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Sales are good. So I must be doing all right. Right?

3/5/2017

Business owners sometimes tell me that “sales” is the only number that matters...

(“That’s how we know if we’re winning!”)

Yeah, sales are an important number.

But guess what?

There are others that are just as important (if not more important).

Let’s look at Sam, a typical kiwi business owner who wants to take his business to the next level – grow his small business into a big business.

He’s been running his company for a few years now and is doing well with his goal - steadily growing at about 30% a year.

He is taking on more staff, has lots of new customers, and has worked hard on getting more sales.

“Sales are good,” he thinks, “I’m on the right track.”

He regards sales as the “all important number” in the business.

But if we look a little closer, there are some things Sam is missing.

Cashflow has been getting increasingly tighter.

Even though he is growing, his staff seem to be a lot more stressed and are making more mistake these days.

And lately, some of his bigger customers have been grumbling that orders are taking longer than they used to.

These are all signs he is heading for trouble if he doesn’t pay attention.

Sales are important but not the most important number.

Mainzeal had 7.5 Billion in construction projects but still went into liquidation
Pumpkin Patch’s turnover was 238 Million, now in receivership
Dick Smith Electronics are in liquidation, previous turnover of 87 Million

These companies all went broke, even though they had more sales than most NZ companies can only dream about.

Those companies are gone, while much smaller ones (like yours and mine) are still standing and actually making money.

The difference is, although sales were big, some of the other numbers were way off with these companies.

Here are some of the other numbers as a business you should be watching every single month.

Margins:

Many companies who focus on growth alone compete too hard to get business, at the expense of margins.

They end up with a whole lot more work without making more profits.

Cashflow:

This can be a killer for any growing business.

If you run out of money and the bank won’t back you, in just a few months you will be dead in the water.

Ignoring cashflow and focussing exclusively on sales is like rearranging deck chairs on the Titanic.

The reality is, as you grow you will have higher accounts receivable, wage bills, you will need to carry more stock, equipment, and gear.

These things all suck up cashflow and if not managed well, can become the iceberg.

Profitability:

Keep a close eye on which jobs or products you sell are making money and which ones aren’t.

Often you can be making good profits in some areas and leaking in others.

You must know which ones are leaking and why, as those leaks can get bigger quickly.

I was recently talking with a company that was losing over $100,000 and did not know why (don’t worry; we are sorting this out, pronto).

Customers Satisfaction:

Are you staying in contact with your customers to make sure they are still getting good service.

How many customers gave you good feedback and how many gave you bad?

Marketing:

How much new business did your marketing attract and are they the right kind of customers that are profitable to your business?

Staff:

Are your employees numbers growing but you’re not making any more money?

Watch this to make sure you don’t get too top-heavy.

Your time:

Keep an eye on where you are spending your time.

Are you putting out fires all day or focussing on the important parts of the business like training staff, talking with your best customers, sales, marketing, strategy, making better systems and more profit.

Stuff:

As you grow, you will need more stuff including equipment and gear, office furniture, computers and software, vehicles and maybe even bigger premises.

If you don’t know in advance how much this is going to cost and when you'll need this, it will be a very unpleasant surprise.

Once Sam gets a handle on these other numbers, he will have a whole new level of control he never had before.

If you have the right numbers when you need them, you have time on your side.

You will know early where the problems are before they get out of hand. If things are going south, you’ll know. And have plenty of time to adjust to get back on track.

But you will only be able to pull this off when you have the right numbers, which is much more than just the sales figures alone.

Now Sam can grow his sales further, be more profitable and have more fun doing it.

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Sales Just Sitting There Waiting To Happen?

28/2/2017

There was an old retired school teacher who used to work part time for me.

Wyn was a breath of fresh air and had more enthusiasm than most guys half his age.

He loved people (and they loved him).

Wyn even taught me something about sales, a little nugget I’ve used many times since with great success.

When I first met Wyn, he told me he had been a teacher his whole working life, except for one year when he was burnt out and needed a change.

He took that one year off and worked as a sales rep for a printing company.

And in that single year, he became the top sales rep, against others who had been there for years with long term accounts.

