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!

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!

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.”

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!

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.

"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.

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.

The question we should be asking ourselves is this: what happens to all the people involved in the building of stadiums, roads, drainage, hotel buildings etc., when the building is over; and when there are no longer any tourists around to occupy these white elephants?
Do we think our economy is going to be able to simply swallow them up in ready-made jobs? I suspect that the general unrest prevalent in the country right now, due in the main to poor delivery by government, may well escalate beyond government’s ability to deal with it, rationally. Politically, our government has to find a scape-goat that won’t damage their own tenure, and white-owned business (sadly) is the obvious target. Recent mouthings by the ANCYL’s Malema confirm this. Even now, business (and in particular white-owned business) is being accused of enriching itself at the expense of the poor masses. We’ve seen and heard this before, but it’s no less distressing!

So – we, as the many small-to-medium sized businesses in South Africa, – and which I might add employ more people than all the rest – are going to have to be prepared for what lies ahead. In the words of a noted Chinese tactician: “If you want peace, prepare for war!”

You may be a one-person business, or you may be a local merchant with 450 employees or more; whichever, however or whatever, you’ve got to know how to keep your business alive during economic recessions.

I would venture to suggest you take time out to plan and implement some of the following strategies:

• AVOID IMPULSE BUYING

Some of the things you can do and should do, include protecting yourself from expenditures made on sudden impulse. We’ve all bought things or services we really didn’t need, simply because we were in the mood, or perhaps due to the flamboyancy of the advertising, or even because of the persuasiveness of the sales person. Then we sort of “wake up” a couple of days later and find that we’ve committed business funds for an item or service that’s not really essential to the success of our own business.

If you’re incorporated, you can eliminate these “impulse purchases” by including within your company policy, a clause that states: “all purchasing decisions over a certain amount are contingent upon approval by the board of directors”, and then make yourself accountable to your bookkeeper/accountant. This will give you a chance to consider any “impulse purchases” a second time after you’ve had a chance to think about the need for your purchase.

If your business is a partnership, you can tell whoever it is that attempts to sell you something, that all purchase decisions are contingent upon the approval of a third party. In reality, the third party can be your partner, one of your department heads or even one of your suppliers.

If your business is a sole proprietorship, you don’t have much to really worry about. Think about your proposed purchase. If you really don’t need it or can’t afford it, don’t buy it!

• DON’T “SHORT-CHANGE” YOURSELF ON PROFESSIONAL COUNSEL!

Especially in times of emergency, be sure that you don’t “short-change” yourself on professional services.

Anytime you commit yourself and move full-speed ahead without fully investigating all the angles, and preparing yourself for all the contingencies that may arise, you’re skating on thin ice. Regardless of the costs involved, it always pays off in the long run to seek out the advice of experienced professionals before embarking on a plan that could ruin you. Its not just about whether a venture will fly – but whether its been structured properly to cater for the myriad, tax, and other regulations that can come back and bite you later on.  The Book of Proverbs has this to say:

“Plans fail without good advice, but they succeed with the advice of many others.” (Proverbs 15:22)

• CONCENTRATE ON YOUR BASIC NEEDS

Particularly when sales are down, you must be “hard-nosed” with people trying to sell you luxuries for your business. When your business is booming, you undoubtedly spend more time allowing different sales people to show you new models of equipment or a new line of better-looking supplies, but when your business is down, skip the entertaining frills and concentrate on the basics. Great care, however, must be taken to maintain courtesy and allow these sellers to consider you a “friend,” and call back at another time.

• FINE-TUNE YOUR FINANCIAL RECORDS TO CREATE INSTANT WARNING SIGNALS.

Whoever maintains your company’s books should reflect your way of thinking, and generate information according to your policies. If you don’t have someone ‘in-house’ who can do it for you, you should hire an outside accountant or accounting firm to calculate your return on your investment, as well as the turnover on your accounts receivable and your inventory. Such an audit or survey should focus in depth on any or every item within your financial statement that merits special attention. In this way, you’ll probably uncover any potential financial problems before they arise.

