Tough trading conditions over the past year have left many business owners stretched financially particularly when you consider the average number of debtor days for a small business may now be well in excess of 50 days.

The shaky financial status of well known major corporations will also be exercising the minds of business owners caught up in the debt collection process. Through inability to collect payment in a timely fashion, proprietors can quickly become the bankers for their suppliers with their working capital being used to fund the suppliers’ business whilst draining their own.

Such situations highlight the need to exercise caution before entering into any agreements. Credit checks and references should both be “top of list” and the collection of a front-end deposit is also recommended.

What are some “Best Practice” approaches to Cash Flow Management?

There are many steps involved. Some are outlined in the paper entitled “Keeping the Cash Flowing” listed in the “Business Resources” section of this website.

Here are a few extra tips you may find useful:

·                Quote accurately for the project and ensure the client executes your account documentation before commencing the work or supplying products/services;

·                Look at ways of making it more financially rewarding for the client to do business with you;

·                Your documentation should set out credit policies including overdue account fees and finance changes  and the processes for enforcing payment and debt recovery policies;

·                Issue a monthly, or progress, invoice for work undertaken to date;

·                Send out regular statements detailing overdue invoices and follow up with friendly reminders;

·                Adopt a positive client relationship and a clear communication policy. Keep in touch with the customer during the job should changes be necessary;

·                Send the final invoice promptly upon completion of the work. Where possible hand it to the client and discuss any issues whilst they are top of mind;

·                Include a client survey with the invoice and make it easy for the client to return it. Posting an electronic version on your website is also a good policy;

As the economy begins to improve and with a fresh approach to winning new clients in the year ahead the temptation will be to focus heavily on pursuit of turnover. Experiences of the recent past reflect that such should be tempered with continued adoption of good cash flow management practices.

She also appreciated that what she needs to address in her content material is to put into words what she actually tells people on a daily basis. That’s because she is a very good verbal communicator with a great personality. In the process of talking with customers and potential clients she is able to close the emotional gap. However, achieving this in written marketing material is another matter altogether!

Everything I shared with her about ensuring marketing messages are framed in terms of advantages for the customer, “what’s in it for them”, really sunk in. I had been saying that marketing is all about telling a story so that you touch your target market in a way that moves them. If you know what moves them, and this is vital knowledge you can develop through your research and development of “customer profiles”, then you are more than half way there in shrinking the emotional distance

Only when you know who your target market is and what their needs and wants are can you focus your story telling in a way that will drive positive outcomes and close the emotional gap.

Of course much will depend on the quality of your products and the customer commitment you deliver by way of your value proposition but if you don’t get your marketing messages right and direct them in a targeted fashion, very few will get to learn about what it is you really have to offer.

• To be truly successful a business must have high profit margins and be one of the lowest cost producers of its products or services relative to its competition.
• A comparatively low break-even point will enable survival in depressed market conditions and enable market and pricing positions to be strengthened when weaker competitors are being hurt or driven out of the market.
• A higher than average profit margin enables the business to generate more funds internally to sustain growth.
• A business with a strong financial management capacity has several important advantages:

a)      Good cost information enables management to direct its energies towards those products or services with the highest potential for profit contribution.

b)      The cost system should pinpoint where production, marketing, and research costs are inefficient even in sub parts of the operation.

c)       Capital conservation through tight control of fixed and working capital investments.

• A critical finance function is to provide an early warning system to identify influences that could threaten the profit plan sufficiently ahead of time to devise remedial plans to minimise adverse surprises.

Growth orientated businesses recognise the critical importance of setting in place appropriate control systems which will provide them with the formal means of managing the business and implementing best practice. Control systems are generally a collection of subsystems, the main elements being:

• Structure of the organisation including responsibility centres
• Measures of performance
• Planning and budgeting
• Capital budgeting
• Employee incentives and rewards

Benefits that can be derived as a result of budgeting include:

1. Provides an instrument into which goals, objectives and action plans can be incorporated
2. Serves to provide a framework for business operations from which different functions and responsibilities can be co-ordinated
3. Incentives can be built into KPI’as measurable standards
4. Enables comparative analysis across performance indicators and enhances cost control measures.
5.  Business performance can be monitored and controlled and corrective action taken when necessary
6.  Over-riding benefit is the ability to increase management decision-making ability 

It’s therefore essential that we understand what the value proposition is for our products and services and be able to clearly and simply articulate that understanding to the market.

