Specific Strategy To Increase Profits

Number one. Lead Generation. This is a process you use to attract interested prospects to your business. If five out of 10 prospects who come into your place of the business end up buying from you, increasing the number of people coming in from 10 to 15, you can increase your sales and profits by 50 percent. You must think about lead generation, morning, noon, and night. The Law of Probability says that if you increase your number of leads, you increase your probability of making more and better sales. I did wish for you to make lead generation guesswork. Attached to this course is a Lead Generation Spreadsheet to track your lead. Additionally, you can sign up for our Advanced Business Growth and Marketing Course at www.BuildingSuccessMarketingAcademy.com.

Number two. Lead Conversion. This is the process by which you convert leads into paying customers. This is the measure of the effectiveness of your sales efforts. If you can increase your conversion rate from 1 out of 10 to 2 out of 10, you can double your sales and double your profits. We\’ve seen over and over again that small changes in a single one of the seven-piece of the marketing mix can lead to dramatic changes in lead conversion, such as from 1 out of 10 to 8 out of 10 within 30 days. This improvement is a critical variable that can differentiate between struggling in your business and becoming wealthy. This is the Parthenon Principle. The Vital Functions Concept of improving your ability to sell and convert interested prospects into paying customers is one of the most important things you can do. And there\’s no replacement for ongoing sales training, both for you and for every single person who speaks to customers either live or on the phone. Look at every key result area in your sales process and seek ways to improve a little bit in each area. Because of the Parthenon Principle, a small improvement in each key area can significantly improve overall sales results.

Number three. More Transactions. In building a high-profit business is the number of transactions. This is the number of individual sales you make to each customer you acquire by increasing the frequency of purchase by 10 percent; you increase your sales and profitability by the same percentage. What are the things you could do to get your customers to buy more from you and buy more frequently?

Number four. Profit-making is the size of each transaction. This is the size of the sale and the profit that you earn from each one. You should be continually looking for ways to upsell each customer so that he or she buys more each time.

Number five. To increase your profits is profit margin per sale. This is the gross profit you make from selling each product or service by continually seeking ways to raise the price or lower the cost of the product or service without decreasing the quality. You can inch up your profits per sale. Every dollar you raise a price if you hold costs, the constant flow straight to the bottom line is net profit. With every dollar, you reduce expenses. If you hold sales and revenues, constant goes straight to the bottom line as net profit.

Number six. Profit-making is the cost of customer acquisition. This is the amount that you have to pay to acquire each paying customer. You should be continually seeking creative ways to improve your advertising and promotion so that it costs you less to buy each customer. This can impact your profitability dramatically.

Number seven. It is increasing customer referrals. These customers come to you due to referrals from your satisfied customers. Developing one or more proven referral systems for your business can impact your sales and profitability. It\’s 15 times easier to make a sale to a referral from a satisfied customer than it is to advertise, promote cold calls, and prospect to find a new customer. This means that it takes one-fifteenth of the time, energy, and expense to sell to a referral. Referral business is the very best business that you can develop. Remember the ultimate question on a scale of 1 to 10? Would you refer us to others?

Ask your customers this question regularly. If they give you a score below nine or 10, ask them what you would have to do to score 9 or 10 from them in the future. Then whatever they tell you that you would need to do within reason, find a way to do it.

Customers who give you a low score will often raise their score immediately if you ask them for advice on improving their scores. When you make a change that they\’ve suggested is likely to cause them to refer your business to others, report back to them and tell them what you\’ve done. Thank them for their advice and input. This will tremendously increase their loyalty and encourage them to become repeat customers.

Number eight. Increasing profits eliminate costly services and activities. Many companies get into a routine or rhythm of offering expensive services to their customers that they could easily discontinue no loss of customer satisfaction. One of our clients, a very successful mortgage broker, got into the habit of taking fresh donuts around to her major client companies between eight a.m. and 11 a.m. each morning. Soon, they began to refer to her as the donut lady jokingly. But this goodwill activity was often consuming half of her working day. She finally summoned the courage to announce that as of the first of the coming month, she would be so busy giving excellent customer service to her customers that she would no longer be able to deliver donuts. Her customers reacted with some disappointment, but they appreciated her commitment to customer service. When she stopped delivering donuts, her business and income actually doubled because she gave customers what they valued most of all, better service. Look at the little services that you offer to your customers. Is there anything that you could reduce or discontinue altogether?