• SET UP A PERSONAL “POWER CIRCLE”.

Many small companies set up advisory boards of outside professional people. These are sometimes known as Power Circles, and once in place, the business always benefits, especially in times of short operating capital. Such an advisory board or power circle should include an attorney, an accountant, civic club leaders, owner/managers or businesses similar to yours, and retired executives – men and women with proven track records in difficult times. Setting up such an advisory board of directors is really quite easy because most people you ask will be honoured to serve. Even if there is a cost involved, it will add enormous value to the business.

Once your board is set up, you should meet about once a month and present material for review. Each meeting should be a discussion of your business problems and potential, and an input from your advisors relative to possible solutions.

These members of your board of advisors should offer you advice as well as alternatives, and provide you with objectivity. Also – don’t be hesitant in sound-boarding them by email if there’s a need. No formal decisions need to be made either at your board meetings or as a result of them, but you should be able to gain a great deal from the suggestions you hear.

An innovative, economic, and we believe exciting alternative, is to use our new internet-based financial service which has been designed for just this purpose. Check this, and a number of other options out, on our web site at www.finserv.co.za

• GROW YOUR CUSTOMER RELATIONSHIPS AND KEEP ON TOP OF YOUR ACCOUNTS RECEIVABLE.

When the chips are down; when the rubber hits the road; when the takkie hits the tar – whatever you want to call it – you need to know that your customers are not only loyal to you, but are going to stay in business along with you. Put together a strategic plan which will involve regular visits – especially to your key clients. Get to know their employees, their systems, their strengths and weaknesses – and don’t be afraid to offer assistance where you feel you can do so. Make them feel they’re part of your family – because when times get tough, blood is thicker than water!
But don’t allow them to abuse you with late payments. It should be that most of your customers have the money to pay at least some of the money they owe you, immediately. To keep them current and the number of accounts receivable in your files to a minimum, you should step up the number of times you call them. Call on them if necessary, and while you’re there keep your eyes peeled for signs of a business in distress, and your ears peeled for gossip which can alert you to problems. Remember, the ‘squeakiest wheel gets the oil.’
If you develop such a habit as a standard part of your operating procedure, you’ll find your invoices will magically be drawn to the front of their piles of bills to pay. Do not be hesitant nor too much of a “nice guy” when it comes to collecting money.

• KEEP YOUR BANK MANAGER HAPPY!

Something else that’s a very good business practice, but which few business owners do is to methodically build a good credit rating with their local banks. Most business owners I know keep away from their banks until they desperately need them; and then it’s usually too late.
Particularly when you have a good cash flow, you should borrow small amounts from your banks every 90-days or so. Simply borrow the money – place it in an interest-bearing account – and then pay it all back at least a month or so before it’s due. By doing this, even though it will cost you a bit, you’ll increase the borrowing power of your signature, and strengthen your ability to obtain needed financing on short notice. This is the kind of business leverage that will be of great value to you if or whenever your cash position becomes desperate.

• KEEP UP TO DATE ON YOUR INDUSTRY.

By all means, you should join your industry’s local and national trade associations. If your industry doesn’t have an association, consider starting one yourself. Sharing information and statistics can be very helpful. Most of these organizations have a wealth of information available – everything from details on your competitors, to average industry sales figures, to new products, services and trends.

If they give you a membership certificate or wall plaque, you should display these conspicuously on your office wall. You customers like to see such “seals of approval” and place additional confidence in your business when they see them.

• GET YOUR SPOUSE INVOLVED IN YOUR BUSINESS.

Still another thing often overlooked – if at all possible, you should have your spouse work in the business with you at least 3 to 4 weeks per year. (Especially if your business is sole proprietorship.) The important thing is that if, for any reason, you are not available to run the business, your spouse will be familiar with certain people and situations about your business. These people should include your attorney, accountant, any consultants or advisors, your major suppliers and creditors. The long-term advantages of having your spouse work four weeks per year in your business with you greatly outweigh the short-term inconvenience.

