partner has the right skills, knowledge and reputation to achieve the desired outcome or can grow quickly into that state?  If not he is the wrong person whether as a partner or an employee

If he does fit then the second key question is: Is the interpersonal chemistry also right? In a pressurised environment like events management the entrepreneur will probably be spending more time with her business partner that with her spouse. Many great businesses have been founded on trusted partnerships so it could be the start of a major expansion of the business. However if the partnership fails on the basis of interpersonal conflict, the results could be catastrophic. This is especially true in a service business with the core of the business being the skills and client relationships of the owners.

Back to the original question: Should she offer him a share of the business? I suggest she defers that decision until she has worked with him for some time. After a year of working together they should know if the business relationship is sound, if there is trust and if the partnership adds to the development of the company. Then she would have the choice of offering him shares in the main company or setting up an operating company in his speciality field in which he is a shareholder. The latter option would allow her to retain full ownership of the core of the company she founded.

She should involve her accountant and remember that the structure must support the strategy. In the meantime she could offer him a profit share to motivate him.

© copyright Entrepreneur Media SA (Pty) Ltd. All rights reserved. No part of this article may be reproduced, stored in a retrieval system or transmitted in any form without prior permission of Entrepreneur Media (Pty) Ltd. Permission is only deemed valid if approval is in writing.

From the May 2010 edition:

This month’s Challenge:

Adrian Maloney started a mobile solutions development business called Bluwinmobi. He has a website, he’s registered the business, and has bought third-party development programmes. Maloney has a concept which he would like to develop for the mobile industry called Mobile Store Value Card (MSVC) – it enables a cellphone to function as a retail store card. The idea is to capture, track and trace, and alert elusive cash customers in the retail sector. He has done 50% of the work and is now battling to create a business plan and marketing strategy for the business.

Our advice

The entrepreneur-to-be has followed a route taken by many start ups, he has developed a creative service in concept. He has thought about how the idea could be used and improved his original concept to the point where it seems like a viable, even an intriguing offering to the market. But he has not invested a similar amount of effort into developing the organisation structure and marketing plans for the business. These will be required to turn the concept into a viable venture. He correctly says he has done only 50% of the required work. So far he has built the proverbial ‘better mousetrap’ and history has shown that the saying is wrong – the world does not beat a path to the door of the inventor, it usually ignores him. This entrepreneur has recognised that he needs to do the other 50% of the work.

Planning is key

Why does Maloney need a “business and marketing plan”? Eisenhower famously said “Plans are nothing, planning is everything” meaning that the process of planning is essential to any venture. This includes conceptualising, thinking about the how, when, by, who, what and why of the venture; translating concepts into figures and assumptions; and monitoring, evaluating and re-planning. The actual document is of secondary importance.

He should also consider the most basic definition of a business plan I know:  It describes how customers are encouraged to put money in your bank account in return for your goods and services; to do this willingly and be pleased they have done so while you make profits.

Questions to ask

The first part of a business plan should see the entrepreneur setting out a summary of his strategy and business model by answering these questions:

  • Which types of companies will want this service? He needs to be specific here; it is a common error for start-up companies to target the entire economy. Instead of being something to everyone they are likely to end up being little to anyone.
  • Why would they buy? This must be answered from the potential customer’s perspective – what is in it for them?
  • Why from him? When they have a near infinite selection of marketing tools they could purchase from massive suppliers why would his service gain the nod?
  • What volumes and margins could he realistically expect to achieve in the first three months, six months, one year, and three years?
  • What are the key business viability questions that need to be addressed? Think about the availability of resources like staff, finance and infrastructure. Can the costs of operation be covered by income? Will the concept work in the field? Can it be supported?

Developing a service prototype

At the same time he probably should develop a prototype of the service he plans to provide and test it in a live situation.  This will allow him to eliminate start up problems and will also assist in marketing the service by acting as a reference customer once the service is launched.

The Business Plan document

Now he can complete the business plan, which should include a section on how, and to whom he will market the service. There are many business plan templates and you’ll find a great guide on www.entrepreneurmag.co.za. He should not get too hung up on the format and style of the plan. Business plans are simply there to guide the business from start up and into the future.

