I’ve been shocked by how many of my friends and colleagues are struggling to survive as SMEs in the current economic environment. One theme is very apparent and that’s that they cannot compete with the ‘big players’ in their respective industries.
We’re also seeing large companies now encroaching on the traditional market space of SMEs, devouring the entire value chain and saturating every market with their economies of scale and aggressive pricing. With this becoming more prevalent are SMEs running out of runway to trade?
My view is definitely not. As SMEs, we are smaller and more agile in the market place. We don’t have the huge overhead structures that large companies do and we can capitalise on new opportunities quickly.
You have to ask yourself why the big companies are all seeing the SME market as the new land of opportunity. The answer is that they are seeing SMEs as customers that have to pay a higher price than other larger companies for goods and services.
SMEs traditionally do not have the bargaining power and economies of scale to negotiate preferential rates to compete. It’s becoming a dangerous market out there and we urgently have to become skilled in how to navigate these dangerous waters.
Beware the double-edged sword
I call the environment that the SME and entrepreneur find themselves in the ‘double-edged sword’. On the one side you, as the SME, need to purchase your raw materials, trading stock and so on from a supplier. Due to the fact that you purchase smaller volumes than the larger players out there, you are at a price disadvantage from step one in the value chain.
Secondly, when it comes time to sell those products we all aim for that one big deal with a large retail outlet or financial institution that will guarantee a successful future. It never works out that way.
The double-edged sword is our reality as SMEs and it won’t go away. We cannot control it, but we can control how we react to it. The following filters and observations provide an overview of how to move forward and hold your own against the larger corporate suppliers or customers:
As an entrepreneur we have all been there. So desperate we will take anything that comes along, no matter what the terms. How many times have these worked out to be good deals? I can only comment from my own personal experience, and that is zero times! Always take a step back and work through the pros and cons before committing. Always go in ‘eyes wide open’!
Always spread your risk-beware the big fish and don’t ignore the little fish
If I counted the number of times that we hunted the big fish out there it would probably shock you. The amount of time invested in meeting after meeting with no decision was worth millions of Rand. The big deals and big companies are sexy, but they always come at a price.
They are time consuming and take a long time to bring to fruition. We often get caught up with landing that one great deal and don’t focus on the bread and butter deals. Always spread your risk and don’t be over reliant on one customer. If you are making profit and generating cash flow then look at the deal.
Always agree on your terms as well
Deal making and hunting customers is like going into a new relationship. You have to know what your non-negotiables are, in other words those areas that would put your business at risk. Everything else is a compromise. Long term, sustainable relationships have to take the needs of both parties into account.
Don’t let your eyes deceive you
You will always be at the coal-face when it comes to the deal. Always read the fine-print and truly understand the terms of any contract or agreement you sign. I like to draw a picture of the transactions and terms so that it makes logical sense.
It also helps to get someone else to cast an objective eye on these agreements and contracts. Often you are too close and may miss something.
Know your business
This sounds like a simple statement but it’s not. Know what impact every decision you make will have on your business. Can you absorb the terms offered at a cash flow level? What is the opportunity cost of inventory levels that need to be ‘on-hand’ as a contingency supply to the large customers?
Work through all of these in extreme detail. Once you are comfortable with this, track the actual results every month against what your assumptions and calculations were. You need to know early on if something isn’t right so that you can potentially re-negotiate in need.
This is your life
No matter what you do or how small your business is, you are one of the brave few that have backed yourself and started this new journey in your life. You and your business are one. Stand tall, and negotiate strong.
How To Survive Exponential Change In Your Business
How to get out of the habit of thinking small, and start thinking in giant leaps for radical – and profitable – change.
I recently went to a meet and greet session at a company that turns over R13 billion a year. As I was introduced to other executives, I was referred to as ‘the guy who is at the pinnacle of podcasting in South Africa’. This kind of feedback is truly humbling, but after hearing that, the only question I had on my mind was: “But for how long is anyone or any brand at the top of any market?”
