Small businesses can collaborate to grow

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If you win, we all win this is what a dear friend and colleague recently said to me, he said that I was one of them and there was no way that they’d let me go under without trying to help me.

These words made a remarkable impression on me, and I started thinking about how that spirit of collaboration could really be what is needed for small businesses to grow.

I thought how many business owners have outstanding ideas, all they want to do is honour that idea and nobly go about growing that one idea to its fullest potential. Very few get there because they need cash flows to ensure that the business lives. How many times do you hear that cash flow is the life blood of the business?
I began understanding that in order to do this, there needs to be cooperation with other businesses, this keeps the cash trickling in at the most basic level.

A supply chain is a group of businesses which are all involved in the moving of a product from one state to the other, either from raw material state to finished product state etc.
What makes businesses efficient is the efficiency of their supply chains. From the producer of its raw materials right up to the person who delivers their goods to the end-user, efficiency in ensuring costs are contained, quality is upheld and time is minimised are the 3 main things they all are equally responsible for.
Very often this level of efficiency is what’s missing from small businesses and likely not to be realised until they reach their maturity. However I believe start-ups are where this kind of social arbitrage is most needed and likely to help each business in the chain succeed.

Let’s look at a bakery for example.

The baker’s processes are geared toward ensuring that customer orders are satisfied at 100% quality and zero defects. The bakery owner would wake early each morning to knead the dough for each delicacy, set the oven temperatures and ensure that the truck is loaded on time so it arrives on time at the client site.
The bakery owner is pleased with himself and finds that defects are 40% and quality is between 60% and 80%. He’s had his customers for years and is very happy with his existing processes and supply chain.

However, let’s imagine we reduced the waste by using baking mix instead, the accuracy of the mix ensures each delicacy is made to specification, with next to zero room for errors (with translate to waste).

If he procured the mix from the manufacturer, he can get it at a better rate and because he now has historic data of his order quantities, he further able to order just what he will use.

Then we look at the number of staff, this can also be reduced with the use of baking kits as let’s assume before he had specialists who headed each type of delicacy, which would make his overheads go down further.

Once wastage is reduced, the process becomes more efficient, let’s say efficiency increases to 80%. To further make his business efficient, we can look at how he could piggy-back his deliveries with those of nearby bakeries so he doesn’t have to bear all the costs of transportation. Remember that hiring a truck would cost you the forward and return legs even though your return leg was with an empty truck.

Ideally, he could negotiate with other bakeries on pooling resources and ensuring that they target bigger baking contracts and get lower prices from their suppliers. Jointly they can increase their revenue as well as work at higher efficiency rates.

This is just one aspect of increasing efficiencies for small businesses, for more information on how and what to do, contact RareRabbit at rarerabbit@mvemve.com.

About RareRabbit:
RareRabbit is a consulting company that remodels small businesses to function optimally and productively.

The cost of bad service

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Like many others, I’ve had my fair share of bad service. What makes it frustrating is when a contract locks in so you’re attached to the bad service. On the other side of my frustration, I realised that its not so bad for me since I only pay once for the bad service, and keep making them redo it till they get it right.

On the other hand, my really terrible service provider has to bear the costs of the extra work. I wondered whether they had noticed the spike in their operating costs and if they cared to enquire what the cause was. If they had, I think they’d see that the cost of doing business hadn’t gone up more than the cost of living, what had driven their costs was the extra materials needed to work on one area.

Let’s take the installation of a door hinge; if they damage the door in the process, they need to buy the door and additional hinges and anything else they may require to get all this fixed.

Now can you imagine budgeting for this? Clearly they wouldn’t but what they might do is just take that as an indication to increase their costs to clients, which makes them uncompetitive. Ultimately the unhappy clients and the price sensitive ones all walk away and tell anybody who’s willing to listen.

As a business owner, you’ve worked really hard to get this client and invested a lot to secure their business, yet in an instant they can walk away from your business due to bad service.

To quote Subir Chowdhury author of The Power of Six Sigma, “…preventing mistakes can make you profitable.” The corollary is simple, mistakes cost you money.

How much bad service really costs, appears to be something that organisations aren’t always cognisant of particularly once they become big in size. The bigger they are, the more constant the wastage tends to be.

In 2011 American Express did a survey to determine the value of bad service in nominal terms. Their findings were that $338.5bn is the cost of bad service per year in the world!

CMTA, a customer experience and service quality improvement firm conducted research on what the effect and cost of bad service on the bottom line of a business is. Their findings were;

As satisfaction levels drop, loyalty drops fasterThere is a significant drop in loyalty between “very satisfied” and “somewhat satisfied” customers – sometimes as much as 50%. A dangerous policy in many organisations is to ignore this fact and simply add together the percentage of “very satisfied” and “somewhat satisfied” customers to get a “better satisfaction score”.

