Know Your Numbers

People ask me what the first thing to do when a business is in trouble. The obvious answer is “Cash Flow”. Cash is king – everyone knows that (almost everyone). So unless cash position is healthy everything else will fall apart. Fix the cash, stop the bleeding, then panic disappears and calmness ensues.

What the not so obvious answer is this: “know your numbers”

Before we try to fix cash flow it is imperative that we know the numbers. Everything from sales figure, profit & loss, cost of goods, cost of operations, hidden expenses, and so on. If we are to have a chance to get to the bottom of the pit we need to keep digging .. and keep digging.

Some people are happy enough to get “an idea” of where things are – trusting their gut feeling and intuition. There is nothing wrong with gut feeling and intuition. Those are important to make a quick decision. But when the time comes to make a more involved and analytical decision such as “where to cut cost that does not affect the core business” – intuition can be misleading.

Knowing your numbers can be heart-breaking. Most business owners in trouble might avoid this because they know the numbers are bad. They couldn’t face reality. Some convince themselves into denial – hoping and praying that everything will turn around tomorrow, or the next day, or the next day.

The problem is of course, the longer they wait the worse it will get. If you cannot do anything with the business then at least do something else. The point is, you have to do something. And all of these start with knowing your numbers.

Knowing your numbers will not kill you, not knowing your numbers will.

A lot of things in a business are out of our control. We can only do so much, try to anticipate, be pro-active, and response to the best of our ability. Everything else is not our problems because we couldn’t control them anyway.

So don’t feel bad or afraid, we are only humans. In other words, don’t be too hard on yourselves. Know your numbers and improve, or exit and do something new.

 

Money The Necessary Evil

The only issue with money is either you use it or it uses you. How does that happen you might say. In reality, it doesn’t. It’s just an excuse we use when we couldn’t control ourselves when it comes to money. We are always in control, money is not.

Have you ever thought about how much money you can make? Or will make?

What about how great business will be if it makes ten times more than it does now?

It is the main currency used by most advertisers. It is how we measure our success, our dignity, our legacy. It is why we rank people based on their wealth.

Let’s face it money is addicting, probably the most addictive substance in the world.

We forget there are other more important things. We forget that money is temporary. We forget that money is only a means to an end. We forget that money is not the end goal.

But talking about a small business we cannot argue that money (or we prefer to call it ‘cash’) is necessary. We must not forget though that it is only necessary to a certain extent. A good business is not focused on cash, albeit it cannot function without it.

So how does this intricate relationship work? We need cash but we don’t want to focus on it? But if we don’t focus on making money how on earth are we going to build a great business?

In every great business, the focus is always on the customers. They exist to solve customers’ perceived problems. These problems do not have to exist – they only need to be perceived to exist. So if you ever felt ripped off by certain businesses, most probably because you are being ripped off. And this is how certain products command such high prices – because they solve ‘perceived’ problems that might not exist in the first place.

Anyway, back to our original discussion.

Regardless of how much you can rip off your customers by creating certain perceived problems and then charge an exorbitant amount to solve them, the focus is still on the customers. The exorbitant amount is the after-effect. Once you start focusing on the money your effort will shift to short-term activities such as reducing operational cost, renegotiating with suppliers, and so on. Not that these activities are bad – they are necessary but they are not the main focus. Your customers will figure out quickly if your business is solving their problems or not. They will sense very quickly if your only interest is their hard-earned cash.

Focus on solving their problems and they will never feel that they are being sold to.

Money is required to fund all these operations but it is never the focus. Never let the temptation of making money pull you down into never-ending addiction.

Focus On One Point

Small businesses often found themselves competing with much larger competitors. Sometimes the amount of money these competitors spend on their operational expenses alone is enough to acquire several smaller businesses. They are so big it is futile to compete head-on. So how do you compete? How do you win in the marketplace?

Well, as large as any company can be they cannot serve everyone. There are pockets of customers they are simply not interested in or they are not perceived good enough by these customers. The issue is then how to identify these pockets and how to dominate them.

