Anyway, who needs an office? Can you use a mobile office?
Offices are needed in order to:
a. enable people to work on the documents delivered to or created in the office
b. house filing cabinets for files, documents and other papers
c. provide a demonstration or showcase of products for potential clients to see and touch (where it is impossible to take them to the prospective client)
d. facilitate the movement of papers and files between all the staff
e. facilitate exchange of information and ideas between members of staff
f. enable delegation of work and subsequent monitoring and motivation of staff
g. monitor the timeliness of staff attendance
h. provide a central focus for the telephone switchboard
i. provide meeting rooms for both internal and external meetings
j. house the office computer network
k. show to potential clients the commitment to providing a service to them locally
l. enable the production process for the finished goods to be supplied to the customer eg a workshop or surgery need
So the question is do we really NEED our office or can we organise to work without one?
Let's take each one in turn.
a. 'enable people to work on the documents delivered to or created in the office,' so if we could eliminate physical documents by receiving them electronically we wouldn't need a permanent office as the electronic documents (or scanned images) could be made available anywhere
b. 'house filing cabinets for files, documents and other papers,' similarly if the documents are held electronically then the actual paper documents can be archived in a safe location, which can be any good storage facility so we wouldn't need an office
c. 'provide a demonstration or showcase of products for potential clients to see and touch (where it is impossible or difficult to take them to the prospective client or to a remote location)' Yes we may need a showroom office, though it could be mobile or temporary
d. 'facilitate the movement of papers and files between all the staff,' if the documents are all held electronically then staff do not need to come into the office to work on them as they can access them wherever they are
e. 'facilitate exchange of information and ideas between members of staff,' crucially important, electronic communication may be beneficial, 'eye' contact is important, meetings are necessary and can be held wherever is convenient for the people involved, and they can be held in 'the office' or anywhere else
f. 'enable delegation of work and subsequent monitoring and motivation of staff,' monitoring is usually based on management information which can be gathered electronically, so the delegation of work, training and motivation will probably need personal contact and that can be done either in 'the office' or elsewhere
g. 'monitor the timeliness of staff attendance' may not be so important because the management role moves from being in part a time-based activity to one of measuring achievement, that is ' has the work been done, is it good quality etc' and this may not need an office
h. 'provide a central focus for the telephone switchboard,' previous technology has required telephone lines to be physical cables or wiring whereas with the latest technology telephone calls can be delivered via 'WiFi' to a computer, similarly the switchboard operator could be a virtual-assistant service based anywhere, running your telephone 'network' through thin air,
i. 'provide meeting rooms for both internal and external meetings,' these do not necessarily have to be at a permanent office
j. 'house the office computer network' this will still be the case where there is an office though the network should be much simpler because the primary network is the Internet rather than an in-house network
k. 'show to potential clients the commitment to providing a service to them locally,' this will depend on the type of services provided and how they are provided, the crucial element is to demonstrate personal and corporate commitment to the potential customer and this may be possible without having a 'local' office.
l. 'enable the production process for the finished goods to be supplied to the customer', this is closer to being a manufacturing process save that for creative activities the working environment is an 'office' style rather than a factory and therefore an 'office' is important.
In summary therefore:
a. enable people to work on the documents delivered to or created in the office - No office needed
b. house filing cabinets for files, documents and other papers - No office needed
c. provide a demonstration or showcase of products for potential clients to see and touch (where it is impossible to take them to the prospective client) - Yes office needed
d. facilitate the movement of papers and files between all the staff - No office needed
e. facilitate exchange of information and ideas between members of staff - No office needed
f. enable delegation of work and subsequent monitoring and motivation of staff - No office needed
g. monitor the timeliness of staff attendance - No office needed
h. provide a central focus for the telephone switchboard - No office needed
i. provide meeting rooms for both internal and external meetings - No office needed
j. house the office computer network - No office needed
k. show to potential clients the commitment to providing a service to them locally - Yes possibly needed
l. enable the production process for the finished goods to be supplied to the customer - Yes office needed
So the core needs for having an office are to:
provide a facility for the demonstration or showcase of products for potential clients to see and touch, where it is impossible to take them to the prospective client
show to potential clients the commitment to providing a service to them locally - Yes possibly
enable the production process for the finished goods to be supplied to the customer(Note this only affects the people directly involved in these particular functions.)
The conclusion must be that we each need to review in detail every individual element of how we run our businesses as to precisely why each function needs to be carried out in an office.
So it's back to the traditional 'Who, what, why, when, where and how", this time the first question is where. It may be possible nowadays for the business to be run without an office or with a much smaller one.
The benefits which I think may be attainable are:
- lower costs
- no commuting or less commuting for staff, leading to reduced travel costs and providing a better quality of life
- convenience of not having to go into the office all the time to get the information you need, leading to a better quality of life
- information readily to hand and thus better customer service, better cashflow control and improved productivity
- freedom to work from anywhere, anytime with a broadband link, leading to a better quality of life
What am I missing, will it work for you, what do you need, what are the downsides. Best regards, Cliff
Please choose whether you want our occasional yoolaa Newsletter or the monthly one business topic email
Wednesday, 30 January 2008
Monday, 21 January 2008
Make it easy, keeping up with interesting blogs
http://www.newsgator.com/Individuals/FeedDemon/Default.aspx
Link the blogs that you're interested in here and when one is updated you get a notification so that you can see it immediately without the nonsense of visiting each to see if anything has happened.
Cliff
Link the blogs that you're interested in here and when one is updated you get a notification so that you can see it immediately without the nonsense of visiting each to see if anything has happened.
Cliff
Wednesday, 16 January 2008
Don't be blinded by Management Speak
Don’t be blinded by Management Speak
The most successful sales motivator is FEAR.
Therefore everyone will try to put the fear of death into you. So how do they do it?
Their most popular method is to use words or acronyms you don’t understand or to use words in an unusual meaning and then to make you feel ignorant that you don’t know them. As you think you may indeed be ignorant and that you should know these words, you are fearful that something dreadful will befall you.
