Treat your customers well…

Yallingup Mainbreak, Western Australia

If it doesn’t feel right, don’t do it.

Several years ago I had dealings with a business that delivered a service to thousand’s of customers each day.

This was a highly transactional business involving a service that was necessary but not exciting, and there was little focus on building relationships.

This lack of engagement from the supplier should have been the first warning sign.

The other indicator of concern was the pricing adjustment mechanisms used.

Upon commencement, new customers would be given a very low rate, but over time, these rates would be driven up through a bulk price-increase mechanism; sometimes multiple times in a 12 month period; and always accompanied by an impersonal letter that delivered a series of vague reasons behind the increase.

The reality was that these blanket price increases were rolled out when the business thought they could get away with it – there was little-to-no link to real cost increases being incurred, or any other legitimate reason for the prices rises.

The price changes were a simple profit-grab and were delivered in such a way, that before the customers knew it, they were paying exorbitant, inflated rates.

Most customers simply accepted these increases - some pushed back - but the Terms and Conditions (T&C’s) in the service contract were watertight, so most customers stayed under duress. 

However, those that really pushed back had the increases waived regularly.

As a result, there were long-term loyal customers on hugely inflated rates; and clients with zero loyalty continued to enjoy low entry-level rates.

The vast majority of customers were small/medium sized, owner-operators, who were highly stressed and time poor.

This was not right.

Treat your customers well – enjoy the interactions and relationships with them - and I guarantee the long-term benefits will outweigh the short-term profits obtained through a structure where mutual respect or a fair exchange is lacking.

Cheers, Garrick

Reach me at garrick@garrickjackson.com

Don't be afraid to raise your prices…

Western Australia

Pricing is one of the trickier aspects of running a business.

Too high and the phone might not ring; too low and you’re selling yourself short and not maximising your returns.  

It’s affected by the return you need to cover costs and make a decent profit, as well as what the market is willing to pay.

There are many different thoughts on how to set pricing, but if you have a business that allows you to do it  (new or established), experimenting with prices can lead to the best outcome.

I met some business owners recently who were working harder than ever and not making any more profit.

They deliver a service.

Pricing had been increased in the last 12 months, but hadn’t been changed for several years before that.

We had 3 problems:

1.     Expenses incurred by the business had continued to rise (rent, electricity, consumables, wages, etc.)

2.     Customers had grown used to the under-market pricing they had been receiving  (and enjoying!)

3.     The owners were working harder than ever, and had no capacity to make more sales and address the profit squeeze they were experiencing

I sat there; listening to these business owners who deliver a great service; suggest that maybe it wasn’t worth running the business anymore.

This business had been in operation for a little over 10 years – and now here we were – the owners despondent and disillusioned about those last 10 years - and with no positive future prospects.

So we worked out a strategy around supply and demand as influenced by price.

Demand wasn’t a problem – it was through the roof and causing a high level of stress and anxiety.  We needed to curb this demand slightly whilst getting a better return on the work being done.

So we published a new price list to become effective in 60 days – we moved all pricing up to the next level, for example, $30 would become $33; $50 would become $55.

We discussed the concept of adjusting prices to the point where demand just starts to fall away, and then you know you’ve hit the optimum price your market will pay for your product or service.

We published these prices with plenty of notice to allow customers to make an informed decision on whether to come back or not.

A quick check of the market indicated these new prices were still below market rate, so there wasn’t a problem.

We also agreed that pricing would be reviewed more often to ensure things didn’t get out of balance again in the future.

A relatively simple thing when viewed from the outside, but so many business owners are buried so deeply within their businesses, that they can easily overlook things that can make their business so much more successful – and enjoyable - to be a part of.

The owners were happy – I was happy (mainly because I’ll still get to use their service, albeit at a slightly higher price) and we get to tip the scales a little more into balance for everyone involved.

Cheers, Garrick

Reach me at garrick@garrickjackson.com

Basic disciplines around reviewing your business expenses...

Yallingup Mainbreak, Western Australia

Many would have heard the saying, "cash flow is like oxygen - without it, your business will die".

For nearly all small businesses, this is absolutely correct.

We are excited by the business we want to launch and run, but the reality is you must have both discipline and visibility around what the monies you are spending, and the monies you are making (or planning to make!).

Now this doesn't have to be rocket science, and the financials of many businesses can be monitored using 3 documents - the Profit & Loss Statement (P&L), the Cash flow Statement and the Balance Sheet.

Keep a close eye on these on a monthly basis, and you'll be helping give your business the best chance of success in terms of your financial performance.