This is a guy with no contacts in an industry he knew very little about, a total business newbie, with no previous sales training.

But he became the top sales rep in just one year before returning to teaching.

He told me he did it with just one idea…

Use the company’s biggest asset…

Their customers.

He made a list of all the old customers who had not bought from them in the last year.

He phoned every one of them and asked a simple question:

“Do you still consider yourself a customer and if not, what happened?".

Some had complaints, some were dealing with the opposition, some had just forgotten who they were.

Then he would simply ask if they would give them another go - and many said yes.

So what can we learn from Wyn?

a) The sales figures from Wyn’s simple strategy of following up old customers were so great he outclassed the other reps.

Can you afford not to do this?

It is an easy way to revive old leads and get more customers on board quickly. These are sales just sitting there waiting to happen.

b) Keep in touch with your customers regularly and don’t let them go cold, forget about you, or be stolen by the opposition in the first place.

If there’s one thing you must have in your business, it’s a complete list of your customers.

Every current customer, every previous customer, those who have shown interest in doing business with you (leads/prospects/quotes).

Also, include suppliers and those who deal with your type of customers that might refer you business (referral sources).

This is basic but so many small businesses just don’t have a list.

You should have systems in place to capture contact details and keep it up to date.

Your customer list is your greatest asset and also your insurance policy if you find yourself in quiet times, ever have to shift premises, or need to quickly contact your customers.

Use your list to full advantage and keep ‘em sweet. Show them some love by communicating with them regularly.

You could entice them to buy new products or services you offer, buy bundles instead of a single product, add one new suggested item to their regular buy, tell others about your services.

How confident are you that your customers even know about every product or service you offer? Obviously, they don't unless you tell them.

Imagine the boost in your sales figures if your customers just spent a little more with you each time they buy, or just came back more often.

This is part of the benefits of keeping in touch.

What's the bottom line here?

Well, Wyn knew instinctively what the research tells us:

If you send an offer to our customers, those who have brought before are 5-6 times more likely to respond.

So, it is more economic and easier to get repeat customers and revive old customers, than get new ones over the line.

Don’t make the same mistake Wyn’s company made.

If you don’t have a list or you aren’t keeping in touch with your customers and contacts regularly, you’re letting your opposition steal your biggest asset without a fight.

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Do your customers trust you?

26/2/2016

Do you find it hard to compete against the large marketing budgets of your competition?
Does it seem like their “name” just seems more credible to your market?

Are you not converting as many quotes or inquiries as you could?

Often “price” is quoted as the main reason why reps say they lost the sale - but is this true?

Research shows that in only 15% of cases, price is the sole factor. A staggering 85% of customers say that factors other than price influence the decision.

Credibility or Trust (in the sales rep or company) is a major factor in the decision.

Here is why...Have you ever paid for a product or service and it turned out to be a disaster?

Once I brought a pair of gumboots from a large chain. They were cheap, and at the time it seemed like a good deal. But after using them 3-4 times they split, so I took them back and exchanged them for another pair. Same thing happened - I didn't bother taking them back again. I had such a small amount of use out of them and if I look at the time I spent going back and forth, these were actually a very expensive pair of gumboots compared to a higher priced longer lasting pair.

For you it could be a shoddy tradesman, a faulty tablet, or a bad car. Whatever it is, we have all had an experience like this at some time.

Guess what? Potential customers who come across your business have had these experiences too. You can bet they will be asking themselves:

Is this a good company to deal with?
Are they going to give me good advice, or just try to get my money?
If there is a problem with my purchase, will they make it right?
Can I trust them?

So, how can your customer know if you are good or not?

You can say how good you are all day long, but the problem is that every company says they are good - especially the bad ones. So how do you separate yourself from the pack? One way is by providing "social proof" in the form of recommendations from others that have already dealt with you.

If your potential customer can see that others have dealt with your company and had a good experience, they feel the chances are, they will be looked after too.

As Mark Zuckerberg says: "People influence people."

Social proof/Customer testimonials is usually found in the form of favourable quotes from your happy customers aka "What our customers say about us".

