When you hear people talking about sales goals, they're almost always referring to revenue. "I want to do $1,000,000 in sales. I want my company to grow to $10 million, $100 million, even a $1 billion.”
But, which is more important, revenue or profits? They’ve probably got it wrong. Shouldn’t the goal be to dramatically increase net profits - the money you keep after paying your expenses? And don’t get fooled into thinking that doubling your revenue is going to automatically double your profits.
In many cases quite the opposite happens. Sales may increase, but the profits lag far behind.
Perhaps a better idea is to prune your business - stop calling on the unprofitable and time consuming accounts - so you can reduce your costs and dramatically increase your profit margins.
With these thoughts in mind, let’s consider the situation a business owner we’ll call John found himself in. John owns a manufacturing distribution company, doing nearly $6 million in total sales. The manufacturers pay his company commissions of 30 percent, so his organization earns $1,800,000. It costs him $1,500,000 to pay his 50 employees and other expenses, so John takes home about $300,000.
He has nearly 600 accounts, but the bottom 200 doesn’t do much business with him. They do, however take up a lot of the sales and service department’s time, effort, and attention.
Doing an analysis, John discovered his 200 smallest accounts spent only $500,000 with him…but took up over one-third of his company’s available time.
As he considered the implications he came to these conclusions:
Target Your “A-class” Customers:
“Pruning” his business was the first step in John’s plan.
The second was to have all his people focus their efforts toward improving the quality of their service to their best, or “A-class” clients. This was easy to do because they were no longer wasting their time calling on, and/or servicing the unprofitable accounts.
This meant his team could easily keep their best customers very happy by making them raving fans who referred lots of other businesses to John’s company…and they were just like the “A-class” clients who had referred them. They were also able to find additional products and services they could sell to those “A” clients.
John and his sales team created a list of the top accounts they wanted to do business with...and went after them.
The attitudes and morale of his organization changed. His sales people were making more money, and everybody was having more fun because they were spending their time, energy, and effort serving their “A” customers; and with their new-found, free time, they’re now able to look for new opportunities and clients with the same profile as their best customers.
John is now setting his sights on growing his business to $8 million, and then $10 million in sales, by doing business with only the “best” clients... and figures he’s going to have much higher profit margins.
Growing Your Business
Here are three things you can do to make more money:
You’ll have more fun, and make lots more money.
First, it's virtually important to understand the meaning of "targeted marketing."
From my experience, most business owners who have learned about this still don't really understand it well enough. When I talk about "targeted marketing" I mean marketing with a laser beam rather than a shot gun.
Imagine there is a shooting target with the red rings and the bullseye 50 feet away from you. Some people would consider it "target marketing" to shoot at that target with a shot gun. In other words, they understand that their target market is out there, and if they market in enough different places, they'll get in front of them.
But why not shoot at that target with a rifle and a laser focus? With the shot gun you'll probably hit the bullseye with one or a couple of the shot gun's sprayed BBs. But with the laser focused rifle you can hit the bullseye with the entire bullet and put a much bigger hole in the target.
By "rifle target marketing" I mean finding your target market in more condenced, smaller groups, and marketing to them again and again. Here's an example: let's say Mr. Business has $1500 to spend on a marketing campaign. He's in the Twin Cities which has a total population, with suburbs, of around 1.5 million people. So Mr. Business has a choice to put out some marketing that will reach many of the 1.5 million people, or he could try to locate his target market in smaller groups and market to them several times. For $1500 he can probably only market to a larger portion of the 1.5 million people once. But if he finds his target audience in smaller groups, it's far less expensive to market to them and so he can do so multiple times for the $1500.
Let's say to have a successful campaign he needs 20 new customers from it. Now, many times business owners look at this and say, "I only need 20, for $1500 I can get XYZ to about a million people. I should get 20 customers from that many people." Well, let's go back to the gun target. Imagine that the target represents the entire 1.5 million people. Let's look at how much money we can spend per person for $1500: the average home has 3 people, so that would be 500,000 homes ($1500 divided by 500,000 homes). So that would leave us about 3 tenths of one cent per home.
