July 2007
Risk Reversal
— The Power Of
Extraordinary Guarantees
Don't Lose Out To Fraud
Turn A Group Into A Team
5 Tips On Lead Management
 
Risk Reversal — The
Power of Extraordinary Guarantees
When you minimize the risk factor in a purchasing
decision a lot more customers are likely to say
“Yes".
One of the best ways of minimizing the customer’s risk
level is to guarantee your product. Plenty of
products come with a guarantee. They are mostly
little more than generic statements
(satisfaction guaranteed or your money back) or
pure compliance with legal requirements.
To really differentiate your product requires an
extraordinary guarantee. An extraordinary
guarantee is one that takes the maximum risk out
of the purchase for the customer. An
extraordinary guarantee can really contribute to
improving sales, attracting more new customers
and getting greater loyalty from your existing
ones.
What makes a guarantee an extraordinary guarantee? The
basis of a really effective guarantee is that it
must inspire trust in the business that offers
it. In the prospect’s mind, this sort of
guarantee goes a long way towards proving
that you can give them exactly what they need.
Do that and you have gone a long way towards
tipping the scales towards a sale.
Here’s an example from a wedding photographer.
If, because of any fault on my part, your
wedding photos do not come out, I will:
- Have the bride's and the bridesmaids' dresses dry-cleaned
- Re-hire or dry-clean both sets of parents’ outfits
- Re-hire or dry-clean the groom’s and the groomsmen’s suits
- Pay for another bridal bouquet and bridesmaid’s bouquets of the same design
- Re-hire the wedding cars
- Re-book the church
- Re-invite the guests
- Have a copy of the wedding cake made
- AND REDO THE PHOTOS!
Put yourself in the place of the young,
about-to-be-married couple who check out two
photographers. One says, "Trust me. I’m an
expert at this". The other says, "This is
your special day and it’s important that you
have a great set of wedding photos as a
reminder... and that's why I offer this
guarantee."
This is a perfect case of a guarantee that is based on
risk reversal – the risk of doing business with
the company is now transferred to the business
owner. If the photographer drops the camera in
the pond on the way home the customer will still
get their wedding day photos. So what have they
got to lose? What’s more, there are no strings
attached. Making your guarantee unconditional
means that you don't require customers to meet
any conditions in order to receive the refund,
replacement, or free services.
Risk reversal can apply in a number of ways. Some
businesses don’t take any money until the
customer signals they are happy with the product
or service. For instance:
- An interior decorator won’t expect payment until their client is completely satisfied with the
work they’ve done, or
- A commercial safety helmet distributor offers to buy back any units not sold in the first 3
months
In each case the customer has made a risk free
purchase because they know they’ll get what they
needed, an increase in sales, a decor that’s
just right, or they won’t have to pay; the
seller has taken out the risk in the deal.
Now comes the obvious question; if I offer this sort
of guarantee aren’t I asking to be ripped off by
unscrupulous customers?
To be able to offer guarantees like these you do need
to be sure you can deliver on what the guarantee
covers – top quality product and top customer
service if it’s that; or on time delivery every
time; or satisfaction with your services; or
being available on the emergency contact number
24x7 – or whatever.
Whatever the basis of your guarantee, you must be able
to deliver. And if you can, then where’s the
risk in offering an extraordinary guarantee?
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Don't Lose Out To Fraud
SMEs are particularly vulnerable to fraud. While most
SME owners probably take a somewhat paternal
view of their employees and tend to place a lot
of trust in them, statistics suggest that that
trust is all too often misplaced.
What’s more, the impact of even a small loss can be
extremely damaging to an SME. Cash flow is
interrupted, productivity slows while the mess
is sorted and the reputation of the business can
even be effected.
Small businesses can make themselves a lot more fraud
proof by implementing a few simple and
inexpensive procedures.
Hire carefully
It’s people who defraud businesses, so the first step
in avoiding fraud is to hire people least likely
to be tempted. Typically, in SMEs pre-employment
screening is rare and haphazard. References
aren’t investigated and statements of previous
employment are taken as read. In many cases of
internal fraud the employee concerned had been
dishonest with previous employers but their past
misdeeds went undetected.
