What period in our history do you suppose accounted for the greatest accumulation of wealth? The answer is the Great Depression. How is that possible you say? It’s during periods of economic downturns, such as we’re in now, when investors and business owners see long-term opportunities at greatly discounted prices. You’ve heard the saying buy [build] when the economy is down and sell when it’s high. Well, now is a great time to begin looking past the current malaise to recognize opportunities to grow.
When your competition is retreating into a blame game (“the economy is killing my business”) isn’t now a great time to “steal a march” on them so then when the economy does turn you’ll be that much further ahead of them. So, ACT NOW! Don’t participate in the blame game.
One idea, instead of looking to increase your leads, why not focus on strategies to increase your conversion rate (the percent of leads that become clients)? These strategies are totally under your control, can be implemented easily and are low cost vs. spending advertising dollars.
Recognize the opportunity you have been given and take the initiative to leave your competition behind. ACT NOW. Don’t find yourself one year from now saying “if only I had done that one year ago”. It will be too late by then because your competition will most likely have adopted that idea and you’ll be left to catch up. Good hunting.
Do you know what percent of people or businesses express interest in a product or service you sell but eventually walk away without buying? I’ll bet you aren’t tracking your conversion rate, i.e. the percent of inquiring prospects who become customers. Begin immediately tracking the source of your leads and whether they end up buying from you. Track these statistics for one month. I’ll bet that you’ll be surprised with the results. Lower than you thought? The mere act of tracking will cause your conversion rate to increase, but there are many strategies we teach our clients to achieve dramatic increases in this rate.
When was the last time you received a thank you note after making a purchase? Only on rare occasions have we ever received a thank you note from the owner of a business after making a significant purchase. If we did receive such a note I would certainly revisit the business, assuming the quality was at least good. So why is it that hand-written thank you notes aren’t modus operandi for most business owners? It’s not because businesses have so many regular repeat customers that they don’t need more. No, the answer is that owners don’t understand customer loyalty.
One of the most important lessons we teach business owners is that there are different degrees of customer loyalty. Just because someone buys from you once doesn’t mean that they will continue buying from you. One-time buyers are nothing more than shoppers; they aren’t customers. It’s not until someone buys asecond time that they become customers.
We introduce the Ladder of Loyalty to clients to help them understand the different levels of client relationships. There are six rungs on this loyalty ladder. The lowest level of loyalty is the “Suspect” because they haven’t purchased from your business, and the most desirable customers rest on the top rung as a “Raving Fans”.
Suspects: Suspects are members of your target market. You may have directed some lead generation activities towards them, but they have been unresponsive to those marketing initiatives.
Prospects: The next rung on the ladder is occupied by those Suspects who express interest in learning more about your business. Perhaps they call you after being referred to you, or after reading one of your advertisements, or after meeting you at an event. How you and your frontline team members handle this initial inquiry is crucially important in moving the Prospect up your loyalty ladder.
It’s important to collect their contact information so that you can start building a relationship with them. Building customer loyalty is all about relationship building. Your goal is to move each customer up to the next level of the ladder.
Shopper: When your Prospect makes their first purchase they become a Shopper. Most business owners incorrectly label first-time buyers as customers. These Shoppers are just checking out your services or products. They have no loyalty to your business.
Customer: It’s only when someone makes their second purchase from you that they become a customer. With their second purchase most Shoppers become profitable, but they don’t have a sense of loyalty yet.
Member: Customers become Members once they begin to feel like they belong to your business. At this stage they are building loyalty towards your business. How do you develop this sense of membership? Once they make their third or fourth purchase give them a VIP (Very Important Person) card, or invite them to an event you host for members only. Perhaps you give them a “Members Kit” that includes a catalog of all your products or services and some valuable coupons.
Advocate: The interim step between Member and Raving Fan is an Advocate. Advocates are huge fans of your business and recommend you often to their friends and acquaintances. Not only are they referring business to you, but they keep buying.
Raving Fan: The highest rung on the Ladder of Loyalty is reserved for Raving Fans. These are those clients of yours that can’t stop selling your business for you. It’s as though they become part of your sales team. How wonderful would it be if your clients did the selling for you?
