Although owning your own business is about much more than just money, there are times when it’s all about the bottom line.

You can love what you’re doing, make a significant contribution to society, have employees that love you, but if you you’re not making enough to pay the bills and then some, you’re going to be in trouble.

And it’s not all about growing your sales – not too many years ago during the great dot com boom times, there were all sorts of companies that were growing like gangbusters.  They were adding customers, their quarterly revenue growth was incredible…and yet the hidden story was that a lot of them were also losing money hand over fist.

The real measure that’s meaningful is profit – simplistically calculated as Revenue minus Expenses.  here are some ideas for improving profitability.

1.  Increase Leads for new customers: 

Become recognized as an expert in your field.

The best way to do this likely depends on what field you’re in.  If you’re a plumber, maybe you could speak to local homeowner associations on common problems that can be avoided.  Prove you know what you’re doing, add value to the prospects that come to listen to you and the odds of you being the one that gets called when there’s a problem are awfully high.

If you sell credit card processing (like the guys at Leadership Advocates) you could do low cost educational workshops or write white papers / articles on how credit card processing works and what to look for in a vendor.  Who is a prospect more likely to select, the vendor that educated them in a non-threatening and value added way or the guy that comes in and blindly promises ‘big savings’?  (alright they might pick the ‘big savings’ the first time, but you’ve got a good shot at them the second time around when they get screwed!).

2.  Increase Leads for Existing Customers and Contacts:

Create / Refine the ‘Wow’ magic moment.

This is the payoff point that your customers experience that causes them to say “I love that business”.  Of course you have to do a good job on the basic stuff, but there should be something that really stands out.

There’s a Wendy’s nearby that may be the fastest drive-through in the world.  They consistently handle a long line of cars in record time.  I have gone there for lunch just because I knew I could count on them to get me through quickly and get my order right.  The food is fine, but the experience is remarkable and consistent.

If you’re an accountant, including a concise, easy to understand written summary of specific tax tips for next year would make a great impression that people will talk about.

3.  Increase Leads from Past Customers:

Do a survey and offer a trial for a new product.

You legitimately would like to find out what they thought of you or your product / service and as a ‘thank you’ offer them a free trial or a discount on a new product that would also likely interest them.  You already know something about them since they were previously a customer – put that to your advantage.

A great example is the game company that follows up a few months after you buy your game and recommends another game that’s similar at a discounted price.  If you enjoyed the first one, the odds are that you’ll buy the second one and really become a loyal customer.

If you’re a retailer – a great way to build customer loyalty is to ask your customers what they like and want, and then give it to them.  Along the way, you can offer a targeted discount that might help them branch out to buy something new from you.

4.  Improve your Sales Effectiveness / Closing Ratio:

Focus on asking questions.

If you don’t do anything else – focusing your efforts with prospects on asking what they need and what the implications are will have a fantastic positive effect.

Think about the last time you went to the doctor or the dentist?  Odds are they asked you how you were doing, what your symptoms were, what was bothering you and spent a fair amount of time gathering information before prescribing a solution.  How would you feel if they just jumped straight to their highest margin product when you came in the door without asking you anything?

Imagine going to a car dealer that really tried to understand what you wanted in a car, why you thought you wanted a big engine and what was important to you?  Would that be more likely to impress you than the salesman asking what monthly payment you could afford?

5.  Increase the Average Dollar Sale:

Raise your prices.

Okay this one seems a little basic, but the reality is that many small business owners set prices in a very arbitrary way and will often be very nervous about ‘overpricing’ their products or services.

What would happen if you raised your prices by 10%?  Do you know how much volume you would have to lose in order to break even on that decision?  If not, you should figure that out – the answer might surprise you.  As an example, a 10% increase in price might allow you to sell less and still make more profit than you did before.  Without the numbers, there’s no real way to tell for sure.

Finally – this may not be true for you, but for a lot of business owners the biggest thing holding them back on prices is fear.  Can you find a way to experiment with pricing and see the results?  If it doesn’t dramatically affect customer response then you have  a winning proposition on your hands!  Price increases go straight to the bottom line!

6.  Reduce your Variable Costs:

Emphasize higher margin products or services.

