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Business model Management Small Business Strategy

Does your business reality match theirs?

If you happen to pay attention to any of the business turnaround reality shows on TV (I see them on rare occasions), you’ll know that the pattern is the same for most of them – regardless of the type of business.

Typically, there are some quality and cleanliness problems, a management issue or two (or five),  a lack of performance that’s often attributable to training and consistent systems and processes, and last but not least, a lack of attention to the numbers.

In some rare cases, the businesses seem to be more of a hobby or an escape than an actual business – a situation that never escapes the consulting expert, and always infuriates them.

On the rare occasion when I see these shows, three things always come to mind:

  • How could they have let the situation get this bad?
  • How could they not see these obvious problems, much less fail to address them?
  • How do business owners who read my stuff feel when seeing these shows?

If you haven’t seen one of these shows, here are the things you should be looking for in your business’ reality.

Filth

One of the universal failures of the businesses in these shows is that they’re consistently filthy. Some are worse than others, with some downright unbelievable.

The reason this can get out of control in your business is the gradual creep of muck. You get used to a certain level of clean and it never again seems to be the kind of clean you’d want to see in a place you’d visit.

My wife and I visited a Cajun restaurant in the south earlier this year and found the dining room’s tile floor filthy. It was hard not to wonder if they simply got used to the dirt.

How are you doing on the filth factor?

Management Vacuum

Another consistency of the businesses profiled in these shows is a partial to total lack of management.

Sometimes, the problem is the owner(s) acting as if the business is a hobby (and often creating a massive distraction – much less money suck), while in others, it’s a failure to delegate and then use the time savings to actually manage the business. Managers in these businesses often have owner-instigated conflicts that prevent them from exerting any authority on day to day operations – making them ineffective at best.

Do any of these situations sound familiar? Ask your manager(s) about it. If you sense hesitation…

Systems and Processes

One of the most common problems in these businesses is a lack of order and consistency.  Many of them have no point of sale system or have nothing more than a cash register to balance at the end of the day.

In the episodes where food and drink are part of the business, food and drink costs are always out of control and highly variable from serving to serving and drink to drink.

They not only have inconsistent production (and thus inconsistent quality), but they also tend to have no measurement / tracking / purchasing controls in place. They have no idea how much they’re spending on food and drink or if they are even turning a profit.

Key to the resolution of these problems is creating systems to manage and track materials, sales and purchasing. Yes, I know… this seems like Doctor Obvious speaking, but you would be surprised at the times this has been missing from businesses in these shows (and in my personal observation).

Do you know how much that $8.95 meal costs your business? Don’t serve food or drink? You still have production costs of some kind.

Training

A tightly integrated issue with systems and processes is staff training. Inconsistency in these businesses starts with a lack of systems and processes and ends with inconsistent (or non-existent) training of the staff.

A universal component of the reality-show-fix is a combination of new systems, processes and staff training on those systems and processes.

Systems and processes combined with training breed consistency, which breeds quality.

Watching the numbers

Beyond cost of production numbers, a common issue for these reality show businesses is a disconnect between what the business is doing sales and cost-wise and what the owner(s) / manager(s) think the business is doing.

Do you know what your real numbers are?

What’s the reality at your business?

Categories
Automation Business model Business Resources E-myth Management Marketing Small Business systems

Big Data, Small Business

Last week, we talked about questions.

Questions tend to produce answers and more questions, which can result in a pile of stuff that overwhelms a small business.

As a business and client base scales, these questions produce data that you can use for guidance, decision making and to ask even better questions. Again, this can result in a pile of stuff (data, in this case) that overwhelms a small business.

A common reaction to this phenomena is to ignore the data, or to be so overwhelmed by its volume that you can’t discern anything from it. Entrepreneurs tend to want to do it all and if they can’t do that, doing part of it seems like a failure. It isn’t.

Identifying your big data

Let’s look at one of the questions from last week’s post and see which ones are likely to produce decision-making data.

How does this impact our key performance indicators? Examples: cost per lead / new client / sale / deployment, support load, lead time, etc.

