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Performance & Growth

3 Ways To Promote Business Growth In A Troubled Economy

If you’re running a small business, here are three things you can do to survive and thrive in this tough economic climate.

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It’s a complicated time for South African business owners. According to Xero’s State of SA Small Business 2017 report, 62% have seen a reduction in consumer demand over the past year, and 68% describe economic instability as their most significant challenge. Of course, these problems that entrepreneurs face are not of their making, but they must face them nonetheless.

There is a degree of optimism amongst entrepreneurs which is encouraging: 45% anticipate that business will stay the same over the next year, and 40% expect growth. While this positivity is a good thing, it must be tempered with pragmatism and proactivity.

Related: 3 Strategies To Implement A Culture Of Innovation In Your Business (Without Blowing Billions)

If you’re running a small business, here are three things you can do to survive and thrive in this tough economic climate. 

1Look for cost savings

This is very obvious, but it’s worth repeating. When your business is contending with an ailing economy, it will be forced to make certain choices. Those choices can become more or less difficult depending on how you manage your incomings and outgoings.

Developing the firmest possible handle on your finances is the best defence against external turmoil.

Look for cost savings wherever you might find them. What subscriptions are you still paying for that you no longer need? Which supplier relationships need to be terminated? Are you spending too much on stationery? Aim to eliminate all unnecessary costs: Even if they’re small, they’ll often add up to a larger cumulative saving.

Technology can often help with this process. For instance, cloud accounting software like Xero can take care of financial administration and cash flow related tasks – identifying any areas of discrepancy or waste and ensuring that your resources are being used efficiently. Taking advantage of it is likely prudent. 

2Automate everything

automation

And we mean everything.

Businesses that waste time, waste money. The more energy expended on manual processes and tasks, the less time you have available for vital business or operationally critical processes and tasks. It’s very hard to grow if you’re spending inordinate amounts of your day on repetitive, time-consuming work.

Related: How You Can Profit From Constrained Consumption

When it comes to things like report preparation, data entry, and accounts payable and receivable, it’s worth investigating your automation options. Things like pursuing invoices can now be done with a click of a button and a few strokes of the keyboard. What’s more, they can be handled safely, legally, and efficiently.

Don’t stop there. See what other tasks can also be automated. When you have more time, you have more headspace for the things that really matter to you and your company. 

3Spend wisely

Although it shouldn’t be a rule during trying economic times, it becomes substantially more important during times of unrest. It’s easy to spend money on hires and gadgets in a blind panic, but it’s also dangerous – and can deepen any financial troubles you may have.

Any investment you have, no matter how trivial, should be thoroughly audited for potential profitability. If it won’t help you make money or become more efficient, it shouldn’t be pursued. If there’s a greater than acceptable chance of making losses, save the risk for a time when your business is more profitable.

Related: Has Your Business Stopped Growing? Here’s How To Turn Things Around

Knowing what is and isn’t a sensible investment isn’t always easy. Cloud technology can again be of use here. if you’re considering investing in service desk software, it can generally let you know if the number of resolved queries will result in meaningful cost savings. If you invest in a marketing automation tool, it will let you know if your campaign ROI is likely to exceed the expense.

Navigating the choppy waters of the modern South African economy won’t be easy, but by implementing the above, it will be more than manageable. With financial prudence, process automation, and strategic investment, you can come out the other side even stronger than before.

Darren Upson is the Director of Small Business at Xero, responsible for growing the Xero subscriber base throughout Europe, Middle East & Africa (EMEA). Following a decade in marketing leadership positions within ERP software vendors, most recently at NetSuite, Darren moved to Xero in April 2015, and has subsequently helped grow the UK & EMEA business from 83,000 subscribers to over 220,000. Xero is the multi award winning global leader in online accounting software with more than 1 million paying subscribers around the world.

Performance & Growth

Controlling Profit Margins To Build Greater Organisational Wealth

To build organisational wealth, you need to have strong financial management and control. Are you getting the insights you need to properly control your profit margins?

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Organisational wealth is a concept that is based on the premise that businesses can only achieve true wealth once all parts of the organisation are running optimally. It places an emphasis on business systems, internal processes, staff morale, job satisfaction and, of course, financial success.