You might think that owners spend as much money getting new clients as they do developing strategies and programs to move Customers up to Raving Fans. Unfortunately, most business owners spend roughly 95% of their marketing dollars to find Prospects, leaving only 5% of their dollars to spend on moving relationships up the ladder. A more appropriate mix would be 60 – 70% of marketing dollars to develop Prospects and 40 – 30% to move clients up the ladder until they become Raving Fans. It’s six time less expensive to get an existing client to make a purchase than to get a Prospect to buy for the first time.
Conclusion: Focus on strategies you can implement that will move customers up the Ladder of Loyalty. You are missing tremendous lead generation potential if you leave clients sitting on the Customer rung of the ladder where they are not helping you market your business.
Let’s look at a couple strategies designed to move clients up to the next rung. Note that what follows are just a few of many strategies designed to create upward movement on the ladder.
Moving Shopper to Customer: In order to get the Shopper to make their second purchase, why not give them a coupon upon their first purchase that can be applied towards their next purchase. By including an expiration date on the incentive coupon you are more likely to get the Shopper to come back. For example a coupon that is good for $5.00 off their next purchase if used prior to (expiration date). What about sending the purchaser a hand written thank you note?
Moving Customer to Member: Recall that Customers become Members when they begin to feel an attachment to your business, as though they were a member. An example you see in some restaurants is a beer stein with the member’s name engraved hanging over the bar as special treatment for frequent buyers. What can you do to make your frequent buyer clients feel special, as though they are a member? How about offering a frequent buyer program? Perhaps displaying a “Welcome” sign outside your office with the member’s name for all to see.
As business coaches we speak with hundreds of business owners about strategies to grow their businesses and hear comments such as:
• “I’ve owned this business for 20 years and know everything there is to know about running the business”. Oh, really? Afraid to think of new ideas?
• “Once the economy turns my business will take off”. Why aren’t you proactively seeking solutions instead of waiting for the economy to turn?
• “There aren’t good people available to hire”. What better time than now to hire quality people; you just don’t know how to look for them.
Why Do We Stay Within the Box? These owners are comfortable within the confines of their box (their comfort zone) and make little effort to expand the dimensions of that box. Their thinking doesn’t change. Yet, failure to think differently by adhering to what has worked in the past doesn’t bode well for business owners in a changing world.
Our experience working with business owners has led us to the conclusion that most don’t like to stretch their comfort zone for two primary reasons:
• Fear (False Expectations Appearing Real)– afraid to try something new for fear of failure
• They don’t understand the importance of breaking out of their box
It’s natural for humans to be afraid of failing when considering new ideas and so most people stay within their comfort zone. There will be times when we don’t succeed in new endeavors, but the learnings from those failures put us ahead of those who didn’t try because of fear. How many times did all of us fail when we first tried walking, or learning to ride a bicycle? Did we let that deter us from succeeding? We picked ourselves up and tried again and again until we succeeded. Each failure got us one step closer to succeeding. The older we get we lose sight of these important lessons…to grow requires taking risks.
Why Is It Important to Push Our Comfort Zone? “We shall have no better conditions in the future if we are satisfied with all those which we have at present.” — Thomas Edison
Like a tree, if we are not growing, it’s because we are dying. Champions know that staying within their box prevents them from achieving their potential and ordains them to a life of ordinary.
Rafael Nadal was undisputedly the best tennis player in the world on clay courts (many consider him the greatest clay court player ever), yet when it came to playing on the faster courts of Wimbledon and the U.S. Open, he wasn’t the best. To become the #1 player in the world and to become one of the greatest tennis players ever, he needed to expand his serving and volleying skills. Step-up he did and as a result he has been in the Wimbledon finals the past 6 years, winning two, and the U. S. Open finals the past two years. Had he stayed in his comfort zone of the slower clay courts he never would have become one of the greatest players of all time.
Are you comfortable where you are and safely ensconced within the familiar confines of your comfort zone? Or, are you anxious to expand that zone so that you can achieve your potential. Far too many Americans are happy in their box, and as a result we as a society don’t achieve our potential. Most people want what they have, i.e. status quo, instead of achieving their potential.
How do I Break Out of My Comfort Zone?
