We know that half of all small to medium businesses fail in their infancy, after spending more money than they make. This means the other half are doing something right. Bayswater director Arnold Kluck says stripping things back has served his car rental company well. Watch our interview to find out how to simplify your business and improve cash flow.
What did Leonardo da Vinci, Steve Jobs and Amelia Barr have in common, besides trailblazing their respective fields?
They understood the immense power of simplicity to create and maintain success.
Simplicity is the “ultimate sophistication,” Leonardo da Vinci once said.
This is as true today as it was centuries ago.
In fact, it applies more now, in the face of a dizzying medley of options that never existed before.
Steve Jobs built his Apple empire at a time when humans can do more than ever, yet he insisted that a simple approach moves mountains.
This also works when moving people from A to B, it turns out. Arnold Kluck from Bayswater adopts a similar “no frills” attitude to run the largest independent car rental company in Australia.
Their motto “no birds car hire” was born in the seventies. This cheeky play on words reflects a back-to-basics approach. At the time, major companies used beautiful women in uniform (“birds”) to promote their vehicles.
Bayswater refused to do this and kept their prices low – hence their “no birds” philosophy that underpins everything they do today.
How to simplify your business – don’t bite off more than you can chew!
Don’t confuse simplicity with being simple-minded or simplistic.
There’s nothing easy about finding a simple solution. It demands a deep understanding of your clientele, competitors and the wider environment. Your priority is to simplify processes for consumers and staff, to improve cash flow.
In many cases, this involves cutting back on what your business offers. Too many options can work against you!
This seems counter-intuitive, but hear us out. You run the risk of complicating your business if you try and adopt every strategy that comes along.
Arnold Kluck resists this temptation every day.
“There are always new things coming, new ways of doing things and new philosophies, so you have to take your time and go “well we won’t do that because it just complicates our model”. You run the risk of missing out on a bit – but if you don’t spend the money you don’t have to charge additional.”
Bayswater only rent out cars. They focus on doing this well, rather than offering a smorgasbord of mediocre services.
If you hire a car, you can only choose from four Toyota types. Sticking with one brand is deliberate. Arnold says other manufactures try to sell their cars to him at a discounted rate, but he doesn’t budge. He’s built a solid relationship with Toyota and is rewarded by their strong support.
This uncomplicated attitude extends to servicing the cars in their workshop.
“We have just one set of bumpers, one set of paint, one set of panels ready to go, so we know how to repair them, we know how to service them and we keep things simple.”
There’s something to be said about offering a limited selection of cars to clients as well. Although choice is wonderful – too much can be overwhelming.
Consumers are stressed by too many options…
Have you ever walked into a shop to buy jeans, only to feel as though you’ve been hit over the head, because there are so many options?
- Slim fit
- Boyfriend jeans
- Skinny Crop
- Boot cut
- Flared jeans
- Straight leg
- Cigarette jeans
I’m getting anxious simply typing this – which pair do you try on first? Professor Barry Schwartz studies the link between economics and psychology. In his TED talk, he explains that too much choice can lead to “decision fatigue”. A flood of options makes it harder to decide.
The Harvard Business Review states that consumers are more likely to purchase from companies that remove obstacles from the decision path. Businesses can make it easier for people to weigh up their best options. This is particularly important since consumers are more burdened than ever!
There are many ways you can simplify your business to boost sales and improve cash flow. A few ideas:
- Provide clear navigation by cutting the steps required to make a purchase.
- Don’t provide too many options, since this can put people off.
- Present information that’s relevant to the consumer in an easy-to-digest manner, so they can quickly identify the features that suit them.
Bayswater does this on their website, by highlighting key differences between their cars in a clear list. This is easy to absorb at first glance. There’s enough information to deliver clarity, without going overboard.
They also compare their vehicles to other brands, which soothes your judgement muscles. Never underestimate the power of comparison, when it comes to narrowing down options. It’s human nature to assign value to an object by relating it to another. This is an effective way to assure customers they have all the tools needed to make the best choice.
“Simplicity” doesn’t mean staying in one spot – adapt to improve cash flow:
Most businesses are impacted by forces outside their control, such as seasonality. This demands a shift in focus.
People tend to go on vacation during summer, which is the busiest period for Bayswater Car Rental. They increase their fleet by 25 per cent to meet growing demand. Stock is reduced by a quarter in winter, when sales drop. Simplify your business and save money by cutting down on resources when demand is low.
“You’ve just got to be prepared to do your maths and stick it out, because if you know what’s coming you can plan for it”
Many Australian companies experience similar swings in revenue over the year. February was the lowest month for small businesses recovering from the Christmas period in 2017 and September was the best month, on average.
There’s always the risk of mismanaging funds when this happens. But there are steps you can take to improve cash flow:
- Identify your peak season: new businesses can research how their competitors perform at different stages over the year (if that company is publicly listed).
- Established businesses can sift through historical sales data to identify the strong and weak months based on revenue and expenses.
- Plan in advance for fixed expenses, such as rent and utilities. Save part of your earnings from the busy period to cover slower parts of the year.
- Be diligent about recording your revenue and expenses each month. This provides a complete picture of your financial health, which you can refer to in the future.
Be mindful of your accounting during seasonal changes:
For Bayswater, their capital transitions back and forth from cash to vehicles, so the numbers can be misleading if taken at face value. They actually see the most money in the bank during winter, because they’re purchasing fewer vehicles. Their accounting books reflect a loss when buying more vehicles during the busy season, but this doesn’t mean they’re losing money.
The relationship between cash flow and accounting isn’t absolute.
“Your net asset stays the same but it just transfers from vehicles to cash or vice versa,” Arnold Kluck said.
Simplify your business in the face of technological evolution:
Car rental has been a strong industry for many decades, but it’s now threatened by ride-sharing apps, electrical cars and autonomous driving.
Arnold believes there will be a need for rental cars in the future, but doesn’t know what this model will look like. He predicts there won’t be many companies popping up over the next five years, due to uncertainty.
“The ones that are ahead of the way and technology will do very, very well. We’re hoping to be one of them, but there’s a lot of challenges out there and you don’t know what you don’t know. You’ve got to try and pick the course that’s going to be a winner.”
Bayswater’s approach is to implement small changes, one step at a time, to avoid losing their footing.
For example, they plan on purchasing the next-generation Toyota Corolla when it’s available. This will feature autonomous braking and a lane departure alert, which warns drivers when they drift outside their lane without a blinker.
One change at a time to improve cash flow:
Incremental changes drive a company forward, while minimising the risk of a major fall if the experiments don’t work. It’s important to keep your feelers out for industry shifts, even if you’re trialling minor tweaks and not taking a major leap. Never stop researching the environment you’re operating in.
Get into the habit of experimenting frequently, but in a way that’s economical, to maintain your stability.
Finally, get comfortable with some degree of failure. Adaptive organisations understand the best lessons come out of failed experiments. Companies that put failure in a bad light will breed staff that are scared to experiment with new ideas. You don’t want this, if you’re looking to improve cash flow.
In his book “Great by Choice”, Jim Collins says that people in the first wave of progress usually screw up the most, because they take the greatest risks with innovation. But they pave the way for those in the next wave, who study their failures.
Arnold Kluck says you can learn from people who take the first risk and tinker their approach to perfect it. Observe the failure of new technology and take it from there. You might not build a project from scratch, but there’s a good chance you’ll lift it to the next level, without falling head first.
“You’ve got to stick with it because people will tear you down, but if you learn from that and regather and keep going, we all win from that.”
Are you looking for more ways to simplify your business and improve cash flow? Watch this space for future blog posts!