If you want better conversion rates and more customers, then you should be using these whenever you can including:

On your quotes or tenders
In advertising
On business cards and thank you cards
On your website
Online – on LinkedIn, Facebook, Trip Advisor etc (depending on your industry)

You want lots of testimonials, and the more detail the better. Here are some of mine and you will see they are quite detailed and specific. If a company is looking for similar results to these, it helps them decide knowing that others have had similar problems and achieved results.

"With Daniel’s continued support we were also able to increase our profit by a massive 86% in just nine months, and have over doubled our sales and staff at the same time, which has been awesome."
Stewart Contracting

"With Daniel's help, we now have some great systems in place in all aspects of the business which has meant that we have most nights and weekends free again, staff are now much more manageable, quality of work is better, and we have clear direction for the business."
Hurunui Drainage and Plumbing

"The increase in the first year was 8% in sales, increase in margin 34%, increase in our net profit of 92%. We’ve been struggling with our margin and always thought it could be better but didn’t know how to put that together – and with Daniel’s help we’ve got there."
Woodend Nurseries

To get good testimonials, ask your best customers for a written testimonial when you have done a great job and they are really happy.

When writing a testimonial some customers will be very happy to oblige, but struggle to write it down. So you can make it easy for them by asking them some questions like:

What problems did you have or want to avoid when seeking our product/service?
What concerns did you initially have about using our product or services?
What benefits did you have from using us?
How did you find us to deal with?

Then put the answers together into a testimonial. Very important to let your customer see the final version and encourage them to change anything that is not accurate.

A good testimonial tells a story and addresses the problems or concerns your prospect might have when deciding about your product or service.

Many companies don't ask for testimonials or are not sure how to use them effectively, so put yourself ahead of your competition and attract more customers, convert more sales and have fun hearing how happy all your customers are.

Action Points for you:
1) Start collecting testimonials from current and previous customers
2) Use testimonials when quoting new jobs, on your website, and in your advertising

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Will your sales suffer in the current climate?

2/10/2015

If you've been watching the news lately, you'll know that parts of the economy are starting to struggle and the mood is changing. The latest ANZ business survey headline reads "Business confidence remains on the ropes, hitting a new six-year low in August". The dairy industry is struggling and construction in some sectors is starting to be affected by the oversupply of houses.

A number of businesses I talk to are concerned about the current climate and if sales will be affected over the next 6-12 months. It's important to be aware of the climate and adapt accordingly, but also remember that all these things are in cycles, so this is nothing new (some suggest every seven years, but this will vary depending on the market).

As these cycles change, what can you do to make sure any impact is minimal to sales and profits for your business?

Smart businesses who recognise the downward trends will be looking for strategies to minimise effects on their business.

Here are six strategies that will help to ensure your profits stay intact even when your market is in a downturn:

1) Be in more than one market

Every market and customer group has highs and lows every few years, so it's important to make sure that you have customers in more than one market. Often when one market is at the bottom of a cycle, another is growing. By selling to more than one market you will still have growth in at least one area of your business.

Look at your existing customers in segments or groups. Some groups will be growing - spending more each sale or more new customers coming to your business. Other customer groups will be shrinking - they are spending less, buying less frequently or not at all. Identify the customer groups that are growing and target them individually in your marketing.

Note: there may be some customer groups that might be growing - but are not attracted to your company - and you don't recognise them. Check out what areas might be growing in the market or your competition is promoting to that you are not.

In every business there are a number of different customers and markets. Let's look at two examples of companies with different markets in a downturn:

IT Company: This IT company might have four main customer groups: residential, commercial, new installs, and maintenance.
Opportunities: Commercial might be slow but there could be plenty of home based businesses starting up and commercial requiring help scaling down; there could be opportunities to decrease costs for these businesses with current telephone technology and cloud based solutions for both existing and new customers.

Water Pump Installation and Servicing: This company may have three main customer groups: farmers, new subdivisions and servicing.
Opportunities: Dairy farming might be quiet; but beef and sheep farmers could still be good. While new subdivisions, and pump servicing will still have growth.

