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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.

Increase Profitability

Are Your Scalable?

Here’s how you can assess if you’ll make it, or if you need to first make some fundamental adjustments before pursuing your growth goals.

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Pete is a classic entrepreneur. He spent 
15 years building his manufacturing firm to 
a R30 million outfit, before his big opportunity came to take on contracts worth R120 million, allowing him to scale to 
R150 million within five years. This was everything he’d worked towards. This was his retirement plan.

Five years later, instead of running a R150 million business, Pete is burnt out and broke. His company is closed and he’s lost everything. The crisis has even torn his family apart. How did this happen?

A common fate

Unfortunately, it’s a far more common story than most of us would like to admit. 70% of the top 1% of businesses (by growth potential) land up failing to scale. Sometimes, like Pete, they lose everything and close the doors. Other times, they land up bigger, but managing a chaotic hell of their own creation: A daily sprint to survive, a never-ending treadmill of frantic hustling to keep things together, with the horizon never coming closer.

The most common reasons? Either scaling something that fundamentally is not scalable, or scaling poorly; not making the right changes at the right time.

In this article, I’ll be focusing on the first reason: Attempting to scale a business that is fundamentally not scalable — because not every business can be scaled. If your ambitions are focused on high-level growth, step one is to determine if you have the 
right business model to do so. Because if 
you don’t, that’s the first change you need 
to make.

Scalability

Some companies scale easier than others. And some don’t scale at all. Let me illustrate with two extreme examples:

Very scalable: Dropbox makes an extra $10 for every user they add, while adding $1 of cost, and zero operational capacity. That is very scalable.

Not easily scalable: A start-up ad agency is soon faced with a growth ceiling created by the limits of the founder’s time and energy. This normally occurs somewhere between ten and 20 people. An ad agency is not a scalable business model because growth requires top, senior creative talent. Such individuals are rare, have attractive options, and usually prefer to either work for big multinationals, or run their own businesses. It’s therefore tough for smaller agencies to attract and retain talent without offering large chunks of equity, which can be a zero-sum game. It sometimes even works out net-negative. Unless you find a way of breaking that constraint, this is not a scalable business model.

Related: If You Want Scale, Fail Fast And Learn Quickly

So, what makes me scalable?

Building a scalable business is a bit like picking a spouse. There are a number of criteria to consider, the absence of any one of which is a deal killer, even if all other criteria are amply present. A suitor may exceed your fantasies in every regard (looks, smarts, fun, caring, etc), but if they are also prone to parallel relationships, that’s enough to pull the plug and look elsewhere.

Just as in relationships, a number of things must come together to make your business scalable. Here are the ten most fundamental drivers of scalability grouped into three core areas: Scalable market, scalable business and scalable team.

Scalable market

  1. Size (Total Addressable Market, or TAM): The market must be big enough to achieve your ambitions. As a rule of thumb for ambitious entrepreneurs, TAM must be at least 4X your business size goal. If you want 
to build a R500 million business, you need a R2 billion market.
  2. Economics: It’s expensive to scale. You need to invest in great management and top talent, plus spend on infrastructure ahead of actually seeing growth. To make that sensible, it must be very profitable serving your market.
  3. Growth: The market must be growing, and preferably faster than the rate of new competition. 

Scalable business

  1. Number one: Highly scalable businesses almost inevitably are number one, or will become number one in their market or niche. If you can’t lead the market, you must be able to lead a sizable niche.
  2. X-Factor: Every market has a bleak outlook: More competition, lower prices, lower margins. Unless you have some fundamental reason to continue to lead the market despite competitive intensity, such as proprietary tech. It must be good enough that you can be and stay number one in your market.
  3. Scalable channels to market: Some customers are just impossible to reach profitably. A scalable business has access to channels to effectively target, market to and sell to customers profitably.
  4. Scalable operating model: Scalable businesses have unconstrained access to all critical materials and talent, without breaking the economic model.
  5. Scalable economics: You can calculate the scalability of your economics with a simple formula: [Gross Profit per R10 million new revenue] / [new cost required to manage each R10 million new revenue (managers, systems, facilities, etc)]. Highly scalable businesses have a 2X or higher ratio. 1 to 1,2 is borderline and scaling will be like walking on glass. Most businesses have a ratio <1, which means they will lose money by scaling.