This implies that you already know your cost per lead, cost to acquire a new client, cost per order/sale, cost per deployment, average lead time per product/service and the support/customer service load your products and services require. Not gut feel, but actual numbers.

Actual numbers are important because our gut is often right when it comes to strategic decisions and the like, but it seldom has a clue when it come to numbers like cost per lead – particularly if you’ve never watched it.

Lead cost, sources, media and campaigns

For example, what impacts cost of a lead at your business?

Lead source is a good place to look.

You might get leads from referrals (cheap and strong, warm leads), from local TV ads, from local newspaper ads, from different media in your education-based marketing, from the phone book (yes, some businesses still depend on those leads), from direct mail (likewise, still quite productive if used properly), from your website, mobile app, and so on.

Each of these have different creation and distribution costs. Each will produce a different lead flow, much less volume and types of client. While in the beginning, you’re likely to lump all of this data together, at some point you need to break them out by media and eventually, by campaign.

You’ll want to do that so that you can answer questions like this:

  • How do you know which media produces the most profitable clients?
  • How do you know which campaign (and on which media) produces what number and type/quality of client?
  • How do you know if a particular campaign works well on one media, but terribly on another?
  • How do you know which media (or campaign) tends to produce clients that are high maintenance to the point that you tend to fire them or not accept them in the first place?
  • How do you know which media produces the best (however you define that) clients you have? Is there a specific type of campaign that does this?

From time to time, an owner will tell me that their businesses doesn’t do any marketing so this kind of thing doesn’t help their business. If that’s really true, you’ll usually have referral sources that produce more and better leads than referrers do.

Would it be helpful to know who is sending you the best referrals?You probably have a gut feel on this, but are you sure that it’s accurate?

Thinking back on those questions

Given the detail on the one question of cost per lead, you can see how this can become overwhelming in a hurry. Don’t fall victim to that. Take it a step at a time.

You may start with another metric. Cost per lead is important for almost everyone, but it isn’t always the best place to start.

When you ask questions like “How did the pilot program go?” – it might provoke follow up questions about the data collected during that pilot which would support the “How did it go?” question.

If those answers aren’t backed with data, then that might provoke you to add data collection to your pilot projects in the future. This will take more time but it will produce better answers that don’t depend on gut feel or a need to be right.

Better answers are what we’re looking for.

Categories
Business model Competition Customer relationships Marketing Positioning Small Business

What are your compelling reasons?

This past week, I’ve had several conversations revolving around why people don’t buy, why people stop buying, how we can get them to use what they bought and how we can get them to switch to our product instead of a competitor’s.

These conversations all have the same foundation: Giving people a compelling reason to change.

Whether we’re talking about buying, changing what they use, or using what they’ve bought, people need compelling reasons to change what they’re doing – even if they’re not doing anything.

Without compelling reasons – buying and implementing is much harder

It seems obvious that making it easier to buy is important, yet some businesses do their best to make it hard to give them your money.

However, buying isn’t the only obstacle to overcome. That’s why I’ve told the software setup story as many times as anyone would listen.

Selling them is one thing, getting them to use, adopt, implement it is quite another – and in fact, it’s more important than the sale over the long term.

If you don’t care what they do after they buy your stuff, it’s an indication that your business model is broken, even if you’re selling that stuff like crazy right now. Someday, that will change. When it does, how will your current business model work?

If you aren’t focusing on making sure they implement what they buy, your business model might not be broken, but your management of it is. You wouldn’t plant a crop and never watering or weed it, so why would you make a sale and then make no effort to cultivate the use of what you sold them?

That’s what the software setup story addresses and as you can read, I’ve been there.

What’s their point of view?

One of the things that fails business owners most often is assuming that their clientele is just like them. To be sure, there some cases where that’s true, but in others – it’s simply wrong.

The danger in this is that people buy, implement and change things for reasons who may not have considered, or for reasons that are meaningless to you. If that reason is the primary driver in decision making for your market and you miss it because their reason means nothing to you, closing a sale could be quite an uphill climb.

Even if you’re shy, you have to ask questions.

