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Tom DePaoli suggests that backdoor or maverick buying is a perplexing problem that plagues many purchasing organisations. The methods to counteract this behaviour are highly dependent upon the cultural climate and ethical standards of your organisation. There is no universal solution. People’s behaviours are influenced by consequences. If there are no consequences for backdoor buying the behaviour will continue and grow. Some of my suggestions are drastic, others are more reasonable. Purchasing professionals must use their judgement to select the appropriate actions that fit their organisation.
An important aspect to solving this issue is to remain objective and to try to gather data on the costs of backdoor buying. These could include lost discounts, lost rebates, and extra transactional work by purchasing and others. Many purchasing organisations know the average transactional cost of a regular transaction with an approved supplier. Try to calculate the extra cost with an unapproved supplier. Always control your emotions when discussing this issue.
Here are some reasonable tactics to create an organisational atmosphere and climate that helps discourage backdoor buying. In my experience the biggest offender is usually the engineering department. So, involve engineering in cross-functional supplier selection teams and standardisation initiatives. Make them a stakeholder in approving suppliers. Get the vice president of engineering on board with OEM (Original Equipment Manufacturer) standardisation and have them participate in OEM standardisation processes.
Consider establishing a policy of no gifts or gratuities to be accepted from suppliers by both purchasing and all other employees (zero tolerance). This discourages lunchtime promises or promise buys to suppliers by non-purchasing employees. Another alternative is to have purchasing have their own modest budget to entertain, socialise and conduct work sessions with suppliers.
Get your compliance employees on board with your policy i.e., your legal department and accounting. Craft an approved supplier only purchasing policy and make it clear that unauthorised purchases will not be honoured by accounts payable. Keep the list of approved suppliers visible and updated. Use your software safeguard controls to limit buying privileges and cross reference the approved supplier list. Many purchase cards can be limited to specific approved suppliers and or categories of goods. Meet with your approved preferred suppliers and ask them to use the grapevine to communicate any purchases from unauthorised suppliers directly to you. Most will gladly do this.
One of the most effective drastic actions occurred when I worked for a global chemical company. The company had just spent over $200 million on a worldwide ERP system. The CEO sent out a strong memo saying that all purchases must be made on the ERP system and only from the approved suppliers in the ERP system. Employees were required to use the new ERP system. The very first day four employees went off system to purchase some items from a non-approved supplier. The CEO personally fired them and publicised the results of the incident to all employees. There were no more such purchases.
Do your networking and informal work before you institute your policy. Meet one-on-one with stakeholders or in small meetings to explain your reasons for your policy and get their buy-in before you roll it out.
Establishing a policy against backdoor buying requires some deft manoeuvring by purchasing that correctly judges the culture of your organisation. Instituting the appropriate policy will help reduce backdoor buying. More important, you must enforce the policy and reprimand employees who violate it. A backdoor buying policy unenforced, is both hollow and meaningless.
So, what does it mean to create a winning culture in your business?
For CEO’s and business leaders it means creating a culture that inspires employees to innovate and achieve. It means creating a culture where employees collaborate to make a diﬀerence for customers every day. Lastly it means creating a fertile environment for learning, growth and celebrating our accomplishments. So what steps can your business take to make that happen?
