Is there relevance for having an E-Commerce website for businesses other than those in retail?

E-Commerce is the name for any kind of commercial transaction that takes place through the internet.  It gives customers the ability to buy from you without having any limitations imposed by time or distance. Its not restricted to a B2C business using a “shopping cart” and credit card.

The question is – are B2B customers ready for this?

This was the topic discussed by members of the Business Exposure Group at a recent meeting and some interesting observations were put forward by members, many of whom had implemented E-Commerce functionality into their businesses.

B2B suppliers know far more about their customers than B2C, so there is no excuse not to deliver relevant experiences to your customer.- a website should no longer be general but nowadays it needs to be specific to the customer browsing your site.

41% of manufacturers are now selling directly to your business customers, so your business needs to be prepared to sell against the same companies you consider as valuable supply chain partners.

Entering into the world of E-Commerce is a major decision and setting up your website is challenging.  Consider the following points raised by our members during the meeting:

1. Website needs to be user friendly with as few clicks as necessary to enable your customer to order as easily as possible. It should load within 5 seconds.
2. Do you require multiple “shop fronts”, different languages, to only provide relevant products and services to the specific visitor?
3. Does your website need a reminder email facility to remind your customer to re-order?
4. Does your website need an email facility to notify your customer about new products or when products are back in stock?
5. When logged into the website, does it recognise your customer and automatically bring up their previous order history? – It is important to segment customers and give them a different experience based on their industry requirements.
6. If you have a complex catalogue, direct customers to the relevant products in as few clicks as possible?
7. Should you put all your goods or services for sale on the website or leave the high end items for your sales team to sell?
8. FAQ’s section is extremely important as it reduces the need to have an extensive customer relations team.
9. With one click specific industry users can fill their ‘carts’ with everything they need for their particular requirements.
10. It engenders customer loyalties. An order can be authenticated with a click of a button, instead of the process taking several days to be confirmed.
11. It streamlines your ordering system. It reduces the bottle necks of tedious work.

Consider who is your real competition, your competitors or your customer expectations?

The buying experience is now more important than ever.

It was felt by the Group that B2B E-Commerce was certainly another route forward for most businesses and a great way to find a new customer base.

Managing Multiple Outsourced Relationships

Successful outsourcing means more than just picking the right supplier.  It’s now a mainstream strategy, it’s an indispensable part of small business operations.

But, what do you outsource? – IT, Human Resources, Wages, Training?

Should you avoid outsourcing areas of your business that directly impact your customers?

For example, is it better to outsource IT to one supplier or to contract with a few suppliers and choose the best one for each type of work?  Failing to outsource effectively can cause damage to your business.

Outsourcing was the subject discussed at the Business Exposure Group meetings recently and members engaged in a lively discussion as to the benefits and pitfalls of outsourcing.

Successful outsourcing achieves:- cost reduction / achieving KPI’s / reduced time to market / process improvements / business agility / increased innovation / commitment to change with enthusiasm.

However, research shows that 15% of business owners think that outsourcing delivers reduced services, poor quality, and costs more when management and overseeing are factored in, and there is evidence of a high failure rate in outsourcing.  The biggest hurdle to overcome is that the contract or piece of work must be commercially significant to the supplier, if the buyer is to receive an appropriate level of service.

Businesses can’t be as efficient in this day and age if we handle all tasks internally.  But what is crucial to overcome the high failure rate is to have some sound service level agreements detailing: the minimum service offering / dealing with on time delivery / the volume of work / and the suppliers availability if your business needs a quick fix.

Time invested in managing outsourced relationships is time well spent but when choosing suppliers for outsourcing consider the following points:

-How do you get suppliers to collaborate with your established functions?

-How difficult will it be to swap outsourced suppliers?

-How often should you meet with suppliers?

-Lay down your terms of business clearly and set clear goals with service level agreements.

-What attitude should you expect from your supplier? They must show

a passion for excellence, rather than just satisfaction

commitment to success

take ownership of the work

bring brainstorming to the table

go above and beyond the contractual expectations

-Can you invoke penalties for failures in service / delivery

If you choose suppliers well then you will have a great resource, which is about much more than just saving costs.  It’s about skill, innovation and giving your business a competitive edge.

Growth by Acquisition

The simple way to expand your business is through hard work, there is no short cut to growth.  However, growth through acquisition maybe appropriate for small and medium sized companies looking to achieve rapid expansion.

What do you think of when you want to grow your business?

• Catch your competitors off guard
• Instant market penetration
• Eliminate a competitor through acquisition
• Is rapid growth too risky in a fast moving business world
• Will staff cope

So, is organic growth too risky in our fast moving business world?  This was a question raised at a recent Business Exposure Group meeting.

