Your opportunity

2008-02-19 00:00

Running your business to make money

In a world that has too much capacity, often chasing too few, price-sensitive customers, a re-occurring business phenomenon has developed.

Because we never seem to have sufficient turnover (or throughput) to produce the required amount of profit, we tend to race around like headless chickens trying to find more and more sales.

Often, the underlying problem rests with the budgeting process: the original budget (which has been cast in stone) simply called for too much turnover in order to produce the budgeted PBT number.

At some point during the financial year it becomes obvious that the budgeted profit is not going to be achieved and all hell is let loose in the business.

The situation is akin to the old butcher in Dad’s Army running around shouting, “don’t panic, don’t panic”.

The amazing thing about this phenomenon is that the revised strategy or tactic, most often put in place, simply exacerbates the profit problem rather than rectifying it.

At a time when there is insufficient turnover coming through to achieve the required profit, management decides to cut the price and advertise more.

The effect of both tactics will, of course, be to increase the breakeven and make the profit objective even more difficult to achieve.

What compounds this silliness is the knowledge that, most likely, the company’s major competitors are doing the same thing! Putting in place tactics that demand more turnover is found simply to stand still!

Possibly as debilitating, the circumstances outlined above result in virtually the entire organisation becoming inwardly looking and “selfish” — possessed with its own needs. Everyone tries so hard to make what they have yield better, that everything seems to be focused on themselves and their company’s needs.

The effect of these happenings often results in “fire fighting” management — a business in which there is never enough time to do something right the first time, but always time to do it again and say sorry. Customer and market focus is lost.

Let me proffer some considerations in relation to the points I have made. When someone becomes selfish and considers only their own needs, they become oblivious to the powerful dynamics of successful relationships, all too often, forgetting even the “basics”.

Because of this, I think it worthwhile to remind us of some prime considerations in respect of customer attitude towards service:

• People want the basics.

• Many people have come to expect they cannot get the basics.

• An acceptance that the basics cannot be had develops apathy, even aggression.

• People are pleased when they get the basics.

• People become ecstatic when they get more than the basics.

• When people get more than they expect:

• they become happy;

• they talk about you;

• they recommend you to others;

• they thank you;

• they appreciate you;

• the basis of a strong, lasting relationship is developed.

This is your opportunity. Indeed, an acceptance of the realism of the points I have raised, represents a powerful opportunity for you to stand out from other companies as being very special.

The cornerstone on which this opportunity is established once again comes back to a statement, a philosophy, that I have raised many times before: you have got to learn to give before you can ever expect to receive.

The truth is that if you practise this philosophy, the chances are you won’t have to advertise so much and you will sell at prices that are conducive to producing the margins needed in order to achieve the required profit number.

frankgreenfield@iafrica.com

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