Now, let's imagine that we find our target audience in groupings totaling about 6,000 homes. Now we can spend about 25 cents per home ($1500 divided by 6,000). Which do you think will get better results? The ladder will inevitably get better results almost every single time. So, why do most business owners not do this? A) I believe most still really think that "casting a wider net" is always better because they don't want to miss any prospects, and B) I think those that do understand it sometimes just don't go through the work of narrowing down who their target market or audience really is (it's actually usually fairly simple to do this, but that's for a later article). So, get out there and find your target audience in small groupings and save a lot of money and frustration by marketing to them with much better results.
During a pandemic, nobody can afford to spend money on ineffective marketing. This is THE BEST strategy to use to develop killer marketing campaigns without spending insane amounts of money. This brings me to my second principle: Now is not a time to experiment in marketing, unless you've never marketed before. Businesses need to really focus on the basics right now regarding marketing.
Whatever has worked in the past, do more. Whatever has performed poorly, dump it now. Those that you're not sure about: start tracking with extraordinary diligence.
If you're at least breaking even on them, keep them (my opinion is that if you break even attaining a new client, it's a good campaign because of potential repeat business and referrals). If not, dump them. It's not a good time to experiment with new marketing ventures.
When cash is tight, you don't want to get burned on a new marketing campaign that fizzled. Go back to all the marketing ads and basics that have always worked or worked in the past. Also, review your marketing messages (particularly your headlines) and be sure to adjust them to an audience that is afraid to spend money.
One of the biggest tragedies I see in business is watching a business owner spend significant time and effort generating leads for their business, but then not acting on them in a logical, methodical, repeatable way to convert those leads into paying customers.
You haven’t done that in your business have you? But I’ll bet you know someone (better to keep them nameless) who has a stack of business cards on their desk that they have collected through their networking activities but they have not been added to their customer database, no follow up has taken place, and they are essentially growing colder by the day. If that is you, no need to raise your hand. But it is time to get out of the trap and start turning those leads into paying customers- wouldn’t you agree?
To get started, take a few minutes and write down the specific steps that you take each and every lead through to get them familiar with you and your business. Each business has a different set of steps in their selling process. Some have just a few steps- most often where the average ticket price for a transaction is relatively small. Others have many steps- most often where the average ticket price is relatively large. You must decide how familiar a new prospect needs to be with you and your business in order to pull out their wallet and make a purchase. If it is a complicated product or service, you will likely need more steps in your selling process.
Once you have your current process steps written down, ask yourself, is everyone in my business doing it the same way? If not, why not? How can you have a “best in class” approach if you allow each individual to “roll their own”? How can you test and measure new approaches if you don’t first start with a standard? How can you improve and predict your outcome if there are multiple approaches? The answer to all of these questions is you cannot!
Establish your specific selling process steps, train your team to follow the selling process, support it with the necessary materials, and measure the results of each specific step. Make changes to your sales process based on the results of your measurements. Test and Measure. Test and Measure. Again and again. Make incremental improvements and hold yourself and your team accountable for the results.
This is a recipe for success.
The first area that my clients and I spend time on when we start working together is mastering the fundamentals of running a business. And, the key to having a healthy business is managing your money, your time, and the consistency of your delivery effectively.
Why are the fundamentals so important? Well, it goes back to the old saying, “You can take any road if you don’t know where you are going.” Setting goals and measuring your team’s progress (or lack of progress) toward those goals will determine your course and eventual outcome. And, if you don’t test and measure your results, how do you really know what is working and what isn’t?
Once you start getting into the habit of managing your fundamentals this way, an amazing thing happens. You start using your information to manage proactively instead of reactively. Once that occurs, you really take control over the results. You will become an expert in running your business, not simply an expert in delivering the product or service.
When setting your key performance metrics, you should have no more than five to seven measurements that act as business drivers. Tracking the number of clients you have, sales you generated, or profits you attained are obviously important, but they are results, not drivers. Rather a business driver is a metric that you can act upon that will impact your bottom line performance.
