Feb 23, 2015 | Finance, Marketing
Increase Profit Margins Now
Welcome to step 5 of the 5 Steps to Increased Profits framework – focusing on one of the five steps each week. As a review, the five key profit-generating metrics are: Lead Generation, Conversion Rate, Average Dollar Sale, Number of Transactions, and Profit Margins.
I’ve highlighted the five keys in the following equation:
Lead Generation
x
Conversion Rate
=
# Customers
x
Avg. Dollar Sale
x
Avg. # Transactions
=
Revenues
x
Profit Margins
=
Profits
I talked last post about the importance of ensuring you boost your number of transactions, which is another way of measuring customer loyalty – or repeat business. This week we focus on how to increase profit margins – because that IS the bottom line. Who cares how much revenue you’re generating if there is nothing left at the end of the month, you’re just working too hard for nothing.
Profit Margins are critical to your overall profitability. You can have a fast growing or high revenue generating business but without acceptable profit margins, all of your growth efforts will be for nothing. It is critically important that you not only know your overall margins, but you must know them by product or service type.
Why is this so important? Because you want to promote your highest margin products and services whenever you can. These are the game-changers for you. These products and services are the ones that provide the resources to cover your costs and provide you with resources to invest in your business.
There are two primary ways you can improve the Profit Margins in your business – reduce your expenses or raise your prices. Most cringe at the thought of raising prices, especially in fragile markets, but if you have done the hard work of creating a Unique Selling Position and have truly differentiated yourself from your competition, and know your target market extremely well, then raising your prices may be an option – but don’t do it blindly.
It is mainly fear of the unknown that keeps business owners from taking the bold step to increase their margins through a price increase. Know your numbers, your market, your customers. Studies have shown that your loyal customers are not doing business from you because of price alone. Most will understand and appreciate your rationale and will remain strong, loyal customers – that is if you have treated them like they were special and found ways to deliver MORE than they expected of you.
Cutting is costs is often times easier, but not necessarily the right move to make when you are trying to grow your company. Eliminating waste is always good, but often times expense cutting comes in the form of eliminating services, reducing marketing programs designed to grow your business, or reducing staff and degrading your ability to deliver on your promise. Be careful not to impact your operational efficiency and speed of delivery when reducing your expenses. The last thing you want to do is to become a “me too” business simply because of your efforts to cut costs.
Now, with that caution in mind, there are always ways to gain efficiency and reduce the effective cost of your system. Toyota and other large manufacturing companies, are masters at eliminating costs through waste reduction, efficiency gains, reduced work in process inventories and unnecessary movement of people and supplies. If they can do it, so can you. When was the last time you critically evaluated your business operations with an eye towards gaining efficiencies and reducing unnecessary steps on your process? Creating systems for your business is a powerful way to reduce your costs –while at the same time, improving your productivity and customer satisfaction. If you are not familiar with the tools and techniques for doing this, drop me a note and I will direct you to them.
The challenge is to first know your margins, then be purposeful about improving them on a regular and steady basis. The trend for your margins should always be favorable. While this is the last of the 5 Steps, it’s actually the one you should work on first (now she tells me!). Work hard on this last segment of the Business Chassis and you will position yourself for phenomenal growth and incredible profits!
Jan 26, 2015 | Marketing, Sales
Avoid These 3 Mistakes and Increase Your Average Dollar Sale
My focus is helping you grow your business and achieve your goals – be that reaching a certain profit level, a quality of life or the ability to sell the business and retire. For any of these goals, creating a consistent, high level of profits is critical. So we’re on step 3 this week of reviewing the 5 Steps to Increased Profits framework – focusing on one of the five steps each week.
As a review, the five key profit-generating metrics are: Lead Generation, Conversion Rate, Average Dollar Sale, Average Number of Transactions, and Profit Margins.
I’ve highlighted the five keys in the following equation:
Lead Generation
x
Conversion Rate
=
# Customers
x
Avg. Dollar Sale
x
Avg. # Transactions
=
Revenues
x
Profit Margins
=
Profits
This week we’re focusing on Average Dollar Sale – this is the average amount of each transaction in your business. If you focus on increasing your average dollar sale, you won’t need to spend more on generating more leads. It’s a much more cost-effective way to increase profits. Over the past 20 years in which ActionCOACH has been working with business owners, we have developed over 70 ways to improve your average dollar sale.
