If you’ve been in business for a while, you will (hopefully), from time to time, have sat back and thought about your business; about what you make or sell and how you do it; about your customers and how to grow that base; about how best to utilise your employee skills.  Some of you may even have gone to the extent of having a formal strategy session once a year – perhaps facilitated by an independent consultant.  They’re always helpful.

In most cases, however, annual strategy sessions don’t amount to much. (Other than a time to get your people together for a bit of team building.)  With the best intentions, and unless they’re well-managed, they can turn into an opportunity for the detractors and whiners in your organisation to air their views on why your business doesn’t work! (And have a go at you at the same time!)  It can also end up as a foundation for issuing new top-down instructions on how to do business the boss’s way!

Tony Manning, a local strategist and management consultant says this:

“Ask people what they understand about strategy.  Here are some common answers:

• ‘It’s a plan for taking your company into the future.”
• ‘Vision, mission, values, and action plans.’
• ‘A long-term view of where we’re headed.’
• ‘A SWOT analysis.” (An exercise that forms part of just about every planning workshop and fills lots of flipchart pages, yet seldom leads to radical thinking.  More often, the same issues get recycled year after year and never go away.)
• ‘The analysis you do to make sure you hit the numbers.’

“Management tools such as this can come and go with mostly disappointing results……

I’ve attended and facilitated more than my fair share of these sessions, and I have to agree with him.  They do stimulate quite a lot of thinking, and some of it can turn out to be very good, but – and this is a big but, unless we can turn that good thinking into solid action, it’s just more words on the wind.

I’ve just moved from a fairly large city to a small rural town.  It’s not retirement – just relocation.  Work goes on – but it now has to go on very differently; and this requires a different strategy.  And let me tell you, this is not so easy!  When you’ve been doing something a certain way for a long time, it’s quite difficult to get your head around the fact that you have to change your methods to get the same (or better) results.   Just living in a new house has its challenges.  Crockery and cutlery doesn’t spring quite so easily to hand; it takes a little extra thought to remember where the socks and the groceries are now kept, and if you’re like me without a landline, faxing a document means scanning and using the internet.  I’ve had to change my daily routines to fit in with the (much) slower pace here in Montagu – like I’ve been told by this wine/brandy community – the best things in life take time!

I’ve had to innovate.

The big mistake we make about change is that we think we can package it, and then dish it out to everyone in our organisations as standard operating procedures.  Now, I’m not knocking the need for SOP’s – order is good, but not to the extent that everyone is strait-jacketed into systems and policies that strangle the life out of any form of innovation that may exist.

In our modern fast-paced economy, we cannot afford any strait-jacketing – either of ourselves or our employees.  In fact, we need to be encouraging innovation, innovation, innovation!  There’s always a better way to do something, and dare I say it, even if that better way is not to do it anymore, at all!

Marcus Buckingham, in his new book “Stand Out” says this:

Every organization is on a near-constant search for “best practice.” They convene conferences of top performers, pick their brains for the precious few actions, and then capture what they hear in online “knowledge centres,” in videos, or in the course books of their corporate university. Though it is not always stated explicitly, the vision driving all of this activity is that innovation can be harvested and that, once harvested, it can be deployed at scale. Find a few key innovations, so the thinking goes, and we’ll spread them to the many.   It is very rare to discover a best practice that is transferable person to person at such scale, with no lessening of its effectiveness.

True innovation has to be seen to be almost unique – no two people will do things exactly the same way.  This means that we have to encourage our employees to think out-of-the-box.  Some of the questions they need to start asking are: “Is there a better way to do this task?” “Should we be doing this at all?” This can be risky because we don’t necessarily want a free-for-all, but we do want them to be excited about what they do, and energized to come up with new innovative ways of doing things.  But, just because one person comes up with a great idea, doesn’t mean that everyone will necessarily take to it, or do it the same way.

Business right now is tougher than it has been for some time.  Margins are down, competition, and business risk, is increasing.  Businesses everywhere, and in every industry are looking for ‘an edge’ – some little thing which will allow their product or service to come out on top – and as a result, innovation has become the all-consuming goal.  Buckingham goes on with:

We all revere innovation. It is the mystical driver of progress, the secret sauce, the touchstone we reach for whenever our backs are against the wall. Our managers, our leaders, even our president cajole us to outthink, outsmart, “out-innovate” the competition. In these accelerated times, only innovation will keep us relevant, only innovation will allow us to keep thriving, only innovation can get us ahead and keep us there.

