Innovate, Don’t Ape – How to Survive the Recession

Aside

apeThirty years ago, according to a recent article in the Economist, the bosses of America’s car industry were shocked to discover that Japan had overtaken them to become the largest car manufacturers on the planet. The bosses blamed this success on cheap labour and government subsidies.

But the progressive bosses went to Japan and discovered that Honda and Toyota had raced ahead of them by virtue of a combination of innovation and inspiration. The American manufacturers quickly dubbed the methods of production “lean manufacturing”. This approach to manufacturing was in fact an American idea that was fully developed in Japan and ignored in America. The inspiration was to listen to customers who – echoing today’s demands- were looking for cars that were cheap on gas but still a quality product.

The moral of the story is that if Japan had merely aped American car manufacturers, their car industry would not have thrived. Today’s emerging economies are growing in part on cheap labour but mostly because they have innovated faster than rich countries. Kenya, for example, is the world leader in money-transfer by cell phone. Frugal innovation in the emerging world has created the $3000 car and the $300 laptop. These products were re-designed to eliminate costly steps in the manufacturing process.

The lesson for today’s businesses is an old one. Innovate don’t ape. If everyone else is offering sale priced goods on senior’s Tuesdays, and they are not making any money, why would you want to copy them? If everyone else offers the same burgers, the same landscaping service, the same financial solutions, the same furniture, then, to compete you must drop your prices in order to gain customers.

 In a conversation last week with a manufacturer in Vancouver, the owner told me that his approach during this recession had been a total reversal of the approach in the recession 10 years ago. A decade ago, the company chose to ride the storm and drop prices. This time they cut costs and left prices intact. The result: fewer sales but more cash in the bank.

 So, the question is how to innovate. Can you make your product or service better in some way than is currently offered? Will the change be a gimmick and easily copied by your competitors or can you offer something your competitors cannot?

 Overwhelmed by the thought of what to do? Do you think your business has no room to innovate? Consider this. Water and flour are commodities traded on the world markets on price alone. When mixed together, they ought to produce another commodity. However, this product has over 1000 market niches with prices that reflect not the cost of materials or the taste of this food product, but the shape of the food. I am speaking, of course, about pasta.

This is brilliant marketing to create a market based upon the shape of a food product while everyone else focused on flavour or fast food.

5 keys to profitability – part 1

keysA profitable business is a saleable business. A profitable business is easier to manage and to operate. Everyone loves to do business with probable businesses because they all know the invoices will get paid. The best employees want to work for profitable companies because they know their paycheques will not bounce or get delayed.

Profit is the reason entrepreneurs get into business in the first instance; but how to keep a company profitable is sometimes a trial. Here is how, with the first of our 5 keys to profitability.

Attention to cash flow

Most business owners focus on price and margins forgetting an important element in running a successful business – cash flow. What does this mean and how does it work?

Let us consider for a moment that you are selling loose tea. You pay 1 dollar per kilo for the tea. You sell the tea for $1.50 per kilo giving you a margin of 33%. Monthly you can sell 100 kilos to 100 different customers. So every time you sell one kilo of tea you profit by 50 cents.

At $1.50 per kilo you can sell 100 kilos per month but experiments have shown that by dropping the price to $1.29 per kilo you sell 150 kilos per month to 150 different customers. That generates a margin of 22%.  So every time you sell one kilo of tea you profit by 29 cents.

Most business owners will focus on sales and price believing that dropping the price will increase sales and the sun will shine. But will that reasoning help your profits?

In the first example the cash flow is $50 per month. In the second the cash flow is $43.50. So dropping the price and selling even more tea has damaged the bottom line. In terms of cash flow, increasing the sales with a lower price has not been a good decision.

But if you focus on the cash flow figure, you can also improve profits, as follows. Suppose that you are now selling tea for the sale price of $1.29 per kilo. But instead of selling one kilo at a time, now the buyer must buy a minimum  of 2 kilos. As before, 150 customers come in and buy tea and the margin remains the same at 29 cents per kilo. But this time the contribution to the bottom line is $87. And you did not have to work any harder for that profit.