It’s easier to increase your average dollar sale than you might realize. The main reason is that this happens with an existing customer-one that already knows you, likes you, and trusts you.
Because it’s at least six times easier to sell to an existing customer than a total stranger, here are some common mistakes to avoid:
-
You assume your customer knows every product or service you have available.
Most customers are doing business with you in one area and would be pleased to give you the business in a related product or service if they only knew about it. For example, the same insurance agent that handles your car insurance can also sell homeowner’s, boat, motorcycle, RV, etc. Every business has multiple products that complement existing ones and deepen the relationship. All you have to do is ask: “By the way, did you know that we also have…?” You will be shocked at how many say: “I didn’t know you did that!” On average 5% of customers would give their business to a friend. Why not get that 5% increase from your friends?
-
You fail to offer an upgrade.
Again, many businesses, including yours, have premium products or services available. At the point in time that your customer decides to purchase, it only makes sense to offer the opportunity to upgrade. Fast-food restaurants proved the wisdom of asking a customer: “Would you like to supersize that?” or “Would you like ____ with that?” A few years ago when a client operated a supermarket, we participated in a scratch-off lottery ticket promotion. For two weeks the cashier asked every customer: “Would you like a scratch-off lottery ticket with that?” Our ticket sales increased exponentially versus the previous period. And it costs nothing to ask. What could you offer your customers as an additional up-sell?
-
You offer what you think your customer will buy even if it’s less than what they really need.
This is where “pre-qualifying” goes awry. It is usually a function of you or your Team’s limiting belief around sales. I remember the wise advice of a professional fund-raiser who said: “Always be willing to ask for too much.” The reasoning here is three-fold. First, you just might get the higher amount! Second, you compliment your customer by implying that they are financially capable of a higher level. Last, you give yourself a “fall back” that is still a good value for both of you. Increasing your average dollar sale takes some commitment, training and practice.
Make the commitment to improve your business, invest the time and effort to train your Team, and remember that professional salespeople need practice to keep their skills sharp. The effort you put into this will pay dividends both short and long-term.
Jan 19, 2015 | Marketing, Sales
Increasing Profits with Sales Conversion
My focus is helping you achieve your business goals – be that a certain profit level, a quality of life or the ability to sell the business and retire. For any of these goals, creating a consistent, high level of profits is critical. So last week we started reviewing the 5 Steps to Increased Profits framework – focusing on one of the five steps each week.
As a review, the five key profit-generating metrics are: Lead Generation, Conversion Rate, Average Dollar Sale, Average Number of Transactions, and Profit Margins.
I’ve highlighted the five keys in the following equation:
Lead Generation
x
Conversion Rate
=
# Customers
x
Avg. Dollar Sale
x
Avg. # Transactions
=
Revenues
x
Profit Margins
=
Profits
This week we’re focusing on Sales Conversion Rate – this is the percentage of your leads that you convert into customers. If you focus on increasing your sales conversion rate, you won’t need to spend more on generating more leads. It’s a much more cost-effective way to increase profits. Over the past 20 years in which ActionCOACH has been working with business owners, we have developed over 80 ways to improve your sales conversion. Here are my top seven:
-
Written Guarantee:
What are your customer’s key frustrations in buying from you, or from your industry? What could you guarantee that would eliminate or reduce the risk of that frustration? For example, a hairdresser that guarantees ‘you will like your haircut and so will 98 per cent of your friends’. For an attorney the guarantee could be a fixed price — You’ll get for patent filed for $5k.
-
Use Sales Scripts:
These are absolutely essential whatever business you’re in. Once you find the right (or very close to right) way to sell something to someone, why change it? Write down exactly what you said, and then do that every time. And make sure your team does the same. Every customer is different, but the objective is always the same: match the product to the buyer. You should have scripts for everything – from answering the phone to saying good-bye.
-
Define Your Unique Value Proposition:
This one is critical. If there’s nothing different about you, people will only buy from you because of convenience, or price, nothing more. Added to that, you’ll never be able to raise your prices; if there’s anyone doing it cheaper, people will buy from them. You need to work out what is special about you, and then articulate it clearly and communicate it loudly.