I witnessed this approach being used to great effect in a small wholesale business I was involved with.  

Each and every month the accountant would prepare the documents listed above, and the team would review these documents; line by line.

This had two great outcomes:

1. All staff knew the expenses associated with running the business, and their particular area within it. This approach gave those staff context and visibility on how they could assist managing expenses, whilst maximising returns from the funds spent in their respective areas

2. There were no nasty surprises the next month (not in terms of expenses anyway!)

As a result all bills, taxes, salaries and other commitments could be paid.

During the monthly review, if the outgoings surpassed the incomings - and there were no other cash reserves available - the outgoings had to be addressed.  

It was often disappointing that a certain expense activity couldn't be pursued that month; but there was also a comfort enjoyed by everyone that the business was managing its financials well.

Whilst you may not have a team (it may be just you, or you and your business partner, husband, wife or accountant) sitting down and going through this exercise, it is still worth the effort.

It takes a little time to set up, but it will inject a discipline into your business that you didn't have previously.

Too many businesses have limited (or no) visibility on their cashflow situation - these are often great businesses with passionate owners - but they are in dangerous waters and vulnerable to suddenly realising the cash in the bank doesn't cover the bills in the in-tray. 

Inject some structure into your business around regularly reviewing your expenses, and you'll see the benefits.

Cheers, Garrick

Reach me at garrick@garrickjackson.com

Funding my business - do I bootstrap, borrow, crowd-fund, sell equity - or is there another way...

Injinup, Western Australia

Questions (and challenges!) around funding are common, and are often the biggest obstacle someone with a great business idea will face. We can borrow money from friends or family; borrow from a formal lender; crowd-fund; bootstrap (ie. fund) the business ourselves; sell equity (ie. a part or % of our business) - or we can get creative.

A good friend of mine had a great business idea but was cash poor.

He'd found a product; negotiated pricing; created a wonderful brand; and built a website, along with a 1000 other tasks required to get his idea up and running.

Supporting a young family with two children, paying a mortgage, and living off an average salary whilst starting up his new venture meant that the business struggled to grow and take full advantage of opportunities that were coming its way.

He funded it himself to start with, then sold some equity in order to buy stock, however, still couldn't quite get the cash flow and inventory to a point that would allow the business to take off.

Borrowing wasn't an option (at least not from a traditional lender), as the business was required to have 2 years of full financials before it would be considered for an overdraft or loan, which is a very common, and very frustrating reality for many small businesses.

As a result, the business lived hand-to-mouth. There were generous and heartfelt offers of loans from family and friends - but as is so often the case, the Founder still had doubts (mainly self-doubts which are extremely common), even though from every angle the brand and business he was building looked solid and a sure-thing.

A funding option that would be both effective and acceptable to the business owner seemed to not exist.

Then came an opportunity out of left field, and one the founder hadn't necessarily expected, as it wasn't the normal way a new, small business finds the cash it needs to grow.  

A business associate in a similar market was launching a new venture, however, had some shortcomings in terms of skills and experience with online marketing, e-commerce and social media.  On the other hand, he had a depth of experience in retail, stock management, and had access to funds.

There was the ability for one business to make up for what the other business lacked, and so a partnership was formed.

We can’t be good at everything - and so whilst not the most obvious way to fund a business, by finding a business partner with the right needs, structure, culture, experience and fit, a great outcome is being enjoyed by both.

Funding a business can be achieved through a variety of mechanisms and structures - just make sure you are realistic about the pros and cons of each method - and stay open to ways to achieve your desired outcome that you may not have thought of.

Cheers, Garrick

Reach me at garrick@garrickjackson.com

Why start a business…

Geographe Bay, Western Australia

Running a business is hard but rewarding work.  

There is a heap of challenges, victories, defeats, and indecision along the way.  

Creating something from scratch, or something from nothing is lonely, and often all you need is a bit of help in making a decision; suggesting the next step; or reinforcing what you've already done, in order for you to keep up the momentum and push on.

My goal is to help businesses achieve their goals - however big or small they may be.

We want to see businesses become successful and profitable - but not at the expense of all else including, lifestyle, health, relationships or happiness.

Businesses take many forms - private; public; large; small; family-run; franchised; goods focused; services focused; start-up; or established.

Businesses face challenges including competition, succession planning, cash flow, economic changes, environmental changes, technological changes, supply issues, pricing decisions and cost increases.  

The list goes on - but inevitably someone somewhere has faced the same issue and overcome it through the application of knowledge, tools, experience, and a desire to keep their business moving forward.

Cheers, Garrick

Reach me at garrick@garrickjackson.com