When and How to Expand

by Rob Spiegel
You’ve seen it a hundred times. A local store begins to catch fire. For years, it had one location and was high on word-of-mouth buzz for its quality goods. The proprietors were making profits hand over fist. Loyal customers considered the store their valuable little secret. Suddenly the owners open two new outlets. Their advertising is everywhere. Six months later you see another two locations pop up and even more advertising. Six months after that all stores are closed down. Even the original store posts the sad sign on its familiar door: For Lease.
Success and expansion can kill a business faster than the long, slow drag of lackluster sales.

Business success rarely occurs in a steady, predictable march toward higher revenue and improved profit margins. Companies tend to grow in unexpected fits, starts, jerks and snap-backs. Fast growth can destabilize a business, giving its owners a false sense of well being while the additional revenues eat up more operating dollars than expected. For the home business, expansion can be particularly troublesome, especially if your growth forces you out of your den and into rented outside quarters. For many home businesses, the low overhead provides a high profit margin that can collapse quickly when you have to pay rent.

Here are some areas to watch as you consider expanding your business.

Avoid grow or die business models.
Try to avoid the trap of running a business that must continually grow to avoid demise. I’ve seen business plans that project 10 to 15 percent growth per year in hopes of hitting a breakeven moment in the third or fourth year. Start-up funds, of course, are always projected to last just until that moment. But what happens if you’re getting 8 percent annual growth? You quite possibly end up with a perfectly good business that’s walking a death curve because it’s not growing fast enough.

Keep your overhead low.
The biggest danger in expansion is the erosion of a low overhead structure. I’ve seen business owners work for years to keep their overhead low, but when they expand, all of a sudden they buy new furniture instead of the flea-market variety that served during the start-up years. Long-delayed gratification often explodes into extravagant spending at the moment of expansion.

Watch your margins.
Just because you have doubled your sales doesn’t mean your additional revenue is as profitable as your original sales. In most businesses, each additional sale comes with a slightly improved profit margin, since overhead is spread across a greater number of sales dollars and because your cost of goods goes down as you buy in greater quantities. But this is not automatically the case. Additional sales often come with unanticipated costs that can actually decrease your margins.

Watch the sharks.
There are hungry vendors out on the street that can smell business expansion. The come in nice suits and expressive smiles. They also come with pricy spending proposals that are cloaked as no-risk opportunities to gain even greater levels of revenue. They will try to convince you they are here to help. What they really want is their own private piece of your success in the form of an advertising retainer or a long-term copier lease. You succeeded perfectly well without this crowd. Don’t take their appointments.

Keep your focus on your success.
The need to expand comes from your success. In the urge to expand, don’t lose the focus that brought you success in the first place. If you’re good with customers, don’t delegate that activity in the interest of expansion. If you’re good at closing the sale, don’t hire sales people to take over your most valuable asset. Instead, fortify it with support. Hire marketing staff that can do the prospecting so you can put more effort into closing. The most frequent mistake during expansion is the owner spends less time in the activity that brought success in the first place. Instead, expand in such a way that you get to do more of your success-producing work.

source: http://www.businessknowhow.com/

Sales Practices That Will Increase Your Margins

by Dave Kahle
I don't know a distributor who doesn't lose sleep over what seems like the inevitable degradation in gross margins.

There are a number of factors that weave together to make margin shrinkage an issue for everyone. In many areas, competition has increased dramatically. As new competitors vie for your business, they naturally lower prices to buy their way into your accounts. In many industries, products cost less today than they did five years ago. In the face of decreasing prices, it's difficult to maintain gross margins. And, of course, in this era of Wal-Mart, Target and ubiquitous demands for lower prices in every other aspect of our lives, salespeople constantly hear that refrain voiced in the B-2-B sector.

What to do? Is margin degradation inevitable? Should we just give in to the pressures and try to lead the pack in cost cutting?
Before we default to looking inward and reducing costs, let's consider a series of pro-active sales practices that can buck the trend and actually bring you higher margins!
Here are ten specific sales practices which, when implemented incombinations that best fit you, will result in higher margins!

First, let's look at sales management practices. My first three practices are behaviors of effective sales managers.

Create and communicate specific expectations for margin growth.
Over and over, I hear client companies complain about margins shrinking. With furrowed brows and pensive expressions they encourage their sales people to, "Raise margins, guys!"
Nice thought. But unless you set down with each individual sales person and spell out a list of specific, measurable expectations, your cajoling will be useless.

