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Sales Strategy & Management

You Can’t Build Profits Without Forecasting Your Sales

How building your foresight will give you the tools for building a profitable business.

Pavlo Phitidis

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It was the beginning of another year. The December holidays felt like they were months ago. Already work was becoming overwhelming.

Charlotte held the hard-earned post of regional operations manager in one of South Africa’s biggest tile retailers, she had been with the company for eleven years. For some time she had felt she needed a change.

She also had a creative side that never found expression in the day-to-day humdrum of operations. For three years before she started her own business, Charlotte had been keeping herself busy over the weekends.

Every week she would collect the broken tiles that were discarded as a result of careless material handling – dropped boxes, forklift damage incurred during the long journeys from manufacturers all over the globe. She only collected the decorative tiles with colours and patterns to suit the tastes of eclectic South African consumers.

The tile pieces were taken home to the garage where Charlotte’s other life took over. On the walls and floor were tile mosaic patterns expressing emotions and images that would appeal to the homeowner.

Her journey into the world of mosaics began on a trip to Chartres, France in 2004. There she visited La Maison Picassiette, a home covered completely in mosaic made of broken ceramic tile. The care, dedication and beauty evident in the work inspired her so deeply that she decided to make mosaics.

Inspiration and passion are key attributes needed when starting a business which she certainly had in large doses.

In 2006 she left her previous employer on good terms and started her own business. She produced mosaic kits including the mosaic pattern, tile pieces, tools and materials needed for home mosaic enthusiasts to create their own pieces of art.

In 2010, her business was generating an annual turnover of R13 million with exciting growth prospects.

Managing costs

Few retail suppliers are pure cash businesses; terms of payment often sit on both sides of your business model. Retailers demand payment terms and you want their business.

On the supply side, Charlotte sourced the broken tile pieces from her previous employer. Her orders were made up of broken tiles collected in nylon bags or end of range whole tiles which she broke up into the fragments.

The relationship was invaluable. Charlotte could order as and when she liked and the pricing was reasonable. The biggest distribution centre of the retailer which supplied stores across the country was a convenient 12km from where she lived.

The early years saw her learning the lessons that cannot be avoided. At first she marketed her product too broadly. Not everyone likes the idea of buying a mosaic kit.

During the first two years, Charlotte worked hard to understand the consumer market.

Turning your business to face your customers and not your ideas is a very humbling and difficult task to achieve.

She found a market and matched the products she developed to retailers that she could market to.

In 2008, the impacts of the global credit crunch began to bear down on the global economy. The South African economy responded soon afterwards. In order to sustain her growth, Charlotte had to innovate. This meant two actions.

First, she had to get the price of her materials down. At the same time, she had to broaden the range of products she had under specific price points and increase the range of designs to appeal to established customers. Her first trip to China was being planned.

After two weeks in Guangdong, China, Charlotte arrived back in South Africa with her first order placed. She found a range and variety of tiles that fitted exactly what she needed and at prices that were almost 30% cheaper than her current line of supply. It was a dream trip.

When I met her in 2011, her annual turnover was a solid R18,7 million.Charlotte complained that while her turnover had grown and things were looking good (she was about to list her products with a national garden product retailer), turnover was not translating into the profit margins she once enjoyed. She was in a terrible cash crunch.

[box style=”gray,info” ]The Importance of Not Letting First Sales Go Bad[/box]

Sales forecasting

I ran the diagnostics on her business. We included the numbers, a site visit and business systems evaluation. What I discovered sent a chill down her spine.

Charlotte’s materials inventory, work-in-progress and especially finished stock ratios were a mess. After additional analysis, we discovered that the problem lay with the Chinese inventory. The levels were too high and cash was tied up in what increasingly looked like unsaleable stock.

Before importing from China, Charlotte procured locally. At most she would have a three or four day delivery cycle. Her ability to order ‘just-in-time’ was on offer all-the-time. While this was great for the first few years of her business, the demands and pressures that led to her having to import required a different approach.

