ROI and emotional decisions in small business

One key difference between big business and small business is how big businesses use their IT systems to drive the business. They measure and measure and if something does not perform, usually, it is gone. There is a relentless pursuit of return on investment. In small business, all to often, underperforming stock is held too long.

This is on my mind today because of work we are doing with a client on turning their business around. We can see that half of the products they have in their stationery department have a stock turn of 1.5 times a year. What big business would tolerate such a return? None. Yet the newsagent we are working with refuses to remove these products because they go to the core of how he sees his business.

He’s wrong. These products are loss making. Loss making products do not define a business. Either this business owner needs to find a way for the products to become viable or he replaces them with other product in this or an allied category which works.

And here is the difference between small and big businesses. The emotional connection often gets in the way of good decisions. It’s a double edged sword, good and bad. I like the emotional of small business but capital demands a return. So, the business decision must come first.

If you client follows our advice he will unlock close to $20,000 to reinvent in new product lines.

Defending employee theft

I don’t know how some lawyers sleep at night. While I accept that everyone has a right to a robust defence, it is unfair that a better resourced defence is able to get someone off a theft charge merely by spending more than the prosecution.

I have seen this too often in cases involving employee theft in small businesses. We gather the evidence of fraud from the computer system, the owner marries this up with the roster, they or the police bring in a camera to catch a theft and charges are laid. That all seems straightforward. Unless the alleged perpetrator or their parents are rich and they get a smart defence lawyer.

A smart defence lawyer locks the prosecutor and the experts on the side of the small business owner in a battle about expert evidence. The prosecutors decide it’s all too hard and withdraw the charges.

These defence lawyers plan the man. That is, they chase after every witness for the prosecution, questioning their credentials and belittling their evidence. This happens long before the first day of the trial, wearing everyone down, tying people up in games and taking them away from their businesses.

I’ve seem small business owners glad to walk away from a court cases against employees who stole from them just so they can get their life back. The emotional pain of the months and years after theft and before the trial take a huge toll.

Yeah, I don’t know how these defence lawyers sleep at night.

Gift voucher overhaul coming soon

We’re completely overhauling how we handle gift vouchers in our POS software. The new facilities will make it easier at the sales counter and more certain in the back office. We’re going to help our small business customers compete more successfully in this rapidly growing space. We expect to release our new gift voucher facilities later this quarter.

Reception vacancy

We are creating an additional reception position to help us better handle the growth of the business. Based in Melbourne, the role could be part time or full time depending on the candidate. If you know anyone, even someone fresh out of school, we’d be glad to hear from them.

Coles does a me too

Not to be outdone by Woolworths, Coles is chasing pity money from consumers in the name of helping farmers. Coles has signs at their checkouts calling for donations to a Salvation Army fund with the pitch that Coles will match the funds donated dollar for dollar. The signs are not prominent suggesting to this cynic that they are not driving this campaign to be a success. There is nothing at their website promoting the fund raiser.

If Coles really wants to help farmers, it ought to give what it can direct and not connect its giving to a charity weary community.

Training new employees

I called a cab yesterday to take me from my home to the Australian Open tennis – where I saw Gonzalez annihilate Haas. When I told the driver where we were headed he said he didn’t know of the Tennis Centre (Rod Laver Arena) as he had only just started in the job. The card on the dash showed that he had been driving taxis in Melbourne nine days.

The Tennis Centre is a Melbourne icon. It’s week two of the Australian Open and everyone is talking about the tournament. I was surprised that the driver had never heard of the place. Surely this would be covered in basic training?

Training new employees is one of the most important roles in any service organisation. It determines their day to day value to the business and how far they can progress. The taxi experience made me think about the training we provide internally for new employees. With three new support / help desk roles in the business these past two weeks now it was a timely reminder to focus on training and ensure that customers are not disadvantaged.

I would not have minded if the driver asked the best way there but to not even know of the place really turned me off.