Your spouse also knows you better than anyone else, your strengths and weaknesses, and will be more likely to provide you with sound constructive and objective criticism than most employees.

• TAP INTO AS MUCH FREE BUSINESS COUNSELING AS YOU CAN.

Whenever you can, and as often as you need it, you should take advantage of whatever free business counselling is available.
There are a number of Small Business Advisory services available who have many excellent booklets, checklists and brochures available on quite a large variety of businesses. Many of these have their own web sites which are full of useful information, and links to other sites.
They also have management and financial assistance programs that can definitely benefit just about any small business. Most local universities and many private organizations hold seminars at very minimal costs, often without charge. You should also take advantage of free services offered by your bank and local library.

• KEEP TECHNICALLY UP-TO-DATE

You may feel no great need for continuing education courses, but if you learn even one new bit of information that will be of ultimate benefit to you or your business (or even your customers), the little time spent at a seminar or in a night course, will be a wise investment.
This is particularly important for business owners who themselves are technicians. Quite often, technicians don’t see the need to ‘brush-up’ on their expertise, believing that they are more than competent to do the job. While that may be the case, it doesn’t mean they’ve kept up to date on technology and new developments. Keep yourself open to learning new things and ways!

• KEEP YOUR FINANCIAL RECORDS UP-TO-DATE AND ACCURATE.

The important thing about running a small business is to know the direction in which you’re heading – to know on a day-to-day basis, your progress in that direction – to be aware of what your competitors are doing – industry trends and sales figures for businesses comparable to the size of yours – to practice good money management at all times – and to prepare yourself to solve your problems before they arise.
It is absolutely essential that you practice sound financial management and this means having an accounting system that provides you with key performance indicators as soon as possible after an accounting period ( after month end.), and someone who can interpret these reports to enable you to make informed decisions timeously.  Another important reason for this is that if you suddenly find yourself in a financial bind, and you need to get the help of your bank, having current, up-to-date financial management information will be of inestimable help to you. Bankers are more relaxed about lending to companies that are seen to be on top of their financial records.

• SEPARATE YOUR PERSONAL FINANCIAL AFFAIRS FROM THAT OF YOUR BUSINESS!

You need to know exactly how well your business is doing, and mixing personal expenses with that of your business is misleading. Don’t use your business bank account for personal expenses. Rather budget a specific amount for personal drawings each month, and then live within these confines until the business is doing well. Become an employee of your business – pay yourself a market-related salary, and then rely on dividends to reward yourself. And then, carry on in this way!!
Many business owners I know have a habit of rewarding themselves in advance. They do this by paying themselves huge salaries (beyond what the business can afford), and dividends from profits that haven’t been earned yet. Be patient, and be frugal – your time will come, and quite often when everyone else is struggling!

• EMPLOY THE BEST PEOPLE YOU CAN FOR THE JOB.

When times get tough, the best people are going to be your insurance against a recession, so don’t let the cost of employing the best people put you off. They will soon add sufficient value to your business to more than cover the additional cost. Not only will they add value, but they will enable you to grow as a leader too!
Employing mediocre people because you think that’s all you can afford is a recipe for disaster. You will have invested a disproportionate amount of your time training them, only to find they’re not sufficiently trainable anyway.

• INVEST QUALITY TIME IN YOUR STAFF

Even in difficult times, – when all you want to do is keep your head down and work, – you need to make time to invest in growing your employees, in their job skills and in their commitment to your business. Develop the loyalty factor in your business – surprisingly, money is not always the motivating factor. A dissatisfied and direction-less workforce can be the death-knell of your business.

Generally speaking, times are always tough for small businesses. In order to survive with a small business, regardless of the economic times, it is essential that you surround yourself with smart people, and practice sound business management at all times. Be sure that if you are doing well now, you will continue to be successful in the future.