It is easier to finance growth via acquisition than other routes of expansion.  Lenders are more impressed with real financials than projections.  Banks prefer to finance acquisition rather than projected traditional growth.

Ask yourself – does acquisition complement our services/does it align with who we are and what we want to become/does it enhance our profile.  For a business to be well positioned for acquisition it needs to be doing well, have a strategic business plan, a strong management team and access to capital before the deal takes place.  Is your foundation sound enough to acquire?  Will your key employees stay?

Acquisition is about getting skills and technologies faster or at a lower cost that they can be built from scratch.  Acquisition is even better than having a super-charged sales effort.

Acquisition is lower risk – expenses are predictable, but how do you find a company who wants to sell?

1. use your accountant/lawyer

2. contact the owner direct

3. look for people around retirement age

4. direct networking with business owners

With organic growth businesses, growth should be restricted to 5-20% per year.  So acquisition assists to go beyond that with control.

If you don’t have the money to buy

1. use the seller’s assets
2. buy with someone else
3. lease with an option to buy
4. assume liabilities or decline the receivables

One of the Business Exposure Group members who acquired last year said ‘Keep the businesses separate for 18 months and let the teams develop – if buying the business, but if buying the talent then integrate them into your business quickly before they leave.  Respect the existing product and/or services otherwise the newly acquired team will feel embarrassed and worthless’.

According to KPMG, on acquisition 15% of staff leave.  If more than 15% this will affect the DNA of the team that you have just acquired.

The discussion at the meeting finished with an agreement that time should be set aside each month to work on the business and consider if an acquisition should be targeted, but note that acquisitions usually stem from the sellers desire to get out rather than the buyers desire for a purchase

Delivering Innovative Customer Experiences

To create distinctive customer experiences, businesses need to push the boundaries and adopt next-generation thinking in six key areas.

Some companies are moving fast to adapt, applying a range of approaches to improve customer experiences.  A great experience that delights customers and earns their loyalty is needed. Improving a customer experience from merely average to something that wows the customer can lead to a 30/50% increase in measures such as likelihood to renew or to buy another product.

Here are six areas discussed at a recent Business Exposure Group meeting.

1. Measure customer behaviour and spend time with customers to understand them 

Companies need to empathize with customers when they experience difficulties and obstacles.

This means embracing new techniques for understanding customer journeys.  Such approaches allow companies to uncover new insights that allow them to design and deliver truly great customer experiences.

One of our Business Exposure Group members is an insurance broker specialising in the farming community. He was developing a new product and took time out to observe the daily activities of farmers.

He learnt that farmers are pressed for time but also very tech savvy, relying heavily on PCs and mobile devices in their daily activities. He had originally planned to market his new product through traditional channels, but lessons learned from an observation trip led him to create a digital solution, which allowed farmers to gather information and buy policies online at night and at weekends.

2. Designing the complete customer experience

Design is not about making devices and screens look pretty. True customer-experience design involves each interaction customers have with your company. Design is not just what it looks like and feels like. Design is how it works.

To design a customer journey, companies must enlist everyone who has an impact on any part of a customer’s journey, not just people with the word “design” in their title—in particular operations and IT. 

A Business Exposure Group member has a marketing agency whose client specialises in visitor attractions. After a 12 month effort to root out pain points in the experience of visitors to theme parks, their clients introduced wrist bands. These brightly coloured wristbands allow visitors to board rides, pay for meals and gifts. More important, the bands and the technology behind them—which is in every part of the attraction—allow visitors to select exactly what they want to see and do in advance. That has helped turn a day out from a series of highlight attractions interrupted by waiting in line to a smooth end-to-end experience.

3. Completely rethink the customer experience

The focus is addressing customer needs, not improving a process. Many of our members bring in people who are not normally involved in the business to encourage fresh thinking.  Looking at the best experiences employed in other industries can  be extremely enlightening.

4. Become an agile organisation

Managers responsible for developing new offerings need the authority to make decisions quickly and to hold staff accountable. 

One of the Business Exposure Group members who has an IT software company shifted entirely to cloud technologies, which allowed new software developed by their team to go live on the clients websites in a matter of seconds.  By making the whole organisation agile, the IT company dramatically reduced time to market for their clients products and services. 

5. From delivering a product to constant tweaking

Many businesses figure out what new product or service offering they want to create for customers and then launch pilots.

It’s impossible to know in advance how an experience will be embraced by customers. It’s better to launch sooner with fewer features and a simpler interface and learn what works, based on real customer input. 