And when we say this, what do we mean by innovation? Usually we mean invention and we point back to that Golden Age of invention, the Apollo years, when anything was possible, when failure was not an option, when necessity created Teflon and freeze-dried food, the Stairmaster and digital photography, the technology inside every kidney-dialysis machine and the materials for your running shoes, solar panels and better golf balls, and, of course, ARPANet, the forerunner to the Internet.

Heady times.   No wonder our leaders hark back to them. For most of us, though, innovation is a little less dramatic. We aren’t looking to invent the Internet. We just want a better technique, a better way of doing things. We are tantalized by the notion that someone in our field has devised a method or figured out a shortcut, the “control-C” or “control-P,” of our job, something that if we could just find and replicate, we would be able to take a giant leap forward in our performance and in our career.

Instead of waiting for someone else to come up with these magical, mystical solutions, how about starting some thinking of your own?  Break it down into the things you do every day.  Do you need to do them all?  Every day? Can you do them better and simpler?  And don’t be too proud to ask your employees for their ideas – you will be pleasantly surprised.

Innovation has really just four components:

• Anticipation. Being alert to change.
• Insight. Seeing opportunities to offer something different and new.
• Imagination. Dreaming up new ways of doing it.
• Execution.  Doing it consistently and to the highest standards

Here’s an example:

You’re a small contractor.  Your revenue is project-related.  Each job has to be separately priced and evaluated.  You do all this estimating at night because your day is too full of other things.  Because of your experience, you are able to estimate the materials and labour required to do the job fairly easily – based on the way that it’s always been done before.  But who says it has to be done that way?  When last did you go out and physically do the job yourself – bearing all those innovation components in mind?  Who knows but that you could discover a novel way to get the job done, with less material, minimal labour, and have a very satisfied customer at the same time? And with the right technology and software, you could easily come up with a price for each new job at the touch of a button – and not at night either!

I’ve recently had occasion to answer these questions for clients, though for very different reasons.

In the first instance, the client’s business is in serious distress.   It’s a vicious circle – on the one hand, turnover has declined, but on the other hand, there are no funds to fund materials and labour for turnover if it was to suddenly turn around! The business is insolvent and I’ve had to advise the client to make the hard decision to close the doors. It’s a difficult decision to make, because no one likes to admit that they may have failed. However, it’s better to make this kind of decision early and then have time (and credibility) to start again, than delay what is the inevitable. It will only get, and be worse, if he waits!

In the second instance, the client is not insolvent at all, but very illiquid, – and simply because he has been unable to recover certain significant debts due to him, on time. As a result, one of his suppliers – who hasn’t been paid as a result – has been going around telling everyone the client is going out of business, and that he is going to ‘liquidate’ him. (in the business sense, hopefully!). In this instance, the supplier is being very naughty (slander actually) and just making things unnecessarily difficult in an already difficult situation. Business people need to work together and not against each other, as doing business is tough enough these days.

Business owners really do need to know what these terms mean, and what the implications are for them, so I thought it would be helpful to provide some short explanations.

A solvent business is one in which the value of its assets exceeds its liabilities. Even simpler – what one owns, amounts to a greater value than what one owes.

A liquid business is one which is able to pay its debts in the ordinary course of business and continue to do so within the next year.

A business that has liquidity problems is not necessarily insolvent. In fact, such a business could be significantly solvent – its asset value significantly exceeds its liabilities. Liquidity is all about cash, and how it’s managed.

The Companies Act in South Africa is particularly tough on directors that don’t take due care with the solvency of their businesses. I suspect that the courts will be just as tough on members of close coprporations and sole proprietors, if they trade recklessly. (in insolvent circumstances).  In managing this important aspect, liquidity has to be taken into account.

When deciding on liquidity, directors should at least consider the following:
• Is the company making its sales targets; have contracts been cancelled etc?
• Is the company able to collect its receivables timeously?
• Is it running into difficulty paying salaries and its commitments to SARS for tax and VAT?
• Are payments to critical suppliers being deferred?
• Are the company’s working capital facilities adequate, or are they already ‘maxed out’?
• Are there any impending legislative or industry changes which could seriously impact on company performance in the short term?
• Can the company continue to service its long term commitments?
• Are there any other cash resources available at short notice?

Directors/members/sole proprietors should be able to answer “yes” to these questions before further committing their businesses financially.
And if they can’t answer “yes” to at least a majority of those questions, they too may have to make the hard decisions!

Well, we’ve just seen the end of January – the first month of 2011 is gone, - and I feel like I’ve missed it; – it went so fast. While we were away on some much-needed leave, I took time to reflect on the past year, and what I see lying in store for us, as business-owners, in the ensuing months/years.

