8 reasons the opportunity for consumer goods SME’s has never been greater.

8 reasons the opportunity for consumer goods SME’s has never been greater.

Mar 14, 2016 | Change, Management, retail, Strategy

Think about it.

  • Many domestic competitors are gone, sent to the wall by combinations of the high $A, the power of the retail duopoly to call the tune with prices and terms, house brand expansion, and poor management.
  • Coles and Woolies have lost some of their grip as Aldi makes inroads, and some of the independents like Ritchies continue to compete effectively in local markets, and access to food service, ingredient and alternative retail becomes easier.
  • Consumer brand loyalty has been disrupted by the disappearance of some of the favoured brands, offering opportunities to forge new brand loyalties
  • Marketing expenditure can now be highly directed, and its effectiveness measured and continuous improvement be applied.
  • The costs of the tools like the analytics required to do effective category management, a data intensive exercise are  getting cheaper and cheaper, and the skills needed to make sense of the data more available.
  • SME’s are recognising that collaborative actions are not verboten, but are in fact very sensible and cost effective. Making it easier, digital technology has removed one of the greatest barriers to effective collaboration, the inability to communicate.
  • SME management has also recognised that collaboration is strategically and operationally sensible to build comeptitive scale to enable long term prosperity, so there are potential partners around.
  • Export is easier, as trade barriers are dropping, and product niches are often global

None of this of course is of any value unless you have the cash flow, determination, and management capability to make the changes necessary. However, those that have survived the last 10 years are a robust bunch, now the pressure is off a bit, don’t make the mistake of taking a breather, get in there!

 

7 trends driving business in 2016.

7 trends driving business in 2016.

Jan 4, 2016 | Branding, Governance, Management, Marketing, Strategy

Like everyone else who sees themselves as having a useful view of the train coming at us, I have again tried to articulate the things I see as important to businesses, particularly the smaller ones that make up my client base.

Following are the outcomes of my assorted observations and crystal ball scratching.

 

The density of digital content is becoming overwhelming.

Businesses have always generated and distributed ‘content’, but it was called ‘advertising’ or ‘collateral material’. Since we all became publishers, and the marginal  costs of access to markets approached zero, there has been a content explosion, and we are now being overwhelmed. It has become pretty clear that video will take over as the primary vehicle of messaging, and I expect that trend to consolidate over the coming year, and see a bunfight for eyeballs between social media platforms and search tools and platforms. Ad blockers will change the way the so called pay walls work, as well as ensuring that the density of content is replaced by less but better stuff, ‘tailored’ to our habits and preferences.

Ad blockers may become discriminatory, allowing through stuff that the algorithms know you have been searching for. The focus on content will be on the sales funnel and conversion metrics, much more than just pumping the stuff out, which will be a huge improvement on the mish mash currently assaulting our inboxes.

Existing digital platforms will extend themselves competitively. 

Attracting new users will become secondary to increasing the usage and ‘stickiness’ of their platforms. Linkedin’s successful extension of their blogging platform and purchase of Slideshare are one, Facebook is aggressively setting out to attract new users by making themselves attractive to developers and others, with the launch of FB techwire in an attempt to attract the really technically oriented including those writing about tech, Twitter appears to be trying to find ways of monetising their users and will probably apply controls to the currently uncontrolled stream in your feed, but there again, I thought that last year and they did not do it. Also, platforms will recognise the huge potential of the B2B advertising market, and find ways to exploit it. Many B2B businesses are reluctant to use social advertising as they see the platforms as essentially B2C and therefore  not appropriate for their products and services. This is a huge potential market for digital advertising businesses, and the social platforms will be cashing it in.

 

Rate of Technology adoption will continue to increase.

Ray Kurzweil’s 2005 TED talk on the rate of technology adoption is resonating louder now than a decade ago. Some of his observations such as the rate of cost decline of solar technology and battery technology efficiency are coming to pass. However, it is his basic thesis of the logarithmic rate of technology adoption that will engulf us over the coming short term. Think about the confluence of big data and machine learning. When you wipe away all the tech-talk and hyperbole, it comes down to a simple notion: the “friction” of information that has always existed is being removed at logarithmic rates, progressively revealing more stuff to see, and to do with the stuff we have. As we go online, and use technology throughout  the value and marketing chain, technology is reducing costs, speeding cycle time, and opening opportunities for innovation.