If you want the salespeople to focus on raising margins, you must give them specific expectations to do so. I recommend annual goals for the total dollars of absolute gross margin dollars, as well as for the average G.P. percentage. So, if you want to raise your margins from 24 to 24.5 percent, spell it out with specific goals for each individual salesperson.

Train and equip the sales force to do what you want them to do.
While it's a necessary start to create specific expectations for margin growth, that won't accomplish much by itself. If you want them to do what you want them to, you need to show them how. Read through the list of sales practices that follow, pick and choose those that you want to pursue. Then create the tools and processes that a salesperson should use to successfully implement them. Then, provide them instruction in how to do them along with opportunities to practice. At that point, you'll be ready to move on to practice number three.

Monitor and manage margin growth.
If you've set specific and measurable goals with them, and equipped them with the tools and how-to processes, you have every right to expect that they will do what you've asked them to do. Meet regularly with each individual salesperson in a one-to-oneconference, and review his/her performance relative to your goals. Measure progress monthly, discuss mid-course corrections, and provide encouragement and coaching as necessary. Now that you have attended to your management practice, the next step is to decide which of the following sales practices you want to encourage. Here is a set of very specific practices that will build your gross margin.

Add a point to routine quotes and bids.
Most people get into ruts when it comes to quoting a certain product or range of products. We just naturally put a standard mark up on the final price. Break out of the rut, by trying one point higher. For example, if you routinely quote some product category at 15 percent gross profit, try it two or three times at 16 percent, or 15¾. Chances are you are leaving some money on the table by using the same mark ups you've used for years.

Obtain the competitions' pricing.
We all try to do this before the deal is done. It is, however, much easier to gain this information after a deal is done and then use it for the next round. After the deal is done, and the customer has made up his mind, just ask about the competitive pricing. Whether you won the deal or not you can still use the opportunity to collect useful information. Ask for what everyone else quoted. There's little pressure on the customer to keep that information confidential. After all, it's a done deal. No harm in divulging that now. As you gather the information after the fact, analyze it to see what patterns your competition is using in their price quoting.
Use the patterns and insights you gained to predict their next quote. Instead of fearfully using very low margins because you are afraid of losing the business to a competitor, you'll have much better information on what you competitor will probably do, and you'll find yourself not deeply discounting so often.

Add a point on price and product changes.
Let's say several of your customers are routinely buying a product line from you. You have it in at 15% G.P. The manufacturer raises his price to you 3%. You refigure the customer's new price at 15.5% margin. You've just gain ½ a point.
Every price, packaging, and product change is an opportunity to add a point or so.

Do a better job of information collecting.
Most deals are not purely about price. In almost every survey I've ever read about why customers buy, price is never the number one reason. What are the other reasons? That's your job to find out. Instead of just focusing your questions on the "technical specifications," dig deeper. Find out what else is important to the customer. Find out what the customer values, what objectives he/she is trying to achieve by this purchase. Then, you'll be better equipped to show him why he should buy it from you, instead of from the lowest price offer.

Create a REBME presentation.
REBME? That stands for "Reasons to Buy from Me." So many distributor salespeople look on every sales call as purely a discussion of product and price that they fail to consider the totality of the factors that influence the customer to buy. Now, if there is absolutely no difference between buying it from you and buying it from the other guy, than the customer should go with the lowest price. However, I very rarely have seen there to be absolutely no difference.

Your job is to identify all the things that are different when the customer buys it from you. Put those things into a list, turn them into statements of benefit for the customer and memorize the presentation.
Then when the customer says, "You're a point or two too high," instead of discounting, share with the customer what he/she gets in exchange for that point or two. If there is some valid economic impact, than you've just added a couple points to your margin by giving the customer a reason to buy it from you.

Promote higher margin items.
In every industry with which I've been involved, there are high volume items that almost every salesperson focuses on, and then there are very low volume items that most people ignore. That's too bad, because the high volume items are usually the lowest margin, while the odd ball requisition items carry margins that are often multiple times higher.
So, make it a point to present and demonstrate those low volume items that are not nearly as price sensitive. When most of your business is going through at 13%, it's amazing what a few items at 45% can do for you average G.P.