Using this approach, one of the Business Exposure Group members was able to build a new tablet-based app in just 6 weeks.  It then tweaked new versions based on user feedback, improving the process.  After these tweaks, the app was scaled across new markets and more products within the company’s range.

6. Working together spontaneously 

Companies need to push their people to move beyond traditional roles and work together to reinvent customer journeys.  Improvements  come from having motivated, empowered frontline employees driven by clear purpose.

Many of our members are working hard to reinvent their customers’ journeys. The ones that win will be those that push the boundaries and adopt new practices.

The Importance of a Sales Strategy

Sales functions are struggling in the internet led world.  Approaches that have worked for decades are no longer effective and many businesses have seen their digital investments fail to deliver expected results.

The importance of a sales strategy was discussed at a recent meeting of the Business Exposure Group and it led to a lively discussion with lots of questions being posed.

Do you have a sales strategy? – You can’t sell here and there, or pick up the phone when you have a spare minute.  Strategy is about making choices, about where we play and where we don’t.  Unless you have a solid strategy you are essentially flying blind.

Do you understand the sales process? – It’s not about money, you need to focus on the positive impact the product or service has on your customer.  Forget about hitting the numbers, make sure the right message gets through.

Your CRM system maybe hurting your cause.  Seeing the top 3 products your customer is interested in is far better than looking at the customer history.  Will your customer benefit from doing business with you rather than your competitor?  Explain to them why you are the best, why your product/service is better and try to create a bond so they will stay loyal.

Do you find yourself trying to get business without understanding the specific growth opportunities? – Define your ideal customer, know your USP, analyse your territory, know your competition and have realistic sales expectations.

Many companies think they have a sales strategy but they don’t.

One of our members got it very wrong.  He has a machine tool business selling to the automotive trade and he decided he wanted to break into the medical market where there was more business at higher profits.  The strategy was to bring in a new line for the medical industry.  He revamped the website, had new brochures printed and then nothing happened.  They hadn’t worked out how they were going to be accepted into the medical market, how they would train staff and what exactly they were selling, who to, which companies, etc.

One of our other members got it right.  They are an accountancy practice who wanted to target independent haulage contractors for business.  They found it was no good expecting hauliers to come into the office during the day as they were busy working.  The company defined a sales strategy offering home visits accounts preparation for hauliers and they now have 420 new clients from that niche industry sector.

How much time should you spend on planning a sales strategy? You need to consider some of the following points

How do you move from being pretty good to very good at generating sales growth

• Take time to analyse problems then work out what your strategy needs to address
• Change your mind-set to ensure you are better than your competitors
• Ensure you are persuasive, but not arrogant or pushy
• Always talk to the decision maker and build a relationship, get in early
• Create a sense of urgency for their order, what can you offer them as an incentive to commit early

Management Consultants McKinseys have researched the SME market place and concluded the top 5 strategies for SME businesses:

1          Find growth where your competitors could not – practice micro segmentation of the market and find a pond where no one is fishing

2          Sell the way customers want to buy – focus on prospects for which you have something original to offer

3          Free up your sales people to sell – get rid of excess admin

4          Focus on developing staff

5          Expect exceptional performance – set stretching targets

Members who attended the Business Exposure Group Meeting left feeling energised and with lots of thoughts to focus on.

 

The Cost of a Product or Service plays no part in setting the Sales Price

Great products and services are priced on purpose.  So how do you work out the price to charge?

Although you understand your customers’ needs, we are not experienced with what to charge and often rely on intuition.

A report by McKinsey Management Consultants states that 80% of all products and services in the SME world are priced to low, which fixes the market position at a low level.

Some of the comments at the Business Exposure Group meetings raised some significant points from the members: –

1.Using the ‘cost plus pricing’ method often means that businesses a)      overlook the amount of R & D employed by the Company, and b) often    have over optimistic market projections which is reflected against fixed  costs

2.There is a benefit in having a useless price point. One member has 3 prices a) Web only subscription price of £59 per month b) Print only subscription price of £125 per month c) A Web and Print subscription price of £125 per month.

Option b) seems useless, but it turns customers from being bargain hunters into value seekers as it makes price c) look like an excellent deal.

3. Charging 1% off the optimal price for a product can mean forfeiting 8% off its potential operating profit.

4. Starbucks and others changed the concept of buying a cup of coffee from £1 to a drink which costs £4. They did this by changing the experience of buying coffee.  You can no longer buy a coffee.  You have to buy a caramel macchiato or a latte.

5. Another member who sells phone systems doesn’t ask customers what their budget is for their telephone systems. But moves the buyer into considering how much time staff spend on the telephone.

