I first learned the business value of estimating when I left home at age 14 to join the carnival. One of my early jobs was to run the “Guess Your Age and Weight” booth. I first tried to guess people’s age and weight until the booth owner slapped me on the head: “Hey kid, stop being so accurate. I want them to win, okay? If they walk all over the midway with a giant stuffed bear and our banner, it’s free advertising for me. The less accurate you are, the more money we’ll make.”
That was a real eye-opener for me, because I began to understand the nuances behind estimating. In my subsequent 40 years in business I’ve come to learn several more lessons about how to sharpen your estimating skills.
1. Don’t overestimate your intelligence or underestimate the intelligence of others.
As a cocky, freshly minted millionaire in real estate I thought I saw a tremendous opportunity in the oil and gas business. I concluded that the locals were indeed yokels too dumb to take advantage of the riches beneath their feet.
I cashed in my real estate chips and moved them all into oil production – and promptly lost my shirt. The lesson? Rather than let my tongue hang out over the prospect of riches, I should have reeled it back in and asked myself if those so-called yokels could know something I don’t and why might others also see this opportunity but not jump at it.
2. Step back for a clearer view.
I later made a fortune by correctly estimating the wave of defaulted consumer and business debt to wash over our economy in the 1990s. It wasn’t due to my intuition but rather to stepping back, looking dispassionately at prices and volumes, and extending trend lines. My competitors could have done the same thing but my guess is they were way too buried in daily operations to see above the forest.
3. Create a feedback loop for your estimates.
One of the keys to growing my business was that I made an unbreakable rule: On every single defaulted loan we bought – and we bought millions of them – we always compared actual results to our original estimates. Then we fine-tuned our estimating engine for the next round of purchases. I know it’s more fun for entrepreneurs to look to the future, but it’s crucial that you continually sharpen your estimation tool against results and adjust accordingly.
4. Don’t underestimate other people’s fear.
My company did the first-ever securitisation of unsecured, delinquent credit card debt. We were the darlings of Wall Street, which invested several billion dollars in my firm. That was until an anonymous letter surfaced with allegations about my company. I incorrectly estimated that investors and the rating agencies would listen to reason and we could calmly analyse the facts. They listened politely and then bolted for the door. Literally within days, I had lost a personal fortune. Had I properly estimated their level of fear, I would have gone into survival mode and not into talking and reasoning mode.
5. Identify the other party’s dominant motive.
When my company was in crisis I agreed to step aside temporarily, even though I had a controlling interest in the stock. I made this move because I incorrectly estimated that the new caretakers would care as much about the company as I did. It was too late when I realised why they made several cataclysmic decisions – they were too new to the company to care about its long-term survival. They were merely executing a short-term salvage operation.
To make matters worse, I continued to apply wishful thinking to the equation by repeatedly estimating that if I just worked harder and smarter, I could bail out water faster than my business ship was taking it on. If I had accurately estimated that we were in fact swamped, my decisions would have been different.
Why do we sometimes see things more clearly in hindsight? Partly it’s because we can more easily identify the important factors that determined the outcome. It’s also partly because we’re more likely to see things as they actually turned out instead of how we hoped they would turn out. In order to realise your brightest business future, you owe it to yourself to sharpen your estimating skills by examining past results, facts and using rational perspective.
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Is Your Business Leaking Money? These are the Holes You Need to Plug
What To Look Out For When Seeking A Mentor Or Coach
There is value in choosing a mentor or coach to help you build your business, says Dr John Demartini. Here he offers some sound advice on how to go about doing this so that you benefit from the experience.
When I was in practice I noticed many doctors attempting to build a business would seek out mentorship from management consultants, from people who have already been down that path. And there’s wisdom from learning from foresight and not learning from trial and error. But there’s a pitfall – I noticed that not everybody is able to do or sustain the actions that these consultants would suggest. Where some would follow and immediately go and succeed, there were others who would sometimes feel self defeated because they couldn’t sustain the actions that the consultants would suggest and recommend.
So a small percentage would excel and do extremely well. But there were those who would spend their money on the coaching and they’d never get anything in return. So the question is – what made the few excel with the help of a coach, consultant or mentor? And why is it that the majority of them didn’t do as well? And it boils down to how congruent the actions of the coach or consultant are with the values of the person that’s striving to build a business.
I have listened to numerous professional consultants all offering slightly different information about how to build a business. I have taken and learned from all of them. Some of them would suggest things I just couldn’t do – it just wasn’t me – and other things that I could do. And when I couldn’t do something, the coaches and consultants believed I just was not disciplined, not driven. They would imply that I didn’t have the drive… Their material works, but I wasn’t following it.
And those of you who have had the same experience will understand what I’m saying. And you need to know that the reason you don’t do what these coaches suggest is because it’s not aligning to your values. So you are labeled lazy, undisciplined, not driven. You are given these labels instead of realising that you’re self defeating because what they suggest is not congruent with your values. And so you go to different consultants until you finally find the one who matches, whose values are aligned with yours.
So it’s important to not envy and imitate somebody with a drastically different set of values. If you’re seeking a coach or mentor, make sure the coach/mentor has a value system that is closely enough aligned to yours or you will be setting yourself up to fail. Just because somebody is successful doesn’t mean if they are your coach or mentor that they will have the values that will lead you to that same form of success. You need to either shift your values to be able to succeed in their system or you need to find the mentor that aligns more with your values. Otherwise you’ll be beating yourself up thinking there’s something wrong with you when there’s nothing wrong with you. When you find the right mentor, you will take off.