What are the obstacles to change? In many cases, they might want to change but think they don’t have the time to retrain their people, adjust their internal business processes and deal with yet another change. Solving that requires your value proposition to be clear, compelling and long-lasting.

What are the real reasons they might change? What truly causes the pain they feel? What keeps them up at night? What makes them worry about their future? Why is changing worth it at all if the outcome is the same? Same reports, same Excel spreadsheets, same profit?

If you don’t know the answers to these questions, you’re going to struggle to sell to them even if you have exactly what they need and want to take away their pain.

I don’t sell things that make the pain go away

If you aren’t making someone’s business pain go away, your clients are probably some portion of the general public. You might want someone to buy your cosmetics, or perhaps you’d like them to give your dry cleaners a chance vs. them continuing to use the one they use now.

Think about the risk people take when they change from Maybelline to Bare Minerals or from One-Hour-Martinizing to Joe’s Hometown Cleaners.

How do you currently communicate that trying your stuff is so easy and so risk free that if it doesn’t work out, they lose nothing?

Once you’ve done a great job of taking risk off their plate, you still have the task of proving the value of switching.  How are you doing that these days? Put yourself in their place.

Imagine a bank asks you to switch to their bank from the one you currently use – the one where your direct deposit goes and where your bill pay stuff is all setup and working smoothly.

Or consider switching from Windows to Mac or iPhone to Android.

Now you understand how they feel when you ask them to switch.

 

 

Categories
Business model Customer service Employees service Small Business strategic planning

Earning return business

When you make client service decisions, do you weigh the cost of losing the client in your decision?

I’m talking about the hard cost of losing that client, not the often fuzzy, sometimes made up, and frequently inaccurate cost of a loss, that usually includes the 10-20 people (on average) that an unhappy client will tell after a poor experience – even if it’s their fault. While that does tend to happen, it’s this unhappy client I’m focused on, not their friends, family and coworkers. That’s the one you’re almost sure to lose in a badly handled situation.

What will it cost you if that person never comes back? Not their friends, not someone who reads what they say on Facebook, but them.

Let me describe a recent adventure at Best Buy to give you some context.

Best Buy?

A couple of months before the iPhone 5S came out last year, Best Buy (BB) had an offer to upgrade from an iPhone 4 to a 5 at no cost. The only catch, which I didn’t view as a catch, was that we had to renew our cell contract with Verizon.

We’re happy to reward their early investment in Montana cell infrastructure by remaining with them, at least until they give us a reason not to. As such, renewing was a zero friction event. More like a two free phones event.

BB has a different device insurance than Verizon and we felt the coverage was better, so we put BB insurance on our phones. The one part of Verizon we aren’t a fan of is the corporate stores, so handling all warranty/damage claims in BB seemed like a much better idea. Little did we know…

Earning return business sometimes means bending the rules

My phone recently developed a loose charging socket, probably from me catching the cord on something too many times. Near the end, I had to get creative to get it to charge. So I go up to the nearest BB store and show it to them. The guy at the counter starts the replacement process and checks their records. He says our insurance was cancelled for non-payment.

Hmm. We dig further and find that our debit card number changed in February. We didn’t think about the connection when that change occurred, and they couldn’t charge the insurance to the old card, so the cancel was legit. Unwise, but legit. After a single email to get our attention – they cancelled it.  The email went to an account that gets a lot of spam and isn’t one that I monitor, so it was missed.

While still in the store, I ended up on the phone with the BB insurance guys. Staying mellow paid off, as the agent was willing and able to reinstate the insurance without paying back premiums, setup future payments with the new card number, tweak the email address and allow us to continue the warranty replacement process.

Yes. You read that right. They didn’t even charge the unpaid months in the past.

Preserve and Protect Lifetime Client Value

The potential lose-a-client error, in my mind, was them allowing the insurance to cancel after a simple email. Are you that willing to let a recurring charge client go away? Pick up the phone, people.  One email is not enough effort.

Here’s why: Had they denied the claim, which was clearly their right, I would probably never do phone business with BB again. If they handled it poorly enough, they could have lost all my BB business.

But that isn’t what happened.

Someone is presumably training the folks at BB insurance to think about the long term and what marketing people call LCV – lifetime client value.

