A better year ahead
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This year has been a bad year for many companies – here is how to make sure 2017 is better
This article was originally published on the Sanlam blog in December 2016 It is a great blog to subscribe to if you are an entrepreneur
The past 12 months have not been a great time for many businesses. It started with the economy struggling to recover from the effects of the double change in finance ministers, was threatened by potential downgrades to sub investment grade by the rating agencies and characterised by shocks like Brexit, the Trump victory in America, local government elections, the #feesmustfall movement and the State Capture report. The serious drought saw food prices rocket and water restrictions added to the difficulty of doing business. All these issues make buyers nervous, and nervous buyers will delay all but essential purchases.
On top of all this the South African national pastime of sharing bad news brought a mood of pessimism and resignation. We know that water restrictions and high food prices will continue well into 2017 and the ruling party will have an elective conference which could be abrasive in the coming year. What, you may ask will make this year any better than the previous one? One of the answer to that question is you. There are many things you can do to shield your business from negative external events, and to seek the opportunities that any adverse event brings. Continue reading
Owner’s involvement in sales
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2016 and is posted here by their kind permission
Where should business owners fit in to the sale process?
Buyers like dealing directly with the boss, and some large organisations insist on the business owner as their primary contact. When your business was a start-up you may have done all or most of the selling, and still have the sales relationship with customers. The problem is that the owner’s involvement in sales is seldom a defined role and this can create uncertainties and inefficiencies, so it is worthwhile examining just what your role should be.
If you have a very small business or if you have a single large customer you will probably have to be the account manager or salesperson. You may find it difficult to delegate sales responsibilities involving customers you have personally dealt with for years. Then there is the awkward transition period between the owners doing all the selling and having a fully-fledged sales force. The usual first step is to hire one or two salespeople and expecting them to generate new business with as much drive and knowledge as you apply. That is unlikely to happen. Rather approach delegation of sales responsibility and development of a sales force as projects, with appropriate funding, training, systems, measurements and processes in place.
Education
If you must continue in sales attend a course or otherwise educate yourself about sales skills and tactics. That might seem strange when you have been selling successfully for years, but unless you understand solution based selling you will not know what additional business you could be getting. Then get an understudy to shadow you and take over at least the routine work. Free up time to manage the business otherwise you will not grow. Continue reading
Good mentors worth their weight in gold
This article was published in a Business Partners newsletter of 24 November 2015, and appears here as a guest post by Christo Botes, then Executive Director of Business Partners Ltd. Business Partners Ltd is an African risk based Finance house and Venture capitalist focused on SME’s. The company has a mentors arm staffed by experienced specialists, and co-manages the South African SME toolkit.
There is no shortage of business advice in the world. It comes in the form of consultants, coaches, advisors, professors, management gurus and self-help celebrities. Each has its place, but for Christo Botes, executive director of Business Partners Limited (BUSINESS/PARTNERS), there is a special breed of business adviser who are worth their weight in gold: the business mentor.
For Botes, the distinction between a business mentor and other forms of business advisers is subtle, because a mentor can play any number of roles, sometimes that of strategic adviser, technical expert or business consultant, and sometimes all of them at once. But the key characteristics of a mentor has to do with their experience, attitude and approach. They practice the science and the art of business, not merely the science, says Botes.
An ordinary business consultant usually has a clinical approach, coming into a business to solve a specific problem and impart formal, defined pieces of knowledge or procedural know-how. A mentor can do this, but also strives to impart wisdom based not on textbook learning but on his or her experience.
The ordinary consultant keeps within his scope of work, and his interest stretches as far as the settlement of his invoice. A mentor can also work with a defined plan and for a fee, but gains his satisfaction from seeing his client succeed as a result of his work. Even if he is brought in to implement a technical process in a business, he does so with passion, and with a broader view to empowering the entrepreneur and the business.
A consultant can be a fresh-faced graduate with an MBA. A mentor can also have an MBA, but can only be someone with experience, or “scars and medals” earned in the real business world, says Botes. Continue reading
Are you driving your business or is it driving you?
