Category: Negotiation

3 Ways To Boost Profit Without Having To Make Any More Sales

28/5/2016

In my last blog, we talked about 3 sure-fire ways to make more profit.

Today, I’m going to share with you 3 ways to boost profit without having to make any more sales.

There are many different ways you can go about making more profit in your business, whether you are in a growing market when profits are rolling in, or in a shrinking market when you’re a little worried. Regardless, now is the time to take control and make a solid plan to ensure your business is surviving and thriving.

Here are 3 easy ways business owners can make more profit by being just a little more strategic. You just have to know what to look for.

1. Key Suppliers

Every business needs to keep a close eye on costs. Suppliers are your biggest cost and a key area to look at. Use my 3-step system for success: First, look at your largest suppliers and write down the most significant products or services you buy from them. What does it cost you? Now, get in touch with other suppliers that sell similar products and get a comparison. You will find other suppliers will be cheaper in some areas.

Finally, negotiate with your current suppliers, quoting the better prices you have discovered from the others. Don’t just use the other suppliers pricing for leverage. Look at their offer genuinely and see if they are a better fit. If you were quoting for new business, you would want to be treated this way also.

When talking with your suppliers you might even discover you are still at old rates. If your business has grown, old pricing based on smaller volumes may not apply anymore. You should be able to get a much better deal. In most cases, just asking the question and pointing out your value as a customer and/or letting them know you can get a better deal elsewhere, will shake out improved prices and significant savings on your costs.

This will increase your margins and a little bit of attention here ultimately equals a lot more profit for you. Yay!

2. Stop Discounting

Another thing to look at: How often are you or your staff discounting when you don’t need to? Every business should have a clear policy on discounting. Without a policy, it is too easy for you and your staff to cut prices unnecessarily. It doesn’t seem like a big deal at the time, but discounting randomly means margins blow out and destroy profits.

I find that some business owners are naturally generous and discount far too often which has a big effect on their profits. You can still be generous to customers when the conditions are right, but you need to be in control. Ultimately, making good profit puts you in a much better position to give back to those around you including your customers, your staff, your family and your community.

3. Hold Your Advertising Accountable

Advertising is one area where costs can get wildly out of control. I have seen businesses waste thousands each year (sometimes up to $100k!) on advertising campaigns that are simply not working. They’re unhappy, but don't know what else to do, so continue burning cash month after month.

Don’t get me wrong: Advertising is vital, and everyone should be spending money on getting more customers into their business. But marketing and advertising must be tested.

How do you know? You must measure every dollar you spend on promoting your business. John Wanamaker famously said, “Half the money I spend on advertising is wasted, the trouble is I don’t know which half”. Always ask new customers “How did you hear about us?”. Do this for a little while and the results will be obvious. Stop what is consistently not working and you’ll spend less, in most cases resulting in significant savings on your advertising budget. And yes - do more of what is working! (which should pay for itself and then some!).

For more practical ways to increase profit, come to my "Rocket Your Profit" workshop - Tuesday 4 April 2017 - Otago Chamber of Commerce, Dunedin
Find out more here: https://goo.gl/3ZxbGL

Are you sick of losing money on bad debtors?

25/7/2015

I am sure at some time during your life as a business owner, you have been stung by some bad debtors. You completed the job in good faith, and then your customer didn't pay you! I have not yet come across anyone who hasn't had this happen to them, myself included, and in every case without exception, at best it has cost you profit and time, and at worst, it has put your business in serious jeopardy or even killed your business completely.

I think it's fair to say that this is a real problem for any business. Therefore it is important that you are keeping this downside to a minimum. It is a disturbing trend I am seeing more often, especially in but not limited to trades businesses.

I have put together here a list of preventative measures, from my own experience and also from advice I have gleaned from lawyers and debt collectors over the years.

I have tailored these specifically for trades and service businesses, but they will apply to other businesses also. Let's jump in!...

Your Terms Of Trade
With any quotes you complete, it's important to include your "Terms of Trade" which should be referred to in your signed quote (yes you should definitely get your customer to sign the quote to officially accept it, and prior to work starting). The "terms of trade" are the terms you will complete the job under and give an outline of responsibilities for both you and your customer. It usually includes standards of work, what happens if there is a dispute, payment terms, guarantees etc.