Having proper control and management of your finances is essential for every growing business. Keeping up with, and staying ahead of, competitors requires more than just a simple accounting system to try control financials. Luckily, modern technology and innovative business management platforms offer practical solutions to give you and your team members up to date information about every part of your business.

This helps businesses better manage cash flow, stock holding, expenses and financial investments for increased control over profit margins as well as continued growth and long-term sustainability.

Here are a few ways in which a good business management system can help you achieve greater profit margins and contribute to building greater organisational wealth.   

Comparing budgets vs actual costs

An integrated system allows different departments to quickly and easily share information on expenses budgeted for and actual payments made. This results in streamlined and seamless project planning and management through automatic distribution of information and project amendments based on accurate information.

Managers can get customised financial reports depending on their requirements and set cash flow alerts as well as expense approvals to ensure that budgets are not exceeded.

Related: 5 Ways To Drive Leads And Double Your Profits

Better buying

With the correct systems in place, your small or medium sized business can manage its entire procurement process systematically. Details of suppliers, requests and responses with cost estimates, purchase orders, returns and outstanding orders can all be recorded, centrally maintained and shared between departments. This will allow you to quickly compare suppliers, negotiate better deals and plan your purchases to maintain and improve profit margins. 

Matching supply and demand

Optimising procurement to expertly match supply and demand can lead to an increase in your business’s profit margins. For many small to medium sized businesses, managing supply and demand cycles can be a time-consuming and complicated task. The good news is that an integrated business system, such as SAP Business One, allows you to get real-time inventory insights and updates.

It also allows you to manage and set up standard and special pricing to cater to seasonal trends, which are also readily available. Over and above that, an integrated system allows business owners to apply volume, cash, and customer discounts and run reports to track the impact these special offers had on overall profit margins. 

Accurate insights to make strategic business decisions

The adage “knowledge is power” is certainly true for businesses – no matter their size. Even in a small business, there is a massive amount of information which can be gathered about your operations within the supply chain and company financials. Having access to accurate information can empower your team members to make more informed decisions.

Related: How You Can Profit From Constrained Consumption

Providing employees with comprehensive information facilitates strategic decision-making, which can lead to optimised stock holding and procurement, meaningful customer relationship management and more successful marketing campaigns. These benefits can contribute to a sustainable growth in profit margins.

An investment in technology may initially seem costly, but when you invest in the right tools and platforms, you will soon start the process of building your organisational wealth through increased profit margins and excellent financial control.

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Performance & Growth

Should You Scale Or Should You Grow? (The 2 Strategies Are Not the Same)

Bigger is not always better.

Pete Canalichio and Mark Di Somma

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For decades, the conventional wisdom in many sectors was that bigger was better. The larger you got, the argument went, the more likely you were to achieve market dominance, supply chain efficiencies and coherencies that you could then carry from developed markets into developing markets. That should lead to happy investors.

Except that, as PwC’s Strategy& discovered, in key sectors like consumer packaged goods there is no direct correlation that can be drawn between being big and achieving higher shareholder returns. That’s a startling conclusion.

There may be a number of reasons for that: Media fragmentation has made it harder and harder to get “big” messages out to a mass audience in the ways that companies could when channels were far more limited; the competitive advantage gap between large companies and smaller participants has closed because small companies have learned how to perform well; and, ironically, innovation has in many ways defeated the need for scale because global networks have changed how big individual companies need to be in order to achieve the presence that they would once have had to grow themselves.

Related: 6 Rules Euphoria Telecom Followed For High-Growth Success

So, how should companies decide whether they need to get bigger? Should they even bother? For many, the decision to remain artisan or to work within defined boundaries is an absolutely valid strategy; it enables them to define what matters to them, and to work within those parameters. But, for those companies that do decide to increase their presence, here are some key factors to consider.

Define your goal, and make decisions from there

The decision as to whether to grow or scale comes down to the definition of success that you have set for yourselves in your strategy.

As Jeremy Melis, UPS’s marketing director for small businesses, told The Balance, “The goal isn’t necessarily the speed of domestic or international growth.The goal is to best position your business to achieve what you’ve defined as success. That could be revenue growth, geographic expansion, a community of loyal customers or a better quality of life for yourself and your employees.”