The question you have to ask is “Is the incremental value worth the lost lifetime client value?”

In BB’s case: Is it worth the incremental replacement cost of a phone, minus the payment of insurance premiums, to keep a BB client? I think it is, particularly compared to the cost of losing a client, perhaps forever.

In my case, it could have added up to decades of purchases by my wife and I, and perhaps our kids. I suspect that would add up to more than an insurance company’s wholesale price of a refurbished iPhone 5.

Are you thinking about the incremental cost of the service you provide vs. the lifetime client value when training your staff? You should.

Categories
Amazon Automation Business model Competition Improvement Leadership Small Business strategic planning Technology

Accelerated change redefines your market

Last month, Harvard Business Review’s Brad Power wrote a short piece about something software people have known for years, even if they ignore it: The rate of change is accelerating.

http://blogs.hbr.org/2014/06/how-the-software-industry-redefines-product-management/

An excerpt from Power’s piece:

I spoke with Andy Singleton, CEO of Assembla, a firm that helps software development teams build software faster. He told me the story of Staples vs. Amazon. As you might expect, Staples has a big web application for online ordering. Multi-function teams build software enhancements that are rolled up into “releases” which are deployed every six weeks. The developers then pass the releases to the operations group, where the software is tested for three weeks to make sure the complete system is stable, for a total cycle of nine weeks. This approach would be considered by most IT experts as “best practice.”

“Best practice”? Not really, but let’s continue:

But Amazon has a completely different architecture and management process, which Singleton calls a “matrix of services.” Amazon has divided their big online ordering application into thousands of smaller “services.” For example, one service might display a web page, or get information about a product. A service development team maintains a small number of services, and releases changes as they become ready. Amazon will release a change about once every 11 seconds, adding up to about 8,000 changes per day. In the time it takes Staples to make one new release, Amazon has made 300,000 changes.

While this situation is old news to software businesses and even to some non-software businesses that develop their own software, the thing you need to be aware of is that this accelerated rate of change and implementation stretches far beyond software.

You may have heard the phrase “software is eating the world“. In many cases, that’s about software disrupting and improving businesses and sometimes eliminating jobs. It’s also about technology and accelerated change in businesses that haven’t traditionally depended on technology.

This rate of change is reaching into many other niches – some faster than others. The question isn’t “Will it touch yours?”, instead the question is “When?”

Consider Amazon

You might be thinking that Amazon is a relatively new company so it was easy for them to start off producing systems as Power’s piece described. Trouble is, that isn’t the case at all.

While Amazon Web Services (aka AWS – the cloud services side of Amazon) has been around since 2006, Amazon has been around since the mid ’90s. They had to remake themselves to pull this off – but they chose to do so before someone else forced it on them.

Three dimensions

A few years ago, if you were in the engineering prototyping business, you might have a turnaround of a few weeks to a month, depending on the type of pieces you prototype.

Then one day, a 3D printer showed up on a local doorstep. Without a massive capital expense, delay and shop build out, a local engineer could now start turning out prototypes your clients could touch and feel in hours or for larger items, a day or two.

Perhaps you can work with that person to partner on projects and you both win. If you don’t, who will?

You can have a 3D printer on your doorstep tomorrow. What makes you different from the lady down the street who owns one?

The choice

Today, you probably have a choice in the matter.

You can either determine what needs a remake or restructure and make those changes (and experiments) on your terms, or you can wait and let someone else determine the time frame and terms for you. Most of us would prefer not to have someone else calling the shots.

I know, you’re busy. You’ve got this fire and that fire to put out. You’ve got soccer games to get to. I get it. I have those too and so do many other business owners.

It might be hard to justify any sort of disruption, even in thought, if your business is humming along on all cylinders right now.  That’s exactly what the disruptive businesses want. Keep doing what you’ve always done, because it’s still working.

Meanwhile, someone out there is fighting the same fires, perhaps as their business hums along, and all the while, they’re restructuring their business for this new reality.

What if they’re in your market? What if you did it first?

