4 under-rated skills you should learn to enhance your small business
You should never reach a point at which you can assert that your education is complete. Your greatest defence against uncertainty is continuous learning. Education comes in two flavours, neither of which should be neglected – learning for intellectual edification, and learning to acquire practical competence in some new area. The former category is the most free as you will be following your attention wherever it lands. The latter category, skills development, may also be interest-focussed. But the prerogative in this case is to create a functional understanding of actions that may enhance your life in some regard.
As a small business owner, you will have already acquired a working competency in financial management, marketing and sales, customer service, project management, negotiation, delegation, networking and time management.
When you’re a small business owner, you want to invest your practical learning time in areas that will show a return. Here are a few ideas that can enhance your small business’s performance.
- Take control of your knowledge
Too few small business owners know how to capture, process, and analyse their company data. Taking control of your data means capturing the useful information that comes to your company. Beyond your financials, this means getting to grips with people that enter your sales funnel at any stage. Too many businesses make the mistake of letting potential customers get away by not keeping track of the contact that they have with your business.
- Master mailers and modern marketing
Modern marketing techniques revolve around a golden axis of email marketing, search engine optimisation, paid search advertising, social media presence, and display advertising. For small businesses, the most effective means of advertising online is to set up a mailing list. Have a simple contact form on your website, and send regular monthly emails to those who sign up.
- Get to grips with negotiation
While you will have a great deal of experience in negotiating both with suppliers and customers, you may be falling prey to poor negotiation techniques that get you into contracts that don’t work in your favour and cut into your bottom line. Great negotiation involves being totally aware of your own situation, having as good an idea of your opponent’s position, and knowing how to leverage a few behavioural tricks to get your best offer. For the first half, you may need to rely on your ability to analyse your business position from a financial perspective.
- Organise your business better
There are default positions that people tend to use as a matter of course when it comes to creating a business structure – the top-down hierarchy predominates. But hierarchies can be unnecessarily rigid, and can restrain a business’s growth. Mastering structuring your business means learning about the various ways that you can move information across your business. If you’re looking to keep high-value employees, for instance, you might consider employee share schemes that incentivise your workers to give their best, and to keep going at the company.
How to help your clients expand their small business
As an accountant for small business, you act as your clients’ first point of contact for financial advice.
A business can look to expand in a number of ways. You can help your clients to choose the kind of expansion that best suits their current state, and once that path has been chosen, help them to reach their growth potential.
Choosing when to expand a business
Expanding a business can mean adding locations from which it operates, embarking on a new service or product line, becoming an exporter, buying up another business’s operations, taking on more employees, or improving marketing efforts to make deeper inroads in their current market.
Businesses are typically pursue expansionary strategies once they have reached a measure of success in securing their place in their market. A business’s lifecycle will take them through the establishment phase, then through the survival phase in which a business strives to achieve profitability and to increase cash resources, to the success phase, in which the business moves to create an institutional structure and begins to leverage its borrowing power. It is at this stage that a business should intensively plan its expansionary strategy.
Choosing how to expand a business
A business can expand in a number of ways. These include:
- Adding a new location
- Exporting goods overseas
- Employ more workers
- Introduce a new service or product line
- Upgrade current premises or capital equipment.
With investment expansions, your primary role for your client will be helping your client secure the loans that they’ll need. To do this, preparing robust financial reports and cash flow projections will go a long way to convincing banks to give your client’s business a chance.
When the business growth regards expanding distribution overseas, your expertise will come in handy in ensuring that your client keeps to the letter of the law as regards the duties that they’ll need to pay, the sorting of currency issues, and making certain that they meet the legal requirements for doing business in their targeted country.
When a company wants to employ more workers, you can contribute by structuring the new payroll properly, ensuring that payments go off in good time. You can also provide great suggestions to business owners about how to distribute information among new employees – a transparent pay-grade system can reap huge benefits. When workers know what it takes to rise through the ranks, they’re more likely to work to achieve those goals. If a business is looking to keep performing workers, you may be able to help your clients manage an employee share scheme, to keep talent at their company, and to equitably distribute the rewards of a firm’s good performance.
Shock proof – how to protect your business from unforeseen events
Nassim Taleb introduced the concept of antifragility into the modern business world in his book Antifragile. For Taleb, something is antifragile when it benefits from uncertainty. Taleb distinguishes entities that are fragile and robust, from antifragile entities – fragile things break when they encounter harsh outside forces, robust things remain unchanged in the face of outside forces.
By distinguishing the third class that grows under stress, the antifragile, Taleb shows that we should reconsider the ideals from which we design things. Businesses are often confronted with uncertain externalities. For Taleb, our economy should be antifragile, our businesses should be antifragile.
With this new concept established, the key question becomes: How can I make my business anti-fragile?
