That leads to success

It appears some sales processes are universal, not learnt by studying some ‘expert’ but by testing over time to find what works and what doesn’t.  There’s a little aside here:  how many of you test your marketing or sales processes to find out what works and what doesn’t?

But back to the point of this blog. My wife and I are on a long anticipated trip to India.  And rather than tripping around, wandering into one monument or another without any idea of the story behind it, and wanting to avoid the boredom of a busload of babbling tourists we opted for individual guided tours of each destination.  And very worthwhile it has been too.

But there is another side to tours. Whether you are with the babblers or on an individual tour, sooner or later you will be guided to an outlet where the wares will be demonstrated (with no obligation to buy of course) and ‘sold’ to you.

Now in some ways this is not a bad thing.  On our experience at least you are likely to be taken to a reputable place with quality products, rather than left to the mercies of sidewalk hawkers.  Be aware of course that your guide will be on a commission for anything you buy, at least 2 – 3% as one guide told us in a moment of transparency.

The sales lesson was in how the sale is achieved, a nine step process which leads to YES.  

Firstly comes education. The skill and expertise of the craftsman is demonstrated, working in the traditional way to make the product.  Authentic craftsmen and women from the villages where this work is done.

Secondly you are asked to appreciate how the skill is applied and how such skills are a dying art in this rapidly changing world (build up the scarcity).

Thirdly see the variety of finished products that are available (more education, but also seeking to identify your point of interest).

At some point the Law of Reciprocity is fed into the process.  This is where a sense of obligation is created so that you will start to feel at some point to you need to reciprocate by buying something, just something small of course.  There’s always a touch of reciprocity from the demonstration as well.  At some stage a tea, coffee or even a beer is offered, no charge of course, “accept a little hospitality” building on the Law.

Then their USP (Unique Selling Proposition) is demonstrated – just why these products are so different from anything that you can buy elsewhere – the fifth step.

So the tipping point process is started, the sixth step.  The first products that are demonstrated are well within your price range and your interest starts to be engaged.  You can afford that product of course.

Graduation - the seventh step.  Having got your engagement, more products are bought out, each of even higher quality and skill, and a higher price of course.  So you start to finger the material, or whatever the product is, hold them up to the light, step back and examine. 

Touch it, feel it, picture it in your home.  There is nothing like engaging the imagination, which of course is what every tourist brochure does with its photographs – can’t you see yourself here, having that experience, the eighth step.

By now you are well past the moment of that low priced product you initially considered, the one that took you past the tipping point.  The question is no longer whether you are going to buy, but what you are going to buy – the ninth step.

Yes, it worked on us, even as I admired the process.  But why did it work?

As a process it works because it has been tested and improved over time, a long time.   And it mirrors the process so many marketing or sales gurus will tell you to follow.  But of course they developed their expertise is in a completely different market.  It just happens to be a universal process that works.

© Copyright 2010 Adam Gordon, Profits Leak Detective

That's a question I often get asked by clients. And of course there is no easy answer.  In my experience for most small businesses there's not even a process by which they decide.

More often than not, SMEs equate advertising with marketing and base their budget on a combination of what they think they can afford and what they spent last year.  Rarely is it based on the results they wish to achieve.

While you shouldn't spend more on marketing than the returns warrant, haphazard budgeting for marketing will produce little return for the investment over time.

Before moving on to a process you could, or should, follow I can tell you the average expenditure of small businesses in various industries in Australia according to financial benchmarking studies.  For example:

• Auto accessories & spare parts dealers - 2.61%
• Auto Electricians - 1.73%
• Beauticians - 2.82%
• Bed & Breakfast - 7.0%
• Building Contractors - 0.18%
• Cabinet Makers - 0.82%
• Computer & Phone, Sales & repair - 1.55%
• Plumbing Contractors - 0.55%
• Smash Repairers - 0.90%
• Metal Fabricators/Engineering Works - 0.57%

There's a fair bit of variation across these industries.  

Are these a good guide? Well, probably not, because as mentioned above the expenditure is probably not the result of a planned process.  
Some quick research on Google suggested all US companies; on average, regardless of size and position in the market, spend 9% of revenue on marketing.  That's not surprising when you consider very well performing companies like Microsoft (21%), Adobe (33%) and 1-800 Flowers (33%) spend a lot more.  

Could their marketing expenditure have something to do with their performance?

So marketing, and lots of it, may well be absolutely critical, and you need to develop systems you can use for new marketing campaigns.
An alternative approach to picking a figure, whether it be industry averages or past expenditure is to work at what you actually need to achieve your objectives.

For example: An objective of an extra $100,000 in sales means;
1.    How many/ what kind of sales are needed to achieve that number?
2.    How many leads do you need to achieve those sales?
3.    What marketing tools (frequency/reach) will be required to achieve those leads?
4.    How much will it likely cost to generate those leads?

Of course that means having some data on your conversion rates from enquiries to sales, and responses to the different marketing media you use.  

To quote from Small Business - Big Opportunity"  Sensis in partnership with Rob Hartnett "A common oversight made by many small business owners  is that they simply don't measure their advertising.  Even fewer actually know what they want to advertise."  

What you allocate for marketing and which media you use depends on your business, your customers, your location, and your industry.  But at least make the effort to plan what you want to achieve.  Ineffective marketing is indeed very expensive.

© Copyright 2010 Adam Gordon, Profits Leak Detective

The business year has now well and truly begun, and no doubt you will be settling down to making it a bigger and better year than last year.

