Customers – love ‘em or lose ‘em

 

The old adage the customer is always right has come in for a fair amount of scrutiny recently and there are many times when plainly the customer is in the wrong.

Notwithstanding it is of paramount importance to the sustained growth of any business that the customer is kept onside.

The key requirement that any customer wants is to feel that his/her business is valued and appreciated.


In business securing the deal is only the start of the process and the repeat order very often stands or falls with the after sales service (or lack thereof).


Simple but effective measures such as ensuring all contracts are performed efficiently and within due time and that any complaints are handled promptly and with courtesy will go a long way to building and maintaining long lasting relationships.


We have all encountered the difficult customer with whom it would be easier not to deal. However, it is always worth remembering that there are many who would willingly take this “problem” and revenue off of your hands.

 

Today's mantra - keep trimming costs

With operating margins being continually squeezed it is imperative that costs are rigorously monitored.

Every sector is seeing the impact e.g. FedEx the world's second largest package Delivery Company have seen their customers moving business from air to slower and less expensive routes.

Manufacturers of electronics and mobile phones are now shipping cargo by sea because competition was eating into their profit margins meaning they needed to cut delivery costs.

Take the example of mobile phones each 20 foot container can hold 13,000 smart phones with a transportation cost from China to Europe of 7 pence per unit and a transit time of approximately 25 days.

Traffic will continue to moving onto the water because moving goods by air is very energy-intensive and the high cost of jet fuel makes air freight too pricey.

Facing marked resistance from consumers to price increases and a greater level of competition those companies who are unable to control costs have an uncertain future.

 

Short sighted tactics

The most important component in any business relationship is the question of trust.

The ultimate demonstration of trust and good faith is when a supplier delivers goods to a customer on credit terms.

It therefore is incumbent on the buyer that they acknowledge this act of trust and observe the agreed payment terms.

With the current pressures it is easy to understand the temptation of delaying payment, thereby “pinching” a few days extra credit but this type of behaviour soon begins to pall.

Once a supplier feels that their buyer is taking undue advantage the relationship is damaged sometimes irreparably.

For any relationship to be sustained there has to be mutual benefit.

When a buyer gains a reputation for persistently crossing the line the merit in maintaining the account is called into question.

It is a very short sighted business tactic.

 

Effective management

In order to achieve success all organisations must have effective leadership. It is the responsibility of management to lay down a set of ideas and objectives that are articulated, understood and supported by the workforce .Good people do not like working for organisations whose values are muddled.

Managers have to take difficult and unpleasant decisions. These often need to be made swiftly balanced against conflicting demands. It is not always possible to access cast-iron evidence to support the decision making process. This is one of the tests of strong management.

A clear and defined vision are essential requirements. Managing a large company, and dealing swiftly with a variety of challenges and issues is a complex task.

The desire to succeed which provides the drive and focus on excellence is one of the hallmarks of a good manager.

The workforce is the company’s most precious asset. Accordingly the ability to judge people and value their contribution is an essential prerequisite for any manager.

To build a talented team requires working with people who may be better at their job than you are at yours, and to guide and motivate them. People learn far more about the art of leadership from a good mentor than from any course or training exercise.

The ability to respond quickly will prove invaluable when things go wrong. Surviving a reverse and changing direction is the utmost test of resilience and flexibility.

 

Adding value

Essentially there are two courses of action when attempting to boost the bottom line, cut operating costs and generate additional revenue.

The first action that many organisations take is to reduce staffing numbers, seeing this as a quick fix.

It is a tool by which management perceive they can demonstrate that they are getting to grips with the problem.

However, there is a danger that in line with reduced personnel there is an accompanying decline in operating standards. In such circumstances customers often choose to vote with their feet.

The sales director only has one shot in his/her armoury namely increase sales. Sales targets can always be raised but a sense of commercial realism also needs to be applied.

If the company is marketing a totally unique product or service the task is easier but for the most part there are many organisations are offering a similar range of products in a broadly similar price range.

In many instances companies would be advised to make customer service their USP but this requires the commitment of a dedicated work force not one that is pre-occupied with the spectre of further redundancies.

 

Don’t say you weren’t warned

 

Monitoring counter party risk is the key to maintaining a healthy business.

In the majority of failing companies the distress signals are plainly visible for some time before the flame out.

Any analysis of a company’s published accounts or even monthly management accounts are by definition “out of date”.

It is vitally important that all counter parties are monitored closely and “real time”.

In the case of customers look out for unusual ordering patterns, repeated delays in payments – these are early indicators of more serious problems ahead.

For any organisation facing mounting problems it is obvious that the solutions will of necessity be painful. However, radical and decisive surgery is often the only way to ensure a patient’s survival.

Many companies adopt the Mr Micawber attitude that “something will turn up”. For many of these organisations the only people likely to turn up are the administrators/liquidators.

Be it merely inertia or fear of addressing the issue, the outcome will remain the same.

 

Time for forward planning

In recent times there has been the tendency for the festive season to stretch out over a number of weeks and therefore with just over 7 weeks to Christmas it would seem an appropriate time to consider the implications for business.

Without doubt of biggest concern to SME’s will be the impact on cash-flow. Many companies are operating very close to the edge and any delays in payment could have serious consequences.

In some instances invoices which fall due for payment after Friday December 19^th could well not be settled until the week beginning the 5^th January – resulting in a scenario of 3 weeks delayed payment.

It would therefore seem prudent to look at your last half December receivables and make a realistic forecast of just how much cash will “come in”.

Similarly with “just in time” inventory it would be sensible to ensure that sufficient stock will be on hand for the early days of January when there will be inevitable disruptions to the supply chain. Already there are reports of shortfall in available haulage capacity for December.

Trying to get things done in the UK during the latter half of December will undoubtedly prove to be a challenging task so it would be best to ensure you are positioned accordingly.