The Challenge of Change
Change is no longer happening in a linear fashion; it’s occurring exponentially. We love linear thinking, because we have been conditioned to think in small steps (1, 2, 3, 4, 5, 6) but we totally suck at exponential thinking (1, 2, 4, 16, 32, 1 024). To a greater and greater extent this is the world we are heading into.
Almost inevitably, markets that used to be relatively predictable are winding up in an entirely new paradigm and some of the world’s largest and most reputable companies have been caught unaware. The main culprit? The exponential growth surprise factor.
For example, in 2012, Toys R Us was a $12 billion company with a retail footprint comprising 1 600 stores. In September 2017, they filed for chapter 11 bankruptcy… only five years later. The message is simple: Innovate or die.
But more importantly, there is a new challenge facing all entrepreneurs today: How can you prepare yourself and help your business survive in an exponential business world?
Here’s a four-step process that can help you get started.
1. Look out for the Warning Signs
In my experience, the warning signs of disaster are present in every industry one to three years before disaster strikes. Ironically, many businesses are simply not paying attention to the warning signs in their market — or even worse, do not know what warning signs to look out for.
Because all industries and businesses are subject to different warning signs, a simple, yet highly effective way to know when your business is in the throes of a critical warning sign is when something within your industry doesn’t make sense.
When a linear industry is on the verge of disruption it generally manifests into something that doesn’t make sense for the incumbents in that industry.
In 2008, when blockchain technology and the Bitcoin first manifested itself, it didn’t make sense to many in financial services. Fast forward to today and there are over 1 000 cryptocurrencies that you can actively trade and the promise of the decentralisation of all industries — not just the financial services industry — is very real.
So, if something new enters your industry and it doesn’t make sense to you it’s time to apply step number three.
2. Ask Why
If you ask a group of incredibly smart people to solve a very difficult problem and they can’t seem to solve it, you may find that they don’t lack collective intelligence, but perspective on the problem itself.
Whenever this eventuality occurs the best thing to do is ask “why” repeatedly until you find the perspective that you need to make new decisions in your business. It’s one of most powerful yet completely undervalued questions that any business leader can ask.
Almost all success in business comes down to execution. Toys R Us didn’t act. When all is said and done, they simply did not believe in the Internet and they paid the highest price. In an exponential world, the ability to not just act but to act quickly is priceless.
4. Move forward
No industry is immune. Let’s take podcasting for example. Our data shows that the addressable market for podcasts is already 16 million people; 50% of all podcast consumption growth over the last five years has happened in the last 12 months; and media consumption is shifting faster than we think into the on-demand space.
To address this exponential shift in media consumption, the Matt Brown Show is evolving from a podcast into a fully-fledged new media company. So, my question to you is simple: How is your business preparing itself for the future? EM
IN YOUR TOOLKIT
Get some perspective
While decades of researchers have struggled to understand why even the best companies almost inevitably fail, Clayton Christensen shows how most companies miss out on new waves of innovation. His answer is surprising and almost paradoxic: It is actually the same practices that lead the business to be successful in the first place that eventually can also result in its eventual demise. This breakthrough insight has made The Innovator’s Dilemma a must-read for managers, CEOs, innovators, and entrepreneurs alike.
Drawing from Matt Brown’s article, start implementing quarterly meetings that review the biggest challenges the company is facing, and start asking the question ‘why’ of even the most basic tenets that are being taken for granted.
The idea is to find a new perspective of the same problem.
Too Big For Your Boots?
How to manage the complexities of a rapidly expanding business.
It may come as a surprise to many, but too much success too soon can result in a company’s failure. That’s often because the company out-runs its ability to sustain and control that success, and a decline follows.
Say, for instance, that an organisation reaches increasingly higher sales targets, but its infrastructure doesn’t scale at the same rate. Inconsistencies and weaknesses begin to appear in its management systems. Quality suffers, and, eventually, the positive trend plateaus and tips downwards.
The answer? Don’t misjudge the impact that business and management can have on realising a sustainable growth strategy. The systems you have in place today may not work when addressing new challenges – or, they may make it next to impossible for you to meet them.
If your organisation is on a growth path, consider these six elements:
1. The right talent
Develop a management system that measures accountability against specific standards and ensures that the quality of your products and services doesn’t waver. As service quality often depends on human capital, you’ll need the right mix of people at every level.