-
Benefits and Testimonials:
Create a sheet (and a page on your website) that you can give to every person who meets with you. It contains the 4 most important benefits of your product, or the 7 reasons yours is a better choice for them. It should include testimonials – that is, direct quotes from your past customers about how good you are. A video testimonial is the most powerful way of communicating all that you do for your customers. If you say it about yourself it’s a lie, if someone else says it about you, its true.
-
Use a Defined Sales Process
In order to determine the optimum way to sell to your customers, you have to create a process to do it consistently. Only then can you find the best way. If you’re always shooting from the hip, or your sales team is all doing something different, you’ll never know what works the best to generate the most profit.
-
Provide Something Extra:
To seal the deal, throw in something they didn’t expect – something that gives them the perception that they are getting a great deal. Then place a time limit on it, which pressures them into making a decision. Make sure it’s something that they will value highly which doesn’t cost you very much — i.e.: high perceived value, low cost to you.
-
Provide Quality Products:
People will buy quality when it’s affordable and they perceive a high value. Sell value not price. By providing the best, you put yourself a cut above everyone else.
To learn more about the 5 Steps to increased profits, come to one of my seminars or workshops.
Jan 12, 2015 | Marketing
Increasing Profits with Lead Generation
My focus is helping you achieve your business goals; whether that means a certain profit level, a quality of life or the ability to sell the business and retire. For any of these goals, creating a consistent, high level of profits is critical. So for the next several weeks we’ll be reviewing the “5 Steps to Increased Profits” framework – focusing on one of the five steps each post.
As a review, the five key profit-generating metrics are: Lead Generation, Conversion Rate, Average Dollar Sale, Average Number of Transactions, and Profit Margins.
I’ve highlighted the five keys in the following equation:
Lead Generation
x
Conversion Rate
=
# Customers
x
Avg. Dollar Sale
x
Avg. # Transactions
=
Revenues
x
Profit Margins
=
Profits
This week we’re focusing on Lead Generation. Over the past 20 years in which ActionCOACH has been working with business owners, we have collected 21 Truths about Lead Generation. I’d like to share the top seven.
-
Separate suspects from prospects:
Too many marketing dollars – and too much time – are spent on people who will never buy. Unless your lead generation marketing weeds these people out, it’s not working effectively. It’s putting a strain on those who process and follow-up on leads. The media you select, the offers you make, your creative strategy, and even your tone all play key roles in drawing out high potential prospects and screening out suspects.
-
Sell the next step harder than you sell your product or service:
The whole objective of lead generation programs is to begin the sales process, not to complete it. Your initial direct mail or e-mail should push for action on the next step – sending for more information, a free sample, a free consultation. Once you have qualified prospects, you can concentrate on a full presentation of product benefits, features, and applications.
-
Construct meaningful, actionable tests:
You can’t improve any direct response program – whether executed in direct mail, e-mail print, online or broadcast – without valid testing. Make sure you test the most significant factors first – lists/media and offers. Once you have a read of results, react quickly and incorporate them into your program. Your results analysis should not only include number of leads and cost per lead, but cost per appointment and per sale. Making decisions on lead costs alone can be disastrous.
-
Once is not enough for lead generation:
Give suspects more than a single time to qualify themselves. No matter how intrusive your direct mail package, email, print ad or online ad, your target may miss it the first time around. Give prospects multiple opportunities to say “Yes” to your offer – whether that means getting additional information, a price quote, or a call/visit from your sales representative. The more narrowly defined your market, the more time you have to spend on each prospect.
-
Understand your target’s “hot buttons”:
Executives are much more often concerned about their time than about saving a few dollars. Direct mail/e-mail efforts that demonstrate how the product/service can save the recipient time works very well to management segments. If the savings are enormous, that’s a different story. Middle managers are more concerned about preservation (of their jobs) and about making a safe, unquestionable choice.
-
Use testimonials and case histories:
If you say it about you, it’s a lie, if someone else says it about you, its true. Aside from the credibility they imbue, testimonials provide the prospect with applications and usage guidance. Larger corporations should select testimonials or case histories that emphasize the company’s ability to provide fast, personal service. Smaller businesses should use endorsements reflecting on the company’s strength and stability. Include testimonials that underscore how customers gained rewards by finding out more when they were prospects.