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in February 2016 and is posted here by their kind permission
Why so many strategies fail to deliver and what can be done about it
It is almost a caricature. The executives go away on a strategy planning weekend. They have a successful think tank and come back fired up with great strategies and enormous enthusiasm. Then the day-to-day tasks demand attention and three months later nothing has changed. The idea may still be discussed in management meetings but this is becoming embarrassing. Why did it all go wrong?
It is a lot easier to think about how to grasp opportunities and solve problems than it is to implement the plans. A central problem of implementing new strategy is that it usually relies on people who already have busy jobs with little time or energy to execute additional demanding tasks. The planning session seldom takes this factor into account so strategy implementation remains project-based and dependant on spare time availability within the busy management team. Nothing changes and the company drifts on as it always has.
Entrepreneur style
The style of many entrepreneurs may also be the root cause behind failure to implement strategy. The phrase ‘working in your business instead of on your business’ is almost universal. Entrepreneurs naturally fix problems, manage people on a daily basis, sell, manage the finances, pacify irate customers and liaise with suppliers because they have always done so, and are now very good at these tasks. They work long hours doing things that others would be less effective at doing. Working in the business becomes a comfort zone, and the area they gravitate to when the business faces problems. Continue reading
Your sales machine
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2015 and is posted here by their kind permission
Turn your whole company into an enthusiastic unit that aids and promotes your sales
It is in the interests of any employee to do anything they can to ensure the business makes sales, or at least not put sales at risk. Aside from loyalty to their employer, a healthy and growing business means everyone is better off and has improved prospects for promotion. Strangely there are employees, and some managers too, who damage the company through carelessness, incompetence or deliberate obstruction. They are hurting themselves as much as their employer.
Contrast that situation with companies where everyone is customer centric, and frequently attract praise from customers they have been in contact with. There are typically no unresolved complaints on consumer forums, and every employee seems to know why customers should buy.
Review yourself
To build a company like them, some introspection may be a good idea. Do you really deliver goods and services that meet customer expectations, or have customers had to lower their expectations to your standards? Think of the grudge purchases you make, or the times you have been distressed but did not change supplier after a bad experience. You cannot expect your employees to be champions if your company supplies shoddy products, uses untrained technicians and seldom delivers on its promises. Fix the real problems and you will be pleasantly surprised by the change in your staff. Continue reading
The one giant deal
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in April 2015 and is posted here by their kind permission
Opportunities and risks of getting the biggest deal ever
What do you do if you get the opportunity of a huge sale, one bigger than anything you have done so far, maybe bigger than your entire business? This is a potential game changer, the opportunity to grow spectacularly. At the same time it is scary. Will you be able to continue to supply regular customers? How will you finance this deal, what will happen if you do not get paid? Can you deliver? The opportunity opens up dreams; all the wished for things you will be able to afford for the business and your family, security for you and your workers…
Best and worst
The best things that can happen are really good. If you make reasonable margins on the huge turnover increase the extra cash can be used to increase competitiveness with additional resources, creative marketing, better buying terms and the best information systems. Once you have executed a large deal successfully, you attract other large deals. Big organisations like to deal with suppliers who other big organisations use, so your business may be at the start of an incredible growth curve.
The worst things that could happen are very bad indeed. Many suppliers have gone insolvent because large customers persisted with unreasonable demands or did not pay. You may not be able to deliver to specification or on time and have penalty or cancellation clauses invoked. If you have personal guarantees to any supplier your lifestyle can be at risk too. Continue reading
Need a quick profit boost?
Five ideas you can implement quickly and inexpensively
All businesses need an occasional profit boost and very few would have the luxury of saying they were already making more than they dreamed of. Here are five relatively painless and inexpensive strategies to improve your business.