Every small business should have a number of different customer groups, to avoid being too exposed when these cycles come and go.

2) Look after existing customers

Make sure you keep looking after your existing customers and go the extra mile. Put more focus into building good relationships. It’s much easier to keep old customers happy, than find new ones. This is also a good long term strategy, for when the cycle comes back around.

3) Look for more of the type of customers you already deal with

This seems obvious, but are you doing it?

If a trades business currently gets work from two large building companies, they should seek out others. Relying on a small number of customers is dangerous anyway because if one is lost, the business is very exposed.

4) Diversify

Think about what else you can offer your existing customers.You might be able to re-package or sell them something different, introduce new lines.

For example, a shoe shop in a recession, could expand their range to include kids school shoes, workboots, and add on's like laces, protective sprays, polishes, etc.

5) Keep things tight

It's important to make sure that any losses you incur in a downturn are kept to a minimum. So work on:

Reducing unnecessary expenses
Becoming more efficient with your production or service
Non-performing staff need to come up to speed or leave/be reassigned (this may seem harsh, but staff that are not producing results will reduce the effectiveness of the whole team)
If price is an issue, offer more economic options for customers (without the bells and whistles)
Protect your margins (be careful as selling two times as much for half the margin will not help)

6) Keep investing in the right areas

There are some areas of your business that you should spend more on like:

Sales related activities (keep marketing to your customers - but always measure what leads and sales these are generating)
Staff training (make sure your sales team keep learning and improving as this will improve sales)
Your training (as a business owner, the better you are at business, the better your business will be - so don't stop investing time and money in your own training, and seek quality advice when you need to)

Action Points
1) Profile your customers and list what markets and opportunities there are for growth.
2) Go through your expenses to see what you can reduce.
3) Decide on one area you need to improve on personally that will help the business (this might be marketing, selling, negotiation, dealing with staff, etc), and commit to improving with some formal training.

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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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Don't shrink your way to failure

30/6/2015

A brewery who sold a lot of beer was one day told by the accounting department that if they could just reduce the malt content in their beer and add sugar instead (because sugar is less expensive than malt), that they could increase profits significantly and no one would notice.

The brewery manager found initially that the accountant was right - no one seemed to notice - and they were making more profit. At least for the first year anyway, he found that no one really complained or no more than normal anyway. He did notice however over the next couple of years, that sales kept declining. This was easy to explain said the accountant - after all, people are drinking less than they used to, taxes keep making beer more expensive, and people have less to spend than they used to - and again it seemed the accountant was right.

But the brewery manager was not sure, so he did some investigating and started asking around some of his old customers. A number weren't drinking his brand anymore. When he asked why they said "We don't know why but your beer but just tastes a little different so we thought we would try something else for a change" or "We don't enjoy beer like we used to".

The brewery manager on hearing this, begin to wonder if maybe replacing the malt with sugar might have been a mistake. He checked the figures again and found that this beer sales had shrunk; total consumption of beer across the industry had also shrunk, but to a lesser degree.

He realised that by changing the beer recipe, although they had made more profit in the first year, they were now worse off. (NB. Take a look at the figures and you will see this is exactly what has happened in the brewery industry in New Zealand over the past 50 years. Even before drink driving and other considerations took effect.)

What is the moral of this story? Well, as a business owner, when you seek more profits by reducing your expenses and purchases, it's important to ensure your product or service is not compromised. In fact often you can make it better and charge more. Research shows that 15% of the buyers in a market will buy purely on price alone, but a whopping 85% of customers have other reasons for buying. The 85% is your market. Think about some of your own recent purchases - how often have you paid more for something because you chose to go for better quality or better service.

Here are some areas you should be very careful with when looking at reducing costs to increase profits especially when sales are in decline:

Raw material costs for your products (don't compromise on quality - this is why many of your customers buy from you)
Sales staff (if you don't have good sales staff, then you won't get the sales - especially the high performers)
Advertising (measure your results first and know which are the winning campaigns before you get rid of the losers)
Marketing (again measure and stay with the winners)
Suppliers (know what else is important to you with your suppliers, like quality, delivery times, reliability, replacement policy, etc)

These are just a few, there are many more.