Antifragile entities are things that benefit from volatility and disorder. When faced with some event that causes harm, the antifragile entity learns from that event. Among the key attributes of an antifragile business is diversity.
Diversity means having a number of resources from which to draw when faced with a new, potentially harmful situation. Finding the best use for the resources can lead to mistakes – but for Taleb, mistakes are to be embraced. Mistakes are the means by which a business can learn and strengthen itself.
The key to diversity as a value is that it can allow your business to absorb the mistakes you may make, and change for the better in response. Diversity may mean having people in leadership roles who are adaptable and able to enact different tactics quickly, employing people with a strong sense of autonomy who provide a variety of perspectives when needed, or being able to pivot in terms of product or service when new opportunities or challenges are encountered.
Don’t be rigid
Fragility is created when a business’s structure is rigid. Rigidity emerges as a key trait for businesses that are reliant on debt and leverage – if you are unable to change your business because of your financial obligations, then you leave yourself open to breakage when a shock is encountered.
Likewise, insisting on a top-down hierarchy for planning and implementation created unnecessary rigidity – useful business information can come from any point in your business, and often the lowest paid employees will be able to identify business weaknesses that you are blind to because of your position at the top of the management pyramid.
When it comes to your employees, their work can create fragility under certain conditions. Taleb argues that salaried employees are fragile, while self-employed workers are antifragile. In order to put this into practice, a business might commit to an employee share scheme. Managers love to talk about employees taking ownership of their work, but if there is no reflection of this sentiment in reality, then it is advice that is condemned to be ignored.
Antifragile is a concept that demands attention. It can open your eyes to weaknesses in your business that you had overlooked, and it could show you hidden virtues in your business that you’d failed to appreciate.
South African small business environment, May 2017
In April, Statistics South Africa releases a large number of reports, detailing state of the country, across a number of sectors. We’ll look at a few sectors that are of particular interest to small businesses, including retail, liquidations and insolvencies, the producer price index, and export and import indices.
Retail is in a period of decline. Retails sales were down 1.7%, year-on-year, in February 2017. The clothes trade (comprising textile, clothing, footwear, and leather goods) recorded -7.6% annual growth rate. Annual growth was negative for household furniture, appliances and equipment retailers (-6.5%), hardware, paint and glass retailers (-5.5%), and retailers categorised as ‘Other’ by StatsSA (-5.5%; these retailers include bookstores, jewellers, sports and entertainment stores, and second-hand traders).
The types of retailers that showed positive year-on-year sales were those trading in food, beverages, and tobacco in specialised stores (5.8%), general dealers (0.8%), and pharmaceuticals and medical goods, cosmetics and toiletries (3.3%).
The largest retailer types, by retail sales at current prices are general dealers (R35 million in February), textiles and clothing (R11.5 million), and ‘Other’ (R7 million). Total retail sales in February 2017 came to R73.7 million.
Out of business
Liquidations rose in March 2017, compared to the same month last year. Year-on-year, liquidations rose by 17%, with a total of 188 cases recorded, comprising voluntary (174) and compulsory liquidations (14).
Businesses in the trade, catering and accommodation industry were the hardest hit by liquidations, with a total of 51 cases recorded, 13 more than the previous year. Despite the year-on-year increase in liquidations, when the first quarter of 2017 is compared to the first quarter of 2016, the number of liquidations showed a 13% decrease.
The number of insolvencies recorded in February 2017 was 13% fewer than those recorded in February 2016. This decline in insolvencies held when quarters ending in February were compared from 2016 to 2017 – a 16% decline, amounting to 105 fewer insolvencies.
Producer price index
The producer price index (PPI) is a measure of the change in the prices of goods when leaving their place of production, or the prices as the goods enter the production process.
Between March 2016 and March 2017, the PPI for final manufactured goods changed by 5.2%. The sectoral drivers of this rise were food, beverage and tobacco products, and coke, petroleum, chemical, rubber and plastic products.
The annual percentage change in the PPI in March 2017 for intermediate manufactured goods was 6.8 %, for electricity and water was 10.8%, for mining was 6%, and, for agriculture, forestry and fishing was -4.2%.
Import and export value
The export and import unit value indices for February 2017 shows the trends in import and export unit values recorded in South Africa. The export unit value index (UVI) for February 2017 was -3.5% compared to January 2017, but when compared to the same period last year, showed a 2.3% gain.
The UVI for imported goods increased by 0.3% compared to January 2017, but the annual rate of change was -9%. The UVI for imported metal, machinery and equipment was an annualised -6.4%, which was the largest contributor to the total decline in the index.
5 ways that technology can improve your cash flow
Small businesses need to find ways to make their operations more efficient. It is easy for a small business – even one that is doing well – to find themselves caught in a liquidity trap, when the money that you need to pay is due before the money that you’ve earned from sales. This situation can lead to substantial problems; from being unable to make payroll, to being unable to pay your bills, and even having your credit score hurt.
