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Why Mitigating Your Risk Can Drive Up Your Fleets Profits

Business naturally comes with risk. How you mitigate that risk could mean the difference between a sustainable, profitable enterprise and a business surviving on the edge. Here’s how fleet management companies handle their risk.

Catherine Bristow

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“Whether your fleet consists of ten vehicles or 1 000 plus, it always boils down to the cost of maintenance, fuel and cost-efficient routes,” said Dr David Molapo, head of fleet management, vehicle and asset finance at Standard Bank, at a round table event hosted by Standard Bank to determine key impacts on profitability and growth in the fleet management industry.

To keep costs down and profits up, focus on:

  • Mitigating fuel costs for business growth
  • Implementing tools and telematics to save on transport and fleet spend
  • Training and monitoring drivers to ensure driver and load safety
  • Mitigating risks such as hijacking, driver behaviour and delivery delays
  • Bringing services in-house
  • Complying with legislation.

Attracting and training quality drivers

Attracting quality drivers is one of the industry’s main challenges. Businesses often have to recruit drivers and upskill them to become quality, reliable drivers.

Related: How TomTom Telematics Is Blurring The Lines Between Your Fleet And The Office

“SAB has a programme where a driver will be sourced and run on a SAB truck for a year to 18 months,” says Con Conradie, country commodity manager: Fleet for SABMiller.

“He is assessed over a long period and once he meets the grade he can buy his own truck and receive a ten year contract.”

“We place our drivers on advanced driving courses and all our drivers are allocated to a specific vehicle, which has reduced our insurance costs,” says Dorin Charalambous, MD of DSC Transport.

Preparing for the risks

risk-management-advice

Hijacking

“We have branded our reps’ vehicles with a full body wrap,” says CEO of Nature’s Choice, Greshan Mandy. “Since then we have not had a single case of theft. It’s advertising for your business as well as an immediate deterrent.”

Driver behaviour

“We contracted with Driver Check to monitor our fleet and their behaviour on the road,” says Mandy.

“We also have cameras in the vehicle to watch the vehicle and the driver,” he adds.

“These can deter the drivers from driving recklessly. If your driver has not done anything wrong the camera can prove his innocence,” says Reinard Basson, financial manager for Shoprite Group Transrite National.

Delays in delivery

“A truck is scheduled to do a certain route and that whole route has been timed, from the moment it leaves the depot, when it stops at an outlet and the time it takes to offload,” says Conradie. “Each vehicle has a slot at the outlets and the vehicles have mechanised forklifts. We levelled the pavements and widened the doors at our outlets so that there would be no delays,” says Conradie.

“Sometimes we deliver palletised goods and the next day it is a delivery of cement bags. Often there is no one to assist with the offload, which results in delays while you wait for assistance,” says Hennie Engelbrecht, director of Kopano Fuel.

Related: How To Keep The Wheels Turning For Your Transport Business

The need for specialist services

Transporting for niche industries is in demand, with specialist transport services required for niche products.

“Cost is important to us but delivering the product the way we want it delivered is also key,” says Carel Ganger, financial director for Ceva Animal Health. “We’re transporting a high value product and there’s a need in the transport industry to do something specific for cold chain.”

Bringing services in-house

“We used to use sub-contractors to get our product to the market as quickly as possible. Courier costs were becoming exorbitant and we were being impacted by the labour strikes in the transport industry,” says Mandy.

“We made a decision to bring transport in-house and we are now saving around R300 000 per month.”

Complying with legislation

“Our legislation and regulations are changing and many municipalities across the country are taking pride in maintaining their road infrastructures and ensuring that vehicles carrying abnormal loads have the right permits in place. This is beneficial to the industry,” says CEO of Matalana Transport, Comfort Padi.

“Customers are also ensuring that suppliers become compliant with the current legislations, such as ensuring that transport suppliers are ISO 9001 accredited and compliant.”

Catherine Bristow is the online editor and content marketing manager for Entrepreneur Magazine. She brings to the mix a BJourn from Rhodes University, Honours in Psychology as well as a certificate in Accounting and Commercial Law.