Let me try to debunk some of the mysticism, but let’s be fair - you do it yourself as indeed sometimes even we do. If we really used straight-forward English and explained everything absolutely to the fullest degree then possibly some clients could do the work themselves, without needing those services:
- Activity Sampling, a valid statistical method to enable you to measure work-load for a complete department just by sampling their activities. If it is done with discipline and over a sufficiently large sample the results can be trusted. It therefore saves a lot of time and effort.
- Bad Debts, the unpaid invoices where you have evidence that they are not going to get paid, a total write-off, genuine unadulterated NET LOSS
- Bank Overdraft facility and Business Plan, it would appear that normally bankers want a Business Plan because that’s what it says in their Standard Operating Procedures. The real problem is that they don’t normally understand a Business Plan unless there are lots of people doing the same thing, whereas you want to be unique.
- Broadband, a common phrase, to describe the power of the telecom supply. Most broadband adverts only specify the maximum they can deliver, what they actually deliver is something like a 640 baud modem.
- Business Activity Monitoring, is the use of computer software to trawl through your business data to monitor, as defined by you, your business activity and to report it to you by email. It may relate to ‘exception reports’, or summary performance or to Key Performance Indicators
- Business process re-engineering, (BPRE) to change how you handle things in the office, whether it’s who does it, how it’s done, what sequence is it done in, etc. the classic who, what, why, when, where and how
- Change Orders, are required, when the customer changes part of their requirements, in order to cover both a changed specification (and therefore of sign-off) and a change in the costs payable by the customer. It needs to be signed by an authorised official of the customer
- Continuity Planning, this is very real, at its worst level you’re not here to worry about it. You are deemed to have taken action to protect your business, your customers and your staff, to provide cover for anyone unable to fulfil their role in your business, whether for a short period or for a longer period. Actually it’s very useful for handling holidays (a good practice for testing the plans) and then you can cope with illnesses.
- Credit control, trying to ensure that the amount of money you have lent to people and companies, who you’re not sure will pay you, is not excessive, rather than trying to ensure that they pay you on the due date
- Credit management, to pay a third party to recover the money you didn’t want to lend in the first place
- CRM, Customer Relationship Management software, the term has the right objective but has been devalued by the poor quality of some of the original software and by the minimal design of some modern software. The objective should be to ‘enable you to deliver an exceptional service.’
- Debtor Days, the total of the outstanding invoices divided by the average daily sales last year. This should be in line with your terms of business, but don’t forget thirty days from end of month after date of the invoice is actually 45 days on average before you get to the due date. Is this what you really meant?
- Depreciation, a word designed to confuse, it’s the notional amount set-aside from the trading profit each month, to spread the cost of a capital item over the profits arising during the expected life-time of the equipment or over the expected life of the product it is used for. Unless the asset is leased I am of the opinion that the whole cost should be written off in the month it is purchased. After all the primary decision was that you’ll make extra profit as a direct result of the purchase and you do need to replace the cash you used as soon as possible
- Disaster Planning, this is real, but just frightening and it’s about any external happening that’s outside your control SLERPT, Social, Legal, Economic, Religious, Political and Technological matters plus floods, fire, Acts of God etc. You are deemed to have examined and taken action to protect your business, your customers, your staff,
- Document management software, seems to be for big organisations and relates to converting paper documents into digital documents which are then kept in digital filing cabinets. It doesn’t seem to be integral with the business process as a whole, but rather is separate from it.
- Doubtful Debts, those outstanding invoices which are months past their due date and your customer is not paying and won’t take telephone calls. You need to decide whether there is any merit in spending any money on trying to get the money in
- How to understand a Balance Sheet, it’s dead easy, please refer to my screencast
- Invoice factoring, to lend you some money against the value of your sales invoices, for three months with a limit on the overall level advanced, and sometimes without making any effort to get your money in earlier than the three months
- Organisation and Methods, very similar to BPRE, a formal review of the methods (and equipment) of organising your routines and running your business coupled with how you organise your people. Most operational change is triggered by more advanced technology becoming available. Early adopters have the opportunity to steal a march on their competitors, late adopters may have to be classified as ‘Me Too’ people now frightened of being left behind.
- Pareto Rule, 80/20 Distribution, shows that with few exceptions everything fits this standard statistical distribution. I think it is another way of looking at the bell-shaped distribution where the main bulk of the results are within ‘twice the standard deviation.’ By ‘everything’ we can be talking about IQ levels in the population, the distribution of wealth, besides looking at product categories or deciding on stock-taking policies
- Qualified Prospects, those people you meet who business and needs fit the criteria of ‘your most likely customer’ regarding type of business, their perceived needs, their probable decision time-frame, their ability to authorise the work
- Royalties, the amount paid to the people who had the original idea and charge you for using the idea, so named as they now live like royalty
- Sales Opportunity Management, the control of the process from a person being a Qualified Prospect through to becoming a customer; that is the control and motivation of sales people
- Self-billing, an organisational device to enable you to have accurate profit reports at the earliest opportunity. We still face the problem that suppliers are poor at sending in their invoices (normally we don’t complain as the delay helps us cover the funding need caused by people who don’t pay us), however if we have issued a purchase order, including the price, and if we are satisfied that the work has been completed to our standards and we have signed it off, then we know how much needs to be paid and it is correct that we should pay it. Therefore we can self-bill and pay the precise amount shown on the purchase order. We then process the ‘self-billing invoice’ as a purchase invoice, transfer the funds and send a remittance advice informing the supplier that the payment has been made for the work contracted for.
- ‘To measure profitability you need an accountant,’ well not really. You buy something for £1, add 10% and then sell it for £11. Provided you bank the £11 then you’ve made £10, that’s measuring profitability. (OK so I ignored the maths.)
- TQM, total quality management, I think it means the same as ‘fault-free’, certainly they both mean a change in the mindset of the organisation, because you need to put all the extra effort and management thinking into getting it ‘right first time’ rather than expecting problems to occur later which then they have to be sorted out. Let’s design ‘totally fault-free’ into all our systems, products and services.