Here are a couple suggestions on ways/strategies to break out of your comfort zone…to begin achieving your true potential.
1. FEAR: Overcome it. Recognize that 99% of the world’s population is living within their comfort zone so it’s only natural for them to advise you against taking chances…trying something new. Recognize that to move ahead you have to push your comfort zone and then just “Do It”. Stop listening to people that tell you not to do something.
2. EDUCATION: Change your paradigm by reading about what other people have done. Set a goal of reading at least one business or motivational book each month. Reading and listening to educational CDs expands your perception.
3. SMALL STEPS: Start by taking small steps. Small steps taken consistently add up to great success over time. Each time you stretch a spring beyond its tolerance it doesn’t return to its original position but rather a spot that’s slightly longer than original. Each small step you take is stretching your spring and in so doing is stretching your comfort zone.
4. NETWORKING: Talk with successful people to learn how they achieved their success. What worked for them? What didn’t work? How can you apply what they learned to your business and you personally?
In his book “How Successful People Think” John Maxwell suggests that you regularly ask yourself,
“Am I working to break out of my ‘box’ of limitations so that I explore ideas and options to experience creative breakthroughs?”
How big is the box you are living in? How are you going to expand the dimensions of your box (comfort zone)? If you want to become a successful business owner or leader, you need to continually expand your comfort zone. The Japanese call it “keizen” – “constant, never ending improvement.”
Thanksgiving is one of my favorite holidays, not because of the volumes of calories and liquids that I’ll consume, or because of the pumpkin pies that will be served or the televised football games. No, I like Thanksgiving because it’s the official day when our focus should be on giving thanks.
Thanksgiving for me growing up in northern New Jersey meant going to the annual Montclair vs. Bloomfield High School football game to watch ole Clary Anderson coach the Montclair Bulldogs hopefully to victory. The game was followed by a Thanksgiving feast with immediate and extended family. Turkey was the focal point of those feasts with my father slicing the bird into succulent portions for eating. But the highlight, at least for me, was my grandmother’s pumpkin pie served with a scoop of vanilla ice cream. That’s what Thanksgiving meant to me and means to millions of Americans…feast, football and fun away from school or work.
With the passing of years I’ve begun giving “thanks” each and every day and not just on this special day. Why do we need a special day to remind us to stop and appreciate everything that we have? Why do we dwell on what we don’t have? Or, what’s preventing us from accomplishing what we want? Why do we spend more time worrying, fearing and denying instead of appreciating what we have and the opportunities that lie before us?
I believe that we become what we think. If we fill our minds with fear, worry, blame, or “woe is me” thoughts our overall disposition and outlook become negative. Earl Nightingale compared the fertility of our minds to that of rich soil. What we plant in our soil (mind) is like a farmer planting seeds. The soil (our mind) doesn’t care what we plant and will yield whatever we plant. We can either plant positive seeds (thoughts) that grow into abundance or we can plant negative seeds/thoughts that become poisonous. The choice is ours.
I prefer to focus on all the good around me; to be grateful for all that I have been blessed with. The choice is yours. Will you daily focus on gratitude and appreciate all that you have? Or, will you succumb to the “dark side” by worrying, fearing and bemoaning life? If you choose the former, how will you focus on being grateful? I challenge you to be disciplined in daily focusing (min. 3 – 5 times each day) on being Thankful. You’ll be amazed how this commitment will change your disposition and your life. See my business tips for a couple ideas.
What will you do to daily incite your focus on gratitude? Two years ago while in Colorado I picked my “gratitude stone” out of Gore Creek. The purpose of this rock is to help me focus on gratitude. Every time I touch my rock, I stop what I’m doing and for 10 – 15 seconds think about all the wonderful things that I have. I’ve rubbed that rock so many times that it’s smooth as glass.
How about each morning before your day begins write down 3 or 4 areas for which you are Thankful. Then throughout the day recite these points of gratitude. Before you nod off into dreamland, let your last thoughts be around giving “thanks” for what you have.
Whatever you do, make it a commitment that becomes part of your daily routine.
In our last issue we discussed the importance conversion rate plays in achieving greater profits from your marketing efforts. Do you often find yourself wondering why you aren’t converting a high percentage of leads to clients? You have created offers, guarantees and scripts but your conversion rate hasn’t increased noticeably.
