There are currently some big market forces out there that as an independent business we have no control over. As the winds of “a slowing in the market”, “rising interest rates” or “a drop in demand” blow through your business, it can be easy to take refuge in factors and influences that are out of our hands.
But rather than resigning to the things we can’t control, there is always action to be taken from within our own operations. .
SEE WHERE DEMAND IS MOVING
Most businesses will track the headline position of sales and margin figures monthto- month, which can be an early warning that things are slowing down.
Digging down behind those headlines is your first opportunity to find out what can be done about it.
Get your enterprise resource planning (ERP) trading system to identify which customer’s spend is growing or shrinking. This can be done with individuals, or maybe business types. The aim is to find out which products are being purchased by the growing customers, to ensure you’re well stocked in these ranges.
Analysing figures such as average order value, gross margin percentages and number of product lines can tell you whether your customers are spending less overall, ordering less frequently or spending less with each order. If customers are spending less, is it worth a phone call to see how business is going for them? Are they having to adapt their operations to a changing market? You may find you can help them by holding different ranges, or that you have stock for the other work they may be chasing.
Tracking the successful conversion rates on quotes can be an early indicator on shifting demand. Talking with your sales team can provide useful insights into which quotes are not being accepted, and potential reasons why. Beaten on price is a common call, but as consumers we know that stock availability, lead times and customer service play a massive role in our buying decisions as well. There may be a need to tighten prices for some shrinking customer types or products, but don’t undercut yourself when selling to more buoyant markets – especially when you have what they want, when they want it.
MAKE IT EASY TO BUY FROM YOU
The growth in eCommerce for merchants is great to see. Not only is it an extra sales channel, working for you by taking orders 24-hours a day, but it also advertises the products, stock and pricing that also brings customers to your door.
In addition to your in-house eCommerce site, are your products being promoted by other marketplace sellers and services?
From well-known platforms like eBay and Amazon, to local product awareness from NearSt and premium demand fulfilment with services like Snap-it, there are more and more opportunities to find the demand for your products.
Get your ERP system linked up to the right services, pushing out up-to-date price, stock and product information, whilst importing in new sales as they are placed, and you immediately increase the number of eyes on your products. As great as the demand for online services has been of late, there is still plenty of business to be done directly with customers over the phone, email, WhatsApp and in person. For all these interactions, does your team have the information at their fingertips to help those customers? From reordering favourite products, to special one-off items, confirming exactly when something can be supplied – we all like to deal with a friendly face when we have more detailed needs, and they can help us best when their systems are making it easy to provide those answers.
LOOK AFTER THE 20%
It is fascinating to me that within the merchant businesses we work with (and I am assured many other types of businesses as well) the statistic “80% of your business comes from 20% of your customers” seems to ring true. Whether or not the numbers exactly line up for you (have you checked?), there will still be a useful list of clients who are worth your special attention. There is a positive impact in investing time in these customers to understand their upcoming requirements, but potentially a significant negative impact if their business is being taken elsewhere.
Use your ERP system to firstly identify who the 20% customers are – you’ll probably find one or two in the list that surprise you. Then, dig deeper into their trading patterns – which products they are ordering (is it a wide range of items, or a few key products?) and are they placing a few large orders a month or lots of smaller ad-hoc purchases?
Armed with these answers, and through discussions with these clients, you can build a picture of their near future requirements, make sure you have in stock what they need, and can supply it at the time they need it most.
WATCH YOUR CREDIT CAREFULLY
It is very useful to allow customers to take materials on generous credit terms – it gives their cashflow some breathing space, and keeps their business rolling in. However, when times gets tight it’s easy to take advantage of this facility, potentially leaving your business exposed.
For starters, switch on automated credit control on your ERP system, so the computer can keep a constant eye on your customers and ensure no one is overextending your generosity.
Secondly, set up alerts to warn when customers are nearing their credit limits, as it is always an easier conversation to keep someone within the facility than having to refuse or put orders on hold when credit goes bad.
Finally, analyse the spending habits of your customers. It is a sad situation, but too often we have seen a spike in orders from a business just before they start defaulting on their credit or go out of business. If you do see a sudden jump in business from a client that can be a great sign, but it is worth doing some investigation to double check that you are not being taken advantage of. .
WHERE IS THE NEXT OPPORTUNITY?
When analysing trading patterns, it is relatively easy to see the big swings, but spotting the little emerging trends, or the gaps in what is not there, takes more effort. Many successful businesses are guided by good instincts, but the power of a good ERP system can either be to prompt a potential opportunity, “we have started selling a few of those products recently, I wonder if that type of customer is seeing a surge in demand?” or be a sense check for new ideas.
Even with the emergence of AI, it is a combination of entrepreneurial instinct and joining the dots that allows us to see where the market is moving – using the data from our internal systems to de-risk a move in that direction.