Scalable team

  1. Scalable founders: Statistically, most founders are not scalable. They lack the experience, skills and personality profile to make the required shifts as the business scales, and to develop the organisation through its various lifecycle stages. Scalable entrepreneurs are able to:
  • Build a great culture for >100 people
  • Attract and build an A-Team of truly impressive senior leaders, and delegate large parts of the business to them
  • Be ‘builders’ and ‘managers’ — that is, graduate from ‘entrepreneur’
  • Submit their interests to the best interests of the organisation, even when it’s painful — we see this when founders step down in favour of CEOs with corporate experience
  • Lead the transition of the business to a professionally managed company, introducing systems, processes and policies in a way that does not break the company’s culture.
  1. Leadership team: Particularly in the most painful scale up stage — going from ten to 100 staff — the key driver of scaling well is the quality of the top team. That’s why quality of early hires is a great predictor of scalability. Leaders who can adapt and be effective in a business of ten, then 20, then 50, then 100 staff are truly remarkable, and therefore exceptional. Not many manage this transition. These leaders can be effective in three completely different ‘modes of organisation’: The hustle (at ten people); The build (from ten to 100 people); The operate and grow modes. By implication, they are — or can grow into — executives. They can hustle. But they can also shift from a tactical focus (immediate fires and opportunities, action focus), to a strategic focus (future focus and system focus). They are able to run operations while transcending operations, bridging the long-term strategy, the short-term strategy, operations, culture, team, and finances, and they can do that in a company of ten people, or 100 people. Of course, you can bring in new leaders and you can replace leaders that are not scalable, but this dramatically slows the scale-up journey and can even derail it.

The result of having founders and leaders who are capable of scaling with the organisation will be the automatic development of the other key ingredients for a scalable team: Great talent, a highly engaged team, a great culture, and an effective organisation.

Related: What It Will Really Take For South Africa’s Businesses To Scale And Create Jobs

The key to growth

If you’re following the path to scale, or investing in a scale-up, it’s important to be aware of the causality amongst the above ten factors. Typically, the main factor that drives the speed at which a business can scale is how quickly founders can delegate major areas of responsibility, so that the business can continue to make rapid progress at scale.

This in turn is driven by the ‘next level’ (non-founding) leaders, as well as the leadership abilities of the founders. The problem is that early-stage companies struggle to attract top talent, unless they find people who want to be a part of the equity-incentivised leadership team pursuing an exciting opportunity. This type of career opportunity can usually attract top talent, despite the various reasons these individuals gravitate towards well-paid corporate roles and their own ventures.

But that sort of opportunity does not typically happen by accident: It’s the function of the founders getting points 1 to 9 right. In a nutshell, the first thing you need is an amazing team of founders who work smart to nail points 1 to 9, find and pursue an amazing opportunity, and then harness that to attract amazing talent in order to delegate effectively, so that you can scale beyond the limits of the founders’ time and energy.

scalability-self-assessment-tool

Click here to take your free self-assessment. 

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Leon Meyer GM At Westin Cape Town Shares 4 Experience-Driven Tips On How To Keep Your Team Productive

Productivity is a fundamental requirement for an organisation – it’s the seed that builds a business and contributes to higher profit margins.

Leon Meyer

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Productivity is a fundamental requirement for an organisation – it’s the seed that builds a business and contributes to higher profit margins. But what’s the best way to ensure employees remain productive, and happy in their day job?

The answer is simple and highly effective and I choose to sum it up with three short phrases – respect, trust and teamwork.

In partnership with my management team, which consists of about eight staffers across various disciplines, we strive to tick these boxes.

Related: 5 Surprising Elements That Boost Your Productivity (One of Them Is Colour)

In total we’re ultimately responsible for managing roughly 500 employees.

Five hundred employees across several departments is a mighty job. But with teamwork, good listening skills and the right attitude from the top to filter down, any business can run like a well-oiled machine.

