It seems that my ‘Beating The Credit Crunch’ ology is like marmite. People love it or hate it.
The messages are pretty straightforward. You shouldn’t even think about increasing sales until you have done the following:
- Put up your prices if you can
- Compete on everything but price
- Screw your suppliers feet to the ground
- Sort (or sack) under-performing customers, staff and suppliers
- Collect money 10 days quicker; spend it 10 days slower
There is no point getting more sales if you aren’t making money on the additional sales. Only once you have done the above (i.e. fix the financial model) should you even think about selling more.
Most people seem to ‘get’ what I am saying but there is a bunch of people who seem to miss the whole point. They describe me as callous, insensitive, cruel, mercenary, short-sighted, and selfish to use a few of the nicer words.
I will list the top few grumbles and my reply.
“It is impossible to put prices up in a recession. All your customers will go to the competition”
Answer: Only the people buying on price will leave but they tend to be the ones who are the hardest work that you would be happy to lose. We recently surveyed some 500 businesses that have put up their prices since autumn 08 – all felt that their businesses have benefited from the price increase (poor clients have left and profit per sale have gone up to outweigh any sales loss) .
“It is impossible to put prices up in my industry.”
Answer: Nonsense. Put the price increase into the contract, or do it annually, or do it based on raw material price increases, or repackage the product, or bundle products together, or do it by stealth. There is no shortage of ways to put up prices.
“You can’t go around sacking people yet expect the rest to remain loyal.”
Answer: In the first instance you should only remove staff that are not pulling their weight or delivering the expected results.
“It is dumb to expect to be able to screw suppliers feet to the ground yet not get screwed yourself”
Answer: You should be selling on everything but price and you should be confident that your customers/clients understand this. As for your suppliers, while they would prefer to keep your business, there are plenty of others who may wish to win your business with low prices.
“It is dumb to expect to be able to get paid 10 days quicker yet pay 10 days slower. It is also immoral”
Answer: Most of us collect the money (that is owed to us) much too slowly; many of our suppliers don’t seem to be too bothered about how quickly we pay them.
Without making sweeping generalistions, I seem to have wound up a brigade of people who feel that their business deserves to do well because of their good intentions. These people hope to be able to survive by being nice.
I am afraid that nice is not enough, especially in these recessionary times. Like pulling off a plaster, the best way to make the decision is to brave up to it and get on and do it. Procrastination does not help anyone.
So, take a morning out with your key business partner or colleague, take a blank piece of paper and make the tough decisions that you will implement over the next two weeks. You will be amazed at how this decisiveness will give you the energy, focus and direction that might have been lacking of late. Go for it.
23 comments:
Agree. Good posting.
You seem to be posting a lot for one day!
Can you sort the formatting as that is a bit random.
Madge
A consolation prize for you Robert. Just found this on Twitter
conscioussol: Robert Craven! My god what a fantastic speaker! Props, physicality, voice, everything!
4 days ago from txt • Reply • View Tweet
They do love you.
Madge
I know where these people are coming from. And they are wrong. Running a business is not the same as delivering a professional service. Most professionals pride themselves on the quality of the work but are lousy businesspeople. Maybe this is part of the issue being discussed in the blog with SW (marketers who can't market themselves etc).
I have had to grow up fast to run this business; it isn't all fun and laughs. Plenty of grinding to be done and plenty of making the tough decisons.
I was running what was really a family business except they weren't my blood relatives with the emphasis on the word FAMILY - no-one really got sacked or dumped. The wake up call (or Aha moment) came nearly too late. Now I run a business and it happens to be in structural engineering.
WM - Structural Engineers
Robert
As ever, there's some great stuff there - you talk a lot of sense. Even in a recession, people look for 'value' not just 'price' - there is a difference.
A number of people questioned the approach to dealing with suppliers. I think a great way to
do it is to ask this question;
"How can you 'add value' to our business?"
It's different to just asking to cut prices, and my experience shows that many suppliers come up with great stuff.
Keep up the great work
Andy
Like in most industries, our clients try to picture us as a commodity and look to buy on price. So they always seek better prices because they think that what we in our industry offer is all the same.
As an extension of Andy's "How can we add value to your business question?" we always make presentations showing core benefits, addtional benefits and exclusive benefits of working with us.