This is what we have to train for – knowledge to demonstrate an understanding at the very least. Throwing people into live situations too soon only upsets customers – and rightly so.

Our training regime includes time behind the counter in our retail newsagency using our Point of Sale software; formal training; listening to other support calls; and, taking calls with a senior team member listening in. There is assessment along the way to determine when the new hire is ready to go solo. This is best for us and for them. It helps develop longer term employees and maintain good customer service.

Now if only the taxi company trained their drivers better.

Valuing technology and data when you buy or sell a business

We are often asked to value a computer system when a business using our software is put on the market. We point to the book value as being the most appropriate for the hardware and the current purchase price as being appropriate for the software if it is up to date and supported. These are starting points. The reality is that the price probably needs to be lower, especially if the system has been badly used. Garbage data has no value. This is one reason why small business owners need to treat data as an asset – so it has a good resale value when they do sell their business.

Due diligence ought to uncover data problems and should lead to negotiating down the goodwill component of the purchase price. It is important that the sale contract is explicit in terms of business data. We have seen situations where data history is wiped on the day of settlement meaning that the business has no history on which to base purchase decisions.

It all comes back to good data management. Time spent today adds value to the business when it’s put on the market and ensures an easier hand over.

Gift shop software features

I have been asked to put together some thoughts on what separates our gift shop software from an off the shelf package such as MYOB or QuickPOS. This is what I’ve prepared so far.

Specialist gift shop point of sale software can do more than track sales. It can drive the business on many fronts – increasing sales, reducing costs and enhancing the sale value of the business.

Gift shop owners ought to consider specialist gift shop facilities when considering the best IT solution for their business. For example, the following tools will not be found in generic off the shelf POS software:

Fast Seller Tracking. It is challenging to watch every item in the shop. Fast Seller tools do this for you and alert the owner when an item is moving faster than in the past or faster than other items in the category. Knowing this allows the business to respond and use this traffic to build other sales.

Employee sales tracking. Knowing who sold what and when allows the business to pay incentives for success. Major retailers use commissions very effectively to get employees from behind the counter and into the body of the shop guiding customers to purchase.

Basket analysis. Knowing what customers are buying with what helps you analyse your business beyond raw sales success. For example, if you sell a range of glassware it may be that one item, not the top seller, is sold more often with other items and thereby is more ‘efficient’ for the business. While strong single sales are good, sales with multiple items are more valuable for a gift shop as it boosts the margin per sale.

Rewarding Customers. With the fuel and other loyalty programs around today it is important for a gift shop to have a loyalty offer. The best loyalty offers are those which bring people back to your shop to accrue rewards which can then be spent in store. Good gift shop software will track customer purchases and allow you to build a reward system which builds your business.

Analysing sales. Unlike other retailers, gift shops are individual businesses, often carrying items which are one off. Sales therefore need to be coded so that the owner can track the department, category and supplier equally with the individual items. This enables buying to be within the successful categories if not the exact same item. Armed with this information at trade shows helps nurture better buying.

Ratios. Good business starts with good measurement and good measurement is all about ratios – return on floor space, return on investment and stock turn. While a gift shop may look attractive and have friendly staff, if the stock is not turning the business will fail. Goof gift shop software will allow you to track departments, categories and items at the return on investment and return on floor space level – to determine if the items you like are really justifying their position in your store.

Too many gift shops run off a docket book and cash drawer. This denies the owner the opportunity to drive the business and achieve the best possible return.

Woolworths farmer noise

Everywhere I turned today there was noise about the Woolworths farmer profit gift. On ABC radio in Melbourne the more callers were suggesting it was a cynical PR exercise than genuine. The Nova radio stations got involved and proved it was more PR stunt. The TV stations tonight gave Woolworths plenty of air time to advertise their brand.

In all of this, the impact Woolworths’ buying policies has on farmers has been lost. The company has not, from what I have seen and heard, offered fairer long term arrangements to farmers. They have not committed to using Australian produce for their home branded product. They have not answered their critics about the growth in their profit compared to the decline in what farmers are paid for what they supply.

