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Back in January we offered five top tips for 2008. For the year ahead, we’d like to do something different… We’d like you to share with our readers your own top tip for 2009.
If you had to define one Top Tip – one key business priority for focus or change in 2009 – what would it be and why?
Please email us your tip and we’ll publish your comments in January’s edition of business i.
We’ve split this month’s tips into two categories: “If you really need it“, for companies struggling to boost cashflow, and “If you just want more of it“, for healthy businesses that simply want to deepen their pockets.
The following steps can boost cashflow in the short-term, but carry some form of direct or indirect cost.
Offer incentives for early payment
Incentives for early payment of invoices brings in cash more quickly, but every incentive carries a cost. How this cost-benefit equation weighs up depends largely on how quickly and frequently you need to free up the cash tied up in unpaid invoices.
Extend credit terms with suppliers
Renegotiate payment terms to boost short-term cashflow or to avoid default on payment. There is no direct cost associated with this method, but it could put undue pressure on suppliers that may also be in need of more cash. If suppliers can help it is likely that they will in order to retain a valuable customer.
Release cash from unpaid invoices
Debt factoring and invoice discounting are two distinct ways of releasing cash from unpaid invoices. Both forfeit a percentage of the total amount as a fee for the service. More info
Delay tax payments
The recent pre-budget report introduced a new “HMRC Business Payment Support Service” to allow businesses in temporary financial difficulty to pay their HMRC tax bills on a timetable they can afford. Interest will still be payable where it applies. More info
Borrow
Try to predict the need for credit early so you have time to broker the right deal. But, as a recent Economist article commented, “don’t bet on the bank… bank credit is likely to be harder to come by and will certainly be more expensive than when the financial crisis began”. Also explore government-backed measures to assist small and medium-sized enterprises facing credit constraints (More info).
Get investment
Investment options range from informal agreements with friends and family to million pound venture capital deals. In between these two extremes is scope for raising investments of any size, if your business proposition is viable and shows the potential for profit. It is not altogether advisable to raise investment finance when you are desperate, and market valuations might be lower during economic downturn (see article). Nevertheless, investment finance is often an option for viable business with high-growth and profitable potential. (See getting investment ready).
The following steps focus on longer-term measures for getting and retaining more cash to boost business health, fund growth or increase profitability.
Learn from big companies
Big companies have the knowledge and resources to devise and implement advanced processes to keep as much cash as possible and squeeze as much out of every penny spent. Companies like Google, for example, are near-obsessive and incredibly good at minimising waste in their operations and spending. The point is: the insights and best practices defined by big companies can be valuable to businesses of any size. Read case studies and seek advice from experts. Turn activities like cashflow and waste reduction into strategic priorities.
Reduce waste
One obvious way to boost cashflow is to spend less. Cutting costs, though, is not the same as cutting corners. The latter approach deteriorates business performance, and such methods are usually crude, ill-conceived steps that serve only to boost cashflow in the short term. The clever way to cut costs is to closely examine operations, processes, and all other spending (line-by-line), to identify points of waste, defined here as moments where costs are incurred which deliver no tangible customer or business value.
Spend more, more wisely
If cost-cutting focusses on areas where no customer or business value is present, it follows that spending should focus on areas where there is customer or business value to be had. It is easy to obsess over cashflow crusades, but it is equally important not to let cashflow restrictions choke business operations or marketing activities, reduce the quality of products or services, lead you to neglect customers, or stifle the development of promising new products or services. Every pound saved by cutting value-less spending is an opportunity to spend more on value-creation.
Get investment
This particular tip is in both categories because often investment is about funding growth rather than boosting cashflow. If you just want more cash, ask yourself why, and question whether your reasoning translates into a viable growth strategy. Company valuations for investment deals might be lower during downturn (see article), but if you are less desperate for cash you should be able to hold on for a suitable deal. See article on getting investment ready.