- Work-in-Progress, the value of materials purchased and the manpower content for products and projects not yet invoiced to customers, whilst it may be necessary for the profit and loss account, I think you’ll get levied for Corporation Tax on it this year rather than when you’ve received payment on selling them.
The most successful sales motivator is FEAR.
Therefore everyone will try to put the fear of death into you. So how do they do it?
Their most popular method is to use words or acronyms you don’t understand or to use words in an unusual meaning and then to make you feel ignorant that you don’t know them. As you think you may indeed be ignorant and that you should know these words, you are fearful that something dreadful will befall you.
Let me try to debunk some of the mysticism, but let’s be fair - you do it yourself as indeed sometimes even we do. If we really used straight-forward English and explained everything absolutely to the fullest degree then possibly some clients could do the work themselves, without needing those services:
- Activity Sampling, a valid statistical method to enable you to measure work-load for a complete department just by sampling their activities. If it is done with discipline and over a sufficiently large sample the results can be trusted. It therefore saves a lot of time and effort.
- Bad Debts, the unpaid invoices where you have evidence that they are not going to get paid, a total write-off, genuine unadulterated NET LOSS
- Bank Overdraft facility and Business Plan, it would appear that normally bankers want a Business Plan because that’s what it says in their Standard Operating Procedures. The real problem is that they don’t normally understand a Business Plan unless there are lots of people doing the same thing, whereas you want to be unique.
- Broadband, a common phrase, to describe the power of the telecom supply. Most broadband adverts only specify the maximum they can deliver, what they actually deliver is something like a 640 baud modem.
- Business Activity Monitoring, is the use of computer software to trawl through your business data to monitor, as defined by you, your business activity and to report it to you by email. It may relate to ‘exception reports’, or summary performance or to Key Performance Indicators
- Business process re-engineering, (BPRE) to change how you handle things in the office, whether it’s who does it, how it’s done, what sequence is it done in, etc. the classic who, what, why, when, where and how
- Change Orders, are required, when the customer changes part of their requirements, in order to cover both a changed specification (and therefore of sign-off) and a change in the costs payable by the customer. It needs to be signed by an authorised official of the customer
- Continuity Planning, this is very real, at its worst level you’re not here to worry about it. You are deemed to have taken action to protect your business, your customers and your staff, to provide cover for anyone unable to fulfil their role in your business, whether for a short period or for a longer period. Actually it’s very useful for handling holidays (a good practice for testing the plans) and then you can cope with illnesses.
- Credit control, trying to ensure that the amount of money you have lent to people and companies, who you’re not sure will pay you, is not excessive, rather than trying to ensure that they pay you on the due date
- Credit management, to pay a third party to recover the money you didn’t want to lend in the first place
- CRM, Customer Relationship Management software, the term has the right objective but has been devalued by the poor quality of some of the original software and by the minimal design of some modern software. The objective should be to ‘enable you to deliver an exceptional service.’
- Debtor Days, the total of the outstanding invoices divided by the average daily sales last year. This should be in line with your terms of business, but don’t forget thirty days from end of month after date of the invoice is actually 45 days on average before you get to the due date. Is this what you really meant?
- Depreciation, a word designed to confuse, it’s the notional amount set-aside from the trading profit each month, to spread the cost of a capital item over the profits arising during the expected life-time of the equipment or over the expected life of the product it is used for. Unless the asset is leased I am of the opinion that the whole cost should be written off in the month it is purchased. After all the primary decision was that you’ll make extra profit as a direct result of the purchase and you do need to replace the cash you used as soon as possible
- Disaster Planning, this is real, but just frightening and it’s about any external happening that’s outside your control SLERPT, Social, Legal, Economic, Religious, Political and Technological matters plus floods, fire, Acts of God etc. You are deemed to have examined and taken action to protect your business, your customers, your staff,
- Document management software, seems to be for big organisations and relates to converting paper documents into digital documents which are then kept in digital filing cabinets. It doesn’t seem to be integral with the business process as a whole, but rather is separate from it.
- Doubtful Debts, those outstanding invoices which are months past their due date and your customer is not paying and won’t take telephone calls. You need to decide whether there is any merit in spending any money on trying to get the money in
- How to understand a Balance Sheet, it’s dead easy, please refer to my screencast
- Invoice factoring, to lend you some money against the value of your sales invoices, for three months with a limit on the overall level advanced, and sometimes without making any effort to get your money in earlier than the three months
- Organisation and Methods, very similar to BPRE, a formal review of the methods (and equipment) of organising your routines and running your business coupled with how you organise your people. Most operational change is triggered by more advanced technology becoming available. Early adopters have the opportunity to steal a march on their competitors, late adopters may have to be classified as ‘Me Too’ people now frightened of being left behind.
- Pareto Rule, 80/20 Distribution, shows that with few exceptions everything fits this standard statistical distribution. I think it is another way of looking at the bell-shaped distribution where the main bulk of the results are within ‘twice the standard deviation.’ By ‘everything’ we can be talking about IQ levels in the population, the distribution of wealth, besides looking at product categories or deciding on stock-taking policies
- Qualified Prospects, those people you meet who business and needs fit the criteria of ‘your most likely customer’ regarding type of business, their perceived needs, their probable decision time-frame, their ability to authorise the work
- Royalties, the amount paid to the people who had the original idea and charge you for using the idea, so named as they now live like royalty
- Sales Opportunity Management, the control of the process from a person being a Qualified Prospect through to becoming a customer; that is the control and motivation of sales people
- Self-billing, an organisational device to enable you to have accurate profit reports at the earliest opportunity. We still face the problem that suppliers are poor at sending in their invoices (normally we don’t complain as the delay helps us cover the funding need caused by people who don’t pay us), however if we have issued a purchase order, including the price, and if we are satisfied that the work has been completed to our standards and we have signed it off, then we know how much needs to be paid and it is correct that we should pay it. Therefore we can self-bill and pay the precise amount shown on the purchase order. We then process the ‘self-billing invoice’ as a purchase invoice, transfer the funds and send a remittance advice informing the supplier that the payment has been made for the work contracted for.