- Know who you are – Creating the culture starts with defining your businesses purpose and knowing your mission
- Identify what works and what doesn’t work – Ask managers and staff, use a survey and create an action plan from the results that involves everyone in changing and improving the culture
- Build trust – Use open communication with everyone in the business, share ideas and focus on how everyone can connect with the organisation’s mission statement
- Empower and appreciate your employees – Use strategic rewards and recognition to recognise employees, celebrate the good things they do and empower them to create
- Conduct a benefit review – Review utilisation, costs, and upsides. Once you’re certain your beneﬁts make sense, communicate the why to your employees
- Identify your values – What sets your culture apart from other businesses, align your company’s personality, mission and values. Embrace things employees identify with that are uniquely yours
- Always look for ways to simplify, innovate and improve – Make being a great place to work part of your culture, always strive for continuous improvement in everything you do
- Give your employees permission to have fun! – Remember it’s the little things that take a culture from being great to being outstanding
- Encourage brainstorming and creativity in all your teams – Provide opportunities for employees to learn and grow, inspire them to do great work and give them input into what they do
- Have clear strategic goals – Follow a plan, share it with everyone, involve the whole organisation and get them on board, get everyone working in the same direction and to a common goal
Sitting in the office Monday morning, Kanika Sharma, Zycus was trying to recall names of famous CEOs. The names that came to my mind were Steve Jobs, Larry Page, Mark Zuckerberg, Indira Nooyi and many more. What made Steve ‘The Steve Jobs’ a legend, a person driven purely by innovation, perfection, simplicity and belief in his dreams? This was followed by the question of what one can do to be the ‘The Steve’ of Procurement.
Be the Steve!
Innovate. In old times, innovation was usually associated with a mission of accelerated growth. But in present times, it is a prerequisite for simply staying competitive and maintaining past growth rates. This revised perspective of the purpose of innovation represents a profound break from the past, one requiring pervasive changes in every business services organisation, including procurement.
Example: Rick Hughes, Advisor to C-Suite Executives on Supply Management and Strategic Engagements. As a CPO for P&G, he took on what was already an active internal cost management program at P&G, but helped to instil a new, company-wide system that focused on what was measurable and deliverable. He streamlined processes in the supply chain as an alternative to asking suppliers to cut their margins. Most notably, Hughes was known for creating an important link with P&G’s Chief Marketing Officer, despite the suggestion that marketing and purchasing don’t play nicely together. This innovative approach of Hughes helped P&G with better return on marketing and advertisement investments.
Simplicity is the key. As Jobs always played it – ‘Simple,’ it is advisable for us to play it simple. Rather than using too much technical jargon, let’s try to explain the processes, systems and solutions in a simpler and easier way so that it can be understood by a person from a non-procurement background.
Example: Stijn van Els, CEO (designate) QP/ Shell Petrochemical joint venture. He previously worked as Executive Vice President, Contracting and Procurement at Shell. As supply markets fluctuate continuously, he and his team must precisely anticipate market movements and develop the right approach to source goods and services in a way that is more profitable and competitive. They came up with Enterprise Category Management. In this practice, regional employees around the globe reported ideas directly to the Shell C&P team, which is coordinated by Stijn. He kept it simple so that employees, even with non-procurement backgrounds, could contribute to the exercise, thus improving savings.
Look for misfits. Steve once said “Here’s to the crazy ones, to the misfits, the rebels, the troublemakers, the round pegs in square holes…” We are too obsessed with procurement professionals, procurement advisors, and procurement analysts; totally ignoring the misfits around us. The day when we will start appreciating the ideas coming from cross-functional minds we will certainly move a step ahead in this journey.
Example: Leslie Campbell, Member Board of Directors at Bideawee. She worked as a CPO at Reed Elsevier from 2007 to 2012. During her tenure she worked to build an open relationship with her team and suppliers to discuss areas that needed development. Being an advocate of importing talent from non–procurement backgrounds, because she believed that they could acquire the necessary knowledge. Her belief that these employees will become strong ambassadors for the procurement process, while adding cross-functional experience, turned into a reality for Reed Elsevier.
So, what does it take to be the Steve?
- Be the innovator
- Be the initiator
- Always keep it simple, and
- Appreciate the misfits
Mixing up the ‘like us and the not like us’ will help us to understand what it takes to be the ‘Steve of Procurement.’
An article from The Conversation caught my eye and I thought it was an interesting piece on adding value to graphite…….Australia is pivoting its economy away from dependence on resources like coal and iron ore, but are there other commodities we can bank on to take up some of the slack? In this “future commodities” series we explore the economic future for commodities we’ve always relied on, and some we haven’t.
Australia can capitalise on graphite if it considers new technologies that convert it to synthetic diamonds and for use in creating carbon fibres, rather than just mining the mineral.