As in all aspects of strategy, the key concern is why, not what or how. Growth or scaling should be the means, not the end. Your goal should be deciding what you are committed to achieving.

Growth and scaling are different things

A key issue is that growth and expansion are too easily confused. Business coach Mihir Thaker makes the excellent point in an article on the site Business Business Business that, “Growth is all about adding percentages here and there around the business …. Growth is normally a factor of turnover …. Scaling is different.

It’s a process driven approach to growth. No longer is the business concerned with growth for growth’s sake, but only with growth which can be managed.”

So, in seeking to scale a business for example, you are looking to change not just the pace and scope of growth but also the manner in which that acceleration takes place. Growth and scale demand different management styles and therefore different types of leadership, while the pace at which expansion takes place also requires careful judgment.

Expand too fast, and the business risks becoming over-extended; expand too slow and the company risks stalling as others react and/or the business cannot keep pace with demand.

And because scale demands a different set of actions than growth, it follows that it springs from a different mindset. One of the key questions that is asked too seldom is: “Does our company have that mindset?” If not, it may be better, and more profitable, to focus on growth.

To scale the business, first scale the culture

Companies that are serious about scaling their presence must understand that their ability to do so hinges on their ability to shift and coordinate new thinking internally at the same time as they look for opportunities and new customer relationships externally. The temptation is to focus only on the latter – to see a shift in scale as achieving a greater footprint through growth, acquisition and/or diversification.

In point of fact, in order to deliver on that, the business itself must change mindset. As McKinsey has noted, in order to achieve a change of scale at requisite speed, particularly in a digital setting, an organisation today needs to start by realigning its technology infrastructure to handle the new levels of customer interactions that will come.

It will also need to invite new people into the business to make the new scaled process work better, develop new ways to ship faster and more diversely and reset its success metrics so that it can accurately gauge performance against its highest strategic goal and act/react accordingly.

Should you scale?

What questions should you ask yourself to determine if you should scale or grow? We have developed a model that helps companies figure out what they should do in order to meet their objectives. This model, called The LASSO Model, addresses a brand’s optimal expandability.

Nearly all the businesses we spoke to in the course of developing our model commented that the decision to pursue scale was about much more than aspiration. It was a conscious decision to achieve critical weight in the markets that they were focused on because otherwise they risked being unable to achieve their goals.

Related: Elon Musk’s Formula For Successfully Growing Companies Faster

That’s particularly true in sectors like consumer packaged goods, media and entertainment, where the pursuit of scale can become an end in itself.

Companies that are fueling their growth through venture capital, for example, will sometimes set their sights on being a particular size at which they are deemed to have succeeded in their quest to expand. In media, the goal for many is to make it to the R100-plus million revenue mark because that is deemed to be a benchmark for a scaled media presence.

If that’s the metric that is expected of you, then that will be the key measure you focus on. Many will get stuck at around R50 million or lower, unable to grow a unique audience, achieve consistent engagement, differentiate themselves against others and over multiple platforms, and improve their margins.

Size alone is probably not enough

That leads to the final factor. Strong businesses depend on more than one thing to protect themselves against competitors. We liken this to a Rubik’s Cube. What makes the Cube hard to solve is that the puzzle does not exist in one dimension, but rather in three.

Equally, businesses that have ambitious expansion plans need to look for ways to build in other aspects of competitiveness beyond just size itself. Indeed, wherever possible, they need to use scale to reinforce and strengthen those other elements that make up their value proposition, so that the bigger they become, the more competitive they are.

Related: Levergy Founders Tell You How To Scale Quickly – And Intelligently

Many of the companies we spoke to in the course of our research found this the most difficult part of their expansion planning – thinking of scale as a competitive factor that wouldn’t just strengthen their market presence but also raise the barriers to entry for copycats and enable them to profitably leverage and capitalise on what really drew customers to them.