A good "terms of trade" will reduce potential arguments with your customer if things go wrong. When completing a "terms of trade" here are a few important things you should always include:

Notice period for any dispute or problem with workmanship (within 7 days of completion or invoice is good).
Any charges incurred for collection of payment can be added to the bill.
Interest can be added on overdue amounts.
Clause agreeing that you can register their debt under the Personal Property Securities Act 1999 (PPSA). This is a national debt register you can register your invoice against until paid - it means that if your customers company goes broke, you have a priority of payment over others not registered. You still need to list the debt on the register for this to be valid.
Personal guarantee (with larger companies you deal with, these are usually difficult to get, but can be possible with smaller companies).

I recommend that you get a personalised copy of "Terms of Trade" for your business from a debt collector. They know the rules and often already have something that is easily adapted. They usually only cost a few hundred dollars and are well worth it.

Spread Your Risk
Make sure you have a good base of customers rather than relying on one of two large ones only. Then if something goes wrong with a major customer you still have a business!

Terms Of Trade From Your Customers
Sometimes larger building companies or corporates will ask you as the supplier to them, to sign their terms of trade. Look through these very carefully as they are written in favour of them not you, and they have expensive lawyers! Be prepared to negotiate anything you disagree with. I will often cross out clauses or make additions before signing these.

Here are a few things to watch out for before signing:

Make sure there is a notice period if they are not happy with workmanship; otherwise if there is a dispute it's hard to get a debt collector involved as debt collectors can't collect disputed amounts.
Check payment terms: when, and if overdue, can you charge interest?
If a debt collector is required, can you recover collection charges?
Make sure that you are not made responsible for things outside your control i.e. other subbies work.
Any penalty clauses for work not completed on time.

When Taking On New Customers

In addition to the "terms of trade" it is also recommended that you get your customers to complete a "credit application form" - this helps gather all the relevant information about the creditor, which you then have on hand if you need to track them down later, and can be vital if it ends up going to debt collection.
If your customer is a company, then check out some of their other suppliers to see if they are getting paid; if not, this is a bad sign!
If you are concerned, get your debt collector to check out their liquidity and payment history.
Wherever possible negotiate deposits up front on starting, or progress payments at various stages of the job.
Make it clear that payment on time is important and get agreement from your customer to pay when due.

When Jobs Are Completed

Invoice the job ASAP, and state due date on the invoice.
Make it easy for your customer to pay you - put your bank account details on the invoice.
Check your debtors list at least weekly, and follow up any overdue amounts. Delegate this task if necessary - but make sure someone is doing this.

Overdue Amounts

If your customer can't pay, then get a payment plan in place, and make sure they stick to it.
Keep in regular contact until paid. Remember your customer has to pay someone or they are not in business - by keeping the pressure on, it's much more likely to be you, rather then someone else.
Be proactive. If the customer is unhappy with your work, then talk with them early. In most cases the longer it is left, the less likely you are to be paid.
Be tough and be prepared to walk off the job or stop supplying if necessary. The more jobs = the more money owed = the bigger the risk to you.

Existing Bad Debts

Don't be afraid to negotiate to reduce the debt and actually get paid something - if you need to. A bird in the hand is better then two in the bush that fly away and leave you with nothing.
If the amount is in dispute and under $15,000 one option is to file an application at the "Disputes Tribunal". You can this yourself without the cost of lawyers. Check outhttp://www.justice.govt.nz/tribunals/disputes-tribunal
If after a few months, you are not getting anywhere, then hand over to a good debt collector.

Note: In my experience a good debt collector is very proactive with phone calls and regular contact putting continued pressure on the debtor. Find out exactly how they will go about collecting the debt. If it's just sending a few letter with no follow up, this is usually not enough.

These things will help reduce your risk, but the only real guarantee in all of this is when the money is in your bank account not theirs.

