- Player: Tshego Sefolo
- Company: Zico
- Position: MD
- Established: 2002
- What they do: Private equity investments
- Contact: +27 (0)11 217 3300;
- Visit: zico.co.za
There is no doubt that times are tough. The global economy might not be as deep in the doldrums as it was in the late 2000s, but we’re far from a position where growing a business is plain sailing.
In fact, the South African economy is contracting at the moment, which is creating a real threat of recession.
But it isn’t all bad news. Growing a business, even when the economy is struggling, isn’t impossible. It requires some hard work and very clever thinking, but it can be done.
Tshego Sefolo is the MD of Zico, an investment and private equity firm that identifies well-established companies on an upward trajectory, and provides growth capital to get these entities to the next level.
So Sefolo has a keen eye for the traits and tactics that separate burgeoning businesses from those that plateau or go under when an economic storm hits. Here are his rules for growing your business during tough times.
Provide great value
What do you do when customers start obsessing over cost-cutting and doing less with more? You could drop your prices, of course, but this is hardly a good strategy for growing one’s business. Instead, you should be exploring ways of providing your clients better value.
“What entices a customer to come back to you repeatedly? It’s about ‘stickiness’. It means that you’re providing something that they’re not getting anywhere else — and it usually has to do with more than the product or service you provide,” says Sefolo.
When the economy turns against you, you need to work particularly hard to prove your worth to customers. You don’t want to be just another supplier; this makes the relationship far too transactional.
You want to become a trusted advisor to your clients. They need to depend on you for more than just a product or service – they need to rely on your advice.
If the market shrinks, you need to come up with clever ways of attracting new customers. You also need to look out for opportunities that haven’t been properly explored yet.
“You need to establish centres of excellence within your organisation and allow them to think creatively,” says Sefolo.
“Companies such as Apple and Google have done a wonderful job of this. They established centres of excellence that managed to identify new and untapped markets. ‘Business as usual’ isn’t good enough in a difficult economy.”
Abandon a plan if it isn’t working
Creativity and a certain amount of bravery in exploring unchartered waters is important when trying to grow, but you also need to be willing to turn the ship around and head back to port if things aren’t working out.
“We often find that companies bend over backwards to attract or retain customers, sometimes to the point where margins are virtually non-existent. That doesn’t make sense. Growing your business usually means growing your client base, but it shouldn’t happen at the expense of your profit margin,” says Sefolo.
So how do you know that the time has come to abandon a strategy?
“You need to put a very definite ROI deadline on an opportunity, especially when the market is struggling,” says Sefolo. “The deadline will depend on the nature of the deal, but you need to be very firm in your ROI target. If it can’t be met, walk away. Importantly, the deadline doesn’t need to be in the short term, but it does need to be fixed.”
Assemble a great crew
“One of the key things Zico looks out for in a company is a great management team. Of course, you want a great MD or CEO, but you also want someone who surrounds themself with the right people.
“Founders of start-ups often struggle to delegate important responsibilities when a business really starts to grow. They need to have the courage to employ the right people, and then allow them to do their jobs. Growing a company while micro-managing every aspect of it is impossible,” says Sefolo.
A solid management team is always important, but it becomes absolutely crucial during an economic downturn. Anyone can pilot a ship over placid waters. When a storm hits, you need a very experienced hand at the tiller.
A booming economy can hide a lot of underlying problems within a company. When the economic tide recedes, though, these issues reveal themselves.
“When the ship starts to sink, you lose your best people first, so you need to value your employees if you want to grow,” says Sefolo.
When a storm looms it might be tempting to toss a few crew members overboard, but you’ll notice their absence down the line. Don’t sacrifice employees for a small bump in the bottom line.
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Take a long-term view
True to the age-old saying, some dark clouds really do have a silver lining and tough times bring with them great opportunities, but you often need to adopt a long-term view in order to benefit from them.
“Take our current electricity situation as an example. It brings with it great business opportunities. You need only look at the number of companies providing generators to realise this,” says Sefolo.
“However, you also take a long-term view. Some opportunities will only pay off down the line, so you need the patience (and liquidity) to sit back and wait. Others might offer a great short-term ROI, but you have to ask yourself if they’re truly great opportunities. They shouldn’t let you lose focus and scupper your long-term growth plans.”
Liquidity is vital when times are tough. “Unsurprisingly, the businesses with decent capital reserves are the ones that generally perform best during economic downturns,” says Sefolo.
“This is important to remember when trying to build your company. If your growth plans are going to seriously impact your liquidity, you have to question the timing of your strategy.”
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Many companies also gear too aggressively, leaving no margin for error. If something goes wrong, they find themselves over-leveraged. Growth is good, but should never be reckless.
You need to be measured and strategic in your growth, especially when the economy isn’t in the healthiest of states. If you don’t keep a close eye on your destination, you’ll find yourself out at sea.
How To Have Your Store Run Smoothly Without You (So You Can Take A Well-deserved Break)
Below are some tips that can help ensure the smooth running of your store even when you’re not around, and let you take that break without the stress.