For example, your average dollar sale, the average number of times your clients purchased are from you and your profit margin are drivers. A good rule of thumb is that unless it makes a difference and can be acted upon, it is not a key performance indicator (KPI).
Start by tracking and trending your financials. Learn how to use your income statement, cash flow statement, and balance sheet and, more importantly, tie your actions back to them. Second, track the key business drivers or leads per month, your conversion rate, your average dollar sale, and the number of times your customers buy from you. Third, have one or two satisfaction and productivity measures; find and track the ones that increase productivity and customer satisfaction at the same time. Improving your KPIs become your priority. And if they are your priority, they will also become your team’s priority.
Set a goal for each KPI. Compare your actual results during the reporting period to the goal or budget. Have your team get in the habit of explaining why there is a variance and, if negative, what action is necessary to improve. If positive, discuss what you did to obtain those results and make sure you continue with them.
When I talk with professional business owners about building their business, I often get an interesting response… “No more. Please! No more! I couldn’t handle any more work; I’m flat out as it is.” This seems strange because many times their business is far from what would be considered massively profitable and by their own admission is often not a fun place to work.
The problem lies in a common misperception that ‘building business’ means just getting more leads. The reality is that business building is more about ‘quality’ than quantity. You can achieve a better quality of client by following these steps:
Step One: Define Your Clients: We all have clients that drive us mad. They might always pay late or complain and haggle over invoices or prices, wait until the last minute to lodge important paperwork, put unnecessary demands on you, have questionable hygiene habits… the list goes on. The first step is to define your clients into 4 classes A, B, C, & D class clients. The definition is up to you. You might also find an ‘A’ class client might be one that always pays a month late but never questions the price.
Step Two: Tell them where they rate: Send all your ‘A’ and ‘B’ clients a letter telling them that you appreciate their effort in the relationship, that you enjoy working with them and will always strive to do the best for them. Then send your ‘C’ and ‘D’ class clients a letter suggesting that it might be time for a ‘new approach’. State your commitment to service and explain how important their participation is in the relationship. If there is no change after a couple of more contacts, you might refer them to your competition. It costs you to work for these clients. You make a living working with numbers… if you make $100 profit on doing a job for a client who haggles, complains, and wastes another few hours of your time and then starts on your staff members, you’d be better off without them. In the least, they vastly increase the chance of a heart attack or other stress-related disease (like divorce).
Step Three: Fill the void: The time you recover when your ‘C’ and ‘D’ grade clients take their business to your competitors and driving them mad, can be used for marketing; attracting clients that want to work for you and that you want to work with. Alternatively, you could work on systemizing to increase productivity in your practice. You could even go home early and spend some extra time with your family or on that neglected hobby or passion.
It’s important to inoculate yourself against more ‘C’s & ‘D’s… Make sure that your new clients are educated on the fact that the unique and outstanding level of service that you provide for them is possible because your clients commit to participating in the relationship and define what you expect of them. This is an important strategy to get YOU more in control of your business, improve your profitability and most importantly, reduce the stress levels of you and your team.
As a business owner, the key to time management is to build your personal and business life around your individual needs and desired outcomes through planned and measured activities. Time management is, in fact, the ultimate in self-improvement because it is the foundation for achieving your goals in every aspect of your life.
With the current economic crisis, running a business is getting tougher. I often hear flustered business owners say things like, “I don’t have enough time to get everything done,” and “How do I become more efficient at time management?”
Time is a limited resource, and it cannot be managed. What you CAN manage are the activities that take place over time by defining the desired outcomes and then taking a course of action to reach these goals.
As a business owner, the process of determining which activities you should be focusing on begins with goal setting. This helps to document your personal and business roadmap in levels of detail that represent periods of time.
The bigger picture will be visionary including broad strategies to achieve the vision over a three to five-year period. The next level of goal-setting will be for the upcoming 12 months and this will require documenting specific S.M.A.R.T goals – goals that are Specific, Measurable, Attainable, Realistic, and Timely.