Now that the Woolworths drought day is coming to an end we ought to direct our shopping to small and other businesses who commit to fairness in their dealings with farmers.

Who blogs about Woolworths?

Woolworths’ gift of profits from trading tomorrow is not igniting the blogosphere. There are really just these two entries according ton Google: Indyhack. Relocalize. Frankly, I am surprised. I expected the Woolworths announcements would have attracted way more comment. maybe the blogosphere in Australia is yet to find its voice.

A socially responsible Woolworths would answer its critics with a fairer and more transparent relationship with farmers. It would negotiate a relationship which provides farmers with fair and continuous income over the long term as opposed to tomorrow’s stunt which will cost the company less.

Australians could hold Woolworths accountable by not shopping in their stores after tomorrow. A boycott of the company could achieve better outcomes for farmers. Rural small businesses in drought affected areas could be a starting point for getting the message out about such a boycott.

A week of wild weather hits small business

Regardless of where you sit on the issue of climate change, this past week in Australia has been bizzare. Small businesses have been hit hardl. We see it through our help desk as our small business clients fight to stay open, dry, safe and sane.

Bushfires in Victoria wiped out a chunk of the electricity grid and this fried some computers and forced others to visit their backups for the first time in years. Massive rain led to floods in other client businesses and a wet computer is, well, not useable – so another hunt for backups. Hot air up north raised static and made a couple of systems behave erratically. Extreme heat caused another couple of businesses to shut down. Every situation I weather related and maybe it’s me but it seems worse now than in the 26 years I’ve owned this business.

While we have supplied hardware to around 60% of or clients, we’ll always help out in these situations. The goal is to ensure a safe backup and then to get the business running as soon as possible.

It seems no matter how much we push the backup message, for many it is only when their business needs the backup that they realise the importance. So, we have declared this week backup week – we’ll ask in every call to ensure that they are backing up, using a separate USB stick for each day and that the backups are stored off site

.In the meantime, we hope that governments start to take more notice of the climate extremes we’re experiencing. The cost to business of climate change will be extraordinary.

Newsagency software helps small business win

Smart newsagents are using technology to increase profit from their magazine department. They are culling titles and holding suppliers to account without having to watch every title which comes into their business

magcashfl.JPG

Our recent magazine cash-flow research proved that over 60% of all magazine titles are cash-flow negative for newsagents. Our software identifies these for you and provides exclusive tools to build cash-flow from magazines. Using our Tower software you can also easily report on magazine sell-through rates, theft and business value (through basket analysis) by distributor, MPA category and title.

Even better, the Tower newsagent software produces title cut and supply reduction requests ready for you to fax or mail to the distributor. These requests provide evidence essential to the distributor acting on your request. Plus, we alert you if the distributor does not comply with your request.

This is the type of market specific software development we excel at.

Many newsagents have found it is cheaper to make the switch to Tower than pay higher support fees for the system they have.

Time bomb POS software

What software company in their right mind lays a land mine in their software which trips if you do not pay for software support? My company does not but it experiences the consequences of this action by others from time to time. One consequence is sales and that’s good. The other consequence is frustration at all POS software companies by impacted. Fair enough too – first time computer users who get burnt are likely to tare others with the same brush.

When people tell us about POS software which stops or behaves unusually following a decision to not take up software support we advise them to take the matter to the appropriate State Government department. Unless they do this the software company involved will continue to leave the land mine in the software and get away with intimidating users into paying for software support.

My view on software support for small business that it ought to be voluntary and that if it is not taken up, the software continues to operate. This con of a time bomb which stock software or hampers the user enjoyment is offensive to the profession.

Questions about the Woolworths farmer profit ‘gift’

I have been thinking about the much hyped Woolworths 23 January profit gift to farmers. Jan 23 is a Tuesday, the quietest day of the week in retail. Am I being cynical? Probably. Consider these questions:

How has Woolworths increased profits by hundreds of millions of dollars while farm gate prices have been flat at best?

