MISSION STATEMENTS

Does your business have a mission statement? A ‘mission statement’ is a brief statement of the purpose of a business or organisation. Sometimes the mission statement is used as an advertising slogan, but the intention of a genuine mission statement is to keep employees and customers aware of the organisation’s purpose. It can be restricted to goals and objectives, but can also include some or all of the following:

  • Purpose and values of the business

  • Which business the organisation wants to be in (products or services or market) or who are the organisation’s primary customers (stakeholders).

  • What are the responsibilities of the business towards these customers?

  • What are the main objectives that support the business in accomplishing its mission?

As an example, here is the mission statement of the Accountancy + Business Advice Centre:

Our goal is to help as many business owners as we can to improve their businesses, maximise their profit and get the lifestyle they want.

The best way to write your mission statement is to take it bit by bit and break it down into its component parts. Answering these questions will get you started:

  • What does you business do i.e. what is its function, what need does it fulfil?

  • For whom does your business perform that function i.e. who are the stakeholders in the business? (Think about customers, team, owners, suppliers & your social responsibilities)

  • For whom does your business perform that function i.e. who are the stakeholders in the business?

  • How do perform that function in a way that sets you apart from your competitors? (Think about your fundamental guiding principles).

If you need help to write your Mission Statement contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

BECAUSE OF THE CUSTOMER

I was searching through my extensive collection of business and marketing material the other day when I rediscovered this useful ditty about the importance of the customer:

Because of the Customer

Because the customer has a need we have a job to do
Because the customer has a choice we must be the better choice
Because the customer has sensibilities we must be considerate
Because the customer is unique we must be flexible
Because the customer has an urgency we must be quick
Because the customer has high expectations we must excel
Because the customer has influence we have the hope of more customers
Because of the customer we exist!

No idea who came up with this, and Google was no help, but isn’t it true?

Nowadays of course, great customer service is no longer enough, and we must look to add value in as many ways as possible, and work out ways to help our customers help their customers, but given the poor service that’s still so common in so many businesses (despite the recession) perhaps many more business owners & their teams should learn this off by heart!

If you need help with your customer care strategy contact Nick on 0800 ASK NICK or email nick@abac.co.nz. The first thing we’ll get you to complete is our 30 question Customer Care questionnaire and then work with you to discover your customer’s key frustrations. We then design a fully customised customer care strategy for your business, typically incorporating key aspects such as performance standards, focused staff training and customer advisory boards to ensure your business begins to display the characteristics observed in the most successful customer driven companies.

RISK REVERSAL

When you’re asking a new customer or client to do business with you for the first time they are taking a big risk by placing their trust in you. Now of course, from your perspective they are not, but it’s necessary to put yourself in their shoes and see things from their point of view. Yes, they may be unhappy with their current supplier but often it’s a case of better the devil they know!

Now to increase the chances of getting that new customer or client on board you need to help them by reducing the risk as far as you are able to or by eliminating the risk by you taking it on the chin, by “reversing” the risk onto yourself. After all, you want the business, so why should the customer or client go out on a limb?

One risk-free way for you to achieve this is by third party endorsement as it always helps if someone else can reassure the prospective customer or client that you are reliable and can be trusted. The easiest way here is testimonials from named individuals, as anonymous testimonials can be fabricated. Another good way is some case studies that talk about specific results and clearly demonstrate how you’ve gone beyond the norm to help your customers and clients.

Now since it can also be difficult to prove the bona fides of case studies an even better (but riskier for you) way is to tee up some referees who are prepared to speak to the prospective customer or client and answer their questions about you, your reliability and how you’ve performed in practice. If you’re new in business this could be difficult but otherwise, there’s normally a customer or client or two that you’ve done that special favour for who’ll be prepared to help.

A potentially even riskier but very effective technique is to offer an unconditional money-back guarantee if the customer or client is unhappy with your product or service. This will only work if you’re good at what you do so take care or you could be in difficulty very soon! Yes, you may get the odd time waster with nothing better to do but on the whole I find this works well, both for me and for clients.