6. Another member manufactures soaps. One line was priced at £1 per bar.  It didn’t sell, so the Production Director suggested a price hike up to £6 per bar.  They all sold because the retail buyers though that the product must be a really good quality product.

7. If a new product costs 15% more to bring to market than the old product, should you increase the price by the same 15%. This was done by one of the members who sells bar coding labels. He made a mistake because he failed to realise the benefits of bar coding over the old product.  ie, instant access to stock control, and the effect of just in time delivery.  The product was priced too low and sold well, but customers would have paid significantly more for the new product.

8. In order to establish a price ceiling it is important to fully understand how the product or service benefits your customers. One of our members, who sells air conditioning systems, never compares competitors’ products, but explains to the buyer the impact of maintenance shutdowns and lost revenue, demonstrating that buyers will pay so much more for the product.

So, considering the above points as a starter, why is it that SME’s are planning on growing their profits by cutting costs, rather than implementing a less risky but feared alternative? Simply put up your prices, it has the least disruption.

Is growth about adapting at speed?

Companies are being challenged as never before to adapt at speed in the face of relentless innovation.

So how do SME’s stay ahead when the competition is accelerating?  Not merely by adapting to changing conditions, but doing so quickly and decisively.

One of our Leeds members stated, at a recent Business Exposure Group meeting, that he is fine with his products and services for the next 2 years, but is fearful for the future as he has no idea which of his products and services will be relevant in 5 years’ time and this is a worry when he runs a £2m turnover business with 19 employees.  It’s quite a responsibility!

The discussion at the group meeting centred around five key questions:-

1. How much growth do we need and how fast?
2. How much growth is left in our core markets?
3. How secure are we in our core market?
4. What opportunities do we have to grow existing business?
5. What new market opportunities do we have?

Some of the points raised were as follows:-

• It is fundamental to understand your competitor environment
• We must use customer insight to drive growth
• The trick is to be agile and persistent, but with a realisation to exit flat business ideas, rather than holding on and hoping they will turn good
• If you can’t comfortably hit your 5 year business plan with your core business, then you need a second act, one which operates beyond the core business
• Embrace the non-conformist in your business, because although they are difficult to manage, they often show the most promise and can help the business adapt at speed

Although fast, innovative business seems to be flavour of the month, it was commented that innovation often has a short shelf life and goes sour like milk.  With that as a backdrop many of our members felt that a more ‘controlled expansion’ was appropriate to their businesses, so that cash flow was not put under pressure, staff remained happy and not overburdened, systems were able to cope, quality was maintained and complaints were kept to a minimum.  The reality is that core values diminish as a business grows, and if it happens too fast then cracks start to appear.  But, whatever your stance, it’s important for your business to be agile, with a rapid cycle between strategies and feedback.  Between an idea and having it in the market, in order to work out what works and what doesn’t.

The Monday morning sales meeting historically talked about how the business did last week.  Now, we need to discuss how we did by customer segment and by product segment so that we can push our limited resources in the direction where we will get the quickest wins allowing growth at a speed we are comfortable with.

Cutting Sales Costs Not Revenues.

Bold companies have used the economic situation to make their sales operation not only less expensive but also more effective.

At a recent Business Exposure Group meeting, we discussed how our sales strategies have changed over the last couple of years.  We asked if employers should tinker with the sales force that gets the job done, even imperfectly.  Most people have moved away from piecemeal ongoing repairs and put in place a resource that allows the business to understand their customers and cut waste not value.

One of the members admitted to getting it wrong.  He had reduced his back office sales staff, thinking it would hurt the business less than removing some front line sales people.  The result was that the front line sales reps began undertaking support tasks.  He conceded that after a few months his business had made the support function essential to the business effectiveness and he had to go out and replace those that he had only just discarded.

The following pints were raised round the table.

• Not all sales effort should be equal. It is important to understand how much effort really goes into each customer.  Then, considering which are the profitable customers, allocate more resource to developing them.  Understanding customers allows companies to focus sales resource where they are needed and to cut waste not value.

• Cutting across the board risks losing quality customers and the salesforce are left without the resource to capitalise on new opportunities.

• Do customers want and need expensive face to face interaction? A shift to telesales may increase satisfaction because it can easily develop consistent and regular contact rather than relying on reps visiting every few months both small and large clients on a rota.

• Time spent on the road by reps should be reviewed. Rather than visiting remotely interested prospects and travelling long distances on a lukewarm lead, it is better to spend more time in the office qualifying and understanding the potential buyer’s requirements before getting in the car.