Give non-management employees the autonomy to contribute positively, and recognise them for it. They’ll reward you with good outcomes and ensure that the foundation of your growth is that much sturdier, while developing a robust working environment.
Identify the people in your organisation whose roles will be most affected by your expansion, and enable them to take initiative outside of their standard work requirements. This way, they’re more likely to get involved and help you to create new cross-organisational systems that address tasks in parallel.
2. Controlling quality
It’s easy to lose track of quality when your business is growing speedily, so give the task of maintaining quality to a loyal management team. Assign them the responsibility for overseeing everything from product development to internal systems and manufacturing.
It’s also important for you to remember that service-based organisations face quality concerns as they grow, and that finding the right talent (see Element #1 above) can be as limiting as a blockage in a production line.
3. Processes that scale
Make sure that your processes and projects are executed in the same way every time. Don’t let your systems become un-scalable; establish which ones are most likely to come under strain as the company expands.
4. Manage cashflow
Numbers never lie. When your company is growing, beware of the danger of spending more than you can afford. More oversight or adjustments may be necessary to increase effectiveness, quality, and sales.
When determining if you’re going to front-load your capital investment, be confident that cash is coming into your account as a result of the investment. Remember that cash profits and accounting profit are very different. Cash profits are your bread and butter.
If you aren’t positioned to finance your own expansion and you require outside funding, carefully consider the pros and cons of getting into debt, as well as the length of the loan and interest rate.
5. Finding investors
Conduct detailed research into potential investors, as each will have sector or industry interests, investment mandates, and value preferences. Pinpoint these, assimilate with them, and make sense of them before engaging.
Then, make the effort to thoroughly evaluate the potential investor. Do this by first determining where your interests are aligned and then uncovering:
- The source of the investors’ capital
- Their investment track records
- The returns that they usually aim for
- Their traditional risk profiles
- Their investment mandates.
6. Communicating culture
Spend as much time determining, sharing, and entrenching your company’s current and growing culture as you do addressing your growth strategy.
With each new stage of growth, commit time and resources into making sure that the cultures of different departments don’t implode when put together – impacting on customers, important employees, or worse.
Make your employees aware of what the future will hold, how it is likely to affect them, and what the bigger picture looks like.
No matter the size of your business or what your growth plans are, expansion can expose you to a host of risks. These may be existing problems that worsen, or new ones that are uncovered for the first time. Either way, it’s crucial that you identify them, prepare for them, and make plans to protect yourself in the face of growth.
Driving Your Business Growth Towards More Customers
Designed to help its customers get the most from their businesses through the right telematics solution, New WEBFLEET can help you reach your customers quicker, get more done, improve efficiencies, save costs and boost your revenues.
Europe’s highly regulated operating environment has made telematics ubiquitous in business. On the one hand, this means industries across the spectrum have become safer, more efficient and highly productive across the EU. On the other, it’s much harder to stand out from the crowd when everyone follows the same best practice standards.
“We don’t have those same stringent regulations in place,” says Justin Manson, Sales Director, Africa at TomTom Telematics. “Our clients have realised what a huge competitive advantage this actually offers them though.
“Locally, everyone understands the role that telematics plays in tracking what your drivers are doing right and wrong, and use it as a tool for encouraging good driving practices, but there’s so much more to this solution, and we’re making it our mission to help business owners really use it to their benefit.
“When deployed across the organisation to its full capabilities, a telematics system can radically improve productivity and workflow. Done correctly, a business can save up to 10% on its bottom line, and redeploy that cash into the company’s growth, thanks to drivers reaching customers quicker and getting more done. The right data also increases productivity and ensures better turnaround times.”
Thomas Schmidt, MD of TomTom Telematics, loves visiting South Africa for this very reason. “Because so many business owners aren’t using telematics to their full extent, there’s such a huge opportunity for us to assist businesses in their growth here,” he says. “We deliver a high-value stack of products that can change the way companies operate, and most importantly help them save money and make money. The challenge for us is educating our customers so that they understand what our solutions offer, and the incredible impact they can have on a business. We consistently improve these solutions based on customer feedback as well, making them very much from customers for customers.