Graphite is a form of carbon, the same element which also appears in nature as coal or diamonds, depending on the geological roots of its formation. At present high quality graphite is used in a range of technology from refractories to lithium ion batteries to carbon composites that aircraft such as the 787 Dreamliner or the Airbus A350.
Global demand for graphite was estimated by the U.S. Geological Survey to be around 1250 kilotons in 2014 but could triple by 2035., with the largest growth occurring in its heavy use in lithium ion batteries. Tesla motors massive investment in this technology for domestic home energy storage may provide a major boost to the market. The “Gigafactory” being built by Tesla in the US state of Nevada is expected to raise global graphite demand by 30%.
Australian companies have been proactive in anticipating graphite demand growth and there are now several ASX-listed mining firms with graphite ambitions. The New South Wales government has even noted graphite in its prospectus document on industrial mineral opportunities.. At present there is only one functional graphite mine in Australia, the Uley graphite mine on the Eyre peninsula run by Valence Industries. At least 8 other ASX listed companies are known to be exploring for graphite.
The supply of graphite from mined sources is not well-understood due to lack of exploration and geo-science investment in this arena. However, a more integrative approach that considers synthetic sources as well as mining is needed to harness the full potential of graphite.
More than seven decades ago, scientists at General Electric devised a process to convert graphite to industrial quality diamonds using very high pressures and temperatures. These diamonds were not of the quality for an engagement ring but worked very well on the edge of cutting saws as “superabrasives.” Stanford researchers have since been working on even easier means of diamonds through catalysts. Most diamonds used now in industry are synthetic.
Although these diamonds are unlikely to be in demand in the jewellery retail sector any time soon, their prominence could grow for industrial uses. A subsidiary company of international diamond miner De Beers, called Element 6, has been working on a range of high technology uses of industrial diamonds, such as infra-red sensors and radiation detectors. This will spark more interest from businesses in this sector.
However, there is potential to convert coal to graphite and its related nanotechnology material “graphene,” for use in greener energy technologies. The technology to accomplish this exists but needs to be made far more cost effective and energy-efficient. Graphene use, like diamonds, by volume will be small as well, though of high importance in terms of its use in strategically important technologies. The large volume uses of graphite would come from demand growth for large structural uses in batteries, buildings and vessels.
There is another type of graphite, high grade vein, that is relatively rare. Currently, the only functional mine for vein graphite is in Sri Lanka which boasts some of the world’s largest reserves of this particularly high-grade material. China remains the dominant player in other forms of graphite mining because of public sector investment in its geological reserves, but increasingly is willing to partner internationally on mineral projects, exemplified by efforts such as Rio Tinto’s Mines to Markets partnership.
Finding better ways of converting coal to graphite for making carbon fibres and other products, could also lead to innovations that make the material more recyclable as well. This goes towards realising the goals of what the Economy. “This is when materials cycle back through the production and manufacturing processes. Metals that are traditionally used in large structures corrode over time, whereas carbon fibres have much less propensity for such corrosion and hence have a life cycle more conducive to recycling.
Graphite presents an important opportunity for seeing the value of partnering business and science to remain “ahead of the curve” in sourcing essential materials for the future. As the bad press increases for the burning of coal for fuel, its value could be in conversion to other forms of carbon – like graphite.
There are many trends prominent in procurement today, Reggie Peterson is Director of Indirect Products at AmeriQuest Business Services and discusses this as well as greater collaboration between stakeholders; digitization and automation of processes; and a focus on data and analytics. However, one of the most notable trends in procurement is the focus on indirect spend and the ability to control it.
The difference between controlling direct and indirect spend.
Would question the ability of procurement to manage a companies direct spend. Optimal management of direct spent is directly related to the fact that these types of expenditures on goods and services are incorporated into the product being manufactured, and is usually centralized within the procurement department itself, with controls in place that ensure accurate accruals and a well-managed cash flow.
