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Strong sales doesn't mean your business is in good shape.

23/6/2017

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

Yes, sales is an important number. But this number alone is not a reliable way of telling if your business is going well. If your sales are strong and growing it's a great start, but it doesn't necessarily mean your business is in good shape. 

As Ryan has discovered.

Ryan's IT company has been steadily growing at about 20% 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 Ryan is missing.

Cashflow has been getting increasingly tighter.

And lately, some of his bigger customers have been grumbling that there are too many mistakes and call backs which is disrupting their business. 

Some have even been saying service is not like it used to be when Ryan's company was smaller. 

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

Sales are important but not the most important number. Here’s why….
  • 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 services business you should be watching every single month.

Margins:

Make sure your margin is holding and watch the mix between hardware vs installation as margins will vary greatly between the two.

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.

Top Clients: 

Watch your top clients and their average spend. Are they spending more each month or less? Are you losing any of them? If so, WHY?

Equipment:

As you grow, you will need more stuff including equipment and gear, office furniture, tech 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 Ryan 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 Ryan can grow his sales further, be more profitable and have more fun doing it.



Written By: Daniel Fitzpatrick, Business Solutions

Found this helpful? For more great ideas, get Daniel's free e-book here



Taking Too Many Risks In Your Business?

5/4/2017

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It’s never been more important to make the right decisions in your IT business. 

The reality is you won’t get it right every single time.

Sometimes you will pick the wrong horse despite your best efforts. 


As anyone running their own company knows, making the right decisions - while remaining profitable - is not always easy. 

There is an old saying “A bird in the hand is worth 2 in the bush”…

This is the dilemma you face in business every day…

Do you let go of the bird in your hand, in the search for the 2 that are in the bush?


Well, you might end up with 3 birds, or maybe none!

As an installer, how can you possibly keep up with cutting-edge technology in the exponentially growing IT industry - and ensure you have the best options for your customers?

Ultimately it will be about what core principles and rules you use in your decision-making that will work long term to minimise the bad calls - and optimise the best ones.

Here are some foundational principles you can use to stay on track when navigating the technology terrain: 


1)    Secure the bird in your hand first 

Put the bird in a cage or somewhere secure. 

Although the nature of the industry is that things move fast, it’s important to make sure your existing clients and business are well looked after and in good shape before pursuing too many new opportunities. 

This includes developing good systems in your business in the key areas like customer service, installations guidelines, cashflow and financials analysis, managing relationships with key customers, and your marketing and sales systems.


2)    Keep watch to make sure security is good

Check regularly that the cage door is secure and the bird is safe. Keep watch to make sure all the systems you have set up are running properly. 

As a business owner, this means you are keeping control of your business. Not necessarily doing everything yourself, but maintaining a good handle on operations, ie knowing exactly where you are now, and exactly where you are heading. 

This means knowing your KPI’s for things like enquiries, quotes, conversions to sales, margins, and of course profitability! 


3)    Be strategic when deciding which opportunities are worth pursuing

You are unlikely to be able to catch both birds at once. In IT there are opportunities everywhere, but only a few that will make the biggest difference for your business right now. 

Smart business owners think carefully about which ones have the best chance of winning and if the potential gain is worth their time.

Your time is valuable, so you don’t want to be running around burning up energy, time, and resources in the wrong areas.



4)    Bet small & often to get ahead

Remember the Sony/Beta vs JVC/VHS videotape-format-war in the late 70s and early 80s?

VHS won conclusively in the end, but many people brought Beta recorders and found the technology was soon redundant. 


With the speed of technology today, which horse you back is not always obvious. 

So make small bets until it’s clear which technology will dominate.


5)    Use already proven technology when you can

If the technology is proven, then that is the safest bet, at least in the short term.

Playing the odds will secure more profit for your business and happier customers most of the time.



6)    Be ahead of the game by following trusted sources

It’s important to keep ahead of your competition with the latest technology options, but you have limited time and can’t investigate everything. 

So stick to a few reliable sources for your information and listen carefully to what they say.

Today we are drowning in information. If you are subscribed to 30 different sources, you will quickly become overwhelmed and confused. 


Be highly selective of your information sources. Only allow a small number of compatible sources to advise you. 


7)    Don’t do it alone

Make sure you have someone to help you make decisions and keep your business on track and profitable. This could be a colleague, trusted supplier, business partner, or a coach/mentor.  

The most successful business owners never try to do it all alone – they know with the right advisors around them, they will reach their goals quicker, see the opportunities, maintain an edge over their competition, and become more profitable. 

Just because you are in business for yourself, doesn’t mean you have to be by yourself.

You may have others you use also. However, what’s most important is you have solid principles to run your business by, come back to for decision-making when you are under pressure, and accountability in place to help you stay on track. 
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If you don’t, you will find emotion will be the deciding factor in important decisions.

​Which might mean you don’t take any birds home for tea, and in business that can be costly.

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Written By: Daniel Fitzpatrick, Business Solutions


Found this helpful? For more great ideas, get Daniel's free e-book here
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HOW TO CHARGE HIGHER PRICES FOR YOUR SERVICES

2/3/2017

 
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​Ever bought a pair of gumboots?

Once I brought a pair from a certain 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.

If I’d known the risks associated with buying this product, I would have gone elsewhere.

Perhaps I should have worked it out by the price, but I didn’t think too much about it, and no one told me, so I was none the wiser.


I think you can see where I am going with this. 

Cheap isn’t always a good deal.

So with prospects we are quoting for – how do we let them know we are worth the extra money?

Last month we talked about what hourly rate you should charge to make profit. That’s the first step – knowing what you need to charge. If you missed that one, go here.

If you’re not charging enough what can you do?  

What if you put your prices up and you start losing jobs? 

