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Recrutment challenges facing SME’s

SME’s are the lifeblood of the economy but despite producing 60% of all employment we often struggle to recruit the best people.  We’ve all been there, hired someone you thought was perfect, made all the right noises at the interview and then before they have even made it through the first month, you realise you’ve made a huge mistake.

So, how do you find quality applicants who will be the best fit for your business?  Because there is a link between good people and good business and therefore attracting the best talent is a strategic issue.  So, try to develop a relationship with people in your line of business and establish a pipeline of talent.

You need to spend time finding the right candidates. Yet, all the best people are fully employed, but many are concerned about their future prospects with all the economic uncertainty and we need tactics to get them engaged.  They look for careers in many ways, but they don’t look at your website and apply for a job.  Your message needs to be highly visible, and part of your marketing.

Most companies set up their hiring process as ‘you must buy now’, but quality candidates will not want to rush into things.  Most job descriptions are turn offs, written to prevent unqualified people from applying, rather than attracting the best people…..  Stop using job descriptions that attract average people, show the job as a growth opportunity and focus on the softer issues which are attractive about the culture within your business.

Is it a good idea to use a recruitment agency?  Only 16% of SME’s feel the value of using a third party recruiter is value for money,  but realistically they do have access to talent you don’t have.  With an agency, many employees feel the company’s culture is often misunderstood and you lose the opportunity to build a relationship with the potential candidates in the marketplace.  Using employee referrals as a means of recruitment is a favourite with many employers.

Research into the subject of recruitment challenges shows:

33% of SME’s believe the most successful recruitment strategy is to place an emphasis on large salaries, but how does this fit with the current team who are often paid less.

68% of employees rate training and development as the most important policy, which is often difficult in a small company.

67% of people employed in 2018 found their role through Facebook.

30% of business owners don’t have the time or resource to find the best candidate for the job and end up with the best of what’s on offer.

The cost of internal recruitment is significantly lower than external recruitment, and is often a preferred route.

SME’s can attract quality candidates even when competing with the big boys because SME’s don’t have layers of bureaucracy which exist in larger companies and so can offer recruitment quickly, and be far more engaging with potential candidates.

Employers often spend so much time on the underperformers that they forget to stretch the top performers.  Managers tend to communicate well with good employees and don’t with poor performers. It’s estimated that 10% of people in business are doing the wrong job.  So, looking at your workforce on a regular basis is definitely a good discipline.

Members of the Business Exposure Group debated this topic at a recent meeting and all agreed the following points were vital when looking to recruit the right candidate.

  • What role does your business need
  • What type of person and experience will benefit your business
  • Keep to an agreed timeframe and allow time for the recruitment process – it takes, on average, 12 weeks to get someone to join the company
  • Provide a complete job description
  • Involve your employees in the process
  • Make the candidate feel comfortable, explain the process of how long it’s going to take to deal with all the candidates so they are not confused
  • Sell the role and the company
  • Give constructive feedback
  • Make your offer clear and concise, get verbal agreement first
  • Continue the recruitment process after the offer has been made
  • Prepare for the candidate start date; get the first day right otherwise you’re always playing catch up.
  • Become a great employer and an employer of choice

After all surrounding yourself with talent is the best way to grow a robust business.

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Recruitment Challenges for SME’s

SME’s are the lifeblood of the economy but despite producing 60% of all employment we often struggle to recruit the best people.  We’ve all been there, hired someone you thought was perfect, made all the right noises at the interview and then before they have even made it through the first month, you realise you’ve made a huge mistake.

So, how do you find quality applicants who will be the best fit for your business?  Because there is a link between good people and good business and therefore attracting the best talent is a strategic issue.  So, try to develop a relationship with people in your line of business and establish a pipeline of talent.

You need to spend time finding the right candidates. Yet, all the best people are fully employed, but many are concerned about their future prospects with all the economic uncertainty and we need tactics to get them engaged.  They look for careers in many ways, but they don’t look at your website and apply for a job.  Your message needs to be highly visible, and part of your marketing.

Most companies set up their hiring process as ‘you must buy now’, but quality candidates will not want to rush into things.  Most job descriptions are turn offs, written to prevent unqualified people from applying, rather than attracting the best people…..  Stop using job descriptions that attract average people, show the job as a growth opportunity and focus on the softer issues which are attractive about the culture within your business.