Consequently, indirect spend is often decentralized and managed in functional areas or business units of the enterprise. These materials are often managed in silos leaving procurement professionals feeling inadequately equipped to control this category of spend. When it comes to indirect products like stationary, uniforms, MRO supplies, laptops, and myriad other products and services, the anticipated smaller transactional cost may seem inconsequential when viewed in a vacuum. However, life, business and reality do not exist in a vacuum. Aggregating the cost of these indirect purchases from all locations, functions and departments can lead to a shockingly high amount of uncontrolled expenditures for the business.
The 80/20 rule becomes the 20/80 rule when it comes to indirect spend.
How high? In a report on tail spend, a smaller subset of indirect spend, consulting giant Accenture found that a billion-dollar company will waste about $15 million annually due to a lack of control. Extrapolate that amount over a company’s total indirect spend, estimated at about 20% of total company spend and the projected waste is even more daunting. What makes it more difficult to control are the numbers of suppliers involved, the proverbial 80/20 split, if you look at the percentages, 80% of a companies spend is on direct spend and usually involves 20% of all suppliers. The exact opposite is true of indirect spend, where 20% of the company’s total spend involves 80% of all suppliers.
It’s vital that this 20% of expenditures be controlled, but the sheer number of suppliers and the amount of paper and manual effort needed to gain that control has often been declared to be too costly for the business. That assertion has started to change with the growth in automated financial solutions entering the market, including P2P (Procure to Pay) solutions that specifically target indirect spend.
This growth has created a virtual sea change in the industry. These procure-to-pay solutions strengthen the procurement and AP collaboration, ensure contract compliance by validating pricing and terms across the organization, increase visibility to both internal and external stakeholders, enforce budget accuracy, eliminate manual errors and maximize cash flow. Gartner observed the growth of these solutions, stating that they “witnessed a 67% increase in end-user inquiry on the subject from January through August 2015 compared with the same time in 2014.”
Additional benefits of an indirect spend solution: Collaboration and goodwill.
While accuracy and compliance are key benefits of implementing an indirect spend automation solution, there are additional benefits to consider. One is the new role that both procurement and AP can play as strategic players helping the enterprise achieve its financial and process improvement goals. The other is the good will and trust that will be cemented between suppliers and customers due to everyone having access to verifiable information at any time; that means fewer disputes, faster payments, and potential captured discounts.
The question shouldn’t be “if” you should implement an automated solution to help control and manage your indirect spend; the question should be “when.”
For more information on implementing Automation to manage your companies indirect spend, contact Business Improvement Advisory.
You’ve heard the term blockchain. What does it mean? How does it work? How can companies use the technology to help make their supply chains more efficient and cost effective? And what does it all mean for procurement leaders?
To get the answers to these questions, Susan Avery met up with Brigid McDermott, Vice President of Blockchain Business Development at IBM. The discussion follows:
How do you define blockchain?
Blockchain is a technology. It is not one of those lightning-bolt ‘aha!’ technologies in terms of a revolution. It’s lightning-bolt in that we realized we can apply current technologies—distributed systems, cryptography, data management—in ways no one has thought of before to create a trusted distributed ledger. If I have to define blockchain in one sentence it is ‘Blockchain is a trusted distributed ledger’ and it is the technology that makes it possible.
For me, it’s important for people to understand that blockchain presents a tremendous opportunity to really transform how we do supply chain, get rid of waste and solve problems of inefficiency. To make that happen, we need the community to come together in ecosystems.
That’s part of why I’m an evangelist. It is going to take getting everyone engaged and contributing. The output is making business work better, saving money for companies. But also, if we look at things like food safety, one third of the world’s food supply globally is wasted every year. Part of that is supply chain inefficiency. We can also help solve real global problems.
But what does that mean? Can you describe with examples?
Fundamentally, blockchain is about trust. It’s about creating a trusted system of record that you can use among all the parties in your supply chain. What we have now is a world in which everyone maintains his own records. Sometimes that means people accidentally have different records. I fax you a document with a nine and you incorrectly input a zero and we end up on the phone for days trying to figure out why our numbers don’t match.