This one also seems basic, but it’s likely in your best interests to start looking at your products and services in terms of margin benefits.  If you’re putting a lot of time and effort into selling your low margin products, then you’re climbing the steepest hill.  What if you translated that effort into a high margin product instead?  Relatively you might have lower revenue but that doesn’t matter – the only thing that matters in this game is the profit.

That’s not to say that you push an inappropriate solution on to a customer just because it has a higher margin – that’s a quick way to lose a lot of sales and profits.  Instead think of it as shelf space at the store – put your best products (the ones that have the best margin) at the front of the shelf and make it easy for customers to buy those products.  Changing the mix upwards even a little bit can make a big difference on the bottom line.

7.  Reduce your Fixed Costs:

Aggressively manage your cash flow.

A lot of small business owners have loans, lines of credit or just good old fashioned credit cards that they use to keep things moving.  Unfortunately all of those things come with interest rates – sometimes very high interest rates that can be a real drag on profits.

One way to reduce fixed costs is to reduce borrowing expenses by paying off debt as quickly as possible and maximizing cash flow.  The Fintel analysis tool that I use for Business Analysis uses a process called Net Balance Position to help figure out ways to improve cash flow.  Net Balance Position simplistically is Working Capital Available less Working Capital Required.  Basically it’s how much money on hand do you have minus how much money do you need to pay off all your expenses.  By maximizing this number, you can free up additional cash to pay off loans more quickly.

At a high level, there are only a few ways to improve your cash flow – minimize how much and how long you hold inventory, get paid more quickly by your customers and take more time paying off your expenses (without incurring penalties).  Easier said than done, but there’s a lot of things you can do to make improvements in cash flow.

What are you doing to increase your profits?  Share any stories you might have here.

Shawn Kinkade      www.aspirekc.comSimilar Posts:

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Jay Liebenguth is helping us to promote the Linked In KC event over on Hot Talk 1510 radio on his two Thursday shows, Live with Jay and the Heart of the Matter.  He does great stuff and you can find information and archives on his site http://www.livewithjay.com/ - give him a listen on Thursdays, I think you'll really enjoy what you hear.

One of the things you'll hear is our plug for the Linked In KC event that's happening on the afternoon of Friday April 25th.  Take a listen!

[audio:http://www.aspirekc.com/images/linkedin.mp3]

Of course you can get more information on my site at www.aspirekc.com/linked.html or you can learn more and register at www.linkedinkc.com !

I'd love to hear your feedback on the ad and any thoughts you might have on the event.  If you have any questions or if you might be interested in group sales (5 or more) don't hesitate to contact me.

Shawn Kinkade www.aspirekc.com Similar Posts:

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photo by clearly ambiguous 

Dr. Peter Venkman: This city is headed for a disaster of biblical proportions.
Mayor: What do you mean, “biblical”?
Dr Ray Stantz: What he means is Old Testament, Mr. Mayor, real wrath of God type stuff.
Dr. Peter Venkman: Exactly.
Dr Ray Stantz: Fire and brimstone coming down from the skies! Rivers and seas boiling!
Dr. Egon Spengler: Forty years of darkness! Earthquakes, volcanoes…
Winston Zeddemore: The dead rising from the grave!
Dr. Peter Venkman: Human sacrifice, dogs and cats living together… mass hysteria!

It’s pretty much impossible to turn on the TV or read a newspaper without getting hammered with all of the dire news about the economy.  This article from Inc.com is a good example:

Growing uncertainties in the labor and housing markets are pointing to slower economic growth in the months ahead.

It goes on to list some key points that are likely affecting you:

• Gas prices are up.
• Jobless claims are up.
• Dogs and cats living together (it doesn’t actually say this, but it is strongly implied!).

Technically we may or may not be in a recession right now, but the reality is that regardless of what you call it, things have slowed down,  prices have gone up and people are concerned.

Having said that, life goes on and despite the fact that most media outlets will continue to sensationalize the fears and concerns, this too shall pass.

Don’t Worry, Be Happy (not quite…)

Even though things will eventually (if they haven’t already) bottom out and get better, we are living in interesting times and it’s more important than ever to pay attention to your bottom line.

If you were only going to focus on one thing – it should be your cash flow.

The recent fate of Bear Stearns stock holders illustrates this well as you can see from this Jeremy Siegel quote via Inc.com:

The truth is, had they had the liquidity to hold on, the Bear Stearns positions might have turned out to be very profitable. [It's] just like Long-Term Capital Management ten years ago — had they been able to hold on, those positions became profitable. But they weren’t in both of these institutions, and as a result, without liquidity, this is a major risk.