Is it a good idea to use a recruitment agency?  Only 16% of SME’s feel the value of using a third party recruiter is value for money,  but realistically they do have access to talent you don’t have.  With an agency, many employers feel the company’s culture is often misunderstood and you lose the opportunity to build a relationship with the potential candidates in the marketplace.  Using employee referrals as a means of recruitment is a favourite with many employers.

Research into the subject of recruitment challenges shows:

33% of SME’s believe the most successful recruitment strategy is to place an emphasis on large salaries, but how does this fit with the current team who are often paid less.

68% of employees rate training and development as the most important policy, which is often difficult in a small company.

67% of people employed in 2018 found their role through Facebook.

30% of business owners don’t have the time or resource to find the best candidate for the job and end up with the best of what’s on offer.

The cost of internal recruitment is significantly lower than external recruitment, and is often a preferred route.

SME’s can attract quality candidates even when competing with the big boys because SME’s don’t have layers of bureaucracy which exist in larger companies and so can offer recruitment quickly, and be far more engaging with potential candidates.

Employers often spend so much time on the underperformers that they forget to stretch the top performers.  Managers tend to communicate well with good employees and don’t with poor performers. It’s estimated that 10% of people in business are doing the wrong job.  So, looking at your workforce on a regular basis is definitely a good discipline.

Members of the Business Exposure Group debated this topic at a recent meeting and all agreed the following points were vital when looking to recruit the right candidate.

  • What role does your business need
  • What type of person and experience will benefit your business
  • Keep to an agreed timeframe and allow time for the recruitment process – it takes, on average, 12 weeks to get someone to join the company
  • Provide a complete job description
  • Involve your employees in the process
  • Make the candidate feel comfortable, explain the process of how long it’s going to take to deal with all the candidates so they are not confused
  • Sell the role and the company
  • Give constructive feedback
  • Make your offer clear and concise, get verbal agreement first
  • Continue the recruitment process after the offer has been made
  • Prepare for the candidate start date; get the first day right otherwise you’re always playing catch up.
  • Become a great employer and an employer of choice

After all surrounding yourself with talent is the best way to grow a robust business.

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CRM Systems – Vital or just another bit of business kit?

CRM is a strategy for managing interaction with customers and prospects.  The overall goal is to find, attract and win new customers, nurture existing ones, entice former customers back into the fold and reduce the cost of marketing and customer service.

This was the topic discussed by members at the recent meeting of the Business Exposure Group.

Do we really need a CRM system?  A growing business needs to manage relationships more efficiently, and can no longer rely on the old fashioned notes in the diary system.

There are various systems on the market – outsourced cloud based/off the shelf/bespoke.  Offering include sales force automation which reduces the number of salesmen, marketing measures multi-channel campaigns, customer service support which streamlines enquiries, appointment scheduling, analytics, collaboration between teams within a business, create special offers for clients drifting away, spotting profitability, customers historic trends, quote reminders.

What should you look for when purchasing a CRM system and how important is it for your business?  77% of staff don’t embrace new systems and there can be a lack of commitment to using the new system.  It’s important therefore to only choose the tools that you will use in your business.  Salespeople may reject the new system on the grounds that it is time consuming, difficult to learn, inflexible and doesn’t integrate well into their standard procedures.  If you get the right system, then salespeople don’t waste time trying to prioritise leads and lists, they can focus on selling.  Customer service teams don’t ask customers for their details multiple times and don’t have to manually search for their details.  Reports and statistics tracking of customers are instant.  Everything is stored under each customer name in the CRM system.

CRM system should not be viewed as an IT project because it involves the whole business.  Check your current system, it may need updating or replacing.  Does it have these features:

  • Telephone calls straight from the CRM system
  • Live chat to communicate with customers in real time
  • Interactive dashboards for easier business analytics
  • Cloud connected so you don’t have to wait until you’re back in the office to update
  • Email and scheduling software to search enquiries
  • Accounting software to see at a glance what customers might buy

But many say their staff hate their current system.  Is it user friendly?  Is it too complex?  Is it outdated and fails to provide the information you need?  Is your system GDPR compliant? Maybe it’s time to look at upgrading or even changing your CRM system.

So, what is the future for CRM?  It has everything to do with the customer, so that they become brand advocates.  The future is moving away from interacting with customers in the same way.  Messages and information should be bespoke.