Problems drive customers away
Customer loyalty varies from one industry to another but there is typically a 25% drop in loyalty among customers who experience a problem. In revenue terms this can be the equivalent of losing some, or all, of the revenue from one in every four customers who have experienced a problem.

More customers have problems than you think
For many organisations, the only measurement of problem-experience comes from their complaints department. Research shows that as many as 50% of your customers may actually be experiencing problems, even though only 5% of those may complain to your complaints department. As many as 95% of customers who experience a problem may say nothing to you at all.

Unhappy customers spread the word!
CTMA’s research confirms that customers typically to tell twice as many people about a bad experience with customer service than they do about a good one. Depending on the industry, between 5 and 10 people are told about a bad experience. Today, the dangers of negative word-of-mouth have been greatly amplified by the Internet and the power of social networks.

Effective customer service and response pays
CTMA’s research also confirms the importance of effectively responding to customers when they do complain. Customers can be very demanding but, with an effective response, it is still possible to obtain a more loyal customer afterwards – than you had before they experienced the problem!
(Counting the cost of customer experiences working paper by By Paul Linnell)

When it comes to bad service, I keep in mind what a friend recently told me. She said that people are only as loyal as their options.

Decide to live a rewarding life

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Every one of us seeks to be in a position where we feel enriched in any relationship we invest our efforts in, such as those with colleagues, business partners, suppliers and customers.

We want to feel that we play a meaningful part in them and then to be able to offer ourselves with an open heart each time. This is where we are fully engaged in what we do. We can all feel this way; it is possible because we possess everything we need in order to feel this way.

The first thing is to show interest and get involved. That is one lesson that I learnt about getting ahead. In my career, in my pursuits for RareRabbit, in getting involved in many exciting projects within the BMF. I always show interest and I genuinely want to be involved in things that require me to stretch a little further than myself.

This energy that is restless within us is life seeking expression. We need to find noble ways to let that out and see just what more we can become.

The next thing that you need to consider doing is to put some skin in the game. Put simply, commit. Very few people are willing to go the distance and put their head on the proverbial chopping block for what they believe in. This is where we fall short and rob ourselves of what could possibly be the most enriching experiences in our lives.

Not putting skin in the game is the same as learning how to swim without every actually getting into the water. You’ll never know that rush of the ice cold water hitting your skin then swallowing it up, the thrill of being fully immersed under water, that feeling of momentarily feeling really alive!

In this New Year, resolve to live with your heart wide open, to put skin in the game to be truly enriched. It is in doing this that you enrich others. When we are all happy and inspired the vibrations of our combined energies soar and bring us to our highest selves.

Each person leaves a legacy — a single, small piece of herself, which makes richer each individual life and the collective life of humanity as a whole.” ― John Nichols, The Nirvana Blues.

Love and customer care

It’s the day before Christmas and although many may not celebrate for religious and other reasons, one thing that connects us all (in business and in our private lives) is the joy and love in this season.

I enjoy this period specifically because it’s probably the single time of the year that we take off our human suits worn so tightly throughout the year and become our real selves.

In business we probably need to take this spirit of holiday cheer along with us everyday in providing customer service. Here are my points to consider on this.

1. Seek more to understand than to be understood. Probing for the need behind the need, would be a key function of solving a customer’s problem. Telling them of your processes and policies makes them go away but doesn’t resolve their burning issues.

2. Follow up with people, expeditiously. In the world of instant information customers seek quick turnarounds to their problems. Taking 3 weeks to give them a one sentence response which doesn’t even solve the problem is just criminal.

3. Be of service, most companies take the service part of customer service lightly. It doesn’t serve them or their customer doing this. All it achieves is brand compromise, where an unhappy customer preaches just how bad your business is. Remember the caveat 6 degrees of separation? All it takes is for that one disgruntled person to tell their network and before you know it, less feet come through your door.

This is not new, yet very few businesses invest in ensuring that their customer service departments are well equipped with meaningful ways to handle and deal with their clients.

Have a wonderful holiday, make time for your loved ones and for yourself. If you’re traveling, be safe on the roads. May the coming year be all that you dream.

Happy Holidays!

A long – term view of things

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Entrepreneurs mostly always begin with just an idea. It’s normally a concept of something that largely has not been done before. Entrepreneurs spend an ample amount of time refining the conception of their businesses. This is all good and well however it is important that when they come up for air, they are able link the intellectual, conceptual aspects to what will happen after they penetrate the market and have been operating for say, 2 years.