Next steps

Maloney needs to plan the following:

  • How : Target markets, marketing promotions, prices and terms, source of product, sales and channels
  • What: Targets, budgets, profit and cash flow forecast, finance needed, organisation and management structure, customer support
  • Who and when: Action plans and responsibilities

Then he should take the deep breath and go out there and make it happen – and have fun doing that

© copyright Entrepreneur Media SA (Pty) Ltd. All rights reserved. No part of this article may be reproduced, stored in a retrieval system or transmitted in any form without prior permission of Entrepreneur Media (Pty) Ltd. Permission is only deemed valid if approval is in writing.

April-Cover

From the April 2010 edition:

This month’s Challenge:
Zunaid Saib* has a hair care products business in KwaZulu-Natal. He is one of a number of licensees recruited by a company to sell its hair care products in South Africa and to also export them into Africa.
He has bought stock but is having trouble knowing where to start with marketing his new business. He has tried advertising in local newspapers and also on the Internet, but is not having the response he had hoped for.
He also needs to recruit his own sales agents, but they are paid on a commission-only basis, with no basic. Zunaid is hoping to resign from his present job and focus his efforts on promoting this business but to do that, he needs to get it off the ground.

Our Advice:

The entrepreneur has followed a business model to set up his distribution business and recruit a team of sales agents based on suggestions by the supplier, but in this instance it has not worked. He now needs to do something different.

Even before recruiting salespeople the entrepreneur must set up a basic business plan to check that he can make adequate profits. He will have expenses like financing and storing inventory, telephone costs, accounting and marketing. Together with his supplier he should plan marketing promotions in his area. If the product brand is well known he needs to inform potential consumers that it is now in the area and can be purchased from his network. If the product is unknown he must rely on the supplier to provide him with sales aids like endorsements, brochures, test results, free samples, posters or any aid that will assist the sales agents to demonstrate the merits of the products. The supplier should also provide information about competitive products and product positioning.

The Sales Forecast

A key part of the business plan is a realistic forecast of sales as his network of agents grows in both numbers and skills. Suppliers sometimes make simplistic ‘forecasts’ to encourage distributors to join, and these should be treated with caution. It is impractical to expect that all sales agents will each sell the maximum possible number of products every day. Some sales agents will be more successful than others and all will need days off for training, illness and leave. Travel time and motivation limit the number of calls that will be made in a day. A good forecast will also recognise that all initial orders will come from new customers, and these sales take longer and have lower strike rates. As the organisation matures repeat business will increase turnover. Based on the business plan a cash flow forecast should be produced to indicate capital requirements.

Recruiting Agents

Only then should he recruit sales agents, but he should be selective. He must identify his target market and determine the types of consumer who would be most likely to buy the products. Then he should look for potential sales agents who would be acceptable to those consumers, and able to make contact with them. Then follow up with attractive offers to them to join his network.

He should be wary of putting too much emphasis on how to sell. Sustainable businesses are built on satisfying customer needs rather than hard selling, and the focus should be on the customer. It is also important to satisfy the needs of the sales agents. They must not feel bullied or unsupported, but should be able to work in an environment where they thrive. Commission only salespeople are mobile. If they don’t feel able to achieve their goals they will walk away – or not join, as has been the case here.

Choosing suppliers

It is prudent to choose suppliers carefully. There are many hard-sell suppliers who sign up distributors to recruit agents or multiple levels of resellers. In many of these instances the retention rate of agents and distributors is extremely low, very few succeed. The supplier does little or nothing to brand products, develop markets or support distributors and agents but does earn income from selling distribution rights. The channel may struggle financially. The entrepreneur should never underestimate the difficulty of making substantial sales via minimally trained new salespeople, selling unknown products to consumers who already have a wide choice of alternatives.

Talking to existing distributors

Before signing on for any distributorship it is imperative to talk to several successful existing distributors. If the supplier will not introduce a prospective distributor to successful members of his channel the entrepreneur needs assume that the supplier could be hiding something and react accordingly. Sales support, brand development, marketing promotions, training, business guidance and good communication must be in place. If these are not, or if the supplier’s rules make the sales agents jobs unattractive, for instance by insisting that the sales agent buys stock before being allowed to sell, the entrepreneur should either negotiate changes or consider alternate suppliers.

But with the right supportive supplier and a well thought out business plan the entrepreneur should make profit and have fun – exactly what entrepreneurship should be.
*name changed to protect readers identity
© copyright Entrepreneur Media SA (Pty) Ltd. All rights reserved. No part of this article may be reproduced, stored in a retrieval system or transmitted in any form without prior permission of Entrepreneur Media (Pty) Ltd. Permission is only deemed valid if approval is in writing.

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