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When it’s time to seek help

When it’s time to seek help

By Tristan Wiggill 

Running a small business requires hard work and dedication. Pinpointing the appropriate actions to take, based on a consultant’s expert advice, can take your enterprise to the next level.

It is important to understand that there are two types of consultancies. There are the wafflers, who sit with business owners and dish out verbal advice. And then there is the second group, which implements strategic and/or operational changes within organisations. The latter group naturally has the more difficult task to perform.

Before a client is taken on by a consultancy, it should analyse that client’s business, both financially and operationally. This will allow it to understand what is happening within the business and what its objectives are. Consultants should be able to fix, grow, or do both for their clients.

Once the consultancy understands what is going on, an implementation plan can be put in place, which indicates what needs to be done to fix or turn the company around.

Consultancies that have the required skills base, expertise, and academic background, primarily target large corporates and government. This is known as high-income consulting, which can cost R1 500+ per hour and eliminates most SMME clients as a result.

Of course, there are hundreds of consultants that operate in the small business sector. A word of caution: they are often one-man bands that may have left varsity recently and therefore have no real business experience. Consultants like this can, at best, put a business plan together. They can be a danger and a menace to SMMEs.

Finding a legitimate consultant needn’t be that difficult, though. As a rule of thumb, it is wise to choose a consultant that relies primarily on client referrals to obtain business.

“If we go in cold, we need to be able to say to the client this is what we do and this is who you can phone for a reference,” explains Rodney Sanders, manager of Rens Consulting.

“The longevity of the consultancy or individual is important in terms of identifying who is good and who runs a management practice that can fix or grow your business,” he adds.

Sanders says he has helped to double a plumbing client’s turnover year-on-year. “We advise him on both the financial and business side. Every now and again we sit down and look at the company’s books and say, ‘This is what is happening, this is what we suggest you do.’ And we assist with implementing particular changes that are required.”

Money’s too tight to mention

Small business owners frequently state that they do not have enough money or that their cash flow has disappeared. They are unable to articulate or identify the problems and can only indicate what turnover the business is doing.

“Part of the problem is that they frequently equate turnover to profit. They don’t always fully understand the relationship between turnover and a debtor’s book,” explains Sanders.

One of the biggest problems with SMMEs is that they tend to employ family members who do not necessarily have the required skills.

“We are busy with a client with a turnover in excess of R300-million per year and the family is involved. That is not a problem per se, so long as they are contributors. In this case, the business has grown beyond the capacity of the family and they are losing financial control. It has become too big to be managed in the way it was in the past.

Choose a consultant that relies primarily on client referrals to obtain business.

“They brought a guy in to be the right-hand man to the CEO, but he only exacerbated the problem. There are many other companies who struggle to maintain their growth trajectories due to family involvement. A lot of people mistakenly think that family is cheap labour, but it’s actually quite the opposite,” he cautions.

Hands-on

Frank Crisafulli of Rivers Corporate Plumbing says he is studying for an MBA because he has come to realise that every plumber who runs a company must be present all the time.

“Any small business is normally a family-type business. Often the father has passed it down to his son or something to that effect. One cannot get through anything. One cannot administer any changes and so there is never any real growth,” he laments.

“Most companies want to grow, and they want to use some sort of system. Nobody wants to complete the same handwritten job card every single day. Surely there is a better way? DHL doesn’t hand write every single delivery they make. DHL and similarly large companies can digitalise because they have the money to put the right people in charge of checking everything,” he says.

consulting 01Many business owners do not fully understand what their balance sheet is telling them.
Image credit: Creative Commons

Small, micro, or medium enterprises do not have the infrastructure to pay for a software application or something similar. “I am busy looking into that to get my guys to become more efficient and to save time and track vehicles. We already have that capability to an extent, but there is still a manual process involved and a person behind it. That person is normally a plumber or the business owner. I am moving in the direction of trying to find systems and ways to better manage work in the plumbing field, which would likely work for every tradesman,” Crisafulli says.

However, this approach requires capex. “Even within the largest corporates, it is often cheaper to hire someone than to deploy automated systems. We have about 50 staff members. It is cheaper to have a foreman policing them and checking the orders and so on. If something is not right, then I’ll step in. Getting a system in place for 50 people is going to cost more than what the benefit would derive.”

Down with the system

Some people, however, do not like systems. “Plumbers do not like systems; they hate admin and do not want to have to do it. To change someone’s ways won’t be easy. Many guys in the plumbing game do not have access to the same technology. It may work, but you would probably spend a year training everyone. A lot of money will be spent on equipment, which could get abused. For example, if you give a guy a smartphone with a gig of data, it is likely going to be depleted on non-work-related activities.”

Crisafulli explains that many of his staff do not have smartphones. “Even if they did, data runs out and phones get lost. You would need to provide them with the necessary infrastructure so they can respond to an email straight away.

“It is not realistic to supply your staff with 50 smartphones when you have to complete jobs in risky areas and where theft is likely, because phone numbers would change frequently, and it would all become a logistical nightmare,” he says.

Crisafulli believes it is good that guys in the industry are looking into this type of equipment and technology. “I think that the industry is evolving that way. However, it is still early days. There is definitely a reward in developing a system that can work internally for plumbing companies. The biggest downfall we have is job tracking and customer satisfaction. And the fact that not every job is the same creates additional complexities.”

Literacy 

According to Steve Brown, operations manager at the Institute of Plumbing South Africa (IOPSA), the use of consultants depends on where the costs in a business are and what an SMME has in terms of core competencies.

“Most guys in the plumbing trade are not computer literate. Also, the costs of business coaches and software can be prohibitive. I’m not saying those do not work, but most SMMEs do not have 10 minutes to themselves, never mind the finance required for coaching and everything else.”

The good news is that there are other tools available that IOPSA provides and which add value in terms of understanding the cost of being in business and what it requires.

“There is certainly credible information out there insofar as assisting SMMEs to start off on the right footing. This includes things like what they charge and what they must look out for in terms of covering their overheads. But the question then becomes: Do they understand what an overhead cost is?” he asks.

consulting 02Computer literacy is still rather low in the plumbing industry.
Image credit: Creative Commons

Brown says IOPSA provides assistance so that plumbers are able to ask the right questions or go back and develop proper budgets, to build sustainable businesses. “Those are the types of principles we put in place and advocate for.”

When it comes to business coaches, training courses, or installing software, sometimes they are a bridge too far for the average plumber. But all is not lost. “We have courses and we run webinars on a frequent basis to help guys understand where they are,” he says.

“This is not to say that we are the be-all and end-all, but we have developed guys in preparation for what they are going to be going through. If you follow our guiding principles that have worked or have been shown to work, you can alleviate the ‘school of hard knocks’ scenario.”


Click below to read the April 2018 issue of Plumbing Africa

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