Without cash or at least access to a loan or a line of credit, the typical small business owner is proverbially ‘running with scissors’ and in a dangerous situation.

You should have a cash flow projection readily at hand and spend time every week or two using it to project what if scenarios.  Things like “What if I lose my largest account?” or even “What if I land that really big account – the one that will require me to spend a lot of up front money?”

Hope for the best, but plan for the worst

If you’re feeling the pressure and you’ve already got a good handle on your cash, then the next thing to focus on is your bottom line.  What can you do to increase revenue, decrease costs or just generally increase profits?

There are literally dozens of ways to do this but here are 3 quick suggestions:

1.  Revisit your existing and past customers:  It’s a lot more expensive to get a new customer than it is to keep an existing one.  Increase your efforts to keeping your customers happy, including giving them special deals and offers.

2.  Make your workforce more productive:  If it looks like it may make sense to cut some headcount, use this as an opportunity to really upgrade your average performance.  Alternatively, maybe it’s a good time to invest in some training.  Increasing overall output without increasing the cost of salaries can be a nice boost to that bottom line.

3.  Create new offerings:  This could either be a package deal of your most popular product or service coupled with another discounted item to get your average revenue up, or it could be creating a new higher margin (or maybe lower cost) product or service that would be more popular with price conscious customers (remember they’re feeling the pinch too).

This article in the SF Gate has several more great ideas – I especially liked this point:

– Don’t stop marketing. Scrutinize your marketing budget to make sure you’re not wasting money, but don’t stop marketing or advertising completely.

If you can afford it, you may even want to increase your sales and marketing team.

“What everyone cuts first is marketing, which is crazy,” said Van Horn. “Look at your marketing to see where you actually get a return. But the last thing you want to do is eliminate the thing that will bring in new business.”

Interesting times can also include great opportunities – strike while your competitors are pulling back.

What are some of your ideas for riding out the storm?  Share them here.

Shawn Kinkade www.aspirekc.com

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photo by booleansplit 

I’m a big fan of thinking bigger.

Thinking bigger is how progress is made, how stuff gets invented, how revolutionary change happens.

Thinking bigger is also how you can inspire – yourself and others.  I’m sure you’ve heard the story about the three bricklayers:

A story that well summarizes the power of Vision, is the story of three bricklayers. The story goes, that three bricklayers were working side by side. 

When asked, “What are you doing?”, the first bricklayer replied:

“I’m laying bricks.”

The second bricklayer was asked. He answered, 

“Feeding my family.”

The third bricklayer when asked the question, 

“What are you doing?”, responded, 

“I’m building a cathedral.”

Which of those are you likely to get more excited about?  Obviously you need to feed your family, but when you can also translate that into a bigger vision…then amazing things can happen.

Thinking bigger doesn’t have to be about changing the world (although that’s cool if it happens), it’s also about moving up and away from the bare minimum to get by mentality.

Here are a couple of radically different examples of what I mean:

The X Prize Foundation

You’ve probably heard about the X Prize Foundation – they awarded $10M in prize money a couple of years ago for the first group to do private sub-orbital flights.

Their latest contest is a $10 Million prize for the winner that creates a practical car that gets 100 miles to the gallon fuel efficiency.

Cars competing in the “mainstream” category must be able to fit four passengers, luggage, have four wheels, air conditioning, play tunes, go from zero to 60 in 12 seconds, hit 100 mph and have a range of 200 miles. “Alternative” class vehicles (such as above) have less design constraints. It’s all going according to plan over at X Prize…

There’s some more detail on the article/post at Wired.  Can you imagine the possibilities if this drives up some new ideas or technologies that can be used in the near future?

Creating lifelong memories

Bill Harris writes a blog called Dubious Quality (and he’s been doing it for a long time now).  He’s a very entertaining writer in a low key kind of way and he writes about stuff that he likes.  A lot of his posts over the years have chronicled his son Eli growing up and a lot of the goofy things that kids do.

One of Bill’s latest post is an in-depth description of an elaborate treasure hunting adventure that Bill is doing for Eli.  Eli is 6 1/2 and the adventure centers around a pirate treasure hunt that includes an old letter, lots of clues and finding the right place to dig up the buried ‘gold’.

