Tag Archives: NZ Business

EFFECTIVE BLOGGING

Posted on January 12, 2012 | Leave a comment

Blogging is one of the most effective yet free – yes FREE – ways of marketing yet few venture into this area. It can position you an expert in your field, build your profile and brand, and draw prospects to your website. Here are a few tips to get started:

  • If you don’t know what to write, don’t worry unduly, just pick on an area you know well, the sort of thing you’re probably discussing regularly with customers or staff. This could be the key frustrations customers suffer when dealing with suppliers in your industry, tips on how to get the best out of your product or service or how the customers can reduce costs or save time etc. Google is a great source of ideas and inspiration.

  • Blog regularly by getting into the habit. I’ve conditioned myself to blog in the same as I’ve conditioned myself to keep fit – if I don’t do it I start to worry and actually feel guilty! The more you do, the easier it becomes.

  • Keep them as short as possible. This isn’t easy and takes practice, but the less you write the easier it will be to read and keeping them short doesn’t mean you are short-changing your readers as writing concisely and to the point will be far more effective and informative.

  • Make your blogs as easy to read as possible without excessive technicalities or jargon as these will just confuse your readers. Youngsters are useful here as they will be able to pick out words they don’t understand. No children or nieces or nephews of 10 -14? Email them to me, I’ll get my younger two to read them through.

  • Write your blog as though you were speaking to a down-to-earth client or customer, not as you would have done whilst you were at school trying to please your English teacher. Not as far as text language maybe, but short easy-to-read sentences, bullets and “chunking”, breaking it down into small easily digestible parts.

  • Try and focus on areas of interest to your readers which may not be the same as yours. Initially, you may have to suck it and see, or look at other blog sites but when you’ve done a few blogs you’ll find that some topics or areas are much more popular than others, so write more on these.

Starting to blog is like going to the gym or for a run on a winter’s night – it’s a scary thought but once you get out there you enjoy it, so don’t delay or prevaricate, just do it! If you need help with your blogging contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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MISSION STATEMENTS

Posted on December 15, 2011 | 2 Comments

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.

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BECAUSE OF THE CUSTOMER

Posted on December 8, 2011 | 2 Comments

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.

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Posted in Business, Marketing

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RISK REVERSAL

Posted on December 1, 2011 | 1 Comment

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.

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Posted in Business, Marketing

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FREE WEBSITE ANYONE?

Posted on November 17, 2011 | 3 Comments

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

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Posted in Business, Marketing

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KEEPING YOUR SALES FUNNEL TOPPED UP

Posted on November 10, 2011 | 1 Comment

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.

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CASH COLLECTION

Posted on November 3, 2011 | Leave a comment

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.

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SUCCESSFUL PLANNING FOR BUSINESS GROWTH

Posted on October 27, 2011 | Leave a comment

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.

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Posted in Business, Finance, New Business

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HOW KEY PERFORMANCE INDICATORS CAN TRANSFORM YOUR BUSINESS

Posted on October 6, 2011 | Leave a comment

I once assisted a business in the UK that couldn’t understand why they had no money in the bank and couldn’t pay their bills. 

The business owner used a traditional accountant, who just prepared the annual financials some months after the year-end, and as is typically the case, the excellent accounting software purchased was used solely for the GST returns. What does that mean? Yes, you guessed it – no management information or regular reporting of any kind which means the business owner was, totally unnecessarily, operating completely in the dark with no idea of what was happening in the business

After discussing things with the business owner I said that what we needed was a two-fold approach, firstly to work out what the current trading figures were, and secondly, if things had gone wrong, why.

To start-off with, easy-peasy, interim management accounts (which was like falling off a log) comparing the trading results for the current year-to-date with the comparative period the year before. These were produced not on the accountant’s externally located accounting reporting software, but on the client’s accounting software (which was more than capable) to save both time and cost. This showed a substantial decline in sales, a reduction in the gross profit margin and overheads which had not been reduced fast enough to cope with the decline in sales and gross profit.

So far, so bad! But why had things gone so bad? Reach for your Key Performance Indicators (KPI’s) which measure the key elements in any business, those which are critical to business survival and success. These are the things that MUST go right for your business to be able to deliver your core products or services in a cost-effective manner which meet or exceed the customers’ needs, which are often called your Critical Success Factors. Having worked out what these are, you need to start measuring these since what you can measure you can manage and then work out how to improve. Often, these are few in number so it’s normally possible to restrict the reporting to 8 or 12 what are known as Key Performance Indicators.

In any trades business, the Critical Success Factors are normally very similar, so I knew what to look for and so I produced a KPI report highlighting the areas where I thought the problems were occurring, a simplified version of which is reproduced below. No budget figures of course, because at that point we hadn’t set targets, but at least these could be filled in later when we had worked out what we wanted to aim for.