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Business model Customer relationships Direct Marketing Lead generation Marketing Positioning Small Business

Even black cats need a reason why

I didn’t do a Friday the 13th promo yesterday. Did you?

In my case, I didn’t get a promo out despite a monthly reminder on my calendar. Yes, every month a week or so before the 13th, a recurring reminder prompts me to check if there’s a Friday the 13th that month. This month, there actually WAS a Friday the 13th, which is a great time for a promo tied to the “holiday”.

I do this and recommend it for my clients for Friday the 13th and other oddball “holidays” because they’re a reason why, even if it is a quirky one. You can always craft a unique story between a product or service and almost any normal or oddball/unusual holiday. For that matter, you can make up a holiday that’s all yours. It isn’t like you’d be the first to do that.

A reason why

Before we do that, let’s go back to the business reason for doing this in the first place: A reason why.

There are all kind of reasons to do a promotion, but they are more productive if there’s a reason behind them – even if the reason is downright silly.

A few years ago, a Baltimore business had an 11% off sale after a snowstorm dumped 11 inches of snow in the area. The online business hadn’t slowed since snow didn’t disrupt their nationwide retail traffic, but the 11 inch snow was worth celebrating so they had a little sale to commemorate it.

Please understand that when I say “promotion”, I am usually NOT talking about “a sale”.

In particular, I’m absolutely not talking about the 40-50-60% sales that stores seem convinced are a daily requirement to keep a mall store open, or at least to generate the traffic they think they need.

I don’t spend much time in malls, but a recent visit had more stores with BOGO and 40-50-60-70 (yes, 70!) percent off sales than I’ve ever seen.

Either their original prices are fantasy or they are in serious trouble.

What exactly is a promotion?

Since I’ve made it clear what a promotion isn’t, I should also make it clear what a promotion IS.

A promotion draws attention, giving your clients and prospects a reason why. While it might include some sort of discount, it doesn’t have to. A well-executed promotion certainly doesn’t need discounts to make it successful.

Promotions commonly attract a specific type of client and prospect to your business. The newbie, the expert, the confused, the investigator, as well as those categories of prospects and clients within each product/service niche you offer.

Fine tune your reason why

A local home brewing store can have a promotion to introduce brewing to their clientele, yet still narrow the audience and get a specific kind of buyer. Instead of having a Saturday in-store brewing day promotion / event, they might have one focused specifically on India Pale Ales (IPA) and then rotate through other styles. In a large market area, they may want to narrow IPA days down to double-hopped or dry-hopped IPAs.

When doing this and focusing on one brewing style, they might stock up on fresh IPA-ready hops and have several brews in different stages of brewing so they can teach each stage’s hopping techniques.

Doing this with a dozen different styles of brewing on the same Saturday would be out of reach for most home brew stores – and would likely hurt business by confusing those who are paying attention.

Worse yet, if prospective home brewers (ie: newbies) show up at the promotion and happen to be folks who don’t like IPAs or the hop’s influence on that style’s taste, they might never come back.

Attract, Educate, Train, Sell

Whether you sell home brewing gear and supplies, or power tools for artisan woodworkers (hmm, do those mix well?), you’re likely to want to separate promotions by audience type so that you don’t attract newbies who need broad knowledge to make a decision with experts focused on tightly defined niches.

The point of the promotions described above is to attract, educate, train and of course, sell. No matter what you do, you’re likely to have prospects and clients interested in what you do that fall into groups you could arrange into newbies, confused, investigators and experts.

What are you doing to give them a reason why?

Categories
Business model Improvement planning Pricing Small Business Strategy tracking

Pricing custom work well is a strategic advantage

How good is your business at pricing custom work?

If you don’t have a way of pricing custom work that consistently accounts for your costs and labor, how do you know if you’re making any profit on these deals? How would it feel to find that you’re losing money on half your custom work?

Do you have a spreadsheet or software program to help? If not, do you have some other formulaic means of pricing work?

If you read the May 12 New York Times “You’re The Boss” piece by the owner of Paul Downs Cabinetmakers, you’ll learn that these guys are fortunate enough to have a formulaic method to determine the price of a custom item.