I’d like share with you the essentials for building and maintaining a productive workforce, and these apply to all industries, not just the hospitality sector:

1. What’s your definition of a productive team and how do you achieve that?

We need to keep in mind that productivity is a result, one that CEOs and managing directors strive for with their teams. But what happens beforehand in order to achieve that result determines whether it will be achieved at all, and is equally important. I suggest the following to ensure a productive team:

Define roles and responsibilitiesDirection is incredibly important; everyone needs to know exactly where they’re going and how they need to get there, so KPIs are essential.

Often when roles and responsibilities are unclear, things go pear-shaped. I am an advocate for setting clear KPIs, it’s a good way to steer us in the right direction, and in turn helps to grow the business and the individual in his/her role.

Be flexible: Rigid environments are the worst kind, allow your employees some flexibility and the opportunity to be themselves in the workplace. We spend so much of our time at work, we need to be ourselves there.

Celebrate the team: When there are achievements, celebrate them, single out individuals who are excelling and living the company values. This builds morale and is indicative of appreciation, which is fundamental when running and building a business.

2. What has and continues to be your philosophy since managing a large team?

Know your strengths and weaknesses, as well as your team’s and leverage off that. Be prepared to learn from others, no one can operate in isolation, regardless of the level on which you operate. Accept criticism and don’t bulldoze someone’s ideas, that’s how you build trust.

3. What in your view are the top characteristics the team look for in a leader?

  • Be consistent – inconsistency screams bad leader
  • Provide guidance – this is key, don’t turn a blind eye, give input and council
  • Listen – always listen intently
  • Be impartial – always be fair
  • Give credit – it builds morale and shows you recognise good work
  • Be patient – Rome wasn’t built in a day, and remember not everyone thinks the same as you do

4. What’s your view on an open door policy and how does it assist with managing a team and ensuring everyone remains productive?

I believe in an open door policy. It’s essential to build and develop trust. I’m the first to admit that it takes a while to build that trust, but once the team (on all levels in all departments) know your door is always open, and that they can trust you implicitly, half the battle has been won.

I host a GM’s roundtable every two months, just to establish how everyone is feeling and where everyone is at. It gives staff the opportunity to bring their challenges to the table, and I deal with them the best I can.

It’s 100 percent confidential and line managers are not allowed to attend. During this meeting we try reach common ground, and I commit to addressing and ultimately solving the problem(s).

Related: 10 Ways To Make Your Employees 10x More Productive

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Why Purpose Drives Profits

If you want to succeed, it’s time to start engaging where it matters.

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Over the past two years, many clients have been extending brand positioning exercises into purpose-driven expressions.

When we look at it, it makes sense given the country’s demographics. With many of our fellow countrymen struggling to make ends meet, brands have stepped in to provide them with a picture of a future worth striving for.

Global customer-centricity study, Insights 2020, led by research firm Kantar Millward Brown, has attempted to understand how brands could drive customer-centric growth as well as the factors that really make a difference. The research surveyed 10 495 individuals in 60 countries, and there are some significant efforts worth investing in if brands want to engage where it matters most, in consumers’ hearts.

The research uncovered that for market-leading companies and brands, traditional value drivers such as quality, packaging, or distribution are necessary, but no longer provide a competitive advantage; most brands are capable of providing these drivers. What is important, are a few critical approaches.

1. Purpose-led brands

The study found that when companies or brands linked to a purpose, 80% of them outperformed the market. Only 32% of non-purpose led brands managed to perform better than the market. 

Related: How To Calculate Gross Profit

2. On the ground

It’s important to engage with consumers in their space and on their terms. Through the use of memorable campaigns, experiential events and activations it is critical to engage with consumers on their turf.

3. Be truthful and authentic

Consumers can smell something inauthentic a mile away, especially when it’s coming from a brand. This forces brands to strive for authenticity in everything they do, especially when it comes to marketing. Building values and principle-based attributes into your brand as a guiding tool is essential.

4. Helping consumers commit

By allowing individuals to attach themselves to a brand with a purpose, it helps consumers personally commit to a cause that they consider important. When a consumer is personally invested, the link between the brand and product or service deepens.

Related: Profit Share for Increased Performance

5. Balancing heritage and modern relevance

There is a continuous tussle in balancing the traditional market, transitional market and the new consumers brands are trying to attract. Keeping the heritage and roots of the brand true to itself, while creating relevance for the new market, is a battle marketers are still fighting.

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