Feeling very brave? Some take this a step further, by offering an even larger cash refund if they get it wrong. That may be over the top for you, but if you need help coming up with your risk reversal strategy contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

ADDING VALUE MADE EASY

Before you get out there and start doing business you need to decide where your products or services sit in terms of your value proposition. Simply put, your have four main choices, low price low value, low price high value, high price low value or high price high value, as can be seen on the graph below:

Adding Value graph

Some examples will help. Low price low value – $2 Dollar Shop? High price low value – some firms of accountants who survive on their brand name alone! High price high value – luxury cars? Low price high value – those trying to buy market share as you wouldn’t normally survive very long!

Now often value is not actual value, it’s just a matter of creating a perception of value, which is often achieved by high fashion, being trendy, being in the right place at the right time or clever branding e.g. iPads (which is why Apple has $76 billion in cash!). Often, that’s tricky for smaller businesses with limited resources so what we need to do is to find a way to boost value without cutting our prices.

Value is defined as customer benefits less costs to the customer, and importantly costs are not just monetary, they also include effort, time, anxiety & emotional costs. Try hanging on the ‘phone to a call centre, or standing in a long queue, or having to return something that’s faulty or that you didn’t order, or receiving a huge bill you weren’t expecting. Aren’t all these costs? These days, we are time poor, increasingly stressed and less inclined to put up with poor service and we want things to be easy, so what we’re looking for are solution providers – we want someone who’s going to solve all our problems and to whom we can just delegate everything to.

So to increase value to your customers without cutting your prices you must reduce or eliminate all the other costs of doing business with you. This means seeing your business through the eyes of your customers and reviewing all your business processes to make these as efficient and as smooth as possible for your customers. Take for example the stationery supplier who comes to your premises to see what you need and then takes care of their own order, or the furniture supplier who not only delivers but assembles everything as well, or the domestic appliance supplier who takes your old appliance away AND all that annoying packaging. Providing superior value like that is now becoming the norm so just providing good customer service like in the old days is no longer enough!

If you need help to set your value proposition and/or increase customer value without cutting your prices contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

FREE WEBSITE ANYONE?

They say only a third of businesses in Hawkes Bay have a website. Given the world we live in today and the importance of the internet and the part it now plays in our lives this is something which amazes me. I’ve heard loads of excuses but come on now, in 10 year’s time those businesses without a website are going to be increasingly marginalised. It doesn’t have to be flash, just a basic one will do to start off with and nowadays, who doesn’t want to check out a business on-line before you use them?

These are the more common excuses and why they don’t stand up:

  • It’s too expensive. Not so, I can introduce you to a web-designer who can do you a basic website for $500 + GST!

  • It’s too technical for me. You don’t need any technical knowledge to get a website up and running, nor even to keep the content updated. Yes, it’s important to choose a website that’s easy to keep up to date but having done so, if you can type (slowly!) you can update your own website.

  • I don’t know what to write on there. What? You can’t say what you do, write about you and your team and quote 6 – 10 reasons why customers should use you and include a Contact Us section? Or include some testimonials, your FAQ or your Point of Difference? If you really can’t do this if you’re a client or become a client of the Accountancy + Business Advice Centre I’ll do it for you!

  • The hosting fees are expensive. Anything but as you can now host websites completely for free! We at the Accountancy + Business Advice Centre have 10 subsidiary web-sites we set up to use all our domain names and these haven’t cost us a cent in hosting fees! One US provider lets you set-up 100, yes, 100 web-sites all for free!

  • All my business walks in the door or comes from referrals. Yes they may do but a website is best way to provide useful information on your business 24/7 in a very cost-effective way accessible to all. You can also provide tips and useful information to position yourself as an expert in your field.

  • I have a Facebook page instead. Well done but a Facebook page will never replace a web-site. Firstly, you’re under the control of Facebook, secondly, it’s likely the popularity of Facebook will wane, thirdly Facebook is akin to renting rather than buying and lastly, Social Media sites should just be one weapon in your marketing armoury.

  • My business is too small. So what? Have a small website!