What this example tells us, is to focus on the dollar contribution and not margins or even the price. Dollars pay the rent, employees and taxes.

Written by Andrew Gregson, Senior Partner at Floodlight Business Solutions and author of Pricing Strategies for Small Business (2008).  1-888-959-0752  www.floodlight.ca. Floodlight Business Solutions, where we help you drive profits.

Thinking twice about price

WHEN bosses promise to make their companies more profitable they usually say they will do so by increasing sales or cutting costs. But a third road to profits is rarely mentioned: putting prices up. Managers often fail to ask how they might do better at plucking the goose to obtain the most feathers with the least hissing. The spiel from the management consultants who advise companies on pricing—whether specialists like Simon-Kucher or giant generalists like PWC—is that it is now more vital than ever to be smart at it. In today’s austere age many businesses cannot depend on rising sales volumes to lift their profits. As for cutting costs, most have already pared them to the bone. Prices are all that is left. And a business can do a lot with clever pricing, to boost its share of the limited spending-power that is out there.

Makers of high-tech products such as smartphones can opt to add whizzy new features and push up prices. In the case of luxury goods, their exclusivity is a large part of their appeal, and this in turn is a function of their price, so firms usually have scope for limiting supply and charging more: Ferrari, a sports-car maker, and Mulberry, a purveyor of posh bags, have both recently signalled that they plan to do just that. But raising prices by making products better or more exclusive is a strategic decision, open to only a few types of business. For all sorts of mundane goods and services there is much that can be done tactically, the consultants say, to charge more for the same thing.

Second, companies need to remember that, as the late Peter Drucker, a management guru, once put it, customers do not buy products, they buy the benefits that these products and their suppliers offer to them. So, businesses that fail to identify what benefits they are offering each type of customer are likely to be undercharging some of them. Equipment-makers who sell to other businesses can be especially prone to a “cost-plus” mentality, in which they charge the same margin to everyone instead of identifying those that are less price-sensitive and finding ways to earn more from them. Oil companies, for example, can suffer huge costs in lost drilling time if a pump goes down, so pump-makers could charge them a premium for guaranteed same-day dispatch of spares.

Airlines have learned to “unbundle” their product, charging separately for baggage and meals and increasing their overall takings. But industrial suppliers may still charge the same to customers who never call their technical helpline as to those who ring it daily. Makers of everything from aircraft engines to lorry tyres have gone further in selling benefits rather than products, by offering “power by the hour” contracts in which customers only pay when they use their goods. The suppliers earn more overall, while their customers preserve scarce capital.

A third route to charging more is to manage customers’ expectations better. In the early 2000s executives at General Motors were told to wear badges with “29” on their lapels, as part of a disastrous plan to get back to a 29% market share in America. This merely reinforced car-buyers’ assumption that GM would offer them whatever discounts it took to shift its metal off the forecourts, putting the firm on the road to bankruptcy. (Last year its market share fell to 17.5%, its lowest since the 1920s.) Once customers know that a firm’s price list is a work of fiction and that it will resort to discounts as soon as sales dip, it will be a long haul to get them used to paying full price, let alone accepting increases. Simon-Kucher’s consultants praise DHL, a logistics firm, which spent years drilling into its customers that whatever the economic conditions there will be a rate rise each year.

You’ve been framed

Fourth, there are lots of simple presentational tricks that almost everyone is wise to but which still, miraculously, work. Restaurants add some overpriced wines lower down the menu to make the ones at the top seem reasonable. Makers of ice cream offer “33% extra free” rather than “25% off” the cost of the regular size, even though these are arithmetically the same thing. Buyers at big industrial firms are just as susceptible to such “framing” when reviewing a list of widget prices.

The pricing experts make it sound so easy. But there are of course limits to how far firms can go in tailoring their prices to the customer without appearing sneaky. Last year Orbitz, an online travel agency, was criticised for offering a costlier selection of hotels to people browsing its site on an Apple Mac because it assumed they were richer than PC users. Although a firm’s customers may not notice the odd price rise slipped in here and there, they will eventually notice if their overall bill starts to swell: Tesco, Britain’s biggest grocer, is now having to offer expensive discounts to win back a damaged reputation for value.