• Companies that analyse bids and conversion rates centrally have a more confident attitude to their sales process, because they are internally applying all the lessons learned from their sales process and addressing buying queries in a professional and consistent way.

• Squeeze out the inefficiencies after the sale. Stop sales people having to waste time dealing with mistakes.

• Major on a client’s buying history, to decide how your sales team should operate first.

• Consider alternatives to expensive trade fair exhibitions just to get 3 – 5 leads. Possibly a good telesales operator could get 3 – 5 leads in one morning and not over several days at an exhibition.

Many of the Business Exposure Group members felt that it was important to communicate cost cutting plans to the entire workforce.  Explain what and how you intend to make savings and then what you are going to do with the savings.  It is important to consider it from the employee’s viewpoint.  They need to know what’s in it for them, so that a strong culture of cost saving and revenue generation can be implemented from the bottom to the top of your business.

What should you expect from your accountants?

Research shows that 82% of business owners want more support from their accountants.  But there is a significant void between the end of year advice, which is months out of date, and strategic advice planning for the future, offered by a few but not all accountants.

The events of the past few years have led many business owners to review all areas of their business performance, including finance and cash flow.  But what is surprising though is that how few businesses have received pro-active up-front advice, support and guidance from their Accountants at a time when it has been most needed.

The question ‘Has your Accountant left you to cope on your own for the last 2-3 years’ was tabled at a recent Business Exposure Group meeting.

Below are some of the points raised during the meeting by our members.

1. The biggest driver for advice is tax mitigation.

2. Some Accountants talk about managing risk and setting up holding company structures to de-risk the valuable parts of your business should the trading side fall into difficulties.

3. R&D Tax Credits and Capital Allowance claims should be on the agenda for all regular meetings with Accountants.

4. A firm of say four partners with 20-30 support staff will add increased value.They can benchmark you against others in your industry.They can advise on appropriate KPI’s to make you understand your business inefficiencies. They can advise you on the impact of new contracts wins on the cash flow of your business. They are well connected with banks and can prepare funding reports in bank ready formats which attract a more serious consideration of your application.

5. How to extract cash from the business in a tax efficient way using EIS and SEIS and VCT investments.

6. The need to have a pre year-end meeting to discuss the suppression of profits and possible pension contributions in order to potentially wipe out your corporation tax bill.

7. Whether quarterly or annual accounting is best for a growing business.

What was clear from the vast majority of business owners at the meetings was that accepting poor service because the bill is cheap is no longer a viable alternative.  To build a relationship with your Accountant towards them acting as a periodic part time FD is crucial to assist building and running a business.  Talking to your Accountant at a regular pre-set meeting about your ideas and concerns is time and money well spent to give you extra confidence when dealing with the challenges of everyday business.

Valuing a Business for sale or acquisition.

Let’s start by asking ourselves if we know what our business is worth. Some would answer that a business is worth precisely what someone is willing to pay for it and what we are prepared to sell it for. So arguably the only way to value it is to put it on the market.

But if we take a step back it is strange that most don’t know what their business is worth. Strange because we know all the other figures – profit, average order value, debtor days, work in progress, sales pipeline value. By knowing how to value a business can help us understand where the value lies and maximise the areas of value within the business.

Some of the comments raised at a recent Business Exposure Group meeting highlighted the following points and all add to why a person would buy a business.

1. Market Share – overnight you can take out a competitor
2. Intellectual Property – this has value but in reality it is only worth something if it generates a profit
3. Brand and Reputation creates the most important value
4. Products and Services may compliment the acquirers business
5. Supplier Relationships may be better than the acquirer has to date
6. It costs a lot to train and harness a good set of employees
7. To scale the business into a new location
8. If a PLC buys a smaller business they can instantly revalue at a higher price on their balance sheet
9. Good housekeeping is essential so that when an approach is received is doesn’t create suspicion amongst staff, clients and suppliers

Having signed contracts, ownership of your website, domain names, software licences and
up to date statutory books are all examples of well-run and groomed businesses beginning
to be ready for sale.

The best time to sell a business is when it is doing well. Don’t leave it until it is too late, ie when you want to retire, because the urgency to get a sale will result in lower offers being made.

Notwithstanding, marketing a business for sale through a business broker is the best channel to create several interested parties and bring them to the table. Nevertheless, it takes many months to find an acquirer and further protraction of negotiation whilst due diligence and legal transfer takes place.

Research shows that most businesses don’t sell because either they are pitched at the wrong price or the seller is not talking to enough serious buyers.

Finally, if you can’t cope with the business changes on the horizon and can’t envisage selling, then perhaps you are better off hiring a new MD and continue to collect the profit without the day to day headaches of running a business.