It is not possible for any small business to conduct in-depth market research to identify these little gold mines. So what they can do instead is to narrow their search and focus on certain type of customers they can serve better based on their competitive strengths. These strengths can be anything from unique products, locality advantage, similar cultural background, excellent customer relations and etc.

**

Lee is a cabinet maker who has been struggling to make ends meet due to the onslaught of cheaper imports. He used to make at least 10 units per month and now only down to 4 or 5. His skills mean he could make any type of wooden products from budget version to the most sophisticated one ever built. In fact the more sophisticated the design the more energised he is.

In addition to his cabinet making skill, he is also an avid gardener with real passion and a very green thumb. Not only he has a vast collection of plants he also builds all sort of wooden boxes, benches, garden beds and so on. He magically transformed his humble backyard into a place of serenity with such artistic touch of a master carpenter.

Of course, like any good inspiring story – Lee then realised how he could use his carpentry skill to transform boring ordinary backyards into majestic gardens. He started to work with landscaper and garden designer to come up with unique designs in Continue reading

How to ruin relationships with your suppliers

***

The day is coming to an end and it’s time to load up. My customer asked if I could deliver these goods straight to his house. I don’t do this too often but business is quiet and every dollar counts. The rain started to pour ss I loaded up the goods, and it was getting heavier too.

The rain got worse as I pulled up on his driveway. I unloaded all the bags and rang the bell.

No one answered.

I tried again, same thing. Silence.

I called his mobile, then sent him a text message. No reply whatsoever.

After almost half an hour trying out the bell, the phone, and more text messages I gave up. He’s not interested in getting these goods despite his numerous remarks of ordering in bulk, growing his business, and so on.

Customer is king, they said. Not this time, this customer is just a waste of time.

***

In the world of entrepreneurship, the word ‘hustle’ seems to be the new trend. Those dreaming of becoming business owners often call themselves ‘the hustlers’. It sounds a lot like one of those Marvel’s superheroes. The problem is off course when these ‘hustlers’ try to hustle everyone in everything. Then they become ‘the shushed’ because no one wants to deal with them anymore.

There is nothing wrong with hustling, it will come naturally anyway after spending few years in the joint. You begin to notice that other people also try to hustle you, some are very subtle (pro) while some are dead obvious (beginner). Some just have no idea what they’re doing and they become what is widely known as ‘trollers’. Avoid these trollers at all cost because they bring nothing but destruction. If you’re lucky enough you can send them (trollers) to your competitors and let them do the damage there.

There is one entity you don’t want to hustle yourselves out of the market. It is your own supplier, especially the good ones.

It might seem counterintuitive since you being the customers, you should be the king, right?

Wrong.

In the world of business, no one is king. We all work together, providing different products and services. Only through a carefully crafted collaboration between suppliers, you, and customers (yes, customers too) that a business can truly survive, and prosper.

Try hustling your supplier too much and the triangle will break. Break the triangle and you break your business.

If the following items are in your to do list when dealing with your supplier, it’s not a bad idea to re-think them:

  • Pay late on purpose to maximise cash flow
  • Demand as much services as possible
  • Play the pricing game at all chances
  • Always try to buy in small batches instead of in volume to reduce cost

Show your supplier that you support them and you are in the game with them for long term. You will be amazed by the amount of support they will give back to you.


Did you enjoy the short article? I also send a dose of perseverance every week for free. Join me to get your personal supplies. (hint: click here to get them) — Fredy Namdin


When to rip off your customers?

It was a cold morning and there was no single message on the phone. I checked the fax and email, nothing there either. Such economy, mining downturn, order was drying up. We had fought a good fight, but how long could we last? There must be something we could do to improve our bottom line.

The phone suddenly rang.

“Hello, is this Envignco Supplies?”, the voice from the other side asked.

“Yes, how can I help you today sir?”, I replied.

“I am looking for a certain chemical, it’s called HDX”

“Yes, we stock that, do you want to know our price?”

“Please, and if you have stock as well. I need it urgently”

You see, HDX is one of those chemical that is widely available. I wasn’t sure how on earth this guy came upon our company and decided to ring. I thought to myself, should I add extra 20% to improve our bottom line a little bit? Or should I give him our normal price? I mean he needed it urgently so there’s a good chance that whatever price I said would lead to a good sale. Should I take the window of opportunity and rip him off?