 

Evolution of the “marketing technology stack”.

For most small businesses this can be as simple as a good website with a series of resources available to collect email addresses, and an autoresponder series on the back. For large businesses it can be a hugely complicated stack of software running CRM, customer service and scheduling, marketing messages, integration of social channels et al.

Mar

 

 

 

 

 

Big data to little data.

The opportunities presented by big data are mindboggling, but even the big companies are having trouble hooking their data together in meaningful ways let alone introducing the third dimension of big data. Small companies will have to start to use little data better, or die. Data already available to them is becoming easier to use every day, to turn into insights about their niche, local market,  and competitive claims. Simple things like pivot tables in excel will be used, and tools like Tableau which brings a structure to  data from differing sources including big data, will  become more widely recognised by small business for the value they can deliver. Big data will have machine learning applied, and the data revolution will get another shove along. From a non technologists perspective, industrial strength  data systems such as IBM’s “Watson” must drive some sort of further revolution, but my crystal ball is too cloudy for me to have much of an idea of the impact beyond making what we currently see as advanced systems look a bit like a pencil and paper look to us today.

 

Technology hardware explosion becomes over-hyped but undervalued.

The volume and type of hardware that has become available is as overwhelming as the access to and availability of information. Driverless, wearables, AI, 3D, blah, Each of the developments has its place, and may change our lives at some point, but there is just so much of it that we are becoming immune to the hype. Who needs a tweeting washing machine anyway?

So, what is next?

Seems to me that we are on the cusp of an energy disruption driven by the combination of hardware and advanced materials science . The technology surrounding renewables is in the early stages of an explosion that will change the face of everything. Highly regulated and costly infrastructure distributing energy will start to be replaced with decentralised renewable power generation, much the same as when PC’s replaced mainframe computers 30 years ago. The catalyst to this metamorphous will be the combination of governments that are broke and no longer able to fund the institutionalised and regulated energy systems and the development of a reliable “battery” system. Elon Musk has made a huge bet on his “Powerwall” battery system and manufacturing plant currently under construction, and it would be a brave person that bet against him. However, looking well ahead, it seems probable that it is the beginning of the logarithmic adoption curve of renewable power following the path of Ray Kurzweil and Gordon Moore. The politicised and subjective debate about carbon and its impact on  the environment will become irrelevant as science delivers cheaper and more accessible renewable energy. All that will remain are the problems of the carbon clean-up. (I suspect this prediction is due to be a repeating one for some time)

 

Marketing has always been about stories.

However, somehow ‘content’ got in the way of those stories, and marketing became a different beast in the last 10 years. We will go back to marketing, and start to tell stories that resonate with individual targets. Storytelling will become again the core, and we will be looking for storytellers in all mediums, written, pictorial, video, as we all absorb and recount stories in different ways.

All the good journos displaced by the disruption of traditional publishing can find great places in this new world of marketing storytelling, if they are any good. The competition is strong, and the results immediate and transparent so no longer can you get away with rubbish. Organisations will change to accommodate the fact that everyone is in marketing

We will become more aware of the permanent nature of the internet, and the manner in which our brand properties need to be managed.

In a commoditised world, where the transparency of price makes competition really aggressive, the value of a brand is increasingly important, and fragile.

These 5 extraordinarily stupid examples of how not to do it  should be a wake-up to the CEO’s who leave marketing to the junior  marketers, often a transient bunch who have no investment in the business or brand, they are just there for a good time, and usually a short time.

One day I will do a study that compares the realisable value of the tangible assets of businesses compared to their value as calculated by the market. My instinct tells me that in many stock market categories  the biggest item as calculated  by the difference between those two numbers represented as  goodwill and a realistic assessment of the realisable values, will be the biggest item on  the asset side of the balance sheet. In short, the current and future value of their brands and customer relationships expressed in dollars. Managers and boards need to deeply consider the nature of the people that have managing their brands, or risk losing them, often before breakfast, as the speed of disruption and change continues to increase.

