The global ecosystem has witnessed a total metamorphosis. Especially so, in India- it is moving fast on its growth trajectory. Volatility in the dynamics has thrown up a fresh set of challenges. Adoption of technology and automation constitute a sine qua non for success. Confronted with such a scenario, Business Owners of any size and dimension have to fine-tune their strategy for achieving the aspired growth.
It’s Time to Remind You
5 Strategic Pillars of Business are:
- Product, Service and Solution
- Marketing, Promotion and Sales
- Operation and Finance
- Human Resource Management
- Customer Service
With proactive management of these areas, there will be less crisis management.
In other words, dealing with things before they become a problem rather than after the fact. To stay relevant, you need to get systems in place. You probably can’t handle all of them yourself.
So, you may need to employ people or outsource some tasks at some stage.
1. Product, Service and Solution
This is probably the most difficult for business owners to delegate or outsource.
Enhance your product /service/solution benefits by:
- listening to your customers/clients.
- keeping a close eye on competitors.
You must make some radical changes if you can to remain relevant in the marketplace.
2. Marketing, Promotion and Sales
Marketing is experiencing a massive shift with Digital Marketing and Social Media.
Marketing encompasses many issues:
- Your message,
- How you convey your value proposition-‘Your unique selling proposition‘ suggesting an edge over competitors.
- Marketing method or medium like TV/Radio advertising, Press Ads, Online, Digital, Social Media.
You need to:
- Decide on your message to capture the interest of customers.
- Work out what is the solution or benefits you can offer to customers.
- Appeal to their emotion to make a connection.
Remember- The people purchase on emotion much more than price!
Articulate your ‘value proposition’ in a way that engages people to want to learn more.
After ascertaining interest, it pays to keep track of customers’ contact details on a
CRM System – Customer Relationship Management – because not all customers buy immediately.
- A good CRM enables you to keep in close contact with potential customers and keep sending them messages and offers.
- If a customer has bought from you once and had a good experience, he is highly likely to buy again.
- A good database can be a valuable business asset- useful if you plan to sell your business sometime in the future.
A website needs to be set up to engage with visitors.
The website may incorporate:
- items to download
- newsletter/blog to subscribe to
- mobile optimized
i.e., it needs to be able to be navigated easily on a hand-held device (a large percentage of searches are done on hand-held devices now.
You need to convert customer interest into Sales.
A well-tested and documented sales process is vital. It ensures you achieve a good conversion rate and make the most of your marketing spend.
There are good salespeople and not very good ones. Some see themselves as salespeople and some behave like ‘order takers’…
- Understanding the need to ‘nurture’ a sale, is a great start to achieving a good sales conversion rate.
- A process for handling sales helps to keep the salesperson on track.
- Salespeople need to guide customers along a path towards a sale.
They need to be good listeners. Also, well-versed in how the product/service solves problems or creates benefits.
- Salespeople need to appreciate the ‘value proposition’ for a customer.
- How many benefits are they going to derive compared to the cost?
- How they will improve your ROI or Return on Investment.
- Good tools and sales aids are vital to supporting the efforts of salespeople. For example, your product may help a client to save lots of money/time.
- Brochures and professional-looking business cards can help people to review the information later or show it to someone else.
- A demonstration of a product or service can be a great way for potential customers to experience the benefits you have to offer.
- When growth starts, others may need to get involved. Here, it’s vital to have a well-documented sales process for them to follow.
A documented process also enables improvements to be easily absorbed.
The best way to proactively manage your operations is to systematize them.
- You must adopt a format that staff can understand and follow.
- You need to identify what are the most critical actions in your business.
- Who are responsible for them.
- How they should be done.
Then, you can share this information with others and begin to do less of them yourself.
Obviously, staff needs to be trained and monitored for these actions.
Little time invested in this direction, will pay big dividends down the track.
Each of these products becomes a quality product and sometimes even a unique product.
This is only by following the Recipe for Success which involves:
- having systems.
- making sure they are functional.
- using and constantly improving them.
If you have systems in place your key staff can easily replicate the critical actions.
This will allow you to have a break when you want and know the business will perform in the same way as if you were there.
If you don’t have systems, you will always be a slave to your business and this is not a healthy way to live.
Systems can take many forms:
- a web-based method.
Web-based methods enable owners to run a business remotely when necessary, on holidays or even just from home. If you have a web-based system you can simply direct employees over the phone on the relevant information and talk to them through it. These types of systems are not at all expensive.