Trim inventory
Review stock levels, production schedules and sales forecasts to ensure cash is not trapped in the supply chain. But be careful not to dry up the supply chain to a point where you cannot supply demand. Correctly managing this tricky area allows you to retain more cash and spend less on products or raw materials that ultimately lose their value or go to waste.
Innovate
Look for points of simplification where change can increase efficiencies. Look for problems and use fresh thinking to devise new solutions. Innovation doesn’t have to cost much more than the time it took to devise a new idea. (Explore different ways to innovate).
Search engine optimisation (SEO) is the process of optimising a website to improve its prominence in organic (non-paid-for) search results. In doing so, web marketers can improve both the volume and quality of traffic derived from search engines.
A search engine delivers customer value by providing relevant search results based on the words a user types into its search box. The search engine determines relevance by employing complex analytical tools that evaluate a website based on numerous different factors (some of which are kept secret). In many ways, therefore, SEO is about giving search engines what they need to perform such analysis and derive relevant results. But more widely, SEO represents a growing appreciation that customer is king; that ultimately it is high-quality, relevant web content that drives consumer engagement.
Delivering customer value
In the past, some SEO approaches did not so much value ‘relevance’. So much so, that the SEM industry has defined two divergent approaches to SEO: ‘white hat’ and ‘black hat’. White hat is a best-practice, customer-minded approach, recommended by search engines and characterised as ‘good design’. Black hat represents the polar-opposite, dissuaded by search engines because it aims to deceive them into providing less relevant search results to customers. Indeed, most search engines work hard to remove black hat driven websites from their search listings.
Today, SEO is about working alongside search engines to adopt customer-minded ‘white hat’ approaches. They provide more favourable search results for customers and businesses over the long-term. And although traffic volumes might not be as high, the traffic that does reach a website should add up to a more valuable and engaged audience.
These are the principles that drive modern SEO. Practically speaking, then, the aim of SEO is to give both customers and search engines the information they are looking for. To do this, SEO must focus on two distinct areas: content, and technical design; two areas which span across both marketing and web design functions.
Web marketing
Creating high-quality, relevant web pages engages the customer and thus engages the search engine. One major search engine describes this step as “the single most important thing to do” when optimising websites. It goes on to suggest that content creators “think about the words users would type to find your pages and include those words on your site”. So in part, the challenge is a marketing one; it is about creating high-quality, relevant messages which are mindful of the ways users search and the words they search for.
Another key SEO objective is increasing the visibility of websites by establishing links to them from other sites. Many web marketers work hard to establish links to their site on other credible, relevant websites, such as online listings, directories, news or blog sites. Such activity provides a two-fold benefit: for example, listing your business on a popular local business directory could not just improve search listing performance, it could also drive referrals from the directory site itself. (Wikipedia quotes a respected search marketing blog which suggests that marketers’ “main sources of traffic are links from other websites”).
Web design
SEO is also a matter of effective web design. Search engines use technology to find and analyse websites automatically. So it is therefore important to make the structure of a website as search engine friendly as possible.
There are many different ways of doing this, most of which follow already established principles of effective, accessible web design. Simple steps, such as ensuring each page on a site is reachable from one static text link, for example, are considered part of effective navigational design. And compliance with website accessibility laws ensures that sites are more easily accessible to all, including the search engine. Another method recommended by some search engines is to create and submit an XML site index to the search engine’s database, so that it can more readily and easily navigate the site automatically. All of these steps, and more, are usually the realm of web-designers.
SEO is therefore a process which incorporates both web design and web marketing. The web designer should be responsible for technical aspects, whilst the web marketer should aim to produce consistently high-quality, relevant web content. Sometimes, companies choose to employ third-party SEO specialists – perhaps in cases where web/marketing people are not to hand – but generally speaking, a lot can be achieved by implementing some good website design and a customer-minded web marketing approach.
Cost vs. benefit
So how much time and money should be invested in SEO, and what are the expected returns? Unfortunately it is hard to tell. In competitive industries, a website must work harder to increase its search engine prominence. And even if you do rise through the search engine’s ranks, there is no guarantee you will stay there forever because search engines may change the way they index sites. It is therefore dangerous to rely solely on traffic from search engines; a business which depends on SEO for sales is a business which could falter if it falls foul of a fickle search engine.
