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
Selling to big 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 October 2014 and is posted here by their kind permission
Sales to huge organisations can be wonderful, but there are risks
Making a breakthrough into a giant corporate or a part of government is like finding the pot of gold for many entrepreneurs. If you have secured a contract rather than a single sale the excitement is even greater; the long-term profit generated allows the business to fund growth and regulates the cash flow. Beware though, this kind of business comes with some risks, and entrepreneurs should be aware that such contracts have destroyed businesses, and cost entrepreneurs everything they owned.
Making the sale
Large organisations, from government departments to mines are required to buy from small businesses, especially black empowered ones. We expect them to seek out entrepreneurial companies as suppliers, but it does not work that way. Little businesses have to fight hard to become suppliers. Large organisations are driven by budgets and the key performance objectives (KPIs) of the business unit which needs the product or service, so they will buy the products that fit the specification they prepared to suit those needs. This may not be the best product offered to them. Giants are risk averse and bureaucratic.
To win their trust you need to be aware of their style and needs and prepare your company and products to meet those. Pitch your sale in a way that will help the end users to do their job better. If there is ever a case of selling to the customer needs then this is it – you want to stand out from competitors and show why your company should become the supplier. Once you make the sale you must execute flawlessly all the time, and be instantly available to them at all hours. Continue reading
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.
Before you even get to tender stage you may have to register as a potential supplier. Government departments, municipalities and corporates frequently publish invitations for suppliers to list their companies in particular categories. If you have a highly competitive attribute or niche and are listed you may become one of a handful, or the only company invited to bid when the company needs your speciality. Continue reading
Tough times
Image courtesy of Paul FreeDigitalPhotos.net
How to negotiate difficult market conditions
“It’s tough out there” a veteran entrepreneur said to me recently, “this is the worst I have seen in 30 years of trading in this market”. Many businesses are really feeling the pinch as the long lasting effects of the global economic downturn slash budgets and postpone new developments. The phrase about tough conditions is heard frequently.
In the local marketplace labour unrest which often turns violent, energy cost and availability concerns, high inflation, increasing red tape and low labour productivity add to the problem. During the good times competition increased with more companies being launched or expanded. This means a shrunken market is being contested by too many suppliers with high and increasing costs. Buyers become more demanding because they can – there is always someone who will shave the margins to the bone just to keep the factory ticking over and some staff employed.
Effective action
Good entrepreneurs react to situations like this; they do not simply accept that times are tough and that their businesses will underperform. The business needs to win more of the scarce business, effectively denying this slice to competitors, and it needs to compensate for increased costs by increasing efficiencies. Continue reading
What is the right price?
This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in October 2012 and is posted here by their kind permission.
Focusing on pricing will pay dividends to start up entrepreneurs
Challenge
This entrepreneur asks where he can find help in setting prices for advertising space on digital displays and which procedures he should to follow before deciding on the right prices.
Response
Setting the most appropriate price is important but not easy to do. It needs at least as much attention as any of the other ’4Ps’ of marketing. Start up entrepreneurs traditionally spend most of their effort on product development, put time and thought into marketing promotions and sales channels and not enough time and effort on pricing. Price is important in almost every buying decision so it can be as crucial as the product features in securing the sale. Continue reading
Getting started
This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in August 2012 and is posted here by their kind permission.
Turning an idea into a viable business is not as difficult as it seems
Challenge
This entrepreneur has a business idea which he thinks will make a viable business, but is unsure of how to go about commercialising the idea. He asks how to execute this transition.
Response
Many people have a business idea. Very few ideas actually turn into commercially viable businesses. This is sad when our country so desperately needs all the new businesses possible to address the terrible unemployment situation. A part of the reason for this failure is highlighted by this month’s challenge; many potential entrepreneurs do not know which steps must be taken to commercialise an idea.
The first step is the business model, including the source of income. This entrepreneur will provide a service to a tightly defined market, and make his money from fees. In other enterprises the income could be commission on sales, sponsorship of an activity, rentals, royalties or from advertising income. The source of products for resale and other necessary services must also be identified. Continue reading
If you are an entrepreneur you are in sales
image courtesy of imageafter.com
Entrepreneurs are frequently great salespeople
It is rare to meet an entrepreneur who thinks they are a great salesperson or sales manager. Most times they will use language like “I just don’t have the gift of the gab” or ‘I know my products but…”. But usually at start up the entrepreneur has to be a salesperson – there is nobody else around!