It’s a really cool idea that I think would be a lot of fun to do – and I’m most impressed that Bill was able to find the time and the creativity to put the whole thing together.  He was definitely thinking bigger on this!!!!

Here’s a link that explains the setup:  http://dubiousquality.blogspot.com/2008/03/big-adventure_20.html

So could you think bigger for yourself or your business?  It doesn’t have to be an all or nothing proposition – maybe it’s just a few changes here or there. 

If you have any stories about thinking bigger, share them here, I’d love to hear them.

Shawn Kinkade  www.aspirekc.comSimilar Posts:

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photo by  pshutterbug

I’ve been giving a lot of thought lately to target markets and how important they are to most small business owners.  Clearly the world is a big place and the more you can differentiate yourself and stand out, the more likely you’ll be the provider that gets the first shot at the business.

As an example, I was in St. Louis this past weekend and went to a store called Gringo Jones that’s in the Hill District.  If you like treasure hunting in a crowded, eclectic and interesting space, then Gringo Jones is the store for you.  Even from the street you could tell that this wasn’t a typical store, it’s in an old house and the front ‘porch’ area is packed to overflowing with all sorts of yard architecture making it a bit challenging to even get to the door!

I don’t know what their advertising or marketing was like, but just from experiencing it and word of mouth it was a different kind of store – and that made it memorable.

Should you arbitrarily pick your focus?

One of the real challenges that I’ve run into (both with my business and others) is that arbitrarily picking a particular market subset seems forced and unnatural.

There’s a reason for that…that’s because it is!

Another term for this focused target market is niche.  Here’s part of the definition of the ecological niche:

In ecology, a niche (pronounced “nich,” “neesh” or “nish”)^[1] is a term describing the relational position of a species or population in its ecosystem^[1]. A shorthand definition is that a niche is how an organism makes a living.

“A niche is how an organism makes a living.” 

When you look at it that way, then your niche is actually where you are most likely to flourish – it’s an organic, natural extension of what you are best at and who you work best with.

I’m currently reading Book Yourself Solid by Michael Port, a very good book so far that I would highly recommend.  He does a great job of explaining a different way of looking at your business that has a lot to do with recognizing and working to your strengths rather than an arbitrary market definition.

What struck me this afternoon was the chapter on establishing a personal brand – it’s the starting point for establishing your niche.  His suggestion for getting started is to break your personal brand into two components:

Your Who and Do What statement

This is often the focus of a standard 30 second commercial.  It’s simply who you work with and what you can do for them.

“I work with small business owners that are feeling overwhelmed, lonely or stuck and help them figure out how to control and grow their business using a 5 step process.”

My friend Toby at Brain Bucket works with small business owners that are embarrassed to answer the question “what’s your website?” and he helps them establish a strategic web presence that’s cost effective and easy to manage.

In a lot of cases, your Who and Do What statements may be shared or at least partially shared by a lot of other companies.  It’s really just an initial filter that listeners can use to see if you apply to them, where they are likely to get hooked is on…

Your Why You Do It statement

This is the reason why you do what you do.  It’s what will allow to potential prospect to make an emotional connection with you.  It’s what makes you authentic, interesting and congruent.

As an example, one of my clients – Dan Melton at NonProfit Technologies, has a fantastic Why You Do It statement:

“Inspired by the potential of the Internet for social change, Dan Melton formed NonProfit Technologies in 2002 to help nonprofits utilize the power of the world wide web.” 

Basically Dan passionately believes that there are better ways to help people and that a big part of that is creating a profitable business that can drive positive social change.  This belief drives what he does, how he does it and connects with his target market of public sector organizations.  They immediately resonate with his good intentions.

Another great example is a networking contact of mine who is a financial planner.  His compelling why is because he had first hand experience of people in his family that were harmed because they didn’t adequately plan for their financial and insurance needs and he would like to help others avoid what can be a truly terrible experience.

In both of these examples, the real intentions and the honesty shine through in all of their interactions, making them very compelling without any sort of clever ‘marketing’ hype.

If you really want to stand out, you need to figure out why you do what you do.  More than likely you’ve got a compelling reason – you just haven’t put it into words yet. 

Share your Why You Do It statement here – I would love to hear more examples!

Shawn Kinkade  www.aspirekc.comSimilar Posts:

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