Number nine. Profit-making is outsourcing business activities. You should outsource every activity in your business that your customer does not want or need or is not willing to pay for. This includes payroll printing, janitorial services, computer services and maintenance, and other activities. Outsourcing companies specializing in a service that is not your direct line of business can usually perform it better and for less than you can when you add in all expenses. Imagine taking your customers around your office and showing them everything you do in your business. Imagine asking them, would you pay money for this function? Whatever activities your customers would not pay for are candidates for outsourcing, downsizing, or eliminating. Keep thinking about streamlining your business down to your core functions and delegating or outsourcing everything else—another key to profit-making.

Number ten. Reduce people’s costs. It\’s estimated that each person who works for you actually costs you three to six times his or her salary. An employee to whom you pay $25000 a year actually costs about $75000 per year once you\’ve included all of his or her benefits, sick pay, offices, utilities, gasoline, and other resources that the employee uses, plus the cost of your time to supervise and manage him or her. In some companies and businesses, an employee cost as much as six times his or her salary. This is why companies that reduce turnover, which is very expensive, and reduce headcount, increase their profits immediately. At one time, when we were starting our current business, offering a variety of products and services. Our payroll grew to 22 people as we became more efficient and streamlined. We gradually reduced our headcount from 22 to 12. Surprisingly enough, our sales and profitability remained constant. But our expenses dropped like a stone. We found that all the extra people’s functions could be consolidated, downsized, outsourced, or eliminated without causing our business to be less efficient or effective. Could this be true for you as well? It seems to be true for thousands of companies around the country during today\’s recession.

Number eleven. Reduces fixed costs. These are costs you incur each month, whether or not you sell a single item of your product or service. These include rent, wages of full-time staff, utilities, telephone charges, internet charges, prepaid advertising, and every other regular expense you incur. You must be continually seeking ways to reduce these costs. Whatever your fixed cost, that is the minimum that you have to reach in profits just to break even.

I visited two companies in the same business in the same city not long ago. In the morning, the owners of one company gave me a tour. They showed off their brand new printing operation, including several hundred thousand dollars of sophisticated printing equipment that they had leased to publish all their brochures and workbooks. They felt that bringing all this work in-house would represent tremendous savings. In the afternoon, I toured one of their competitors. They showed me an empty room where their printing facilities had been located. They told me they had outsourced all printing to independent companies with great pride. This would save them tens and eventually hundreds of thousands of dollars a year, especially when they did not need printing. Both companies were in the same industry. Both companies had the same choice to increase or decrease fixed costs within a few years—the company with a World-Class printing. Corporation went bankrupt. Their fixed costs dragged them down so far that they shut down their business. The other company continues to thrive.

Number twelve. Increase variable costs. A variable cost is a cost that you incur only when you make a sale. This can include the cost of salespeople in sales commissions, for instance, paying people on straight commission. It can include shipping and delivery costs, overnight postage, and other forms of labor.

Example. One of my clients owns a car wash business. They needed a full staff of people working when business was booming. But as soon as business subsides, they immediately send home all excess staff. As a result, they managed to turn losses into profits and dramatically streamline their operations by lowering their variable costs as soon as sales taper off. They created a successful business by managing their business related to sales during peak times and decreasing staff during low times.

Number thirteen. Profit-making reduced your break-even point. This is the number of items you must sell each month to break even or make a profit. You remember that you determine your break, even point by first calculating your gross profit per item and then dividing that item into your monthly fixed costs.

For example, if your monthly fixed costs are 10000, whether you sell anything or not, and you earn $10 gross profit per item that you sell after the cost of goods sold and all selling costs, you divide $10 into 10000 to get 1000 units as your break-even point for the month. You have to sell this minimum amount to break even and not lose money. You use this break-even point to evaluate the potential effectiveness of any advertising or any other expense that you incurred to increase sales. Every expense to increase sales must be seen as an investment by an expected rate of return that is greater than the cost.