Perhaps you need to look at how your sales team is engaging their prospects. By that I mean, what is the focus of their conversation with prospects? Are your sales people doing most of the talking by presenting the features of your product(s) or service(s)? Or, are they seeking to first understand the needs and goals of the prospect(s) by asking lots of probing questions? Hopefully you have taught them well, and they have the prospect doing most of the talking. A colleague of mine says that he wants to finish his cup of coffee before his prospect has touched his coffee cup.
Good, so your team is focused on uncovering each prospect’s needs, but equally significant is whether your sales people are appealing to the prospect’s logical or emotional side. Confused? What difference does it matter whether the focus is on the logical or emotional side? The answer is that eighty percent (80%) of our buying decisions are based on emotions and not logic, yet most sales people engage in discussions around logic. Tom Hopkins, author of the national bestseller “How To Master the Art of Selling”, says that people buy based on emotion and justify on logic. Your team sells to individuals who have emotions; they’re not selling to machines that have no feelings. The emotions we’re speaking of here are those that are positive to the sale you are proposing. Tom Hopkins further points out that “Positive emotions trigger sales; negative emotions destroy sales.”
So, if you and your sales team are asking lots of questions all focused around understanding challenges in processes, strategies and policies without driving towards the emotional impacts of these challenges, your sales effort will suffer. Your goal when meeting with prospects should be to get them talking about the pain caused by the challenge(s) is having on their business. Once that pain is identified and its impact fully understood, you come to the rescue by establishing how your product or service will alleviate the challenge and thus eliminate the emotional pain.
Create a list of questions you can ask to elicit positive emotions from your prospect that will support your selling effort. Build this list based on several possible variations of responses that you might receive from your prospect. Secondly, be careful to avoiding arousing negative emotions. Your prospect will develop positive or negative emotions based on your appearance, how firm your handshake, how prepared you are, how aggressive you are, how well you listen, and the sincerity of your compliments. Members of your sales team must focus on generating supportive positive emotions and absolutely avoid anything that creates negative feelings.
We often speak with business owners who don’t understand why they aren’t generating more leads. They seem to think that simply having a referral program in place is enough. We teach our clients that one, two or three lead generation strategies in place isn’t enough. You need to have ten strategies to broaden your lead generation net. If your one, two or three strategies suddenly “dry up” there are alternative strategies in place.
In the last issue we talked about the importance of a having a formal referral program in place. This issue is focused on another effective lead generation strategy…Host Beneficiaries.
Lead Generation – Host Beneficiary
You enter into a host beneficiary relationship when you and another noncompeting business with a similar target market engage in a non-contractual “loose” partnership to help each other generate leads. An example is a high-end salon who would offer clients of an upscale woman’s boutique free coloring on their first visit to the salon. Another example is a business training organization and business supply stores…stores offer their business clients a free one hour consultation with the training company. How about a house painter and a company that repairs and installs new gutters? Another example would be a video store and a pizza delivery service. The possibilities are endless.
Host Beneficiary – A Win – Win For Everyone
So why would the owner of a noncompeting business agree to help market my products? The answer is very simple. Clients of your host beneficiary appreciate the owner for offering them promotions that only they receive. What other woman’s boutique enables its clients to get a free coloring (example above)? This is an excellent strategy for business owners to offer their clients added value and in so doing help propel their clients to Raving Fans.
Host Beneficiary – Rules of the Game
Consideration 1: Before you establish which business would make a good host beneficiary partner, you need to know your target market(s). These types of lead generation strategies work best when soliciting business from a narrow target market, like those sited above.
Consideration 2: What are you going to offer client’s of your host beneficiary partner? Without a compelling and attractive offer, the chances of this strategy generating significant leads are nil. ?
Consideration 3: Know your costs…the lifetime value of your average client, your acquisition cost, and the profit margin by product are examples of relevant costs that you need to consider when designing a host beneficiary program.
Consideration 4: To be effective the letter you’re going to write for your host beneficiary partner to distribute to his/her clients must; 1) contain a great headline, 2) include your compelling offer, 3) be clear, concise and on point (rambling not permitted) and 4) include a post script as this is often the most read section of the letter.
