We know that 2016 will be a difficult year. Entrepreneurs I speak to believe competitive pressures are increasing as businesses chase shrinking markets. Price cutting is common as competitors do anything to get a slice of the limited business available.
Some entrepreneurs may respond by cutting costs to remain marginally profitable. Others will look for new markets or slash prices, and some will simply hope to avoid catastrophe. The problem is that almost all competitors will do similar things, so competitive pressures will remain unchanged.
This is a good time to think strategically about positioning your business to get through bad times while increasing your competitive advantage.
I suggest you take a deliberate competitive position and I have listed three possible strategies for your consideration, and a fourth which you could fall into if you do nothing.
Companies adopting this stance will throw up defences, particularly around their customer base, and take very few risks. They will plan their cash flow carefully and monitor cash continuously. They restrict development of new products to those that will preserve their key customers.
They will increase customer service and communication, but ruthlessly eliminate waste and unprofitable products.
They will pamper key staff, look after suppliers and get rid of deadwood. This strategy is much more than cutting costs and prices, in fact some prices may increase to preserve margins.
If you adopt this strategy you will need to protect everything that allows you to defend all that is yours. When the economy improves you will be stronger than competitors and able to attack them in their weakened state.
This is a high-risk high-reward strategy that is not for the faint hearted.
Companies following this aggressive strategy go on the offensive when times are tough, growing the company by acquiring new customers and markets, usually at the expense of more cautious competitors who are caught unawares.
If you adopt this idea you would have aggressive pricing offers, great incentives for new customers and extensive marketing. You would also lure away key sales and technical people from competitors.
This is an expensive strategy, so you need more sales to pay for it, but that means you could negotiate with suppliers for better terms in return for increased volumes, and attract high performing people, both of which make you more competitive.
We think of the innovator as inventing new technologies or products. This is only one type of innovation; pricing, packaging, manufacturing, delivery and customer response can all form the core of an innovation strategy.
Think of the way the motor and cell phone companies price products; a mix of products and services expressed in monthly payments. The fast food industry has many successful innovators from creative marketing to new ways of getting their products to customers.
If innovations have never been tried before they may not work, so there is risk. The company must be agile, creative, motivated and excited.
Good internal and external communication is needed to convey excitement and creativity. Those who get this strategy right become difficult to compete with and are able to grow quickly.
Some entrepreneurs will drift along as usual. They risk being vulnerable to the predators and innovators, they will be weak compared to the defenders, stranded in the worst of all worlds.
I call this the ‘drifting along’ or the ‘potential victim’ strategy. Think carefully before you stagnate into this one.
For many people, the holiday season represents a time of change.
For many people, the holiday season represents a time of change. Some folks have made the decision throughout the year to start a new business in 2018, and the festive season’s message is one of hope for a bright new entrepreneurial future. Unfortunately, for most, this dream can become a nightmare without considerable amounts of planning on part of the entrepreneur and start-up founder.
So, without sounding too depressing, Christmas and New Year’s should be a time for stringent planning rather than celebration for the season and the year ahead. Call me Ebenezer Scrooge, but hitting the laptop and doing research is the best thing an entrepreneur can do while family and friends are unwrapping gifts or holiday-making.
As a business owner who has used the month of January as a starting block for my foray into a new industry, I can say that one of the problems I encountered was not accurately defining my customer personas, both in real-time and online. It got me thinking; if I can make the mistake when it comes to accurately segmenting customers in real-time, how many people make the mistake of inaccurately creating customer personas for their online brands?
It’s All About the Customer
Creating a customer persona is easy. Most business founders have an idea of who their customer is before marketing their product. And once you know who the customer is, its just as easy to find out their likes and dislikes, as well as their habits.
The best way to create customer personas is to base your personas on research and data. Many established businesses find this a simple task, as they have a wealth of clients from which to draw this data. Unfortunately, this is not the case for business founders, so they must carefully test the waters using surveys, third-party research, and an ear-to-the-ground within the industry.
