THE COST OF DOING BUSINESS HAS GONE UP! WHAT NEXT?

The World Bank puts Kenya as a growing economy with a 5% growth rate by the end of 2012. Despite of this, businesses are still finding it difficult to save, invest and execute their organizations growth plans. A good number of factors keep affecting the ability to generate our desired profitability from the rise in energy prices, high rates of inflation, cost of borrowing, labor and office facilities would either directly or indirectly affect the cost of doing business. Since most of these factors are out of the control of the entrepreneur, it is critical that you put a close leash on your expenditure with the intention of weeding off expenses that do not directly increase your sales.
ENERGY PRICES
This will directly affect your traveling costs. If you have a habit of having meetings outside the office you may want to watch out for this cost. You may also want to take advantage of technology such as conference calls or skyping as an option to physical meetings. If the nature of your business is one for delivering products to the customer, it would be helpful to analyses the cost of purchasing a vehicle through hire purchase, leasing one and the cost of public transport. Select the option that is conducive to your business. When considering these options, one must be careful to include the full cost of the vehicle which includes maintenance insurance, fuel and possibly a driver.

HIGH RATES OF INFLATION
Increase in inflation will reduce your purchasing power making it difficult to purchase supplies needed to deliver your service. In addition to this, it is also important to remember that the rise in inflation will also reduce the level of disposable income for your customers hence reducing your sales volumes. You then have two options, to reduce your cost of production or differentiate your outputs to increase the value of your services. For extremely profitable ventures, it would be prudent to hold on dividend payouts and invest the surpluses in secure investments such as real estate, or fixed income securities.

COST OF BORROWING
Debt can be a good or dangerous for the business. The high cost of interest makes it expensive to acquire capital to either start a business or provide working capital. Short term borrowing tends to be more expensive and if not carefully monitored, you may end up working for the financial providers. It is critical that during a season of high interest rate to use debt to acquire assets that have a high rate of return and to structure it in a way that you are able to pass the cost of borrowing to a third party.

LABOR COSTS
The recent increase in minimum wage is a good indicator that the cost of labor is on the rise. You have to make a clear distinction between a profit center labor force and a cost center. Cost center labor forces are your administration, support staff and back office operations. They do not directly contribute to producing sales. Companies should consider outsourcing such services to reduce the wage bill, which included the cost of supervision and training. One must be strategic when recruiting. Staffing must be seen in the light of either increasing revenue or saving costs. A gap analysis will help you identify the critical skill needed to generate value that will get you out of a hole or propel you to greater heights.

OFFICE FACILITIES
A good office space will give you a sense of stability and comfort for you to execute your operations. Support services such as electricity, water, office refreshments, stationary and internet come with the territory. These are all expenses that are within your control. Business centers are a good way to save on facilities cost since these services are provides in bulk.

SAVINGS AND INVESTING
You must always be moving towards reducing your business risk and the best way in doing this is growing your passive income. This is income that is generated from your investments. Over dependency on one source of income could be detrimental in the long term in an environment where costs keep escalating. Investing in real estate, a second business that compliments the existing one are some examples of investment worth perusing. Investing in assets that are tax allowable would also be of great help in your attempts at reduce your tax liability.

The cost of doing business is predominately due to factors that are somewhat out of the control of the entrepreneur. As a result this increases the risk of doing and sustaining your business. You have to sharpen your skills and efforts in reducing this business risk through carefully making value adding decision for your business.

 

Profit Pathways – P.A.S.S.I.O.N Part 1

I recently had the opportunity to speak at an event and I share on what I titled 7 Pathways to Profit which I believe will be of value to you. Turning your Passion into Profit is a lifestyle.  It is not a destination because it keeps evolving as you keep discovering and making adjustments.  In the weeks to come I will share 7 pathways that will lead you to profit by your passion and it spells the acronym P.A.S.S.I.O.N. The pathway you follow will always determine your destination.