The reality is that you cannot afford not to have a website! If you need help to set-up a low-cost but effective website contact Nick on 0800 ASK NICK or email nick@abac.co.nz

KEEPING YOUR SALES FUNNEL TOPPED UP

Whilst many businesses enjoy regular recurring income, many need to be proactively seeking new orders and new customers at all times. In good times you can just sit back and wait for the business to flood in, but not when economic conditions are difficult.

Unfortunately, many business owners had gotten used to the good times and forgotten how to proactively drum up more sales. This year, more and more business owners seem to be acting sooner to ensure the funnel which is their sales pipeline is kept topped up. It’s a funnel because only a small proportion of the prospective customers you have contact with will turn into actual customers and only so many quotes or proposals you give out will be accepted. Here’s a good illustration of a sales funnel:

A Sales funnel is, at the widest, highest point, the collection of hot leads, of which a certain amount will turn into opportunities, then an even smaller amount of quotes and some of those will convert into an actual sale.

The best way to keep your sales funnel topped up is to divide your sales between recurring work and non-recurring work. Then calculate the average non-recurring sale by dividing the total non-recurring sales by the number of non-recurring sales made. Having done that, work out firstly what percentage of quotes or proposals turn into sales and secondly, what percentage of prospective or existing customer contacts (depending how you prospect for sales e.g. by telephone or in person or both) end up giving you the opportunity to quote or make a proposal. Add a margin for error and hey presto, you now know how many prospective or existing customer contacts you need to make in any given period. If you build this into your regular routine your sales funnel will runneth over!

If you need help keeping your sales funnel topped up contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

CASH COLLECTION

A large part of keeping cash flow under control is managing your debtors. In these challenging times businesses will generally take as much time as possible to pay their accounts, after all, why pay interest on an overdraft facility when they can use your cash for free?

Good debtor management starts with a very simple calculation to measure ‘debtor days’. By dividing the month end balance of your debtors by your average daily trading, you get a simple measure that you can monitor on an on-going basis. If the number of days goes up, you know that people are taking longer to pay you, prompting to you to investigate why. If the number of days goes down, you know that you’re becoming more efficient at collecting your debtors.

As a simple example, let’s say a business is turning over $10,000 per day and has a month end debtors balance of $600,000. This would equate to having 60 days trading revenue tied up in receivables. If, over time, you could get this down to say 45 days, the business would have another $150,000 in the bank account rather than tied up in debtors.

So how do businesses get people to pay on time? Here are a few practical points that may help:

• Make payment expectations clear on all your invoices and Terms of
Trade.
• In your Terms of Trade include a time frame within which any queries
relating to your invoice must be raised. It is always frustrating for a
query with your account to only be raised when payment is already
several months overdue!
• Reserve the right to charge interest on all overdue accounts and
specify the rate that will be charged. You should also advise that any
other costs incurred in the collection process will be passed on.
• Send invoices out promptly, preferably at the time of supplying the
goods or services or if invoicing monthly, very shortly after month end.
• Make it as easy to pay you as possible. Many businesses no longer
have chequebooks, so providing your bank details on invoices and
statements is essential. Allowing payment by credit card is also a valid
option, which can have great results, although take into account the
fees that you will incur.
• Make sure that you have a documented collections system and follow
it. A standard process will include a time line of follow-up letters, emails
and phone calls that ultimately lead to interest and collection costs
being added and the account being handed to a collections agency.
• Get tough! If you give someone a final date on which the account will
be handed to a collections agency, actually hand the debt over for
collection if it remains unpaid. Many businesses talk tough but will then
not actually follow through.

As with all things in business, a bit of common sense and compassion also goes a long way and while not ideal sometimes you may have to bend your own rules on collections when a good client or customer is struggling and needs a bit more time than usual to pay. As long as your customers are communicating with you, being honest and making the payments that they have committed to, then be prepared to cut them some slack occasionally to preserve good relationships. However, the moment those commitments are broken or communication stops, it’s time to move quickly to secure payment.

SUCCESSFUL PLANNING FOR BUSINESS GROWTH

I was privileged recently to help a fabulous small business owner in my role as business advisor.