If a host beneficiary programs is not one of your lead generation strategies, you are missing a wonderful opportunity to increase your customer base.
Business Tip – Approaching a Potential Host Beneficiary
Here are a couple things to keep in mind when approaching a potential host beneficiary partner.
“Get this right and you’ll have other people doing your marketing for you. And not only that, you’ll be spread your wings in such a way that other business will love you.” Brad Sugars, Founder and Chairman of ActionCOACH
Often times the best solutions to challenges we face in business and our personal lives are not immediately obvious. If we keep a narrow focus, rather than being open to new ideas and new ways of looking at a challenge, we often miss the best solution.
The need to control weeds is important to cotton farmers in the southeastern states in order to increase crop production, but they are unable to use a popular weed killer. Roundout is an environmentally friendly product that effectively kills weeds, but unfortunately also kills cotton plants. Other weed killers were either ineffective or ecologically harmful. After much research an answer was found that effectively killed weeds, didn’t harm the environment, and allowed the cotton plants to grow. The answer didn’t involve modifying the Roundout formula. Instead, biotechnological researchers developed a cotton plant resistant to the killing chemical in Roundout.
Most of us would have thought about re-engineering Roundout rather than the better solution of re-engineering the cotton plant to be resistant to glyphosate, the prime weed killing ingredient.
So What Does This Mean to Me?
It means that regardless of whether you own a business or work for someone else, you need to keep an open mind when confronting a challenge. Often the best answer is not immediately discernable and may be beyond your current knowledge or experience.
In his book, “Getting Everything You Can Out of All You’ve Got”, Jay Abraham writes “you must constantly be on the lookout for new and better ways to dramatically improve your overall business performance…” Are you constantly on the lookout for new and better ideas or are you of the “I Know” mindset, (e.g. “I’ve been doing this for 15 years and know everything…I don’t need to learn more…I don’t have time to read”)?. If cotton farmers were not receptive to “out of the box” re-engineering, the cotton plant would not have emerged as the best solution.
History is full of examples of businesses and individuals who were acknowledged as leaders, but who in a short while had fallen off that pedestal not because of any error that they made other than keeping an open mind. These leaders didn’t adjust to an ever changing world. The failure of these leaders to adapt left room for other businesses or individuals to claim their mantle.
So What Can I Do to Keep an Open Mind?
1) Successful leaders recognize that they need to be constantly learning to recognize game-changing solutions that would have been outside their sphere without the additional knowledge. The Japanese use a term “kaizan” for constant never ending improvement.
2) Recognize that the words “I know” do more to impede absorption of new ideas than any two other words in the English language. When you say “I know” your mind closes down and the best solution for your challenge might just pass by unheard. Instead of saying “I know” next time keep an open mind by saying “Isn’t that interesting”. In saying this you are not agreeing with the comment, but your mind remains open and may hear a nugget of information that will help you solve your challenge.
3) EDUCATION: Change your paradigm by reading about what other people have done. Set a goal of reading at least one business or motivational book each month. Reading and listening to educational CDs expands your perception. Did you know that 99% of the business owners in the world read less than 1 book each month? Set a goal for yourself to read one or two books a month and you’ll gain a huge edge on your competition.
4) Force yourself to break out of your routine ways of identifying solutions to problems. Research how other business owners or individuals have resolved similar problems and apply what worked for them, modified of course to fit your business.
Anyone who thinks that the buying preferences of their customers post recession will mirror those exhibited prior to the recession is most likely going to be in for a surprise. Owners and individuals will encounter completely different dynamics which will necessitate new solutions. If you limit your thinking to what worked in the past, you will struggle against more enlightened competitors. What worked in the past won’t always work in the future.
Last evening my daughter’s softball team unknowingly reinforced a valuable lesson I teach business owners. The Cyclones could have beaten the #1 ranked Blue Raiders were it not for one inning when the Cyclones failed to convert a couple simple plays into easy outs. As a result, the Blue Raiders scored three unearned runs that made the difference in the game. Having watched the Cyclones as often as I have, there’s no question the girls knew what they needed to do defensively, they just failed to execute.