Do you think your value proposition is well communicated through your marketing material including your website?

As part of this articulation process, a specific challenge is to communicate the value linkages between core services with those that have the potential to add extra benefit. This approach when combined with the value generating series of functions encompassed in the “value chain” can help to define core competencies and the activities in which an enterprise can pursue a distinct and competitive advantage.

There can be many functions involved in the value chain ranging from initial sourcing of raw product from suppliers, through the processes of in-house manufacturing, inventory and operational controls, logistics and distribution management, marketing and sales channels, and customer commitment and service delivery through to successful end sale to the consumer.

The extent to which a business can effectively manage the value chain and the systems, people and technologies that underpin it can materially influence both customer loyalty and profitability.

Case studies, success stories and testimonials are highly effective in demonstrating the value proposition and the value chain that supports it and in the process can assist to create interest and build desire.

Does your approach to value chain management generate superior value for your customers?

Do you focus on core competencies and capabilities within the value chain in order to perform them better than your competitors?

Here are a few tips that might help you to measure, monitor and manage:

1 Analyse Your Sales &/or Fee Income.
Hopefully there is a strong growth trend evident! As always, it’s important that you measure, monitor and manage, but be careful about what you measure. Some firms have a longer sales cycle than others and to gain an accurate picture you might need to also measure the number of new leads being generated, or the number of appointments, or the number of invoiced hours achieved.

2 Ask Your Clients.
Check to find out where they heard of you and why they decided to do business with you. Most businesses never ask this question and miss out on gleaning valuable insights into how clients select a service provider. For example, if it was generated by a referral from an existing satisfied client it will be most important that you recognise and reward that source appropriately.

3 Does Your Advertising and/or Promotional Activity Produce Direct Responses?
It should, but be honest with yourself - if your answer is “I’m not sure” or, “I really don’t know” then clearly you’ve got some work to do. Here are some things you can do to improve response rates.

• Make sure you are advertising in the right media.
• Choose media to suit your selected audience. Be as specific as possible. And avoid rejecting options just because they don’t look “exciting”, such as trade journals and local papers that might have relatively small readership. Importantly, check with your audience to make sure they actually do read the publication.
• Use a strong headline that asks a pertinent question, or gives a solution-oriented statement. This should flow from your customer profile assessments.
• Include a clear call-to-action. Tell people what they should do. For example: Ring today for your free appointment; Ask for our free information sheet.
• Include multiple methods of contact. Phone, email, and web site are all important. Give prospects a choice of how to contact you.

4 Do Your Networking Activities Create New Opportunities For You?
One of the major principles of effective networking is to “give” rather than “sell”. That is, you should look to help others as you spread word about your services. But this softly, softly approach can make it hard to measure effectiveness and you need to make sure you track the source of incoming enquiries. Then see if any of your visible/tangible tactics can be credited with generating the enquiry. If not, then maybe you can safely say it was a referral generated by networking. This is made a lot easier if you’re a member of a lead-generating organisation.

5 Do Your Marketing Tactics Make it Easier to Sell Your Services?
To be effective your marketing activities and material should achieve the following:
• Attract qualified prospects (who have shown a specific interest in your services).
• Anticipate and diffuse potential questions/concerns from prospects. Again, properly assessing your customer profile will help to identify fears, frustrations and concerns in respect of which you can build solutions in anticipation.
• Be memorable and easy to use when personally selling to prospects. For example: material should be relevant; images/charts easy to understand; and be presented in a format that delivers “advantages for them” and which the prospect will want to keep and refer to when need arises.
• Focus on your client needs and your points of difference as part of your value proposition.

6 Check Your Sales Conversion Rate.
The suggested approach here is to look at your historical records and determine whether your conversion (or closure) rate has improved. “Selling” is an important part of the “marketing” function, so make sure you assess your success at closing the sale, rather than just focusing on generating new leads in the pipeline.

7 Does Your Plan have a Positive ROI?
Does your marketing plan bring in sufficient new/repeat business to justify the outlays? Rather than just looking at the “marketing budget” as one total, you really need to evaluate the cost effectiveness of each specific marketing segment and activity. Even if you think you’re getting a great ROI overall, maybe you can do even better by changing or eliminating tactics that mightn’t be quite so productive.