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If You Want Scale, Fail Fast And Learn Quickly

Mindset, focus and an understanding of scale are essential if you want to build a highly profitable, growing business.

Matt Brown

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“The secret to scaling a business is increasing revenues without incurring a corresponding increase in operating costs,” says Tom Asacker, author of The Business of Belief, Opportunity Screams, A Little Less Conversation and A Clear Eye for Branding, all groundbreaking books that redefine business and communication for the new age of abundance. “The single most important challenge is to have a deep understanding of your value creation and customer attraction and retention process, as well as how the company will ultimately make money over time through the unique realisation of that process.”

According to Howard Sackstein, founder of Saicom Voice Services, scale used to be measured by the number of people you employed or the number of branches you opened. “Today, these questions have become irrelevant,” he says.

howard-sackstein“When Whatsapp was sold for $19 billion the business had only 55 employees servicing 450 million users who were sending 34 billion messages a day – that’s a tiny company with enormous scale. So, today scale has come to mean something very different. In the new economy, scale is about scalable technology, how do we build software and apps that can cater for a billion users? The ideas of lots of employees and lots of offices has become old fashioned.”

The problem is that scale comes with costs and that’s why money is often the enemy of entrepreneurship. “Many of the great businesses of the new economy all began in garages, a small group of people, each with real skills each trying to bootstrap an idea to see if it worked,” continues Howard.

Related: Do You Have That 1 In 100 Business That Can Scale And Land An Investor?

“Often people go looking for funding; there’s a problem there too though – they scale too fast once they receive the cash and ultimately they fail because they have too much money. Entrepreneurs need to start small and if they fail they must fail fast. They need to test the market and grow incrementally to prove their idea. Once the idea has achieved a degree of adoption and has ‘crossed the chasm’ of technology adoption, only then can you start thinking of scale. And today scale means few costs, few employees, and tech that can scale to a mass market.”

Your Mindset is Everything

Your mindset while scaling is critical. “Value creation, customer attraction and your retention process are the result of every decision you make as an entrepreneur,” says Tom. “Your mindset shapes how you make these decisions.

“Every rand spent should be to add value in the eyes of the customer, or to improve the process that delivers that value, through automation, distribution, channel partners and so on.

“If businesses aren’t hyper-focused on adding value and deepening relationships with customers, someone will come along who will. If that happens, whether or not that process produces rapid growth is beside the point.”

Howard believes that follow-through is also essential. “So many people really want to build empires,” he says. “But how do you measure your success? Is it the number of employees you have, the number of companies, your disruptive influence on the market, revenue or actual profitability?

“You really need to decide this up front and that will affect your strategy. I probably have an old school mentality, but for me profit is everything. I don’t really understand the idea of focusing on scale with no business model in the hope that on an exit someone will find value. I know that’s a common idea in the tech world and you could get lucky by following it, but I think there are few people with that degree of luck – build for profit and sustainability, build as lean as possible and keep your eye on the actual ball.”

Related: What’s Stopping Your Business From Growing?

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Do You Have That 1 In 100 Business That Can Scale And Land An Investor?

Only 1% of businesses are investable, mainly because that’s how many businesses can 10x their growth. There’s an art to scaling, and it starts with you.

Matt Brown

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Only one in every 100 applications typically receive funding from venture capitalists. All 100 applicants believe their businesses are scalable and worthy of funding – and yet only 1% actually close investment deals.

“Most entrepreneurs radically overestimate their prospect of success and scalability,” agrees Jason Goldberg, founder, and CEO of 10X-e and co-founder of Edge Growth.

“If you really want to scale your business, you need to know that you are absolutely obsessed with solving a problem that hasn’t been solved before – so obsessed that you wake up at night with solutions buzzing around your head; so obsessed that your mind is always on the problem you’re trying to solve. The reality is that hunger is an incredibly important success factor – hunger, the hours you’re willing to put in and your level of intensity. How far are you willing to go and how many obstacles will you overcome?”