Remember you have provided goods or a service for your customer, and you deserve and need to be paid. You also have bills to pay and if you don't get paid, you can't pay your suppliers, your employees, or put food on the table for your family.

This article is really about protecting you from those bad debts that destroy your profit for the year or even wipe you out. The large building company, for example, that goes broke, takes lots of subcontractors with them. So reduce the risk and keep your exposure to a minimum - if you have a few small bad debts that's okay- you will survive those - it's the larger amounts you need to really pay attention to.

Action Points
1) Get your "Terms of Trade" sorted or updated and start using them with all your customers. Yes even the old ones.
2) Be proactive with your overdue debtors - check them weekly and chase the overdue ones.

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Do you get bullied into bad deals?

1/5/2015

In business, you are negotiating all the time, with your customers, suppliers, staff, the bank, and almost everyone else you come across. But how often are you bullied into bad deals or just doing bad deals period?

If you look at a single day, you will be involved in literally hundreds of negotiations, with people who range anywhere from that large customer you have just signed up, to your staff wanting to leave early. Even when you get home you may find yourself locked in a heated negotiation over bedtime with your spouse and kids! Or yourself!

I have put together here some key principles that will help you get better results from your negotiations.

These principles are based on a book called "Start with No" by Jim Camp. This is an invaluable resource which I often refer to as I coach many clients through difficult negotiations they face in running a business. I particularly like his approach because it is not manipulative or deceptive, but is instead based on good honest principles that simply work and get results.

Neediness - don't do it
As soon as you start thinking that you need this deal, you are already on the back foot. Take a step back and think. If you don't get this deal, can you still put food on the table? Will your business still survive? Are there other options, other customers, other deals if this one doesn't come off? In nearly all cases, the answer will be Yes. You don't need this deal; it would be nice to have it, but you don't neeeeeeed it.

Once you realise this, it's much easier to make better decisions, and you don't feel or look needy when negotiating. Think back to the last time you dealt with a sales rep that appeared a little desperate, a little too needy. If you are like me, you were probably thinking why is guy/girl so desperate to get this sale? What is wrong with this deal?

So take the pressure off yourself, and stop being needy.

Start with "No"
This sounds strange at first but it makes sense. If you have a "Yes", you need to check if it's real. An early "Yes" can be dangerous because it can easily be changed to a "No" - it's not based on much.

If you have a "Maybe", this must to be turned into a "Yes" or "No". Don't be caught in "Maybe"-land. It sucks because if you are not careful, you start making plans on the "Maybe"s; you start counting those sales you don't have, planning cashflow around them... thinking about that new house if the deal comes off. Then before you know it you are in trouble and have become needy.

This leaves "No", which is often a good place to start. Everyone involved is forced to define exactly what they do and don't want. Once you have a "No", you can explore the real issues to see if there really is a deal there or not and if there is not, no worries, start spending your time on finding better prospects or deals, rather than wasting time in negotiations that are going nowhere.

Mission and purpose
Get into the world of your adversary (the other party), and find out what they are looking for. Then create a vision or mission and purpose they can buy into. Find out what they need and then start talking with them about how they can achieve this with your help.

Once you understand your customer and what they really want, and have the ability to provide this, then you are well on the way to a deal that is going to stick.

Stop trying to control the outcome
At the end of the day, you can't make anyone do anything unless they have a gun to their head. And guess what? Once that gun is taken away, I doubt they will stick to their agreement (would you?) After all, they never had a choice really did they, so they don't feel any compulsion to honour the agreement.

So stop trying to control the outcome. They ultimately have to decide, so give them the space to do that. Instead, get alongside them and help them make the best decision for them. Maybe it's your product, maybe it's not. Take this approach and you will find that the barriers come down, you will be more trustworthy in the other parties eyes, and with the pressure off, you will get much better results.

Blank slate
Don't assume you know everything or anything, because you are probably wrong and will blow the deal. Ask questions. Be a detective, and look for clues that will help you give the best solution for your customer.

Have an agenda
Know what you want from the negotiation, and then stay the course. This is about deciding what you want to achieve from the particular meeting. It might be a small step like "I want the customer to understand the extra benefits my product has over other competitors in the market" or "To fully understand what the customer needs or is worried about". If you have achieved this, it will bring you closer to a good result.

