Archive for category business discussion
With every passing month it becomes increasingly important to separate your business from the competition. Gone are the days of copying and undercutting. You have to get out of the commodity business and shout about what differentiates you from the rest.
So, how do you do this or has your mind gone blank with all the Covid uncertainty. This was the subject for discussion by members of the Business Exposure Group at our recent meeting.
One of the big differentiators at the moment are those businesses which pursue the face to face meeting in a Covid safe way. Many larger businesses are following business rules which prohibit meetings and demonstrations etc, but many SME’s are able to take advantage of those businesses on hold, and provide what the customer wants. It’s a great time to steal a march on competitors.
Equally take a look at your current customers, is there a common element among your best customers. Interview them and ask why they choose to work with you, why they stay and why they refer others. Study your competitors to establish what you could do better and what don’t they offer.
Focus less on traditional marketing and more on customer experience. Get personal with your customers, get to know their life story and find out the real reasons why they buy your products. Build a relationship with them so they move from being account number 2367 in your ledger to customers with whom you have a real relationship.
7 months into this Covid pandemic. It is now time to act not react!
Do you manage cashflow or do you just rely on being careful? Do you have a formal strategy for improving cash flow? Do you have a cash management culture?
These were questions posed to members of the Business Exposure Group at their recent meeting.
82% of business failures are as a result of poor cash management. 60% of businesses have inadequate cash flow. In many industries cash is difficult to access which creates problems for you to remain competitive, maintain financial stability and pursue growth.
But, how do you encourage a cash flow discipline in both good and difficult trading times. Do you link compensation to achieving specific cash flow targets?
During the meeting our members came up with the following points:
Use email to send invoices rather than post, this should speed up billing and collection.
Reduce error rate on invoices.
Don’t wait to invoice at the end of the month, and have a regular schedule to follow up on all collections
Ask for a deposit or milestone payment.
Incentivise customers to pay faster by offering discounts.
Exhaust current stock and delay expenses.
Request better supplier payment terms.
Finance purchase orders.
Sell or lease idle equipment
Turndown or postpone work
Don’t pay early, pay electronically and on the last day the payment is due.
Sometimes more flexible payment terms can improve your cashflow more than a bargain basement price, so don’t always focus on the lowest price when choosing suppliers.
Arrange a line of credit from the bank, even though you don’t need it immediately.
Ask suppliers for extended payment terms.
Ask you best customers to accelerate payment.
Offer clients fixed rate retainer packages for some of the work, this way you get paid up front.
Suggest payment by monthly direct debit, instead of by cheque.
Offer finance as part of your product package to ensure that you get paid on time.
Operate a ‘just in time delivery’ to eliminate dead stock.
Offer discounts on lower demand products.
Source items from low cost countries, but beware you may need to pay upfront and buy in large volumes, so it may be false economy.
The popularity of financial software has made cash management easier, but as difficult as it is for business owners to prepare projections it is one of the most important things that have to be done. But, does an educated 3 month cashflow forecast work in reality, and should you continually review your projections? All members agreed that you should have a line by line projection for every significant outlay in the month.
A further problem is managing cashflow in a seasonal business which is never easy. You need to clearly identify the highs and lows of the yearly cycle and be confident that your projections are realistic.
One of our members commented:-
‘To our surprise we were called by our bank for a meeting shortly after we filed our annual accounts. We were seen as high risk, despite being profitable, having sales growth and cash in the bank. We were told that we would have to pay higher interest rates and would have restricted access to funding. The problem was inadequate cashflow. So, we reduced debtor days by 5 days (75 to 70) and inventory by 15 days, which improved our negative cash position by 60% and restored our relationship with the bank’.
This subject created a lot of debate amongst members of the Business Exposure Group and they went away with additional ideas of how to improve the cash management in their businesses.
Strengthening your business doesn’t just involve financial management, it includes strategies to maintain and broaden your customer base, keep morale high amongst staff and improve business practices. Chamber of Commerce figures show that three quarters of SME’s are concerned about the economy but few have plans in place to protect their business, if business takes a downturn for the worse.
Have a plan which outlines a comprehensive menu of cost savings which could be implemented in a downturn. Adapt products to be more suited to customer’s current needs, diversify to protect from the loss of a significant customer. These points were posed to members of the Business Exposure Group at their recent meeting.