Is your business executing as you desire / expect? Is your team executing flawlessly in helping you build your business? Have you provided them the tools and training necessary for them to conduct errorless performance? In working with small business owners I find that they often haven’t taken the steps necessary to ensure that their team performs as expected. It’s as though they relinquish responsibility for establishing processes to a team that they often haven’t trained. These owners aren’t helping their employees perform errorlessly and their competitors may be the beneficiaries.
Conversion Rate: One area where we find owners poorly equipping their employees is in helping them convert leads, defined as prospective clients who have expressed an interest in your business, into paying clients. What are you doing to help your team increase their conversion rate? Failure to measure their conversion rate is common amongst small business owners and results in a false sense of what is needed to gain more clients – spend more money on advertising.
I want to briefly focus on the importance of measuring your conversion rate and, once known, taking steps to increase that rate and thereby help your employees do their jobs better. Increasing your conversion rate by 50% will have as big an impact on your net profit as will increasing the number of leads through advertising by 50%…and it won’t cost you any money. For example:
|Number of Leads||200||400||200|
Strategies to increase conversion your rate: In working with business owners I have found that just measuring the percent of leads into paying clients increases their conversion rate. Often the actual rate surprises owners who have an inflated idea of their rate. So, begin measuring immediately.
Unique Selling Proposition (USP): A second strategy that I teach clients is the importance of clearly differentiating their business from competitors. To be effective these differentiators must be valued by buyers and ideally must help them overcome a frustration they have with your industry. Failure to clearly differentiate your business results in competing on price, where there aren’t winners except those who have built their business to be the low cost provider.
Scripts: Rehearsing and documenting responses to inquiries from prospective clients is another essential strategy to develop for your employees. Why leave how your business responds to questions from leads to the momentary whims of your staff? Ideally every interaction with prospective clients should be thought out and scripted, not memorized but as guidelines for your staff. Staff must personalize and rehearse the script so that it comes across as being natural.
Conclusion: Preparing, practicing, and executing are just as important in growing your business as they are to the Cyclones in winning their softball games. Failure to equip your “team” with needed strategies, material and training will without doubt lead to your competition recording lots of unearned runs at your expense.
I have provided a brief glimpse into the importance of your sales conversion rate. I encourage you to spend much time thinking through how you can equip your staff to increase the effectiveness of your business’ conversion rate. Don’t spend money advertising until you have attained a desirable conversion rate…you’ll be wasting your advertising dollars.
Stop spending long hours stressing over how to increase profits in your business. Owners need to realize that there are only five areas of their business that they need to focus on to drive profits. Profits can be dramatically increased by small increases in each of the following: 1) lead generation, 2) conversion rate, 3) average dollar sale, 4) average number of transactions, and 5) profit margin.
Of the five areas, the most immediate lift to profits can be achieved by focusing on the business’ profit margin (defined as total expenses divided by total revenue). Directing your focus to increasing your profit margin is the most cost effective way to increase profits. Lower your expenses and that savings goes to profits before taxes.
Consider Increasing prices: In addition to reducing costs, consider increasing prices. I speak with many business owners who assert that they can’t raise their prices. I am not suggesting a dramatic increase in prices and not on your high volume products, but rather a small increase on your other products and measure the impact. We worked with a hardware store whose owner was absolutely convinced that he couldn’t increase prices. Fortunately, he listened to us and raised prices by a nominal amount. What he found was that while revenue declined, profits increased (# 1 focus should be profits) because his “D” clients, who “nickle dimed him”, left and those who remained were his core customers.
Reduce Expenses: In addition to modest price increases, look at reducing your expenses. We have over 60 strategies that have proven successful in helping to reduce costs. Here are a few of my favorites.
1. Stop discounting across the board. Instead of reducing your prices to obtain business think about ways you can add value. Give prospective clients something that has a high perceived value but low cost.
2. Stop spending time with your “C” and “D” clients. Have you classified your clients into tiers? If you have not, begin doing so immediately.