Growth and scaling are different approaches and neither one is “better” than the other. Each has its strengths and weaknesses. Each works better in some sectors than others. Each has its own dynamics and makes its own demands. What’s important for entrepreneurs with ambitious agendas is that they understand why they have chosen one approach over the other, how they have organized their infrastructure and culture to make it happen, and where they will integrate growth or scale with other competitive factors to make it harder for others to emulate their success.

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Company Posts

How TomTom Telematics Can Keep Your Business Moving Forward

Successful businesses need to find ways to improve their margins while still delivering excellent and efficient customer service. VDM’s CEO, Deon van der Merwe, explains why this wouldn’t be possible in his business without TomTom Telematics’ solutions.

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When TomTom Telematics entered the South African market in 2010, the local team took a deep dive into the different industry verticals they were servicing.

The more they got to know their customers, the more they realised a different solution was needed to address local conditions, and a subscription model was introduced whereby customers didn’t need to invest a large capital outlay into TomTom Telematics’ technology, but would receive the tech and software, including installation, at no extra cost, in exchange for a monthly subscription fee.

This model gives SMEs affordable access to TomTom Telematics’ solutions, but it’s had another benefit as well: As TomTom Telematics introduces new innovations, existing customers can benefit — without the costs associated with replacing all of their existing technology themselves.

An indispensable tool

For a transport and logistics business like VDM Group, which has more than 160 vehicles on the road, this means they have access to incredible new offerings, without needing to replace their TomTom units themselves.

“TomTom plays a critical role in our business,” says Deon van der Merwe, CEO of VDM Group. “It’s an indispensable tool in ensuring quality customer feedback and the management of KPIs for all supply chain stakeholders.

“Earlier this year, TomTom Telematics launched their New WEBFLEET product. We were very satisfied with what we had, and yet they still approached us and offered to replace all our existing units with new tablets, and they’re covering the installation costs,” explains Deon.

Related: Driving Your Business Growth Towards More Customers

“New WEBFLEET is the result of TomTom innovating their product based on customer feedback from around the world, and the local team wanted to ensure we had access to the additional functionality and innovations that had been introduced.”

Seamless integration with your network

According to Deon, the new TomTom PRO 8275 units seamlessly integrate VDM’s fleet scheduling software with information they extract from TomTom, including individual vehicles’ standing time and arrival notifications.

“The software from TomTom is open API, which means that all our various applications can communicate and interact with each other,” he explains. “From a productivity perspective, we no longer need to manually capture any trip information.

In addition, we have every conceivable piece of data available that will assist us to run a leaner, more cost-effective fleet, enabling us to ensure that we are delivering on all our KPIs — particularly with regards to meeting our customers’ needs.”

Related: Changing The Shape Of What’s Possible

VDM is a large transport business, but Deon believes the benefits for SMEs are as great, if not more so. “Many SMEs don’t have the back-office support that we do. The ability to capture and use this information without a team of admin specialists at your disposal is a huge competitive advantage for smaller businesses,” he says.

Offering you the competitive edge

VDM offers a specialised logistics service that creates custom-made options for clients. In order to ensure the most optimal and cost-effective solutions, while still ensuring top quality delivery, they need to consider special and complex individual customer requirements, from the point of origin to the point of destination, before finalising a customer-specific solution.

“We take into account a host of factors, including inventory carrying costs, volume requirements, product specific factors and route to market,” explains Deon.

“Road transport significantly impacts total supply chain costs, and if not managed properly, can have a severe impact on the sustainability of any particular channel. We try and manage this risk by continuously improving our service through innovative logistical solutions, the use of advanced technology, vertical integration and a team of passionate and talented experts.

TomTom assists in creating differentiators

“This focus has helped us to develop a market offering that includes dedicated and completely flexible inter-modal solutions, which is a big differentiator for us. TomTom Telematics plays a key role in our total productivity, helping us measure the performance of road transport across our supply chain.”

Deon believes that what you don’t measure you won’t know.

“TomTom provides updated fleet statistics that allow us to constantly benchmark our fleet against pre-defined route surveys and, in so doing, enables massive savings in fuel and total turnaround time.

Communicating via the WEBFLEET platform also helps us save time and creates a formal trail of correspondence with our drivers. I don’t believe it’s possible to successfully run a business like ours without a solution like this.”

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