Cash equals survival, does this need to take precedence over profit if business goes awry. Having a contingency plan to produce short term profit, despite a drop in revenue, can make all the difference. A decline of 10% in revenue could wipe out the entire bottom line and most companies have a relatively narrow margin for error.
So it is important to develop your forecast on optimistic, realistic and worst case scenario basis. But, who does? Businesses generally fail because problems are noticed too late, so thinking about vulnerabilities and opportunities early on can be a big advantage.
Identify and maintain your strengths and your best customers. Identify your highest-margin customers and understand what you are doing right for them. Instead of cutting costs, be ready to shift resources to retain high margin customers and continue to be creative in how you can add value for your customers without increasing costs. Look through your costs and identify what’s inefficient, what’s nice to have, what’s there historically, and what isn’t creating value like it used to.
Be ready to take a knife to anything that isn’t adding value.
So, how recession proof is your product or service – is it a necessity or a luxury?
Quite often banks have a level of credit granted but some levels may no longer be required, which may mean you should move them to other areas. If business is good consider increasing your line of credit and establishing new credit facilities, even if you don’t need them at present. Perhaps look into unconventional sources of finance as a fall-back.
Look at speeding up working capital to release cash. If sales fall can you respond so as to avoid excess stock? Review your sales forecasts, keep an eye on your stock inventory and reduce the number of slow moving products. Look at other sources of income such as sub- letting part of your premises.
Review and delay your expansion plans and the purchase of high ticket items. Categorise your company’s assets into, underperforming v high performing, and strategic v non-strategic. Try to lock prices with your suppliers to stabilise margins.
Look at buying optimistically or defensively a competitor to stop them falling into the hands of another competitor. Monitor advertising by competitors, if they are cutting down now is your chance to do more. It’s equally important for your business to find new markets.
In conclusion, the best time to prepare for a downturn is when the company is operating well. Plan ahead so that if needs be you can react in a controlled fashion.
Above is a snap shot of the comments made during the discussion at the Business Exposure Group meeting.
Many businesses have a sales machine, designed to replicate the star performer. But recently sales have been caught off-guard by a dramatic shift in customers buying behaviour; longer sales cycle time, lower conversion rates, less reliable forecasts, reduced margins. Has selling become harder and why?
This question was posed to the members of the Business Exposure Group at their recent meeting and the following points were discussed.
Process driven sales fall short because it gives the sales rep no room to exercise judgement and creativity when dealing with highly knowledgeable customers. Sales team should not just compete on price. It is not a good idea to have a price driven quick sale as opposed to a longer sale that offers a better solution and best value. Support your sales team rather than direct them; give them greater latitude. ‘It’s not the journey but the destination we have to focus on’. Reward the sales team for long term focus rather than short term deal volume. Do not let sales reps simply sell products rather than solutions, purely to boost their figures.
There is now a new world of sales
|Customer has a definite need||Customer is uncertain|
|Find someone with authority to spend||Find someone open to change|
|Demonstrate value in your solutions||Disrupt the customers thinking and assumptions|
Perhaps the answer is to have adaptive sellers who challenge customers with disruptive ideas and offer unexpected solutions-‘Insight selling’. Demand should be created early in the sales funnel rather than responding to it later on. Instead of making the sales rep work through a checklist of sales activities focus instead on the customer’s behaviour, and let the customer acknowledge that the status quo is not working. Verifying whether a customer is open to change is a prerequisite to pursuing a sale. It’s not enough to do a demonstration; you need to first establish with the customer that the existing approach is underperforming and that a new solution is necessary.
Large sales driven organisations monitor sales reps by KPI’s, especially cycle times and closure rates, smaller businesses can and should be more agile and flexible. We can track and report on a customer’s actions rather than on the sales reps activities, which would encourage the reps to focus on achieving outcomes with the best possible solutions.
Originally sales was about scheduling times with the decision maker; determining if they have a budget for the purchase and sending a proposal in writing. Now, find out if the customer has agreed that status quo is unsustainable; does the current approach expose them to risk; how much is in their budget; can we help the customer think creatively about funding if money is not available in this year’s budget.
The Institute of Directors state that only 17% of existing sales people score high on the competencies required for ‘Insight Selling’. ‘Hire people not in sales, but hire people who have good critical thinking and are willing to sell’.
If you used to recruit as follows –
‘Wanted experienced professional looking to maximise earning potential in a fast paced competitive sales organisation’.
Change this advert to
‘Wanted critical thinkers looking for an opportunity to exercise their judgement and assume significant responsibility for business growth’.