Or, say, a trucking company has a four-hour window to make a delivery. It knows the location of its truck, the driver has stopped for coffee and will make the delivery near the end of the four-hour window. If we can get the four-hour window down to a four-minute window, think of how much more efficiently you can manage your warehouse, forklift and workforce.
As we think about using blockchain across supply chain and procurement, what we are thinking is, can we get everyone looking at the same set of information and trusting that it is correct? That’s what blockchain does. It creates a distributed shared ledger that’s immutable and permissioned.
You’re a technology evangelist and obviously passionate about the technology. What is IBM’s role?
At IBM, we are basing our work on the Hyperledger, which is the open standard the Linux Foundation is running. Doing this on anything other than an open standard is unfathomable. The system is permissioned which means you know the identity of everyone using it. Once everyone party to the transaction knows they are looking at the right piece of information, you can start thinking about your business differently. You can manage inventory not only within your four walls, but also across the entire supply chain. If you have real-time data, you can potentially help facilitate customs clearance. You can drive towards longer shelf life because you can do a better job managing transit time. You can do a better job at cost management because all the paperwork and all the processes associated with getting a delivery from the factory in China to the retailer in New York are shortened and facilitated.
IBM announced in October that we are working with Walmart on a food safety project. This is about providence and traceability. To prevent an outbreak or food scare, you need to know where things come from and you need to know immediately. A few years ago, there was a case in which retailers pulled spinach from their shelves because of E. coli. There was no way for anyone to tell quickly which packages were good and which bad. It turned out it was one shipment from one farm. It took years for spinach consumption to rebound. Farmers, retailers and shippers were hurt. Seeing common linkages and triangulating them helps pinpoint the issue.
How does it work?
With blockchain, the information is on the blockchain. You can set up the system, so it becomes more broadly available in the case of an emergency when more companies might need to access it. You can have permissions in general, but at other times you can easily let academic statisticians get on quickly and try to triangulate the problem if you don’t have the calculating ability in your own process. You can do all sorts of things once you have the data and everybody agrees with it.
The flip side to providence and traceability is the idea of visibility. Providence tells us the location of goods. Visibility tells us the location of the goods as they make their way along the supply chain. With visibility into data, a shipper can redirect a shipment if needed. Blockchain is not magic. It does not make all problems go away. But with information in real-time, you can make changes.
Say, a retailer has a delivery window for trucking companies. As an incentive for a trucker to deliver within the window, the retailer charges a late fee if it misses the window in an agreed upon amount of time. The retailer wants to narrow the window. Is there something the trucking company can do to ensure the delivery arrives on time? If the first truck is broken down on the side of the road, can it send another and avoid the late fee? Right now, that information is not aggregated in such a way that companies can use it. We are doing some in-house work looking at whether this is valuable to companies. From a technology perspective, how can we help make this happen?
Are some companies using blockchain?
No one is currently in production. But, as you may know, IBM runs its own global financing organization. It’s a $44 billion business. At any given time, we have $100 million tied up in dispute, with an average dispute of 40 days. When we first got excited about blockchain a year ago and approached our CFO about it, he, like every CFO, wanted proof. He asked us to figure out how to make the disputes go away.
In late spring, we started putting together a system with a group of suppliers running blockchain for dispute resolution in parallel with our existing system. We were able to reduce the length of time spent on disputes by 75%, from 40 days to 10 days, and reduce the capital tied up by 40%. This is in a matter of months. Our CFO is now a believer.
For me, this is a good proof point because disputes occur is so many places in the supply chain. Companies have people in the back office on the phone all day. They’re not customer service advocates who make people happy, improving the brand, making it worthwhile. No, they are spending days cleaning up discrepancies. Blockchain makes it go away.
What is it going to take to get to this point?
While I may be dating myself with this example, let’s look at VHS and Beta technology. Beta was great, but VHS won because it was a great technology and it built an ecosystem where we could not only watch movies, but movies we wanted to see. So, with supply chain, while there’s some great technology, there also needs to be investment to build the ecosystems. We are starting to see a groundswell.
