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Time to reinvent ourselves, new times, new business models.

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Never in recent years has there been a greater urgency to reinvent itself. It is mentioned that humanity itself since 2000 and the next 50 years will change more than in the last 2,000 years.

It sounds like an exaggeration, but technological processes have accelerated life in ways that we still do not yet realize. This change is concentrated in the way of working, of living, although we still lack much in internal changes, there is a strong weakness here, because although the fundamental value resurgence is taking the media, there must be an inner personal effort for this to be consolidated and we are still behind in this path. However, in the outside world, things are in a big blender with the following ingredients:

– Consumer requirements,

– Technological platforms,

– Environment,

– Business Models,

– Globalization of Diseases,

– Globalization of Economies,

– Digital transformation

– Communication Virtualization,

– Practical Applications of Artificial Intelligence

– Quality and Immediacy of Services.

– Sustainable development

– Biotechnology Fusion

Clearly the equation shows variables that were not measured before, some new and some not.

Let’s now add something from Singularity University’s Projections earlier this year:

– Global gigabit connectivity, which will connect everything and everyone, everywhere, at an ultra-low cost.

– The increase in human life expectancy by more than 10 years.

– AI-Human collaboration will skyrocket in all professions. This will lead to the gradual replacement of knowledge-intensive professions.

– Cheap and globally abundant renewable energy.

– The insurance industry is transforming from “recovery after risk” to “risk prevention”.

– On-demand production and on-demand delivery will lead to an “instant economy of things”.

– Advertising disruption.

– Cellular agriculture will provide high quality, cheaper and healthier proteins.

– High-resolution virtual reality will transform retail and real estate shopping.

– Increased focus on sustainability and the environment.

– As society becomes more aware of global warming and environmental challenges, companies will invest in sustainability, both from a necessity standpoint and for branding purposes.

Well, several of these announcements are already installed and others are in process for the very short term. In 2019 at the Singularity version in Santiago, Chile, there was a high-level group of attendees, representing corporations and state entities. I managed to attend thanks to a franchise and listen to experts from around the world, the second day what was on the table seemed an alternative reality, it was not from our country, it was not from our continent, and I doubt it was from most others, there was a lot of cutting edge research that makes you think that this “will come perhaps in many more years to us”, because we are small, we are far, etc.. That thinking may have been true in the last century, but today with the levels of global integration, thinking like that is causing many professions and especially businesses to feel that they are aging at an abnormal rate and the truth is: yes, they are. The adjustment today must be vertiginous, the trend must be integrated as something certain and not potential. Today we are all part of a series of experiments with high success and implementation rates. Even rulings are recycled in an inclusive manner.

PENTALOGUE FOR REINVENTING AN SME BUSINESS

Rule Number 1 Update the business model in the form of Co-creation, that is, integrate the different areas of my business internally and externally in the process of determining added value. Today I must determine the real needs from various points of view, our customers today are of a different generation, I must integrate what has been done historically and see the effective migration to the new.

Rule Number 2 Do not integrate technology first as if it were the solution to change, technology is the MEANS to achieve change, but the BOTTOM is a change in the business model. I then define which technology is appropriate.

Rule Number 3 The transformation process called “digital” is born first from the adjustment of the business model and then from an internal cultural change, the integration of the service modalities of the collaborators of our company must be trained in the new model, otherwise, the failure rate of technological integration is very high.

Rule Number 4 The key or focus to achieve transformation is in SERVICES. If we keep in mind that today the final consumer has online access from the dealer to the manufacturer, we will realize that B2C businesses will have a strong influence on B2B businesses. A normal wholesaler today manufactures based on its standard and the dealer must adjust to its parameters, often far from what the end customer requires. In the past, the only thing left to do was to conform to that standard. Today, the end customer knows who manufactures, where, how it is distributed, deadlines, etc. and therefore has the capacity to complain and, of course, to change.

Rule Number 5 Due to globalization, many products are in the process of commoditization. That means lower sales margins, more suppliers and competitors. Therefore, I must generate space for analysis in my company to give strength to CONSULTANCY. This true “trade” allows us to get closer to the customer and detect the “pain” and “need” he has, integrating with him from this point of view, achieves loyalty, differentiation and above all the possibility of generating RECURRING SERVICES, which will give sustainability to the cash flow of our company.