 

As we go into 2016, the 3 questions every board and management should be asking themselves are:

  1.  “If  I was starting in this business today, what would I be doing to deliver value?”,
  2. “If a leveraged buyout happened, what would the new management be doing to unlock the value in the business?”
  3. “What do I need to do to implement the answers to the two above, today?”

 

Have a great 2016, and thanks for engaging with me.

things I learnt, and relearnt, about marketing in 2015

things I learnt, and relearnt, about marketing in 2015

Dec 22, 2015 | Branding, Change, Customers, Management, Marketing

The year has been a blur, they go faster as I get older, something I find disturbing. Rushing headlong towards the daisy bed seems illogical when there is so much left to do.

I will be 64 in a few weeks, must be a song there somewhere, but it seems that the older I get, the more I learn.

How does that work?

Perhaps that  is because I have a wide and deep foundation built up over all those years that offers many places to tuck some added knowledge in, and the connections to other parts of the foundation are that more visible.

Anyway, here are the headline  things that struck me during the year.

All that is old is new again.

The king of Mad Men, David Ogilvy said it best, something like 50 years ago.  “It takes a big idea to attract the attention of consumers and get them to buy your product. Unless your advertising contains a big idea, it will pass like a ship in the night. I doubt if more than one campaign in a hundred contains a big idea.”  Never before has this been so relevant, as we drown in a sea of mediocre so called ‘content”. What is an old fashioned ad if it is not content? What is an informative film made to show users how to build something, or adjust the points on my old Dodge, if not content. Just because the rules of engagement have changed, i.e., those on the other end of a communication can now tell us if it sucks, either by writing to us, responding on a site that scored whatever it s we flog, or ignoring it. The challenge remains the same. Find your market and build an emotional connection with them.

Scale is not everything.

In the pre internet days, a young academic named Michael Porter wrote the definitive book on competition. One of his 5 forces was all about scale. If you had it, you carried the hammer others could only aspire to, volume sales, negotiating power in your supply chains, power to advertise and promote, it was a huge barrier to either scale or hide behind.

No longer.

The net has destroyed much of the competitive power of scale. One of the greatest wielders of power I see every day are the two FMCG retail gorillas in Australia, who between them hold 75% of FMCG (CPG to my US friends) market share. Yesterday I went into woollies to buy the Xmas ham. My job for  years. In about 30 linear feet of chiller shelf, with many SKU’s of ham on the bone, not one was a proprietary brand. Every single SKU was Woolworths in some guise or another. Clearly buying scale at work for woollies, but I walked out hamless, and went to a small supplier who has a retail outlet about 15 k from my home and bought a ham there. Good price, good service, and probably a better ham because the margins had not been screwed to the bone by Woolies exercising their power of scale. (poor pun, sorry)

The tool relies on the tradesman.

There are so many tools around, to do just about everything, but by themselves they do nothing. All still require a skilled person to get the most out of them.

I have laid many bricks in the course of renovating two old houses, paid my way through Uni all those years ago on building sites, so I know how to do it, but look in my backyard, and you can tell the brinks I have laid, and those laid by a tradesman. If you want something done properly, only do it yourself it is what you do, not what some webinar on YouTube tells you can do.

Do not be seduced by the newest shiny thing.

Simplicity is really hard.

‘The ultimate sophistication is simplicity’.

Steve jobs said those words, and others before and after have said similar things that have been proven time and time again over the years. In todays world it holds more true than ever when it is operationally now so easy to add features few want, sacrificing simplicity and elegance in the process.

We tend to fall in love with our products, forgetting people do not care about them, only what they will do for them, what problems they solve, what value they deliver.

Dunbar’s number still rules.

We might have hundreds, even thousands of “friends” and connections, but we can only manage a limited number. We have been again seduced to believe that there is value in the breadth of many  connections, sacrificing the depth with a lesser number. I would rather have a list of 100 people who knew me well, would take a phone call from me, recognise the value I can bring to them, and are prepared to recommend me to others  based on that value, than a million friends on Facebook, LinkedIn, or any other of the other houses of digital one night stands.