Many are complaining about information overload these days, and there is no doubt this is an ever-increasing problem. You just have to read some of the postings on the innumerable blog sites to realise that people are getting caught up in an environment where meaningless and idle chatter consumes much of our productive time – time taken to throw it out there into cyberspace; and time taken to read the responses, not to mention everyone else’s musings about nothing terribly important.   To see phrases like “Just woken; not sure if I should wash my hair or not…oh well” actually infuriates me! It infuriates me because I actually took time out to allow my brain to scan this drivel! I got caught – along with millions of others!

Business these days is tough! Don’t get me wrong, it’s always been tough – it’s just that it’s different now. The rate of change in the marketplace is increasing – new products and ideas proliferate, and many businesses get caught up in trying to keep pace with these changes. Rather like getting caught up in reading someone else’s dribbling in the social media, we also get caught up in trying to follow the latest product/fad/way of doing things – and we forget what we started our businesses for in the first place.

Business is actually not about the quickest and easiest way to make as much money as possible. That’s just one of the bottom lines. There are others – like contribution to society, the environment, the development of our people, a legacy – and we have to learn to hold all these things in balance. Perhaps the way to do this to focus on “the one thing” ; as chiselled out by the cowboy, Curly (Jack Palance), in the movie ”City Slickers”.   The conversation went like this:

Curly: Do you know what the secret of life is?

[holds up one finger]

Curly: This.

Mitch: Your finger?

Curly: One thing. Just one thing. You stick to that and the rest don’t mean shit.

Mitch: But, what is the “one thing?”

Curly: [smiles] That’s what “you” have to find out.

(For those of you who may never have seen the movie, it’s about three friends from the city, trying to find some meaning in life, who join a real cattle drive – and end up coming to terms with themselves.)

In a more genteel way of saying this, it’s about single-mindedness. It has been written that the double minded person is unstable in all that he or she does – blown this way and that by every new wind of change; every new idea or scheme.     If there’s one thing we need to focus on in these days as business owners, its being single-minded about what we’re good at.

Take some time out to reflect on your business.  Think about these things:

• Recall the reason why you started it; the hopes and dreams you had for it.

• Think about the way you do business.

• Are you still making your products as good as they were in the beginning? (or hopefully, even better!).

• Do your customers still feel that you’re the best supplier they’ve got – is your service still up to scratch?

• Are your employees growing in maturity, in their skills mix, and in their contribution to the firm?

• Are you still passionate about what you do? Or, – are you finding yourself constantly trying to follow a new trend, a new way of doing things – or simply trying to emulate your competition? After all, they’re gobbling up the market, so they must be doing something better than you – right? And you’re making so many changes, so many times, your customers are getting confused, your employees are becoming more and more frustrated, and your mind can no longer focus on anything for more than a minute or two!

And then along comes all those emailed newsletters (including mine), and magazines and books, many of which are not subscribed to, and many of which suggest you try some new management style, some new technique, some new product, some new way of attracting customers, and you find yourself running around like a novice squash player tracking the ball around the court. You feel like you have the attention span of a dog in a room full of bones!

Here’s a suggestion. Get back to the basics of your business!

• High quality essential product or service, delivered to your clients exactly when they want it, at a reasonable price – consistently; make sure you do what you do, well!

• Cash flow carefully managed – collecting your outstandings, and paying your bills, on time; and, most importantly, watching your spending on non-essentials – taking care to build up a bit of a war-chest of cash for that rainy day.

• Getting out of debt.  get out quickly, get out totally – and don’t go back there!

In those wise words from Curly, “One thing. Just one thing. You stick to that and the rest don’t mean shit.”

Thanks to the development in information technology, and the ease with which we can all communicate today, many of us can now do our work almost anywhere in the world. This is especially true in many consulting-type environments.

When I was first articled to an accounting firm in Pietermaritzburg, in the early 70’s, computers were only talked about, – and even then in hushed tones, We didn’t even have pocket calculators at that very early stage, relying as it were on huge manual adding machines to total up columns of figures. Monthly management accounts were almost impossible to prepare within a few days of a month end, and the most exciting accounting system around for most small business was one called “Kalamazoo”. (In fact, it was so good, it’s still around today!) And it never involved computers in those early days.

Today, sophisticated systems can be bought off the shelf for a few thousand Rand, and they’re really good, if you know what you’re doing. Some, like Quickbooks, are very simple too and especially designed for non-accounting types. The need to employ a full-time qualified bookkeeper is not as essential as it used to be. Nowadays, an outsourced bookkeeper, on a one-or-twice-a-week basis, is probably all most small business needs, to keep their records up to date and accurate.