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:
“In the April 2002 edition of the Journal of Applied Psychology, the Gallup Organization published research that proved that a more engaged employee is also a more productive employee. The research also proved, if proof were needed, that a more engaged employee is also a more profitable employee, a more customer-focused employee, a safer employee, and an employee who is more likely to withstand temptations to jump ship. Many of us have long suspected this connection between an employee’s level of engagement and the level and quality of his or her performance. This research laid the matter to rest.
Neuroscience tells us that between the ages of roughly 3 and 15, a person’s brain organizes itself by strengthening the synaptic connections that are used frequently, while those that are used infrequently wither away. As Dr. Harry Chugani, professor of neurology at Wayne State University School of Medicine, describes it: “Roads with the most traffic get widened. The ones that are rarely used fall into disrepair.” Beyond a person’s mid-teens, that unique network of synaptic connections, in which some are strong and robust and others non-existent, does not change significantly. This means that a person’s recurring patterns of thought, of feeling and of behavior do not change significantly.
The practical implications of this are hard to miss. Because a person’s talents do not change much after he is hired, we must be very careful whom we select. We must identify the talent levels common to the best in the role and build our selection instruments to find candidates who possess similar levels of talent. We must begin any developmental work with a person by first identifying his strongest areas of talent. Of course, none of this implies that a person cannot change. Not only can he learn to better channel his talents by stabilizing his values or by developing a measure of self-awareness, but he can also be taught new skills and knowledge. He will learn the most, change the most, and improve the most in those areas of his brain where he already has the strongest synaptic connections.
What neuroscience is telling us is that if we want to develop a person, if we want to net the greatest return on our investment in his growth, the best thing to do is identify where his talents lie and then expose him to skills, knowledge, and experiences that build on those talents to create consistently excellent performances — what Gallup refers to as strengths. In Professor LeDoux’s words, we must help him create new buds on his existing branches, rather than totally new branches.” (The Four Disciplines of Sustainable Growth.)

These comments are very relevant to our organisations as a whole, and wherever possible, I believe it is vital that we begin this process of ‘strength-development’ with our respective work forces.
However, what is even more important is the fact that we need to apply this process to ourselves – to our own contribution to the business. If we don’t, all we’re going to end up on is the treadmill – overworked, over-stressed and under-paid.

SO, – find out what you’re good at, develop those strengths and then use them to specialize in a very small niche. If you’re the owner of a small business, then it’s likely that the business is an extension of yourself. The organisation tends to take on the character of its founder/owner; your core values and belief systems will infiltrate the organisation – even without your knowing it. The business itself can then begin to operate within this specialized niche area, until you become known as the ‘supplier of choice’ to hordes of satisfied customers.
I came across a true story in Michael Gerber’s little book “The E-Myth Contractor” which is relevant. It’s a great story and one which brings tears to the eyes – especially when one thinks of the generally poor service dished out by people these days. It’s quite a long story, but really worth reading:

“Marino Santos us was a framer; he and his small crew subcontracted the framing of houses in Southern California, Arizona, Nevada, and Colorado; wherever the work took them. To the general contractors who hired them they were simply known as Santos’s crew. Within Santos Construction – more like a small band of men than an actual business – they thought of themselves as los apassionados sin igual – “without equal”.
Everyone in the trade new Santos’s crew. They were the stuff of folklore. No one disputed that they were the best, but it was more than that. A mystique surrounded them wherever they went. They were a tight bunch. At breaks they hung together, drinking coffee, eating burritos and whispering among themselves – a cluster of stars!
But when Marino Santos and his crew went to work, there was nothing quiet about them. Their framing hammers fairly flew. Walls went up in record time, first one house and then another. The sounds of their tools at work reverberated off the hills. Often they worked to music. For Santos’s crew, every day on the job was a performance, a dance, a crusade. It was what they did, yes, but more. It is what they lived to do. It was who they were.
And then one July morning on his way to a job in Barstow, California, Marino Santos’s pickup blew a tyre and left the road at 90 miles an hour. It turned over five times, finally coming to rest upside down against a boulder. Marino Santos lay trapped in his truck for thirteen hours before help arrived. His back was broken. What a miracle that he survived the accident, everyone said. He failed to see the miracle. In fact, he was blind to everything except one unassailable fact – He was finished with the framing business.
What does a framer do when he can’t frame anymore? Especially one who is driven to excellence as Marino Santos? This framer drank, and for the next six months was rarely sober. Sometimes he railed at the night, flinging his empty whiskey bottle through the closed bedroom window into the street. For hours, he would sit in his wheelchair amid the shards of broken glass, screaming at the injustice. His crew came to visit him every day. They cried with him. They sat silently with him. And for a long time, nothing changed. Then one-day it did. Marino Santos was getting better. At last, Santos called his crew together and apologised for his stupidity. “I don’t want to be stupid anymore” he told them, “Its time to start a new business.”
The new business would be in construction, but in what field? Yes, that would take some study. In the meantime, he knew this: his new business would have as great an impact on the people around them as the old business had had.
One-day, Santos addressed his crew. “I have thought about this a good deal,” he said. “It comes down to this: Either, we went for a living, like burros, until we can’t work any more. Or we find a way to build a business that works for us. We think about this business; we put our minds to it, and we shape it so that it works like we have learned to work, with precision, joy and energy. “But we must build it so that it works even without people like us. We must make it easy for people who are not like us to act like us. We must learn how to give our fierce pride to people who do not possess it naturally. And we must make it possible for everyone who works in our business to become as good as we are. That will be our gift to them.”
Santos paused and looked soberly into his men’s eyes. “Brothers, what I’m suggesting is a risky venture. I have no way of knowing it will be successful or not. But I know in my heart it is the path for us to follow.” Santos instructed his men to take jobs in a segment of the construction industry that was new to them. They sorted the industry into new construction and reconstruction, commercial and residential. They then broke those parts down into sub-parts, which they analysed using certain criteria. The new business had to be in a segment of the industry that: (1) had consistent growth; (2) did not rise and fall dramatically with the economy; (3) Essentially repeated the same tasks from job to job; (4) wasn’t capital intensive to start or maintain; and (5) could be operated independently of other contractors – that is, they could secure, start and complete a contract without having to depend on general contractors or other subcontractors to do their parts of the job.
Every night the men gathered in Santos’s kitchen to have a cold beer and report their findings. Often, they argued. But gradually, as the men became smarter about their mission and more eloquent in their expression of it, the arguments became less heated. Santos’s strategy was simple; as one specialty after another was eliminated as an option, those employed in that field left their jobs and found work in one of the remaining fields, until, in the end, everyone was working in the same field, the one of choice.
And that’s exactly what happened. After two and half years of dedicated work, research and planning, all signs pointed to the kitchen remodeling business. This was the birth of THREE-DAY KITCHENS.
How many people do you know who are willing to devote such effort, intelligence, care and attention to choosing the right path? Most of us just stumble ahead, hoping it will turn out all right in the end. Even with all that research, Santos still wasn’t satisfied. He and his crew installed hundreds of Kitchens, – just for practice. Every imaginable problem was confronted, dealt with and overcome. It would be another two years before the crew took on their first kitchen for pay.
At night, they gathered to discuss the problems they faced that day on the job, analysing every peculiarity, every exception. No one, they were sure, had ever devoted as much time and intelligence to solving kitchen remodeling problems. They were determined to get it right.
Their goals were: (1) to create a kitchen remodeling system that could produce an absolutely predictable result in the hands of novice workers trained only in their system, and (2) to figure out how to renovate or remodel any kitchen within three days, at a cost lower than the competition.
Actually, Santos and his crew discovered that the competition was not a problem. The crew reported daily on the waste, inefficiency, apathy and lack of management on the jobs they were working. No, other contractors would not determine the fate of Three-Day Kitchens Marino Santos and his men would.
They studied every variation on every theme, created a variety of preplanned Kitchen solutions to address each one of them, and devised a preprogrammed construction and installation strategy for each type of kitchen. Then they recruited, hired and rigorously trained a small crew of inexperienced technicians in the construction and installation system. Finally, they created a management system to ensure that the system would be used exactly as planned, every time. Then they practiced, – practiced, – practiced! In the end, they invented a kitchen remodeling system that allowed them to install a kitchen in three days or less – guaranteed!
After all those years of preparation and study, Santos’s first paid kitchen was a sweet moment for him and his crew. It went off without a hitch, just as they knew it would. They had planned it that way, and practiced until nothing was taken for granted. Their first customer was appropriately astonished. Not only was the job done exactly as promised, but the workers were clean, well organised and fastidious – “almost joyful” the customer enthused. “How you find such good people?” she asked. Marino Santos smiled. “I wish I knew,” he said.