Related: What’s Stopping Your Business From Growing?

With this in mind, Jason and Vuyo Tofile, CEO of Entbanc Group, a fintech and digital support services firm share their top 3 secrets of scale.

1. You need to shift into a ‘scale’ mindset

Jason-Goldberg

Start-up entrepreneurs are focused on the hustle: More work, more energy, more sales. These are all important factors in building a business, but scaling a company requires a different focus. “Scaling up is all about architecting an enterprise and strategically putting in place the building blocks that will move you from working primarily in the business to working on the business,” says Jason.

“You need to minimise the work in the business so that you can work on the business and build a great company.”

This is easier said than done though. Often the biggest stumbling block to a company’s ability to scale is the founder. “The company founder or owner’s inability to really focus on solving an initial problem for specific target market, understanding what their business really does and is offering, and finally how to truly replicate that service or offering can be major barriers to growth, and they all lie with the entrepreneur,” says Vuyo.

The lesson is clear – you can hustle and make sales without clear structures and strategies in place, but that won’t get you to scale.

“A lot of entrepreneurs love the innovative and creative mind space of start-ups as well,” adds Jason, “which is great, but scaling is all about executing all those great ideas that you innovation and creativity helped you to come up with. If you can’t do that, you’ll never be able to scale.”

“Having the ability to execute on growth is critical,” agrees Vuyo. “Execution of the vision is far more important than having a strong vision. Vision without execution is meaningless.”

2. Get the right team in place

According to Vuyo, if you want to scale your organisation, you need the right people on board – and this too is a crucial skill the founder needs to foster. “You have to be able to build an effective team around the business,” he says. “You don’t need to be able to do everything yourself – in fact, in order to scale you mustn’t – but you do need to know who you need and where you need them.”

For Jason, the lead indicator of your ability to scale is whether or not you can build a sales organisation. “Can you shift from selling to becoming the architect of an organisation that sells for you?” he asks.

Alongside this ability is shifting from hiring who you can afford to who you need. “Start-ups hire talented ‘jack of all trade’ young high potentials (who are typically overworked and underpaid). This is an essential start-up tactic. Mature firms in scale-up mode need seasoned leaders who can take each part of your business to the next level.

“Having an awesome team is your most important ingredient of success. Every senior person needs to be pretty impressive in general, spectacular in their roles, and work well as a team.”

3. Understand if your business is scalable

Not all businesses are scalable – and that’s fine. Not all entrepreneurs want to scale their businesses either. However, if you do want to scale, it’s important to know if your business falls into the scalable or un-scalable category.

“There are three basic rules of thumb,” says Jason. “First, how big is the problem you’re solving? Is this a problem that lots of people have and are willing to spend money on the solution?

“Second, what kind of problem is it? Is your solution a vitamin pill or a headache pill? How does your client feel if you don’t exist? You’re not scalable if they don’t have a painful experience without you. In other words, do they have a headache if they haven’t seen or heard from you today?

Related: Is Your Business Ready To Be Funded?

“Finally, how different is the value you bring to your client than all their other alternatives? You need to be ten times more valuable than your competitors. If you’re not, there’s too much competition, and you’re unlikely to 10x the business.”

Vuyo agrees. “Scale is all about having a service or product that is of real, tangible value to your customer. All the resources and brand equity in the world won’t help you scale if you aren’t providing real value.”

Secrets of Scale Event #3

PART 1 – BUILDING THE AEROPLANE

This segment will be the majority of our focus and will cover practical “how to steps” for scaling your business. We’ll be revealing how to design a scale ready business and walk you through common pitfalls that all entrepreneurs will encounter as they “build the aeroplane” and how to avoid them. We’ll also reverse engineer how to design a scale ready business from a 150 strong team all the way down to a 5 person team.

PART 2 – BUILT FOR WINTER

This segment is all about how to ensure that you remain profitable as you scale. We’ll unpack how to bring different revenue streams, partnerships and products/services to together to help you weather any storm.