-
Plan separate, creative strategies and offers for different levels of decision-makers:
Even if you’re prospecting within a specific industry, copy and offer – and sometimes graphics – must change by function and by the objective of your communication. The highly technical approach you make to the head of the IT department will not work in addressing the CEO. And the CEO’s possible interest in your product/service will differ from the CFO’s.
To learn more about how to grow profits, come to an ActionCoach workshop or seminar soon.
Dec 1, 2014 | Customers, Marketing
Converting leads into customers – 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 make improvements in this area, you simply have to start doing one thing – MEASURE your current conversion success rate! Most business owners have no clue what their conversion rate is. By simply measuring where you are, you will improve. It happens every time. Once you start measuring, you realize what you should be doing that you are not, and your results begin to improve.
Add to that a specific, focused approach to handling your leads and your conversion rate will go through the roof! And, the best part is, you can grow your business without spending one more dollar! You’ve already invested marketing dollars to generate the leads. Now, make the most of that investment by defining your specific, repeatable sales steps that will convert your leads into customers.
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!
I often hear business owners say they would lose their best sales person if they made them follow a standard sales process. Let me ask you – whose business it? Is it yours’ or your sales person’s? Who has all the risk in the deal? Who is setting the expectations and limitations? My hope is that it is you – the business owner. Don’t let the personal preferences of others dictate how you will run your business – unless you like working for them!
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 the recipe for success.
One last thought. As you build your step by step sales process, be mindful of the thought that in every sales process there is a point where your prospect will do some specific physical something to indicate they are ready to buy. If you can identify that “physical something” for your business, then point all of your efforts to make that happen, your conversion rate will improve. I call this the “get on the boat” moment. One of our clients has a 100 person catamaran on a local lake and does corporate events, private parties, wedding, etc. His specific physical something for his prospects is to get them to step foot on his boat. Once they do that, they are so impressed that they are very likely to sign a contract. What is your “get on the boat” moment?
Stay focused. Stay determined. Be determined. Build a repeatable process for converting leads into customers. Your business success will become a certainty.
Nov 10, 2014 | Marketing, Sales
Holiday networking, should I or shouldn’t I?
As the holiday season is upon us (I know!!), many of you are wondering if this is a good time to market your business. After all, isn’t everyone preoccupied with shopping and waiting until next year to make business decisions?
Let’s put one myth to rest forever: “The holiday season is a bad time to market your business.”
I want to suggest that the holidays are the BEST time to market your business – especially if you’re a professional service business owner.
Why?
Because even though networking is a good thing to do the rest of the year, it’s real natural over the holidays.
I have had more folks over the house in the last two weeks than I have for the whole year. What a great opportunity to meet old friends, clients and associates, discuss how the year went and share your goals for the coming year.
So how can you take advantage of holiday networking? Here are a few tips:
1. Accept all invitations. Remember that this opportunity to meet with so many people won’t come around again for another year. Also look around for holiday events at your professional organization, chamber of commerce or other business groups.
2. Go to the party prepared. Bring plenty of business cards and a pen. Make it a goal to make substantial connections with at least half a dozen people. In other words, a connection means a one-on-one talk that’s ten minutes or more.
3. There are two types of people you’ll connect with at a party (no, not drunk or sober) – people you know and people you don’t know. For those you know, ask sincerely how they are and how business has been this year. For those you don’t know, be prepared with your “elevator speech”. This is a description of how your profession may benefit them, not your job title.
4. Spend more time asking questions and listening than talking. This is really THE KEY to effective networking at parties. “How has business been going? How have the changes in the economy affected your business? What are your plans for growth in 2015? What kinds of clients are you looking for these days?”
5. Have a strategy for getting in touch. What good does it do if you connect with all these people and they never hear from you again? Don’t fall into the rut of suggesting you should get together for lunch sometime and never following up.
6. Follow-up with your new prospects after the party, if appropriate. If some topics came up that indicated there was a reason to talk further, give them a call in a few days with a very specific purpose. Make a specific follow-up plan and stick to it.
7. Keep an open mind. If you’re in the right place at the right time, you could make some very profitable business connections. If nothing happens right now, at least you’ve sowed some seeds for the future.
Happy Holidays! Get your New Year started off right by coming to GrowthClub planning session in December.