- ‘To measure profitability you need an accountant,’ well not really. You buy something for £1, add 10% and then sell it for £11. Provided you bank the £11 then you’ve made £10, that’s measuring profitability. (OK so I ignored the maths.)
- TQM, total quality management, I think it means the same as ‘fault-free’, certainly they both mean a change in the mindset of the organisation, because you need to put all the extra effort and management thinking into getting it ‘right first time’ rather than expecting problems to occur later which then they have to be sorted out. Let’s design ‘totally fault-free’ into all our systems, products and services.
- Work-in-Progress, the value of materials purchased and the manpower content for products and projects not yet invoiced to customers, whilst it may be necessary for the profit and loss account, I think you’ll get levied for Corporation Tax on it this year rather than when you’ve received payment on selling them.
Monday, 14 January 2008
What are 'proper books of account'? What is 'adequate'?
What are 'proper books of account'? What is 'adequate'? Discuss please.Proper Books of Account - aka book-keeping
For SMEs what constitutes proper books of account and how do you determine that they are adequate.
Firstly the legal requirement is for Limited Companies; however let's assume sole-traders, partnerships and others actually have a similar need.
The primary need is for the safeguard of creditors whether they are suppliers or indeed bankers so that they can continually assess the risk attached to the funding they provide you. However there is another need and that is for the control and calculation of Value Added Tax and Corporation tax etc as the revenue (HMRC) like to feel that they can rely on your figures.
OK so that means we probably do need adequate book-keeping and accounts. (The word 'proper' occurs in the auditors report at the foot of a set of accounts for limited companies, except that companies with a turnover of less than £5 million are exempt from having audited accounts. They are signed off by the Director(s) personally, which means you.)
So whatever we describe as 'Books of Account', they do need to be adequate.
What do 'proper books of account' entail, what does it include?
Do they need to be like the original ledgers and day books which were beautifully bound (and very heavy) books of account (which is where the term comes from) - In my opinion, NO.
Do they need to be created from specialist accounting software - In my opinion, NO.
Does the profitability need to be reviewed frequently and in a timely manner - In my opinion YES, most definitely.
Do your debtors (your unpaid sales invoices) need to be monitored continuously - In my opinion YES, most definitely.
Do your creditors, predominantly your unpaid purchase invoices, need to be monitored continuously - In my opinion, YES, most definitely.
Therefore what is adequate?
1. Certainly a sequential list of sales invoices (with copies available) or cash receipts duly summarised by week or by month; plus a separate column for the VAT content, marked paid when cleared;
2. Certainly a complete list of purchase invoices, and a file of the documents; plus a separate column for the VAT content; all marked paid when cleared
3. Certainly a complete list of your personal business expenses with receipts; plus a separate column for the VAT content.
Providing you don't attempt to be clever then these lists, printed and totalled and summarised into a Profit and Loss Account are adequate books of account.
Only spend anything where the costs are wholly allowable for tax, so rent a car, rent your office equipment, no lunches out, no presents for valued clients unless you're doing it out of your own money.
Don't buy anything unless it is for a particular job or project. In other words don't buy anything for stock, if you do then you may need software like Sage or Access Accounts. Otherwise don't waste your time trying to grapple with anybody's software. OK OK if you want some help adding it up and making the lists look smart then use MS EXCEL or other spreadsheet.
I don't think you need anything more complex. Mind you having an employee moves your needs up the complexity ladder and certainly well worth having the payroll done by a payroll bureau.
Other views, please.Cliff
For SMEs what constitutes proper books of account and how do you determine that they are adequate.
Firstly the legal requirement is for Limited Companies; however let's assume sole-traders, partnerships and others actually have a similar need.
The primary need is for the safeguard of creditors whether they are suppliers or indeed bankers so that they can continually assess the risk attached to the funding they provide you. However there is another need and that is for the control and calculation of Value Added Tax and Corporation tax etc as the revenue (HMRC) like to feel that they can rely on your figures.
OK so that means we probably do need adequate book-keeping and accounts. (The word 'proper' occurs in the auditors report at the foot of a set of accounts for limited companies, except that companies with a turnover of less than £5 million are exempt from having audited accounts. They are signed off by the Director(s) personally, which means you.)
So whatever we describe as 'Books of Account', they do need to be adequate.
What do 'proper books of account' entail, what does it include?
Do they need to be like the original ledgers and day books which were beautifully bound (and very heavy) books of account (which is where the term comes from) - In my opinion, NO.
Do they need to be created from specialist accounting software - In my opinion, NO.
Does the profitability need to be reviewed frequently and in a timely manner - In my opinion YES, most definitely.
Do your debtors (your unpaid sales invoices) need to be monitored continuously - In my opinion YES, most definitely.
Do your creditors, predominantly your unpaid purchase invoices, need to be monitored continuously - In my opinion, YES, most definitely.
Therefore what is adequate?
1. Certainly a sequential list of sales invoices (with copies available) or cash receipts duly summarised by week or by month; plus a separate column for the VAT content, marked paid when cleared;
2. Certainly a complete list of purchase invoices, and a file of the documents; plus a separate column for the VAT content; all marked paid when cleared
3. Certainly a complete list of your personal business expenses with receipts; plus a separate column for the VAT content.
Providing you don't attempt to be clever then these lists, printed and totalled and summarised into a Profit and Loss Account are adequate books of account.
Only spend anything where the costs are wholly allowable for tax, so rent a car, rent your office equipment, no lunches out, no presents for valued clients unless you're doing it out of your own money.
Don't buy anything unless it is for a particular job or project. In other words don't buy anything for stock, if you do then you may need software like Sage or Access Accounts. Otherwise don't waste your time trying to grapple with anybody's software. OK OK if you want some help adding it up and making the lists look smart then use MS EXCEL or other spreadsheet.
