Like many company leaders, due to government lock-downs, I’ve been forced into a change of scenery. Over the next few weeks, I’ll share some ideas and experiences from my background in business. We’re all in this together, I hope my ideas are useful to you in some way.
“Predicting rain doesn’t count, building the ark does.”
– Warren Buffett
Yep, business is unpredictable. Who knew?
In 20 years of business, I’ve learned that unpredictability is well, almost predictable. You just don’t know the ‘what’ and ‘when’…
There are a few fundamentals that I have learned. Not all of these can be applied to all businesses, but for me, they have helped me build secure and resilient businesses.
Build and keep a good team. Keeping a team for the long term and supporting them through ups and downs gives a strong base of knowledge and experience in the company. You can leverage that in good times and bad.
Keep Admin systems slim. Admin bugs me… it seldom adds any tangible value to customers. It’s just an internal cost, so I keep it as small as possible. At Comet, we have almost zero human input into administration. Our office is 100% paperless. We never manually send invoices, payments are automatically reconciled, income and payroll-tax are calculated and paid automatically. Accounting is cloud-based and linked to our accountant’s office. If our office burnt down, and we never returned, it would barely be an inconvenience.
Build recurring revenue. I love recurring revenue businesses. Look for ways you can add value to your customers for a “small monthly fee”. Licensing, service contracts, support agreements, reviews, renewals – anything that makes their life easier, and smooths your revenue. Create a system and automate the billing, it’s lifeline in difficult times.
Work on relationships, in good times and bad. Relationships are like bank accounts; you make deposits and withdrawals. Make sure you’re doing lots of depositing in the good times, you might need to make an unexpected withdrawal when trouble hits.
Sell before you buy. If you are a stock-holding business, talk to your suppliers about just-in-time stock management, deferred payments, sale-or-return or other arrangements that help you sell product before you have to pay for it.
Consider pre-payments. My favorite coffee shop has a discounted pre-pay card that I can charge up with coffees in advance. It’s good for them and for me! We do a similar thing at Comet. Customers pre-pay and we give them extra free credits. This gives them total control of how much they spend and when, so they are in control of their own cash-flow.
Chase the little fish. Salespeople expend a lot of time chasing the biggest customers. Don’t get too hooked on those “whales”. They will lever your pricing down, your competitors will constantly be knocking on their door and they contribute a disproportionate amount of revenue compared to profit. A broader range of smaller customers will spread your risk, be more loyal and often result in more profit.
Next time, I’m going to talk about avoiding the “Entrepreneur Trap”
Kia mau, kia ū, otirā, kia haumaru
(Hold fast, stay strong, furthermore be safe).
Director, Comet Backup
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