Promote sole-source agreements.
If you could come to an agreement with your customer to be that customer's sole source, you both could set aside the tedious quoting and price comparisons that occupy so much time. Instead, you could agree on some range of prices that are competitive and fair, and not have to worry about deeply discounting every deal.
Why would a customer do that? To save time, to develop a trusting relationship with a good vendor, to reduce his costs of acquisitions, storage, etc. The first step in getting some customers to this point is to begin to talk to them about it. Break out of the mode of "here's my price" conversations with your customers, and challenge them to think differently
about how to do business with you. You'll find some interested in the concept enough to seriously consider a partnership with you.
And, if you pull that off, you'll not have to worry about the competition threatening your margins.

Source: http://www.businessknowhow.com/

E-payment Systems Offer Secure Convenience

David S. Shymkus
Net savvy small businesses and consumers are turning to a unique on-line service for simplifying their busy lives - e-payment programs. What was once thought to be a risky, unsecured endeavor, e-payment has become a way of life for the web-at-heart. Don't confuse e-payment systems with on-line auctions, and credit card purchases. E-payment has evolved into a full blown service for on-line bill management and the capacity to send cash through an ordinary email. Here are a few programs worth visiting.

Paytrust.com offers a complete bill management service, boasting the highest levels of password security and extreme privacy. You can receive all your bills on-line, get an email when they're posted, and authorize payment. All of this can be done anywhere, anytime.

Here's how it works:
• You select which bills you want to receive on-line.
• Paytrust notifies the accounts to send bills electronically (or by mail) to their Processing Center.
• When your bill arrives, you get an email from Paytrust indicating the bill has been posted and ready for your review and payment authorization from your on-line bank account.
• You access the bill center, review the billed details if necessary, and click to authorize payment.
Paytrust also offers a checkbook-balancing program called SmartBalance™ to give you the most up to date immediate information on your account. The cost of the Paytrust program is a meager $8.25 per month for 25 transactions. Additional cost over 25 is $.50 per transaction. Plus, the monthly fee covers the SmartBalance™ service.

Another e-payment system currently in pre-launch is Paybills.com. They exhibit similar features as the Paytrust service, and include a color-coded payment center showing which bills are due within three days, and which are overdue. The overdue bills are red, of course!
PayPal.com offers a different twist to e-payment programs. PayPal allows the business owner, small office entrepreneur, or consumer to send money via an email. Sounds a bit impossible, right?

Here's how PayPal works:
• The individual wanting to send money logs into Paypal.
• He/she registers a credit card, enters the amount to be sent, the recipients email address, and sends the money.
• The recipient receives the email and enters the PayPal web site to access the cash.
• The recipient must register with PayPal, and either elect to receive a check directly from PayPal or direct deposit into the recipient's registered account. The PayPal service is free and protected with secured firewalls. This is a convenient service for businesses electing to quickly send cash to their satellite offices, vendors, or associates in the field. On the consumer side, parents with college students can quickly transfer money for books, tuition, and sundry items (pizza and beer) into the student's account.

The major advantages of e-payment systems are the reduction of paperwork, mailing cost, ease of on-line data and financial information storage, and the ability to access the web at any time for accurate real time information.

Source: http://www.businessknowhow.com/

10 Mistakes That Reduce Profitability

by Dr. Rachna D. Jain
In my professional experience as a sales and marketing coach/consultant, I've had the opportunity to work with a number of small business owners on various issues related to sales and marketing. The owners who are struggling to keep their businesses afloat tend to engage in some, or all, of the following mistakes that reduce profitability.

Mistake #1: They fail to market or market inconsistently. Once you have committed to owning and running a business you must be equally committed to marketing and selling the products and services of that business. It is difficult, if not impossible, to stay and remain profitable without a commitment to ongoing concerted marketing.
Solution: Market all the time, every time.

Mistake #2: They hesitate to "ask for the sale". Rather than seeming pushy or obnoxious they let profit-producing opportunities pass them by. They worry more about what someone thinks of them than they do about bringing more money into their business. If you find it difficult to "ask for the sale", you can be sure that you're not bringing in as much money as you could be.
Solution: Practice asking for the sale.

Mistake #3: They don't ask for help or assistance in the aspects of the business where they most need it. Most business owners possess strengths in a particular area but whether by necessity or ignorance they often end up working in areas that aren't part of their strengths. When business is not going as it should they delay or procrastinate in asking for help. Each day that goes by with your business running at less than maximum efficiency means dollars lost from your pocket.
Solution: Get expert advice from an attorney, accountant, or other service professional before you really need it.