I don't think you need anything more complex. Mind you having an employee moves your needs up the complexity ladder and certainly well worth having the payroll done by a payroll bureau.
Other views, please.Cliff
Thursday, 10 January 2008
Pareto Rule, 80-20 distribution and what it can mean for you
Pareto Rule, the 80 / 20 distribution.
I love this one because it eliminates half the work. Let me give you some examples:…. But first let’s try a definition or two:
In 1893 Pareto was appointed as a lecturer in economics at the University of Lausanne in Switzerland. In 1906 he made the famous observation that twenty per cent of the population owned eighty per cent of the property in Italy, later generalised by Joseph M. Juran and others into the so-called Pareto principle (also termed the 80-20 rule) and generalised further to the concept of a Pareto distribution.
Indeed I think if he’d delved deeper or presented the information in a different way he would have probably ruled that 5% of the population owned 40% of the land or 10% of the population owned 60%.
For me, I think it’s similar to the standard bell curve, we’re looking for the results outside twice the standard deviation. In our case we’re looking at the top end, whereas at the bottom end none of the population ‘owns any land.’
One of the examples I spotted on Google relates to 80% of all the work on your computer relating to only 20% of the files!! You really can use it anywhere!
So back to my examples
a. Purchase invoices
In one company the Purchase Ledger team were hugely over worked and suppliers weren’t getting paid, so the level of phone calls demanding money rocketed, so the team were even more over-worked.
To see if we could reduce this problem I looked at the value of the purchase invoices being processed and found that 90% of the invoice accounted for just 10% of the value – which meant that they accounted for 90% of the over-working. They were all under £300 (pdv*) in value.
Incidentally the suppliers were pretty unhappy and the engineering managers were suffering because none of the suppliers wanted to supply them!
There were about ten engineering managers, so I organised them their own individual bank accounts and their own cheque books (all printed ‘amount not to exceed £300’.) They were delighted as were their suppliers and as was the purchase ledger team, the only ones upset were the central purchasing department who suddenly faced a work-load reduction of 90%. Oops!
b. Sales Invoices - Design activity
In a printing and packing company, we’d been taken over, had moved into huge new premises and had purchased two beautiful, huge and powerful four-colour printing machines. So the need was to get sales orders to use this capacity.
We needed to change the product mix and to free up the design team so that they could work to get these larger contracts.
A quick check of the sales invoices showed that 80% of the invoices accounted for only 20% of the sales value and were each less than £3,000 (pdv). We decided to risk losing 20% of our turnover by doubling the price of these jobs.
What we were surprised and delighted about was that half the customers accepted the new prices. This meant that that half paid twice as much and so we did not lose any of our sales turnover.
40% of our design capacity became available to win the new contracts.
c. product lines
This example is actually the other way round. At the popular end of the fashion industry, the company was having trouble with expanding too fast and it was obvious that the people and premises were going to be too few and too small within a year.
One of the problems was in the layout of the stock in the warehouse and the ‘picking and packing’ of customers orders. I did the Pareto analysis work and found that every product had virtually the same level of demand (What a compliment to our designer.) This even spread of demand meant I could arrange the product lines in a logical order for ‘picking’ without having to work out any complex algorithms. Phew!
We were able to collect the information from all the sales outlets and with a weekly computer bureau run, process all the sales orders so that on Friday the lorries were loaded for the Scottish and Cornwall runs (leaving on Mondays) and shorter distance ones were loaded later.
The ‘Picking and Packing’ was simplified and errors reduced, the warehouse staff were equipped with trolleys and because orders were picked in the most appropriate sequence we had more warehouse space available.
Even with doubling sales every year for seven years the original premises were able to handle the extra through-put. The directors and shareholders loved it.
The final benefit was that the sales teams also loved it because there was an immediate consistent pattern of when they could expect their next delivery and ….. therefore when they received their commission. Even the customers loved it because they could confidently rely on the forecast delivery times.
d. customers
Every company needs to rank its customers. It’s a simple process just list them off in MS EXCEL showing the sales value for the last year and sort the data by value into descending order.
Broadly chop the list into three segments. The top segment will broadly be your top 20% accounting for 80% of the sales, etc. The bottom 80% segment should be chopped into two on some almost arbitrary basis.
Now develop different strategies for each of the three segments, ‘A’, ‘B’, and ‘C’.
For example:
‘A’ customers,
fiercely defend these customers, love them, they are very expensive to replace, get to know everyone in their team as your key man might move, find out what they want your product or service to do in the future, ask them how you could improve your service or product, ask them what niggles they have (at all levels in their company). What other stratagems can you find? We could give you a report at the start of every month the ‘A’ customers who hadn’t received a visit during the previous month. Think laterally, look sideways, what about you organise a five–a-side football match with them – for charity (and then do a joint press-release)
‘B’ customers,
some of these need to be your next ‘A’ customers, what other products and services can you supply them, What stratagems can you devise to help your client?
‘C’ customers,
do you really want them, what else can you sell them, can you put up your prices, they need to become ‘B’s or be disposed of. But wait …could you find another route to market for them? If you could take out the selling costs and automate the sales process then you may have created a new division.
New customers have a very high cost of acquisition. For years Amazon were running at $75 per new customer and that was just for books with a very low margin. IBM used to budget $500,000 (pdv) for getting a major contract.
e. Works Orders
Works Orders are the internal orders given to sections or departments for the work to be done prior to them being sold.
This instance is about an engineering company who made hand tools. In engineering there used to be a ‘rule of thumb’ to allow one week for every operation in the manufacturing process and some of their products had seventeen processes.
The production team had previously noticed that works orders were taking longer to get through the factory so they had put more works orders into the system. When I arrived there were enough works orders on the factory floor to cover five years manufacture!