- Google Drive is a good tool for housing documented procedures that can be accessed from anywhere in the world at any time.
- Things that are replicated are easier for your staff to follow. This helps greatly with staff retention. Staff who feels secure with the systems they are operating under have much less stress.
- This can easily be systemized for sales staff so that they know which products go into the optimum position.
You as the Business Owner know this, but your untrained staff may not. When something isn’t being done as per the system you can simply say “This is the way we do it here and this is the system.” It leaves no doubt in the mind of staff about the way things need to be done.
- Systems also create an environment for improvement.
It gives staff the opportunity to contribute new ideas and see them incorporated into the system-another Motivator and Retainer of good staff.
Finance is the lifeblood of your business. Profit and Cash are the key elements. Cash comes from Profit. The profit comes from the proactive management of revenue and costs. Timely and accurate reporting on Net Profit and Cash Flow helps you to plan and take advantage of opportunities. Running out of cash is a key reason for business failure.
WHICH KEY CONCEPTS WORK
Breakeven Point or BEP is the number of sales needed to make to cover the costs and overheads i.e., to avoid losses. This is a great place to begin making a profit.
These are the ‘direct’ costs of creating your product or service i.e. labor, materials, etc. They can be directly compared against your sales to determine if the service is profitable. It is essential to know the ‘true cost’ of your product or service as it enables you to charge the right price to ensure a ‘gross profit’. It’s vital to understand your ‘gross profit’ because if you can’t make an acceptable gross profit, you are not likely to make a net profit i.e., profit after running expenses.
Pricing is impacted by the costs of delivering your product service. If you want to make a profit you need to charge a price that will cover your costs and running expenses. Often market pressure dictates price to compete on price. If this is the case and you plan to be profitable, your only room for maneuver might be reducing your costs.
Once you’ve set a price it’s vital to monitor profitability constantly to ensure to stay profitable.
- It’s very common for costs to creep up. But, if the price is kept the same, profit get eroded over time.
- Many businesses fall into the trap of not maintaining a process for constant small price increases.
- You can factor it into your contracts with customers or use increased costs as a reason for regular small increases.
Most reasonable people understand that you can’t constantly absorb cost increases without passing them on.
- If you deliver a good quality product/service, your customers should appreciate that you need to be profitable.
- Raising the subject of price increases can be a good time to subtly remind your customers of why they deal with you i.e., use it as a marketing opportunity to let them know why you’re the best at what you do.
MAKE THE INVISIBLE VISIBLE
- explain what you do that’s better than your competitors and why it’s actually more economical to deal with you.
Running expenses are incurred in the day-to-day running of your business e.g., rent, admin wages, marketing, etc. This is an area that you can get wildly out of control, if not monitored closely. It can eat up your profit.
- It is always prudent to have a clear view of your business running expenses and keep your personal expenses separate.
- That way you stay compliant with tax laws. You also get a more accurate picture of your business profitability.
A budget is simply a document that sets out your plan for sales, costs, and running expenses- so you can see how much money you will make or lose.
If you don’t have any plan for your profitability you will struggle to make any profit.
- Incorporate Budget into your accounting system and compare monthly versus actual of your budget, to see how on or off track you are.
- It enables you to make changes quickly. You don’t have to wait until the end of the financial year to discover you’ve made thumping losses and started to run out of money.
- Being able to see a trend in month 3 rather than month 12 of the year, gives you an opportunity to save 9 months.
- If you give your customers terms and they take longer to pay you then your suppliers will experience a cash squeeze.
This is a common situation where the person dealing with accounts doesn’t like calling customers for payments. However, he pays suppliers straight away because he doesn’t like calling them and asking for money.
- Business Owners must have a different set of people dealing with separate functions- one for reminders to pay and another person to deal with supplier payments.
- Adopt a policy of not paying suppliers before the due date to take advantage of every day of credit that you can get.
- Constant negotiation with suppliers for better terms pays big dividends for your cash flow.
- Make it a policy to regularly shop around and keep good records of what business you’ve done with suppliers for ammunition at negotiating time.
Jobs take time to finish and stocks sit in the store for some time before being sold or used on jobs. During this time, they are both sucking up cash or incur costs of labor and materials. If longer jobs are in progress without being invoiced, the longer stock sits on the shelf. Consequently, more cash is needed. Thus, it’s vital to manage jobs so they can be invoiced ASAP so you can get paid.