Action Points
1) Identify areas in your business where you should NOT cut costs, to safeguard yourself and preserve the integrity and quality of your product (and stick to it).
2) List ways to increase profits for your business - without compromising on service or quality.

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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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Are Bad Customers Good For Business?

1/11/2014

As a business owner, I am sure you have heard or thought at some stage that "Every customer is a good customer". After all, every customer puts money in the bank and keeps you busy, especially when things are quiet. Right?

Wrong. Be very wary of this approach - it's a trap. If you run your business this way, you will be creating a lot more headaches than you want, and will be disappointed with your profits (or lack of profits!). Let me explain:

If you think about all your customers over the last year, they will basically fall into four types:

A customers
This customer values your service, and is prepared to pay what you ask. They don't argue over price and value your service and quality. They are raving fans of your business and tell others so. Very loyal, they repeat business with you regularly and won't go elsewhere. You often get referrals from them.

B customers
Most of your customers are B customers. They appreciate your service, but are a little more price sensitive. You need to work a bit harder to keep them, but they are still good business.

C customers
Not very loyal, they will haggle over price and will shift if someone else is a little cheaper.

D customers
Impossible to make profit from, they are always complaining - something is always wrong with your product or service. Often to get the bill paid, you have to argue and sometimes reduce the bill. They never pay promptly either, and take a lot of your time sorting out their constant whining and complaining. Keeping them happy is almost impossible because they always seem to come up with some new problem or complaint.

Warning: If you are getting a lot of D type customers, you are either accepting too much of the wrong kind of work, or it could be a sign you have poor systems for quality and customer service - which is a whole different problem in your business (and you will need to fix these issues first).

Once you have identified your customers, now you need a strategy for dealing with them.

A customers (A = Awesome)
Really look after them. Go above and beyond with exceptional customer service. Keep in touch. Let them know what you are doing for them; let them know what else you do and look for new ways to add further value to them. Tell them how much you appreciate their repeat business. For every referral you get from them, make sure you recognise it with a personal thank you note or gift. They will reward you with more of the same.

B customers (B = Basically sound)
You want to turn as many of these into A customers as you can. Treat these like A customers by making sure they understand and appreciate how and why you do things. Keep in touch regularly and get feedback from them on what they like and don't like about dealing with you. Then work on improving your service.

Tell them how important it is to you that they get the best service. For example, if you are a plumber you could explain why you test the fitting to make sure there are no leaks, why you use a certain grade of fitting, and why you won't use the cheap nasty ones that leak and will cost them more money in the long run; remind them that you are a Registered Master Plumber which means that you have a standard of work they can rely on.

Again, once the job is finished, thank them for their business. For a larger job, go all out with the thank you gift - I guarantee you that your customers will be blown away by this gesture, especially if it is unexpected. Sending a thank you is a tried and true approach that still works today and a great way of creating very loyal customers who tell their friends how great you are.

Also, these strategies work best when you put them into a system so you don't need to remember. For example whenever you get a referral, a thank you card should automatically be sent; when a large job is completed, a gift is sent one week later; on the job your staff should know to automatically explain to the customer the reasons why you do it the way you do; maybe send a free sample with the invoice if the job is over $1,000, etc...

Due to the nature of some businesses, there may not be a lot of repeat business, but this strategy is still worthwhile. Maybe you build new houses? Remember a small percentage will build again in the future, but more importantly, many will know others who are also looking to build, so are an ideal source of referrals.

There are lots of ways to get referrals but first you need to have happy customers who remember you.

C customers (C = Could do better)
Do your best to turn these into B customers. (Find out what they are really looking for - then you will get a better idea if they will suit your business - in some cases they may not, which is fine.). At the end of the day if they don't respond, don't be too worried. The non responsive customers are unlikely to stay anyway.

D customers (D = Don't want to deal with)
Every business gets a few of these. Get rid of them as quickly as possible. D customers take up all of your time and you will never make any money off them. They will send you broke trying to keep them happy and then they probably still won't pay. Send them to your opposition and let them have the problems instead! Just say something like "We are not really geared up for this kind of work, I would recommend you contact x competition, they might be better equipped. Here are their details. Have a nice day". This kind of approach will work best as it avoids confrontation and means both you and the D customer keep your dignity intact.