Once a business understands its various buyer personas, it’s time to start considering the typical online buyer persona…
Just because you can accurately determine your optimal customer due to your created customer personas, you may have to create alternative personas for online consumers. This is because a slightly different person will be looking for your product online.
As an example, Bob owns a pool business, building as well as maintaining pools for residential clients across Johannesburg. Bob’s nominal customer persona is that of Adam, the 40-something business owner who owns a home in a middle-class neighbourhood. Adam is likely to come across Bob’s out-of-home marketing material, or comes to Bob for business through referrals. However, Adam differs from Lerato. Lerato is a different age, race and gender. Even more importantly, Lerato looks for products and services exclusively online. To appeal to Lerato over Adam, Bob’s customer persona must be changed for the online customer, and the online customer must be exposed to tailored content to be appealed to.
Lerato also lives in a middle-class neighbourhood, but Lerato has young children, while Adam’s children have now moved out of home. This means that Bob can take advantage of Lerato’s need for pool safety nets and a custom-built pool fences, and Bob will make sure that Lerato is exposed to content about these services while making her online journey.
When creating online material, ensure that it is developed to take advantage of the online customer. One mistake that business owners make is that, in their attempts to be recognised as industry leaders, they try very hard to use industry specific language. They make attempts toward showing their prowess in the trade and showcase their own certification and business journey.
The online customer persona representing the business’s primary online buyer does not care about the business’s goals and objectives, and they have no clue as to what is being said when the website uses online lingo. They want content created for them; they want to know why they need the product or service, they want to know that they are using the best business for the job, and they want social proof regarding the service offered.
Make sure that you do proper content mapping research, and identify the online journey taken by the consumer through online channels before they make a purchasing decision.
Take this a step further and make sure that you define several online customer personas. Determine the value of each persona and structure content and the consumer journey for the most profitable of the personas. Additionally, determine the lifecycle of the journey, how much attention a segment of online content generates, and capitalise accordingly. For example, if most of the purchasing decision is made on the product or service landing page, make sure that the landing page is optimised as often as possible to increase your business’s revenue.
Hit January 2018 running, and make sure you understand your online client before receiving your first online lead. And if you make a few mistakes initially, don’t worry. 2017 was – and 2018 will be – known for being the year of big data, where business owners make operations and marketing decisions based on the behaviour of customers online. Always analyse the data available to your business when made available, and make changes accordingly. The best of luck for the year ahead!
How South African Small Business Owners Can Overcome Economic Uncertainty
Here are three things you can do to overcome these economic challenges.
South Africa’s entrepreneurs haven’t had it easy. The current political landscape coupled with global uncertainty has brought with it significant business instability.
This is evidenced in Xero’s 2017 State of SA Small Business Report which found that 68% of small businesses view economic instability as their number one challenge, while 38% are concerned about their cash flow.
Within the small business community, the report also highlights a growing frustration with the government’s lack of support to help keep them afloat. Despite being set up to do just that, 89% of small businesses don’t feel that The Department of Small Business provides the right support.
This lack of support extends across government: 48% of entrepreneurs would like to see more funding, 44% want less red tape, 43% call for more tax breaks, and 36% want better access to finance. While these requests are perfectly reasonable, they’ll only take effect if the government gives them the go-ahead.
Implementing more measures to support small businesses will take time. This means 2018 is going to be just as challenging as 2017 – if not more so.
Here are three things you can do to overcome these economic challenges.
Smaller businesses are typically more agile than their larger competitors. This is a huge advantage when navigating an unpredictable market. Macro-economic challenges are, for the most part, beyond your control. Rather than try and ‘fix’ the situation, move with the market and adapt to its changing nature.
The best way to maintain customer relevancy is to review your offer regularly and look for ways to improve it. You could consider lowering your prices – as long as it doesn’t upset the books. Or think about investing money back into the business to yield greater returns.