Here are seven suggestions to apply personal discipline within the context of achieving better management of business operations and the more effective utilization of your personal time:
Delegate: Delegate activities to the staff with the appropriate skills. Manage this approach through an organizational structure and individual Positional Agreements appropriate to the size of the organization.
Prioritize: Prioritize your daily work by reviewing the next day’s important activities in a ‘to do list’ at the end of each day. You can maximize personal productivity by focusing on this list the next day. And don’t do what’s not on the list – resist the urge to be distracted and to do things that you enjoy more.
Handle each piece of paper only once and never more than twice: Don’t set aside anything without taking action.
Clean up: Clean up your desk and office shelves once per month. Categorize everything into four groups: ‘Do it’, ‘Delegate it’, ‘Defer it’, and ‘Dump it”. Before getting rid of anything, just ask the question, “What is the worst that can happen if the item was gone?” If the answer is “nothing,” then dump it.
Put personal interruptions on hold: Put your calls and personal interruptions on hold for one hour, two hours, or whatever is appropriate to your task at hand. It is amazing how much work that can be achieved by using this simple technique and not being distracted by a phone call or personal interruption – and most of these potential interruptions will not meet the definition of ‘important’.
Learn to say “No”: This may be the most effective way to maximize your personal utilization of time and is often the hardest word to use in business. Make sure that if you don’t say “No,” it is because the activity is important in the context of your own role in the business.
Make sure you set aside personal relaxation time during every workday: Don’t work during lunch. It is neither nutritional nor noble to skip important stress-relieving time or important energy input. Take vacations, particularly mini-vacations. The harder you work, the more you need to balance your leisure and exercise time.
Time is a limited resource for most business owners, so it must be “managed” if you want to achieve your goals within the timeframe you set. Time management (or SELF-management) is all about setting priorities and sticking with them.
When it comes to managing your time (or self) consider this: There is a big difference between activity- tasks that keep us “busy,” and productivity tasks that take us closer to our goals. Most business owners are busy, but are they busy doing the right things?
Self-management requires discipline (no doubt about that). And at the end of the day, you need to find what works best for you.
Know How You Spend Your Time. Begin to track your tasks for a two-week period and be specific. Then build a list of tasks and people that wasted your time (or money) each day. Make a special note of the interruptions. Most people find this eye-opening. Once you recognize the time and people wasters, you can take action to fix the problems.
Get Organized. It is easier to perform tasks when everything is where you need it and out of the way. This means clearing off your desk so you have room to work and eliminate distractions. Everything should be in a file or binder (in a drawer, cabinet, or bookshelf). If you need help organizing your space, check out “Organizing for Dummies” or get help (there are people who do this).
Create a “To Do List” and Use It. When you identify a task that needs to be completed, put it on the list and give it a priority (low, medium high). When you plan your weekly work, pull tasks from the list and always do the high priority tasks first. Don’t forget to continuously evaluate the priority levels you have assigned; time can change some of these.
Plan Your Work. At the end of the week, plan your next week AND at the end of each day, plan the next day. According to Brian Tracy, every minute spent in planning saves as many as 10 minutes in execution. In other words, 10-12 minutes planning can save you two hours in wasted time and effort throughout the day. What would you do with an extra two hours per day?
Block Off Time to Work on Tasks. The tasks on your “To Do List” will remain there unless you block off time to work on them. When planning your week, block off chunks of time and assign tasks to them. Don’t work on anything not on your list and don’t try to accomplish everything in one week.
Break Down Big Tasks. Big tasks can appear overwhelming (so they quickly get put aside). Break them into smaller chunks that are more manageable. Then schedule time to work on them.
Delegate or Outsource. Always look for opportunities to delegate or outsource recurring tasks or low-value activities. Did you know that 50 percent of time wasted in business is due to lack of trust? This is because the owner doesn’t think others can do it as well or micro-manages the team. Give your team the tools and processes; then watch them shine (and see how much time you gain for more valuable activities).
Don’t Procrastinate. Work on the tasks you dislike (or those that are more complex) first. Then, they won’t be hanging over your head or causing your mind to wander. Plus, you’ll feel great when you check tasks off the “To Do List.”