It is for this reason that Steven Covey, author of The seven habits of highly effective people, says begin with the end in mind. Long term sustainability includes considering how you will deal with an economic recession, understanding trends in your industry so you can proactively respond to them thus keeping you ahead.

A day ago I had the privilege of meeting with a senior strategic planner at an enterprise funding agency. He relayed to me the need to understand the sector in which one is involved. An example he made was that of the general dealer, a key player especially in the Township economy. The industry was regulated till about the late eighties, meaning that you previously were required to have a trading license to be general dealer and these stores were our version of Pick ‘n Pay in that time. Deregulation brought about lower barriers to entry which is what birthed the Spaza Shop. A smaller convenient store, these sprung up on every street and suddenly one could bypass the general dealer and opt for the Spaza Shop.

Another thing that Spaza’s got right at that time was service, they opened very early in the morning so if you were going to catch a tax at 5am and had no change (small denominations of the note you have) they helped change that for you. And what was a universal problem in all households was that it took Monday morning for them to realise they had no bread for breakfast and kid’s lunch.

The Spaza was always open; in fact in our home in Pimville, it was the bread truck that woke me up at 5 am each morning. The Spaza also closed much later than the stores. This saved a lot of us that always remembered in the late evening that we needed certain things before we got home.

The Spaza is the only place that sold 1 single egg instead of a box of 6 or a dozen. It remains the only place that sells one cube of beef stock where we buy it in a box of 12 in the store.

I think I have made my point of how useful it was during its time. Now fast forward to post 1994 South Africa where Spaza Shops in the Townships are under threat. The entrance of competition in the form of Somali-run Spaza Shops. These guys run an efficient supply chain providing real savings for their customers added to that they have a real sense of the old maxim the customer is king.

Further to this competition, is the development of Townships with malls and shopping centres being erected. The Spaza Shop’s clients want to become part of the progress that is Pick ‘n Pay and Woolworth’s, organic food, loyalty points, use of speed point at pay points and of course feeling they are a part of the modern world.
The long-term view of things requires that you are aware of the changes and trends. Imagine what the vigilant Spaza owner would have done seeing the changes? Perhaps begin with being part of the Somali buying syndicates to also tap into the lower prices which can be passed onto his customers.

Or even more than this, they could have looked at changing the form of the Spaza Shop, perhaps no longer being a mini general dealer. But looking at specific items such as cold drinks, personal care items and yes, selling one egg instead of a box, which I believe could be cheaper than the convenience stores.

In the 21st century we are finding that competition is coming from areas that weren’t your traditional competitors to begin with. Innovation and technology are enabling this not forgetting legislation.
If you are an entrepreneur reading this, consider this as a challenge to innovate and come up with a new you, show up differently to your clients and be surprised at the positive response.

The trick is to continue to solve a problem through your services; if you’re not solving a problem then you’re creating waste.

A parting thought is that night clubs particularly in the upmarket areas understand that in order to stay in business they need to rebrand and even change venues. What can you do?

How to build a business that will outlive you

built to last

The topic today speaks to my personal path of building a business that becomes great such as the likes of Apple and Microsoft.

My two cents on this matter is as follows.

Determine what your purpose is, that is the spirit which you will pour into your business. To do this well, one needs to rid themselves of internal conflict or cognitive dissonance over what it is they believe they are here (on earth) to do. One way to find out is to look for that golden thread in all your areas of involvement. Are you passionate about being an enabler for others or are good at starting projects from nothing and enjoy seeing them grow.

Next is to think about what exactly it is you want your business to stand for. This is the why, why are you in business? It is normally linked to your purpose. So spend time considering what you stand for and what would your employees be volunteering for if your company was a social movement? Can this be something which you view as a dedication to your life’s work?

What problem is your business providing a solution to? I have asked several consultants on business development what it was that they find start-ups tend to get wrong. In many ways they have told me that start-ups tend to underestimate the market for their products. This leads to understated budget forecasts which in turn frustrate operations. Knowing your market requires an understanding of what it is that drives your client’s purchase decision and what factors influence your own margins. This information will help you know what to manage during an economic boom as well as during a recession as the client’s (and your) context becomes different which impacts their purchase decision.

Where is your client? The client or customer has to be top of mind throughout every effort you make in your business. Companies (even the big ones) can get so deeply involved with themselves and forget adding value to their client. The client is the person who determines whether or not we have a business to run in the first place. So we need to place them squarely at the centre of each strategic plan, product development and restructuring process. A word of caution however is, do not try to be all things to all people. Ensure that in doing things right (for the client) you are doing the right things.