There’s no one-size-fits all approach, so just make sure you do what is right for your business. Part of this is ensuring you stay fresh in the eyes of your customers by continuing to respond to their evolving needs.
2Invest in new technologies
Investing in the most up-to-date technology will pay off in the long run. For South Africa’s small businesses, technology is only growing in importance: where 19% said it was essential last year, that number has increased to 49% in 2017.
Cloud accounting software, for example, can help you understand your company finances and track budgetary health in real-time. Knowing exactly where your funds are and how they’re being allocated, enables a much faster response time – this is critical during unstable economic times.
Technology can also help you build a more competitive business by reducing wasteful expenses, automating time-consuming data entry tasks and streamlining processes for greater efficiency.
The more knowledge you have, the easier it is to put measures in place that will enhance your company’s operations.
3Deliver superior customer service
Purse strings might get tightened during tough economic times, but there will always be demand for certain products. Ensure you give your customers a superior user experience when they engage with you, and they’ll return.
It’s not always possible to compete on price. Bigger, more established companies generally have the capital reserves to undercut their rivals. But, small businesses can always compete on value. If you can offer a superior customer service, then you’ll receive customer loyalty in return – this is priceless in a volatile economy.
The past year has been incredibly challenging – and it’s unlikely to get easier as we move into 2018. But, the most successful entrepreneurs don’t let the economy thwart their ambitions – they equip their business to weather any storm. The sooner you innovate and adapt your business, the better your chances of success.
SAB-Commissioned Research Shows SA Poised To Reap Entrepreneurship Rewards
Every country has both significant opportunities and challenges.
Every country has both significant opportunities and challenges. It is becoming increasingly evident that corporates have a big role to play in addressing both.
Companies, particularly large ones like The South African Breweries (SAB) with all its scale and resources, not only do they have a responsibility but a duty to invest in a better world for all.
We know that entrepreneurship can have a huge impact on the growth and development of countries. That is one of the main reasons SAB is backing entrepreneurs 100%. The level of their impact was reaffirmed by recently released research by the Global Entrepreneurship and Development Institute (GEDI).
Not only is the environment for entrepreneurship in South Africa more conducive to small business development than many had previously believed, it also places the country ahead of some of our partners in the Brazil, Russia, India, China and South Africa (BRICS) economies and several others.
This is pretty significant, given that the South African government’s National Development Plan (NDP) envisages that 90% of jobs will be created in small and expanding firms and that by 2030, the output from these firms would have grown substantially.
The GEDI research indicates it is commonly believed that South Africa does not nurture small businesses. This is mainly because self-employment makes up a comparatively small share of the total, relative to other African countries where it dominates employment.
It is, however, interesting that the report found that high levels of total entrepreneurial activity correlate globally with lower GDP, prosperity and development, and vice versa. Once you scratch beneath the surface, this begins to make better sense.
In less developed economies, it is harder to grow a small business beyond a basic survivalist enterprise. That is often where the story ends: These businesses never grow, therefore, they never employ more than a handful of people each.
By contrast, South Africa has a number of high-growth and high-tech start-ups that have carved out a place among the top companies on the planet and one of the continent’s only two “unicorns”, private, venture-backed companies valued at $1 billion or more, in the form of Promasidor Holdings.
By looking at the entrepreneurship ecosystem rather than at individual entrepreneurs, the GEDI research found South Africa to be the leader on the Continent when it comes to entrepreneurial activity. Furthermore, the potential is enormous. So, once South African start-ups have weathered the initial turbulence that comes from establishing a small business, they have the ability to grow significantly and even potentially compete globally.
In a nutshell, South Africa performs better where it counts: in entrepreneurial aspirations, innovation, high growth, internationalisation and risk capital – the main pillars that lead to economic growth.