- Sell more to your existing customers by cross selling. Cross selling means you sell products in your range to customers who now only buy other products in your range. They may be buying products which you carry from your competitors and this is often because they do not know the extent of your product range. It does not matter that you have explicitly told them about other products in newsletters or advertising, they may not have noticed. Do this by listing your known customers, and then making a matrix of what they buy. You should have this information in your sales analysis. If there are too many customers, take a selection of maybe 50 or 100. Assuming you are sure they could use your other products, make a series of individual direct approaches by e-mail, messaging or in person. Offer trial periods, initial order discounts or anything to get their attention
- Stop throwing things away. Unless your organisation operates on very lean principles, chances are that you are throwing a lot of valuable stuff away. This will include packaging material scrap, damaged, stolen or obsolete goods, operational time, space, managerial time and a whole lot of other stuff. Start a ruthless campaign to cut down on waste. Pay particular attention to wasted time like idle time waiting for some needed thing to happen, wasted time making things which will have to be remade and wasted time in inefficient processes. Also pay attention to scrap and rework whether you are a manufacturer or distributor. Check the scrap bins and figure out ways to stop throwing away stuff you paid for. If you don’t have the right systems or training to manage that then buy them, it’s cheaper in the long term.
- Target a competitor. Pick your weakest competitor (you do have up to date competitor analysis, right?) and attack yheir weaknesses and cash cow customers with special offers, top rate service, better technology or whatever your business has which makes it different from and better than your competitors. (You do have a clear and distinct statement of your differentiation and advantages, right?). If you cannot do this chances are you either do not know what your competitors are doing or you have no clue why your customers buy from you. In which case fix that quickly before your competitor reads this and you become the victim of this strategy.
- Adjust prices up or down. Do this only on products where a small price change can mean a large change in demand (price elastic products). Often these are small items, consumables, service contracts, add-ons, some fashion items and minor luxury goods. The ideal is to identify a number of high volume price elastic products. Make a guess what would happen to sales at a couple of price points above and below the current price. Then draw a spreadsheet to show what the total gross profit will be at each price point. You will often find the best strategy is to increase the price rather than cut prices. The total margin may be higher and the costs lower because there are less deliveries and other unit sale related costs. If the cost to you is likely to change with volume then factor this in. Test the theory by changing the price on a few items and make sure sales follow your projections before making mass changes. Try to increase some items and reduce others so you don’t look greedy or desperate.
- Get rid of the junk. You probably have customers and products which are not profitable and suppliers and staff you support because of loyalty despite the fact they cost you money. Supporting loyal people and suppliers is a wonderful thing to do but then view this as charitable bequests, do not hide it in the mainstream of your business. You don’t need to be cruel in offering money instead of work, but helping suppliers to become competitive and finding more suitable employment for people who have outlived their usefulness in your company restores their pride and gives them new opportunities. You can now monitor the cost of your kindness. Then kill or replace the unprofitable products, even if it hurts (Keep thinking of Kodak, at one time the world’s second best known brand, which could never tear themselves away from film and make the switch to digital). Politely discourage the bad customers or sharply increase prices of the stuff they buy so at least you make some money from them.
Competitive strategy
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2014 and is posted here by their kind permission
Is this only for the big corporates?
Large IT companies spend millions on market research to see how they stack up against their competitors and use this information to figure out how to be different and better than them. Automotive manufacturers and importers watch every move competitors make, being first-to-market with a new fashion trend can mean the difference between a clothing brand outselling its competitors or disappearing. Even cities position themselves against other cities to attract tourists and businesses. Why should competitive strategy, a vital part of marketing strategy only be relevant to very large organisations? Why not your business?
Being competitive is a core requirement for all businesses irrespective of size. Not-for-profit organisations like charities, schools and religious organisations compete for funds, members and media attention. Very small business and start-ups must wrench business away from competitors or alternatives just to survive. Without a compelling message about what advantages they offer over others many of these organisations will fail as consumers take the easy route of buying the most popular, the most accessible or the most familiar.