And sticking to a pricing strategy takes guts. The irony, confides a senior management consultant, is that firms like his have such a taboo against letting go of a client that they are the worst at taking their own advice to be fearless in asking for more, and walking away if they do not get it.

Economist.com/blogs/schumpeter

Business for Sale – But is there enough money to retire?

In these troublesome economic times may businesses face the twin threats of falling sales and increasing debt. Is this the time to sell your business? Today, 20% of small businesses in Canada are for sale by owner or through a broker. In 5 years accountantinescapable demographics will push that percentage to 50%. With more sellers than buyers, prices will certainly fall. Choosey buyers will pay for the best and ignore the rest.

Will there be enough money to retire comfortably?

If that answer is no, what can be done to change that?

This article is all about business succession planning and how to do it profitably.

Step 1: Improve the balance sheet. That means reducing debt or at least changing the ratio between debt and assets so that the company has more value.

Step 2: Improve sales. Sell more but  be careful of selling to poor credit risks. This increases accounts receivable, an asset until it must be collected but then becomes a bad debt. You need more sales to better quality (blue chip) customers.

Step 3: Improve profits. This can be achieved by increasing prices, reducing costs and keeping more in the company.

Sound easy doesn’t it?

Well, how easy is it to increase sales today? Can you double your sales which will therefore double profits? These are tough times and your competitors are pushing back every day.

Marketing methods are changing. Yellow pages, the workhorse of advertising for decades is in its death throes. Customers now shop on line and the younger demographic chat on social media before opening their wallets. Have you got a strong presence in that virtual world? Have you got any presence at all or have you merely got a static website that is found on page 97 of a Google search?

Can you cut costs enough to make a big difference in profitability? This will not mean counting the paperclips but real and deep cost cutting. Cutting costs in any business is important. Cutting into fat is imperative; cutting into muscle regrettable; but cutting into bone, an amputation of ability to perform.

Can you increase prices and still sell more? Your customers may associate high prices with better quality, but can you deliver a better quality product or service? And how will you measure that better service and communicate that to your customers, in 25 words or less?

How can you reduce debt when every dollar earned is spoken for? You could manage your payments better and more purposefully to reduce debts, eliminating the highest cost debt first and planning to retire all the debt within 3 years.

soldBut please ask yourself how determined you are to accomplish all that this entails. Can you do this without help? Daily business pressures make it difficult. It takes character to create and implement a 3 year plan to improve the value of a business.

Andrew Gregson is  a Senior partner with Floodlight Business Solutions where we  help our clients to re-build their business. We focus on sales and the balance sheet so that value in the company is increased, letting the owner sell or retire.

Pricing Lessons – How to Sell more Healthy Food

broccoliI am extracting the pertinent information on pricing food, from a learned article by two INSEAD  researchers called “Does food marketing need to make  us fat?” ,.

Most food is still sold as a commodity which has brought with it a steady decline over the past 50 years in the relative cost of food. We spend less on food as a proportion of our income, certainly in North America, than previously. But does price or discounting influence purchasing?

The authors pursue a number of studies on the effect of price on purchase decisions that are important for the savvy businessman.

In the long term.

The average price elasticity of food consumption is low at -.78. We need to eat to survive! But, long term low retail prices for food, especially fast food, have resulted in people consuming more, as measured in the increasing rates of obesity.

But higher prices can lead to reduced consumption.  A 10% increase in the price of fast food leads to a statistically correlative reduction in obesity of 0.7%.

Pricing is a stronger motivator in a buying decision than nutritional labelling – a strategy that sometimes backfires because nutritional labelling is often associated with no flavour or just bad taste.

“The only exception to the rule that higher prices reduce consumption comes from a study showing that higher prices at an all-you-can-eat pizza restaurant led to higher consumption of pizza, probably because of the psychology of “sunk costs,” which leads people to try to eat “their money’s worth.”

In the short term

In the short term, significant price reductions can lead to measurable increases in consumption.