The good news is: We have the capability to cultivate world-class, high-growth, highly innovative businesses from scratch and push on to achieve global competitiveness. The unfortunate news is that we have bottlenecks in the system that make it very difficult for entrepreneurs – especially those from disadvantaged backgrounds – to get a start in the first place.
If entrepreneurship is a two-stage rocket, we are good at getting the ones that make it past stage one into orbit but too many fail to launch at all.
That is largely a function of our dual economy: Poor education and skills, lack of social capital, limited access to risk finance, markets and knowledge networks. This leaves many aspirant entrepreneurs stranded at the idea phase, while a culture that prizes formal employment and shuns risk makes entrepreneurship a seemingly unattractive option.
All this is changing though.
SA’s Broad-Based Black Economic Development (B-BBEE) legislation is designed to promote inclusion, encouraging big corporates to consider emerging suppliers for integration into their supply chains and stimulating investment in enterprise development, education and skills training, among others.
There is a huge pool of funding available, which, as we learn more about the bottlenecks in our entrepreneurship ecosystem, is being deployed more effectively.
At SAB, we have one of the longest-running entrepreneurship programmes in the country – SAB KickStart – which focuses on youth-owned businesses.
It complements the SAB Foundation, an independent trust that primarily also promotes entrepreneurship and social innovation. There are also recent additions, SAB Thrive, a black private equity fund set up by SAB to transform the company’s supplier base through acquisition, business development and fostering entrepreneurship, and SAB Accelerator, an incubator with the aim of growing SAB’s supply chain to be inclusive of black-owned, especially black women-owned businesses. And then there are the agriculture projects, where we are investing R610-million over five years to establish thriving barley, hops, maize and malt industries in South Africa to strengthen rural employment and job creation.
These initiatives, and our commitment to create 10 000 authentic, real and sustainable jobs through entrepreneurship within five years, demonstrate our desire to make a difference in society and our faith in the ability of entrepreneurship to drive growth and employment.
In fact, we commissioned the GEDI research because our daily interaction with emerging entrepreneurs led us to question the prevalent assumptions about the deficiencies in the system.
In the 23 years since the launch of SAB Kickstart, we have developed a deeper understanding of what it takes to propel small businesses past the launch phase. As such, we have refined our support systems to boost them to scale.
We have also built a multi-pronged programme to provide support, finance where required, mentorship and skills, access to markets and supply chains across the entire trajectory of a small business – from idea phase to developing the skills to manage a business, to achieving the scale, quality consistency and sustainability that a large corporate like SAB requires of its suppliers.
We have the capacity – and we have ramped up the budget – to significantly expand these programmes and with the introduction of SAB Thrive and Accelerator to complete the circle, but it is also about a change in approach.
Whereas we have concentrated, up to now, on the entrepreneur, in future we will focus on the job-creation potential of candidate businesses. We have also changed the way we think about procurement to make inclusion a serious consideration when we choose our suppliers.
The GEDI research shows South Africa is an entrepreneurial leader in Sub-Saharan Africa and has made considerable progress in overcoming structural factors to produce some of the most innovative and successful enterprises on the Continent.
South Africa provides the institutional support necessary for high-growth businesses to emerge and thrive, while government policies work to close historical gaps. With the addition of targeted, co-ordinated policies to address remaining bottlenecks, the country is poised to achieve greater growth through entrepreneurship.
We can achieve far more if we work together, if we make small business development an area where corporates share data and lessons learnt, link suppliers into one another’s supply chains and work more closely with government to ease the regulatory burden for small businesses.
If we can bridge the divide between the thousands of entrepreneurs struggling in the early stages of business development and the dynamic environment at the apex of the system, we can create high-growth enterprises in numbers that would change our employment outlook and harness the demographic dividend of a youthful nation.
As a responsible corporate citizen, we are committed to continuously building on the foundations we have laid over past two decades to drive sustainable entrepreneur development. Entrepreneurs are our future!
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