XYZ Ltd
Monthly KPI Report for Feb 2011

For the Month YTD

Actual Last Year Budget Actual Last Year Budget
Sales $74,554 $104,889   $887,656 $1,201,876  
Cash Collected $65,222 $93,445   $796,101 $1,180,665  
Gross Profit % 52% 53%   52% 55%  
Overheads $38,101 $46,123   $481,774 $571,331  
Net Profit $667 $9,468   $20,192 $89,700  
Labour Productivity % 81% 86%   82% 89%  
Value Added on Parts $6,512 $7,998   $84,116 $106,117  
Average Labour Hourly Charge $47 $53   $46 $52  
Number of Jobs Completed 199 233   2403 2711  
Average $ per Job $375 $450   $369 $443  
No. Of Customers *


6421 5158  
Average Sale Per Customer


$138 $233  
Job Enquiry Conversion Rate 74.00% 84.00%   81.00% 93.00%  
AR Days Outstanding 52 44   51 42  
Work in Progress Days Unbilled 43 34   41 37  
* Invoiced in the last two years

And what did the KPI report show us? That there had been a serious decline in virtually all the key areas:

  • Whilst the number of customers had increased significantly, the average sale per customer and the average $ per job had reduced substantially, meaning a lot more running around, more administration costs, and more working capital tied up in the business.

  • The job enquiry conversion rate had reduced by 12% meaning that more time was spent talking to customers with nothing in return.

  • Both labour productivity and the average labour hourly charge had reduced which indicated the business had become much less efficient.

  • More working capital was tied up in the business as both Accounts Receivable days and unbilled work in progress days had extended outwards.

  • Not surprisingly, cash collected had reduced substantially too.

The next step was to set some targets to get the business back to its former level of profitability by implementing a number of specific strategies for each problem area such as billing work in progress more frequently, collecting Accounts Receivable quicker, working to improve the job enquiry conversion rate by scripting and improved quoting techniques and moving the customer’s focus away from price to the benefits of using the business in the longer term, as well as introducing a powerful guarantee and re-inventing the USP (Unique Selling Proposition) of the business.

So, all this just from a quick, inexpensive look at Key Performance Indicators – a truly simple, but powerful, underutilized business improvement tool you can use to transform your business to success!

If you need help with yout business performance contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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CASH FLOW MANAGEMENT

Posted on September 1, 2011 | Leave a comment

Virtually all of us will know of recent business failures, some of which will have had a direct impact on our own businesses. Sadly, many of these failed businesses will have been profitable and failed simply because they ran out of cash. The importance of cash to a business can easily be compared to the importance of air to a human – cut off the supply and the end is imminent.

In a typical business the cash cycle looks something like this:

Ideal flow of cash in your business

Cashflow management

In the above model you start your business by using cash to purchase stock. You then sell some stock (hopefully for more than it cost!), converting your stock into debtors. Once you are paid by your debtors the cash returns to you and the cycle begins again. Obviously in some businesses (for example a service business), stock in the above model can be replaced with work-in-progress and in others there may be no debtors as all sales may be paid for in cash. However, regardless of the business, a variation of this model will apply.
The more you can accelerate the cash cycle outlined above, the faster you turn your profits into cash and the easier it is to manage your working capital position.
Aside from the obvious issues, such as generating sufficient sales and having suitable margins, the areas that typically cause cash flow problems are the following:

  • Carrying Too Much Stock – ideally a business should carry no more stock than it needs in order to maximise sales. Slow moving or obsolete stock needs to be liquidated and turned back into cash. Monitor stock turn rates, create sound relationships with suppliers to shorten lead times and know your market so that you don’t end up with hard to move items. It is also worth noting that there is a proven link between high stock levels and an increase in both stock theft and damage.
  • Inadequate Debtors Control – take a look at the way you manage debtors and where the payment process can be tightened up. Monitor your debtors’ days and implement a robust collection system. Late payers need to be brought under control now to minimise the impact on your cash flow. In this market customers will take every opportunity to delay payment and those businesses without tight credit controls are invariably the last to be paid. Don’t forget that it’s costing you money every day to fund your overdue debtors, so charging interest is a valid option.
  • Capital Expenditure – be wary of paying cash for any significant capital items unless you have robust cash flow forecasts in place that show the purchase can safely be done. Many businesses run into trouble because they used their cash to fund asset purchases and then later couldn’t pay their tax bills or their suppliers. Remember, you can finance or lease your equipment purchases so that you are not putting pressure on your cash flow. A good rule is to match the life of the loan with the life of the asset.
  • Drawings – as a business owner, how much money are you taking out of the business on a monthly basis? Many business owners are shocked to see the annual level of drawings that they take and are unaware of the pressure that this can put a business under. Set yourself a budget that is acceptable to both you and your business and stick to it.

One of the simplest and most valuable business tools you can have is some solid cash flow projections. For some businesses they find that they can operate on projections that show a month end cash position only while others need weekly or even daily cash projections to keep things on track. Projections let you see potential cash flow problems in advance and deal with them before you reach a crisis point.

If you need help with your cash flow management or cash flow projections contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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