As you can see, our suggestions are quite logical and perhaps not very new, except for one detail: Today they must be the urgent focus of our strategic gaze, because if they are not activated, someone else will do it, and much more quickly.

“It is not the strongest of the species that survives, nor is it the most intelligent that survives. It is the one that adapts best to change”. Charles Darwin.

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Successful Virtual Sales

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Reality overcomes fiction, that slogan so busy in the movies when something surprises us out of the blue, manifested itself again today in the global business world. Years of experience, lectures, workshops, seminars where we were explained how to make a successful sale, suddenly must be modified from the root, because the very essence of these was based on the “contact” with the customer. Healthcare measures and also digital transformation as a process of cultural evolution leave this cornerstone altered and in some cases literally obsolete.

Sales managers around the world are usually a very high proportion of self-taught non-professional sales people, in other cases various professionals who had to incorporate sales as a “technique” to survive in their basic studies, and to a lesser degree some born salespeople. Whatever their origin, today they are facing a very different reality and therefore must “reinvent” themselves by adapting the best of the past and jumping on the bandwagon of commercial virtuality without delay.

The different sales processes, customer prospecting today is maintained through calls and emails, after a normally very basic analysis (by zonal divisions, by vertical category, etc.). In some companies more up to date CRMs connected to AI systems generate fine segmentations, but it is not yet common.

The next stage of negotiation has lost the space for that “magic” where the salesperson tilts emotions, temperaments, techniques, needs and benefits in the sacred moment of the sale. Today he must do this in front of a screen, where the interlocutor has less time and more space to hide behind a mute or a blocked image. Today we are faced with those reality shows where you meet a millionaire banker to whom you must sell your business idea in the few minutes it takes you to ride in an elevator, there is no more time.

Therefore, if this is already a trend, we must do it right, use everything that exists as a tool and transform the old salesperson into a SalesManager version 2020.

The first thing is obviously to get to know the media correctly, the platforms that are used today are varied, and we must prepare ourselves so as not to make a mistake, one wrong keystroke and our business is gone. Whether Zoom, Teams, Meet or other, they are simple, easy to use and can be used on smartphones, tablets, notebooks, etc. without major problems.

The recommendations in front of the screen are very important, look good, an appropriate background, regular wifi network, and above all good sound, many meetings are “heard” rather than seen. There is a tendency to multitask, this means that an interlocutor can be doing more than one thing while listening, or supposedly listening. It should not be this way, but it is a reality. We have been in group meetings with only black screens, this should never happen from a salesperson.

We have little space, and we must be concrete, hopefully practice several times with time, and rely on a striking presentation oriented to the one who will observe it, in substance and form, with limited time, language with precise marketing, benefits over features. This is what one must bring from years of business experience to the present moment.

The fusion of virtual sales and traditional sales will generate your success, but you must get used to be up to date, the times of “we have always done things this way” are gone, today we live in the change, every day new applications appear, we must navigate in the networks observing this, educating ourselves in youtube, webinars, elearning workshops, lives, etc. social networks migrated to commercial networks and every day new ways of giving added value to our customers appear.

Welcome to the digital economy, where no one is left out, and sales are perfected with simple tools available to everyone.

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Professionalization of the company: key to projection.

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In Chile, 80% of the companies are family-owned, a scenario that presents several administrative and management shortcomings, which can be addressed by creating corporate structures that allow the business to be projected over time.

In general terms, a “family-managed company” is one in which at least 50% of the senior executives are from the same family group. INE data indicate that today there are around 750,000 companies in Chile, and of these, according to studies by the Business School of the Universidad de los Andes, around 80% are family businesses.

This is not minor if we take into account that, at market level, it is considered that a company loses value if more than two thirds of the executives are family members -mainly because of the potential for conflict- and that, according to the Association of Family Businesses (AEF), 85% of these companies do not survive to the third generation, with an average duration of 8 years of existence.