1. Before your Passion can bring you Profit, it has to be a solution to a problem. And how you provide the solution will determine your profit. Many people tell me I have but I have many passions, how can I know which is the one that will turn into profit.  And my response is always the same, which of the many passions you have is a solution to another’s problem.  Believe it or not, I love to sing and I can sing!  But I have noticed that no one has invited me to sing at any event, save at my nephew’s wedding where it was a dare.  But that is a story for another day. No one has ever asked me to sing.  However, I get many invitations to speak, which has led me to the conclusion that speaking is a better passion to turn into profit. The problem I solve is helping people create, manage or grow their enterprises.  Some people want to start and are afraid or don’t know where to start; others have started and need to scale up while others just need a one time solution for a persisting problem.  I am called to serve all those people through our programs Business Success Blueprint, Scale Up Blueprint or Speak for Profit for those who have a passion to speak like me. Before I move on to the next pathway, how you solve the problem will determine the kind of profit you attract.  Choose to be a peak performer and not a short cutter.  Be the best at solving the problem you are called to solve whether you are doing it pro bono or for a fee and watch the profit roll in.
2. For a long time I have heard it said that your Attitude will determine your Altitude. And to some extent I agree. But as I look around me, I have seen many people with a good attitude that have lowly incomes and people with good attitude and aptitude that were raking millions.  So I decided to alter that quote to “A good attitude with aptitude equals a cruising altitude” Did you know that private jets are designed to fly higher than commercial jets? And that the higher you fly the less congestion you experience? I hear the air is cleaner and the internet speeds are faster!  Similarly if you add aptitude, which is acquired capacity, to your passion, you can set yourself apart in your industry and enjoy less congestion and higher speeds of progress.  Acquiring capacity means reading regularly, investing in personal development of yourself and your team, refusing to settling for less than the best, developing some non-negotiables as a standard. Some of mine include, showing up on time every time, working with deadlines,  refusing to cut corners and going for excellence, to name a few.  The temptation is normally to fit in, I dare you to be your best self and stand out! Depart from the congested altitudes and soar to cruising altitudes.

 

Eliminate These Productivity Killers

As an entrepreneur, every single minute of your day is extremely valuable as you are using limited resources – time, talent and treasure. Any entrepreneur will do almost anything ethical for more time.

Sometimes your work environment and personal habits can waste precious time without your knowledge. Here are eight common distractions that are responsible for killing productivity.

1. Social Media. Facebook status updates, tweets and Instagram pictures are a great way to stay connected to your target audience, but they can also suck valuable time away from your day. Our culture is addicted to social media. Schedule time for this purpose.

2. Cell phones. Not only are phone calls and text messages a major distraction, but most of us have Facebook, Instagram, Twitter and various other social apps on our smart phones. While putting the phone on silent mode is better than nothing, it may vibrate across your desk, eventually peaking your interest and causing you to check it. To eliminate distractions, turn off your phone or set it to airplane mode while you work.

3. Chaotic work environment. Your office environment can be a major distraction when you are trying to get work done. While it is great to be accessible to your entire team, it is also important to have quiet space when it is time to get down to business. Establish a schedule open-door policy whereby your door is open for employees on a certain day at certain hours. You can also put a small whiteboard on your office door, so team members can leave you a note about what they need when the door is closed.

4. Email refresh syndrome. Many entrepreneurs could spend their entire day responding to emails. Ever find yourself constantly hitting the refresh button to get your email? Set it to auto-refresh every 30 or 60 minutes. You can then quickly scan your inbox and respond to urgent matters accordingly and address the rest at scheduled times. Responding to emails first thing in the morning before your day starts, once in the middle of the day, and then again before you leave for the day will help you keep current and end that disruptive refresh syndrome behavior.

5. Internet browsing. It is very easy to jump on a website for what you think will be a quick minute, but then several minutes or even hours pass. Checking sports scores, reading your favorite blog and keeping track of the most recent shenanigans can wait. Leave the Internet browsing work to the nine-to-fivers. (No offense to our working friends)

6. Taking unscheduled appointments. Not only will taking unscheduled appointments cut into your productivity for the day, but it also sends a message to the particular individual that your time is not valuable. Emergencies can pop up but they shouldn’t be the order of the day. Set aside a day to have scheduled meetings. This will also help you focus better.

7. Unexpected friends and family office visits. You are an entrepreneur, which means that you most likely have friends and family that think you sit around all day barking orders as you sip on a tropical drink while being fanned down. Unexpected visits take away from your production and also sets a bad example. Plan social time out with family and friends so they’ll be no need for them to disrupt your day,

These are just the tip of the iceberg. I am constantly trying to limit distractions that take time away from my company by asking myself every time I start a task or engage in an activity “is this the best use of my time at this moment”