There are several ways this question might be answered. Let me start by saying that there are many factors that can drive and influence the capacity of a business in pursuit of growth strategies. However, in the first instance a business must possess an ability to make an attractive offer that meets or hopefully exceeds customer expectations. The nature of this capacity will be underpinned by such factors as:

 Quality of the value proposition
 Brand strength
 Market share & Competitive strength
 Effectiveness of the value chain
 Product/service differentiation (USP)
 Customer relationships & loyalty
 Economies of scale (compared to competition)
 Strength of competencies – structure, systems, technology & innovation
 HR skills, quality & effectiveness
 Leadership and entrepreneurial spirit
 Shared values & work/life balance

Just where the business is at in its lifecycle will have a direct bearing on the relative importance of these factors.

Overlayed with this is the degree to which the capacity of the business is linked with an adequately resourced and targeted marketing and promotional campaign. The identification of which customers, markets (or market segments), and for what purpose and likely return needs to be well researched and formulated. For example, strategies might involve the development of new or diversified products directed at new markets. Some of the drivers that can underpin markets include:

 Market size and segmentation
 Nature & variability of demand
 Market growth rate
 Competitive intensity, rivalry & regulations
 Pricing trends
 Profitability
 Risk, reward and regulation
 Distribution structure/channels

These are, therefore, some of the key areas and market drivers that a business could explore and focus attention on in order to develop strategies that will drive increased sales and profitability.

Carolyn referred to it as the 7 Steps to Retain and Grow Your Customer Base and went on to outline how to assess and rank current performance in order to find gaps that can be improved on by means of action plans. The 7 key steps being:   

1. Extend your Customer Value Proposition

2. Develop, Maintain and Grow Your Database

3. Establish a Customer Service Charter

4. Build a Customer Contact Program

5. Provide the Customer with a WOW Experience

6. Seek Feedback and Listen

7. Constantly Innovate and Communicate 

There was a lot of discussion about the customer value proposition and a handy model was introduced by Carolyn to help members understand the components that link a business’s point of difference with its promotional efforts.  

Do you think your value proposition includes a minimum of 3 points of difference? Or are they merely points of distinction? Does it really matter?

Planning the future of your business and making the right strategic decisions now in the light of past performance and your forward objectives can drive your business for growth as market conditions improve.

Now is the time to set a clear vision of where you are heading and to get your people fully engaged with team objectives. Do you set meaningful goals and measureable objectives for your team to drive success? Have you set up internal business practices and structures for internall reporting? Do you  monitor performance indicators on a regular basis? 

“Measure, Monitor & Manage” was a concept discussed at the Boot Camp held recently. What was thought to be important in this context was the inspiration and commitment that this type of framework can provide for team members. Facilitating a constructive focus and process that enables staff members to regularly evaluate their performance against key performance indicators can be a strong motivational influence.

Do you understand that a fundamental of leadership is about vision and setting an inspirational direction for the team?

1. A desire to undertake change;
2. A clear picture of what you need to do;
3. A coherent approach to doing what you need to do; and
4. A process to challenge yourself and implement growth startegies

Following round-table discussion, Bob summed up views by clarifying that the characteristics of leadership can be grouped together under 4 central headings:

• VISION
• PASSION
• PLAN
• COMMUNICATE

This highly engaging session of the Boot Camp was summed up by Bob stating, “Leadership is a never ending journey; your first role as a leader is your own growth; second is growing others with the ultimate goal of achieving a strong growing business.

Answer: Collecting and using information about customers and prospects.
(Caution: there are customer privacy and data security considerations)

Why?
Develop and cultivate the customer relationship with two goals in-mind:
1 Deliver value to the customer, and
2 create profit for the business

How?

• Capture )) there are many practical ways of capturing information through
• Storage )) adoption of Customer Management Systems (CMS)
• Analysis
• Application

Making use of the Information

Analyse the business; number and type of customers, sales segments, customer behaviour, purchasing preferences, market category, market share, revenue and profitability by customer and category.

Application of the Analytical Data

Enhance focus on customers’ needs and expectations

Improve the quality of customer service & customer retention

Streamline product offerings and aid new product/service pricing decisions

Design specific customer campaigns and targeted marketing campaigns including email and web-based strategies.

Assist financial forecasting and “what if” scenarios

Help to predict the probability of customer defection.