Even with this technology available, many small business owners still resort to calling someone in to do their bookkeeping or to sort out any accounting problems. There hasn’t been much of a change in the mindset about just how efficient modern technology can make this simple service. Have you ever been with someone (slightly older, like me!) who wants to make some notes and/or calculate something? In front of them, they will have a notepad, a pen, and a calculator – right next to their laptop. Notes will be made on paper, figures written down, and then entered into the calculator and the answer, also written down. If they’d taken a few seconds to think: “what is the best way to do this?” they would have realised that they could have done everything on the laptop – in a spreadsheet, in a fraction of the time, and it could also have been filed away immediately! Old habits die hard!

Over the years, I have been slowly changing my own ways of operating – I have to, to keep costs down and become more efficient and effective. When I started Finserv just over 13 years ago, technology was nowhere near as advanced as it is today. Laptops were frowned on – they were expensive and problematic. Nowadays, they’re the only way to go – especially with the power problems we face. Even cell phones were severely limited by comparison then. Skype was unheard of and the social media of today was just a thought in someone’s mind. If a client needed help, I went out to see him – or he came to see me.

It’s very different today. Digital cameras can provide incredibly detailed photographs of a workplace environment, and in seconds they can be uploaded and sent to me. Documents like financial reports and tax returns can be scanned and PDF’d to me in minutes. Whole backups of accounting systems can not only be emailed to me, they can even now be stored in cyberspace, where – with permission – I can access them, and make the changes needed by the client. I don’t need to be there anymore, and this means that the client can be saved a lot of money, and I can be saved a lot of time and wear and tear on my car!

In fact, I can now help anyone with an accounting need, or a business problem, anywhere in the world, in a matter of minutes. (Provided they operate in English or Afrikaans of course!). What’s more, with Skype and broadband, I can now not only talk to my client, but we can see each other at the same time. Amazingly, I can now attend a board meeting in Cape Town, while in my study at home.

Our new Business Buddies programme also means I can involve four or five very different specialist skills, on conference call, at the same time, to assist a client – and each one of us could be in different cities around the world, at that time. This is the stuff of dreams for me!

Clearly, this doesn’t all just happen naturally; nor is it inexpensive to set up. One needs the relevant hardware and software to do this – both the client and myself – but once this has been set up, man -what a difference it makes.

The only downside to this is the loss of the human connection; the handshake, the sense of fellowship, the presence – and one mustn’t ever underestimate the power in this. We need each other in person – we can’t deny that. But, we don’t need it all the time – and it makes a significant difference to the way in which we run our businesses.

So, – why am I telling you all this?

Well, I’m about to make a major change in the way I do my work. I’m going to be moving from Hilton, where I currently live, down to the Western Cape, to a little town called Montagu, in the Breede River area.

A few people have asked me, “why Montagu?” Well, my wife and I have always loved the place, and felt that we would probably like to put down roots there one day. At the same time, my aging parents still live there – now well in their 80’s – and if something were to happen to one or both of them, it will be a great deal more traumatic for them to move (and for me to move them too!), than it will be to care for them in their own home. I’m told that apart from death and divorce, a move – especially when you’re an octogenarian, – can be fatal! We’ve bought a piece of land down there, and will start building – God willing – in early February, hoping to move there by the end of July next year.

People have also asked me if I’m retiring. Well, – first of all, I’m too young and I don’t believe in the concept. As a Christian, it’s not biblical, while ‘work’ certainly is. And what’s more, – I actually enjoy my work! I love helping people, especially in the business field. Secondly, – I know that I can help more people, a lot quicker, in this way, than if I have to jump in the car and travel out to them all the time. I’m looking at it as a relocation, not retirement; – a relocation of my home, and not my business! In fact, my business – FINSERV – will continue to operate from its base in Hilltops Office Park, Pietermaritzburg – along with its existing – and growing team of great people. And, – I do intend to make quarterly trips back to Pietermaritzburg, to maintain some of my longer-term, existing relationships, on a more personal level.

You see, – most of the work I seem to do these days, involves advising business owners how to get out, and stay out of trouble. I also spend quite a bit of time advising potential business owners how to set up new businesses, with the right structures and the right people. With the advance in technology, I can now do this more than adequately, via the internet – but, (and this is still a big ‘but’!) it needs to be easily seen and understood in this fashion, by business people out there. (Including existing clients.)

So, – how is this all going to work? To be honest, – I’m not entirely sure right now; I’ve never been this way before. However, I am confident in three things – my experience in a variety of business over nearly 40 years, the excellent team I have in support, and the beauty of modern technology – which just seems to be getting better and better by the day!