Sometimes clients complain that the menu is too big and could we cut out certain features (and the associated benefits) but on balance this little device enables us to try to start to seperate ourselves from the competition which is Robert's big bugbear.
WM - Structural Engineers
Just saw this - this is exactly what we were talking about today at the Barry event. Can you put up prices? What is holding you back? What would the impact of higher prices be? The retailler man seemed to struggle with taking things from your session but I think maybe it was a little too close to home. As you said, he needs to take one or two things and do them properly rather than literally doing every single thing you said. It was a list of choices rather than a rigid regime? Are your stats about people putting up prices correct? No-one has ever suffered after putting up their prices? No-one? Ever? Will try the train to London idea. Will put up my fees. Will keep you posted.
Morag
Robert shouldn't be getting "hate mail." If he is, it is clearly from the same over-emotional operators that need his help (aside from counseling).
Though I personally took offence at his corporate-bashing antics of previous postings.
In a heavily competitive commodity market it takes nerve to put up prices. It is hard to seperate yourself from the rest especially when everything looks identical. A Mars bar is a Mars bar wherever you buy it from.
But putting up prices will lose us the customers just buying on price and I would feel happy to see some go.
I am not sure if my customers will tolerate the price increase. The other stuff we can do. But not that one. The downside is too high. My nerves couldn't take the stress amd strain.
I may be a coward. This has got me thinking but I think we will stick with the existing price list. As you can see there is still a chink of light so I haven't ruled it out 100%.
Sorry - that's how I feel about it.
Nigel. Computer and Office Supplies
So, the heart of the argument is:
- Put up your prices
- Compete on everything but price
- Screw your suppliers
- Sort (or sack) under-performing
- Collect money quicker; spend it slower
Makes sense to me. Don't most people do this but in reverse order? Or do most people just ignore any common sense? Maybe these are your hate maillers.
Stevie
Morag
You ask:
"Are your stats about people putting up prices correct? No-one has ever suffered after putting up their prices?"
The debate is a lttle self-referencing.
Of the people we have asked, none have admitted to suffering after putting prices up. But they only put prices up because they have some sense of confidence and understand the downside and the maths.They know how much sales revenue must reduce before GP reduces.
Robert
I read the article, he has missed a few other things, like outsource, increase value of worktime by increasing the targets for staff, challnge your competition in a range of ways, improve quality indicators etc, etc., etc.,
Great business growth is achieved by creating strong relationships internally and externally, paying for value and value what you pay for. The article is full of hype without real substance but we have just achieved something that most would say is impossible in a recession 3 local SME's have become £1 million turnover companies in five months.
It isn't tough love it is in reality a hard massage, the real skill is in making it pleasant. I will start following his articles possibly even challenging the arguements thanks for pointing to it.
Mark
Mark
I don't disagree with anything you say.
My brief was 250-260 word to reply to some of the criticisms of the "Beating the Credit Crunch" book and workshops.
As such it was attempting to be succinct and would therefore miss some of the subtely and finery that a longer answer might allow.
Robert
I went to a political husting organised by the Federation of Small Business this week and my blood was boiling.
The national chairman was there and his whole focus was on complaining about the minimum wage, the increase in NI, the expansion of the big supermarkets i.e the whole focus of the FSB's argument is cost cost cost.
I wanted to interject and explain that, if the whole thrust of the FSB is to lobby in the reduction of the cost to business, then their members will not last long in business. A strategy of low cost will fail; if you reduce the cost burden on business, you reduce the cost base for everyone (including the big supermarkets!), so nobody gains a competitive advantage.
If I was involved in the FSB, I'd be focusing on how to help their members compete by adding value; here's a real example for you:
A very good friend of mine's family had a chain of butchers shops in Sheffield for many years. Thankfully they saw the changes coming and changed their channels to market strategy. They sell quality meat so realised that they needed to focus on selling to those who value quality meat...up market restaurants and wealthier individuals. They still have one shop which they use for preparing the meat (and selling over the counter), but deliver direct to restaurants and customers. They have a thriving business.