After I’d read the story, I found myself wishing for two things – one, that I could find people with such a passion for what they did; and two, that I could become one of them myself!

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.

Of course, we can make appointments to see our Accountant, or our Attorney – rather like we make appointments to see the doctor. And like the doctor, our accountant generally is pretty far removed from the day-to-day action of the business. He will look at a few figures and make a few suggestions. If they could, they’d write out a prescription that would read something like, “go back to the office, sell all your slow moving stock, collect your outstanding debts and you’ll be fine.” That’s true! Most of us know this instinctively – the problem is we usually don’t know where to start and even if we did, how do we fit this in an already hectic day? Trying to keep the production line humming, customers satisfied, supplier’s accounts paid – sometimes all at once – and still find time to go out there and find new business – its no wonder so many small businesses fold.

Once the cycle begins, it becomes harder and harder to break out of it. The cycle becomes a vicious one. Initial problems lead to greater ones. It becomes easier and easier to find someone or something to blame. The more time you spend managing your cash flow the less time you have to go out and find new business. The more time you spend blaming your employees for their lack of commitment, the less time you have for praising them for work well done. The more work you try to do yourself, the less you seem to be able to achieve. Defeat stares you in the face!

Enough of this doom and gloom!

Let me say this to you: It’s in the midst of this kind of tribulation that we very often are able to turn the tables on defeat – if we are sensitive to the early warning signals.

The very first thing we must determine is that we will not be beaten. In the words of the Apostle Paul: “We are hard pressed on every side, but not crushed; perplexed but not in despair; persecuted but not abandoned; struck down but not destroyed.” Paul wasn’t walking around with his head in the clouds, heavenly-minded but no earthly good; no, he acknowledged that life is full of challenges but each one can be overcome.
Read the biographies and autobiographies of great people in history, and again you discover that each of these people could have surrendered to setbacks many times. It is not possible to win high-level success without meeting opposition, hardship and setback. In fact, if you’ve never failed, you’ve probably never experienced real success. It is possible to use setbacks to propel you forward.

The Civil Aeronautics Administration in America is responsible for investigating every air disaster. We have a similar organisation here in South Africa. They do so in minute detail and every investigation goes on for weeks. They do this to try and prevent similar disasters from taking place again. Doctors use setbacks to pave the way for better health. Post-mortems teach them more about the human body. Rugby coaches analyse each and every game, especially the lost ones, to try and prevent the same mistakes from happening again. The principle they all adopt is this: salvage something from every setback. But we human beings are strange creatures. We’re quick to accept the plaudits in victory, and equally quick to blame someone else for each setback.