Integrate teams – sales/marketing/customer service so that they all have the same perspective of the customers.  Use brand advocates to recommend – use social listening tools, get an alert the moment someone mentions you on social media – social CRM will grow and allow bespoke communications linked into an ‘all in one’ system which enables you to look at the entire customer journey.

Our members left the meeting with lots of useful ideas regarding CRM, realising that CRM is now a vital business tool.

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The Importance of Customer Satisfaction

According to the IOD 80% of companies say they deliver ‘superior’ customer service, however only 20% of customers agree with that sentiment.

Now with increased competition, crowded markets, little product differentiation and flat sales makes it more important than ever to give top class customer satisfaction.

So, how do you quantify, measure and track customer satisfaction and how do you know what your customers’ expectations are?

Consider the following statistics:

A 5% increase in loyalty can increase profits by 25% and a very satisfied customer is six times more likely to be loyal than just a satisfied customer.  Only 4% of dissatisfied customers complain.  The average customer with a complaint tells at least nine other people.  Satisfied customers tell five people about their good treatment.

So a business should view each purchase by a customer as an opportunity to recruit a promoter of the business.  Don’t just watch sales volume and rely on the sales rep describing your customers state of mind, track frequency of complaints and turn a dissatisfied customer into a brand advocate!

Customer satisfaction is based on

  • quality
  • business relationship
  • price
  • whether services/product meet or exceed expectations

So, how can you do more for your customers.  If a customer scores 90% satisfaction, they are then 90% more likely to recommend you.  If score drops to 80-89% the likelihood of recommendation drops to 48%.  It is fundamental in building a stable business.

Survey your customers using email/phone/mail or face-to-face and rate their experience on a scale of 1 to 5 and calculate the effect of customer satisfaction, for example if:

100 customers spend £100 per month and customer satisfaction is 90% then there are 90 happy customers and 10 unhappy customers.  10 unhappy customers = £1000 per month lost.

Next month customer satisfaction is 75%.  25 unhappy customers = £2500 per month lost.  That begins to put the importance of customer satisfaction into perspective.

Sales and management must head the initiative for implementing a customer satisfaction system.  Compare your own customer satisfaction with that of your competitors.  Engage your employees, measure everyone’s KPI’s and inform your customers about the changes you are making.  Ask the question of your customers why they prefer another brand over yours, get their feedback.  Are your employees making promises they can’t keep.  Identify the best company in your sector and benchmark against them.

During a Business Exposure Group meeting we asked ‘When is the right time to conduct a Customer Satisfaction Survey, is it

– post purchase

– periodic surveys

– on a continuous basis

– verbal feedback on a monthly basis

– should you have a formal measurement in place’

It is important to realise that what satisfied your customers at the beginning of 2018 may not satisfy them in 2019.  Use the Brexit issue as an excuse to talk and discuss concerns and areas of opportunity. If you receive a low score from the customer survey it is important to reply – ‘You were right to feel let down and this is what we are going to do to rectify the problem’. This makes you look proactive and gives you maximum credibility with your customers.

However, if customers complete a survey their expectations rise and they expect positive changes.  Do not let the surveys sit there gathering dust.

There are 6 parts to a customer satisfaction survey –

  1. Who should be interviewed – eg a truck manufacture, should it be the driver / manager / director
  2. What should be measured
  3. How should the interview be carried out
  4. How should satisfaction be measured
  5. What do the measurements mean
  6. How to use the survey to greatest effect

Put yourself in your customer’s position.  What do they consider important, and when you have evaluated the results of your customer satisfaction survey communicate some quick wins via your monthly newsletter to show how the business is committed to customer satisfaction and improving business processes.

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Non-Exec Directors – Are SME’s missing a trick?

The benefits and role of non-exec directors are well known amongst larger businesses but the picture is less clear for SME’s.

Is this something to consider or is it just another expense?  This topic was debated by members of the Business Exposure Group at their recent meeting.

In a small company it’s not about corporate governance as it is in large companies, but about credibility and a sounding board.  A non-exec director should ensure the strategy of the company is fully debated and then properly monitored.  A non-exec director can also ensure that the management do not become complacent.

Research shows that privately owned companies with a non-exec director stand a better chance.  With a non-exec director businesses show a higher profit margin.  Yet, people fall into three categories.