But that picture should only dissuade if you intend to devote huge amounts of time and resource to SEO. As discussed, a lot can be achieved by taking a few simple steps. These steps not only improve search engine presence, they offer scope for improving the relevance of a website and its accessibility to customers. And in addition, these steps should be part of web design and marketing functions by default, so should not require significant additional investment. If both web designer and web marketer has the customer and the search engine in mind, their work will invariably produce effective SEO approaches.
More info – Getting the most out of search engines
In previous editions of business i we have discussed how diversity of people and knowledge facilitates the creative process, helping generate better and more well-rounded ideas. And we have talked about how collaborative innovation – the pursuit of new ideas through open relationships with outside individuals and organisations – can aid business development.
In many ways knowledge transfer partnerships (KTPs) reflect both of these things in action. They give businesses direct access to the unique and diverse knowledge and skill sets held by academic organisations, and they allow such institutions to apply their competencies into real life business contexts. In essence, knowledge transfer partnerships are the marrying of academia and business to further the ambitions of both.
KTPs are alliances between a company and individuals from an academic institution, such as a university, college or research organisation. This involves the appointment of one of more recently qualified persons (referred to as ‘associates’) to facilitate knowledge sharing over the course of a KTP programme. The partnership aims to satisfy a core strategic need of a business, and seeks innovative solutions to help that business develop and grow.
They are designed with a wide range of businesses in mind, not just companies in high-tech industries. Knowledge Transfer Partnerships, an organisation funded by the Technology Strategy Board, says that it has worked with over 3,000 organisations, “from manufacturing, to design, sustainability to marketing; any business sector can take part. Businesses of all sizes can take part too.” Examples of partnerships carried out in the past include product development, development and implementation of new marketing strategies, and the creation of “new systems and frameworks to improve efficiencies in staff and processes”. KTPs must offer mutual benefit, so partnerships are only established in cases where both business and academia stand to gain value.
Interestingly, a recent Business Link survey of local businesses found that almost half are currently planning to “break into new markets” and “devise new marketing approaches” in order to overcome the effects of economic downturn. It is exactly these kinds of specific and specialist development projects to which KTPs are well-suited.
When considering the cost of a KTP, it is important to appreciate the numerous benefits the programme offers. KTPs are part-funded by the government, for one; the SME would be expected to contribute about a third of the total project cost (the average annual cost of a KTP is around £20k). That means that on average two-thirds of the total KTP cost comes for free. Not only that, but 75 per cent of KTP associates are offered full-time permanent roles within associate companies upon completion of projects, often in senior roles. So, for minimal cost, a business can work with individuals who show such talent and potential that most of them later become senior employees.
KTPs offer diversity of knowledge. They offer fresh thinking which translates into value creation. And they offer opportunities to help implement the kind of projects that many of our readers have already identified as vital to beating economic downturn. If now is the time to develop your business, maybe now is also time to explore if KTPs are right for you.
More info
Knowledge Transfer Partnerships
KTP Case Study
“Here’s how I used a Knowledge Transfer Partnership and worked with a university”.
Coaching and Mentoring
Coaching and mentoring are about as personal as training gets. Both methods offer scope for personal and professional development. And both establish close personal relationships between trainer and trainee in order to get the best out of both. Not to mention, both offer the potential to improve not just people but businesses too.
Coaching
Relative to mentoring, coaching usually lasts for a shorter period of time. It is also more defined in scope, focussing on developing specific skills and achieving particular goals.
The CIPD points out that coaching aims to foster “the achievement of organisational objectives”, thus linking the training process closely with a business’s key priorities.
Coaching can take place internally, in cases where one employee holds specific skills and knowledge which can be imparted to another. Or external coaches – who possess expert knowledge or skills not held within an organisation – can be brought in to coach an employee.
