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
Incentivising sales people
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in October 2016 and is posted here by their kind permission
How do you keep sales people motivated when clients aren’t spending?
Salespeople are by nature risk takers. Their success or failure, and significant parts of their income if they are commission earners, are in their hands. Sales is one of the very few job categories where performance is instantly measurable, and usually linked to rewards and threats. So what happens when outside factors reduce demand? How do you keep them motivated and rewarded when customers reduce spending?
Being fair is important. If you have reduced forecasts because of the economic climate it follows that you are expecting your salespeople to make less sales. By then continuing to incentivize your sales team based on the original quotas you will be condemning at least some of them to reduced income and failure to make target, however hard they sell. You are likely to build resentment and damage motivation which is the last thing you want to do in a reduced market. Consider reducing quotas in proportion to your reduction of forecast, even if that means that some salespeople will earn more for selling less. Listen to their concerns and suggestions, provide training and coaching where it will improve performance. Continue reading
Managing hidden expenses
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in March 2016 and is posted here by their kind permission
The costs you don’t get invoices for
A potential customer walks away without buying after a bad experience with one of your employees. Your deliveryman cannot find the address so he returns with the customer’s order. Inventory at the back of the storeroom lies unused and unsaleable. A manufactured item fails a quality check and has to be remade. Clerks spend large parts of the day reconstructing lost information. These and many other failures cost your company a large amount of money, and yet the cost is almost invisible. These are the intangible costs for which you do not get invoices. They are typically a substantial part of the total costs of running a business.
Intangible costs include overstaffing, overtime, overstocking, excessive transport costs, scrapped material, excessive rent and loss of profit from lost customers and lost sales which should have been made. Few raise alarms or are subject to intensive cost cutting drives, simply because unlike direct costs nothing highlights their existence. To illustrate this point image a scene where every lost sale generated an invoice for the loss of profit. There would be a predictable response to improve competitiveness and service, but the lack of visibility of lost sales makes this response unlikely. The loss of profit is as real as the cost of wasted stationery, but seldom gets as much attention. Continue reading
Taking stock of your performance
This article was first published in the Sanlam Business Tips for Business Owners newsletter of December 2015, an excellent resource for entrepreneurs distributed free by a wonderful company. Entrepreneurs would do well to subscribe to this newsletter.
Comparing actual performance against planned results pays dividends
At year end many companies take stock of all inventory items. Taking stock of how your company performed against your plan is even more important. Pull out the business plan you completed earlier and make a comparison between what was planned and what actually happened. Of course if you never did a business plan cannot do this, and you should take note of Dave Ramsay’s wise words “A goal without a plan is just a dream”. Stop dreaming, plan and implement
The easiest way to do this is to develop a spreadsheet or table with the targets from the plan listed. Be as comprehensive as you can be. Obvious items are sales, profitability and cash flow forecasts, customer and staff retention, staff and management development, customer service levels, planned marketing campaigns, planned product development / improvement and competition monitoring and reaction. If those were not in your plan take this as a good reminder about what should be included when you do your plan for the following year. Now you should enter the actual results and show variances.
When you compare actuals to plan be brutally honest. If your plan had a non measureable goal like “give great customer service” assess honestly how well or badly you did, ask a few customers, and not only the friendly ones. Continue reading
Customer base or new business?
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2015 and is posted here by their kind permission
How should you deploy limited resources for best returns?
Entrepreneurs know that they do not have unlimited sales and marketing resources. You face the question of how to get the maximum output from what you have. Should your energies be directed at more sales to customers, or more customers? Is it wise to split your resources between these?
A partial answer can be found in the nature of the business. If you sell things that customers buy very seldom like flooring or wedding facilities, your effort should go towards positioning your brand as one to consider and delivering beyond expectations to grow word-of-mouth and referral business. Similarly if your product set is applicable only to a small total market and you are the major supplier you want to ensure that all customers use as much as possible of your product range.
In cases where you offer highly differentiated products or have a unique market focus your priority should be new business before imitators become a problem. Where you have a ‘me too’ product set, very similar to that of your competitors your first priority should be to ensure loyalty of your customers and differentiate by excellent service.
Some new business is essential. Customer attrition will come through closures, relocation and competitive attack. Costs will increase and without new business you will have to cover this increase with price hikes, which make you less competitive. Continue reading
The power of focus
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in October 2015 and is posted here by their kind permission
Concentrate your resources on the target to improve performance
It seems logical to spread your net as wide as possible, to develop all available sales opportunities and markets if you want to grow. This makes sense if you are the dominant player in the market with an abundance of resources, one who can afford to waste resources on loss making sales simply to deny them to competitors. For everyone else it is a bad idea. Military strategist von Clausewitz wrote “Where absolute superiority is not obtainable, you must produce a relative one at the decisive point by making skilful use of what you have”, echoing the much earlier Sun Tzu maxim of concentrating your forces where the enemy is weak.
This military strategy applies equally to business. If you concentrate your resources and focus on a particular target, you gain many advantages: Sales costs reduce, sales become easier through customer referrals. Salespeople become expert in the area and competitors recognise your expertise and go elsewhere, so your strike rate increases. Customer support and administration costs fall and service levels increase. Your company becomes the go to company in that market.
Alternative choices
By contrast trying to hit everything that moves is costly; implementation and procurement complexity increases, as does the risk of cancelled sales. Your people become frustrated because they continually need to learn new industries and seldom re-use their expertise. Poor customer service is frequently an outcome and you lose the power of relevant reference customers. Continue reading
Tenders – timewaster or business generator?
