The Way to Wealth (11 page)
Authors: Steve Shipside
Working smarter is another management maxim seen as a modern development, but the seed of the idea was there back in 1758 when Benjamin advised us to
‘let us then be up and be doing, and doing to the purpose; so by diligence shall we do more with less perplexity’.
An enthusiastic advocate of hard work, Franklin was not blind to the fact that labour for labour’s sake is not in itself a virtue and that real productivity goes hand in hand with the ability to focus on the real goals and deliverables.
DEFINING IDEA
…When in doubt, mumble; When in trouble, delegate; When in charge, ponder.
~
JAMES H. BOREN, AUTHOR OF WHEN IN DOUBT, MUMBLE: A BUREAUCRAT’S HANDBOOK
The working culture of long hours and lunchtimes snatched at the keyboard is no longer the purely Anglo-Saxon phenomenon it once was Increasingly, employees feel they are expected to put in long hours in order to show commitment. Often this culture comes in by means of an insidious creep, where nobody wants to be seen to go home earliest or take the longest lunch break, and a lose/lose escalation kicks off.
Working smarter can really be boiled down to a combination of personal organisation, prioritising and (where appropriate) delegation—in that order.
Personal organisation starts with managing your diary at the very least, and project management software if that’s what you are using. A lot of work crises that seem to ambush us at the last minute are, if we are honest with ourselves, entirely predictable were we to spend a little more time with our diaries working out deadline clashes. If your project is very complicated then project management software, with its ability to track and schedule multiple stages and tasks within a single project, is well worth the investment in both finance and learning that you need to get up to speed.
Prioritisation goes hand in hand with organisation. You have to be absolutely ruthless about which deadlines are critical and which are merely desirable. It’s a classic human error to waste time dabbling on two projects rather than focusing on just one, or to be distracted into working on the more attractive one despite it being less urgent.
Delegating is part of prioritising. If you’ve managed your time looking forwards and realise that you’re not going to be able to satisfy the demands on you, then you may need to look to some personal outsourcing if you’re still going to hit your goals. Small businesses, sole traders and self-made entrepreneurs are notoriously bad at this since they tend to resent paying anyone else for something they can do themselves. Often, however, this means that while your clients pay you for a skill they value, you are wasting your own time on skills they don’t—such as bookkeeping or admin. We know it’s not cost effective, but many of us spend hours doing petty tasks that could easily be batched up and handed off to someone else for a fraction of the hourly rate we ourselves are worth.
HERE’S AN IDEA FOR YOU
…Working to a tight deadline? Stop multitasking. Close down your email and switch your phone to voicemail. Research suggests that we only manage three continuous minutes of work before being interrupted. Taking intrusive but impersonal interruptions out of the equation makes you much more likely to get your work done.
Like Pavlov’s dogs we can’t help but salivate at the sound of the word ‘bargain’. And yet as Franklin points out ‘…
many have been ruined by buying good pennyworths
’. With a looming financial slowdown that has never been truer.
DEFINING IDEA
…If there is a conflict If there is a conflict between making profit and generating or saving cash, go for the cash alternative. Loss-making businesses can survive, but businesses that run out of cash will not.
~
MICHAEL IZZA, CEO, INSTITUTE OF CHARTERED ACCOUNTANTS IN ENGLAND AND WALES
.
Somehow a bargain is more than a financial saving; it encompasses a sense of opportunity not to be lost and even a degree of wisdom in the choice. There is a Monty Python sketch featuring the British comedians dressed up as housewives discussing their day:
Mrs Non-Gorilla: ‘Have you been shopping?’
Mrs Gorilla: ‘No…been shopping.’
Mrs Non-Gorilla: ‘Did you buy anything?’
Mrs Gorilla: ‘A piston engine!’ She reveals a six-cylinder car engine on a white tray, on a trolley.
Mrs Non-Gorilla: ‘What d’you buy that for?’
Mrs Gorilla: ‘Oooh! It was a bargain.’
While he was unlikely to have had piston engines in mind, Franklin’s ‘good pennyworths’ are exactly the same idea—items with prices that tempt us to snap them up without due consideration of their real value.
‘And again, at a great pennyworth pause a while: he means, that perhaps the cheapness is apparent only, and not real; or the bargain, by straitning thee in thy business, may do thee more harm than good.’
Of course any bargain is only a bargain if it is a price cut on an item you needed to buy anyway. A bargain that leads you into buying goods or services you were otherwise happy without isn’t a bargain at all—it’s a loss, and any theoretical saving is not only a waste of money but, more crucially, a waste of cash.
With a credit crunch already biting and a potential recession in the offing, a bargain ceases to be a bargain if it damages your cash flow. To genuinely evaluate a bargain for your business you can’t just take into account the price; you must also consider the terms of payment. Hard as it may be to turn down, any bargain that puts a strain on cash reserves is probably not a saving you can afford. Maintaining positive cash flow can be more important than generating profit or scoring that ‘bargain’, since a lack of ready cash brings with it the risk of failing to meet liabilities—with the likely result of insolvency. If that happens, the receiver will investigate your behaviour and if it turns out that you failed to meet payments to creditors due to a hoped-for long-term saving, that bargain could cost you dear.
The flip side of this is that you can make your own offerings into a ‘bargain’ that encourages positive cash flow. Whether you deal in products or services, you can improve your cash flow by giving discounts in return for prompt payment or insisting on deposits in advance for jobs that you are taking on.