For example, if you spend $10000 on advertising and have to sell 1000 units to break even on your advertising, you should have a goal of 2000 or 3000 units in sales. In order to justify spending that much advertising. If you do not believe that there\’s a high probability of achieving that level of sales, you should not advertise in that medium at all.

Number fourteen. A way to increase your profits is to raise your prices. You can raise your prices by five percent or 10 percent without experiencing any market resistance in many situations. If your products and services are good quality and your people are friendly and helpful, a small increase in your overall prices will not drive your customers away. Some friends of mine began publishing a magazine some years ago. They started off charging $18 per unit for a 12-month subscription. Their subscriber base grew to 40,000, but they could never seem to make a profit. Their expenses continued to eat up all their revenues. A business consultant, a friend of mine, sat down and looked at their business. He determined that subscriptions to similar magazines with loyal readers were selling for $40 and $50 per year. He told them they should immediately double their price to $36 a year from $18. They almost had a heart attack.

I remember this, but when they recovered, they announced with great trepidation that effective January one, the new subscription price would be $36. Of their 40,000 subscribers, only about five percent canceled their subscriptions. The others gladly paid the higher amount because it was an excellent publication in a specialized field. My publisher friends went from rags to riches; overnight. Virtually 100 percent of the price increase was pure profit to them. Almost all of their costs remained the same, except for a small increase in paper and printing.

On which of your products or services could you increase your prices? Are your competitors already charging higher prices for similar products and services? Which of your products and services are really popular with your customers? A small increase in price would not affect buying behavior in those areas. Announce that effective as of the first of the coming month; your prices will be increased. Give people a little while to adjust to the price increase, and then don\’t worry.

If you could increase your prices by 10 percent across the board with no loss of customers. That price increase would go straight to your bottom line as profits. It could make the difference between a marginal company and a highly profitable growth business.

Number fifteen. An increase in your profits is constraint analysis. The Principle of Constraints is one of the most helpful ideas you will ever learn. This principle says that between you and any goal you have for your business, a choke point or bottleneck is a constraint that determines the speed at which you achieve that goal. What sets the speed at which you reached the point of doubling your profitability? What is holding you back? You must focus single-mindedly on alleviating that constraint by removing that limiting factor. One breakthrough: alleviating one critical constraint can enable you to double your sales and profits. In examining all of the ways listed above for increasing your profits directly or indirectly, which one jumps out at you first?

• Could you double the number of leads you\’re attracting?
• Could you double your closing rate with new prospects?
• Could you increase the number of sales that you make?
• Could you increase the size of each sale?
• Could you increase the frequency of each sale or each customer purchase?
• Could you offer another product or service that your customers want and need?
• Could you enter into a Joint Alliance to sell to other people\’s customers?

Go through the list one by one and think about how you could bring about a marginal improvement in each area? Since there\’s always much uncertainty in any business activity, be prepared to test and measure, test and measure, test and measure until you find the method or combination of methods that work best. Try out your new idea on a small scale.

• Change your advertising or your advertising message by a few words or a difference in your offer.
• Change your special offers to attract customers.
• Change places where you advertise.
• Change your prices or the discounts or bonuses you offer to new customers

Test, test, test, measure, measure, measure. One change would bring about the greatest and most predictable financial results if you make it effectively. Whatever your answer, focus and concentrate single-mindedly on that particular method of profit improvement. Study your financial statements each month or even weekly. Sit down and focus on one key element of your business. When you examine your financial statements, focus on the biggest numbers first. Examine each of those numbers carefully. Find out what\’s in it. Ask questions. Why is it so high?

Could we improve our operations in this area?

Focus on the one thing that you could do that could bring about an immediate improvement in that particular area. Restructure your business so that everyone is focusing all the time on increasing sales and improving profit. Measure your results daily and weekly. Make whatever changes are necessary and be prepared to react quickly to changes in the marketplace. You must manage, motivate, and lead all of your people toward greater profits. Think about and talk about profitability all the time. Never stop until you achieve it and then achieve it again and again.