That they have this formula puts them ahead of most businesses that do custom work. However, the trouble starts when they discuss what’s going on behind the scenes as there are a number of things going on that conspire to cause problems when reality and the pricing formula meet on the shop floor.

The failure points

Downs mentions that the spreadsheet’s material prices haven’t been updated in over 6 years, that material use and overages are not tracked, that tool use and labor methods have changed and that the info in the spreadsheet is sometimes entered wrong and fails to match the reality of the work actually being done.

As you read about all the possible failure points of this spreadsheet and how they’ve allowed it to become outdated and stale compared to their business reality, you can’t help but wonder how they got to that point.

Here’s the thing… this type of situation is pretty common.

Our tendency to think we’re too busy to address these critical, but tiny (at the time) maintenance issues has a way of giving us permission to postpone giving them attention. We think we’ll take care of them someday since some other thing seems more important right now.

It doesn’t seem to work that way, despite the best of intentions.

What usually happens is that the business lets these little things get out of sync an hour at a time, a day at a time, a week at a time and so on until we find that our internal systems look like they were designed to run some other business (or none at all).

At some point, things will have crept so far out of line that you’ll have no choice (like Downs) but to address them. Not only has the job you face become massive, your strategic advantage of having accurate, formula-driven custom pricing will have become the exact opposite.

Why does it matter?

The trouble with getting your business into this situation is that it severely damages your ability to see trends, know if you have enough (or too much) raw material or labor to deliver upon your work commitments.

If you’re already stuck, you have to consider the cost of continuing with a broken pricing model, assuming you have one.

If you aren’t sure you’re turning a profit on custom work – the showpiece work of your business – this merits immediate attention.

This is your best work. It’s the work that generates the reputation that earns your bread and butter work. It’s the work that you use to get your best, most profitable clients.

And yet you aren’t sure exactly how much profit you make on it?

If a close friend was in that situation, you know how you’d react. You’d go out of your way to make the situation clear to them, helping them if possible.

Why not do the same for yourself?

Should this take six months?

No, it shouldn’t. While Downs says his expert worked on this for six months, I suspect what he really means is that it took six months from start to finish – not that his expert worked on it eight hours a day, five days a week for six months.

The important thing to remember is that this doesn’t have to be perfect the first time.

Start with the highest impact item you can wrap your head around. and implement it. Tweak and add pricing components one at a time to improve accuracy.

This allows you to see results and adjust for accuracy and additional information without allowing any single change to be so complex that you have no way to assess its worth, much less its accuracy.

Get to work!

Categories
Business culture Business model Customer relationships customer retention Customer service Entrepreneurs Improvement Leadership Small Business Strategy

Choose your market or craft it?

Sometimes you choose your market, and sometimes it chooses you. Today, we get a little of both.

A discussion with some software business owners prompted this piece, but you should stick around even if you aren’t in the software business – because these problems are universal no matter what business you’re in.

During these discussions, there was a lot of talk about cheap clients.

The discussion started with the group lamenting that their clients are constantly falling back on their lack of a budget as the reason they can’t do things.

The comments started like this:

  • “Our clients say they have no money for tech support.”
  • “Our clients say they have no money for newer hardware, so their 10 year old XP machines will have to do.”
  • Our clients don’t have (this and that).
  • Our clients can’t do (this or that).

The conversation continued for a bit, discussing the kinds of things you’d prefer to avoid when seeking clients.

Thing is, many small businesses are in a position where they can’t avoid clients like this, at least not when they’re small and getting starting.

No matter what market you’re in, you have clients and prospects that have these issues – or say they do. For many business owners, it’s pretty frustrating.

Dump ’em?

Normally, I would counsel you to find a way to sort these guys out from the rest. Actually, I’d still suggest that to a fair number of my clients, but not everyone is in a position to fire a bunch of customers.

Even if you are in a position to shed those customers, you need to be selective about how to do it and even then, do so carefully and kindly.

Why selective? Because a sizable handful of those customers will figure it out, get out of bootstrapping mode and become the best clients you’ve ever had. Your job is figuring out which ones are the keepers. We talk about that fairly often.