But be very clear on what your results should be, and be prepared to walk away if you can't achieve them. I know plenty of subbies in the building industry that are taking some terrible deals with impossibly low margins because they had not decided on their own margins, and at what point they should walk away.

Remember if you don't have an agenda, the person across the table most likely will. And their agenda, you may not like.

Deal with the decision makers
Have you spent hours negotiating a deal, only to find after you have made all the compromises, that the person you were dealing with did not have the authority to make the decision anyway?

Don't be fooled - this is a common tactic with larger companies. They will get all the compromises from you early on, only to then advise that the decision will be made by their boss. So check first and make sure the person you are dealing with has the authority to make a decision, before spilling your beans and then be asked to spill some more when your jar is already empty.

We have only just scratched the surface here, but this will get you started to win in your negotiations as a business owner. There are more principles in the book, but I have picked the ones I have found particularly effective.

These principles are simple enough, but to master them takes a lifetime.

Action Point:
1) Pick one of these principles per week and start using it in your negotiations.

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Is your bucket leaking?

18/3/2015

Increasing profits is not always about making more sales. In fact, if you don’t control the other aspects of your business well, you can sell a lot more and actually make less money.

I come across businesses like this all the time – you might even be one of them.

Is your business bringing in lots of sales but not making much profit? You may have leaky bucket syndrome, a common ailment in many businesses.

This parable will explain further:

Celeb lives in a small village on the Amhara regions of Ethiopia with his wife and two small children. They live in a small thatch house and he is the proud owner of a beautifully hand crafted wooden bucket. Now this village does not have any running water so Celeb must get up at 3am every morning to make a four hour journey to collect water from the river using his wooden bucket.

Celeb is very careful carrying the full bucket back home and always takes the best track so spillage is minimal. But even after all this, the bucket always has less than he was expecting. However what he discovers on careful inspection is that his bucket is leaking where the slats of wood join the bucket together - and these gaps are widening, making the leaks progressively bigger.

He now has a dilemma. Does he keep going carrying water and getting less return, or does he go to the cooper in the next village and get his bucket fixed - which will cost him three days travel to another village, and one months wages to fix the bucket. The portion of water left each day is dwindling and if this continues, eventually there will be no water left for his family anyway.

Celeb comes to the conclusion that he must make the 3 day trip to the cooper and get his bucket fixed. So he takes the trip and on arrival the cooper, a master craftsman, painstakingly takes the bucket apart piece by piece, shaves the individual wood pieces until they fit neatly together again, binds them back together again with metal bands and then soaks the new bindings and the wooden bucket until the wood swells to the point that there are no more leaks. The bucket is as good as new.

Celeb travels back to his village and prospers with his repaired bucket. He accumulates extra water and trades the extra for money to buy another bigger bucket. All is well again for Celeb and his family.

A nice happy ending. Now, let’s put this in the context of your business.

Imagine that the bucket is your business, the water you carry in the bucket is the money flowing into your business, leaks are expenses and unnecessary costs in your business.

How much water do you have in your bucket, and where are the leaks? After answering this question you now have some choices to make - carry on as you are, or fix the leaks.

As a business coach I know that every business has leaks but often the owners can’t see them so they lose a lot of hard-earned-profit unnecessarily. I have seen companies who had increased their business by as much as 200–300% and had hardly increased their profit at all. What they have now is a monster of a business that gives them more problems in exchange for taking even more of their time and energy - which is a terrible deal.

One of the easiest ways to increase profit is to just to stop the leaks, but I find very few think about this part of their business much, let alone take the action to fix it.

So where do you start? Let’s take a look at some your biggest costs and work on them. A good rule of thumb when looking for leaks is to hunt out the big ones. Here is a list of the most common ones most business have:

Pricing
Increase your prices in every area you can. Even a 5% increase is significant as it will go straight to your profit. For example if you have $1,000,000 sales, a 5% increase will give you another $50,000 profit. Not bad for a little tweaking (and your customers in most cases won't even notice).