Well, you might lose the odd job, but chances are, you wouldn’t have made money off some of those jobs anyway. 

Research shows that 15% of buyers will buy the cheapest regardless of quality. These are the ones you don’t want – they are generally very good at complaining if they perceive things haven’t gone perfectly. 

The other 85% have other factors that are also important in the decision. Like quality, reliability, completion times, expertise and risk. These are profitable customers you want, who will appreciate you for your service rather than the lowest price. So how do you get more of these?

Risk vs Price 

When buyers have more than one option, they start assessing the perceived risk vs price. If the risk is low (installer seems to know what they are doing, using good materials, will stand behind their service, etc), then in many cases they will buy the lowest price option.

However if price is low but the risk is too high (cheaper option might be missing something out, parts might not be as reliable, unsure if installer is experienced in this type of work, do they stand behind their work), they are more likely to see the value in buying a higher priced option.

Remember my gumboots?

Everyone has a story like that. 


What product or service did you buy that you wished you never had?

It might have been that cheap builder who did a shoddy job on your renovation you then spent months arguing about - the smartphone case that promised it would survive a drop, but tragically, didn’t – maybe a gym membership which promised you the world at a weak moment, but which you never used?


You lost on that deal – lost time – lost money – and it stressed you out. It’s etched into your brain in the hopes you don’t make that kind of mistake again. 

Guess what - the same thing has happened to your customers, and they remember too.

Your job is to show your prospect that dealing with you is the best and least risky option, even though it might cost them a bit more money. 

Here are some practical ways you can do that:

1.    First things first. 

If your marketing is attracting the wrong kind of customers, it’s not going to work.

First figure out what you do best – what are you really good at? What is your edge is over your competition?

Then profile your ideal customer (your most profitable customer, who'll be easy to work with, give you repeat business, will tell others about you, who needs what you do best, etc).

Target them in your marketing. Then, when you get these good quality leads, be attentive and professional. Have a script and questions ready.

2.    Get to know your customer and what they really want 

When you talk to the prospect, take the time to really understand what they are after. 

You can do this by asking questions like:
•    What is most important to you about this project?
•    Why is that important to you?
•    Who is the decision maker on this?
•    What do you really want to achieve here?
•    Is there anything else we need to know?

3.    Explain the process and why

Position yourself as a trusted advisor helping your customer solve their problems. Talk it through with them. Find the best way forward for them.

Explain your process and what happens if it isn’t followed. What equipment you use and why. This shows you are an expert and fully know what you are doing. 

4.    Social proof

Collect testimonials from your best customers and use them on  your website, on your quotes, etc. Make your customers the hero of the story. It shows that others just like them have had great results, which in your customer's mind means they are more likely to get the same great results if they choose you.

5.    Quotes

Make your quotes professional, include lots of details. Do not just send the quote off and hope the customer comes back to you. In many cases, they won’t. 

Always present the quote. Get agreement to go through it with them. You’ll convert more quotes to contracts/jobs and learn a lot in the process. 


If you follow these guidelines, not only will you be able to charge more but you will also get more business.

Happy Hunting! 
Business Coach - Daniel - Email 

PS: If you found this blog helpful, you can get my free ebook “Profit Strategies Every Business Owner Must Know” here


WHAT HOURLY RATE TO CHARGE TO MAKE PROFIT

14/2/2017

 
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As a system integrator, the hourly charge-out rate for you and your technicians will not only determine how much profit you make this year, but also the long term success of your business.

If the hourly rate is too low, cashflow will always be tight especially at peak times during the month.

You’ll find yourself sweating it out hoping there will be enough money in the bank to pay staff and suppliers, frustrated that profits are disappointing after another year of hard slog.


Or if your rates are too high, you will be losing too many jobs to your competitors.

So how have you worked out your hourly charge-out rates?

Some base their hourly rate relative to the skill level of their technicians, others go on gut feel and adjust pricing to how much work they have. Some even guess what their competitors’ rates might be and base it on that.

​These are factors you should take into account, but this is not the right way to price and will get you into trouble.


​
To price right, you first need to start with your actual costs. 

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Let’s take a look at our friendly neighbourhood employee Peter Parker as an example.

Peter is a good reliable systems installer on a salary of $65,000 per annum. Although his previous job was as a reporter, he is surprisingly agile at getting into difficult places with cable (crawling under floors, roof crevices, etc).

​He just works the 40 hours per week, but gets a lot done in a day; a little eccentric though - some of the other technicians mentioned he talks to himself a lot. He doesn’t do overtime due to other commitments outside work which he is quite secretive about (we don’t think it’s anything sinister, although he does seem to look a little beat up sometimes).


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Here is a breakdown of costs for Peter:  

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​Note: Overhead cost calculation: These are all costs that are not directly related to the jobs (ACC, administration staff, office expenses, advertising, vehicle expenses, etc). To calculate this accurately for your business, take all overhead expenses for the year divided by total paid technicians hours to get an hourly rate. This can range somewhere between $15 - $25 per hour depending on the size of your company.
 

Although we originally thought Peter was costing $31.25 per hour, actual costs are $73.57 per hour for work done.

To make profit off Peter as a technician, here is a good formula to use:

Salary Rate Per Hour  X  2.4  +  Gross Mark Up  =  Hourly Charge-Out Rate

Example: 
$31.25 per hour
x 2.4
$75.00 per hour
+ 20% Mark up
= $90 per hour charge-out rate (plus GST)


Anything less and you won’t be making profit! 
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If after reading this you're worried you aren’t charging enough but don't know how to increase prices while still keeping your customers happy, or you suspect one of your employees might be Spiderman, then email me (your friendly neigbourhood business coach) to set up a free 30-minute Pricing Strategy Session.

​​Daniel Fitzpatrick
Business Solutions

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