How do we build an ecosystem? How do we get all the participants who are interested in making supply chains work better, making business more efficient, making customers happier—farmers, manufacturers, packagers, logistics companies, carriers, customs agents, government regulators—engaged and aligned to share information? How do we make this happen? It’s going to take real work.
Could cost be a burden, especially on smaller companies?
This is one of the fun things about thinking about the business model. For an ecosystem, you may need someone to participate who does not see as much direct benefit as you do. Using a hypothetical example, say there was a way for a retailer to use blockchain that would reduce its costs by 50%, but it needed information and participation from small manufacturers which put a 1% burden on them. The answer then is the retailers to figure out a way to pay the manufacturers to participate in the system. There are potential cost savings that can help pay for the investment to build the system.
From a technology infrastructure perspective, we are at a place where we can build these ecosystems. That’s what software as a service (SaaS) lets you do, by working in the cloud you can put systems out there that everyone has access to.
We can take advantage of things that already exist. Most people have smart phones. Designing a lightweight app, a trucker can download to his smart phone that allows him to update his location is not a burden.
Are we on our way? When you mention using SaaS and smart phones, do you see us moving in the right direction?
If you think of blockchain as a trusted set of data, then the more data you have as input, the better. Changes over the past 10 years or so are enabling this to happen now.
You spoke of having and giving permissions to view data—how secure is blockchain? Is security a concern?
Security is one of the fundamental reasons to use blockchain. Look at bitcoin. It came into being because people wanted a secure way to spend cash. It’s been running for years and no one has been able to break into it. As IBM sees it, the success of blockchain is going to depend on making it enterprise-class encompassing security, scalability, reliability, auditability. That’s why IBM supports Hyperledger, the Linux Foundation’s open standard. I like their approach and the way they are building Hyperledger because they are thinking about the way enterprises would use it. They are considering security from the beginning.
From an IBM perspective, we have a high-security network offering which leverages our experience. IBM runs ATM networks. You cannot let people break into ATM networks. You have to have security that involves hardware and protected crypto keys leveraging that with the immutability and security inherent in the software. You end up with something impressive. Enterprises we are talking to feel comfortable with this from a security perspective.
Are there competing technologies?
There are competing standards. IBM looked at them and decided that the permission nature of blockchain is necessary, that there wasn’t another technology that’s an open standard, open governance and built from the ground up with permission as a fundamental tenet. That’s why we decided to go with this one. Using databases is another option. Databases are great when you’re working inside an organization, but when you work across organizations, they don’t imbue trust into the technology in the same way that blockchain can.
Recently Paul Kennedy wrote a very interesting article on finding your ideal client, it has some very good points that are worth using in your search for that “ideal client”
If there’s one challenge all businesses share, it’s how to find ideal clients. It begins with the business plan. In the words of Thomas Edison:
Good fortune is what happens when opportunity meets with planning
Business plans are important to:
- identify and document goals and outcomes;
- create a blueprint on how to get there;
- develop relevant marketing initiatives, activities and actions; and
- build the business profile and brand amongst ideal clients and networks.
Key questions for functional and relevant digital marketing
Simon Sinek is a British / American motivational speaker, marketing consultant, and author of three bestselling books including “Start with Why.”
Meeting someone for the first time, instead of asking “so what do you do?” Sinek suggests the first question should be “so why do you do what you do?”
What does this have to do with the business plan and finding ideal clients?
In building the plan, the question Sinek poses is a great place to start: “Why do you do what you do? (what drives you, what motivates you – your purpose, cause, belief – why does your business exist?).” Answering these questions first helps ensure business and personal goals are aligned, consistent and complementary.
Sinek says everyone has a ‘why.’ Sinek’s TED Talk can be found here Having established the firm’s ‘why’, will then lead to ‘how’ and ‘what’ needs to be done (not the other way around). This approach will also help identify who the business’ ideal clients are (and why they are ideal – what makes them ideal).
