You’ve probably heard the saying “cash is king” 10 million times. Well, that’s because it’s a true statement – and it applies to businesses of all shapes, sizes and ages.
But, for young businesses in particular, every dollar that comes in the door is especially vital to your long-term survival. According to new data from CB Insights, “ran out of cash” is the second most common reason startups fail.
With that in mind, growing your roster of clients isn’t just important – it’s exciting. When people are willing to pay for the product or service you worked so hard to create, you don’t just feel validated; you also form a special bond with each client. These are your early adopters, and they hold a special place in your heart.
But, what will you do once one of these first clients becomes a problem child and begins monopolizing your team’s time, resources and sanity?
To save or to sever?
When you’re trying with all your might to grow your revenue, cutting ties with a paying customer is probably the last thing on your mind. Instead, you’ll do everything in your power to salvage the relationship, because if the client leaves, so will a hefty chunk of your revenue.
I used to think the idea of “firing” paying customers was preposterous, but I quickly changed my tune after seeing one too many of them kill my margins and spray the internet with inaccurate negative reviews about my company.
To help you avoid my mistakes, here are four types of paying clients who could be doing your business more harm than good:
This customer thinks he’s the most important person on the planet. Every time he calls with a question or complaint, he demands to speak with a manager – or worse, with you. If your reps push back and refuse to transfer him to your personal line, he’ll yell and scream and curse – and maybe even threaten legal action.
Bullies cause workplace stress, and the longer you force your team members to tolerate them, the more likely they are to quit their jobs. According to research from Monster, 42 percent of U.S. workers have changed jobs at least once, to escape a stressful work environment.
Given the high cost of turnover, you’re probably better off keeping your great workers and firing your bullies. Each time I have made this difficult decision, several employees have come to my office to thank me for having their backs.
Right after launching my property management firm, I began working with an accountant to make sure all our finances were in order. I paid him about $100 a month, and I definitely got my money’s worth. I constantly called and visited his office to pick his brain – until one day, he sat me down and said, “Mike, I like you a lot, but unless you start paying me more, we’re going to have to part ways.” As a small startup, I couldn’t afford to pay him more, so he ended up firing me.
At first, I was furious – but after thinking about it, I realized he taught me a very important business lesson: Be wary of small clients who eat up large amounts of your time.
When you devote too much attention to overly needy, underpaying clients, you end up neglecting your larger, more significant relationships. If you’re not careful, you could lose happy clients who didn’t feel like they were getting the attention they deserved.
Don’t let this happen to you. Proactively reach out to your largest, happiest clients. Ask them how you can better serve them, or just thank them for being loyal and easy to work with. Simple thank-you notes can go a long way. In fact, as one charity found, notes make people 38 percent more likely to donate again down the road.
Some clients will treat your company like it’s a vendor at a flea market. They’ll try to bargain every time you send a quote or invoice. This isn’t just disrespectful; it’s dangerous. Remember: Cash is king.
A healthy partnership should allow for occasional wiggle room on pricing, but once price breaks become the norm, you’ve reached unhealthy territory. You’re probably better off replacing this client with a new one who will recognise the true value of what you have to offer.
In another scenario, perhaps you’ll come across a client who always drags his heels when it comes time to pay his bill – or maybe he’ll just stop paying altogether. Unfortunately, this happens much more often than it should. Last year, Atradius found that 47 percent of B2B invoices were paid after their due dates.
To avoid getting stuck with a partner who doesn’t pay the tab, create an immovable policy.
After a set number of days, cut off all communication and service until payment is no longer delinquent. If you keep working and let the invoices pile up, you are much less likely to collect what you’re owed.
4The online complainer
If a client would rather complain on the internet than collaborate with you to resolve an issue, he or she is putting your company in serious jeopardy. Your online presence is vital to secure new customers. According to BrightLocal, 92 percent of consumers consult online reviews before making a purchase. Further, Cone Communications found that four out of five consumers surveyed said they’d reneged on a purchase decision because of a negative online review.
We once had a non-paying tenant post more than 50 negative online reviews about our company. He would call to scream at our reps about anything he found unsatisfying, and immediately after hanging up, visit a dozen websites to repeat his complaints. There was literally nothing we could do to make him happy, and even though his long ramblings didn’t make much sense, the multiple one-star ratings he gave us definitely deterred potential customers.
Don’t wait for the situation to get out of hand like I did. Proactively pull the plug if one of your clients becomes a serial online complainer – and also ask your happy customers to post about their positive experiences. Today, I’m proud to say we maintain a 4.5-star rating on Google.
It may seem counter-intuitive, but firing certain types of paying customers could actually help your company grow. Working with bullies, time-suckers, nickel-and-dimers and complainers will result in unnecessary turnover, lost revenue and missed opportunity.
By cutting ties with these clients, you can use your newfound freedom to keep other clients happy and pursue new business.
This article was originally posted here on Entrepreneur.com.
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?
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.
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.
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.
Should You Scale Or Should You Grow? (The 2 Strategies Are Not the Same)
Bigger is not always better.
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.
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.
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.
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.
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.
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.
“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.”
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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