ROLE CROSSOVER AND LACK OF MEASUREMENT

“These companies face, first, a growth crisis, and then a management crisis”, this would be generated, among other reasons, by administrative failures of managers and/or owners, invasion of roles or members unsuitable for the positions, lack of protocols, irregular financial and communicational flows.

In this scenario, one of the greatest shortcomings may come from the leader, who, bypassing middle management, intervenes in the areas of competence of other members. “This is harmful, because it avoids the structure of people through which you could transfer decisions, and at the same time, measure their efficiency”, it also happens that the founder is the one who “has the business in his head”, not having created a system to transfer that knowledge, a scenario that can complicate the family succession of the business.

Another present problem is related to people in positions merely because of family connection, instead of knowledge, “who try to make up for what they don’t know, with authority; thus, those who really know see that there is no merit in the processes”, adds the engineer. Unfortunately, in these situations, there is often no intervention, either for emotional reasons or because of a lack of effective measurement of the work to support a removal.

In terms of financial diagnostics, he warns that audits often uncover what he calls “Bowling Pin Syndrome”, a common phenomenon characterized by unclear accounting information and/or erratic cash flows, something that usually goes unnoticed “because the owner feels that the business has been doing well”, but which may be generating large losses.

BUSINESS BLINDAGE or ORGANIZATIONAL MANAGEMENT

At the corporate level, the professionalization of an organization is not merely the academic improvement of its members: it is to make it visible, optimize it and standardize its operation through a clear and assessable corporate structure, thus generating a “shield”,

to consolidate its position in the market as well as to face its ups and downs. Something that can be complex to achieve in a space where things have often been put together on the fly.

This requires a company accompaniment – developed by external advisors – characterized, in the first instance, by the creation of management committees, which will define rules, procedures, roles and authorities, and regularize the provision of information for decision making. “The objectives must be clear, nothing can be left to interpretation,” he says, adding that an alignment of senior management, with commitment and a strategic outlook, is fundamental to the success of this.

“In Chile, it usually happens that when companies go bankrupt, especially medium-sized ones, they do so because of cash flow problems”, stressing that a restructuring of the financial administration may be required, consciously analyzing the suitability of the roles, not only in this area, but at a general level, since “the neural network of the company is sometimes different from the network of authority and you have to be able to identify who is who, to make the most of human capital and see where the elements that give meaning to the process are”.

In this sense, it is vital to measure the performance of each of the parts of the gearbox. “Progressively each member should be advised that they will begin to be evaluated. Methods and goals are established, and the person will have to start performing. If he or she doesn’t, there is an objective argument for moving him or her; in addition, a signal of transparency will be given to the rest of the organization.”

However, it is asserted that success in the process stems from the ability to visualize the value of the process. “There are people whose business is so good, that they won’t make the effort to become more efficient, because they like the familiar. And no matter how much they are told that such a person is a ‘disaster,’ they won’t take him out.”

LONG-LASTING

It should be clear that the experiences of professionalization counseling vary from case to case, and according to the specific needs, although all of them require long-term and, in the first stage, intangible work. Depending on the organization of the company, after approximately 6 to 18 months, the necessary radical changes begin to be identified: who is really useful, who has potential, as well as who and what no longer worked”. However, contrary to what one might think, in the expert’s opinion, these are very simple stages that begin with the loyalty of the information. “When you have the appropriate information, you start with one area, normally administration and finance, which is the one that summarizes everything, then you combine it with the commercial area, with the logistics area, and in the end you make the whole unit work together in a great delivery of regular and stable information. And with that you can make key decisions to give projection to the company”.

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How much is my company worth?

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When we have goods that are easy to exchange this question is asked based on what the market is willing to pay, and it applies to properties, vehicles and practically all goods because there are web portals that in a very simple way can determine value ranges.

But if someone suddenly arrives and says “I want to buy your company, how much is it worth?”, the answer is not so simple, because although what the market is willing to pay is always a premise, access to this information is not easy to access.

In developed countries where the accounting and tax systems have public regulations, companies are traded as a commodity because it is assumed that the values are audited, reviewed and controlled.

In Latin America the issue is like this only in the corporate segment, but what happens in the middle or small segments? In this case we must carry out a valuation process that, although not extensive in time, can be complex due to the quality of the information.

