Business update 3

Here’s an article my colleague, Michael Coward recently penned.  I think most small businesses should find this useful and interesting.

SMBs Finally Take Data Security Seriously

Over the last decade, our world has become interconnected in ways not previously thought possible. Small companies can now easily be spread across the globe in an affordable way, and big companies can now have inter-office collaboration on a daily basis. But all the benefit that goes with this enhanced freedom relies, in a large part, on our ability to protect our networks and data.

Data loss can cost business valuable reputation and costly financial penalties. The most recent high profile data losses saw Zurich Insurance pay an enormous £2.3m fine for losing thousands of British people’s personal data including some bank details. After a year of high-visibility data breaches such as this and influence by security experts within small and medium businesses, it seems that the message is finally sinking in with small business leaders.  In a recent survey from Symantec *¹, SMB leaders agree that protecting information is their highest IT concern and priority. This is a massive increase from last year when 33% of SMBs surveyed did not even have the basic antivirus software deployed in their organisation. In the same survey, 74 percent of the decision makers polled said they were either "somewhat" or "extremely" concerned about losing electronic information. This fear appears to be well justified considering that 42 percent of these same companies admitted they had lost confidential or proprietary data in the past year which resulted in direct losses such as lost revenue or financial costs such as money or goods and not forgetting reputational damage.

A recent report by Javelin Strategy & Research*² found that a staggering 11.1 million U.S. adults were the victims of identity theft last year.  In total, U.S Consumers and businesses combined lost a massive $54 billion due to identity theft last year, up 12 percent on the 2008 report. UK businesses should take these figures seriously as since Tuesday 6 April 2010, the Information Commissioner’s Office (ICO) have gained enhanced powers to fine organisations up to £500,000 for serious breaches of the Data Protection Act. The maximum fine prior to this date was a mere £5,000.

SSLPost, the email and document encryption specialists recommend that all SMBs should review their company security policy on a regular basis and protect their IT systems, data and communication channels against threats and ensure suitable measures are in place to protect their business against serious security threats.

Data and Email Encryption

Data encryption protects your sensitive business information whilst at rest - whether it's stored on a laptop, email server, corporate network or other device such as PDA or a removable storage device.  Encryption allows you to securely access important data from the office, or any other location. If your device is lost or stolen, the information will be protected by the data encryption mechanism.

Email encryption is often overlooked by SMBs and is usually the main communication channel that a company uses on a daily basis. SSLPost believe that this is a vulnerability that is prone to allow data leakage and can have both financial and reputational consequences. All organisations should invest in a good email encryption service such as the one offered by encryption specialists SSLPost. Data contained in emails can be intercepted and then read, deleted or altered before it reaches the intended destination. The advantage of using the SSLPost service is that the sender and recipient do not need to invest in complicated and expensive software or hardware. SSLPost also offer a policy based product which allows businesses to prevent data loss and leakage by enforcing encryption on their organisation. The encryption is transparent to end users, allowing businesses to comply with industry data regulations such as FSA regulated businesses.

The encryption service allows selective encryption of emails to be implemented from a companywide policy or right down to individual user level; the service makes it simple to create and enforce effective encryption policies.

Some key benefits of the service are

ü    Enforces email encryption without disrupting day-to-day operations.

ü    Helps protect organisations from liabilities associated with privacy regulations.

ü    Encryption complexities are hidden from the end user ensuring ease of use.

ü    Monitors all messages to ensure compliance.

ü    Compatible with any SMTP compliant email messaging platform.

Viruses

A virus can inflict serious damage to your business by making documents stored on computers unusable. As more and more business is conducted via email, a virus can also make getting in contact with your suppliers and customers more difficult. This could mean delays in making purchases and taking customer orders more difficult which can cost your business some serious financial and operational issues.

·         Invest in good anti-virus Software. Ensure all computer systems are protected with up-to-date anti-virus software and other defences against malicious software attacks

Internet and Network Security

Encryption specialists SSLPost say there are number of potential threats on the internet such as hackers that will take advantage and exploit poorly protected company IT systems using harmful and often brutal practices.  Hacking is an act of exploiting the vulnerabilities of the operating system without your business knowing that this has occurred.