Mistake #4: They don't follow up with past customers. It is usually much easier to reactivate a former customer than it is to attract a new one. If you are not following up with past customers on a regular basis you are reducing your profitability potential.
Solution: Develop and implement a regular method for customer follow up.

Mistake #5: They don't take regular stock of their expenses. Savvy business owners regularly appraise their business expenses and find ways to reduce costs without sacrificing quality. If you haven't completed a cost analysis lately, you might be paying more than you need to be, which will reduce your profitability.
Solution: At least once per quarter review expenses and negotiate for adjustments as appropriate.

Mistake #6: They spend large amounts on glossy, slick marketing materials and expect business to pour in without any additional effort. Glossy brochures and slick marketing materials are a nice addition to more active forms of marketing such as meeting people, calling people and speaking to people. Brochures and business cards, no matter how beautiful, do not replace direct contact. If you are spending money on flashy marketing materials rather than marketing directly you will be less profitable than you could be.
Solution: Take those glossy brochures and hand them out directly to people at the next possible opportunity.

Mistake #7: They spend a significant amount of time in low-return activities (as measured by dollars and personal satisfaction). If you are spending the majority of your day completing tasks which are administrative in nature and/or which can be easily completed by other people you are reducing your profitability.
Solution: Track your time and figure out how much you're making per hour. Hire an assistant if you are spending the bulk of your time in administrative work.

Mistake #8: They charge less than they desire. This challenge seems to arise especially for consultants, coaches and solo entrepreneurs who sell services. It is often tempting to accept less money than you need - so you get "some money" rather than "no money". After time, working for too little can leave you exhausted and resentful and it takes a deep cut out of your profitability.
Solution: Commit that, at the next opportunity, you will ask for full fee. And then do it.

Mistake #9: They make infrequent or no use of technology which could save them time and effort. As a business owner, you have a fixed amount of time and energy within which you must maximize your profits. Technology can help you do this in the form of auto responders, voicemail, wireless internet connections, speech recognition software and the like. All of these tools are designed to save you time and effort. If you are not making consistent use of technology in your business you are likely not as profitable as you could be.
Solution: Look for ways that you can make your business processes more efficient by using inexpensive technology.

Mistake #10: They adhere to outdated business models or plans. If you do not stay up with the trends in your business you will notice a steady decline in your profitability.
Solution: Attend meetings and conferences that will keep you on target with your market. Implement new means of doing business and update your business plan at least every couple of years.

If you are serious about improving your business' profitability, start by implementing the suggested solutions to these ten common mistakes. Together, these solutions will help you make more money and have more fun in your business. Try them and see.

Source: http://www.businessknowhow.com/money/reduceprof.htm

Talking to a Prospect as if to a Friend

by Wendy Weiss
While working with a new coaching client, I asked to hear her sound bite. Everyone needs a good sound bite. A sound bite, sometimes also called an "elevator speech," is a 10- to 15-second commercial on what your company does, offers or stands for. Use it when you meet someone new in business, use it at networking meetings, and use it on the telephone as part of your introductory calling script.

Here is the sound bite from my client:
Client: We offer complete marketing solutions.Wendy: (With eyes glazing over…) Huh?

The idea behind the sound bite or elevator speech is to communicate clearly, easily and effectively what you do and why someone else should be interested in what you do.

I asked my client, if a friend asked her to explain what she does, would the answer be "complete marketing solutions"? Probably not. And there's your litmus test. If a phrase would make a friend think you'd suddenly lost your mind, don't use it in a conversation with a prospect! Most likely, it sounds artificial and probably doesn't actually mean anything. That same phrase may be fine in writing, for your brochure or web site, but it is not as effective in spoken language, because written language and spoken language are different.

These differences come into play when you are writing an introductory calling script. Write your script down the way that you speak. If your script is in written language, you will sound phony. Real people do not speak with capital letters at the start of sentences and periods at the end.

People actually speak more in phrases or fragments, with pauses and the occasional "ah" or "um..." Write your introductory calling script with no punctuation and no capitalization. If there is a point that you particularly wish to emphasize, underline or highlight it. It is imperative that you sound real, so you may want to try talking into a tape recorder, then playing it back and writing down what you've said.