  1. Haven’t considered it
  2. Cost effect
  3. Can’t find a suitable candidate

Is there a need for a non-exec director in the SME world?

They can bring experience, contacts, and an objective and supportive view.  When turnover is £500K plus per year a non-exec director can be justified for amongst other things

  • Resolving director disputes
  • Offering support
  • Persuading busy directors to attend to cashflow
  • Persuading the founder to let go
  • Supporting a request from a reluctant bank
  • Assistance with a large or unhappy customer
  • Adjudicating highly sensitive reward schemes
  • Finding new business
  • Keeping the company on the straight and narrow re their strategy

It is a fast track to commercial wisdom because

they constructively question strategies

they bring experience which the business owners do not have

they provide a sounding board to the MD

If you decide to engage a non-exec director then there is a need to integrate them into the company, but there are challenges!

You need to have confidence in the person, not be best friends, they need to be your ‘awkward friend’.  Agree a fee and length of their contract.  Don’t take a financial investment in your business from them, as they need to be totally independent.  Avoid the ‘trophy appointment’, ie a retired executive looking for a hobby.  Decide if it’s better to have a finance non-exec director, or someone more general, as someone with experience of other sectors would perhaps be better value.

An experienced non-exec director gives outside stakeholders confidence in the company, but the decision to engage a non-exec director should be carefully considered, and provide them with offices and director insurance cover, as clearly a monthly attendance means that the day to day decisions are left with the daily management team, and the non-exec director, to add true value, should not be worried about any exposure on a day to day basis.

And finally, as soon as they begin to reduce their strategic impact, then find another because it’s important to know when to call it a day and find a new ‘breath of fresh air’.

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Challenges of Budgeting and its real value

Business owners and managers feel the need to prepare a budget, but very few actually appreciate the rationale behind the whole act of budgeting.

This was the main topic discussed by members at a recent meeting of the Business Exposure Group.

Should you have a formal business budgeting process, and ask yourselves why do we prepare budgets.

  • To assist in planning
  • Motivate and measure staff
  • To plan changes to your business / changes to your marketplace
  • Create objectives for the year and KPI’s
  • Address issues and problems
  • Provide financial forecasts
  • Consider investment requirements

However, if you have a mature business is there any point in budgeting when it will be much the same as last year.  A budget is not a forecast.  A forecast is a prediction of the future, whereas a budget is a planned outcome of the future.  Members were in two minds regarding the value of formal budgets.

A budget should be an ongoing process, not just a once a year routine.  Research shows that 87% of budgets are not used in reality, so is time spent preparing worth it?

Perhaps it’s better to always discuss financial decisions with your team.  Ask …

  • Does this align with our culture
  • Is there another solution which is better for our customers, even if more expensive
  • Is there something less expensive that provides the same value
  • Is the timing right
  • Do we really need to make this expenditure at all
  • What is the worst that could happen

Getting the employees acceptance of the budget is important.

  • When setting targets should they be aggressively challenging or easy to achieve?
  • What you don’t want is budget padding where some people introduce slack so their budget can be easily achieved
  • Setting high targets can result in loss of staff motivation
  • Allow staff to have some input of what they are measured on

Structured planning is the answer to improve profits, reduce costs and increase ROI.  Don’t allow yourself to get bogged down in the day to day problems of the business, make time to look at the bigger picture.

An important consideration when planning your budget is to allow room for flexibility, as quite often brilliant ideas and projects come up which have not been factored into the original budget, and it would  be wrong to discount the opportunities.

Be prepared to make changes to the budget as the year progresses; if money needs to be reassigned then don’t be afraid to alter it.  Budgets can be flexible.

One of the members of the Business Exposure Group stated ‘We abandoned the traditional budget.  We believe sound business decisions should be based on what’s best for our employees, our customers, our operation and whether the decisions will help us in the future – not on a budget’.

When setting budgets the members suggested taking into account the following.

  • Rolling 5 quarter forecasts eliminate the distortion caused by having financial incentives to meet a fixed target for a single financial year?
  • 13 week cash flows are better and easier to keep updated to the ebb and flow of your business and provide a better picture of reality to make business decisions?
  • A budget really helps you do a better job of belt tightening during recent difficult trading
  • Resource allocation should be about putting funds behind the right high value opportunities.

Our members left the meeting with lots of new ideas to put into practice in their own businesses.

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Building a Cash Management Culture

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.

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