It is also rare for entrepreneurs to take steps to develop selling or sales management skills, which is odd. They will frequently take financial courses, read marketing ‘how-to’ books and study HR and staff management. The business is totally dependent on sales being made, and yet it is the one art that entrepreneurs seem to shy away from.
Let’s back up a bit. At the time the business launches, the entrepreneur talks to prospective customers, defends the price, negotiates terms, enthuses about the qualities of the products or services and spends lots of effort to think of ways he can make initial sales. Contrary to the usually-expressed belief by entrepreneurs that they cannot sell, they are often really good salespeople. They work really hard and are determined to make sales because they have to. Their product knowledge is awesome; they have the ability to shave a price and the knowledge of when cutting further will hurt the business. They make very sure that what was promised gets delivered, and attend to any customer complaint with vigour and immediacy. Continue reading
What do customers need?
This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in August 2011 and is posted here by their kind permission.
Starting a new business to supply an innovative solution needs lots of research
By Ed Hatton
The challenge
I have been developing a product for the health and beauty industry for the past 2 years. How do I sell and market my product both nationally and internationally?
Response
Many wonderful inventions never see commercial reality, let alone international success so the questioner is wise to ask for advice on the way forward. If the market does not see the value of a new creative concept it will not sell. The inventor may get excited about something that solves one of her own problems, but before launching a start up business she needs to be sure that the market has the same need and sees the value of her product in addressing that need. Continue reading
Cutting prices
Image courtesy of xedos4 at Freedigitalphotos.net
This article was written by Ed Hatton and appeared in the October November edition of Destiny Man magazine
The economy is uncertain, business is slow and your competitors have slashed prices. Should you follow suit?
The simple answer is yes if that increases profit or improves cash flow through more sales. Also yes as a defensive move to retain irreplaceable market share and that retention is worth sacrificing profit for. Be careful of emotions here. Clinging to things that should go can kill your business.
No if your products are price inelastic, so a price reduction does not materially increase sales. Also no if it would be more profitable to reposition and increase prices and value to your customers, and take higher margins for lower sales. Continue reading
Competing with giants
This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in July 2011 and is posted here by their kind permission.
Start ups must respond to aggressive and bullying tactics to survive
By Ed Hatton
The challenge
A small concrete pipe manufacturer with great customer service opened a factory in East London to support the local demand from local contractors and government. This reduced the cost and delays in transporting pipes and was an immediate success; turnover increased rapidly. The large and powerful manufacturers in this industry lost market share and reacted by slashing prices dramatically, absorbing reduced or negative margins with their substantial resources to attack the upstart. The new factory cannot match these prices and there is no product differentiation. Their question: how do they compete?
The Solution
Voltaire wrote that “God is on the side of the big battalions”, but I wonder if the Almighty would want to be associated with some competitive practices of large and predatory organisations. Entrepreneurs starting new ventures in competition with powerful organisation often face the kind of threats experienced by this questioner. The competition may be price based as in this case or it could be massive increases in marketing spend, cornering the raw materials supply, buying key staff from the start up and others. Many believe that free competition and entrepreneurship are the best routes to more employment, but sadly practices on the ground are often very different.
How can this entrepreneur compete? Continue reading
Fighting the lowest price
pic courtesy of imageafter.com
This is the first of a series of sales and marketing tips drawn from my long experience of trying different things. Some could call these street fighting ideas…
Say you operate in a market with many small competitors. Price will become a major decision factor and price competition will be fierce. Some competitors will pitch their prices at levels where they cannot give the service they promise, but they will establish a low price perception in the minds of customers.
People in courier services, stationers, web site development car repairs and a host of other business types will have experienced this problem.
Your company wants to be there for the long haul and give good customer service, but you cannot compete with the prices offered by those who promise the world and don’t deliver, or those new entrants who are still to discover how costly customer service is. How do you compete? Continue reading
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