HERE’S AN IDEA FOR YOU
…Tempted by a bargain? Don’t pay for it now. Instead make sure you’re making the most of payment terms. If payment can be agreed on in, say, thirty days, don’t pay before then and make sure you use a prompt payment system, such as electronic transfer, to ensure you pay on time.
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LOOK BEYOND THE PURCHASE PRICE
The price tag is often only the beginning of the payment. If you or your business buy anything then consider the ongoing maintenance costs, not just the purchase price. Or as Franklin put it:
‘…’tis easier to build two chimneys than to keep one in fuel’.
DEFINING IDEA
…They think they can make fuel from horse manure—now, I don’t know if your car will be able to get thirty miles to the gallon, but it’s sure gonna put a stop to siphoning.
~
BILLIE HOLIDAY
Fuel is as timely a topic as ever, albeit one more associated with cars than chimneys. When buying cars we realise that there will be ongoing costs in the form of petrol, but we rarely take into account the full impact of standing charges and running costs. Standing charges are the costs you pay whether or not you use the vehicle. That means tax, insurance, the cost of the capital used (on a purchase plan), depreciation and breakdown cover. Running costs are mainly fuel but also all those little things you’re busy tucking to the back of your mind—parking, servicing, repairs, wear and tear, etc.
In the UK the AA (Automobile Association) provides tables to help you calculate the cost of running and standing costs depending on the cost of your vehicle. You may be horrified to learn that with a car worth £10,000, driven around 20,000 miles a year, the combined running and standing costs come to about 30p per mile. So that’s £6000 per year. More than you thought? Undoubtedly, and that figure was based on fuel prices that have since risen dramatically. Buy yourself a more expensive car and the cost per annum soars, not just because it uses more fuel but because of the factor depreciation plays in the costs.
Depreciation, the AA informs us, is ‘the biggest cost after fuel purchase’ and yet the chances are that it’s the factor least likely to be considered when buying personal or company transport. Partly that’s because it’s not an exact science, with different models depreciating less based not just on their perceived build quality but also on their popularity—a factor which varies. It may come as a surprise to find that a typical new car will lose 40% of its value in the first year just because it is no longer new, but if it is a model in particular demand that figure can be reduced to as little as 10%.
The first year is the biggest bite out of the value of the car just because it no longer boasts that ‘fresh from the showroom’ appeal but by the end of year three a typical car will have lost 60% of its value. Compare that with the cost of capital if you are buying on a credit scheme and you can see that the initial purchase price is really only the tip of the iceberg. Which is why the most cost-effective car is probably a five-year-old model with a low mileage…
HERE’S AN IDEA FOR YOU
…Most of us use cars for work or personal reasons but do you need to own those wheels? Leasing provides a means of managing depreciation and helps plan ahead by setting a fixed monthly cost (usually including servicing). If you’re doing major mileage it can also prove the cheapest option.
Franklin was a great believer in putting down roots in business. When he says
‘I never saw an oft removed tree, nor yet an oft removed family, that throve so well as those that settled be’
, he was clearly referring to the joys of being established.
Nowadays location is not so critical to business, but other forms of establishment certainly are.
DEFINING IDEA
…When you stop talking, you’ve lost your customer. When you turn your back, you’ve lost her.
~
ESTEE LAUDER
While just about every business pays lip service to the importance of customer retention and creating a community around a brand, product or service, the fact is that the vast majority remain far more interested in customer acquisition. So much so that a survey by Accenture a couple of years ago found that boardrooms in the UK ranked maximising revenue from existing customers at the bottom of their list of objectives. Franklin could have told them, however, that as natural as that may be, it is also wrong.
Email, mobile phones and online shopping have all helped erode the amount of contact between businesses and their customers, but that only means that each touch point is all the more important. At a time when it has never been easier to take your custom elsewhere customer retention is crucial, but many companies don’t even have effective mechanisms for monitoring customer attrition, let alone for doing anything about it.
The first step is to start to measure attrition, meaning the number of your clients who don’t go on to repeat their purchase or renew their relationship with you. That should be done over an appropriate trading period and expressed as a percentage of the total. The next step is to go back to the old 80:20 rule and see if it applies to your business. Typically some 80% of a business’s profits come from just 20% of the customers—time to start expending more effort on targeting that 20% and ensuring you deliver the service they expect. This demands a CRM (Customer Relation Management) system. If you are a one-man band with only a few clients then your CRM could be as simple as good people skills, nice manners and a razor-sharp memory. For pretty much everybody else, however, it’s worth investing in CRM software.
Software alone won’t do it, though. To keep customers happy you need staff who share your ideals and are sufficiently empowered and motivated to deliver them. Complaints shouldn’t be swept under the carpet; they should be reported—and acted on.
Nor is fixing a complaint the end of the process. It should be followed by a review of the lessons and communication to other customers to let them know that you’re on the case. Make sure that everyone, no matter how senior, gets to experience just what it is like to be one of your customers, and one of the staff that deals with them. It’s because boardrooms become so distant from the customer that they lose sight of the importance of keeping their existing clientèle.
HERE’S AN IDEA FOR YOU
…You don’t have to be a supermarket or an airline to introduce a loyalty scheme. They can be scaled to suit the size of your enterprise and could be as simple as theatre tickets or a bottle of wine sent to anyone who makes a repeat order or spends a certain amount.