Hold Calls (Or Send to Voicemail). If you block time to work on important tasks hold that time sacred and don’t permit interruptions except from a handful of VIP’s. Block off time to return calls each day at your convenience. You may also find that when you are not so accessible, others will handle the “issues” and some problems will actually resolve themselves.
Handle Mail (or Email) Once. When you go through the mail apply the following formula: Delegate, Action (add to ‘To Do List’), File or Trash. Do not put aside to handle later or you simply end up with multiple piles of unaccomplished tasks.
Strive For Excellence, Not Perfection. Results come from taking action. By striving for perfection, you delay taking action or delegating tasks to others.
Learn to say NO. Those two letters are the best time-management tools there are.
There is a saying, "the only thing that stays the same is change." In today's world we are subject to change more than ever, because we now have much more choice than ever before. Through the internet, we now have access to unlimited amounts of information – we Google something and we get thousands of opinions, options and choices.
All this choice is both a good and a bad thing for us. On the plus side, we like to have options, and freedom of choice is something we continue to fight for. On the negative side, too much choice and constant change can be very stressful and overwhelming. So what is best?
The simple answer is we need both, and how much of each really depends on the individual. Some people like constant change and risk taking, whilst others prefer to maintain the status quo. So how is this relevant to business?
Well, we need to recognize that our customers now have greater choice - they have unlimited access to buy products and services from anybody else and in some cases from anywhere in the world. So no longer can we rely on the fact that as long as our customers are satisfied with what we do, they will stay with us. They will be constantly bombarded with new choices and even if they have the most anti-change personality, can we really afford to just sit back and hope that they don’t go and try our competitors?
In his book “Customer satisfaction is worthless, customer loyalty is priceless,” Jeffery Gitomer identified that we have to work as hard on keeping our existing clients as we do getting new ones. This is a really important issue. I had a client who was spending tens of thousands of pounds on generating new leads for their business, but the customer base was not increasing year on year. When we looked in detail at what was happening, we found that they were losing as many clients as they were bringing on. So we took some of the marketing budget away from lead generation and put it towards looking after our existing customers and this helped the business to start growing again through improved customer retention.
So the key question to ask yourself is, WHY should your customers stay with you? The first answer is, of course, the product or service you supply. This must be first class and give great value for money. In ACTION we call this Delivery Mastery and it is this that stops your customers going elsewhere. However, it is not sufficient to make your customers WANT to stay – the real key to building customer loyalty is going the extra mile for them and creating the “WOW factor”. So what is the “WOW factor?”
Think of it the little extras that you do for your customers over and above the normal product or service you provide. It is the things that you do that tap into the emotions of your customers and leave a lasting impression. A classic example is of a top hotel in New York that ensured its top guests’ rooms had their favourite flowers, wine and chocolates waiting for them when they arrived. It also trained its staff to remember the little details that would make their guests’ stay so much more memorable and ensure that they would never even think of staying anywhere else.
Paddi Lund, the most successful dentist in Australia, built his entire business on referrals and loyal customers. He called these extras “critical non-essentials” or CNE’s. The key to their success is that they are not directly related to the product or service you are offering. Just giving more or better service is not enough; your customers expect the best, so when you deliver it, they are just getting what they have paid for. The WOW factor comes when you surprise the client with something different and unique to them, so much so that they not only say WOW to themselves, but they also go and tell everybody they know about it.
An example of this recently happened to me playing golf at Celtic Manor. Being taken to the locker room and shown to my own personal locker with my name on it, two lockers away from Tiger Woods’ locker, was such a memorable moment that I tell people about it whenever I get the opportunity!
The key to successful CNE’s is to overcome the 3 reasons NOT to do them:
1. Lack of ideas – give yourself time to think. Talk to your customers find out more about them and what interests and excites them. And speak to friends and colleagues too - it is always easier to come up with ideas for other people’s businesses than it is for your own.