What we don’t often discuss is what to do if you’re the one who has to keep most (if not all) of these customers – and what to do about it.

By force or by choice

What happens if you decide to (or must) work with them regardless of their situation?  Not everyone can get out of this situation easily.

Perhaps you manage part of (or work in) a business that this kind of client and you have no control over the situation.

If you own the business, perhaps it’s a situation you’ve unintentionally created over the long haul and it’s either hitting you square in the forehead and wallet simultaneously that it’s an expensive situation, or you’ve known about it all along and are now managing to come up for air long enough to take some action to deal with it.

Either way, it needs to be addressed.

Long time readers would probably guess that my plan “A” would be to execute my time-hardened battle plan to help you help them transform from mere customers to good clients. I don’t say “mere customers” lightly. It isn’t a meaningless smear, as there is a serious difference between mere customers and good clients.

Thing is, plan A has two benefits: While it’ll help some of them become the clients you want, it’ll also tell you who the doers are.

Even if they aren’t good at some (many?) of the things you put in front of them, the doers will try almost everything. Keep them around unless they drive you absolutely crazy. I mean visit your house at 11pm on a Sunday night kind-of-crazy.

Why? Because those are the guys who won’t quit trying. You need clients like that and they need you.

What about the rest?

The doers will listen and execute based on what you tell them. Many of them will get it and grow into the kind of client you wanted in the first place.

The rest? Well, those are the ones that you can part with once you’ve done your transformation work on the rest…unless you just can’t let them go.

If you can’t, then ponder what you’re willing to do about it. They consume time, effort and money that might be better leveraged on other projects. Can you help them? Do you have time to help them? Will they listen if you offer help? (Their effort on Plan A teaches that).

Give them a chance, then make a decision.

Categories
Automation Business model Customer relationships Direct Marketing Getting new customers Lead generation Management Productivity Sales Small Business tracking

Where does new business hide?

In every town, there’s a place where new business hides.

If you can’t find its hiding place, your business is likely to struggle.

Most of the time, that struggle is rooted in the inability to dependably produce predictable, month to month revenue.

Without predictable month to month revenue, businesses close, scale down or at the least, fail to reach their potential to support their owner, their family, their employees’ families and their community.

Revenue consistency problems influence a business owner’s decision making because their decisions end up being driven by cash flow. Decisions based on sales you made last week (much less yesterday) rarely fit into a long-term strategic plan.

Predicting revenue isn’t all that difficult. You simply have to check the Sales Thermometer.

What’s a Sales Thermometer?

Imagine that there’s a thermometer on the front door of businesses and homes that told you to pull in and sell something to someone because they had developed a need or a want that *had* to be fulfilled.

Armed with a town full of sales thermometers, you’d have all the new business you’ve ever wanted and wouldn’t waste a bit of time chasing around town after people who didn’t want or need what you sell.

Instead, you’d simply drive through town, check the thermometer and stop at the places where the temperature was the highest.

On days when you need a little extra revenue, you might get up a little earlier and drive around a little later so you could check more thermometers. 

Once you took care of the places with the hottest temperatures, you could retrace your steps, scan for the next highest set of temperatures and take care of those sales.

As the sales thermometer readings change on other homes and businesses, you’d see them during your travels so you could pick up on the newest opportunities for new business – simply by being observant.

Scaling

There is a downside to this sales thermometer thing. It has some scalability issues.

For example, you can only drive so far in a day and every customer who takes an hour of your time consumes an hour that you can’t use to check other thermometers. That will eventually force you (subconsciously at least) to stop and work with only the hottest thermometers.

If only there was a way to automatically check the hottest thermometers without spending all that time driving around.

Fortunately, there is.

Getting new business isn’t a joke

While talk of a sales thermometer seems like a bit of a fantasy or even a joke, your business’ inability to consistently produce new business from existing and new clients is no joke at all.

If your business struggles with that, the problem isn’t the lack of a thermometer. The problem is that you aren’t reading it. 

The sales thermometer in the information you should already have about your clients and prospects.  The thermometer’s temperature is driven by behavior and interaction, both yours and that of your prospects and clients.