China required an increase in the size of the average order and she also had to endure long lead delivery times, as the tiles were transported by ship.

Despite her experience, the stock she ordered often arrived when the season for its demand had passed. Mosaics have a fashion and novelty factor and so we quickly went to work on developing a system to create an inventory order foresight capability. It’s called a sales forecast.

Charlotte had to prepare a forecast on sales over the next year. The forecast needed to specify sales into product units. For the first time, she could get a sense of what the future plan of the business would look like. Supporting the forecasted sales was a promotional plan, something she had never aligned against a forecast.

With our ability to read the market signs and present them in product units, we developed an inventory ordering capability that took into account the manufacturing and delivery processes from the Chinese suppliers.

Included in the February orders were samples for the development of products for the following summer season. This allowed Charlotte to move to a point with her retailers where she could pre-sell the season’s products before placing orders from the Chinese manufacturers.

Forewarned is forearmed

The power of doing a well thought out sales forecast in your business provides you with advantages that you would never have thought of. In Charlotte’s case ‘forewarned is forearmed’.

Today Charlotte’s business generates a consistent R27 million with an average stock turn of around 1,4, dramatically down from the terrifying 3,2 that we first discovered. Goods are almost completely sold before they are even ordered. A nice place to be. And profitable too.

[box style=”gray,info” ]Become a Sales Process Master[/box]

Sensing the future

Forecasting isn’t about mind-reading. It’s looking to the future, and then using the numbers to make intelligent decisions today.

Stock sense

What does your inventory look like, and is it hurting your business?

Toolbox

Build your forecasting tool

Create 12 columns marked with the months of the year.

Row 1

Identify all the activities this year that will impact sales e.g. school holidays, strike season, elections, the seasons etc.

Row 2           

Forecast the business from your current clients.

  • Organise your profitable clients. It’s likely that the top 20% of your clients make up 80% of your sales. If you are dealing with consumers, segment them and identify which segments make up your 80% of sales.
  • Forecast their performance this year: Take a view on growth given the poor economy — say 10% and take your 20% customer segment and grow their revenues over the period by 10%.

Row 3

Forecast sales from new clients against your product/service range.

  • Take all your products or services and do the same — segment them into the top 20% that brings in 80% of your sales. List them over the 12 month period.
  • dentify what promotional activity you want to implement this year and locate these activities over the 12 month period.
  • Take a view on what new sales you will generate against your top 20% products/services in response to your promotions.

Row 4

Aggregate your sales forecast for this year by adding the expected sales from current customers to the hope for sales of the new customers responding to your promotions over the year together.

You now have a forecast

It will never be right. Every month register what sales you brought in and compare to what you thought you would bring in. Did you over- or underachieve?

Ask and interrogate why and in so doing you develop the intuition of foresight through a most useful tool called the forecast. Do it now and it will serve you beyond your dreams.

Pavlo Phitidis is the CEO of Aurik Business Incubator, an organisation that works with entrepreneurs to build their businesses into valuable assets. Pavlo is a regular commentator on entrepreneurship on 702 Talk Radio and 567 Cape Talk Radio. He can be contacted at www.aurik.co.za

Sales Strategy & Management

5 Reasons Why Your Business Is Losing Customers

Ever think about why people keep buying iPhones, even though they’re so darned pricey?

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Like it or not, your business is losing customers. Recent research from McKinsey & Company revealed that only 13 percent of customers surveyed said they were loyal to a single brand. The research found that 87 percent of customers surveyed said they shopped around, and 58 percent had switched to a new brand.

Why do people shop around? What motivates them to abandon the businesses they know and buy products or services from competitors? It’s time that you take a close look at why your business is losing customers – and, what you can do to fix it.

Here are five common reasons why customers leave small businesses … and effective tips you can use to start turning the tide.