Consider the specific type of client your business is providing solutions for. Your mission statement and values statement will help profile the type of client you are targeting. Tim Williams, lead consultant at Ignition Consulting group, states that a business is defined by the clients and services it does not have. To further illustrate this point, Williams states that narrow companies can have large markets; companies such as Mittlestand and Basecamp are a case in point. It is through their focus that they have developed specialisation in their fields. One would travel (and spend a pretty penny) for a specialist doctor whilst no one would do the same for a GP.

Governance in small businesses

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The word governance refers to the processes of ruling or controlling resources in particular. The pillars of corporate governance are ethics and risk and main elements of governance are fairness, accountability, responsibility and transparency.

The increased importance of governance in business today is from the collapse corporations such as Lehman Brothers, Enron and WorldCom as a result of breaks downs in one or in the case of Enron, all of the elements of corporate governance.

Corporate governance as a practice has grown immensely subsequent to the economic impacts of the collapse of these global giants and has been strictly required of large corporations. Organisations of this size are powerful and they tend be most at risk of such power being abused by individuals on the other hand this places investors and other stakeholder with legitimate claims to the corporation at the mercy of management and this relationship is a risk of being abused.

The question now however is whether small businesses should be expected to instil good governance procedures in their companies. It is said that compliance with the codes of good corporate governance such as Sarbanes Oxley in the US in particular costs companies millions per annum and yet they don’t necessarily prevent impropriety from occurring where good corporate governance is concerned. So what then is the point for small businesses many of whom barely make enough to get by?

The opposing view particularly among advocates of codes such as the King 3 report (SA) and the Combined Code (UK) will tell you that investors are more likely to pay a premium for equity in a well governed company than pay a discount for one that has no proof of adequate controls or governance measures in place.

What then of small businesses?

Well according to research by 4imprint, a research company which provides “how-to” articles based on this research, small businesses should start integrating corporate governance practices in order to support its investors.

Corporate Secretary, an online publication on governance, says reasons for corporate governance in a small business are;

Small companies are always growing so they need to implement policies and procedures ahead of time. This will eliminate future risk of growing bigger in the future such as insidious growth of the wrong culture of distrust or abuse of power.

Regulations, unfortunately part of being in business is to comply with regulation and a big part of this regulation is to ensure that the business has transparent procedures and policies that provide its employees with a framework on how to conduct business while still being compliant with the law.

So how can this be done exactly?

An advisory board is probably the simplest way in which this can be done as it would be composed of independent members who are able to help the organisation identify risks, address conflict of interest and identify how the business can operate optimally. This advisory board can be a type of business “mentor” to the small business and by extension would fulfil a function similar to a board of directors in a large corporation.

Further to this the small business should consider consistent financial reporting which will equip it with the resources it needs to closely monitor its revenues and expenses. These records will also serve to hold staff accountable and promote transparency.

Lastly, addressing compensation and benefits by means of a kind of policy or protocol for how staff (owners included) is remunerated. Once again this promotes transparency and fairness and goes a long way to ensuring that in the future the company has entrenched in its culture the moral code of doing the right thing.

 

 

 

Sources:

Corporate secretary.com

SA Business Index

4Imprint

Spike Lee’s Mo’Ne Davis Ad Settles the Whole ‘Throwing Like a Girl’ Thing

This brings new meaning to the derogatory phrase “Like a girl”. #likeagirl.
#brandswithconcience.

TIME

The World Series is upon us, but 13-year-old Little League superstar Mo’ne Davis is still the most talked-about player in baseball. Director Spike Lee teamed up with Chevrolet to create a commercial featuring the young pitcher, who made the cover of Sports Illustrated this year after becoming the first girl in history to throw a shutout during the Little League World Series.

In the ad, Davis reads an open letter to America: “I throw 70 miles per hour. That’s throwing like a girl,” she says.

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Ban the word bossy. Sheryl Sandberg lights up TEDWomen 2013

Not bossy, executive leadership skills!

TED Blog

Photo: Marla Aufmuth “That little girl’s not bossy. That little girl has executive leadership skills,” Sheryl Sandberg, left, tells TEDWomen co-host Pat Mitchell at TEDWomen 2013. Photo: Marla Aufmuth

“It’s nice to look out and see so many women. That’s not my norm,” Sheryl Sandberg comments drily as she takes her place onstage at TEDWomen 2013  at the SFJazz Center. She’s here to talk with co-host Pat Mitchell, in a Q&A follow-up to her incendiary 2010 TED Talk, given at a TEDWomen three years before.

First, Mitchell asks her to remember the process of putting together that talk. The subject matter wasn’t her first choice; in fact, Sandberg recalls that she’d had absolutely no intention of talking about anything so personal. “In the business world, you never talk about being a woman, because someone might notice you’re a woman,” she says. Friends told her that if she gave a “woman’s” talk, it…

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