So that’s twenty times the raw materials, twenty times the number of tote trays and pallets, twenty times the difficulty of finding the right one to work on. The paths were blocked, the factory floor was filthy because it couldn’t be swept or cleaned. The inventory was huge.
Pareto Distribution analysis of the previous year’s sales and of the current year’s sales orders. (There is a fairly common trap of basing forecasts on actual sales (because it’s easy) rather than on sales orders that is on the actual demand. The key difference arises in that you can’t sell something because you don’t have it… and therefore it has not been included in the sales figures.)
First job was to scrutinise the current works orders and to schedule them by forecast demand. The rest were all put into an area, which became known as ‘the cemetery’, as they were not going to be needed for upto five years.
There was a Board battle of how to select the most important products, the sales director wanted to choose by looking after his favourite customers, the rest of the Board wanted the selection based on Gross Margin. No chance for ‘C’ products based on their Gross Profit so none got made for quite a time.
The Sales Director was actually delighted because the output soared as the factory was tidy, clean and the employees could see that the management team knew what they were doing.
With the increased output the sales figures also soared and more of his favourite customers were delighted with the level of deliveries.
The Board were delighted with the hugely increased Gross Margin.
f. The domestic appliance engineers
With Pareto you should have a reasonably-sized population, though as we are looking at all the members of the population we do have a statistically valid number. With the engineers we had over a thousand of them.
We identified key features of their work every week eg sales value generated, ratio of re-work and call-backs, cost of materials used, number of calls completed, miles driven and created an algorithm to give us one number to represent successful effort.
Then we did a Pareto analysis to find out who were the top performers so that we could work out what they did and therefore how to motivate and train others to their standards.
In doing this we also found the people at the other end of the scale! When they were asked to come in so that we could discuss the situation, they all resigned!
……. But that also meant that there was a new list of people at that end of the scale.
I love this one because it eliminates half the work. Let me give you some examples:…. But first let’s try a definition or two:
In 1893 Pareto was appointed as a lecturer in economics at the University of Lausanne in Switzerland. In 1906 he made the famous observation that twenty per cent of the population owned eighty per cent of the property in Italy, later generalised by Joseph M. Juran and others into the so-called Pareto principle (also termed the 80-20 rule) and generalised further to the concept of a Pareto distribution.
Indeed I think if he’d delved deeper or presented the information in a different way he would have probably ruled that 5% of the population owned 40% of the land or 10% of the population owned 60%.
For me, I think it’s similar to the standard bell curve, we’re looking for the results outside twice the standard deviation. In our case we’re looking at the top end, whereas at the bottom end none of the population ‘owns any land.’
One of the examples I spotted on Google relates to 80% of all the work on your computer relating to only 20% of the files!! You really can use it anywhere!
So back to my examples
a. Purchase invoices
In one company the Purchase Ledger team were hugely over worked and suppliers weren’t getting paid, so the level of phone calls demanding money rocketed, so the team were even more over-worked.
To see if we could reduce this problem I looked at the value of the purchase invoices being processed and found that 90% of the invoice accounted for just 10% of the value – which meant that they accounted for 90% of the over-working. They were all under £300 (pdv*) in value.
Incidentally the suppliers were pretty unhappy and the engineering managers were suffering because none of the suppliers wanted to supply them!
There were about ten engineering managers, so I organised them their own individual bank accounts and their own cheque books (all printed ‘amount not to exceed £300’.) They were delighted as were their suppliers and as was the purchase ledger team, the only ones upset were the central purchasing department who suddenly faced a work-load reduction of 90%. Oops!
b. Sales Invoices - Design activity
In a printing and packing company, we’d been taken over, had moved into huge new premises and had purchased two beautiful, huge and powerful four-colour printing machines. So the need was to get sales orders to use this capacity.
We needed to change the product mix and to free up the design team so that they could work to get these larger contracts.
A quick check of the sales invoices showed that 80% of the invoices accounted for only 20% of the sales value and were each less than £3,000 (pdv). We decided to risk losing 20% of our turnover by doubling the price of these jobs.
What we were surprised and delighted about was that half the customers accepted the new prices. This meant that that half paid twice as much and so we did not lose any of our sales turnover.
40% of our design capacity became available to win the new contracts.
c. product lines
This example is actually the other way round. At the popular end of the fashion industry, the company was having trouble with expanding too fast and it was obvious that the people and premises were going to be too few and too small within a year.
One of the problems was in the layout of the stock in the warehouse and the ‘picking and packing’ of customers orders. I did the Pareto analysis work and found that every product had virtually the same level of demand (What a compliment to our designer.) This even spread of demand meant I could arrange the product lines in a logical order for ‘picking’ without having to work out any complex algorithms. Phew!
We were able to collect the information from all the sales outlets and with a weekly computer bureau run, process all the sales orders so that on Friday the lorries were loaded for the Scottish and Cornwall runs (leaving on Mondays) and shorter distance ones were loaded later.
The ‘Picking and Packing’ was simplified and errors reduced, the warehouse staff were equipped with trolleys and because orders were picked in the most appropriate sequence we had more warehouse space available.
Even with doubling sales every year for seven years the original premises were able to handle the extra through-put. The directors and shareholders loved it.
The final benefit was that the sales teams also loved it because there was an immediate consistent pattern of when they could expect their next delivery and ….. therefore when they received their commission. Even the customers loved it because they could confidently rely on the forecast delivery times.
d. customers
Every company needs to rank its customers. It’s a simple process just list them off in MS EXCEL showing the sales value for the last year and sort the data by value into descending order.
Broadly chop the list into three segments. The top segment will broadly be your top 20% accounting for 80% of the sales, etc. The bottom 80% segment should be chopped into two on some almost arbitrary basis.
Now develop different strategies for each of the three segments, ‘A’, ‘B’, and ‘C’.