It can be hard for business owners to take time off from their retail stores – whether that’s because they’re too busy, need to be around to make decisions, or simply feel they can’t relax without knowing how the business is tracking. But taking a break can be incredibly important, if not sometimes necessary. And as we head into the busiest retail season of the year, taking a break now before the rush could be the best thing you do – for yourself and even for your business.
Below are some tips that can help ensure the smooth running of your store even when you’re not around, and let you take that break without the stress.
1. Make the most of technology that lets you keep an eye on your store from anywhere
The beauty of living in this modern age is that there’s an abundance of tools that can help you run your store even when you’re away. To do this, cloud-based software is the way to go. Using a cloud-based solution to run your store means that you will no longer have everything housed on your computer server in one place. Instead, you can access files, sales and stock data, financials, business reports, customer and even employee data from anywhere, in real-time, and from any device provided you have an Internet connection.
The other beauty of cloud-technology is that it’s usually relatively inexpensive compared to more traditional systems. If you haven’t done so yet, look into some cloud-based software options, such as point-of-sale and inventory management, accounting and finance, customer management, and employee management and scheduling.
2. Develop a store manual
Create a manual that your staff can turn to when you’re not around. Document procedures, contact information, and anything else that will help your employees to know just what to do in your absence. Some of the sections you may want to include in the manual are:
- General store information – What do you stand for? Who are your target customers? Instil this information in your staff. The more they know (and love) your business, the easier it’ll be for them to make decisions in line with your company values. Include details on personnel conduct, pay and scheduling, store access, conditions of employment, store policies, etc.
- Customer service – Have an entire section dedicated to taking care of customers. Include information on conduct, customer service standards, lost and found procedures, and dealing with difficult customers. Also, provide detailed instructions on how to handle theft and shoplifters.
- Cashier procedures – Include information on the operation of your POS software, the types of payments you accept and how your loyalty program works.
- Contact information – Take note of the tools you use in your store (computer, accounting software, analytics, cameras, etc.), and provide basic instructions on how to operate them. These tools likely come with their own manuals, so make sure that employees know where those documents are and how to contact the vendor if required. Include the contact details for the individuals or entities that your store deals with, including vendors, suppliers, business partners, contractors, etc. Also have a list of emergency contacts, such as the local police and fire department, as well as medical facilities in the area.
3. Appoint a second-in-command
Pick a second-in-command (or 2IC) to take charge of the store in your absence. This person should be someone you trust who knows the business.
It’s best to hire someone from the inside — ideally an individual who’s been in the business for a few years (this demonstrates loyalty) and has shown strong leadership skills or initiative.
4. Empower your staff
Of course, the success of your store doesn’t depend on your 2IC alone, which is why it’s important to empower all your employees always do their best, even when you’re not around. This can be accomplished by giving them adequate training and by fostering an open environment that recognises the efforts of each team member. Encourage questions and be sure to give them specific as well as big picture answers so they know exactly how their actions affect the company.
It is important that you clearly define the roles of each staff member. Establish who’s in charge of what and require your employees to be accountable for their actions. Finally, believe in your employees and show them that you do. Trust you did your job right when you hired and trained them and that they’ll be fine even when you’re not there.
5. Do a test run
When should you start planning for your absence? That depends on the nature of your leave and how long you’ll be away. If you’re planning to be out of the office for a few days, then giving your staff a heads up a week or two before would be enough. But if you’re planning for maternity or paternity leave, then obviously your team needs to be notified months in advance.
Still worried? Implement a test run by consciously getting out of the staff’s way for a day or two. Work from home for a while or stay in your office instead of the sales floor and tell your 2IC to handle the store. Consider hiring secret shoppers who can put your staff’s skills to the test and have them report the findings, so you can figure out ways to improve.
With Christmas and holiday season fast-approaching, now is a great time to start empowering your team so you can find the time for a well-deserved break.
Stop Surviving And Start Thriving In Business
It will inform your operations, which will inform your human and asset capital and lastly, the financial investments you make.
To thrive – and not just survive – in business you need three basic building blocks: 1) attract more customers and clients; 2) who spend more; and 3) buy more often. But how do we make this happen in the tight, recessionary environment we find ourselves in South Africa?
Despite the tough economic conditions, businesses can still thrive. In fact, many small businesses have been found to thrive in difficult economic conditions and are known as counter-cyclical businesses.
So how do you turn the tide from surviving, to thriving? You need to start thinking creatively, making informed decisions and being agile in the business environment. Always start with your marketing strategy. It will inform your operations, which will inform your human and asset capital and lastly, the financial investments you make.
Ansoff Growth Matrix
Business leaders continuously explore various growth strategies to retain and grow market share. One of most respected and often used is the Ansoff Growth Matrix. It was first published in the Harvard Business Review in 1957, written by strategist Igor Ansoff to help management focus on the options for business growth. Ansoff suggested that an effective strategy considers four growth areas, varying in risk. This strategic planning tool guides us to understand our current situation, contemplate strategic options and consider the associated risks.