·         Ensure all dedicated connections to the Internet and other external networks are properly documented, authorised, and protected by firewalls, intrusion detection systems, virtual private networks (or some other form of encrypted communication) and your organisation has incident response capabilities in place.

·         Ensure all modem and wireless access point connections are authorised and properly secured.

·         Ensure all security-sensitive software patches are quickly applied to systems that are accessible to users outside of the organization.

·         Ensure the removal of unnecessary sample application software.

·         Ensure all sensitive and valuable information is properly protected from unauthorised access including Windows network file shares, desktop, Web and FTP servers.

·         Ensure all computers and network devices such as routers and switches within your business are tested for vulnerabilities.

·         Ensure your business computers are monitored for unauthorised (or illegally copied) software on a regular basis.

Managing cash flow

The second biggest area of concern that came out of the survey was how to manage cash flow.  This is particularly concerning as all of the government cuts are about to hit. 

I've put together a list of things that may be worth exploring, if you’re not doing them already.

1.    Review your credit terms – are they too lenient or are they unclear?  Consider shortening them.  Are they clearly stated on all invoices?  Do you send out a reminder statement 7 days before payment is due? Consider also sending a statement out as soon as the payment is due.  Remember, it’s worth thinking about sending these documents via secure email to keep the costs down (see point 6 below)

2.    Incentivise early payment, bulk orders or commitment over a longer time period.  For example, you could give 2.5% for paying before the due date, or 5% if they increase their order by 50%.  For a longer commitment offer, you could look at holding today’s price if they commit to regular purchases over 2 years.

3.    Have you reviewed any carrier/delivery charges?  The postal prices have increased a lot over the last few years; it may be worth checking that you are at least covering costs.  Some businesses add money to their delivery charges so that they are making money from post.  I wouldn’t necessarily advocate this but it’s worth looking at.  In addition, there are some attractive new postal services that allow you to deliver mail more cheaply.  These “last mile” postal services are worth considering if you are reviewing your costs.  Also, as point 1 above, to really reduce costs it’s worth considering sending documentation via secure email.

4.    Do you have a good system for managing your accounts?  Understanding the detail behind your outgoings and incomings is essential if you want to manage your cash flow effectively.  You could be making very good sales but your costs could have escalated without you realising.  You may  be making regular and repeat orders of office supplies but find that your cupboards are stuffed with stock that will take you months to use.  There are plenty of good software packages for small businesses.  Ask your account to recommend what they are using as this may help to reduce your costs for their services too.

5.    As point 4, it’s worth reviewing all of your costs – can you save money anywhere? It’s worth looking at costs where they have seen a sharp rise recently.  Just in the last few months we’re all aware of the increase in VAT and fuel charges.  If you have a high travel bill you may want to see if public transport is a more viable alternative for you and your business.

6.    Getting a greater visibility of your invoicing audit trail will help too.  It’s now possible to get an electronic invoicing tool linked into back office software, like Sage, that enables businesses to send invoices, statement, payslips etc. via secure email and then tracks when an document has been received, open, accepted, queried etc. (the name of the product is secure-send). If you have more visibility of whether an invoice has been received or not, then it will help avoid all those “I haven’t received it” excuses.  In addition, sending invoices by secure email will save you both postage costs and admin time.

7.    As well as offering different payment term incentives to your customers, it’s also worth seeing whether you can negotiate extended payment terms with your suppliers.  They will want to keep your business so may be prepared to extend your credit terms to help you out.  This will give you a bit of breathing space over the coming months

8.    Ensure customer satisfaction before raising invoice.  If you make sure there aren’t any outstanding issues before you send out the invoice then this should speed up payment.  At the very least it means there won’t be any reason for your customer not to pay which makes credit control easier.

9.    Send invoices and statements on the 1^st of every month to keep your debt front of mind.  As point 1, don’t forget to send reminders.