For example:
‘A’ customers,
fiercely defend these customers, love them, they are very expensive to replace, get to know everyone in their team as your key man might move, find out what they want your product or service to do in the future, ask them how you could improve your service or product, ask them what niggles they have (at all levels in their company). What other stratagems can you find? We could give you a report at the start of every month the ‘A’ customers who hadn’t received a visit during the previous month. Think laterally, look sideways, what about you organise a five–a-side football match with them – for charity (and then do a joint press-release)
‘B’ customers,
some of these need to be your next ‘A’ customers, what other products and services can you supply them, What stratagems can you devise to help your client?
‘C’ customers,
do you really want them, what else can you sell them, can you put up your prices, they need to become ‘B’s or be disposed of. But wait …could you find another route to market for them? If you could take out the selling costs and automate the sales process then you may have created a new division.
New customers have a very high cost of acquisition. For years Amazon were running at $75 per new customer and that was just for books with a very low margin. IBM used to budget $500,000 (pdv) for getting a major contract.
e. Works Orders
Works Orders are the internal orders given to sections or departments for the work to be done prior to them being sold.
This instance is about an engineering company who made hand tools. In engineering there used to be a ‘rule of thumb’ to allow one week for every operation in the manufacturing process and some of their products had seventeen processes.
The production team had previously noticed that works orders were taking longer to get through the factory so they had put more works orders into the system. When I arrived there were enough works orders on the factory floor to cover five years manufacture!
So that’s twenty times the raw materials, twenty times the number of tote trays and pallets, twenty times the difficulty of finding the right one to work on. The paths were blocked, the factory floor was filthy because it couldn’t be swept or cleaned. The inventory was huge.
Pareto Distribution analysis of the previous year’s sales and of the current year’s sales orders. (There is a fairly common trap of basing forecasts on actual sales (because it’s easy) rather than on sales orders that is on the actual demand. The key difference arises in that you can’t sell something because you don’t have it… and therefore it has not been included in the sales figures.)
First job was to scrutinise the current works orders and to schedule them by forecast demand. The rest were all put into an area, which became known as ‘the cemetery’, as they were not going to be needed for upto five years.
There was a Board battle of how to select the most important products, the sales director wanted to choose by looking after his favourite customers, the rest of the Board wanted the selection based on Gross Margin. No chance for ‘C’ products based on their Gross Profit so none got made for quite a time.
The Sales Director was actually delighted because the output soared as the factory was tidy, clean and the employees could see that the management team knew what they were doing.
With the increased output the sales figures also soared and more of his favourite customers were delighted with the level of deliveries.
The Board were delighted with the hugely increased Gross Margin.
f. The domestic appliance engineers
With Pareto you should have a reasonably-sized population, though as we are looking at all the members of the population we do have a statistically valid number. With the engineers we had over a thousand of them.
We identified key features of their work every week eg sales value generated, ratio of re-work and call-backs, cost of materials used, number of calls completed, miles driven and created an algorithm to give us one number to represent successful effort.
Then we did a Pareto analysis to find out who were the top performers so that we could work out what they did and therefore how to motivate and train others to their standards.
In doing this we also found the people at the other end of the scale! When they were asked to come in so that we could discuss the situation, they all resigned!
……. But that also meant that there was a new list of people at that end of the scale.
Yoolaa, the dictionary definition
"In the 2015 edition of the Oxford English dictionary the word Yoolaa has been recognised for its popular use."
Yoolaa. a, n & v, a way of organising your work. First used 2006, prop to the Yoolaa company. colloq. We are a Yoolaa business: one where the team work together as a formal business unit but do not use a 'bricks and mortar' office, working together using an integrated telephone system and an integrated business management system, both of which work on any laptop or PC, so the team members work anywhere, sharing all the documents and records. Also: Are you having a Yoolaaday? This is a day when you work wherever you like but without going into the office; are you having a Yoolaa Holiday? This is a holiday when you spend thirty minutes in the morning just to check your reports and see that everything is going well; Yesterday I yoolaad. Yesterday I worked from home or the beach or wherever. I Yoolaa; you yoolaa; he yoolaas; they yoolaa; we all yoolaa. Yoolaa was originally the acronym for Your office online anywhere anytime.
With our sincere apologies to the OED."(Imitation is the sincerest form of compliment)
Yoolaa. a, n & v, a way of organising your work. First used 2006, prop to the Yoolaa company. colloq. We are a Yoolaa business: one where the team work together as a formal business unit but do not use a 'bricks and mortar' office, working together using an integrated telephone system and an integrated business management system, both of which work on any laptop or PC, so the team members work anywhere, sharing all the documents and records. Also: Are you having a Yoolaaday? This is a day when you work wherever you like but without going into the office; are you having a Yoolaa Holiday? This is a holiday when you spend thirty minutes in the morning just to check your reports and see that everything is going well; Yesterday I yoolaad. Yesterday I worked from home or the beach or wherever. I Yoolaa; you yoolaa; he yoolaas; they yoolaa; we all yoolaa. Yoolaa was originally the acronym for Your office online anywhere anytime.
With our sincere apologies to the OED."(Imitation is the sincerest form of compliment)
Monday, 7 January 2008
Selling Successfully
Selling Successfully
By Cliff Jenkins
The secret behind every successful salesman is having:
- the right product
- with the right marketing collateral
- in the right market
- at the right price
- at the right time
- whilst needing to earn lots of money
- and then working very hard
I’ve managed it once, such that everyone in the team all made lots of money.
So if you want to earn lots of money (preferably you have no choice, you really need lots of money, and as soon as possible) then:
- analyse your best skill set
- find the companies who want to sell to people who have that skill set
- check out their products / services and their prices
- review their marketing collateral to see if it is telling the story you want to tell, and
- get yourself a sales job with them
Now let’s turn this round and look at it from your company’s point of view.
You’re about to recruit a person to get you sales, lots of sales at good prices, what have you got available to offer these people?
Do you have a straight-forward case for them to put forward?
Is the product stable and useful, does it work?
Is there a clearly defined market need?
Have you got the pricing right?
Are the benefits and costs reasonably easy to explain, and what are the outcomes for your customers?
Do you have good client user stories and testimonials?