Suppliers
This will be your biggest cost and will require the most attention. Take a look at your largest suppliers and list the most significant products/services you buy from them. Write down their costs and then contact other suppliers for similar products to get a comparison. You will find that in some areas other suppliers will be cheaper. Now start negotiating!

Expenses
Here is a list of some expenses also worth looking at; this is just an initial list; in your business there will be others:

ACC
Make sure that you are on the right rate. If you don’t specify the correct rate for your business, you will probably be on a default rate which could be higher.

Advertising/Marketing
There is a very famous quote by John Wanamaker, a very successful retailer: “Half the money I spend on advertising is wasted, but I could never figure out which half”. Test and measure every dollar you spend on advertising or promotions. Then do more of the stuff that’s working and drop the others. You will spend less and make a lot more sales.

Bank Fees/Eftpos/Visa
Check with your bank that you are on a competitive rate for your level of business. Many businesses I come across have rates from years ago that are no longer relevant to their business today so they are paying higher rates on transactions than they need to.

Freight/Courier costs
These will vary greatly depending on which company you are dealing with. For example in a previous business I used to send 20kg boxes around New Zealand - depending on which freight company I dealt with, the delivered price ranged from $4.60 to $21.00 per carton.

GST
Most businesses get a staff member or book-keeper to work out the GST. Make sure whoever is doing the returns knows what they can claim and what they can’t. Ask your Accountant if you are not sure and then check the GST return before paying. Often businesses are not claiming everything they should, and are paying way too much. Amounts I discovered were being overpaid overpaid by previous clients include $35,144.00 and $8,007.00 - yes these are real figures of GST claimed back - so don’t assume you have it right without checking.

Insurance
Nearly every business in New Zealand has had an increase in insurance costs since the earthquakes, however it’s still worth looking into. Check into the excesses on your policies, a significant amount of costs for insurance companies is in paying lots of small amounts, so if you increase the excess you will have good reductions. Again shop around and get a comparison, you might be surprised what you can save.

Interest
Check out current interest rates on your mortgages and loans to make sure you are on a competitive rate. If you have long term debt, take a look at what fixed options are available.

Most businesses have times of the month where they have money in the bank until accounts are paid. Put these funds in an interest bearing account or even better have a flexible portion of your business mortgage where funds can be transferred temporarily so you are not paying any unnecessary interest.

Internet and Phone
This is becoming a very competitive industry with plenty of options. Check what deals you are on and if they are still the best for your company. Especially with mobile there are plenty of plans out there and it can be complicated to work out the best deal. Take a typical month and then get your current provider to check if you are on the best plan. It’s also a good idea to show other providers a typical month and see what they can offer for comparison.

Skype and other internet based providers are also worth looking into, as sometimes these can be free for national and International calls.

Taxes
Make sure all your taxes are up to date, and if they are not, get hold of IRD immediately and make an arrangement. If you don’t, you will be charged late payment and filing fees and interest. Left long enough this can mount up – in some cases I have seen these extras being more than the original taxes owed – not cool! Don't pay more tax than you have to.

Wages
It’s always best to have good staff and pay them well, however double check if you are getting value and have the right staff at the right times. Make sure that you are not paying for extra staff during down times. For example a cafe client I coached found that staff were taking too long at the end of each day cleaning up. Just by making it clear that staff needed to start earlier to clean up so that they were out by 3.30pm saved them another 10-15 hours per week which over a year was significant for them.

Bonus Tip 1:
Talk with your staff about areas you could save costs; there are a lot of hidden costs that they will see that you may not. This could be anything from excessive waste or dead stock through to more efficiency in areas of your business, through to better customer service.

Bonus Tip 2:
I often find that businesses I work with have not negotiated with their suppliers for years and are buying much more than when they originally started. They might be buying 2-5 times more than when they first dealt with that supplier but are still on initial rates. Remember the bigger the volume, the more negotiating power you have. A big account in most cases will get a better deal than a smaller one. Most suppliers will give a better discount for their larger customers but not often without being asked. So start asking.