“A” clients are Awesome – never complain about price, always a joy to work with
“B clients are Basic – rarely complain, fun to work with and don’t take much time
“C” clients are Can Do With or Without – move up to “B” level or move out
“D” clients are Dead – move them out or at least charge a higher fee – give them to a competitor
3. Negotiate costs with your suppliers. When was the last time you asked a supplier to reduce the price they charge you? During one of my presentations on this topic, an owner in the audience texted his largest supplier and was immediately given a 3% discount on all future purchases. That savings goes right to the bottom line.
4. Do it right the first time. Are you having to revisit and spend time and dollars with clients having to redo work that your crew improperly installed? Better trained crews and teams reduce the need to spend time redoing work that was incorrectly installed.
5. Take your largest cost categories and reduce each category by at least 10%. This will probably require that you dive into each category to better understand where the money is being spent and what can be done to reduce the expenditures.
Helping business owners increase their profit margin by either reducing expenses or strategically raising prices are just a couple of our 60+ profit margin growth strategies. Experience teaches that just by focusing on your costs you will reduce costs. Once you begin looking into the details you may find much potential to lower your costs. A note of caution however, history is replete with examples of business owners who in an effort to reduce costs adversely impacted revenue generating assets or process – meaning sales and marketing.
Determined not to live the life of a farmer as recommended by his father, Frank applied as a clerk in a general store in Watertown, NY. The year was 1873 and in a post Civil War economy Frank was fortunate to find the job. One day Frank encouraged the owner of Augsbury & Moore Corner Shop to put obsolete and slow moving items on a table out front and sell them for 5 and 10 cents.
Frank recognized that it was better to receive some cash for these slow moving items than to hold on to them indefinitely. The formerly slow moving items were rapidly purchased, proving the validity of Frank’s premise. After a second similar success Frank and his brother Sum started their own store and named it F. W. Woolworth’s.
As he was growing what was to become one of the largest retailing businesses in the world Frank looked for strategies to keep his costs low. One of his successful strategies involved banding together with other retailers to buy in bulk. With the larger volume the combined group began purchasing they demanded, and were granted, price concessions from their suppliers.
Here are two great examples of strategies to increase your profit margin…get money for slow moving inventory and reduce costs by increasing purchasing power.
“Mr. Lovejoy, what are New Year resolutions?” Jackie, my nine year old daughter’s best friend, recently asked me that question. While surprised by her question, I realized that many people no longer commit to New Year resolutions, perhaps reflecting their past failures in enacting long term change. Want evidence? Go to your local workout center in January and wait in line to use the equipment, but by March the crowds are gone.
Why is getting change to stick so difficult? Have you wanted to enact changes in your inner self, but found that over time you reverted back to your old habits? Have you had difficulty getting team members to consistently adhere to changes? Or, have you wondered why some prospects don’t buy your product, though it’s exactly what’s needed.
What can we do to make change sticker for ourselves, our teams and our prospective clients? By understanding the components of change, we gain insights into what it takes to make lasting changes.
(D x V) + F > R
This “Change Formula” helps explain what’s necessary for change to stick – Dissatisfaction (D) times Vision (V) plus the first steps required to make the change (F) must exceed Resistance (R). If either dissatisfaction and / or vision are low then the chance of overcoming Resistance is low and long-term change won’t occur.
In our example of the diminished workout crowds in March, their absence can be explained by the fact that either their dissatisfaction with their current aerobic/strength condition isn’t driving their continued participation; and / or they didn’t have a strong vision of themselves achieving their desired strength/aerobic goals. So, how do we use this formula to make our workout resolution succeed over the long term?
Let’s look at how this applies to running your business.
Having a better understanding of the forces that impact long-term change will help you succeed in enacting the desired changes.
Increasing your dissatisfaction (D) or correlating the proposed changes to a clear vision (V) for your life and your business will increase the likelihood of change over the long term. Another option is to reduce resistance (R) to the contemplated change. How do you lower resistance? Step one: build a plan to manage the roll-out of the change. This plan should consider possible points of resistance and identify steps/strategies to alleviate that resistance. Step 2: establish accountability – someone who won’t let you deviate from that plan or backslide on your commitment to the change. As a business coach, I help clients develop 10, 5, 3 and 1 year goals and 90-day plans, and on a weekly basis I hold them accountable for completing the planned tasks assigned for the respective time period.