This switched-on business owner had already grown his business to employ 24 full-time staff and doubled, yes, doubled his turnover during 2010 and now wanted to grow further. His business objective was to take on as many staff as practical, whilst maintaining profitability. What impressed me even more was his policy on staff training. He made it a high priority, even though in his line of business training would normally come last because of the low skill level required. What’s more, the business growth has been financed out of cash flow – how good was that?

Now we already had one of the three key factors for success in place: accountability. Taking on a business mentor is one of the best ways to ensure that your keep on track of your business plan. So we just needed two more success factors: a defined goal and some practical and effective business planning.

Setting the goal was easy – we agreed to 100 staff within 5 years. Now growth of that magnitude and rapidity requires detailed planning as all the different parts of the business have to dovetail together (working capital, HR, marketing, operations, new premises, more plant and equipment etc) so the next task was to complete a detailed set of financial projections covering the next 5 years.

To complete the financial projections, we needed to firstly work out the average turnover that one employee could generate. That way, we would know what turnover we required for 100 employees. Having done that, we then needed to work out the annual growth in turnover required (having regard to current turnover) which turned out to be 32% – a piece of cake when you’ve doubled yours in one year!

From there, it all fell into place into place: required monthly sales, cost of sales, overheads with the new premises, wage costs with the gradually increasing number of employees and how and when to recruit them, what supervision they would need, cash flow requirements, new vehicles and plant needs and the required marketing activities.

If you want to grow your business by enlisting the help of an experienced Business Mentor with key finance and marketing skills contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

BUSINESS ADVICE PAPAU NEW GUINEA STYLE

I have just come back from a week assisting local business owners in Port Moresby in Papua New Guinea.

It is a place of huge contrast with luxury, very expensive hotels and apartments alongside falling down shanty-towns, slums, filth and poverty, relentless sun (it was the dry season), with everyone sweating profusely in the heat. There is rubbish strewn everywhere, mangy dogs rummaging through everything. Graffiti is rife, thousands of people sitting in the dirt on the roadsides trying to sell small piles of fruit or nuts, naked kids coated in dust running and rolling in the dirt, and walking along the street you have to dodge locals spitting out great mouthfuls of red betel nut juice (out of vehicle windows too) which they chew to make themselves high. Not only does this juice stain the roads and pavements everywhere but also it makes their mouths bright red. The beach is covered in rubbish and filth too.

Contrast that with the luxury hotels and apartments. Because of the booming economy (GDP growth is 9% due to oil, gas & minerals) our rooms cost $600 per night. Apartments cost $5,000 per week – yes, that’s per week! The cost of employing the expats is huge. The minimum wage here is $2 per hour whilst food is more expensive than at home.

Whilst there are some very friendly people in PNG it a very dangerous place. Many you speak to, both locals and expats, have been robbed or car-jacked at gun or knifepoint more than once. Shops have signs saying “No Guns or Knives” which is comforting to a degree I suppose! Whilst we encountered no problems ourselves, we were careful. We had a couple of drivers taking us around and if we walked anywhere, we tended to go with at least one other or made sure it was busy and not dark. I did go, against advice, for a couple of runs as it was getting dark along the seafront but it was very busy with locals so I felt safer with so many people around but I was told off later for doing so by the NZ High Commissioner and the expats!

One of our drivers (a local obviously) say crime is not due to poverty, but laziness, as the criminals come from the Highlands where they all have ancestral lands to farm but can’t be bothered. There are thousands of security guards and all businesses, hotels and restaurants etc have them standing around en masse. In addition to the security guards, high fences surround all houses and business premises together with roll after roll of barbed or razor wire or electric fences. Upon arrival in the car, they beep their horns, the gates are opened and immediately shut and locked with you on the inside! You can’t even move around the hotel without using a card which activates the lift, opens the doors in and out of the stairwell or the doors in the mostly glass walls which divide off the sections of the hotel on the same floor.

When assisting a business its best to see the business in action. In PNG this means leaving the safety of the hotel and venturing out into the suburbs or outlying districts. The two most exciting trips for me were out to business owner’s homes and business premises, the first in a shabby part of town a long way out and secondly, to a village built on stilts out over the sea.