Customers are people.

Customers and potential customers are not “targets” or ‘target audiences’, or ‘potentials’ or ‘rusted-on’ or any of the other expressions I hear regularly. They are people , they control their pockets in ways unimaginable just a few short years ago. Treating them with distain, or even a hint of condescension, tan they are able and willing to pack up and go elsewhere.  The power is very much in their hands  now, not those of the marketer, so make your communication as personal and specific as you can. I get lots of emails with the salutation “Dear Friend”. If I was so effing dear, why not use mu name. They never get opened, and a rule gets put in my email package to dump them into the Spam file never to be seen again. Dear friend indeed, give me a break!

Trust is the make or break metric.

Trust is a word that gets bandied around like a novelty game at  the Easter show. Everyone agrees that trust is a key, but so few recognise that Trust comes from consistent, transparent and generous behaviour, it is hard earned and easily lost, and never given without deep consideration. Don’t let this important word pass your lips unless you really mean it, and back it up with behaviour over a long period.

The nature of assets.

Almost forever, corporate assets in enterprises of any size from micro of MNC have been one of three in some sort of ratio: people, technology, and capital.

Now there is a fourth.

Data.

The integration of data cross functionally, through the value chain, and increasingly with outside “big data” is becoming rapidly more important than the traditional three as the world digitises and competition is increasingly dependent on the availability and accuracy of data from a range of sources.

One of my mates runs a small freight business. He recently added GPS, and a simple program to route his small fleet in real time, that integrates with public traffic info. Now he is wondering if he can  do with less trucks, and maybe make a bit of a return on his investment for a change.

Recall the furore when the email addresses of Ashley Madison subscribers  were hacked and made available for download. The asset value of data has rarely been more publicly demonstrated.

Beware the seductive hiss.

Snake oil salesman have found a new well of clichés and poisonous  bullshit to throw at you.

Beware.

Next time you hear the word ‘awesome’ (my current greatest hate cliché)  run like hell, and save yourself the time and potentially money these sophisticated purveyors of snake oil will try and winkle out of you.

Is your business “solvent”

Is your business “solvent”

Nov 13, 2015 | Management, Small business

Many small businesses do not know the answer to that fundamental question.

It is technically illegal to trade while insolvent, but many small businesses do it every day, often without knowing.

So how do you measure “solvency”?

Being solvent means you are able to pay your bills when they fall due, but measuring it exactly involves a little judgement and understanding of the commercial circumstances of the business.

However, there are two simple measures almost always used by a lender, or anyone else with a need to check the health of your business.

Both are about the manner in which you manage your cash, which should be right on the top of any management agenda irrespective of the size or complexity of your business.

1. The current ratio.

The current ratio is the first calculation a prospective lender will do , it is pretty easy to calculate, and most bookkeeping packages have it as one of the standard reports available.

Current ratio =   Current assets / current liabilities  

“Current” in a accounting speak means less than a year, so your current assets include cash, inventory at sales value, accounts receivable, and any short term investments you may have.

Current liabilities are those bills that will have to be settled within the same year. This number is accounts payable, short term maturing loans to be repaid, and the one many miss, the provisions for an accrued liability you may have for things like employees long service leave and other benefits.

2. The “Quick” ratio.

The second commonly used ratio is the “Quick ratio”, which as implied, is a measure the very short term ability to cover debts. Many businesses have a lot of money tied up in finished goods inventory, work in progress and raw materials. All can be challenging to liquidate in a short time, so the quick ratio is a simplified ,measure of the immediate ability to pay the bills.

Quick ratio = (Current assets – Inventory) / Current liabilities.

These ratios are the same apart from the inventory valuations and provisions, and are usually used together.

The valuation of inventory is always a challenging question.