Competitive
More than 30 years ago Michael Porter defined competitive strategy as “The plan for how a firm will compete, formulated after evaluating how its strengths and weaknesses compare to those of its competitors”. This plan should be focused on getting a sustainable advantage over competitors so it is much more than simply reducing price or having a special offer. Continue reading
SME sales force
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in June 2014 and is posted here by their kind permission
Managing a small sales force is challenging
In start-up small businesses the entrepreneur will usually make all the sales. As the business grows a sales team is often recruited. The entrepreneur may retain important customers and may keep responsibility for some product lines.
Some arrangements like this work very well, but if your sales force is underperforming and you still have to bring in the bulk of the income you need to take action. A typical result of this situation is a deteriorating relationship between demotivated salespeople and the frustrated entrepreneur. Do not automatically blame the toxic situation exclusively on the salespeople – your own actions and omissions may be causing the problem.
The right people
Finding the right salespeople is a challenge; you need strong enthusiastic people who see sales as a desirable career, not just a place to earn some money until they get a ‘real job’. Your company probably does not yet have well-known brands or comprehensive sales support, so recruit those who can work in this environment. Ask the right questions. They must enjoy learning on their own, be self-reliant and work hard with little supervision. They must also fit the culture of your company.
You may unconsciously assume that new salespeople share your product knowledge, work ethic, and feelings of being responsible for the business succeeding. You will need to build these characteristics with training, motivation, communication, mentoring and rewards. The investment of even large amounts of money and time in these aspects pays dividends. Continue reading
The dreaded top of the “S” curve
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in March 2014 and is posted here by their kind permission
A threat or a real opportunity?
Successful start-ups normally begin slowly, then grow rapidly. Growth is not usually a straight line, but can be compared to an elongated “s” curve, with a slow start then strong growth until it levels off. Think about a flat topped mountain – the lower slopes are quite gentle then the sides steepen until the plateau on top, where the business becomes static with little or no growth. Arriving there can be a problem where the company depends on growth to pay the bills, and if nothing changes then like the mountain example the only way from there is down. How can you avoid this trap?
Many S curve books focus on large corporates, getting to the plateau when they reach market saturation, but the slowdown can occur in businesses with less than ten employees, and in as little as two years from start-up. This is often attributed to running out of the friends and family the business relied on as customers in the early stages, or running out of working capital.
Running out of time
In my experience a frequent reason for getting to the top of the S curve is the management style of you, the entrepreneur. You often run everything, and do it very well. You learned this when the company launched and you had to manage everything – from sales to logistics. As the business grew you got better at them than anyone else, so there was no sense in delegating to others. One day you run out of capacity to do more work and the business stalls, limited by your available time. Continue reading
Moving from the core business
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in February 2014 and is posted here by their kind permission
Think positively to diversify your small business
Entrepreneurs are creative by nature. That is a core value and advantage. So it is not unusual for an entrepreneur to think of new business ideas that could be additions or diversifications for the existing business. Some of these ides will differ radically from their core business. Should they be implemented? If they should, how should they be put into practice? What are the things to look out for when you move away from your core business?
Entrepreneurial businesses thrive and grow by innovation; by adding new products, by fresh approaches to old problems and by creative development of new markets. This is one of the attributes that allows them to compete with large corporates. Diversifying is generally a great way to grow the business. Sadly it can also be a way of reducing existing business to shells. The difference is how the entrepreneur manages the diversification.
New ideas can arise out of boredom. Many entrepreneurs are enthralled by the activity and challenge of starting something new but are not happy with routine management. I call them the ‘firestarters’. The disadvantage of firestarters is that they get bored doing all the hard and repetitive work of growing a business after it has developed a toehold in the market. Their business can fail as the entrepreneur neglects it or strips it of resources to build a business based on the new idea. If you recognise yourself in this category then either become a serial entrepreneur, building and selling businesses as they mature, or find a partner or series of partners you can hand the core concept to when your mind starts to wander. This is a great way to build a huge business empire or personal fortune.