So you either have to change your values to match the objectives of the coach, or change the coach to match the truth of your own values.
So the bottom line is, if you’re going to get mentorship, coaching or consulting from somebody, don’t just select the person because they’re successful. Select them because they’re successful and they have some alignment with your mission and your values. Make sure you select your mentorship and a consultant that is truly valuable to you; don’t live in a fantasy about who you are.
The Link Between Scaling, Relationship Building And Technology
It is the first solution of its kind in South Africa, this platform supports entrepreneurs to effectively establish legal foundations in their businesses for optimum growth and overall business success.
The challenges and opportunities of this new world and that the world is more connected than ever. The constraints of distance is no longer applicable and as a result business has little constraining borders. Networking is therefore still a component in key relationship building.
It brings me to my real point – in a world so busy and connected, what we cannot make more of is time and time, unlike any other commodity is invaluable when it comes to forging important relationships and sustaining them. So, if technology can break barriers when it comes to legal cost and time spent on it… why not? Especially when so many have experienced the consequences of not documenting the most important relationships in their business.
The SchoemanLaw SME Self- Service DeskTM is the ideal tool for any member-based organisation wanting to capacitate and empower members. It is an affordable and reliable online solution for start-ups and SMEs, where Users can customise and download their own contracts online and in minutes. It is the first solution of its kind in South Africa, this platform supports entrepreneurs to effectively establish legal foundations in their businesses for optimum growth and overall business success.
The following documents are examples of those available on the platform (currently hosting over 35 documents / agreement types):
- Confidentiality and Non-Disclosure Agreement (“NDA”)
- Independent Contractor Agreement
- JV Agreement
- MOI and Shareholder’s Agreement
- Supplier Agreement
- Letter Demanding Payment
- Various HR Documents and Company Resolutions
- BBBEE Affidavits (EME and generic QSE)
and many more!
Prices range from R195 and R895 per document if downloaded on a pay- as- you- need- basis or R249 / R495 per month on a subscription basis, this is over 75% less than usual rates if traditionally drafted by an Attorney. What is more, Users have the support of a Law Firm not only having created, but who maintains the platform and supports each User. We even offer customisable solutions. So, there support and a solution for any business regardless of size and industry are on offer.
The platform is easy to use, no prior legal training is required, and Users are supported through help texts, free podcasts, videos and training events. In the case of a legal incident occurring, you can consult with an attorney with the click of a button.
The platform is also ever evolving and completely customer- driven. Documents are added as and when customers request them. All the documents are also frequently updated to ensure that they align to the latest best practice. There is no need to leave your legal needs unattended ever again! The SchoemanLaw SME Self- Service DeskTM therefore ensures that SMEs are no longer invisible and capacitates them to free up time needed to build relationships, grow and scale their businesses.
Empower your business today, go to: https://www.schoemanlaw.co.za/online-legal-services/
5 Winning Ways To Strengthen Your Bottom Line This Year
Let’s get down to the nuts and bolts of your profitability.
The beginning of the year is upon us, and the question everyone is asking is, “How are we going to make this year more profitable than 2018?” Break away sessions to strategies are always good, however, the most effective organisations know that the best ideas didn’t come from high-level planning, rather, they come from the field.
1. Your winning market
The saying goes, ‘The riches are in the niches.’ This year, stop spreading your sales focus thinly across several markets. Review your data on the which niche or subgroup of buyers make up your best customers. Then laser focus your best sales efforts and talent on these prospects this year. If you don’t have data on your buyers, then make a commitment to invest in your CRM software this year, so that next year your focus can be accurate.
2. Your winning product or service
Don’t let chance dictate which sale you focus on, rather identify which of your products or services has the highest margins. Your data will tell you which products or services you should focus your sales efforts on this year, and which you should phase out, or simply terminate immediately.
3. Win more customers
You have a big budget for your lead generation, but invest more this year on optimising your lead conversion rate. No matter what industry you are in, or if you convert leads digitally or face to face, your ability to turn leads into sales is a potent leverage point to increase profits. For example, if you increase your conversion from 20% to 25%, that 5% increase in conversion will lead to a 20% or more increase in profitability (assuming your costs stay steady.)
4. Whittle down waste
One immediate way to see your bottom line improve this year is to keep a tight rein on your sales team giving out discounts and freebies, and on your production team’s unregulated wastage. You’ll be surprised when you add it all up how much profit you’ve lost this way. Set boundaries over what is and isn’t okay for your sales team to do during the sales cycle.
Rather create bonuses or value adds that they can add in that have high perceived value but low cost of goods sold. For example, you might offer two free training classes to a new customer when they buy a year’s subscription to your software service.
A training class has a high value, but likely costs very little to add more seats to the room. As far as your production team goes, if you haven’t already, you should invest in business software that tracks productivity in your team, as well as in your machinery and equipment, to improve efficiency and reduce wastage. This alone is worth the investment costs of the software.
5. Say ‘No’ to scope creep
Scope creep is when your customer alters the scope of your product or service after the initial agreement of work has been signed off, but with no alteration to the initial quote. It is excessively common and can be very detrimental to a bottom line in service businesses.
This year, be clear about what is and isn’t on offer in the quote, and if there are any adjustments down the road, inform the client upfront of these additional costs. Wait for approval before starting the work. Be clear about prices for common extras that clients may want and let them know you’d be happy to provide these additional items for them at these pre-agreed prices. This could also be an opportunity for gentle upselling.
With this in mind, may 2019 see your bottom line grow from strength to strength.
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