Why are supermarket prices are increasing faster than inflation?

How does Woolworths help the community by getting bigger and therefore leading to the closure of more green grocers, butchers, bakers and independent supermarkets?

A wise friend suggested that if we need to shop on Jan. 23 do it at Safeway or Woolworths but not on any other day.

I’d like to see the media ask tough questions of Woolworths but I won’t hold my breath as the risk to advertising revenue would be too great.

Woolworths farmer profit promise needs explaining

Woolworths has announced that the entire day’s profits from their Woolworths and Safeway stores from January 23 will be given to Australian farming families in need. You can read the Woolworths announcement here. I would like Woolworths to announce exactly what constitutes profit. Such transparency is crucial. I would also like them to explain why they are not including profit from the Beer Wine and Spirits, Dan Murphy, Dick Smith and other stores.

While the Woolworths gesture is better than them not doing anything, I would prefer to see them make a long term commitment to more equitable dealings with farmers as well as a commitment to Australian produce and products over imported produce and products. I would also like to see them make a commitment to small business. Only last year Woolworths set up shop in Maleny to much criticism from those concerned for small businesses.

Woolworths and Coles dominate retail in this country. As a result of the power of their supermarkets they dominate farming and food processing. This is where Woolworths can help Australian farmers the most – more than contributing the profit from one day.

We need to ask questions of Woolworths in an effort to get behind the PR spin. We need to challenge them to do more than stage a stunt and make a real and lasting difference to our farmers and the wider community.

Blackout melts computers

The blackout earlier today caused by the bushfires in Victoria has hit the help desk with a wave of calls. One good thing to come from this is the reminder to small business operators to have a backup plan for such situations and to have a backup – yeah, we’ve had those calls – people who have not backed up for weeks. Duh!

Gift shop software hot in 2007

The year is just over two weeks old and already the phone is ringing hot with leads for our Gift Shop software. It’s surprising because IT is far from the mind of other small business owners. It seems January is housekeeping month in Gift Shops, when they get things ready for the year ahead. Hence calls to us.

Our Gift Shop software is designed to help independent gift shops compete with the major department stores and magazine stock. We report on age of stock, return on investment, return on floor space, return by supplier as well as deep analysis of shopping baskets to measure efficiency by category and product. While it all sounds like truckloads of reports, the reality in that our reporting is outcome focused. If you’re about to buy then our reporting focuses on that. If you are about to review an account with a supplier then we focus on your trading with them. This way, the small business operator can deal with facts and not fiction when it comes to buying and negotiating deals.

One good source of leads for us has been the Australian Gift Guide Magazine.

Depression in small business

We deal with many calls in our software company and not all of them software related. One such call we receive is that from the small business owner at their wits end over one aspect of their business or another. In this situation they call about what sounds like a technical issue and their reaction to the advice given sets off a chain of events which leads us to wishing we could offer help from a mental health perspective. Our people can tell from the caller’s sensitivity to simple requests or comments made during the call that things are not right with or for them. But it’s not our place to intervene.

Drought and the economic pressure of the time, particularly for small business, is presenting more people who seem depressed than before. Not that many really but enough for us to want to find out what we can do to help. That took us to Beyond Blue. They have a range of programs and links with other organisations which at least give us a starting point. Our goal is to be more aware of how to best handle people venting to us about unrelated matters and at the Beyond Blue website we started that journey.

At the other end we plan to take the matter up, in general terms, with suppliers whose behaviour fans the problem. In some small business channels business is considerably tougher today than any time before. Everyone is out to protect the bucks they make. Unfortunately, suppliers are in the box seat and sometimes their harsh actions against a small business owner can come at a most unhelpful time.

I’ve rambled off topic a bit. My key point is that small business owners often do it tough. In Beyond Blue we’ve found an organisation which can help navigate some of the challenges which result from tough time.