10. Start chasing for payment as soon as the invoice is due.  If you have a good, visible audit trail (as point 6) it will mean you can see when something was sent, delivered and read. You may also want to consider recorded delivery for some of your invoices, especially for large amounts. You’ll need to cover this in your billing but at least it would give you piece of mind to know that your invoice has been delivered successfully.

11. Find out when your customers issue cheques and time your billings and reminders around these dates.  You’ll need to have a good management process for this but it’s worth making the investment. Send a reminder before your customer’s cheque run (if this is monthly then a miss could cost you another 30 days)

12. Make sure you are speaking to the right person when you chase for payment.  If you don’t, then you may get passed around a business which will lead to wasted time and frustration.  Also, ask your sales people to get a purchase order when they process any orders.  This also helps confirm that a customer has genuinely ordered the goods.

13. Consider factoring companies.  They do tend to take a % of the value of your invoices but at least you know the payments are in your bank and your outgoings can be met.

14. Try and keep a tax/late payment coverage fund – easier said than done. 

Tips for Sales

Clearly, sales vary dependent on your type of business.  For some it’s face to face sales, for others it’s telesales and some SMEs get all of their business via word of mouth sales.

Below  are a few thoughts on what to think about when recruiting, managing and targeting sales people.

Recruiting:What type of sales do you do – what type of person do you need?  Things to think about are: what will you customers respond to and, indeed, do you need different sales people for different types of customers (assuming you can afford this)? For example, some like a consultative seller, whilst others prefer transactional sellers.
What do I mean by this?  Broadly we all fall into 4 main personality types: activists, reflectors, analysts and theorists.  Therefore, as purchases or sellers we relate to each other with different levels of productivity . I don’t intend to cover this in detail but I would certainly recommend some further reading...  Suffice it to say, I'm an activist, as such I will make decisions very quickly and so I want a sales person to get to the point quickly.  I'm not particularly interested in building rapour, nor am I concerned with long, detailed reflections on the products or services on offer.

      Tell me what you’re selling, what benefits it will give and how much it would cost.  For others, reflectors for example, they need plenty of information and then time to think about the offer and reflect on its relevancy to their business or themselves.  Taking all of this into account you may want to think about this before you start recruiting.  These skills can then be set as interview questions and selection criteria.  

      Preparation is key.  Make sure you have all the paperwork sorted before you get started. Consider things like: interview questions, selection criteria, job description, salary offers (see later), employment contracts.        

      What are the key skills you are looking for?  For lower price points you need to make sure that the sales person is going to be efficient, and close the sale as quickly as possible.  For higher value sales, you need to make sure that the sales person has the gravitas to relate to your customers whilst still having the appropriate closing skills.

      Interviewing: when it comes to sales, I always think it’s a good idea to start with some telescreening.  Buy a cheap mobile phone and use this as the number for inbound calls, don’t be afraid to run through some questions with the candidates on the phone (this is one of the best ways of getting a feeling for whether these people will work well with your customers), have a bit of fun with the questions (e.g. ask the candidate to think about the worst Christmas present they have received and then ask them to sell it to you over the phone – you’ll quickly get to see whether the candidate is right for you and your business or not.)

      What should you pay: A good sales person needs to have absolute clarity on what their earning potential is.  Therefore, you need to work out a. The basic, b. The commission and c. The short term incentives.

      a.    The basic - things to think about are: what is the going rate in the employment region, what are your competitors offering, how much can you afford? 

      b. The commission – like the basic – can you afford to pay above the odds, what does that look like versus your competitors?  As a benchmark you should be offering between 6 and 12% of the full product price as commission.  Later, if they want to negotiate on price, in order to close the sale, you may want to think about making this negotiation possible out of their commission margin (this stops sales people dropping the price from the start of the call – as most won’t want to lose their commission at all)

     c.    Short term incentives.  In order to keep your sales people motivated you might want to consider some incentives – e.g. for most sales made in a day or a week.  This could be a shopping voucher or a bottle of wine – whatever works best for them and you.  Again, have some fun – have a competition for the best decorated work station at Easter or Halloween.  