Try to stay "jargon-free." Every industry has its own jargon, but you must know and use jargon appropriately. If your prospect does not understand your industry jargon, then she will not understand you when you use it! Instead, become conversant with your prospect's industry jargon—then, she will see you as an expert who understands her industry and her issues and concerns.

When you are writing your script, keep in mind a particular individual to whom you will be speaking. Picture this person as a friend, as someone who is open and receptive to what you have to say. Speak to that person as you would to a friend, and not in formal business language taken from your company brochure.

I have seen perfectly reasonable, articulate human beings become stiff, formal and uncomfortable while trying to speak in a manner they believe to be "businesslike." They use unwieldy phrases like "complete marketing solutions," because someone told them it sounds more professional. It doesn't. If no one understands what you are talking about, no one will buy your product or service. Be yourself, and speak as you would to a friend. Remember your litmus test: Do not include anything in your introductory calling script that would make a friend raise an eyebrow.

The very definition of an introductory call is that you are talking to a stranger. You are telling your story to someone who knows nothing about you, your company and your product or service. You must be clear. For the ultimate test, before you get on the telephone, try role-playing your script with an eight- or nine-year-old. If that kid does not understand what you are talking about—no one else will either.

source: http://www.businessknowhow.com/marketing/friend.htm

The Top 7 Marketing Strategies for Independent Professionals On a Budget

by Susan Martin
American companies spend billions of dollars each year on marketing. As a matter of fact, in 2001, U.S. advertising expenditures alone topped $230 billion, more than doubling the $105.97 billion spent in 1980.

(Source: "Advertising: Exposure and Statistics" November 2003 newsletter of the Media Education Foundation) Now, these figures may seem staggering to the independent professional on a budget, but don’t panic; there are lots of effective strategies you can utilize that will help you grow your business fast. Here are some of my favorites:

Identify your niche.One of the easiest ways to attract customers is to figure out which group of prospective customers you get your very best results for and go after them exclusively. Many professionals are afraid to do this claiming that they’ll be leaving someone out, but many marketing experts agree that niche marketing as the easiest and fastest way to get business.

Position yourself as an expert. Why? Experts make more money and get more media attention and that’s free advertising! Let’s face it; it’s easier to trust a specialist than a generalist who’s trying to be everything to everyone. Once you’ve identified your niche, let the world know about how you can help.

Provide free information products, write articles and white papers about the problems your clients face and how they can solve them. Conduct workshops, seminars and tele-classes specifically geared towards helping your prospective customers and before long you’ll be regarded as an expert in your field. And, while you’re at it don’t forget to, collect names, emails and addresses of prospects to keep filling your pipeline.

Develop ongoing relationships with complementary professionals and build your referral team. These are other professionals who sell non-competing services or products to the same niche customers you are targeting. For instance, my clients often need the services of bookkeepers, accountants and business attorneys. Likewise, they refer business to me. Here’s a couple of other examples:

• Residential realtor, mortgage broker, real estate attorney, home improvement contractor, architect and interior designer.
• Commercial printer, copywriter, graphic designer.

Institute a system to keep track of all of the people who are interested in your product or services, and find creative ways of keeping in touch with them on a regular basis. To start, go through your notes. Put together a list of all of the people you’ve spoken to in the last 6-9 months who’ve showed interest in you but haven’t become paying customers. Follow up with them in a variety of ways: call them to touch base, use email, ask them to subscribe to a newsletter, send them interesting articles, or invite them to join you at events. It takes numerous impressions to make the sale; that’s why you see commercials on TV over and over again for the same products. By keeping track of all of the people who’ve showed interest and keeping your business on their radar screen you’ll turn more of them into paying customers.

Let your satisfied customers help you sell your products or services. Here are a couple of ways to do this:

• Ask them for referrals - right away (if you were a car salesman you wouldn’t wait for the new car to get dirty and dented!)
• Ask them to write testimonials for you, (also right away) and compile a list of testimonials to use in your all of your marketing collateral.

'Create a marketing calendar and keep to it consistently. Scheduling marketing activities that take place weekly, bi monthly, monthly and quarterly will help you to avoid the feast or famine syndrome that most independent professionals fall prey to. And, by doing so, marketing will become easier since it becomes a regular part of your business life.

Identify innovative ways to get more business from existing customers. It’s much easier to get business from customers who are already happy with your services or products. So develop additional services or products to keep customers coming back for more.

source: http://www.businessknowhow.com/