First-time clients will be able to access my services either via the web site, by logging on as a user, or by direct referral from other clients.

The following exchange is how I see a client’s problems being thrashed out – in cyber-space!

Client: “I have a curtain-making business in Cape Town. All of my work is jobbing and I have to quote on every one, not knowing whether I will get the job or not, until I do. I don’t know how to plan my cash flow anymore, and I’m battling to pay my bills. Can you help?”

Answer 1: “Absolutely! But, to assist you I need to know a few things: first, you need to give me a list of your fixed monthly expenses and the average day in the month when these expenses are paid. Second, – you need to give me an idea of what your average monthly sales have been over the past year, and how they fluctuate according to time of year etc. Third, I need to know what your average mark-up on material costs is. Fourthly, please send me a summary aged analysis of your customer’s and supplier’s amounts due; and lastly, what is your current capacity – is there room for growth?”

Response: “I’m attaching the list of expenses and details; and the most recent aged analysis of debtors and creditors. My average monthly sales are R250k, and they are fairly steady during the year, but with about a 10% higher turnover in November and December. My average mark-up on cost is 50% and I’m running at about 65% capacity.”

Answer 2: “I will need to do some spreadsheet work for you. I estimate that it will take me about a day to complete, and the cost to you will be R5000 plus VAT. Before we go ahead, I will need you to complete the attached Client information form, which will give me all your details, and my banking details, for payment. If these terms are acceptable, please respond by email accordingly, and I will commence the work.

Response: “I’m happy to go ahead – please attached forms duly completed.”

Answer 3: “I’m attaching a spreadsheet for you. It contains two worksheets – a budget for the year and a Cash Flow forecast, on a weekly basis, covering the next 13 weeks. It’s also includes a “help” sheet, explaining how the forecast works. The forecast contains all the information you sent me. You will need to update it on a daily basis. If you have any problems, email me, or give me a Skype call. I will be available to clients every workday for this purpose, between the hours of 10h00 and 15h00. If I can answer the question directly by email – without having to do any number-crunching – then I will respond within the hour. If it involves some accounting work, I will endeavour a turnaround within 12 hours.”

And remember, – we don’t just have to write stuff to each other; with Skype we can see and talk to each other over the internet. I’m not just some faceless name on a written page. I also don’t have be a lightning-fast typist anymore either – not with Nuance software’s “Dragon Naturally Speaking” (which converts my spoken words into print.) and ‘Audacity’, which records my voice into MP3 format, and which can then be sent via the internet using “YouSendIt” to handle larger files. (And the last two are free downloads on the internet too.) And, if there’s a real problem that requires more hands-on, then with TeamViewer (also free to private users), I can access a client’s computer and do the work there myself!

The first help-out will be free.

Thereafter, I believe that a monthly retainer payable by debit order, will give clients access directly me to me, on a daily basis, for whatever advice I can give. Just being there, as a listener; as a sounding board, for many a lonely, small-business owner, will be worth it’s weight in gold . (This is also to help me with my time management in dealing with those clients who phone, ask me if I have a minute, and then spend the next thirty discussing their problem!)

And with the monthly cost less than a DSTV subscription, it has to be value-added!

I had an interesting experience the other day while visiting a client.

While we were chatting, his firm’s buyer popped his head into the office and said (almost gleefully), “I’ve just been told by XYZ Company they won’t be able to deliver the goods when they promised – and this is the second time now!”

“They’re useless!” the client said, “It’s about time we used someone else! I’m tired of people making their problems, my problems.” He carried on with: “But listen, I know the owner of XYZ and I don’t want to create an international incident, so don’t tell them – just use someone else. If XYZ ever finds out – we’ll deal with it then!”

“I agree!”the buyer said, “And I know who to use.” And off he scuttled.

An hour-or-so later, our meeting was interrupted by a phone call – which my client said he had to take. What followed was almost comical. He was being hauled over the coals about not being able to deliver as promised, by one of his customers – and there he was, making excuses, blaming his suppliers, and making his problems, his customer’s problem! I recalled the words of Jesus: “Why do you look at the speck that is in your brother’s eye, but do not notice the log that is in your own eye?”

We are never going to be able to deliver on all our promises all the time. There are circumstances beyond our control, which may occur from time to time. Sometimes we may just forget; or we may slip up. It’s normal – no matter how good our systems are, or how hard we try. The issue though is how we deal with it – both as a supplier and as a customer – because we must never forget that we are both, at some stage.