Writing in The CPA Manager, senior forensic
accountant Thomas A. Buckhoff cites the case of
Paula Ross (not her real name) who claimed on
her resume that she possessed a bachelor’s
degree in management information systems and an
MBA. Based on these qualifications, a regional
law firm hired her as their information systems
director.
Nearly two years later the law firm discovered that
Ross had embezzled $2,035,232 by creating two
fictitious suppliers. A belated background check
revealed that Ross had neither of the two
degrees that she claimed she had received.
Knowing that would have been an early warning
sign that this was a risky hire at the least.
Research indicates that one-third of all CVs used to
gain employment contain false or misleading
information. It can be anything from academic
degrees that don’t exist to the fabrication of a
previous period of employment to replace a time
when the person was unemployed. While a
pre-employment check is no guarantee that an
applicant is all they claim to be, it is a good
first line of defense.
Develop procedures based on
separation of duties and use internal controls
A primary area of concern for SMEs should be their
accounts setup. It’s usual for one person to
manage the accounts of a business with little or
no separation of duties. Having just one person
to maintain the books, do the banking, count the
cash and manage payrolls (not uncommon in a
small business) creates the opportunity for
fraud.
Procedures for such common, but fraud vulnerable,
areas of operations such as handling cash,
purchasing and goods receipt are generally less
formal than in larger firms and often have no
inbuilt safeguards. Poor or easily circumvented
internal controls are the main contributor to
enabling fraud in SMEs.
Ensure that accounting work is never the
responsibility of just one person. Do periodic
counts of stock and cash and regularly reconcile
bank records. Follow up anything suspicious
immediately and don’t accept excuses.
Your accountant can offer a raft of information on
reliable internal control procedures used by
SMEs.
Watch for red flags
Look for warning signs that something’s not right.
These include changes in cash flow patterns,
stock shrinkage, variations in accounting ratios
and customer complaints.
Finally, watch for employees living beyond their
means, avoiding holidays and never delegating
any of their work. They could have something to
hide and it could be costing you money.
Fraud can’t be ruled out completely by internal
control practices but the harder you make it for
employees to cover their tracks the less likely
anyone will be tempted to try out the system.
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Turn A Group Into A Team
A team is a group, but a group in not always a
team. The difference: if a collection of people
shares a common office address, then it's a
group. If it shares a common mission and works
together to achieve it, then it’s a team!
Smart business owners know that running a
business is not a one-man show and that in the
workplace having a team is a lot more pleasant,
efficient and ultimately profitable than having
a group. But good teams don’t just happen. They
are the result of an intentional effort on the
part of the owner to create a work environment
in which every person knows how they are
contributing to making the business successful
and are made to feel appreciated for their
contribution.
The most common comparison when talking teams is
to think about how a successful sports team
operates. Here are some lessons from coaching to
help jumpstart the team-building process in your
small business.
Set the vision
Sports team members share a very clearly defined goal,
or vision and know that the only way they’ll
achieve it is to cooperate. In business this
means sharing your vision and your goals with
the employees, your team. Did you choose a
primary objective for your business to achieve
this year? Did you share it with your employees
so they all know where you want to go and can
get behind it? Did you involve them in working
out the strategies to achieve it? Let's say your
primary objective this year is to stimulate
retail sales for a new product line, and you
want it to be 20% of overall sales. If that
information isn’t shared with the people who do
your marketing and selling, then they’ll just go
on pushing the same products they always have.
To win the game everyone has to be working to
the same game plan.
Establish clearly defined roles
In team games every player knows what the role of
their position is and the extent of their
freedom to operate in contributing to a
successful play. And they know what the other
team members do so they don’t interfere with
their game. As the business owner, it’s your job
to make sure that every employee clearly
understands the role they play in the business.