1. You’re guilty of poor customer service experience.

Few things can sour a customer experience more quickly than poor customer service. To a customer, your support team is your business. Shauna Geraghty, a clinical psychologist and head of talent at the global customer support innovator TalkDesk revealed on the company’s blog that over 90 percent of customers who are dissatisfied with your customer service experience will — rather than telling you that something is wrong and how you can improve it — just not come back.

So, if you’re not paying attention to your customer-service policies and performance, there’s a good chance that neglect is costing you customers.

This is one reason why some companies, including Comcast, create create support-focused accounts like @comcastcares on Twitter. These accounts are public and are known for helping customers to resolve problems quickly.

Related: How to Lose Customers through your Website

What you can do:

Outline thoughtful, positive customer service practices. Start with an internal audit of the policies that govern your team. Conduct interviews with customer-support managers and representatives.

Assess what company policies have led to customer dissatisfaction. What internal issues are preventing your reps from supporting customers quickly and effectively? Use this data to improve your customer service practices.

Then, bear in mind these three golden rules of customer service:

Respond quickly. Acknowledge when a mistake is made and make it right.

Treat the customer with respect and empathy.

Support your customer support team. Give your customer service team the resources they need to provide your customers with awesome service. This includes the technical infrastructure as well as the autonomy to make choices that will benefit your business and support your customers.

2. Your product or service failed to meet expectations

Disappointed customers are likely to share their disappointment with friends on social media. And angry customers will post angry reviews for other prospective customers to see.

What you can do:

Design and build a quality product or service. Don’t think that marketing magic or any amount of other business trickery is going to make up for a poor product or badly executed service. So, work with a talented product designer.

Test. Build with quality materials. Adapt your service based on customer feedback.

Do whatever it takes to create and deliver a service or product that is worth paying for.

3. You didn’t show the value

valuePrice is what a customer pays. Value is what a customer gets. Sales expert and emotional intelligence coach Liz Wendling pointed out on her blog that customers don’t necessarily choose only “the lowest price or the cheapest in town.” Customer preferences, she said, have nothing to do with price and everything to do with the value you are conveying. When your potential customers tell you it is about the money, wrote Wendling, that is actually customer code for “show me the value.”

This is certainly one reason why Apple continues to dominate when it comes to smartphone profits. In Q4, 2017, Apple captured 87 percent of smartphone industry profits but accounted for only 18 percent of total units sold. Customers, clearly, are buying iPhones because they believe that Apple products deliver more value, despite the higher price.

What you can do:

Identify your unique value proposition. What awesome value do you bring to your customers that other businesses don’t? This is your unique value proposition.

Clearly articulate your unique value proposition on all platforms. Publish the benefits of your product or service on your website home page.

Educate your customer support and sales staffers so that they can speak fluently about the value included in your pricing.

Feature your unique value proposition on the landing page for every offer. (Check out https://www.crowdspring.com/blog/landing-page-guide/this article to learn more about creating effective landing pages.)

Related: 3 Ways To Stop Taking Your Most Loyal Customers For Granted

4. Your business is Inconsistent

In business, and in life, consistency breeds trust. Things that are consistent can be relied upon. And, things that can be relied upon don’t need to be worried about. Inconsistent branding, including using your company’s name or logo differently on your own site and on social networks, plus inconsistent quality or service, all have the potential to drive customers away.

United Airlines learned this lesson the hard way when young women wearing casual wear were not permitted to board a flight unless they changed out of Spandex leggings. Yet any traveler is going to see many, many women at the airport wearing leggings. And there’ was no previous record of United barring others from flying for wearing leggings. That’s why this particular decision created a social media firestorm and lots of confusion.

What you can do:

Deliver an experience customers can rely on. This starts with you and your employees.

Educate all of your employees about what a good customer experience should look like.

Create a branding guide to establish uniform branding guidelines and share it with your team.

Hold your employees accountable for delivering a consistently positive customer experience.

Create strong customer interaction policies. Whatever your policies are, make sure that they will serve your customers well before you implement them. Then stick with them! Be consistent.