“Probably the best evidence of this comes from a randomized controlled field experiment involving 1,104 shoppers. This study found that a 12.5% temporary price discount on healthier foods increased the purchase volume of these foods by 11% among the low-income consumers who received the coupons. The effect persisted even 6 months after the promotion had been stopped. “

This is important because low income shoppers mind their pennies and are motivated to buy as many calories per dollar as they can.

Interestingly, “price deals can influence the speed of consumption even when the food has already been purchased. This should not, in theory, influence consumption because the cost cannot be recovered, no matter when, or how quickly, the food is consumed. Nevertheless, studies have found that people accelerate the consumption of products perceived to have been purchased at a lower price.”

Observation – quantity discounts lead to stockpiling which accelerates consumption. The quantity purchase of some foods displaces the purchase of other foods. Because it occupies shelf space, we eat more of it. This effect also persists even 6 months after the initial discount.

Recommendation – offer “buy 1 get 1 free”

*** However, the discounts on healthy food did not reduce purchases of “vice” or unhealthy food.

So, if you want people to buy healthy foods, do not discount unhealthy foods.

Observation – consumers prefer price discounts to bonus pack on “vice” foods, but prefer bonus packs to price discounts on healthy food.

Recommendation – offer “free quantity” promotions. That means Larger Package size on healthy foods like fruit and vegetables.

The points that are important to food retailers in order to increase sales and profits are:

  1. Keep the packaging of “vice” foods to smallest sizes and lower the price.
  2. Package healthy foods in larger quantities and keep the prices higher.

 

(Nutritional Reviews. 2012 October; 70(10): 571–593.  Published online 2012 October 4. doi:  10.1111/j.1753-4887.2012.00518.x PMCID: PMC3495296 Does food marketing need to make us fat? A review and solutions Pierre Chandon and Brian Wansink)

HOW TO REDUCE BUSINESS DEBT – A PRACTICAL ACTION PLAN

Business debt can be a good thing. It can help you to establish your business, fund growth or invest for the future. However, if the level of borrowing becomes excessive it can lead to many problems, such as:

  • Servicing the debt drains away all the cash
  • no free cash to deal with unexpected costs
  • debt unbalances the balance sheet reducing the value the business
  • no cash to take advantage of opportunities
  • Reduced service/product quality
Crushed by Debt everyday?

Crushed by Debt everyday?

This article gives a framework and various practical ideas to help you reduce your business debt.

A framework for recovery

There are six basic strategies that can help a business get out of excessive debt:

  • Sell assets
  • Increase income
  • Restructure liabilities
  • Reduce costs
  • Raise more capital from investors or partners
  • Exit the business

The following examples in each area are not exhaustive, but may give the business owner some practical ideas.

1.        Sell Assets

Your business may be able to conduct business normally without that extra forklift or truck. You may have a mortgage on your building and selling the building will reduce the debt and cash flow requirements.

2.          Increase Your Income

There are various ways of increasing the amount of money flowing into your business, such as:

  • Increase sales
    eg: through increased marketing, cross-selling to existing customers, offering special deals to get additional or advance orders, getting referrals with other organisations/affiliates
  • Raise your prices. This is easier than it sounds but if a price rise is not accompanied by a hard look at value pricing, then it will frighten existing customers.
  • Find alternative sources of income
    eg: renting out unused office space, assessing your waste or unused products and seeing if it has any value., obtaining commissions from other organisations

3.          Restructure liabilities

Your ‘liabilities’ are all the amounts of money that you owe to other people. Restructuring your liabilities doesn’t necessarily reduce the overall amount you owe, but it can give you more cash, more disposable income and/or reduce the amount of debt you need to provide working capital.