Ask ideal clients what they need and want (and why) – focus on delivering those needs and wants (rather than on what the business makes or provides). Asking and answering these questions will open up a whole world of where the business may go and how to get there. There’s plenty of advice readily available on what headings (slides) to include in the business plan (so that advice is not repeated here).
Completing the business plan is just the beginning – it’s the implementation and day to day living of the plan that delivers success. That’s the difference between having a plan and achieving goals.
Key criteria for success
The key criteria for success are:
- having a well thought out and documented business plan; and
- sticking to that plan on a daily basis (living the plan each and every day).
In developing the plan, “Nirvana” is to have ideal clients seek out the business. So anything that takes the firm towards that goal is positive. Having addressed the core issues of mission, vision, values, value proposition, services, structure, people, etc., the plan should focus on clearly identifying:
- who the firm’s ideal clients are (who they currently are, who the firm would like them to be, who they could be, and why they are ideal – the types of organisations, their background, profile, traits, characteristics);
- where they can be found (how do they spend their day; what activities do they participate in; what groups are they members of; what events do they attend; what are their interests?); and
- how to engage with them on a daily basis (raising the company’s profile amongst its ideal clients and networks; building the firm’s brand; what events and activities the firm should attend or organise).
Marketing initiatives, activities and actions
The plan should identify and commit to a series of marketing initiatives, activities and actions that ensure the business:
• constantly surrounds itself with ideal clients; and
• engages with ideal clients on a daily and on-going basis.
This way, new business won or existing business retained, will be of a type that is consistent with the business plan.
These initiatives, activities and actions should be specific and detailed in the plan headings (slides) titled:
• Marketing initiatives, activities and actions; and
• Calendar of marketing initiatives, activities and actions (with timelines covering the next 18 months).
These two headings (slides) are amongst the most critical because they detail exactly what the business is going to do to attract its ideal clients (including how and with specific dates covering the next 18 months).
The plan should also identify non-ideal clients (because they too will seek the business out – and when they do, it’s imperative they don’t distract from business goals – and that they are re-directed to competitors!)
In doing so, consider what makes them non-ideal – the types of organisations, their background, profile, traits, characteristics. For example, because they are too small, can’t afford the business’ services, don’t value or act on good advice, are slow payers, are high maintenance, or will never be ideal clients.
A business plan is just as important for individuals
A business plan is just as crucial and valid for an individual as it is for a business. Everyone needs a plan – irrespective of whether they are a business, a not-for-profit, self-employed, an employee or “seeking new opportunities.”
For individuals the plan should include both business and personal goals. These should be mutually consistent, complementary and take individuals to their desired outcomes, both business and personal.
It’s best to discuss and agree the plan with partners, ensuring their views are reflected in the plan.
Generally, there isn’t just one type of ideal client – usually, there are many different types of ideal clients (across a wide range of industries, each with different characteristics and a different profile). Identify them all, prioritise them and then set about getting the firm’s story in front of them.
Also think through why the firm is the best solution for ideal clients’ needs and wants – in communicating with a prospective client, focus on the benefits to them of doing business with the firm.
In identifying ideal clients, consider who their trusted advisers are (confidants they discuss their business matters with and take counsel from – e.g. their lawyer, accountant, or financial adviser).
Think of the parties who will be involved in discussions and the decision-making process when a transaction is being considered. Where practical, include these trusted advisers in the firm’s marketing and business development activities.
Other thoughts and comments
Much of the background information required in preparing the plan is readily available from the firm’s website, marketing material, LinkedIn profiles, CVs, other business and personal documents. It’s not a matter of starting from scratch or re-inventing the wheel. If the plan is right, it will lead the business to ideal clients and desired business outcomes. Identify who ideal clients are – build a profile of them – what industries are they in; what are their demographics; what characteristics and traits do they have; why are they ideal clients; what makes them ideal?
A final thought on business planning
Have a business plan – but also be open to other opportunities that may not have been considered or identified during the planning process.