5. Your sales tactics are out-of-date.

Aggressive sales techniques are more likely to drive customers away than lead to positive results. Leslie Ye, for HubSpot, wrote that the old sales playbook — dragging prospects through a sales process and strong-arming them into a purchase — worked only because there was no better way for buyers to buy.

If your sales techniques focus on manipulating or coercing a sale, your business is actively chasing customers away.

What you can do:

Employ value-based selling techniques. Take the time to learn what your customer actually needs. Then offer value-based solutions that address those needs. Show how your product benefits the customer and allow them to decide if it’s the right fit for them.

Build relationships with your customers. If you’re trying to sell with every single customer interaction, you’re doing it wrong. Instead, focus on establishing trust with your prospective customers.

Have honest interactions and provide value through useful content and entertaining social media engagement. Then, when a customer needs the product or service you provide, he or she will turn to you, a trusted resource.

The key to growing a business is to maintain the customers you already have while acquiring new ones. So, stop leaking customers. The success of your business depends is at stake.

This article was originally posted here on Entrepreneur.com.

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Sales Strategy & Management

How To Find The Right Salespeople: And Attract Them To Your Business

A key part of finding star talent to join your business is to start the process much earlier than you need to, by building a strong talent pipeline – also known as a Virtual Bench.

Andrew Aitken

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In a previous article, we discussed the 3 things business owners and sales managers should be concerned about when trying to increase sales in a systematic, more sustainable manner. The first of these is to hire a sales team consisting of A-players, and as the owner of a business, you’ll know how hard it is to find this kind of talent.

A key part of finding star talent to join your business is to start the process much earlier than you need to, by building a strong talent pipeline – also known as a Virtual Bench.

Related: 3 Ways You Should Use Data Science to Skyrocket Sales

What is a Virtual Bench?

A virtual bench is the concept of building a pool or pipeline of strong, A-player talent before you need it. Like sports coaches in team sports who always have players on the bench that are ready to play when needed, you too, need to have a pool of people that can fill new spots and substitute existing players on your team when necessary. A virtual bench is about ensuring that you don’t only think about hiring when the need arises – as doing so can have painful, costly effects on your business.

Always be recruiting, even if you don’t yet have a position to fill.

How to build a Virtual Bench of A-player talent

1. Use your existing contacts

Go through your existing contacts – on your phonebook, on LinkedIn, etc. and shortlist, from your past experiences, which of them are A-players that you would like to have working with you one day.

  • Keep in contact with the people on this list – let them know that you believe they are talented and have a great attitude, and that you are always looking for great people to join the business. Make an appointment to meet with them to discuss where they are in their careers and what their future plans are. Use this meeting to get to know them even more and unearth possible synergies where you could potentially work together in future.

2. Keep an eye open at social functions and networking events

Use regular social interactions to identify people you could work with one day. Speak to the people you meet about what they do and about their future plans. Also ask mutual friends or acquaintances about your new contacts, so that you have a clearer picture of who they are. Then keep in touch to nurture your relationships with them.

Related: How To Structure A Fair Salary That Will Motivate Your Sales Team

3. Work with your marketing team

Most of the support you need when building your virtual bench should be from your marketing team and not necessarily your HR team.

Sit down with your marketing team to see what content and campaigns they can run to attract the right people to your business. A-players are attracted to organisations that have a clear mission, distinguishable energy and drive, as opposed to merely seeking a job and a regular paycheck. So, create content that portrays:

  • Who you are as a business and what you stand for
  • Who your customers/clients are
  • The wins you are getting
  • What the working culture is like in your organisation

If you think about hiring in this forward-thinking manner, you’ll be sure to not only prevent a scramble when you need new talent to join your business, but it could help you prevent a lot of costly mis-hires.

Keep an eye out for our next article in this series: What core skills do your salespeople need to have?

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Sales Strategy & Management

5 Lessons On How You Can Deliver A Product Your Customers Actually Want

By learning quickly and failing fast, yourself, you’ll be better able to keep in step with customer expectations and respond to their needs.