      Of course, not everyone is motivated by money.  Some sales people join companies with a view to being more senior or because it fits in well with their lifestyle.  Don’t forget you can recruit some excellent sales people if your prepared to be flexible: part time, home workers, school term workers.  Don’t rule these options out as you may get fantastic loyalty and return by this different form of reward and flexibility. 

      Setting targets is key.  If you set them too high then sales people quickly get disillusioned, set them too low and you’ll be paying out too much commission.  Work out what it will cost you to employ a sales person – not just their pay and incentives, but any hardware, software, telephone costs, travel costs etc. that you will then to cover.  Consider the margin of your products and then what you need to achieve to break even and make profit.  I would suggest setting short term (weekly targets) to start off with and then building these up as you learn.  There are several targets you should consider: sales (obviously), call/visit attempts per day, number of decision maker contacts (DMCs) a sales person reaches per day, level of leads in the sales pipelines, amount of talk time (telephone – 2.5 to 4 hours per day)

      An important part of the sales process is to get feedback.  Don’t forget to listen in to the calls and then ask the customers and potential customers for feedback.  In this way, you will understand not only how your sales person is doing, but also how you can improve your product or service to ensure you get the sale next time. This feedback can help you with manage your sales people and it can also help you understand many other dimensions to your business, including: whether you have the quality, availability or price of your products right. 

      A good sales person will need a good system or process for managing customers. In order to help them and make your ability to manage them easier it’s worth investing in a good customer relationship management tool. These don’t have to be expensive or complex. There are good customer management programmes widely available now – both online and offline. 

        Lots of businesses are trying to balance how to increase sales at a time when budgets are being cut. At this time, it might be a good idea to go back to your existing customers and ask them how they prefer to work going forward.  For example, you could offer a loyalty discount via your sales people – like a discount for a commitment to order over a period of time or a discount on their second or third sale (don’t forget to put a timescale on this to try and speed up the business).  If cashflow is an issue you could offer a discount if they pay up front.  

      All these offers give your sales people a chance to go back through their existing customer lists and gives them a nice reason to go back and call again.  This should make the sales person’s task easier whilst making your existing customers feel special.  At the same time, you’re going to have to ask your sales people to work twice as hard to get new business. 

      Relevancy is absolutely key here – how do you make the sales approach feel relevant and worthwhile to the customer.  Only you can answer this question but think about time of year (if you sell consumer goods – is it beginning, middle or end of month – how much money will they have for your goods and services.  If it’s a small business what will they have on their mind?  Is the key decision making preoccupied with their end of year accounts, or HMRC payroll submissions?  Is it the start of their financial year or the end of the year – i.e. do they have new budget or do they have budgets they must spend before the year end.  At the same time – how are you going to make the messages about your products cut through?  You must give your sales people the information and knowledge and timely offers to help them with this.

What are the pain points of small businesses?

Our business recently sent a survey to a broad cross section of SMEs. One of the questions asked them what the biggest issue facing their business was.

The results were really interesting, Here is a snap shot of the top 5 most pressing issues.

The most pressing issue faced by the responders was how to manage sales, particularly in a recession. This was followed by cash flow management.  In other words how to keep their businesses afloat when customers are slower to pay and suppliers are chasing more quickly for payment. Linked to cash flow was a drop in funding, clearly SMEs are struggling with loans or grants.

In the top 5 key issues was also a lack of time, small business owners are notorious for being hard workers but it appears that more are finding it hard to find enough time in the day to manage their businesses. 

Number 5 in the list was enlightening, clearly more and more UK businesses are trading in Europe so, issues relating to the stability of the Euro zone, was the next hot topic on the list.

We’re going to attempt to give advice against some of these issues, plus some others, over the next few weeks.  It would be good if other SMEs can contribute to these discussions, so that we’re all sharing ideas.

Do you agree with these issues or do you have something different to contribute?