2. Lack of money – if you remember that your CNE’s are marketing, then you should be allocating some of your general marketing budget to them. Also be creative - some of the best CNE’s don’t have to cost a penny.
3. Lack of time – always make sure that any CNE you start you can continue to do however busy you become. You can do this by systemising the process, training and delegating responsibility to your team.
So now you know how to create the WOW factor, you just need to put it into ACTION, because if you don’t your competition might beat you to it!
Capture Opportunity & Tackle Challenge
There should be a playbook for running a family-owned business. The stakes are high and you’ll need a winning strategy to successfully work together. If you do, you can create opportunity and avoid common pitfalls.
At ActionCOACH WilCo, we understand the highs and lows of a family run business, because we ARE a family business. My father, Andy O’Brien, and I are owners. I am also the COO and dad is designated as one of the top business coaches globally within the ActionCOACH organization.
We work through the same dynamics in our business that you do:
Our first-hand experience, and expertise in coaching puts us in a great place to help others struggling with the challenges of finding success in family business.
In our upcoming workshop 6 Steps to Building a Great Family Business on Sept. 8th, we look forward to helping business owners position themselves and their businesses for great things. If you would like to learn more or sign up, just click on the link. In the meantime, let’s talk a little more about success. It’s one of our favorite topics.
When we coach clients with family businesses, we start by making sure everyone is on the same chapter and page. Answer these questions honestly:
If you answered “yes”, congratulations! If you answered “no”, understand that you are not alone.
It’s safe to say that family owned businesses are the backbone of the American economy. They account for half of the country’s employment and gross national product. Flip the coin for a sad truth: Only 40% will be passed on to a second generation, and less than 15% make it any further.
It’s our job, in fact our passion, to turn that around. Let’s start by acknowledging the elephant in the room. Family relationships are tricky. When you a mix shared history with the day-to-day workings of a business, you could easily be headed down a slippery slope. You can find sure footing with guidance in key areas.
Communication It’s important to communicate openly and often, in any business but especially in a family business. You want to see your spouse, child or sibling in the best light. It can be difficult to be up front in business with someone you’ll be sitting down to dinner with that night. In coaching our clients, this is something that we tackle right away.
Conflict Mediation The worst thing you can do is sweep conflict under the rug. It helps to have a designated person to make a final decision. But who should that person be in YOUR organization and should you include someone from outside of the family as a trusted advisor? We talk with our clients about conflict resolution and what their plan should look like.
Evaluate Skills And Invest in Education What is your interest, background, forte? Answering these questions will allow each family member to identify jobs that will best suit them and allow them to contribute comfortably to the business. Then, it’s important to make a commitment to continuing education and workshops in each area of expertise. We help our clients clarify what roles family members can happily and successfully fill, and what kind of continuing education will best suit their company’s needs.
Share Your Family Story The exercise of talking about your history and values helps to build a powerful and binding synergy between family members and it gives customers a chance to support people they know, and trust. We explore the many ways you can leverage your family’s story by identifying the most effective ways to share it through marketing, advertising, and community involvement.
Have A Transition Plan To do business from a position of power, you need to establish certainty around what CAN be controlled. A transition plan gives everyone in the family shared expectations, and a roadmap for the company’s future. Our clients find that having a coach to discuss the best course to take, helps to clarify their options.
Create A System For Operations As COO of ActionCOACH WilCo, I can tell you that having a documented system for day-to-day operations is vital. This system should be all encompassing and serve as a resource for management and employees alike.
We have a Systems Checklist at ActionCOACH WilCo, which you can download here, free of charge. It covers everything from daily office operation systems, to product development, inventory and tracking, accounting, customer service, sales and marketing, education, and legal issues.
Are you ready to position your family business for success? Sign up for the upcoming seminar, 6 Steps to Building a Great Family Business on September 8, 2021. Check out the topics on the link, give us a call at (641) 420-5917, or contact us at firstname.lastname@example.org or visit our website, www.actioncoachwilco.com to learn more.
At ActionCOACH WilCo, we return fun and energy into your business and provide a path to achieving your lifelong dreams and goals.
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