Know when to be bold, know when to fold

 

In business as in poker there are times when discretion is the better part of valour.

Put simply, some of the best business deals are those you turn away.

All organisations operating in today’s climate need to have constant and rigorous focus on their commercial exposure.

It is obviously difficult to contemplate turning away business especially from a customer of long standing. Similarly the attraction of securing “prestige business” can be very seductive.

However an objective assessment may well lead to the conclusion that at times the best course of action is to leave these opportunities to others.

It may well be that turnover suffers when stricter controls are in place over such elements as payment terms and credit limits.

However, the reward for such fiscal discipline is obvious. Avoiding defaults by customers not only protects the company’s bottom line whilst allowing focus to be placed on more profitable activities.

 

It’s pointless to shoot the messenger

 

One recurring theme from analysis of losses made in the financial sector is that the management were totally unaware of the risks which their institutions were running.

To be effective, risk management and risk controls rely on the people operating them.

As has been well documented all too often the corporate culture is dominated by fear and greed and these together make for a toxic combination.

When strategies fail and trading positions spiral out of control these two elements come very much to the fore. Fear can often lead to individuals embarking on an even more reckless course of action in the misguided belief that it will all come right – the gambler’s doubling up mentality.

At the same time recklessness is often driven by greed; the larger the risk the greater the reward should it prove to be a successful course of action.

Against this background it is incumbent on management to ask the uncomfortable questions and not merely rely on the assurance that all is well and going to plan.

It is always worth remembering that if something looks too good to be true it invariably is.

Risk/reward – the Ying and Yang of commerce

Every business transaction contains an element of risk, but the crucial factor is how adequate are the mechanics and systems that are in place to manage these risks?

In recent years we have witnessed just how costly the laissez faire attitude to risk was in many institutions be they large corporations or smaller SME’s.

In the never ending quest for larger profits many of the saner principles of business were jettisoned.

An analysis of the most spectacular flame outs all have one common denominator – the architects of these calamities went hurtling over the cliff like lemmings.

There has never been a more relevant time to examine all areas of exposure.

For example a forensic analysis of the current Debtors Book might make for uncomfortable reading but like most unpleasant tasks it should not be ducked.

It is far better to take remedial action such as a write down whilst you are in control of your own destiny rather than have a 3^rdParty appointed to do it for you.

 

The value in leaving some deals for your competitors

 

In the coming weeks, much media focus will be given to the projected burst of retail sales in the pre Christmas/ post New Year period.

With tightening household budgets it should have come as no surprise to retailers that consumers will be hard to attract and some more innovative marketing in the last weeks of 2014 will pay dividends. As it is Kamikaze discounting makes little commercial sense and the results of this policy are likely to be more spilt blood in the High Street.

Aside from the retail sector all companies operating in today’s climate need to have constant and rigorous focus to their commercial exposure.

Against the current competitive background it is very difficult to contemplate turning away business especially from a customer of long standing.

However, there are times when subsequent events show that on occasion the best business decision was to leave it to your competitors.

When stricter controls are in place over such elements as payment terms and credit limits the result is likely to be a reduction in turnover.

The upside of such fiscal discipline carries its own rewards. Avoiding defaults by customers is the surest way to protect the company’s bottom line at a time when profits are hard won and losses hard to recoup.

The value of the human touch

Companies have traditionally thought of customer service as a cost centre, which made it a ripe target for cuts during the downturn. That has contributed to increasing frustration among consumers at poor service in recent years


Although many operations are completed electronically in this virtual world we should never forget that essentially commerce is about people trading together.


The reality of the real world is that goods need to be moved from point of production to point of consumption and obviously the diverse elements which make up this chain cannot be achieved solely via a computer terminal.


It makes sound economic sense to foster and maintain good customer relationships as it has been determined that it costs up to five times as much to win a new customer as it does to retain one.


There is an old adage “know your customer,” this dictate has never been more relevant.

 

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.