What makes this process difficult? events such as unaudited financial statements, continuous changes in accounting styles, confusion between company assets and shareholders, etc, etc.

Therefore, if you want to answer this question and just as you know the value of your house, your car, your apartment on the beach, you should assume that it is better to be prepared to answer this question in advance so as not to embark on a sale that will cause you to encounter uncomfortable surprises.

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SMEs: Prevent or Lament

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Common sense tells us that during the winter we should be attentive to the weather report so that we are not caught in the rain without the proper clothing and umbrella. If we are not prepared, we can obviously get wet. In an ideal scenario, companies also take all the necessary financial safeguards to avoid being surprised by a crisis that could jeopardize not only the fulfillment of their obligations, but also the very survival of the business. 

Unfortunately, the reality of many micro, small and medium-sized companies -which account for 98% of the country’s labor capacity- shows that there is still a great deal of improvisation in financial management. Companies do not detect where their weaknesses lie until a local or global event – a crisis, market or technological changes – bitterly reveals to them that they could have avoided a debacle if they had been “armored”. 

It is in normal and prosperous times that we must properly prepare for crises, because when the crisis has arrived, there is no more time. It should not be forgotten that the economy moves in cycles of highs and lows, of stability and volatility. Experts who have studied the subject point out that major crises occur approximately every 10 to 12 years worldwide and that they occur in increasingly shorter periods. 

A wise warrior knows that he cannot wait to receive an attack before saying: “I will have to design and make my own armor” or “get a blacksmith to give me an armor resistant to everything”. That moment has passed, and now he must be in the trench all day, resisting the attacks of his enemies and in the few moments of rest, dreaming of the time he lost. 

Similarly, companies must be financially shielded to meet their challenges. For Chilean companies, their main armor is working capital, since in general they do not go bankrupt or lose their battle because their products are deficient, but because they do not know how to optimally use their “cash flow”. 

The most recent international crisis alerted that many SMEs in Chile have not yet taken seriously that the management of this concept is vital when planning the development of growth or decline, for their own or external reasons. A cash flow mismatch can cause a great idea, a tremendous innovative effort or years of entrepreneurial family effort to disappear for lack of proper financial shielding.

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Tips for Economic Challenges

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1.- CALM

Nothing is decided correctly in the heat of the moment, it is very important to be able to mentally process the situation calmly, to find the space to be able to reflect.

2.- TEMPLANZA

This is not the time for complaints or emotionalism, that is wasted time and does not contribute to any change, we must assume the change and be VERY TEMPLATE in the analysis of the reality we face. Moments of change are not necessarily a drama but an opportunity to adapt to a new reality.

3.- ECONOMIC AND FINANCIAL ANALYSIS OF THE COMPANY

To make decisions for an action plan I need to know what I count on, how is my company really doing? Is it prepared for a downturn in sales? Do I have external or internal liquidity support? I need to have an x-ray to know which treatment is the most appropriate for medicines or vitamins, or both.

4.- VARIABILIZE EXPENSES, eliminate superfluous expenses and make fixed expenses variable.

5.- INVESTMENT EVALUATION,re-evaluating investment projects does not necessarily mean stopping them, many times they are necessary to take advantage of the moment, but it is important to evaluate the moment of execution to see if it fits with the economic demand.

6.- ACTIVATE FINANCIAL SHIELDING,privilege your cash flow, look for liquidity by all means (improve collection, negotiate suppliers, improve your bank lines).

7.- ACTIVATE MARKETING STRATEGIES, seek to position yourself and be current in the market at low cost (social networks, marketing notes, etc.) Your competition will also be affected, it is an opportunity to occupy the market. Periodically review your business model and ADAPT.

8.- ELIMINATE “BAD” DEBT, free yourself as much as possible from high interest debt such as credit cards, overdraft lines or similar.

9.- EVALUATES THE USE OF YOUR FIXED ASSETS

In many companies the use of the company’s assets are over-protecting the activity, check if the company’s liquidity can be improved by making a refinancing structure more in line with the economic moment.

10.- PLAN B

It is always healthy to have a contingency plan, such as looking for new partners to add value in management and capital as an option and also to take into account the valuation of your company in case it is time to sell.

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