Things to watch for
Often a new idea looks attractive only because the core business is not succeeding. The entrepreneur will be thinking of ways to make the business survive and prosper. Adding synergistic opportunities to a business which is not producing expected results can be a great way to inject life and success into that business. Doing something radically different to cover up the failure of the current business to deliver on expectations can kill it. If the core business is not performing then either fix the business or close it, and create a new business with the new idea. Continue reading
Lessons from the beginning
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in October 2013 and is posted here by their kind permission
Remember how fanatical you were when you opened your doors?
The plateau phase can happen when a business stabilises after the initial survival struggle, and growth becomes static. The company may be at break even or making a small profit; it falls short of its sales forecast and cash is tight. The entrepreneur is frustrated, customers pay late and suppliers are demanding. All of this has a bad effect on the staff.
If you are in this position or have been there you will know about searching for ways to solve the problem. How-to books, mentors, motivating speakers and training will be considered. Salespeople will come under pressure and some will succumb and leave. Some entrepreneurs will blame the economy, the government, the banks, trade unions or suppliers, and become helpless.
Simple answer
There is a simple answer to the problem. Cast your mind back to when the business launched, when making the next sale was a life and death issue for the business. You would have walked on hot coals to satisfy a potential customer, you would have tried desperately to anticipate their needs. Carelessness or laziness affecting a prospective customer would see the perpetrator in real trouble. A mistake in an order or a telephone that was not answered promptly would have been cause for a tantrum. You would celebrate with the entire company when you got orders that today seem trivial, and the enthusiasm would have spread. Continue reading
Staring at failure
This article was written by Ed Hatton, the Start Up Coach for the South African edition of Entrepreneur magazine, as the My Mentor column published in May 2013 and is posted here by their kind permission.
That terrible time when it looks like the business cannot continue
There comes a time in almost every business’ life when failure seems inevitable, and the entrepreneur fears that they are unable to continue. His or her self confidence nose dives. Prospects for success or even survival appear to be extremely limited and a sense of hopelessness sets in. It is a terrible time, and often happens within the first year of operations, sometimes near the launch.
There is a real basis to this fear. Businesses frequently fail and start-up businesses are especially vulnerable, with many never getting beyond the first year of operations. Entrepreneurs may not have the skills, knowledge, risk taking ability or drive to manage their businesses profitably.
Rational thinking
The key to managing through this stage is to decide rationally whether the business is really doomed or whether the entrepreneur has just hit that painful wall that left so many others bruised and shaken but stronger and thriving. Many business owners quit in despair at this stage when with the right tactics they could have succeeded. Decisions have to be made only on facts and stripped of emotions, pessimism, and blame. This is extremely difficult for an entrepreneur to do alone at a time when they are swamped by doubt about the whole business concept, their own abilities and their fears of the consequences of failure including catastrophic financial loss and shame. This is a great time to have a mentor to turn to.
An old business saying suggests that the best loss is the one taken early. If a rational analysis of the state of the business shows that there really is no likelihood of the business succeeding then plans must immediately be made to close the business with as little damage as possible. It is not smart to continue to ride a failure into yet more debt and broken promises.
Finding out why
An assessment of the current situation is vital, write down cash resources, sales prospects, market reaction, product and service quality and fitness for purpose and all the things a buyer would look at it he were thinking of buying the business.. These must be compared to the business plan to see what has changed. Why were the expected returns not made? Are the causes fundamental or can they be reversed? Be certain that the real causes have been identified; this is not a place for rose tinted spectacles. Once the causes of the distress are identified it is a whole lot easier to make a close or survive decision. Often the crisis is brought about by something as simple and reversible as the failure of marketing promotions to attract potential customers, deviating from plans to satisfy unreasonable demands by early customers, trying to attack too many markets or spending too much time on product development and not enough on selling. This is where a mentor can bring an impersonal outsiders view, especially if the mentor has experience in managing similar situations. Continue reading
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