A newly appointed managing director might be coached in the ways of leadership, to guide his personal transition into a heavily leadership-focussed role, and to help navigate the business through its period of change. An executive or manager might be trained in the skills needed to raise finance, in advance of a company’s investment raising efforts. Or a buyer might be coached in the ways of negotiation, so that he can broker better deals.
Whoever is being coached, and whatever the subject, coaching is led by business needs, but focussed on developing a person’s specific skills, knowledge and job role.
Mentoring
In contrast to coaching, mentoring is a longer term process which may span several years or more. Mentoring is less specific in scope, but the process still aims to develop a single person’s skills, thinking and performance.
The Coaching & Mentoring Network describes the traditional definition of mentoring as a process which enables an individual to “follow in the path” of a more experienced colleague. This colleague can “pass on knowledge, experience, and open doors to otherwise out-of-reach opportunities”. But it also makes the point that increasingly mentoring is a term used to describe situations where mentors are brought in from outside an organisation.
The CIPD adds to this definition by describing mentoring as “the long term passing on of support, guidance and advice”. In this sense, mentoring aims to establish a longer-term relationship than coaching where the mentor is available over the course of time to support the development of their trainee.
A newly appointed marketing graduate might be paired with a more experienced marketing director, so the latter can help the former understand how his academic knowledge fits into the real business world. An aspiring young recruit may be mentored by a manager who can add knowledge to his flair and drive. Or finally, a managing director of a young company might be mentored by an experienced leader from outside his organisation, to help the company develop and grow.
Whoever is being mentored, and for whatever reason, mentoring is led by the desire to invest time into developing people. Over time, such close relationships create new talent from old.
More info – Training providers: mentoring and coaching
Support - If you would like an Organisational needs analysis or to find out more about coaching and mentoring support please call Train to Gain on 08456 047 047. A Train to Gain Skills Broker will be able to help you find the right training and support to meet your business needs.
Preventing a knowledge-loss crisis
When employees leave an organisation they take valuable knowledge with them. Research from the US argues that, in many businesses, steps designed to capture departing knowledge do not go far enough. It’s not just about what employees know, it’s about who they know, the research suggests.
The rate at which employees leave their jobs in the UK is not disastrous, but it is significant enough to raise concerns amongst employers. CIPD research estimates an overall employee turnover rate for 2007 of 17.4 per cent in the UK, with a higher rate of 20.4 per cent in the private sector. According to the research, “over 70 per cent of employers believe employees’ departure from the organisation has a negative effect on business performance”. CIPD
Separate research from the US suggests employee turnover impacts business performance because companies are not doing enough to retain the right kind of knowledge.
The research, from MIT Sloan, asserts that many organisations could fall victim of a knowledge crisis resulting from insufficient knowledge-retention processes. The authors suggest that departing employees “leave with more than what they know; they also take with them critical knowledge about who they know. That information needs to be a part of any knowledge-retention strategy.”
MIT Sloan identifies three important types of employees that should be on a knowledge-retention strategy’s radar, and recommend two key approaches to help minimise the risks of losing valuable employee knowledge:
“In our work, we have used an approach called organizational network analysis, or ONA, also known as social network analysis… ONA can highlight the unique knowledge held by three important types of employees: “central connectors” (those who are regularly asked for help, typically because they have a high level of expertise in one or more areas), “brokers” (those who act as bridges across subgroups) and “peripheral players” (those who reside on the boundaries of a network but could still possess valuable niche expertise and outside knowledge)… Thus companies need to take various measures to (1) identify key knowledge vulnerabilities by virtue of both what a person knows and how that individual’s departure will affect a network and (2) address specific knowledge-loss issues based on the different roles that employees play in the network.” MIT Sloan
Together these two reports highlight the magnitude of the problem, and provide insights useful to the development of an effective solution. Any company that is concerned about the effects of employee turnover should read more about knowledge-retention approaches and consider how such processes might reduce the negative impact of departing staff.
More info - Importance of knowledge to a business