Examples of ways that you can restructure your liabilities to reduce your debt include:

  • Negotiate temporary  longer or scheduled payment terms with suppliers
  • Replace existing loans with, for example:
    • loans that have a lower interest rate
    • guaranteed loans (guaranteed by shareholders) to reduce the interest rate
    • repayments over a longer period of time
    • consolidated loans
  • Defer tax liabilities (this requires specialist tax advice)

4.       Reduce Costs

There are two principle ways to reduce costs:

  • looking for big savings, or
  • make small reductions across the board

To find big costs savings, concentrate on large savings first. Can you reduce rent by moving? Or cutting staff hours? To make savings across the board, set a savings target (say, 10%) and reduce each budget by that amount. Then take small steps to reduce costs, eg: reduce communication costs by going to prepaid cell phone cards or opting for cheaper equipment when purchasing, for example

 

5.          Raise more capital

You can raise more capital by:

  • finding more investors, eg: venture capitalists
  • issuing more shares to current investors
  • obtaining grants

Also, take a look at your asset list and assess whether it can be converted into assets of greater value. For example, if you own land, can you build more offices or houses on that land?

6.           Exit the business

To exit the business, options include:

  • Selling the business as a going concern
  • Going into receivership
  • Selling off all the business assets (including the business goodwill, eg: the client base) and using the proceeds to pay off the liabilities.

Andrew Gregson is a Senior Partner with Floodlight Business Solutions (www.floodlight.ca), a turnaround company that supplies specialist advice on rebuilding sales and reducing debt.

THE BAILIFFS ARE COMING! THE BAILIFFS ARE COMING!

How to save a business in crisis!

We got a phone call from a manufacturing business on a Wednesday afternoon with the message – The bailiffs ARE COMING! By Monday afternoon, we had put court protection in place. The court protection stopped the bailiffs in their tracks and bought the company 30 days in which to demonstrate to their creditors that the business was viable and could paul reverepay the somewhat overwhelming debt.

This business was viable, our analysis showed, because it had purchase orders in the pipeline. The orders had been delayed however due to circumstances beyond the company’s control. This familiar story had created the cash crunch and hence the crisis.

But the reality was that the company had narrowly avoided their creditor crisis for over a year by juggling the cash and making last minute payments. Now all the problems crystalised into one crisis. This was the perfect debt storm.

First we created a debt restructuring plan. To satisfy the courts, in 30 days the company must produce a credible plan to convince creditors that it can pay its bills in full or in part.  The payment offered to creditors is based upon the ability to pay. But some creditors are fully secured with asset loans or leases. They expect to be paid as agreed or they can exercise their prerogative and repossess equipment. Canada Revenue Agency is a preferred and dangerous creditor especially with regard to payroll remittances.  They demand to be paid within the first year no matter what the terms offered to other creditors.

The hardship really falls on the unsecured creditors. This usually means suppliers and can mean bank loans that are not personally guaranteed.

The company, through its intermediaries and the court, made an offer to the creditors based upon ability to pay. In this instance it was 100 cents on the dollar but paid over 36 months. And, oh yes, interest charges stopped.  In many prior instances of this type of agreement with the creditors, the debt was negotiated down to levels that the company could tolerate. Many deals have been struck at 35 cents on the dollar.

But is this the right way to help a company? Faced with insurmountable debt, a company has no operating room, no credit and is in serious danger that any minor bump in the road will send it careening off the edge. Just think of General Motors. And many companies have accumulated huge amounts of debt during this recession – loans  from banks, loans from government, suppliers unpaid, Revenue Canada remittances, unpaid taxes. Far too many owners also borrowed heavily from their own resources (house and credit cards) to keep the company afloat.

So if the company gets no help, it disappears, taking jobs and family assets with it.

But a bout of debt relief is not a solution for long term problems. Typically the company has seen falling sales and has lost the art of managing the company. In order to make this succeed, the marketing and sales have to be completely re-worked, pricing and costs have to be addressed, and most of all, the manager or owner needs a set of metrics in order to know when the business is on track.

If you can’t fix sales, a financial turnaround just doesn’t work. If you only fix the sales and marketing, the finances can pull down a very busy and otherwise profitable company.

Insider Tips to Saving Your Business in Canada

Business debt worries!!!□   Are you worrying about where to find the money for the next payroll?

□   Considering filing for a business bankruptcy?

□   Afraid to answer the phone in case it’s a creditor?

□   Meeting soon with your unhappy banker to persuade him not to call your loan today

□   Searching the web for business turnaround, bankruptcy, receivership and insolvency information to help your company.