Let me suggest you do the following:

1. When your supplier lets you down, contact him immediately and let him know – and ask him what he is going to do about it. Regardless of the response, give him the benefit of the doubt, and make a plan to overcome the supply problem before it becomes your customer’s problem!
2. If the problem re-occurs at some later date, contact him and remind him that this is the second time, and that it will be the last time. Let him know, in no uncertain terms, that it must not happen again or he will lose your business. He now has the opportunity to shape up, or….!
3. If there is a next time, don’t backtrack on your promise to stop buying from him. You need to be seen as someone who does what he says.

Give your suppliers’s some grace and some space, but please communicate your views directly and honestly. At the same time, never forget that at some stage, it may be you on the other end of the line. Hopefully, what you have sown you will reap, and you will be given a second chance. If you do get one, don’t muck it up!

I would rather my customer told me that I’d messed up and gave me a second chance to improve, than lose him forever and have him bad-mouthing me all over town! Let’s treat our suppliers the same way.

I recently copied this extract from an edition of Business Day:

"November 2009 marked the centenary of Peter Drucker’s birth – he died in 2005 just short of his 96th birthday – and the anniversary was celebrated in a series of events held round the world. He is widely regarded as the father of modern management thought, and debate centered on his views and legacy. What would he be advising us to do now? And what would be his response to the great financial and economic crisis the world is facing?
In fact, Drucker’s greatest virtues were his plain-spoken insights and practicality. If one word was mentioned more than any other at the conference, it was "purpose".
Drucker’s "five most important questions you will ever ask" should help any manager ensure that he or she leads a purpose-driven enterprise. Those questions are: What is our business (or mission)? Who is our customer? What does the customer value? What are our results? What is our plan? "

In reading through the article again, I was struck by those words: "The five most important questions you will ever ask", and by what they are:

• What is our business (or mission)?
• Who is our customer?
• What does the customer value?
• What are our results?
• What is our plan? "

As we launch into 2010 – and most of January is already over – I believe most small business owners need to take some quiet time aside, and answer these questions, about their own businesses.

Many of us will have grown stale. It may be business as usual, but it may also be that we shouldn’t have business as usual – because it wasn’t that great anyway! If we think that we’re going to make money in the same way we’ve always done, selling the same old products or services, with the same old technology – and sometimes the same old people, we really need to think again. Don’t just fade back into your business with a sigh! Grab it by the scruff of the neck and give it a good shake.

In an article entitled "Rethink Your Strategy: An Urgent Memo to the CEO" by Branstad, Jackson, and Banerji, they say this:

"As of October 2008, your job has changed. (The article was written a few months after the 2008 meltdown.) You need to readjust your mind-set for a future that looks very different than it did just a few months ago. These are extraordinary times to be in business. It is human nature to wait and hope that your company will emerge relatively unscathed from the downturn. But waiting is not an option. Nor is hoping! Instead, you must look objectively at your business and decide: Can you survive? Then swiftly and decisively pursue the course of action determined by the answer.
The weaker players should be scared. If your company is positioned poorly right now, it is time to face the facts. You are probably going to the wall – or, at best, your business will be much reduced. The most precious thing you have is time – and you may not have much. Figure out how to best position your assets and your people to give every piece of your company its best chance to succeed, even if under different ownership."

I have recently seen a few clients of ours "go to the wall"! And it has really saddened me. Most of my business focus is on helping businesses to grow from strength to strength, not in seeing them go down the proverbial slippery slope. What is worse is that I do not believe it was necessary for that to happen. Steps could have been taken to prevent it. So, why did it happen? Well, Captain Hindsight never lost a battle, but if we’re prepared to confront reality, the issue was one of poor management – in a variety of forms. Not making decisions when they needed to be made; not making decisions at all; making wrong decisions and then blaming someone else for them when they failed – all of these and more. In many ways, though, they did not go back to basics when they needed to.

Whenever I’ve been faced with making some tough business decisions, I always go "back to basics" first. And for me, those basics have been enshrined, if you like, in Drucker’s five questions. So, let’s unpack these a bit more:

• WHAT IS OUR BUSINESS?

Face up to it! Who are we? What do we sell? Do we need to change any of it? Is our product or service good? Is there a need in the market for it? Are we better than our competition? Is there another way we can do it? Does the market know us? This question is really at the heart of purpose, and right now, we need to be very clear on what the purpose or mission of our business is.

And now is not the time to come up with some boring, trite mission statement about your business – it needs to be bold, compelling – even passionate. If you’re an athletic shoes company like NIKE, there is very little purpose in a statement like: "To make and sell athletics shoes on a worldwide basis." That’s boring – and about as passionate as a piece of steak! Come up with something like they actually did – "Crush Reebok!" It may not sound very ‘nice’ but man, it certainly does have purpose!