Building the client avatar
Julie Mason (LinkedIn Sales Strategist and founder of LinkedSalesFormula.com) is a strong believer in developing and knowing the firm’s client avatar (a detailed profile of target customers / ideal clients).
Mason’s advice is: “If you’re struggling to identify and find your ideal clients, or your marketing is failing to generate results, it could be you haven’t fully developed a client avatar for your business.”
“Your client avatar needs to go much deeper than simply ‘small business owners’ or ‘accountants’. While this is at least a start on the demographics, it doesn’t even touch the surface of emotions that will motivate your ideal clients to purchase your goods or services.”
Mason also notes “every sale is based on emotion and justified with logic in the purchaser’s mind – if you haven’t delved into what makes your ideal clients tick, then you are leaving money on the table.”
Mason concludes: “This information will help find your ideal clients by using business tools such as LinkedIn, where you can search on the demographics and then create marketing material and content that will appeal to their emotions and draw them towards your business.”
“Unfortunately, most businesses don’t dig deep enough on this topic opting for the basic ‘my ideal clients are accountants.’ Yet, studies show that businesses that take the time to really drill down into the emotions and motivations of their ideal clients will enjoy far more success.”
CASE STUDY ONE
Who are the firm’s ideal clients currently – who would the firm like them to be – who could they be?
A leading Australian consulting firm works with medium to large companies in helping develop their strategic thinking, leadership, and sales and marketing skills.
In the past, the consulting firm typically delivered their program at a single location chosen by the client (e.g. the client’s head office). The program runs for ten months and involves the client’s senior management team coming together for a day each month.
A prospective client approached the consulting firm about engaging their services. However, the prospective client was a national firm with offices and managers located throughout Australia. The cost and down time of bringing 30 senior managers to a central location every month for a day, for ten months, was prohibitive. Other than cost and logistics, the prospective client and the consulting firm were an ideal fit.
The solution was to hold the monthly team and individual meetings via video conference, with all managers coming together in the one location twice during the ten month program.
The outcome was that the consulting firm delivered exactly what the client wanted – all that changed was how they delivered their service. As a result, the consulting firm has totally re-defined who their ideal clients could be (and opened up a much broader range of prospective clients they can now offer their services to).
CASE STUDY TWO
Know your ideal clients and where to find them – even better, if they find you!
A wonderful example of someone who truly understands and knows their ideal clients comes from Helsinki in Finland.
The magnificent Uspenski Cathedral was built from 1862-1868. It is set on a hillside overlooking the city. The Cathedral is said to be the largest Orthodox Church in Western Europe and attracts over 500,000 visitors a year. In front of the Cathedral, there’s a large area for tourist buses and cars to park while people drop in to have a look around.
Every day a homeless man sits at the bottom of the steps leading from the parking area up to the Cathedral. He looks bedraggled and down trodden – sitting there sad and down faced, shaking an old and dirty coffee cup with some loose coins in it, every time someone walks by.
This man knows exactly who his ideal clients are – every day, the system delivers him more than 1,300 ideal clients – busloads of tourists on holiday, visiting a grand place of worship, feeling grateful for their situation and no doubt empathy for the homeless man.
Who could walk past him without dropping a Euro or two into his cup? Those Euros all add up.
If Nirvana is ‘to have your ideal clients seek you out’, then this homeless man has created the perfect business model. Businesses can learn from him!
Some final thoughts on business development
- identify ideal clients (the types of organisations and people the firm wants to do business with);
- invest time with ideal clients;
- know what ideal clients need and want;
- be the best there is at delivering those needs and wants;
- constantly surround the firm with ideal clients;
- “appoint” everyone the firm knows as their business development manager (so if they hear of an opportunity, they can refer ideal clients to the firm);
- keep it simple; and
- love and enjoy what you do!
About the Author
Paul Kennedy is the Principal of PGV Consulting (a Brisbane based business planning and business development firm with a focus on the Australian and New Zealand markets).