Those behaviors are like a patient’s symptoms. Monitoring  and acting on them in a predictable, repeatable, systematic way is what gets your business to the point where you *can* produce consistent, predictable month to month revenue.

Random revenue from new business is an indication that you’re not watching and acting on these symptoms on a consistent basis. We all know we need to do these things, but sometimes we get sidetracked by the crisis-of-the-day.

While they should be acted on individually for each prospect or client, these symptoms should also be grouped together (aggregated) to help you monitor the health of your business and your market.

Things that drive up temperatures

What causes rising temperatures?

  • Interaction behavior changes.  You should know when someone is paying more attention than a typical prospect. Do you have a way to detect this?
  • Sales cycle behavior changes. You know how long it takes to close a sale. Is that timeline changing? Are certain prospects skipping steps in the process? Is their path-to-purchase pace is faster than normal? If so, does your internal behavior toward those prospects change to suit their timeline?
  • Purchasing behavior changes. For example, customers who are buying more (or less) often than they normally do. Even if you’re tracking sales on paper, you can monitor this .

Are you monitoring the sales thermometer?

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Advertising Business model Competition Lead generation Marketing Small Business Strategy

Win on low price, lose on low price

Do you depend on having the best price to win business? If so, are you sure that’s really how you want people to choose your company?

I ask that because if you cut your price 10%, that 10% comes out of your profit margin. Perhaps obvious, but not always something folks pay attention to – particularly when price is used as an end-all, be-all to close a sale.

You can tell that’s going on when you intentionally keep silent when someone names the price of a product or service. Stay silent long enough after they react to your “What’s the price?” question and the “we’ll win on price at all costs” salesperson (particularly the novice) will often get nervous and say something like “Of course, we can go lower…”

Use low price as a component

As Amazon Web Services SVP Andy Jassy is fond of saying, “I’ve never met a customer who asked if they could pay more.”

So how do you balance between being too expensive and being the one with the paper-thin margins?

Don’t get me wrong. Using price as a component of the things you use attract customers is fine. Where you run into trouble is when it’s used as the primary decision point. In those cases, you’re more than likely going to get burned and less likely to attract long-term customers.

One common example is using products and services as loss leaders. It’s OK to leverage price in this way as long as you know your numbers very, very well *and* you know that once you get that customer, there are plenty of opportunities to provide more value to them – value that they’ll be happy to pay for.

Fail to do this and you’re headed for trouble. This isn’t just about milk at the back of the store. You see it frequently with internet-based services. How do they offer “free” to so many people, yet still make a profit?

They know how much it costs to offer that free service.

They know how many of those freebie users will convert to paying customers because they want services, features and benefits not offered to freebie clients.

They know their margin on the paying customers is enough to fund the freebies, plus profit margin, so that more paying customers raise their hand and say “Yes, I need that.”

Bottom line, they know their numbers and they never stop recalculating them, just in case something changes.

Low price isn’t owned by the internet crowd

You can use free or cheap as a lead generation carrot as long as you too know your numbers, and make sure that you’re using that offer with the right prospect.

That’s where most businesses get started down the wrong road – they make the offer to the wrong group of people, ie: people who would never have been their customer in the first place.

If you make your offer to the right people, that’s a different story altogether – and that’s the magic formula no matter what your pricing is like.

The timeshare business has done this for years by giving away a free night or two, dinner, etc – all in order to get you to see and enjoy what their facility offers. They know historically what percentage of people will buy if they take the time and make the effort to attract the right prospects to their offers.

Using low price requires well-crafted offers

Timeshares don’t make their numbers by giving away all those free nights, golf rounds, lift tickets and meals to anyone and everyone. They’re careful to pre-qualify prospects using financial, behavioral, demographic and psychographic measures to make sure they closely match historical buyers.

When you attract people with a low price offer, the goal isn’t simply to make it free or available for a low price, but to provide enough of a taste with as little risk as possible to the prospect so that the right person can make a decision to become your newest client.

If you can do this without killing your margins during the period between the time they taste and the time they get serious about buying the real value you can deliver, then low price can work.

Do you know your numbers that well?