In valuing finished good inventory for a “quick” calculation , the appropriate number is the realisable value within a month. If you have three months inventory on hand, it is unrealistic to believe you can sell it all in a month and get full price. Valuing WIP and raw materials inventory is even more difficult, as who wants a half completed product, and suppliers will be very reluctant to take raw material back at full invoice value.

As noted, these ratios are virtually always used when seeking funding, by any means. The potential funder will look at both ratios before any other detailed discussions. A bank will generally require a quick ratio of at least 1:1, and preferably 1: 1.1 or more, depending on their lending policies.

Are you trading illegally?

Do you know?

4 steps to a positive cash flow for small business.

Jun 5, 2015 | Governance, Management, Small business

 

whoops!

whoops!

 

Do I have enough cash to……………….?

This is one the 4 fundamental questions for small business survival, and is the one I hear far too often. It is all to do with how much cash is available at any given time to pay the bills.

It is almost inexplicable to me that many operators of small business do not understand their cash flow, how it works, how it can be managed, and how to leverage it. After all, it is their lifeblood.

The sad reality was brought home again a week or so ago talking to a tradie I met casually who was hurting badly because a developer he had subbied for over many ears was not paying him, and he in turn was not paying his bills, as he had used up his overdraft. He was in effect funding the developer, and ultimately the receiver, and seemed unlikely to get any of his money back.

A common occurrence and all too easy to address with a bit of planning.

 

There are some pretty simple things that can be done to assist in the management of cash, but like all things it takes a little bit of work up front, and a disciplined process

1. Routine.

The steps to a positive cash flow are simple, if you make them a part of your routine, you can follow them with little effort, although at first, it can be a bit confronting.

  • Have robust, enforceable and explicit terms of trade. For anything that requires credit terms to be extended, make sure you have a signed agreement that specifics all aspects of the terms under which you agree to provide your goods and services. These terms are an enforceable contract, and in the event it is necessary, is actionable. There are templates available that can be personalised for your needs and used without cost or with just a small charge. Some service providers such as EC Credit Control will assist in the preparation, as will your bank, although your bank has a vested interest in lending you money, not making what you have work harder.
  • Do credit checks. By giving credit, you are effectively lending someone your money. It makes sense to check if they have any history of fraud or default, which can be done easily for a modest fee. You pay for access to a database that is in effect a credit footprint of everyone who has applied for and been given credit, and the data includes their credit history, and any outstanding judgements. Veda is one of the agencies that provides this information as a service, there are several, most banks will provide the service for a fee, often they wholesale services like Veda. Often if you choose to outsource your debtor management in some way, these sorts of checks are a part of the service.
  • Issue invoices immediately and follow up politely but persistently and in a highly predictable manner. Most businesses wait until  they receive an invoice before they initiate any consideration of a credit period, let alone get around to paying, so the sooner you issue the invoice, the earlier you have a chance to be paid. A client of mine about two years ago instituted a process of sending a polite “thanks in advance” for payment on the invoice due in a couple of days. He thanks his clients for the expected payment, indicating being paid on time is one of the ways he manages to maintain the high value he is able to deliver. It had a significant impact on his debtor days, and served a marketing purpose to highlight the quality of  the service he provided, and as it was highly automated. After the initial set-up and a few teething problems, the process became virtually automatic, and a boost to his business.
  • Keep the credit period ASAP. In this case, the acronym is As Short As Possible. Generally the negotiation on credit terms will take place at the beginning of the relationship, and that is the best time. Make it as short as possible,  I always advise starting with 7 days from invoice date, be very happy with 21, and if it is in your interests, give a bit more, but if you start with 30 days from the end of the month, watch your sales bunch into the beginning of  the month, which effectively gives a customer up to 60 days to pay, before the invoice is overdue, and you can start chasing payment. This is a gap you are funding, bankrolling your customers, and generally people in business are not there to be a philanthropist, leave that to Bill Gates.
  • Do a weekly rolling 13 week cash forecast. This is a simple exercise, but knowing what is coming at you offers the opportunity to manage it with the least pain, ignoring it can be terminal. Generally this cannot be automated, but most bookkeepers and service providers can do it simply, although most would say monthly is sufficient. I strongly recommend weekly for small businesses.