This kind of corporate reflection is good for the business soul. It will help you to see what your business should be and could be. Then, once you’ve got that picture in mind, line it up with what you’ve got. The difference between the two pictures is what you’re going to have to pay attention to in the weeks ahead.

For my money – our businesses need to be relevant to the time and the place. There’s no point in trying to sell grandfather clocks and other collectables in an informal settlement – you need to be selling basic food and clothing.
And, be sure the focus is right! One client of mine has just made the discovery that it isn’t the product he sells, but the solutions he provides that’s important. His customers would buy any product from him, because they trust him. This changes his entire marketing strategy, even though the product he sells is unlikely to change too much.

• WHO IS OUR CUSTOMER?

Are they the ones who place small variable orders and expect you to jump for them? And do you? Are they the ones who make you wait for payment, – even if it’s only ten days over term – and then still expect their settlement discount? And is he your customer, or your salesman’s customer? Do you know him personally? If not, if your salesman leaves, your customer could leave with him. Where is this customer? Is he nearby or is the cost of transporting goods to him ravaging your profits? And there are a host of other questions which spring to mind under this heading.

Do some statistical research from your business data base. Analyze your sales per customer over the past two years? Analyze your profit per customer over the same period. What are the trends? If sales have been dropping off, it’s possible that two scenarios could be developing – the customer is buying elsewhere, or he’s going out of business. Either option needs your attention.

• WHAT DOES THE CUSTOMER VALUE?

In answering this question, I think sometimes we need to ask ourselves this: "How would I feel about buying from my business?" Would it be a pleasing experience? Would the products be of a suitably high quality and reasonably priced enough to keep me coming back? Would I be willing to refer the business to my best friends?

• WHAT ARE OUR RESULTS?

This is probably the most important question to answer in these days. You will be surprised how few small business owners actually know how well they are doing? Inevitably, a business is only as good as its cash flow, never mind the profit. If your cash flow is positive – and growing – you’re making a profit. If its negative, you’re not only making a loss but its likely you’re in debt and that’s growing.
It never ceases to amaze me how many small business owners think they can continue indefinitely trading at a loss, and still take the same personal drawings every month. Losses have to be funded. They’re either funded by the owner or by his creditors .

It’s also good to know your results so that you can find ways to improve on them. Just because you’re making a profit, doesn’t mean you’re doing well – you could be doing a hell of a lot better!

• WHAT IS OUR PLAN?

Once you’ve answered the other four questions, it will become obvious that you need a new plan – your business plan! Without getting into a whole lot of detail about who you are and what you’ve accomplished, make sure the plan simply states what your intent is, and how you expect to achieve it. I like to follow the pattern used by Jim Collins in his book "Beyond Entrepreneurship" because it keeps things simple. It should cover the following:

• An overview of where you’ll be heading.
• Comments on the products/services you will be providing.
• The kind of customer you will be supplying.
• The cash you’re going to need to fund this ‘new’ business.
• The people and organisation you’re going to need.

When this is all done, you’ll likely find that you’re feeling more motivated and energized about your business, and it will really take off.

I read in Business Day a few weeks back that we’re supposed to be coming out of the recession. The manufacturing sector, we’re told, is back on track. Well, I’ll reserve judgement for now, because I’m not seeing any fireworks out there at present. Still, if you’re not ‘back on track’ perhaps you need to consider this: In my last newsletter, I attempted to highlight the fact (as I believe it is a fact), that far from seeing an end to the recent recession, we may well be brewing up even more difficult times for business in the next few years.

My reasons for saying this are two-fold: firstly, we mustn’t overlook the impact on our economy of all the infrastructural development necessary to cater for the 2010 world cup, and all the ancillary business which sprang up as a result. Its been a bit of a feeding frenzy in some circles and like all good feasts, they do come to an end!
Secondly, it appears that our fairly restrictive labour laws tend to impair the effects of globalisation on our employment situation; employment lags behind the economy, so that the effects of a recession on employment are felt long after the effects on the economy. I think that has caused many to make bold statements like: South Africa has not been affected by the global recession to the extent the rest of the world has, – which are proving to be anything but true. (more…)

You may recall one of my earlier newsletters (Seeing the wood for the trees.) which introduced Richard Koch’s (The 80/20 Principle) ten golden rules for success. This newsletter is about the first of those rules.