Never be rude of course. Just be aware of who you can deal with and who you can't. At the end of the day you are running a business (which your family and your employees rely on to be profitable), and you don't have unlimited time or resources.

It is worth mentioning that I come across a lot of business owners who get scared about letting these D customers go, as they are worried about less sales. If you are still feeling unsure then take a look at recent sales you have had with these D customers and if you are a service-based business, do a quick costing on the job. Include time involved at your hourly rate, cost of extra materials, freight, time spent explaining things to them, etc. Work out how much you lost on the job and then think about what you could have done with the extra time to make more profit in your business. How much did you make or lose on this job?. I'll bet that you actually lost money and are worse off.

The point of all this and the key: is to isolate your A and B customers, find out what they have in common, and use your marketing to attract more of those excellent profitable customers. Ditto D customers, if you are getting a lot of them, ask yourself why they are attracted to your company. What is going wrong in how you market your business?

The truth is, you need to be very strategic with your customers and your business. Get your customer base right, and your business will be much easier to run and you will achieve much better profits and margins.

Task

Take a look at your customers over the past year and give a rating of A, B, C or D to each one. Then decide how you will deal with each group. Make it into a system that is automatically followed and assign one particular staff member to follow through.
Look at each group and search for similarities. You will find that your A and B customers will be in a certain location or have very specific needs or a certain income or occupation. This is valuable to know because now you can target this specific type of potential customer! And chances are they will be excellent customers for your business and bring in good profits for you.
Make a decision to stop dealing with D customers. List who they are and make a clean break.

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Is your service up to scratch?

2/6/2014

It does not matter what industry or market you are in, at the end of the day your business will be made or lost on how well you deal with your customers.

A customer is four times more likely to defect to a competitor if the problem is service-related than price or product related.
96% of unhappy customers don't complain, and 91% of those will simply leave and never come back.

In most cases, businesses spend way more money trying to get new customers - and literally nothing on looking after the ones they already have.
The probability of selling to an existing customer is 60 - 70%. The probability of selling to a new prospect is 5 - 20%.

Customer service is the lifeblood of your business so don't underestimate its power!

Recently I was waiting in line at the kids section at one of the major department stores and was enthralled to watch exactly what you should not do - an example of customer service unfolded before my eyes. The cashier was a young girl in her early twenties and this was most likely one of her first jobs. She was serving a woman with kids (their target market) who wanted to charge some clothing items to her store card. Much to the surprise of the customer, the card had declined, and in her disbelief the customer explained to the cashier that money had been put on the card just two days ago. She wanted to know what had happened.

The cashier shrugged her shoulders and explained defiantly that she did not cause the problem or have any idea how to fix it. Her advice was to go and line up at a desk in another part of the store and they might be able to help her if she was lucky - that desk was busy handling other (more important) customers. The cashier made it very clear to this customer that she just didn't care. At this stage the customer was starting to get a little frustrated and after further questioning, the cashier pointed out she could do nothing more and pointed her finger in the general direction of the inquiries department who might know something about it. The customer headed off in the general direction with the parting comment "You have been incredibly unhelpful".

We have all seen this before or been on the receiving end of this type of terrible customer service.

So what is your customer service like?

By comparison a while ago I purchased a Freeview box for my TV from another well known store. I waited quite a short time, however the cashier acknowledged that I was waiting and let me know he would be just a couple of minutes. After serving the previous customer, he apologised to me for the wait and asked how he could help. He was passionate about his store and the products, and knew the answers to every question I had about how Freeview worked and the comparisons to other systems.

He sold me the unit and started explain a complicated system for installation (complicated to me anyway). He could see I was struggling so he offered to pre-tune the box, ready for me to plug in, which would take only seven minutes. Sounded like a great idea to me as it would probably take me two hours and even then it might not be right. (As you can tell, I am great at helping businesses become more profitable but not-so-great at setting up new technology.)