- Market Penetration: Market penetration has the least risk of the four options. Here you are selling more of the same things to the same market. You know your product and market well. The question is, how can you defend your market share and sell more to your existing customer? You may consider special promotions or introduce a loyalty scheme.
- Product/ Service Development: Product and service development is slightly riskier as you introduce a new component into your existing market. The advantage is that you sell to a customer/ client that you know, and they trust you. Ask yourself how to grow your product and service portfolio? You may consider adding new services and products or modifying your existing offering.
- Market Development: With market development you target new customers and clients with your existing products and services. You sell more of the same things to a different market. You can consider new sales channels, online or direct sales. Do a proper market dissection to target different groups of people, considering different age groups, gender and demographics.
- Diversification: Diversification is very risky. Here you consider introducing a new, unproven product or service into an entirely new market that you may not fully understand. You may need new expertise, acquiring another business or venturing into another sector. The main benefit of diversification is that during difficult times only one component or element of the business may suffer.
Related: My Business Is Growing… What Now?
The fifth element: Passion
In addition, I would add one more element critical to business growth: Passion. It is the single component most critical to business success and, combined with any one or combination of the four areas of the Ansoff Growth Matric, it can equip small business owners with all they need to thrive in their business environment. Passion determines your business success, so make sure you have it in heaps to reap the rewards of your hard work.
6 Common Decision-Making Blunders That Could Kill Your Business
Among the logical errors nearly everybody makes is thinking only everybody else makes logical errors.
Humans are often very irrational. If you’ve ever explored behavioural economics or psychology, you may have found a host of examples demonstrating situations when we make objectively bad decisions.
Below are six of the largest decision-making blunders we all make. Avoiding them will dramatically improve your decision-making, your quality of life and success.
1. Sunk-cost fallacy
Of all the ones on this list, the sunk-cost fallacy is the most common. Many of the decisions we make are final or difficult to change. For example, let’s say you invest R1 000 in Facebook, and the price of the stock goes down to R600 the following day. The fact that you put in R1 000 initially is irrelevant to the situation at hand; you now have R600 worth of Facebook shares.
What this means is that once the decision is made and our cost is incurred, there’s no point thinking back. You already put in the time, money or other form of investment. Considering that in any future decision is illogical, despite how tempting it is. Instead, present yourself with the new options at hand — without considering the sunk cost.
2. Narrow framing
Would you take this bet? You pay me R1 000 if a flipped coin lands on heads and I pay you R1 200 if it lands on tails. Most people would say no. We tend to be risk-averse, unwilling to risk something like R1 000, despite the reward being a bit greater.
Now, what if I offered you that bet, but I promised we would flip 100 coins? Each time, the loser pays up. Would you take it then?
Almost certainly, right? The chances that you lose money, overall, are extremely slim. This idea can be applied throughout life. When we’re in situations that will repeat themselves over time, we should take a step back and play a game of averages.
3. Confirmation bias
Another common one in the worlds of psychological and behavioural economy is confirmation bias. It hurts our ability to keep an open mind and shift our opinion. When we have a held belief, we typically look for information that confirms our opinion while ignoring data points that tell the opposite story.
For example, if I’m really excited about a new software product that I just integrated into my business, with ten of my employees as users, I might have made up my mind about the quality of the service before we put it to use. I would then be more likely to listen to the three employees who enjoy it, not the seven who don’t.
There’s almost always information that will validate our opinions, no matter how wrong they might be. That means we need to always look for conflicting evidence and, from there, make judgements based on more well-rounded information.
4. Emotionally driven decisions
When we’re angry or upset, we’re much worse decision-makers. When you have to make an important decision and happen to be in a bad mood, you should hold off. Instead, wait until you cool down and can think more clearly. It will remove the outside influences and let you think more rationally.
5. Ego depletion
This one makes intuitive sense, but it’s one of the most common ways to make bad decisions. The idea of ego depletion is that when we’re drained, physically or mentally, we’re less likely to think critically. Think about the times you’ve been exhausted after a long day of work. In those moments, you don’t want to have to think hard about anything. Instead, you want your brain to work automatically.
What that means is that when you’re tired and faced with challenging choices, you’ll rely more on your instinct or automatic processes as opposed to analysis and thought. That can be extremely problematic in situations that require effort.
6. Halo effect
The halo effect says that once we like somebody, we’re more likely to look for his or her positive characteristics and avoid the negative ones. This is similar to confirmation bias, but it’s oriented around people.
Related: 10 Stupid Mistakes Smart People Make
For example, let’s say I just hired someone named John, who was great during his interviews. Through his first few weeks, John does a few things well at work, but he also does many things poorly. The halo effect — brought on by his wonderful interview persona — could cause me to ignore his poor attributes and emphasise his good traits.
This can be detrimental to our ability to make judgements about others. We have to realise our biases toward certain people and eliminate them.
These are a handful of the many decision-making errors we’re all prone to. Although it’s challenging to scrutinise your preconceived notions, doing so is worthwhile. It gets easier over time and will, ultimately, make you a more effective decision-maker — personally and as a business owner.
This article was originally posted here on Entrepreneur.com.
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