The following extract is taken from the Gallup Organisation’s newsletter about Strengths management. While it clearly addresses how we as business owners should be managing the strengths of our employees, (and not just picking on their weaknesses) I felt it was important to consider from our own perspective – as business owners. The fact is this: whatever applies to employees, applies to us. If we are busy, busy, busy – operating in areas of weakness, or potential weakness, our motivation is going to go down, and so will our success rate. Let’s just consider these statements: (more…)

The business world is a large, lonely place for many small entrepreneurs. Competition is fierce, access to sufficient capital is difficult and making every Rand count becomes harder and harder. Add to that a culture of non-payment by many small businesses today and the seemingly mercenary attitude of most of the large banks, and it becomes easy to ask the question, “Why did I ever decide to get into my own business?”

Most of us who are entrepreneurs have asked that question from time to time. Even though it’s a struggle, we probably wouldn’t ever trade the hassles for the freedom and the sense of being in charge of our own destiny.

Yet, – it can be very lonely, not having anyone on tap to discuss things with. Owning and managing a small business can be very lonely. Sure, you’re surrounded by people – employees, customers, suppliers – yet its in those quiet moments before a storm; those times when big decisions need to be made; when all seems against you – its then you can feel at your loneliest. (more…)

Extending credit to customers can be very risky, especially these days when job security is a thing of the past. Nowadays, we have a highly mobile working population in South Africa who can be difficult to trace. We also have a New Credit Act which can work against you if you don’t take proper care, AND PLEASE TAKE THIS SERIOUSLY.

If customer expectations or the nature of your business compels you to sell on credit, you need to manage the risk with a great deal of diligence.

• Customers who pay late (or not at all) cost you money by
• reducing your cash flow and
• directing your time towards collections rather than making more sales.

Bad debts, however, are inevitable for most businesses. The level will depend on your industry.

As a guideline for an acceptable maximum you can compare the cost of bad debts with the cost of insuring your book debts.

One of the best ways to manage your credit risk is to ensure that you have the basics right, and that all your employees involved in the sales and collections process know and understand a sound and simple credit policy. Used consistently, a well conceived credit policy helps you avoid the cost and frustration of handling late paying customers.

Here are nine points to consider which will help you create a simple but effective credit policy for your business:

• Decide who you’re going to offer credit to – all customers, for large orders or amounts of Rx or more, those who purchase at least x times per week/month, longstanding customers of x months or more.
• Decide on how you’re going to verify the credit-worthiness of customers. Will it be by ordering a credit report, checking references, or both?
• Fix the maximum amount of credit you will offer, AND STICK TO IT.
• Lay down guidelines for reducing credit limits. It may be reduced if the customer has a poor credit rating, an unreliable payment history, or one or more overdue bills.
• Decide on the credit terms you will offer. It may be deposit with balance due upon delivery, deposit with periodic progress payments, net 30 days or even COD.
• Be clear on the incentives you will offer for early payment. These can take the form of 2,5% discount for payment within 30 days of invoice, higher credit terms for customers who pay bills early, or just sending thank-you notes to customers who pay on time.
• Decide on action to take as a result of late payment by customers. It could include charging a Late Fees of Rx, and/or finance charges of x% (though there are now implications caused by the New Credit Act in this one), reducing credit limits or even a revocation of credit privileges.
• Formulate a clear-cut collection procedure. For example, if bills are over due by:

• 1 day  – we call the customer
• 7 days  – we call the customer
• 14 days  – we call the customer and mail a firm letter requesting payment
• 21 days  – we call the customer
• 28 days  – we mail a collections notice
• 45 days  – we send the account to a collections agency.

• Decide how you’re going to handle cancellations and refunds. It may be that they will be billed in full, billed proportional to work completed, refunds may be granted within x days of purchase, or even a ‘satisfaction guaranteed or money back’ commitment.

It has been my experience that businesses that are struggling to keep afloat tend to chase turnover, almost at any cost, to keep their cash flow ticking over. This is extremely dangerous and can be terminal. Bad paying customers are simply not worth selling on credit to. In fact, no business is better than bad business!

Collecting the debt invariably involves everyone in the business to a greater or lesser degree, and the cost of this can very easily exceed the profit generated by the sale, never mind the loss of opportunity to do good business! If the bad payer really wants your product he will find some way to pay you cash for it, so hold out for that. If he decides to go somewhere else – well, someone else’s loss won’t put your business into liquidation!

If you have to use a Collection Agency, check out its credentials first. A couple of years ago I decided to use an agency that advertised its rates at 15% of amounts collected. I discovered some time later that they had collected the money and had not paid it across to me. I eventually had to hand them over to Attorneys for collection, which really added insult to injury.

No one likes chasing people for money – it seems to be the job no one wants to do.  If you don’t – well, the results are obvious!  If you want peace, prepare for war!