Businesses that continue to embrace the sales machine process are watching their margins fall. Our Business Exposure Group members agreed that it’s better to hire good people, create an empowering environment and then get out of the way.
How do you provide your buyers with a complete understanding of what you do, what you sell and why your products or services are better than the competition?
Too many businesses are already generating all the leads and prospects they need but are unwittingly losing up to 90% of opportunities to convert them into sales.
As an aide memoire it is important to consider the following:-
- The buyer is more intererested in themselves than you.
- Map your sales process. A step by step process to convert enquiries and leads into sales. Build trust/understand the buyers goals/create certainty that your product meets their needs/ overcome fear of making the wrong decision/officially confirm the sale.
- There is value in trying to convert old and cold prospects. It may be time to approach another prospect in the target company.
- Qualify leads so you don’t waste time. If a prospect isn’t ready to buy don’t give them to the sales team. Provide useful mailshots and wait your time.
- Spend enough time researching the buyer’s needs, then offer the solution to win the sale. It is important to listen and find the solution for the prospect.
- Offer content and information that educates, regular newsletters are the beginning of the process.
- Fish where the big fish are, don’t waste time trying to convince people to buy when they are clearly not interested or ready to commit.
- Establish a no communication deadline to remove redundant prospects from your pipeline.
- Follow up your initial call a few days later asking questions, eg, have you had a chance to go over the information and make a decision? 80% of all significant sales occur only after a minimum of 5 follow ups. Following up will apply pressure and open up dialogue to discover questions and concerns that the prospect may have.
- Have a list of scripted answers readily available for every possible objection/query.
- Remind them that you have a solution that is going to make them more money.
- Don’t adopt a one size fits all approach, target and segment, focus on the best prospects first.
It’s all very obvious but there is tremendous value in reflecting on the above and evaluating your conversion process.
This was the topic discussed by our members at a recent meeting of the Business Exposure Group.
As a business you need to know how you are performing. Should the management pack consist of a one page summary, or should it be more extensive, and what should be included in it?
Most businesses include KPI’s/ Action plan and corrective action/ Profit and Loss showing period against the budget/ Aged Debtors/ Staff headcount/ Cash at bank/ Capital expenditure / Cash Flow forecast.
These are all essential pieces of information needed to enable you to get an overall picture of what is happening in your business at this particular moment.
The figures should be monitored on a regular monthly basis, say 5 days from the month end, with time set aside in the diary to study them and ask questions. This is the best way to monitor your working capital and decide whether you need to invest more time in chasing payments. Armed with the information you can get the business to perform better – control costs/ improve margins/ boost cashflow/ reduce risk through better management.
Management accounts are used to help plan and control activities of the business and to assist in decision making. Information should be shared with staff members, as it will help them understand where to focus their energy and avoid big surprises at the end of the year. Often visual graphs make the figures easier to understand, and can highlight both positive and negative trends.
Information can be obtained to identify seasonal differences, plan dividend payments and other remuneration.
One of our members felt that his management accounts produced figures that were too focussed on the present, but it’s up to you to interpret them and spot trends. Consider burn rate, ie how long can you last if no more sales were achieved beyond those already known, therefore unnecessary costs must be dumped.
Looking at management accounts should not be seen as an additional administrative burden. All this information is there to help you decide about – adjustment of stock levels, hiring of extra staff to meet demand, investment in marketing, discounting or discontinuing certain product lines or services. Nowadays with the common use of Xero accounting software there is no longer a need to wait a full month before knowing the financial position of your business. The use of accounting software allows companies to produce information on demand.
Our Business Exposure Group members were all aware of the value of regularly reviewing their management accounts and agreed that they were important for the business to progress, but some felt they did not give sufficient attention to the definitive information available.
In today’s confusing economy many business owners are in need of a jolt – something that will help their company grow. But what are the ways to find an edge in a crowded market, to find new ways to sell your product or services?
This was the question posed to members of the Business Exposure Group at a recent meeting and they came up with the following points.
- Is the business truly scaleable? Is the demand for your products enough to sustain growth by focusing on either one product at a time, one new customer at a time, one new sector at a time? But often the key to scaling up is scaling down and become more efficient.
- Make sure you do your market research before scaling your business.
- Re-organise your company to serve customers better. Look at your inefficiencies and review where improvements can be made.
