GETTING BUSINESS FUNDAMENTALS RIGHT

GETTING BUSINESS FUNDAMENTALS RIGHT

Many small and medium accounting practices (SMPs), in their efforts to establish themselves in a crowded marketplace, cultivate an air of service excellence and client focus. While clients no doubt appreciate the personal touch, SMP owners must keep in mind that being competitive requires getting business fundamentals right. In other words, SMPs will only grow when owners understand that practices are small businesses – with all the challenges and possibilities that this entails.

Professional vs. entrepreneur

The necessary shift in thinking in terms of viewing practices as ‘businesses’ can be traumatic. Having studied for years, paid their dues as articled clerks, and possibly having worked for several years at an established firm, the qualified professional who sets out to start a business – I use the word deliberately — is often seen as the antithesis of the popular concept of an entrepreneur: the hands-on, risk-taking, fast-talking salesman with boundless energy and resilience. This image of the entrepreneur may not always be accurate, but specialist professionals need develop a pragmatic understanding of entrepreneurship as the art and science of small business growth.

Fundamentals of entrepreneurship

The business fundamentals I refer to are the tools that entrepreneurs use to assess the risks inherent in a particular enterprise, and the techniques used to mitigate these risks and promote growth. These tools and techniques are applicable across disciplines and industries. To grow your business, whether you are offering a professional service as an SMP or are, for example, selling fresh produce, you need to approach these fundamentals as an entrepreneur. ln this article l briefly examine five questions on the entrepreneurial approach:

1. What are you selling?

Understanding what it is that you are actually selling is the first step in ensuring that your SMP can take flight. Don’t try offering all related services to all clients. Rethinking your service as a product can unlock various ways in which your product can be repackaged to play to your strengths. Productising your service is central to differentiation.

2. Who are you selling it to?

Once you have redefined your service as a product, or even a line of products, you need to identify and analyse your target market. What do they need? What do they expect? When you undertake your market research, you must be sure that you are interpreting the data correctly. Your research must be targeted at the right people, and it must ask the right questions. An entrepreneur should always distinguish between enthusiasm for an idea and potential demand for a product.

3. How much will you charge for it?

A point that bears much repeating is that small businesses are, for the most part, unable to compete on price. The truth is that when small businesses try to compete on price, they almost inevitably fail to cover their overheads. This again serves as a powerful driver for differentiation and specialisation – a specialised service commands a much higher price than a generalised one.

4. Will you make a profit?

While l would not presume to explain how to calculate a business’s profit margin to the readers of this journal, my experience with assisting thousands of small business owners through the most difficult stages of their entrepreneurial journeys has convinced me of one thing in this regard: reasonable additional margins ought to be factored into a small business’s costing to ensure that their financial models are robust. To counter the inevitable protests of expense being prohibitive to clients, l refer readers to Chapter 2 of my book (What to Do When You Want to Give Up), for a pragmatic justification of what l call the Complexity margin.

5. What makes you different?

All SMPs sell essentially the same product. When growing your business in a crowded marketplace by competing on price is not truly feasible, how you differentiate yourself from competitors is vital. In a service industry, such as accounting, finding a specialist niche is the key to becoming less price-sensitive – you will be able to charge more for your services without drastically impacting on the demand for those services. The difficulty lies in identifying an appropriate area for specialisation, and then converting that specialisation into a product that can be sold.

The real challenge: finding new customers

If you have a differentiated product with a real target market, and have costed your product to enable you to make a real profit, then your business has an economic right to exist. But existence is not the same thing as growth.

Unfortunately there is no quick tix in terms of developing new clientele. The only sure-fire method to grow your SMP’s client base is building new relationships while maintaining your old relationships. Your consequent success will be a function of your ability to market your business and concurrently deliver great professional service.

Networking

ln many professions, regulations restrict the use of conventional advertising or marketing techniques. This places networking, although an often-maligned element of business life, at the centre of any SMP’s strategy to grow its client base.

I firmly believe that vigorous networking is a hallmark of successful entrepreneurs. However, it is important to separate the concepts of networking and sales. While successful networking will inevitably lead to increased sales, the link between the two is more subtle than many realise. Sincerity is key Sincerity is the most fundamental aspect of networking. lf you focus on making money at every step, without learning from and enjoying the time spent with the people you meet along the way, your approach will have no integrity, and relationships formed through networking will not last.

Be prepared

That said, it is of critical importance to be prepared for any opportunity that may present itself. Be sure to have your ‘elevator pitch’ (one-minute sales motivation) prepared should someone ask you about your business. An effective elevator pitch should not come across as unnatural, and should prompt the listener to ask for more information.

Follow up!

It is astonishing how many people fail to follow up on networking leads. Whether through laziness, fear, or inefficiency – not following up by sending that email or making that call represents opportunities lost.

Conclusion

SMP owners should take note of the lessons to be learned from their hands-on, risk-taking, fast-talking entrepreneurial fellow travellers.

Authentic entrepreneurship is not academically rigorous like accounting or the law of delict – but its tools and techniques apply to the growth of any business – your SMP included.

Reference: Allon Raiz