Is there a smooth flow throughout the progress of the sales opportunity?
Is it all presented smartly?
How are you getting your message across? How do you expect them to get the message across? Is it via web sites, exhibitions, mailshots, door to door delivery, telemarketing, cold calling?
Do you have a short clear message to get attention and to get your sales person the first crucial meeting? Have you defined who you are selling to, because you will need people who can speak their ‘language’?
You will need a salary, commission and bonus structure. You will also need Sales Opportunity Management software.
Now all you need to do is to define the criteria of performance, and find people with the knowledge of your market, who need to earn lots of money.
In my experience you will never find a ‘good salesman’ as the best sales people are already earning so much money you could never tempt them to join you, except possibly with the offer of equity participation in your company. For the rest, well you don’t really want to recruit second-best, do you?
All that’s left is to:
- find them and train them, just how easy it is to do
- drive them forward and help them, bring in professionals to help you,
- help them at every stage of the way (what do you have to do to make them each successful)
- provide more training
- celebrate success frequently, we did it formally every month
- present prizes (Champagne and Waterford Glassware from Harrods)
- train them some more
We went from a team of six people doing sales in total for about £500k (pdv) per year to £2million (pdv) per year in the next year to £6million (pdv) in the following year.
The ‘rookie’ salesman had recognised that the benefits were enormous for our clients and we just needed to show how easy they were to achieve. The outcome was to be ‘top salesman’ within three months and to be appointed Sales Manager within nine months.
BY THE WAY I noticed that if you are lumbered with admin stuff which takes you twenty hours per week (as it did) then your selling time is only twenty hours per week.
I also noticed that if you start work two hours earlier every day and finish work two hours later every day you can double your selling time.
If you would have been a poor salesperson you’ll be an average salesperson just by doing twice as much work. Similarly if you would have been average then you’ll be one of the top players. Easy isn’t it!
If you then prepared your proposals at home then you saved another three hours every time.
How did it all stop? That’s easy as it’s standard with an awful lot of silly companies. The boss couldn’t see just how much the company (and he) was making, he only saw how much the sales team were making, so he changed the remuneration structure (the one which hepersonally had created and which he’d been using for several years) and surprise surprise he lost his whole sales team. The following year the sales were significantly less than even £1million (pdv) although the sales pipelines had already been built.
The best results were in seeing these sales people blossom, seeing them recover from the situations they had seen themselves in, seeing them believe in themselves again and seeing them wearing new suits, new shirts and new shoes. Successful people.
They all went on to succeed even more.
By Cliff Jenkins
The secret behind every successful salesman is having:
- the right product
- with the right marketing collateral
- in the right market
- at the right price
- at the right time
- whilst needing to earn lots of money
- and then working very hard
I’ve managed it once, such that everyone in the team all made lots of money.
So if you want to earn lots of money (preferably you have no choice, you really need lots of money, and as soon as possible) then:
- analyse your best skill set
- find the companies who want to sell to people who have that skill set
- check out their products / services and their prices
- review their marketing collateral to see if it is telling the story you want to tell, and
- get yourself a sales job with them
Now let’s turn this round and look at it from your company’s point of view.
You’re about to recruit a person to get you sales, lots of sales at good prices, what have you got available to offer these people?
Do you have a straight-forward case for them to put forward?
Is the product stable and useful, does it work?
Is there a clearly defined market need?
Have you got the pricing right?
Are the benefits and costs reasonably easy to explain, and what are the outcomes for your customers?
Do you have good client user stories and testimonials?
Is there a smooth flow throughout the progress of the sales opportunity?
Is it all presented smartly?
How are you getting your message across? How do you expect them to get the message across? Is it via web sites, exhibitions, mailshots, door to door delivery, telemarketing, cold calling?
Do you have a short clear message to get attention and to get your sales person the first crucial meeting? Have you defined who you are selling to, because you will need people who can speak their ‘language’?
You will need a salary, commission and bonus structure. You will also need Sales Opportunity Management software.
Now all you need to do is to define the criteria of performance, and find people with the knowledge of your market, who need to earn lots of money.
In my experience you will never find a ‘good salesman’ as the best sales people are already earning so much money you could never tempt them to join you, except possibly with the offer of equity participation in your company. For the rest, well you don’t really want to recruit second-best, do you?
All that’s left is to:
- find them and train them, just how easy it is to do
- drive them forward and help them, bring in professionals to help you,
- help them at every stage of the way (what do you have to do to make them each successful)
- provide more training
- celebrate success frequently, we did it formally every month
- present prizes (Champagne and Waterford Glassware from Harrods)
- train them some more
We went from a team of six people doing sales in total for about £500k (pdv) per year to £2million (pdv) per year in the next year to £6million (pdv) in the following year.
The ‘rookie’ salesman had recognised that the benefits were enormous for our clients and we just needed to show how easy they were to achieve. The outcome was to be ‘top salesman’ within three months and to be appointed Sales Manager within nine months.
BY THE WAY I noticed that if you are lumbered with admin stuff which takes you twenty hours per week (as it did) then your selling time is only twenty hours per week.
I also noticed that if you start work two hours earlier every day and finish work two hours later every day you can double your selling time.
If you would have been a poor salesperson you’ll be an average salesperson just by doing twice as much work. Similarly if you would have been average then you’ll be one of the top players. Easy isn’t it!
If you then prepared your proposals at home then you saved another three hours every time.
How did it all stop? That’s easy as it’s standard with an awful lot of silly companies. The boss couldn’t see just how much the company (and he) was making, he only saw how much the sales team were making, so he changed the remuneration structure (the one which hepersonally had created and which he’d been using for several years) and surprise surprise he lost his whole sales team. The following year the sales were significantly less than even £1million (pdv) although the sales pipelines had already been built.
The best results were in seeing these sales people blossom, seeing them recover from the situations they had seen themselves in, seeing them believe in themselves again and seeing them wearing new suits, new shirts and new shoes. Successful people.
They all went on to succeed even more.
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