- A good stock management system will enable you to handle stock.
- It gives you an insight into historical trends of stock movement and allows you to set lead times, to ensure that you have stock when customers want to buy. It doesn’t sit there for too long sucking up precious cash.
TAXES AND LOANS
To run a sustainable business you need to manage your tax obligations like. GST, Paying Company Tax, and so on. If you don’t manage it properly, the Tax Office will soon be on your back demanding payment when you can least afford it.
- Set up your regular tax payments in the best way by-monthly, quarterly or yearly.
- It depends on your business turnover i.e., yearly sales figure, how often you must file a GST return.
- You need to have a good understanding of how much tax you are holding until it’s due to be paid. This helps you have sufficient cash flow on tax payment, payment of wages and tax suppliers.
- Sometimes the funds just aren’t there to pay everything that is due all the time.
PEAKS AND TROUGHS DO OCCUR.
- Due to seasonality, and sudden dropping of sales.
- Expenses creep up beyond what can be afforded.
- An unexpected disaster or event occurs.
Funds need to be found from somewhere:
- Borrowed from a lender or business owner/s.
- From Banks where you will need to provide good information to support your loan application along with proof of your trading and profitability as well as evidence of your assets and liabilities.
If you can’t or don’t want to borrow from an outside lender, you may require your
- own funds or
- seek input from other shareholders in the business.
- In this situation, it’s important to handle the transaction correctly in your accounts
i.e., it needs to be entered as a loan and not income.
CASH FLOW FORECAST
Cash management in a business can be quite complicated.
The best way to avoid worry is to manage the situation with a Cash Flow Forecast.
- It sets out everything out in black and white.
- You can see when funds are coming in and going out. Also your bank balance at any point in time.
If you monitor it closely and compare actual events to your forecast, you will be in a good position to avoid any cash crunch.
4. HUMAN RESOURCES
HR management is a stumbling block for business- big and small. Proactive management is called for. It involves developing people and helping them to be satisfied at work. Satisfied and happy staff can make a business ‘fly’.
Getting things done is so much easier when people are engaged with the overall objective.
HR is probably the most vital area of business as it impacts every other area so closely.
A good HR management process starts with a detailed ‘Organizational Chart’
- a list of what gets done in the business.
- who does it now and
- how critical it is.
Job Description for those you employ is essential. It brings clarity about what is expected.
A well-documented ‘Organizational Chart’ and clear Job Description help to avoid gaps and overlaps in tasks.
- The regular review provides an opportunity for constant realignment of job descriptions.
- Nothing ever goes exactly to plan in small business. It is vital to keep reviewing things and developing as you proceed.
- Realigning Job Descriptions and discussing with Staff gives them the opportunity for input and helps you to be on the ‘same page’.
- Hiring people can be a scary proposition for the uninitiated. You better ‘hire slowly and fire quickly’ Don’t be too quick to employ someone unless you are certain they are the ‘right fit for your organization.
- Do your homework, check references and check with others in your business to ensure that they were comfortable with a recruit.
- In a small business, you can’t afford to have high ‘maintenance passengers’.
5. CUSTOMER SERVICE
The satisfaction of customers is a result of how well you manage them. If cash is the lifeblood of a business and happy customer pay, then Customer service is vital to business survival and success.
The very best way to gauge customer satisfaction is simply to ask them.
If you, do it well, clients keep coming back and sales will grow.
- It’s much better to get proactive feedback on how you can improve constantly than to wonder why sales are falling.
- If you provide a great product/service, people will tell others and you will get more customers. Conversely, if you provide a poor product/service, you will lose customers.
- For repeat business from happy customers, you also want them to proactively refer you to others.
- Obtain good Testimonials.
- Referrals can be the best source of customers and the Cheapest Form of Marketing.
They are easiest to convert to sales.
Commentary from your customer about what your product/service means to them e.g., how much time/money it has saved them serves as a solid testimonial on the website. The potential customers will be able to easily identify with them and understand your ‘value proposition’ more clearly.
Once Business Owners succeed in streamlining their business keeping in mind 5 strategic areas:
- They would acquire the confidence to move ahead.
- The blurred image becomes clear.
- They can crystallize the way to growth.
- Bottlenecks to business are identified immediately.
Business Owners are on a solid pitch to take any challenge-internal or external- head-on.
They kickstart their journey to vistas of profit and growth.
NO exaggeration to say horses will run without whipping!!!