 

2. Automate.

One of the more innovative automations I have seen is the one noted above, but most of the basic bookkeeping routines are now highly automatable via mobile connections into software that can manage all the recording and  invoicing processes. For a tradie, assembly and issue of an invoice via email against a signed and dated acceptance of the cost can be done on site the moment a job is complete. No paperwork to end a long day. Automating can cost a bit to set up, and ensure it all works, but the expense is well worth it.

 

3. Outsource.

Most parts of the process can be easily outsourced if you choose not to do it yourself. Think of this outsourcing cost as insurance, and the cost of buying back a bit of your own time and peace of mind.

  • Book-keeping. There are many book-keeping services available, and whilst they may vary in quality and cost, it is pretty easy these days to find one you are comfortable with, who provide the mix of services you require.
  • Debtor  and debt management. There are many service combinations possible from the straight invoice financing where you in effect sell your invoices to a finance broker who then owns the debt, to more relationship sympathetic arrangements where a third party undertakes to be your accounts receivable function, and often do some of the risk assessment functions noted above. Selling your debt, or “factoring” still smells of desperation, but outsourcing accounts receivable is pretty sensible and often very cost effective.

 

4. Leverage.

Most understand the concept of leverage when it comes to moving a physically heavy object, but have never thought of it in relation to their business, and particularly their two most crucial resources, their time and their cash.

  • Closely managing terms and collections so that your average debtors is shorter than your average creditors means you are collectively enjoying having your creditors fund your business. However, I recommend paying your bills as they come due, as a history of reliability can pay big dividends when things suddenly go pear-shaped.
  • Inventory. In many businesses the greatest consumer of cash is inventory, and closely managing it can save considerable sums. For a retailer like a fruit and veggie market, they take most of their revenue by cash or credit  card, for which they get paid within 24 hours, but often pay for their stock on 21 or 30 days, by which time they have turned the stock over several times. Lovely. Measuring stock turn is a great metric if you have inventory.

 

Finally, there is a further measure not usually recommended that I particularly favour, Net Cash Consumption  or NCC. It is a simple measure you can apply over any period, simply the difference between cash in and cash out over a time period. For small businesses I usually exclude capital items, so it is a measure of trading cash generation, or destruction.   If the measure is positive, that is a good start, if it is negative for any extended period, trouble. I usually recommend a rolling 3 month measure, short enough to be sensitive, long enough to accommodate the operational vagaries that occur like paying the receptionist long service leave. Adding it as a graph on the bottom of your cash flow forecast automates it. Easy.

If you would like more information, or the opportunity to discuss any of this, just give me a call.

KPCB Internet trends 2015 report.

Jun 3, 2015 | Change, Governance, Management

KPCB

For 20 years, Mary Meeker of KPCB  has been collating and publishing an annual report on the growth and growth of the net and the services and products it carries.

This 20th publication contains information that will be useful to every business.

The local lemonade stand, to the huge Multinationals dominating the commercial landscape, there is vital stuff for you.

Just a few of the points that jumped out at me:

  • Mobile data usage rose 69% last year
  • 55% of mobile data traffic is from video
  • Ads in mobile account for 8% of ad spend, but mobile accounts for 24% of time spent with media.
  • Mobile use in underdeveloped economies is disproportionately strong. In effect, they are jumping the stage of fixed line infrastructure developed economies went through. If you want to do business in Asia and India, go mobile.
  • Government policy, regulation  and use of the net lags public usage substantially, around the world
  • The number of hours a day people are spending in front of a screen s still growing, and though it has flattened off a bit, but it is 9.6 hours/day. (US data)
  • The number of productivity tools becoming available is still exploding, as is the number of platforms for distribution of information and data
  • The nature of work is changing rapidly, as is the location of those doing it.

 

Whoever you are, if you are in business, and want to stay there, it is worth flicking through the report.

PS. June 13.

Mary Meeker released a presentation of her amazing report, listening to her talk through the report makes it easier to absorb, way easier than just looking through the huge pile of slides.

Everyone should watch this, absorb it and figure out how to leverage it for your business.