Thankfully, technology has been developed to make these sorts of situations easier to avoid. Here are a few ways that technology can improve your cash flow:
- Automate your administrative tasks
Invoicing is one of the most time-intensive tasks for businesses without accounting software, like Sage. Having to manually keep up-to-date with the back-and-forth nature of payments can lead to massive frustration, and force your attention away from matters that are more deserving of your focus, like ensuring customer satisfaction.
You want to minimise late payments – an automated system will update you in real-time about which accounts are late. You can then take advantage of automated reminder emails that will be sent to the customers that have to settle their accounts.
- See into the future
While genuine foresight is beyond us, technology has allowed us to achieve greater insight into the prospects of a business. Utilising advanced budgeting software will give you the ability to keep in touch with what the year has to offer, and will give you the ability to prepare for those times in which your cash flow may suffer. If your business is affected by seasonality, this can be enterprise-saving.
- Check credit easily
Many small businesses rely on long-term, trusted clients. But extending that trust too far can result in your business taking a hit that it might be unable to recover from. You can protect yourself from difficult situations by taking advantage of easily accessible verification technology. At the most basic level, this may mean that you Google a client that is buying on account to ensure that there is nothing untoward about their business. But for large accounts, it is sensible to use credit checking facilities to assess the credit-worthiness of these clients. Protecting yourself against chancers is easier than ever, and the height of prudence.
- Improve your inventory
When you’re running a complex, multi-faceted business, you may not notice the inefficiencies in your business. Under-performing inventory can be a burden on a small business. Thankfully, with the right solution in place you can identify poorly selling stock before you notice it yourself. This can give you the leeway to sell your undesired stock at discounts, freeing up storage space and giving you the ability to stick to the things that really sell.
- Market your business better
Small businesses are the most community oriented area of enterprise around, and word-of-mouth has often been the most effective marketing tool. But if you’re not taking advantage of the vast opportunities that the internet provides, you’re doing your business a disservice. Your intricate knowledge of your target markets can be used to get your business selling across the world. Take advantage of tools such as Google AdWords, Facebook advertising, and e-commerce portals, to acquire client leads more reliably.
Great techniques for bringing out the best in your employees
When you’re an employer, you want to get the most out of the people who work for you. If you only want to get your employees to complete the requisite amount of work that constitutes their job description, then management is a simple task – lay down clear goals, make sure that your employees have schedules for that task and that they have enough information and skills available to them to complete their tasks, and then set them to work.
But putting a basic limit on a person’s creative capacity is a waste of their energies. Nothing fosters discontent and resentment more than being trapped in menial, seemingly meaningless productive activity. Insisting on a restrictive, uncreative environment can cause your employees to shirk from sharing their insights. A company that cannot listen to those closest to it will be condemned to failure.
Bringing out the best in your employees means encouraging them to make your company a better entity. A better entity is one that is more stable, a nicer environment in which to spend time, more efficient at producing its goods or services, a positive contributor to society-at-large.
Thankfully, there are a few things that you can do that help to bring out the best in people:
- Pay your employees better
Salaried South Africans have had to suffer the real value of their wages falling, as inflation has increased more than their salaries. In December 2016, South Africans earned 1.5% less than the year before, on average after adjustments for inflation. Less real income means that life is made more difficult – a month feels like an eternity when your funds run out halfway through.
A huge amount of academic literature has developed suggesting that increased wages are better for a company. Health is improved in a workforce that feels valued. Productivity and innovation gains are more significant when workers don’t have the pressures of monetary shortfalls to deal with. Staff turnover, one of the greatest impediments to a business’s continued growth and good functioning, is sharply reduced when employees are paid what they feel is a fair wage.
There is more than one dimension to this technique. Increasing the base rate of pay across the board can work to the ideal of company solidarity.
You can also consider using open wage structures. This means that wages are knowable by anyone in the company. The principle of equal pay for equal work is guiding here. You can incentivise workers to hit performance targets better when the reward structure is open to interrogation from any within the company. This transparency encourages lower paid workers by providing them with a clear understanding of what they have to achieve and work towards in order to become a higher paid member of staff.
Another way to bring out the best in your employees and keeping your best workers on board is to create an employee share scheme. This has the benefit of discouraging workers from slacking, as there is a direct link between their performance and the company’s success, and allows your company to retain its best talent for a number of years.
The virtue of smallness in business
There are few more persistent myths in business than the belief that bigger is better, that success is measured in revenue, and that to be anything less than a billionaire constitutes failure.
“More” is the modern monosyllabic mantra. It serves as an incitement to avaricious behaviour, and drives society away from a common human, reciprocal base. “More” is the force that drives the green root of greed, strips the Earth of products without replacement, and keeps human interactions at the level of winner-takes-all competition, over mutually beneficial cooperation.