If you find yourself in this situation, here are a few suggestions you need to consider:

• Study your setbacks. When you lose, learn, and then go on to win next time. Ask yourself the question: “what can I learn from this situation?” If you can’t answer it yourself, ask someone else to help you. Then write the answer down next to a statement of the setback you’ve just been through, and then frame it and hang it on the wall where you can see it every day!
• Be Objective. Put yourself in a glass tube and look at yourself as a disinterested third party would look at the situation. Another way to consider the issue, is to zoom out and study the scene from afar. If you’ve ever used Google Earth on the internet, you’ll know what I mean. Zoomed-in you’re faced with a brown/green screen and not much else. Zoomed-out on the same spot and you notice that it’s a small town on the southern part of Africa. Same spot, different view! See if you have a weakness you’ve never noticed before. If you have, take action to correct it. Being constructively self-critical will help you to build personal strength and efficiency. Don’t get too introspective though and just look for faults so you can say to yourself “Here’s another reason why I’m a loser.”
• Stop blaming luck. It never got anyone where he wanted to go. Also – stop giving luck all the plaudits for the victory of others. Rather examine how they accomplished the victory and you will learn something new. When Gary Player was asked what the secret of his success was, he replied with: “I guess the more I practice, the luckier I get!”
• Be persistent (but not stubbornly so.). Persistence on its own is only one of the ingredients for victory – we also need to experiment. Many ambitious people go through life with admirable persistence and show of ambition, but they fail to succeed because they don’t experiment with new approaches. Stay with your goal but don’t beat your head against a wall. If you do, you may well end up breaking through the wall, but be brain-damaged for life as a result! If you aren’t getting results, try a new approach. Consider these two suggestions:

1. Tell yourself, “There IS a way.” This year, thousands of new businesses are being formed. Five years from now only a small portion will still be in operation. Most of them who fail will say, “Competition was too much. We had to quit.” The real problem is that when most people hit the TAR (Things Are Rough) barrier, they think only defeat and so they are defeated. The Proverb says that “as you think in your heart, you are!”
2. Back off and start afresh. Often we stay so close to the problem for so long we can’t see new solutions or new approaches. President Eisenhower of America once was asked at a news conference why he took so many weekend vacations. His answer is good advice for everybody who wants to maximise his creative ability. He said, “I do not believe that any individual, whether he is running General Motors or the United States of America, can do the best job just by sitting at a desk and putting his face in a bunch of papers. Actually the President ought to be trying to keep his mind free of inconsequential details and doing his own thinking on the basic principles and factors…so that he can make clear and better judgements.”

• See a GOOD side in every situation. Have you ever noticed how dark everything becomes just before a storm breaks? Have you also noticed how bright and clean and fresh everything is when the storm has passed? Well, life is pretty much like that. “In many ways, what we see in our past and visualise in our future determines how we view ourselves today – the present! When we look back, one thing is clear – life is short. When we look ahead, another thing is clear – life is uncertain. Most importantly, however, is that when we look to the present we discover that life is challenging! Because it is short, every moment presents challenging possibilities. Because it is uncertain, it’s filled with challenging adjustments.” (Charles Swindoll)

Success is possible against even the greatest odds. Charles Swindoll tells a wonderful story about the effects of determination on overwhelming odds. It tells of a man who moved into a new neighbourhood with his three Red Setter dogs. Early the next morning, he noticed through the back window that a small, scarred bulldog had crawled under the fence and was making its way towards his house. Before he could do anything, his dogs had attacked the bulldog and gave it a fearful beating – chasing it back under the fence, torn and bleeding. The very next day, to his amazement, the bulldog once again crawled under the fence only to receive a more substantial beating. Eventually, after a week of this happening, each day, he was alarmed to hear a terrified scratching sound and whimpering at his back door. He opened it to find his three Setters trying to get in! The bulldog had won!

People who have bull-dog persistence, who can grab something and not let go, have an essential success quality.

(If you, or someone you know, has hit the TAR barrier and would like someone to talk to, someone to guide them through the process of recovery to success, please ask them to contact me by e-mail at gary@finserv.co.za

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!