Wednesday, 30 May 2012

Are you Attracting the Right Clients

To the TEAM, SME Owners in SA.

Most of us hear this alot, it means different things to different businesses or does it.

Remembering there are always exceptions to the rule.

Here are some things for us to consider.

-in a startup there is a sales mentality, attract as many clients as possible in the shortest possible time, with the view take on the client do not worry about the gp%/ margin. the view is ,we will get the price/ margin up over time to be at the benchmark that was set for the business to be profitable!
The business has just started a down hill fight for itself over the next three years if the business lasts that long. SO A POOR FOUNDATION has been established. Here's an example or two, that I have come across in my coaching of sme businesses over the past 15 years,(where the business environment has been up and down)
First 6 months of trading 40% of total sales under gp% benchmark, so you know what this does.

Ok so we have got through the first 3years, business not profitable,cash flow not great, but you are still in the game.You start to get the picture that more focused sales activities are needed, so focus is on going after clients you want, not just any client, year 3 to 5 must be the period you really get a handle on more profitable business, so the 40% drops to 20% of total sales, remembering the 80/20 principle, (which I believe was first used in the 15 century) A business mentality has set in.

Year 5 onwards you still have some low margin business, that's ok if it stays below 20% of total sales every month.
Here's a final thought-

Theodore Levitt- USA marketing guru, the purpose of a business is to get customers.

Peter Drucker-USA management guru, the purpose of a business is to create and keep customers.

                             to me they are legends in the business world,

I have added the following- the purpose of a business is to create and keep profitable clients who are good payers.

So if you have low margin clients make sure they pay you quickly.
Till the next time may the Force be with you, I am your silent partner helping you work on your business.
Guy Daines

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