Job application as wage negotiation

One of the applicants we offered last week turned us down saying that he got the pay rise he wanted from his employer. We felt used. It was a toss up between him and the candidate who accepted, both had good skills and interviewed well. In fact, between those of us making the decision both were even. We tossed the decision around longer than usual but needn’t have bothered because he was never going to take the job – as long as he got the pay rise from his existing job. Ah the joys of recruitment.

Ah, job interviews

We’re conducting job interviews today and tomorrow, looking for successful candidates for three of the four new positions we are looking to fill. With more than 120 applicants in the pool it has involved considerable effort to get down to the interview group. The decisions are more about the culture of the business than any other factor in that even the most skilled candidate will not work out if they do not fit or enhance the culture of the company and, therefore, its offering. This is why interviews for us are all about the conversation. So, the day begins…

Banks play the merchant fee game

Last year we approached our bank about Visa and MasterCard fees and were knocked bank. They would not budge from 1.445%. Last week we told them of an offer of .9% from another back. They matched it. It says something about how much they appreciate us that we don’t get a deal until someone else offers it first.

Overcoming barriers in small business

This blog post has nothing to do with Tower Systems or small business.

I’m in Hong Kong at trade show and noticed this construction (see photo below) over the water. I know it’s not a first here or elsewhere but it’s still a surprise to see land reclamation in progress and what they do with the new land. This is not a jetty or a wharf. They have constructed roads and building sites where there was once water.

While there are what seem to be valid complaints among residents about the use of the reclaimed land, my interest is in how they have faced a barrier leapt over it.

DSC00047.JPG

Too often in small business we face a barrier and it stops us. We don’t have the layered management nor the impersonal connection with our businesses that you see in big business. Our personal connection, a core asset, causes us to sometimes be paralysed by challenges. It’s happened to me.

Call me whatever you like but I found the reclamation inspiring, inspiring me to work harder in 2007 at overcoming the barriers one often encounters in small business and to focus on the vision as opposed to the challenge. No, I’m not going soft! I didn’t come to Hong Kong seeking any great revelation. This construction over the water is inspiring. I’m glad I saw it today.

Conference calls to help first timers

Our client base is growing rapidly and each new user of our software, naturally, takes time to settle in. So, we’re trying a new approach to help our new users get comfortable sooner.

We’ve established a conference call system which will enable us to host new user conference calls for the cost of a local call to them. We see each call lasting for between 30 minutes and an hour. We’ll start with a few minutes coverage on a topic we know will be of interest based on support calls traffic and then throw the session open to questions. We have found that people listening to questions from others and our answers is a valuable way to learn.

If there is good take up on the conference calls we’ll extend it to longer term users.

Our first conference call will be late next week. I’ll report back here on how it goes.

Overqualified candidates miss on customer service

For one of the new Help Desk roles we have going at the comment we have received eight applications from people with Masters Degrees. That’s on top of a good IT degree and, usually, an Honours year. This education shows they can retain information but it does not demonstrate the kind of intuition which is crucial in a good help desk person.

Help desk calls are 80% listening and communication and 20% knowledge. While the applicants with a Masters education may have exceptional knowledge, I am more interested in people with practical experience as they are more likely to empathise with those who call our IT help desk. Our answers are not learnt by rote.

It seems to me that we have a glut of IT graduates with Masters and other bits of paper which, at my end of the IT patch, are of little value. It’s certainly not the skills shortage the government talks about.

Noisy office

If you call the Tower Systems office between now and late January you’re likely to hear construction type noises in the background. Our building is crawling with trades people fixing a concrete cancer problem. Even though the damage is minor, the nature of the repair work is such that they are drilling the veins of damage all day.

DSC02396.JPG

We own level 3 and even that high it’s noisy and intense work. The noise is especially challenging in our Help Desk office where our team are working the phones all day. So spare us a thought.

We’re using caffeine as compensation and buying coffee in each day for everyone here.