“Anyone can buy a map for less than R100. Why invest in such expensive devices? The answer is because we’ve developed solutions that change lives. With the right data — and access to that data — you increase safety, simplify your business, drive efficiencies, increase your output and customer service, and ensure you are always productive and reliable — across the organisation. And that impact can be measured, and given a real ROI value.
“Imagine the impression companies that operate at that level make on their industries. They stand out from their competitors. There is so much room for growth in South Africa as we deploy these solutions.”
As an organisation, TomTom Telematics is focused on continuous growth and innovation as well, constantly learning from market conditions, its customers and industry needs to improve its product offerings.
The result is the launch of New WEBFLEET in February 2018. “We’ve increased the value we offer our customers,” says Thomas. “We’ve collated data from hundreds of thousands of customers around the world who gave us their feedback through surveys, and New WEBFLEET is a window into easy-to-use, smart fleet management that is a game changer for companies.”
“TomTom Telematics is in the business of helping businesses,” agrees Justin. “Our goal is help our customers master their challenges. The right data at your fingertips will help you change the way you operate. That’s our goal. How much cash is being left on the table in an organisation because of inefficiencies?”
Introducing New Webfleet
The smartest way to manage your vehicles and mobile workforce
TomTom Telematics’ state of the art Software-as-a-Service (SaaS) fleet management solution, with best-in-class user interface, is inspired by two decades of working together with customers to achieve more for better fleet management. New WEBFLEET is everything you need to manage your vehicles in the cloud, in real time. It allows you to monitor reports and dashboards, manage orders/workﬂow, and improve driving behaviour, safety and service, helping you save fuel and reduce costs.
Best-in-class user interface
- A future-proof platform with a completely renewed interface, based on the latest HTML5 technology and driven by continuous innovation.
- Simple and clean interface, with minimised clicks for faster working.
- Intuitive functionality, means it is more accessible for greater impact across your business.
- User rights management and state-of-the-art data handing ensures the highest level of data privacy and data security.
- Fast access to the right information.
Know where your vehicles are and where they have been. Different map options such as Google, Google Street View or satellite map are enriched with traffic information, giving you a more detailed view on what’s happening on the roads. Toggle between different types of information on the map such as traffic, addresses and areas and create specific views, so you only see the information you need.
New WEBFLEET’s dashboard gives an overview of performance at a glance. Up to 27 KPIs can be used to track the performance of vehicles, individuals, benchmark teams or give a simple overview. This helps you to track real-time performance against your pre-defined KPIs.
New WEBFLEET gives you instant access to the information that matters, meaning you can spot trends over time and use real-time information to make smarter and more informed decisions. You can instantly download or schedule reports to help you stay on top of everything — from fuel efficiency and legal compliance to quality of service.
Manage on the move
New WEBFLEET is optimised so you can manage your fleet on any device by entering WEBFLEET through a web browser or by downloading the WEBFLEET Mobile app on your smartphone.
Send routes direct to drivers
- Plan accurate routes in New WEBFLEET by adjusting multiple variables such as location, time of departure/arrival, traffic and vehicle type.
- Get a choice of alternative routes, as well as suggested fastest route with traffic.
- Customise your route by simply adding new waypoints, or dragging and dropping existing waypoints on a route. Then choose from guided or forced route* options.
- Send planned routes directly to a TomTom PRO driver terminal to keep your drivers on the right track.
Personalised Map views*
- Create your own saved map view to reach information you need fast.
- Switch between vehicle groups or areas, without needing to adjust the map filters and zoom levels. n
Many ways to customise WEBFLEET to suit individual requirements from personalised views to adding information to make what you see more informative on one page.
Plan a route the way you want it
Use multiple variables (including waypoints) to give fastest or most efficient routes.
Across different device types, allowing you to always stay on top of business.
Simple, clean and easy to administer
Toggle between views to get the right information to focus on the task in hand. Get the right information to the right people at the right time, keep data secure and in the right hands.
Send routes to driver terminals
In real time, ensure drivers follow or avoid specific routes.
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