Decision..decision..

For many people in business, pricing is often the deciding factor in closing a sale. It is however also the deciding factor in determining whether a business is profitable or not. Price it too high and you loose the sale, price it too low and there is not enough money to pay the rent, staffs, and so on.

Every now and then we got the opportunity to charge much higher than we should. We believe it’s ok, because we can, but the big question is off course – should we?

It is no doubt certain companies are able to charge enviable margins on their products. Some because they are the only companies with those products with no immediate substitutes in the market, some other because they dominate and corner certain market. So what is the problem then? Isn’t it good to make fantastic profits? What’s the deal here?

Unless your company has enough resources to dominate the market there is no chance you could even come close to charging extraordinary margin. There is a certain price point that you need to be. Any upward movement from this pricing point will mean you have priced yourselves out of the market. In other words, you have no business. Price it too low and you invite price war which will lead to annihilation of you and your competitors, at least in the particular products that you are competing in.

More importantly – it is your brand. Rip off enough customers and you will be known as that – a company that rips off its customers. Is that how you want to position yourselves in the market?

What about those little instances where you know you could get away with it?

This is rationalisation. The question you should ask yourselves is could you really get away with it?

Maybe you couldn’t get away with it. Maybe no one could. You might get the sale and make handsome profit, but with what repercussions? On the other hand, what are the benefits of disciplined competitive pricing?

Which one would you prefer:

“Long term gain, short term discipline” or “Short term gain, long term destruction” ?

 


Did you enjoy the short article? I also send a dose of perseverance every week for free. Join me to get your personal supplies. (hint: click here to get them) — Fredy Namdin


Hustling on Steroids

Running a business is like the ultimate sport. It is 24/7 and 365 days per year. It just doesn’t stop. Often it is the daily hustle, grind, and motivation that separate successful ones from the rest. Day after day and year after year, you just have to keep coming to work.

If there is something you can do to make it just a little bit easier to run.

Just a tiny bit less headache.

Would you do it?  What if I tell you in addition to less headaches, your business will also improve significantly?

You probably notice that entrepreneurs are well known for their ‘hustle’ skills. They just know what to say, how to say it, to whom, and at what time, to maximise impacts. That’s what hustle is really. However, do you also know that once a good business is up and running hustle is not required as much anymore.

A sign of a good company is when their sales people don’t need to hustle much yet they still sell an awful lot of products.

What is the secret to this wonderful depiction of a business, you might say.

It is one the oldest trick in business: TRUST.

While the word itself might be short, never underestimate the meaning and the work that goes into it. Trust is not just wiggling your tongue to convince the other people to trust you. It is much more than spending millions in advertising budget to convince your customers how magnificent your products are, and how great your company is.

Trust is the drug that put business hustle on steroids.

Hustle is comprised of four main components, and ‘trust’ plays a great role in them.

“What to say” – When someone trust you enough, whatever you say will get through.

“How to say it” – Again, when someone trust you enough, whatever you say will get through.

“Whom to say it to” – You say it to those who trust you enough.

“At what time” – Anytime will be fine, as long as they trust you – it will get through.

Capitalising on trust will lessen your headache in running your business. Instead of hustling all day long, you can just talk normally – and your message will be very well received happily by your customers, suppliers, and everyone else – that trust you.

So how do you build trust then?

Many books have covered this great topic in details but I am just going to the essence here.

Trust is built on good reputation.

That sentence should summarise it. Good reputation is built on honesty, integrity, and consistency. It is not just what you do once in a while. It is not just what you’re telling everyone. It is what you say and do, everyday, without failing. That is what your reputation will be built on.

So the magic pills are:

TRUST = HONESTY + INTEGRITY + CONSISTENCY

HUSTLE x TRUST = HUSTLE ON STEROIDS

So:

HUSTLE x (HONESTY+INTEGRITY+CONSISTENCY) = HUSTLE ON STEROIDS