Our own business is all about exceptional customer service; it has to be as we are a product/industrial design business (and we have tens of thousands of 'fred in the shed' competitors...individuals working from home using illegally downloaded software); one of the areas we gain a competitive advantage is by helping our clients develop their sales/marketing strategy for their design (more specifically, we introduce them to other clients who we think would benefit from access to the design). There are other things we do based on the value chain, but I won't go into them here...my competitiors might be reading!
So, if you are an SME business and want to know how to survive and grow your business; do NOT join the FSB! Focus on value add because, unless you give away what you do, you will never be the cheapest!
Squeezing at both ends cannot be sustainable, sorry Robert - says KarinH http://www.thekissbusiness.co.uk/2010/04/squeezing-at-both-ends.html
I went to a political husting organised by the Federation of Small Business this week and my blood was boiling.
The national chairman was there and his whole focus was on complaining about the minimum wage, the increase in NI, the expansion of the big supermarkets i.e the whole focus of the FSB's argument is cost cost cost.
I wanted to interject and explain that, if the whole thrust of the FSB is to lobby in the reduction of the cost to business, then their members will not last long in business. A strategy of low cost will fail; if you reduce the cost burden on business, you reduce the cost base for everyone (including the big supermarkets!), so nobody gains a competitive advantage.
If I was involved in the FSB, I'd be focusing on how to help their members compete by adding value; here's a real example for you:
A very good friend of mine's family had a chain of butchers shops in Sheffield for many years. Thankfully they saw the changes coming and changed their channels to market strategy. They sell quality meat so realised that they needed to focus on selling to those who value quality meat...up market restaurants and wealthier individuals. They still have one shop which they use for preparing the meat (and selling over the counter), but deliver direct to restaurants and customers. They have a thriving business.
Our own business is all about exceptional customer service; it has to be as we are a product/industrial design business (and we have tens of thousands of 'fred in the shed' competitors...individuals working from home using illegally downloaded software); one of the areas we gain a competitive advantage is by helping our clients develop their sales/marketing strategy for their design (more specifically, we introduce them to other clients who we think would benefit from access to the design). There are other things we do based on the value chain, but I won't go into them here...my competitiors might be reading!
So, if you are an SME business and want to know how to survive and grow your business; do NOT join the FSB! Focus on value add because, unless you give away what you do, you will never be the cheapest!
In a heavily competitive commodity market it takes nerve to put up prices. It is hard to seperate yourself from the rest especially when everything looks identical. A Mars bar is a Mars bar wherever you buy it from.
But putting up prices will lose us the customers just buying on price and I would feel happy to see some go.
I am not sure if my customers will tolerate the price increase. The other stuff we can do. But not that one. The downside is too high. My nerves couldn't take the stress amd strain.
I may be a coward. This has got me thinking but I think we will stick with the existing price list. As you can see there is still a chink of light so I haven't ruled it out 100%.
Sorry - that's how I feel about it.
Nigel. Computer and Office Supplies
A consolation prize for you Robert. Just found this on Twitter
conscioussol: Robert Craven! My god what a fantastic speaker! Props, physicality, voice, everything!
4 days ago from txt • Reply • View Tweet
They do love you.
Madge
Robert
As ever, there's some great stuff there - you talk a lot of sense. Even in a recession, people look for 'value' not just 'price' - there is a difference.
A number of people questioned the approach to dealing with suppliers. I think a great way to
do it is to ask this question;
"How can you 'add value' to our business?"
It's different to just asking to cut prices, and my experience shows that many suppliers come up with great stuff.
Keep up the great work
I know where these people are coming from. And they are wrong. Running a business is not the same as delivering a professional service. Most professionals pride themselves on the quality of the work but are lousy businesspeople. Maybe this is part of the issue being discussed in the blog with SW (marketers who can't market themselves etc).
I have had to grow up fast to run this business; it isn't all fun and laughs. Plenty of grinding to be done and plenty of making the tough decisons.
I was running what was really a family business except they weren't my blood relatives with the emphasis on the word FAMILY - no-one really got sacked or dumped. The wake up call (or Aha moment) came nearly too late. Now I run a business and it happens to be in structural engineering.
WM - Structural Engineers
Here, here!
Liz Cardew
Sorry, mate , you haven't goyt a clue.
ive follow it & it was my business model /economics ive learnt anyway. you must be at the bottom as the 'cream' will rise to the top ! :)
Slightly cryptic but I think I understand what you are saying.
RC
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