He then went in for the up-sell - "Would you like a warranty with that?". Usually this is not my thing, as I am of the view that if your product will not last the distance then maybe I shouldn't buy it. He could see that I was not convinced, but remember he already had my attention with his impeccable service. So he pulled out a Freeview box that had been pulled apart and showed me how small the parts were and that they are easily damaged through wear and tear or even small knocks. I thought why not, after all he seemed to have my best interests at heart. He got the up-sell and I walked away a happy customer with my purchase.

Did I tell others, absolutely. Will I go back, yes.

So what makes good customer service?
Well, we can take a few clues from my two examples above.

One knew their products well - the other not a clue.
One was interested in the customer - the other was not.
One went out of their way to be helpful - the other went out of their way not to.

So do you staff ...............

Know about your products and how best to use them?
Know the procedures on what to do when a customer complains?
Have a good helpful attitude to your customers?
Care about your customers and your company?
Take pride in their workplace?
Have a list of questions they can ask customers to lead them to the sale?

What does good customer service get you? It gets you repeat business (remember this is a lot easier to get than brand new customers), it gets you more referrals and a good reputation, and ultimately, it gets you a lot more sales. Good customer service equals a whole lot more profit!

Action Point: Listen in on some of your staff and how they are handling your customers. Or even better, ask some of your customers how they find you to deal with. Use these quick questions:

How do you find our company to deal with?
What do we do well?
What do you find frustrating when dealing with us?
What could we do better?

Listen very carefully especially to the answers to the last two questions. They will be your biggest clues to a much more successful and profitable business.

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Two easy ways to make more profit in your business quickly

27/10/2013

In every business I come across there are always some quick simple ways to increase profits without too much extra effort. I like to call this the low hanging fruit because just like a fruit tree laden with fruit, you can pick from the lower branches with little effort. However to reach the higher branches you may need to climb or use a ladder, which requires a bit more work. So it makes sense to take the easy fruit first.

There are so many ways to increase profits but to start with, here are two quick and easy ways:

1) Increasing Your Prices

Every year costs increase which erodes your all-important margins. Often business owners are worried about putting prices up as they are concerned about losing customers. However the reality is that in most cases when prices are gently increased very few customers, if any, even notice.

But let’s say you increased your prices and a small amount of your customers left - let’s look at the numbers to see if you would be better off or not.

Say you had a Gross Profit Margin of 20% and decide to increase your prices by just 10%. You would have to lose 1/3 of your current sales before your profit fell back to what it was originally before the price increase. Would you lose 1/3 of your sales from a 10% price increase? Probably not.

A cafe business owner I have been working with has increased prices by 5-10% three times over the past 18 months, and their sales and profits just keep on increasing.

Action Point: Increase your prices by between 5-10% next month.

2) Ask your existing customers to buy something extra (Up-selling)

Depending on what business you are in, there are many ways you can do this. For example if you are a men’s clothing store and your customer is about to buy a suit from your store, a smart salesperson, just as the customer is about to pay, might suggest that because they have just purchased a suit if they buy now they qualify for 35% discount off the price of your best ties. Just by having something extra to offer (not necessarily at a discount), your staff can increase your sales with very little effort.

McDonalds have added millions of dollars in sales every year by asking “Would you like fries with that?”. Other classic upsells include - a case with your new iPhone, waterproofing spray with new boots, batteries when purchasing a toy, insurance for plane tickets, extended warranties, a chocolate bar by the checkout. Having already made the decision to buy, the customer is already in “buying mode” and if they are offered a little something extra, they are very likely to go for it.

Action Point: Pick one lower value related product each month that all staff can offer as an upsell or add on when the sale is made.

There are tons of low cost ways to increase profits; try these to get you started.

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Sales are good. So I must be doing all right. Right?

Sales Just Sitting There Waiting To Happen?

Do your customers trust you?

Will your sales suffer in the current climate?

Are you sick of losing money on bad debtors?

Don't shrink your way to failure

Do you get bullied into bad deals?

Are Bad Customers Good For Business?

Is your service up to scratch?

Two easy ways to make more profit in your business quickly

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