That was the year that … still is!

2008-12-22 00:00

In the mid-1970s, the UK aired a television programme called That was the week that was. To all intents, big celebrities of the day ridiculed the previous week’s events.

They always managed to put the boot into something. With a tiny play on words we could describe 2008 as “that was the year that was”! In fact, it would be more correct to say “that was the year that is”.

Many of 2008’s debacles are going to live on into 2009 and 2010. Back in January 2008, I suggested every business in SA should batten down their hatches and get ready for the storm … and did it hit! All the tactics and strategy I asked you to consider from those early weeks are still bang on the button now. As 2008 draws to a close, I thought I should reflect on one or two of the key statements made in my columns over the year.

We have to make lower levels of turnover to produce the required profit. This philosophy is key to everything I talked about in the early columns. All the considerations comprising this strategy are so important for business people that I intend to devote my first 2009 column to it. The essence of making lower levels of turnover profitable is to appreciate that turnover is the most fickle element of business — you cannot demand sales, you have to earn them.

You have to learn to give before you can expect to receive.

If I were asked to pick a number one consideration in respect of business strategy, it would be this. It of course, infers a way of thinking for all business managers or owners with regard to employees, customers and suppliers.

When I wrote this particular column, many readers contacted me to say that they found this philosophy weak. It is amazing how often people associate giving and sharing as being weak.

If you run a business that truly empathises with the needs of both staff and customers and you do all in your power to fulfil those needs, (or go beyond), you will have the basis for success.

I am not saying turnover is unimportant — I am saying the gross margin value of that turnover is critical. This subject is huge, so big you could write a book on it, (which I did, The Margate Approach). I’m going to make one of those Frank statements that often raises the entrepreneurs’s hackles: Ask 100 business managers to define gross margin and 90 would get it wrong. Equally, ask the same people to accurately define the relationships between gross margin, fixed costs and profit. The majority would commence with: “Well, of course there are many that … ”

The big point is, you frequently hear of businesses going under in the face of turnover growth.

Turnover does not pay the bills. Only the gross margin value of turnover pays your rent, salaries, bank charges, interest and all the other costs of running your business. You can produce an awful lot of turnover, but, if once you have paid SARS and your variable cost suppliers, there is little or nothing left, you are dead!

The leader’s role is to serve, not to be served. For many of us in business in South Africa, this is a hard lesson to learn. We have been brought up to instruct people what to do and leave them to do it. Great leaders, successful leadership, is all about being a part of the people, being part of your workforce, as opposed to removed from it.

South Africa must look for innovative, creative solution in respect of all labour relations. If we simply mirror yesterday into tomorrow we will go backwards. The essence of this implies we need leaders who totally understand the needs, wants, aspirations and day-to-day existence of those they lead — their people, their labour.

frankgreenfield@iafrica.com

(Previous articles can be viewed on www.frankgreenfield.com)

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