Action Point:
1)   Go through all of the leaks and aim to reduce each of them by 5-10%
2)   Take out your Financials and see what other costs not listed here can be reduced
3)   Repeat this at least once a year

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You lost that deal. because you weren't in their world.

2/7/2013

Have you ever spent a whole heap of time wooing a new prospect, putting together a detailed quote or proposal and you just knew they would sign on the dotted line - but the deal didn't go ahead?

This one was in the bag, at least in your mind anyway. Now you are thinking about all the wasted time and effort you put into this sale that has just slipped through your fingers. And you don't have a clue why. What was your prospect thinking? They must have it wrong. It just doesn't make sense...

We have all been there, so let's have a look and discover what went wrong.

The main problem is that you didn't get into their world - you were still in yours. In their mind, you didn't offer the whole solution to their problem or at least have a better solution than your competition. Result = No sale.

In my world as a business coach, I try not to assume that I know what every business owner wants. But we all just want more sales and more profits, right?... Well, no, the reality is often more complex. Many business owners do need more sales and more profits, but sometimes they need other things even more. For some the highest priority is to get more time with wife and kids, less stress, a holiday once in a while, freedom where the business does not rely on them so much that they can't take a breath. For these business owners, if I talk about more sales and more profits, it just sounds like more hard work - exactly what they don't want!

In a sales meeting/presentation, or negotiation of any kind, both sides must agree first on the objectives of the meeting. If you do not, you will be heading in different directions and often this results in the sale being dead in the water.

So how do you get into their world? You need to be a detective and search for the real problems your prospect wants to solve. And here is a clue - often the first answer they give, is not the answer you are looking for - there is another important layer that you still have to find.

Let me give you a real life example from a sales training I did last year. I'll recount the story for you - details are accurate but not verbatim:

A real estate agent had a customer, who we will call Jan, who was looking for a house with a "nice view". Jan had been around all the real estate agents in the area and no one had been able to find a house she was happy with. Our real estate friend showed her all the houses that she believed had the best view including looking over the city, looking out to sea, overlooking some beautiful open parks. But much to her frustration and surprise, every single house Jan was shown, almost immediately received the same response: "No, this is not what I am looking for".

Every option seemed to be exhausted and she seemed no closer to finding a house Jan was even remotely interested in. So the real estate agent had to try a different approach as this one clearly wasn't working. So she asked her client a different question: "All the houses we have looked at I thought had a good view, but you didn't like them. So that I can understand more clearly what you are looking for, can you tell me what you mean by a good view?"

Jan explained that her husband liked repairing old cars and he would do this in the driveway. She was sick of looking at half assembled cars and car parts when she looked out her kitchen window. Everything she has seen so far had a view of the driveway from the kitchen window. Suddenly, our real estate agent understood what Jan really wanted, and she now had the complete answer. The next house she took Jan to, she loved. Jan found a house, the real estate made a sale and everyone was happy.

Now Jan is a raving fan, and this is what she said to the real estate agent once the deal was done: "You were the only real estate agent who took the time to understand me and what I wanted - Thank You". Did finding Jan a house have to take that long? - NO, it just needed the right question.

Our real estate friend was never going to get there by assuming, only by getting into Jan's world. This is a true story!

Here are some questions that will help get you into the customers world:

What are you expecting to get from using this product/service?

What are the main benefits for you?

What is the main problem you are expecting to solve with our product/service?

Try threading these into you next negotiation or sales meeting - you will be surprised what you discover. It may be the difference between making your next deal or missing out.

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3 Ways To Boost Profit Without Having To Make Any More Sales

Are you sick of losing money on bad debtors?

Do you get bullied into bad deals?

Is your bucket leaking?

You lost that deal. because you weren't in their world.

Like this?

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3 Ways To Boost Profit Without Having To Make Any More Sales﻿

Are you sick of losing money on bad debtors?﻿

Do you get bullied into bad deals?﻿﻿

Is your bucket leaking?

You lost that deal. because you weren't in their world.

Like this?

Categories

Archives

3 Ways To Boost Profit Without Having To Make Any More Sales

Are you sick of losing money on bad debtors?

Do you get bullied into bad deals?