That means developing a clear organization
structure (who is responsible for what) and
ensuring that every employee has an accurate job
description. Tools such as an organization chart
and team meetings provide a way for employees to
see how they fit into the big picture and to
sort out any time wasting overlaps or conflicts.
Make communication work to
improve team spirit
Communication is the building block of an effective
business team. Not just open communication, but
honest and respectful communication to build
regard for each other. There should be no
tolerance of abusive, denigratory or sexist
language in the workplace. Those just turn
people off from thinking of themselves as part
of the team.
Resolve conflict quickly and
fairly
Inevitably, there will be occasion for conflict among
team members. Ignoring a conflict can leave
space for it to grow until it becomes a major
problem. So instead of ignoring them, develop
your conflict resolution skills and create a
mechanism for them to safely bring those
conflict situations they can’t resolve
themselves to your attention. If you don’t feel
up to the task of counseling your employees on
how to resolve their conflicts yourself then
consider bringing in a professional, or do some
training to improve your skills and level of
comfort with the process.
Celebrate achievements as a team
Since every employee plays an important part in the
success or failure of your business, it only
makes sense to celebrate your achievements as a
team. Match the size of the celebration to the
size of the accomplishment. Be careful to be
inclusive – most wins are the joint effort of
many people including those not directly
involved in the final sale or whatever the
achievement was.
Turning the group into a team
A lot can be done towards building a team through the
application of experience and common sense but
it can be helped along the way by the use of a
business coach with particular skills in the
area. It can be very useful to employ an advisor
– particularly in the initial stages – to run a
review and establish just what needs to be done.
Behave like a captain
What you need to remember as a business owner/captain
of the team is that your team will look to you
for guidance on how to behave. Your behavior
will be a model for theirs and if you are
positive, upbeat and respectful of them, then
team members will tend to act the same to you
and each other. Demonstrate a negative or
critical attitude and the team will fall apart
into a group. Strong tone at the top is
essential to hold a team together.
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5 Tips On Lead Management
A lead is really just raw material waiting to be
turned into something of value – a customer.
Achieving this requires careful management, from
the moment the lead is acquired until the sale
is made and a new customer joins the database.
Modern lead management should be a combination of
people, software and processes that work
together to acquire, manage and convert leads
into sales. Lead management isn’t just having a
team of salespeople that prospect and sell, it’s
about having a systematic process for ensuring
leads are dealt with in the best way to turn
them into customers.
-
Qualify leads: to avoid wasting time on tire
kickers or missing out on a hot lead you need a
system to qualify the leads that come in. It
might be as simple as a checklist of the ideal
customer or the ‘feel’ of the person who took
the inquiry, but it needs to be made so that
response priorities and the amount of time and
effort to invest in nurturing the lead can be
assigned.
-
Ensure good leads are responded to in a timely
manner. Like fruit left too long, leads spoil.
Surveys show a surprisingly high number of SMEs
either are very slow in responding to a lead or
even fail to respond at all. That can be for a
variety of reasons (don’t check their email
frequently, have no one responsible for dealing
with them and so on), all of them resulting in
lost opportunity and bad reputation. Have a
back-up plan that kicks in when the primary
individual responsible for contacting leads is
not available.
-
Respond to leads appropriately: if you have
qualified a lead as ‘hot’ you can move to the
sale quickly. If the lead is just ‘warm’ then
more time is required to supply information and
build their confidence in your ability to supply
just what is wanted. Too much pressure could
cool the opportunity.
-
Develop a system to get leads to the right sales
channel: a particular lead may stand the best
chance of turning into a sale depending on
whether it goes to an individual sales person,
the territory manager, a reseller, or a
distributor. Don’t risk getting passed around
and going stale.
-
Make each person who has contact with a lead
responsible for updating the customer database:
it should be possible to call up the lead’s
record any time and have an up-to-date snapshot
of where things are. This is critical since it’s
the only way you can accurately measure the
quality of leads and decide your next move with
them. In the longer term, this data will allow
you to assess the effectiveness of marketing
programs and the ROI you achieve.
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