There are 3 vital factors that any person leading a failing company must consider. These are:

1. Stress And Worry May Keep You From Saving Your Company
2. Trustees, Lawyers and Accountants Don’t Have All The Answers
3. Innocent Mistakes Often Kill Troubled Companies

Factor #1: Stress and Worry May Stop You from Saving Your Company

Here are some common worries associated with a failing company:

  • You can’t pay the employees on time. What can you do about it?
  • Is bankruptcy the right answer? Will this save your company or kill it?
  • Should you pay your taxes? What happens when CRA or some other authority      padlocks your door?
  • Can you make your loan payment? Should you ask your banker for help? Will you      screw up talking to your banker causing the bank to foreclose?
  • You’ve made personal guarantees. What happens when the business fails? Will      you be working the rest of life to pay these debts? Could they take your      house?

Here’s the problem. Worrying is taking valuable time away from you… time that you should be using to save your company.

And it’s a vicious cycle. Because your worries are stopping you, your business declines further. And this causes even more worry and less action. You are the rabbit in the headlights.

Factor #2: Trustees, Lawyers and Accountants Don’t Have All the Answers

Trustees are experts at structuring settlements to the advantage of the creditors. But they have an accounting background and have no insight into how to salvage a falling business and return it to profitability.

Most lawyers have a passing acquaintance with the Bankruptcy and Insolvency Act. Unless they are working with the Act all the time, they are not aware of the changing politics of debt and what it takes to keep creditors happy.

Most accountants see burgeoning debt as a business killer and urge you to pay it down. They deal in ratios and cash flow but cannot help you rebuild a broken business.

 

Factor #3: Innocent Mistakes Often Kill Troubled Companies

Because you’re not an expert in business crisis management, you’re certain to make silly, but honest mistakes right now.

Do you know what to do when…

  • The bailiffs are at the door to seize your equipment?
  • The bank calls your loan?
  • You can’t make the rent payment?
  • The CRA padlocks your door?
  • Your biggest creditor threatens you for a payment but all the cash you have is for the payroll this week.
  • A creditor is asking you to make good on your personal guarantee?

The list could be much longer. You can just imagine all the problems for which you don’t have an answer. And when you decide wrong, you could be shutting your doors shortly and paying your creditors out of your own pocket.

Here’s How You Can Fix The Problems and Stop the Worries.

Call in a professional crisis manager. Why?

A turnaround specialist enters a company with a fresh eye, knowledge and skills and enjoys complete objectivity. The professional is able to spot problems and create new solutions that may not be visible even to company insiders simply because the latter are too close to the subject.

The turnaround manager has no political agenda or other obligations to colour the decision-making process, allowing him or her to take the unpopular yet necessary steps for survival.

Experience within a particular industry may mean little when a company is facing bankruptcy and a loss of revenue. A turnaround specialist brings experience in crisis situations. Like a paramedic, the talent lies in making critical decisions quickly in order for the patient to have the best chance at recovery.

Operating in the eye of the storm, the turnaround specialist must deal equitably with angry creditors, scared employees, and wary customers. With the highest stakes on the table, clearly this is no assignment for the faint-hearted.

When do you call in the professionals?

Most businesses can be salvaged, provided that the business idea is still intact and there are still customers willing to buy. It is not possible to turn around a buggy whip manufacturer, for example.

But the timing is important. Each day lost in not hiring the expertise translates into just two things – more cost and more pain.

Having a Business Turnaround Strategy can help you Build Your Business and create a more profitable company.

Article written by Andrew Gregson, Senior Partner at Floodlight Business Solutions  LLP

agregson@floodlight.ca

MEDIA RELEASE

Floodlight Business Solutions, a Business Turnaround Company, Launches

Kelowna, BC, A new type of business consulting company has just launched in Kelowna to help troubled medium sized businesses in BC and Alberta.

Floodlight Business Solutions Group LLP offers a unique turnaround service that is normally available only to companies with revenues in excess of $10 million per year.

Floodlight helps by focussing on two key facets of a company’s business problems – their finances and their sales.

