Change your business model

DO YOU normally spend January rueing the spending decisions you made in December? Let us see how you can make January 2019 different.

We are fast moving into the season when many are jolly and spend heavily to make it so, then spend the months after rather miserably.

Perhaps you did not save systematically during the course of the year for the extra spending this season. Perhaps you did not make a budget at all or made one generally but not one for the holiday season. It is late to make a budget for the year at the end of the year, but you can still make a holiday budget. Your current income should drive your spending plan for the season, and there should be no room for spending January’s income before January.

The following recommendations should help. Determine the spending priorities early with your family. If you are into gift giving, determine whose experience you will season with a gift. Set a limit on how much you will spend on gifts overall and on the gift for each person.

Determine how much you will spend on entertainment. Join with family and friends to undertake entertainment activities and the associated costs. Consider having some activities at home rather than going out.

SHOPPING LIST

Make a shopping list and stick to it. It will help you to resist buying on impulse. To further resist the temptation to buy on impulse, avoid environments where the temptation to do so is strong, and avoid the company of family and friends if being with them encourages it.

Manage your credit card well – even those with special benefits, such as frequent-flyer miles. In particular, cap online shopping, which credit cards make so easy. Avoid having to pay credit-card bills that you are not able to pay in full; interest rates on those balances are not friendly.

Although it is risky to carry cash around, use cash as much as possible. To reduce the risk, use a debit card, but be careful and consider the full gamut of expenses you must cover in the spending cycle when shopping.

If you overspend in one area, cut spending in other areas to keep within your budget. And give yourself an incentive for keeping within the limits of your budget.

If you are one of the fortunate ones to receive extra cash – a bonus or remittance, for example – avoid blowing it away. There are many good uses to which you can put it – paying down debt, saving, investing, or contributing to the acquisition of an asset capable of lasting for a long time.

Let your savings and investments remain as they are unless they were designated earlier to be used to acquire assets or to cover a designated expense. Avoid liquidating them prematurely, and keep the end in view at all times. Never lose sight of your long-term goals.

Keep short-term considerations in mind as well. Emergencies come when you least expect them to, so resist the temptation to encroach on emergency funds.

Avoid spending money you have not yet received. Factor in time for delays. If you are paid by commission, go slowly on your plans to spend it, considering the risk of transactions not going as planned. It is not wise to count your medals before the Olympics.

Bear in mind other commitments — insurance premiums, loan repayments, school fees. It is easy to forget about some of these because they are not monthly commitments, but it is important in any case to reserve funds each month for them.

Plan for the necessary things; important assets have to be maintained. Painting of the house, for example, is important for some individuals this time of year. This is not an annual activity, but the funds to do so can be set aside over time.

Have a system of reviewing the management of your finances, especially if you are in a family setting. Appoint a firm member to be the finance manager and have all family members buy-in on the finance plan. Encourage all parties to be open at all times and to be faithful to the plan.

You will hear the non-stop advertising and see the deals and discounts in your faces, but it is up to you to determine how you respond.

If you fall short this year, next year can be better with earlier planning. Determine the goals and put the supporting financial plan in place early.

Oran A. Hall, principal author of ‘The Handbook of Personal Financial Planning’, offers personal financial planning advice and counsel. Email finviserl.jm@gmail.com.

ITHERE IS a certain false comfort that comes from believing that your organisation’s profitability will always occur in the same way, year after year, that is, until the magic stops.

When a disruption takes place, you must face the facts: your products are stale, your people are disengaged and your loyal customers are doing business with someone else altogether.

Now, it’s time to transform your business, except that you are too late. The perfect moment was several years ago, while you were enjoying the fruits of your success. Back then, you suspected that you would eventually have to make a shift but never expected it to come so quickly, so suddenly. You thought you had more time. In retrospect, you should have paid more attention to the disruptions already taking place in other geographies.

If your business is able to survive today’s onslaught, how can you ensure that it never happens again?

One way is to plan the kind of strategy that assumes a future combination of new technology, external competition, poor economic performance and government regulations. Put them all together and you imagine a perfect storm in which you are forced to react to monstrous changes.

There is a way to be proactive. Start by using the ‘jobs to be done’ framework introduced by Clay Christiansen. It asks the question: What are my customers trying to do when they purchase my product or service?

For most industries, a rough answer might be: to achieve a decent balance between price and value. For example, look at the value-price equation for a highly competitive niche like Internet access. Over the years, the consumer has been able to enjoy the best of both worlds as both sides of the equation have improved dramatically. How can you provide such a benefit to your customers that would endear you to them?

CHANGE YOUR MINDSET

If your company views customers as scoundrels to be defeated or as disloyal partners to be scorned, it might be time to shift your

mindset. Instead, think winwin, in which each transaction is an opportunity to build goodwill on both sides.

Consider that the average transaction delivers a dose of goodwill that ‘satisfies’ both parties. However, that might simply be ordinary.

What if you were to commit to a mindset of providing extraordinary goodwill? What difference would a systematic approach to increasing value and decreasing cost make to your company?

Imagine if you were to keep your prices constant. Ask yourself how you can deliver even more value to customers, while continuing to achieve a win-win relationship.

As tricky as this may sound, it’s a principle embedded in Jamaican history. ‘Brawta’ – the little extra offered by a supplier to sweeten a transaction – has been part of our island’s commerce for as long as most remember. The idea is simple: A supplier can improve the buyer’s experience in ways that are asymmetrical.

For example, imagine visiting the local butcher. She offers some raw dog meat as brawta — a gift of scraps that were headed to the garbage bin. To her, the cost is nothing. To you, the benefit is substantial.

As a supplier of value, you probably have lots of ways to make your customers’ lives easier. You just need to look for them with the right level of creativity. Once found, can they be packaged up and delivered so they add significant value yet cost you relatively little?

CUT PRICES

Here’s the more difficult part. How could your company deliver the same value, enjoy the same margins and lower prices at the same time?

This is no theoretical exercise. Instead, you are anticipating a time when you won’t have a choice – a future in which you may be forced to cut prices in order to remain competitive. The difference is that if you do so now, you will have higher margins and retain some powerful flexibility for later.

In effect, you are building a buffer against disruptions.

Plus, you’ll be able to provide customers the kind of price cuts that make them fall — and stay — in love with your business. As foreign as this may sound, look around at companies that consistently offer you the lowest prices. If they are smart, they are being aggressive to find ways to continually cut the amount you must pay.

What you may not know is that there’s a secret benefit to this effort. If your company commits to reducing prices, it will discover the technologies necessary to keep a competitive advantage. In other words, you’ll never be surprised by a disruptive technology because you already use them.

Together, these three strategies can launch you into a different world from your competitors – one they’ll find hard to replicate.

Francis Wade is a management consultant and author of ‘Perfect Time-Based Productivity’. To receive a summary of links to past columns or give feedback, email: columns@fwconsulting.com.

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