- Operate with integrity; don’t let money or greed get in the way. Strive for excellence and be different. The owner is the main sales ambassador, so get out and visit your customers. Focus on good customer service. Stay up to date with technology and up your marketing activities.
- Many small businesses run too lean for too long, putting all their investment into selling, but certain inefficiencies maybe things you can get away with in the early stages, but if you are serious about growing these ‘holding you back’ issues need ironing out.
- Don’t think just about tomorrow, at the expense of the long term.
- For some it is easier to carry on as you are, rather than developing skills to manage and grow your business. A leader’s job is to set the vision and a manager’s job is to set tasks and look after the operation. It is vital to position yourself correctly in the business.
Your business can either grow or stagnate, it’s your decision, but let me leave you with three interesting thoughts –
- Don’t become obsessed over ‘cool features’ as this will drain resources and will not increase your bottom line.
- Don’t over innovate because this will drive your customers away because your products and services become too complicated.
- Don’t wait until a product is perfect before you launch because you will have launched too late.
Remember growth is about having processes, being organised and delegating trust to others working in your business.
Strategic business reviews are useful if you are
- uncertain about how well your business is performing
- if you want to know how to get the most out of your business or marketing opportunities
- if your business is moving in a different direction to the one you planned
- if the business is becoming difficult or unresponsive to market demands
But what are the questions we should be asking ourselves?
Members of the Business Exposure Group discussed these questions and came up with the following.
- If things are running well should you let it run or is it actually time now to plan again? Most thought that it should be a constant agenda item.
- A simple planning cycle can greatly enhance your ability to make changes in your business routine.
- It is vital to review the progress of your business, but how are you measuring success and is your annual business strategy fit for purpose? Most thought that a review should take place every time a game changing event happens.
- What are your markets now and in the future and how do you gain market advantage? There is no point in going head to head with the competition, try to find a niche.
- Which of your products/services are succeeding and which are not performing as planned? Spend more time on the latter.
- How effectively are you marketing your goods/services to your customer’s needs? Have you reduced the risk of them placing an order with you?
- Conduct competitor analysis. Find out what they offer. How they price their products/services. What is their competitive advantage. What was their reaction to your entry into the market. Who are their biggest customers. With this information your business can be more robust and targeted.
- How often do you review your financial position? Have your requirements changed recently? How frequently do you review costs and new ways of doing things? These questions are crucial.
- How often do you review and update your website? Don’t let it sit there reflecting the old times.
There is a benefit to have an outsider question your thought processes periodically. They will ask questions that you never even thought of. There will be many external factors which may affect your business’s ability to compete and it was generally felt amongst our members that is was vital to review your business periodically, especially if legislation changes, new technology is introduced, a significant customer is lost or a new competitor enters the market. It has to be a disciplined ongoing process.
Most business owners dream of growing their company. Greater revenues are a measure of accomplishment. Larger companies are trusted more and getting bigger makes it easier to get even bigger!
But, being big creates problems – the business becomes less flexible, less customer centric and all the aspects of being small are jettisoned: agile, frugal and responsive. So, can you stay small but continue to grow? This was a question posed at a recent Business Exposure Group meeting. It’s important as the business grows to keep thinking like a small company. So, consider:-
- Does adopting the formal trappings of a large company in order to appear more credible actually reduce performance?
- Employees function better when the rules and procedures are short and simple.
- Adding more staff often creates more problems, and it increases staff turnover.
- Working with fewer people creates conscientiousness and keeps everyone more involved.
- Employees wherever possible should be rotated between tasks, so everyone can multi-task.
- Decisions take longer to make in a large company. There are too many managers who create bottlenecks.
- Do we need constant regular meetings? There is often a mis-alignment between when meetings are scheduled and when a conversation is needed. So, be more flexible. Big businesses have too much reporting, too many meetings, too much training. Create a culture of action and hire people who get things done!
- Customers are happier when there are fewer layers of management and procedures. Several layers of management depersonalises the customer experience.
- Eliminate useless work practices, don’t issue a companywide rule that only applies to a few – eg everyone must write a report, but it’s only relevant to one employee who doesn’t communicate well.
- As the business grows the agenda will change, make sure everyone is working to the same project. Don’t let people continue on old projects when the needs of the business have changed. There is nothing quite so useless as doing with great efficiency something that should not be done at all
These points were raised at the Business Exposure Group meeting. It was felt that keeping teams small and agile with little bureaucracy, a flat organisation and smart employees was the appropriate model for a contemporary business.