On the way to the former, the car I was being driven in (by my new local client) broke down, just alongside a really shabby-looking shanty town. Watching the interest shown by the hundreds of locals upon finding a European in their midst, locking the car doors was not that comforting but luckily, just in time, the car chugged into life again allowing our journey to continue. Not wanting to risk that car again, I asked my new client to telephone one of our drivers to bring me back into the city but he couldn’t find where I was, so after driving around for a while gave up and went back into the city! By then it was getting dark and I was beginning to wonder what to do, as the local taxi drivers are untrustworthy and walking out where I was (a very rough suburb) would be crazy. Luckily, the driver returned following my requests for help and eventually found and rescued me. 

As for the village on stilts, the house/business we had to visit was about 400 metres out on a long slim planked wharf with huts on either side. The surface of the wharf consisted of slats of wood but what was alarming was to be told to walk in the middle because the ends were not safe! Even worse, many of the slats were missing so there are huge gaps to step over as the wharf swayed alarmingly from side-to-side! Tripping and plunging into the sea would have been one thing but not into the soup of rubbish, sewage and sludge that collects underneath the houses, as needless to say, not only do the villagers use the sea as their toilet but their animals too, mainly pigs that are trapped in tiny wire cages with corrugated iron floors. And then, horror of horrors, smiling kids wading waist deep in the sewage sludge – yuk! Apparently, the huts do blow down now again but there’s never been a tsunami, just high tides that bring the water level over the floors! The locals sit listlessly watching as you pass whilst one or two wash themselves or their clothes in big tin buckets.

Business there is done a little differently, with corruption a huge problem, as is the large network of family and friends they call “wantocks” which is both a blessing and a burden. A blessing because that’s the way they get business, but a burden because they don’t know how to get business the normal way! In addition, they feel obligated to either employ their wantocks or support them with money or gifts, which can place real pressure on the business owners in terms of affordability, as everyone thinks the business owners are rich.

Business objectives are different too, as they are not bothered about profitability but want to employ more people and feel obligated to expand their businesses to support their wantocks. Despite that, we were surprised by the successful and profitable businesses we saw which, overall, are financed out of cash flow, as they lack the security for borrowing which is hard to get anyway. We could do with more of that in NZ.

So a fabulous experience all round, and even better, we’re going back next April. By the way, my business Facebook site under the name Nick Roberts (not Nicholas Roberts) includes some photos, so take a look if you’re interested. Unfortunately, as always, photos cannot really capture the whole experience…

HOW TO RECOGNISE A PROACTIVE ACCOUNTANT

Can you tell the difference between a reactive or proactive accountant? Let’s see if you can recognise your accountant here…

How Reactive Accountants Work With Their Clients

How Proactive Accountants Work With Their Clients

You call them when you have an issue

They call you and ‘check in’ on how you regularly

You visit them only when you have to

They ask to see you or visit you frequently

You only see or hear from them when something bad has happened

You hear from them frequently about all sorts of issues, ideas and opportunities

They do not have a regular communication program – it’s almost a surprise when they contact you

They have a structured communication program (that does not cost you anything)

They charge you by the hour for everything they do in 6 minute units so you’re too frightened to ask them anything

You know in advance what it’s going to cost you

They do not understand your business or situation and take little interest in you

They do understand your business or your situation and are very interested in your welfare

You receive surprise bills that you do not understand from the IRD

They have advised well in advance of the forthcoming tax bill and it is no surprise to you

They tell you what to do

They explain what to do and how to do it

They only offer you what you legally have to buy – tax returns and annual financials that add minimal value

They offer you a range of business improvement, systems and marketing services to help you get on

You do not have a very good relationship with them

They make an effort to enhance the relationship with you

They do not explain your work to you – they just mail it to you with no explanation

They sit with you and step you through what it all means, where the money went and help you interpret your situation

They virtually say ‘good luck, you’re on your own’

They offer you real help to plan and achieve your goals, financial and otherwise

Yes, there are plenty of old-fashioned reactive accountants out there and taking on the many new clients that I do enables me to see how they work and listen to what their ex-clients said about them! If you need help to find a proactive accountant contact Nick on 0800 ASK NICK or email nick@abac.co.nz.