Small businesses that embrace their smallness choose other words to keep them in action.
Smallness as socialising
A small business keeps itself as a part of a community. When running a small business, you are acutely aware of all those in your employment. Those working for the small business are more than costs – they are a large part of the reason why the business continues to exist. Small businesses are small clusters of society; lives become intertwined, and the dominant mode of interaction is nearer to friendship than it is to formality.
Studies suggest that small businesses are more likely to promote individual contentment in those who work for them – this comes largely as a function of the rich socialisation that happens when each person in a company knows all others in the same organisation.
This rich social environment extends from your small business, to other small businesses, and to your greater community. You are a member of a society of people who value smallness, and you can turn to these fellows with greater confidence than if you were lost in a part of a monolithic corporation.
Smallness as surviving
Smallness allows for adaptability. When faced with uncertainty, an adaptable business is a business that survives. Because a small business is in touch with its true capabilities to a greater extent than large businesses, it should find itself better endowed to use its human resources in new ways. As a small business owner, this means that you have a responsibility to keep your employees’ skillsets current, and relevant to the changing world.
Success in a small business comes from creating an environment in which the parts that make up the business can work as a whole. Your team is your greatest endowment, and will be what you rely on as you push on past adversity – give them the tools and confidence to do so.
Smallness as quality
The limits of the human mind mean that one’s attention can only extend so far before it must succumb to vagueness and supposition. Large businesses can fail to have eyes on the details, and may end up failing to provide the best possible good or service. Not so with a small business.
Small businesses can afford to look at their products with care, and look at the reception that their products have with consumers with keen interest. As a small business owner, you should be using this possibility for detail to craft the best possible experience for consumers.
The modern world has brought huge time- and effort-saving innovations that can help your business to run at maximum efficiency, giving you more time to create the small business that contributes in the best way possible.
Making moves, shaking things up – How to be a great business leader, according to economics theorists
Is there a way to evaluate whether a person is going to succeed as a business leader before they have the opportunity to prove themselves in the field?
New research suggests that there are a few measureable attributes that can provide a reasonable indication of whether a leader is going to succeed or fail.
Is there a way to evaluate whether a person is going to succeed as a business leader before they have the opportunity to prove themselves in the field?
New research suggests that there are a few measureable attributes that can provide a reasonable indication of whether a leader is going to succeed or fail. Whether these traits are innate, or developable, is not debated in the paper – so if you find yourself wanting to be a great leader, but don’t see these attributes present in your person, perhaps consider this as a touchpoint from which you can develop yourself.
Connected is key
The key trait that Robert Akerlof and Richard Holden identified for a great leader is connectedness. This is the ability to bring people together. Getting diverse people to unite for a common task is the skill that defines a leader. Without this quality, people will be distracted, and individualised. A leader changes this – they get people to identify the best expression of their self-interest with that of the group.
In their paper, they create a model with two sets of people: managers and investors. The managers are the group from which a leader will emerge. Managers exist to bid for control of an investment project. Once a manager has control, through a successful bid, they must then use their connections with investors to get them to invest.
The top dog
What Akerlof and Holden discovered was that in each group of managers, a central leader emerged – they called this person a ‘mover and shaker’. This leader gets the highest pay-off, due to the effectiveness in getting a project going, and getting investors to buy into the project.
In the analysis, it comes to light that the ‘mover and shaker’ was the actor who had the best network. Establishing and maintaining these connections meant, in the model, that the top manager ended up taking control of other projects. While connections determined success to a very large degree, secondary attributes also played a role – skill at running a project, communication ability, and personal capital all contributed too.
The insight that should be drawn for the small business owner is that establishing and maintaining a network with high-quality connections is essential for success. In the model used in Akerlof and Holden’s paper, the presence of a strong network was a strong signal for the investors that the project was going to be a success.
Capital for the capitalist
The work that it takes to establish a network of quality should, therefore, be seen by the aspirant entrepreneur as of equal importance to getting employees to do their jobs. Securing capital is at the heart of an entrepreneur’s work – without it, growth of your business becomes a Sisyphean task.
What Akerlof and Holden show is that very often, those with money to invest have a herd mentality – they follow one or more other investors’ opinions of a manager. To illustrate this point, Akerlof and Holden recount the story of the origin of The Blackstone Group, a private equity fund. After being turned down by 488 potential investors, they had a stroke of massively good fortune, when Garnett Keith, Prudential Insurance Company’s vice-chairman, invested in their fund. Almost immediately afterwards, a raft of other investors followed. The fund now controls $30 billion in funds.
Blackstone’s story is one of determination, but it is mostly one which highlights how important it is to leverage every node in your network in order to make your dreams reality.