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in September 2014 and is posted here by their kind permission
Should you tender or stay away? Some basic rules
Tenders are used by all levels of government and many companies to buy goods and services and issue contracts. The total value of tender business is enormous, so an immediate reaction is to get involved. There is a downside as many small businesses and start-ups have experienced. It is entirely possible to submit many, many tenders without success. The direct cost of preparing a tender is high, but the opportunity cost of conventional sales you could have made instead is higher.
Me too
I call these ‘me too’ tender submissions, where you have nothing special to offer, and the company never heard of you. Among the bidders will be existing suppliers, those having specialist skills in the area and those bidding the lowest price because they can. Your chances of success are almost zero. Instead of wasting your time, develop a specific niche expertise or technology then tell potential buyers about it. Your chances of winning subsequent tenders increases dramatically. Continue reading
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
The right workload
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in March 2015 and is posted here by their kind permission
Entrepreneurs work hard but should get the balance right
It is routine for entrepreneurs to work very hard for long hours. Hard work is a part of entrepreneurship, but how balanced is that workload? Do you handle customer complaints, check quality, answer e-mails, expedite deliveries, do progress chasing, and fix problems? These are all reactive. Your may also do some proactive work like designing the website, selling to customers, developing products and similar tasks. Even these may really be reactive – arising from the lack of a website, no trusted salespeople and customer gripes about product deficiencies. If this sounds like you, you are working in the business, not on it, and working at a low level as well.
You should be focused on beating competitors, innovation, customer retention, structuring finances, building the brand, managing budgets and forecasts, getting the right people in place and a host of other managerial tasks. These are working on the business not in it. At least some of your time must be devoted to strategy – have you got the right products? Are you in the right markets? Should you buy competitors or be bought? Is your buying strategy right? Your pricing? Does your structure support your strategy?
Life balance is equally important. Family, health, friendships, networking, learning, spirituality, hobbies, holidays and entertainment will often be sacrificed for long days working, but there is a cost. Continue reading
Breakout
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in February 2015 and is posted here by their kind permission
Planning and executing real growth strategies
The year 2015 stretches ahead, and many entrepreneurs I speak to are still cautious. This is understandable, 2014 was a horror year of violent strikes, power cuts, limited postal service, slow economic growth and uncertainty. The temptation to proceed with caution into 2015 is very strong.
Beware though, caution can become a habit, business plans showing a modest growth on last year can become the norm. The company does not invest in new products, markets or channels, research, marketing and training are put on hold and the company develops a culture where innovation becomes too risky “for now”.
Breaking out from the limited growth habit can be a challenge, but a very worthwhile challenge, if only as a defensive move to stop competitors getting bigger and threatening you. Continue reading
A better year
Last year was a bad year for many companies – here is how to make sure 2015 is better
A variant of this article was published as the Sanlam Business Tips for Business Owners January 2015 edition. This publication is a great resource for entrepreneurs, well worth subscribing.
Last year was one of the most difficult for businesses in recent times. The strike in the platinum mining sector started in January and was only settled in June. Losses to the mines and their workers were enormous, but the trickle-down effect of the mines not buying meant suppliers were badly affected. That in turn affected their supply chains, down to tax consultants of managers of third tier suppliers. Only a week after platinum strike settlement the metalworkers strike paralysed industry for a month. The post office did not deliver mail for months in some areas, new power stations again experienced construction delays, the radical EFF appeared on the stage and the e-toll saga developed in Gauteng.
On top of all this the South African national pastime of sharing bad news brought a mood of pessimism and resignation. Already in 2015 we have seen threatened strikes, load shedding xenophobic violence. What, you may ask will make this year any better than the previous one? One of the answer to that question is you. There are many things you can do to shield your business from negative external events, and to seek the opportunities that any adverse event brings. Continue reading
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.
Don’t slow down
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2014 and is posted here by their kind permission
November and December offer many opportunities for alert entrepreneurs
You will all have experienced it – the dreaded November slowdown, with many anticipating the year-end holidays before South Africa shuts down sometime in December. Entrepreneurs complain that it is impossible to sell at this time of the year. Many can’t wait for the start of the holidays.
How much are you contributing to this business slowdown? Are you demotivated by decisions being deferred to next year? Have you gone into pre-holiday slowdown mode, and repeated that this is an impossible time of year for marketing or sales? If you have then you are part of the problem, and this is a self-inflicted limitation on doing business.
Can you really afford to have one quarter of the year, from the beginning on November to the end of January as a time of minimal sales? Is it really true that nobody buys at this time of the year? The truth is there is an enormous volume of business available at this time, but it will not come to you if you ignore the opportunity.
Opportunities
There is an old saying that “everything comes to him (or her) who hustles while they wait”. Many successful entrepreneurs have had great successes during the slowdown by catching competitors napping in preparation for the holiday, or being the only bidder for profitable business. Tenders are published now to limit the number of bidders – really awake entrepreneurs take advantage. To get a slice of the millions spent in the next couple of months you must be alert, work hard and look for opportunities. You should also plan and execute an assertive sales campaign. Continue reading
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
Customer information
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in April 2014 and is posted here by their kind permission
A seriously valuable marketing tool – and it is free
Good customer information held in a structured system will tell you whether customers are growing with you or reducing purchases. It will have a record of every meeting, sales order, complaint, compliment, reference given, products purchased, payment history, budget cycle, nature of their business, basic credit information and key contacts. All of these are stored somewhere in your company records anyway, but are they accessible in an effective customer information system?
If you have a good system you can research target markets, make individualised tempting offers to customers, cross sell products and plan campaigns in target market niches with a high likelihood of success. What a great marketing tool, and its free.
Using the information
One way of using this information would be to list of all customers in a particular line of business, and list which products all or most of them are buying. Now you could do a survey among them to find out how they are using the products, their degree of satisfaction with those products, and any needs which are not being fully satisfied by the products. With this information you can: Continue reading
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