Victoria Lawson

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When Zappos.com founder Nick Swinmurn had the initial idea to launch an online shoe retailer in the ’90s, he sought out the leanest way possible to test whether customers were willing to buy shoes online. Instead of spending time building an infrastructure and inventory systems, Swinmurn went to local shoe stores, took pictures of products and posted them online.

If a customer purchased the product, Swinmurn bought the shoes from the brick-and-mortar store at full price to ship to his customer. When the concept actually worked, he knew it was go-time.

Almost 20 years later, in today’s retail environment, adopting this type of low-risk, lean-startup mentality, with a “fail fast, fail cheap” approach, is the number one strategy for success. Here are five lessons to help you nail product innovation through an agile approach.

Take lean to the extreme

Forget about scaling at the beginning. Instead, identify and embrace the bare minimum you need to develop an end-to-end solution, even if it’s manual.

Then build out a basic product infrastructure to mimic a more scalable process and iterate as you progress through development and validation.

This is called the “garage phase” of innovation. Thought leader and author Marty Cagan explained a similar “light-weight” process to product development in his book, Inspired: How to Create Tech Products Customers Love.

Related: What You Need To Know About The Lean Start-up Model

By embracing a lean approach, Cagan wrote, you’re making room for the next great idea and continuing to discover and improve with each step you take along the way.

Don’t overcomplicate

Consider simple solutions that are as innovative and personalized as they are valuable for your customer and business objectives.

Related: Saab Grintek Defence’s Strategies For Staying Lean and Competitive

Recently, our company, CarMax, launched 360-degree-camera technology to allow shoppers to interact with 360 photos on carmax.com and experience the inside of a prospective car as if they were sitting in it.

The goal was a more optimized and personal online customer experience, and it started with a selfie stick. This basic low-cost solution required little time, training and resources, and was quickly scalable.

Starbucks is another example: The company excels in creating a simple customer experience because of its focus on seamless personalization: Baristas serve coffee ID’d by the customer’s name, and each location has the same look and feel but is personalized to the geographic location.

Recognise that innovation doesn’t happen in a lab

Don’t isolate your R&D in a lab; instead, send your team out to the field while developing your solution, in order to deliver real-time adjustments and build your awareness of variables you may not have considered before.

Test different approaches, speak with customers and stakeholders and understand all the possible challenges or failures that could happen.

When Nordstrom was attempting to develop a digital way to help sunglass shoppers make a purchase decision, members of the innovation team embedded themselves at a Nordstrom store for a week, talking to real customers, showing prototypes and adjusting those product samples based off those customers’ feedback.

Innovate for both internal and external audiences

Remember the two “customers” you’re innovating for — both the end user and the associates who will be using the product.

By finding a simple solution that works for everyone and training for the rollout, you’ll be setting yourself up for success.

Qualitative testing and immediate feedback can also help your team better understand usability and the overall customer experience the product is delivering. A product just might fail if there’s a lack of understanding about its functionality.

Avoid product remorse

By starting with a minimum viable product, you’ll be able to get something in front of customers as early as possible before you’ve invested too much time and energy into it.

Related: How To Determine Your Minimum Viable Product

Take a page from Jeff Gothelf’s book, Lean UX, and don’t sit on value or wait to arrive at a perfect solution before implementing at the level of “good” can be good enough and be your starting point for further iteration.

You’re not going to learn everything and anticipate every problem before you introduce a product. And, if you wait too long, the market may shift.

Before co-founding Groupon, Andrew Mason spent almost two years working on a product called The Point, an online platform for social activism.

While The Point never gained steam, Mason did observe his customer base using a featured offering for a group discount on products. Because of good timing and openness to learning, he was able to pivot and create Groupon.

By learning quickly and failing fast, yourself, you’ll be better able to  keep in lock step with customer expectations, to leave behind the ideas that aren’t helping your customers and to deliver the experience your customers want today.

This article was originally posted here on Entrepreneur.com.

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