“A company on life support needs a structured solution to its debt problems, it needs a strategy for pre-determined profitability and  it needs to pay attention to its pricing,” says Floodlight Senior Partner, Andrew Gregson. “But these are unhelpful in the longer term if sales do not improve”.

So Floodlight also brings expertise to the table that establishes both an online  and physical marketing presence to drive customers through the door.

The Floodlight business concept was created by a marketing genius who saw this opportunity. Don Robichaud was an exceptionally talented marketer with an instinctive feel for what would make any company’s sales jump, and had the ability to implement his solution. But he saw that his clients had too much debt, no profit strategy and no pricing strategy to complement the sales improvement. Enter Gregson, whose financial sweet spot is all three. Sadly, Don passed away in February this year, so Gregson, the other half of this yin and yang, is carrying the concept forward.

”Accomplishing a business turnaround is not for the faint of heart,” says Gregson. “It requires hard work and dedication on the part of the business owner”.

“With the help of professionals, however, the causes of the business problems can be identified quickly, and solutions can be created and then implemented”.

Why do businesses get into trouble? To quote former president Bill Clinton, ’It’s the economy, stupid!”.

Gregson believes that the recession has damaged many businesses in ways they could never have anticipated, while the length of the downturn has amplified business problems.

“In the first year, owners said to each other, ’next year will be back to normal’. As the gloom persisted, owners cut some costs and borrowed to make ends meet. But now, too many businesses have hollowed out their companies, carry too much debt and have cut into bone trying to get costs under control. And when the economy breathes again, they may be too far gone to revive”. How does the turnaround process work? Typical of any consulting work, establishing whether Floodlight can help at all takes one hour. Then the work of assessing the causes of the problems begins, followed by assembling a plan and then implementing the solutions.

How long does this take? A turnaround is typically a 90 day process of upfront “heavy lifting”, followed by 9 months of business coaching to keep the reforms on track.

Who can benefit? Floodlight specialises in providing support to manufacturers and service providers who have seen their sales crash and their debts soar.

For further information and media enquiries, please contact:

Andrew Gregson

Senior Partner

Floodlight Business Solutions Group LLP.

www.floodlight.ca

250-859-0752

AGregson@floodlight.ca

 

Dynamic Pricing – an Update

DYNAMIC DRIVING COULD LEAD TO DYNAMIC PRICING

 

dynamic pricing

dynamic pricing hits the auto insurance industry

 

A couple of years ago I wrote an article on dynamic pricing based upon my own observations; an article I had read about beer pricing in Britain and some crystal ball gazing. My speculation was that the impact of cheaper and more powerful technology to gather terabytes of information on our buying habits would inevitably lead to tailor made pricing. CBC Radio liked it, interviewed me about my views and created a radio science fiction adaptation.

Well, my predictions are happening, and in the stuffiest business world imaginable – insurance.

Car insurance companies in America and Britain are dismantling their broad stroke underwriting criteria in favour of a much more customised approach. The push to do this, was a ruling in an EU court that bars insurers from discriminating upon the basis of gender.

Insurers are now gathering information from black boxes in cars and even from smart phones. They can, or will soon be able, to determine if you drive too fast in school zones, skid round corners or run red lights. Big Brother is truly watching you as you drive around town.

The information is then used to profile your driving habits and calculates a risk factor based upon the data and not upon assumptions that because you are a 30 year old mother then you are a better driver than an 18 year old testosterone driven male.

“The reward for prospective customers can be a discount ranging from 10% to 40% off a standard rate. The drivers most likely to benefit are those the standard insurance market is overpricing because of their age or other factors, says Mike Brockman of  insurethebox, a British underwriter” Economist “Insurance and telematics . Feb 23, 2012.

Amusingly, a UK insurer launched a campaign in January called “Drive Like a Girl”. The intent is to goad young male motorists to drive more carefully with the temptation of wads of savings. I understand the market is growing quickly because customers like personalised discounts. Now if I can gaze into that crystal ball for the next lottery draw…

Andrew Gregson consults and speaks on Pricing Topics