PART 3 – SCALE BLUEPRINT

In this segment we’ll explore the systems that can help you scale, how to automate repetitive processes and outsource non-essential tasks and how to design a business that makes more money while you sleep than when you’re awake.


Listen to the podcast here:

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Increase Profitability

Growing Your Revenue In A Slow Economy

The dos and don’ts for your business.

Greg Morris

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The most dangerous counter to the unpredictability of any economic crisis is… doing nothing. The same everyday attitude can ruin any company. But what’s the next most dangerous behaviour? Clumsy or uncontrolled reactions.

What is needed, therefore, is finding and embracing the less common but noteworthy opportunities that unveil themselves during slow economic times.

You can do this in two stages.

  1. First: steady your company by sheltering it from associated dangers and make sure that it has the cash flow needed to stay afloat during the crisis.
  2. Only once you’re confident that you’ve adequately prepared for the worst, should you approach the second stage: looking for ways to grow your revenue over time.

Related: Why Bartering Can Be Your Untapped Revenue Source

An article by Gulati, Nohria & Wohlgezogen in Harvard Business Review (2010), indicates that, “…a subset that deploys a specific combination of defensive and offensive moves has the highest probability of breaking away from the pack. These companies reduce costs selectively by focusing more on operational efficiency than their rivals do, even as they invest comprehensively in the future by spending on marketing, R&D, and new assets. Their multipronged strategy…is the best antidote to a recession.”

Stage 1: Steady your company

In the first stage of stabilising your business in a recession (especially one that could continue to slide), take the time to methodically evaluate its weak points.

  1. Test out a few economic scenarios both at department level and across the broader business. Assess how each might impact your organisation, and cautiously calculate the financial effects. Then find ways to reduce your exposure. Make sure that you have sufficient cash flow and access to capital, to sustain your financial stability.
  2. Make a strong and targeted effort to lower expenses and boost efficiency. But, while it’s imperative to be fast, it’s also essential to have a rational, cautious, and well-thought-out plan. Don’t make radical cuts that will damage your business in the long term – by, for example, risking valuable future opportunities.
  3. Remember that cutting expenses boosts profits, but only if the sales price and the quantity of sales stay the same. If a reduction in expenses affects the quality of your products, you may need to consider lowering your price to maintain sales. This is critical as it can cancel out any potential returns and ultimately end in a loss.
  4. As your customers’ needs change, re-evaluate your pricing strategies and product mix. This may mean raising prices through effective branding, like Coca-Cola and Sony have done. These organisations have such strong brands that they can get away with charging higher prices than many of their competitors… all while growing their market share and preserving quality status, even during recessions.
  5. You can sell off non-core businesses and peripheral (or poorly performing) operations. Don’t hold out for ‘better times’ in the hope that you’ll secure the price you would’ve gotten when the economy was stronger. If the company isn’t essential to your goals and it increases your risks in the recession, sell it now.

Related: 5 Strategic Steps to Help You Double Your Revenue Next Year

Step 2: Prepare for the future

  1. A common challenge that many businesses encounter is inflexible or obsolete business models. Reconsider yours. Innovation in technology and media is constant, yielding a perpetually evolving business landscape. The traditional publishing industry is a perfect example of this.
  2. Do things differently and don’t be afraid to stand out by marketing your product in a novel way. Take Jordan’s Furniture: a US furniture outlet that sells more furniture per square foot than any of its competitors thanks to a strategy called “shoppertainment”.
  3. Consider pursuing transformative opportunities like mergers and acquisitions. If your business is relatively strong financially and strategically, a recession can be a rare opportunity to boost your competitive position. According to a Harvard Business Review article by Rigby and Harding (2009), “…companies that acquire in bad times as well as in good outperform boom-time buyers over the long run.”

Bottom line? Businesses that can find calculated and clever ways to balance lowering expenses to endure today and carefully planning and investing to grow tomorrow are most likely to survive and thrive after a period of economic recession.

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