A recent survey suggested the top priorities for Australian small businesses this year were:

• Finding new clients and customers (58%)
• Growing my business (33%)
• Gaining worklife balance (8%)

That's worth thinking about but I would be more interested in hearing about the issues that might be troubling you about the year ahead.  What are the issues that you feel you need to be wary about, that could have an adverse impact on your business?

I can tell you what is concerning some small businesses, in Australia at least.  The Council of Small Business of Australia (COSBOA) and Telstra Business conducted a poll of small and medium enterprises (SMEs) to gauge their expectations about the economy and their own business in the year ahead.

You may not be surprised about the results.  It is the things that are outside their control that concerned most SMEs surveyed.

Let me quote from a newspaper report on the results:

"Interest rates, a carbon tax, the cost and availability of finance, changes to the Australian industrial relations system all weigh on the minds of respondents, to different degrees.  

The survey also revealed a lot of the pain that SMEs are going through at the moment.  

Only 26% of respondents said that their business had improved in the last 6 months, while 39% said that they expected theirs to improve in the next 6 months, although the same businesses were far more positive about a recovery in the economy overall."

Higher interest rates and the cost of obtaining finance to expand were the top issues of concern.  That is interesting given the priorities quoted above from the other survey.  People want to find new customers and grow but feel they may not be able to find the money to do so.

At the same time they believe the economy is more likely to recover than them, perhaps because of those finance concerns.

What about you? What are your concerns?  Is the cost and availability of finance your major concern, is it finding the right staff, their costs, or is it your market and the willingness of customers to buy?   Those surveyed seemed to think there were opportunities for growth but are you as confident?

Certainly for small businesses outside Australia the picture may be more problematic.  Reports I read suggest potential problems in the US and UK but Canada?

Please click on the "Add Comment" button below right and let me know what you are thinking.

© Copyright 2010 Adam Gordon, Profits Leak Detective

Ignorance is bliss

Before you set up your business, did you ever give any thought to what you needed to know about running a business, let alone running a business in your industry?

After all you were probably pretty good at what you did, whether it be a trade or a techie.  That's the reason so many people start a business; they reckon they can do a better job than their boss, and they've probably got good reason for so believing.

And it is probably good enough for the moment - "do what you do, do well boy, do what you do, do well" as the old song went.  If you did what you did 'well' then word of mouth will have got you customers and given you at least a wage.

But if you are going to be in business for awhile, you need to be earning more than a wage.  You need to be recompensed for the risks you are taking, and for the hours you are working.

Don't tell me you are working fewer hours than you were working when somebody else was the boss.  It rarely happens as I sure you well know.

And training as a tradie or techie doesn't tell you how to handle the business when times get tough, as they will.  All too often events outside your control can come and give your business an almighty belt around the ears.  Or for some reason you can't explain the cash is no longer there.

You see, when you say "What you don't know can't hurt you" you are completely misleading yourself.  You are also saying in effect that "what you do know, can hurt you."  You need some business management knowledge as well as those good technical skills.

Ignorance is not bliss.  Ignorance is dangerous when you're running a business.  

Whether it is that big wallop from outside the business, or inexplicable things starting to go wrong in the business, for the profits seemingly to have silently leaked out of the business, lack of knowledge can and will prevent you doing the things you need to do to protect your business.

To quote a good client - "I didn't know where to go to fix the problems, or how to fix them."  "We owed money to our suppliers and were not able to make ends meet.  We were not even making a profit."

"Until we saw the facts and figures we didn't know what to do, all we knew was that we should be doing better.  I was disappointed with myself, not happy because I knew we COULD do better.  I was frustrated and felt helpless because I didn't know what to do."

"You don't see the pitfalls before you set up your business.  You should sort out the hurdles before you start; otherwise you are just operating in the dark."

A little ignorance can go a long way, but only some of the way.  What you don't know will always hurt you when you are managing your own business.

© Copyright 2010 Adam Gordon, Profits Leak Detective

A slogan for an interesting year.

The small motel just above the beach where we live has a small blackboard beside the entrance.  We pass it on our morning walk just to make sure we catch up with the proprietor's pithy comment for the day chalked on the board.  I don't know his source but his daily comments can be amusing, irreverent and sometimes thought provoking.

Today's offering "Why not - a slogan for an interesting year" falls into the latter category.  

It's a bit more about you and what you might do in your business than about the old Chinese curse; "May you live in interesting times", which seems more about what the outside world may inflict upon you.  I think we've had enough of that in the last year or so.

With the holiday rush over, you may be thinking about settling back into your routine, getting more comfortable.  But I suggest you don't get too comfortable.   Once you do you'll find yourself stuck in the same routine, repeating the same patterns and producing the same results.  Keep on this track and your business can't grow or evolve.

Challenging yourself by stepping out of your routine and doing something different in or with your business is the only way you'll grow.

The oft-plagiarised quote from George Bernard Shaw "Some men see things that are, and ask "Why?"  I see things that never were, and ask "Why not?" reinforces this.  

Continually asking "why" is an open invitation to doing nothing, making no changes to how or what you are doing.  You will end up taking no steps forward, trapped in a comfortable lethargy, producing those same, familiar results.   Do what you've always done and you'll get what you've always got.

If you want a challenge ask instead "What today is impossible to do in your business but if it could be done, would fundamentally change what you do?"   Now there's an opportunity to say "Why not"!

That's not to say that change automatically leads to improvement but to recognise that improvement won't happen without change.  Asking "why not" to the impossible is a challenge, and will allow you to make some fundamental changes to improve your business.

Such changes may be:

• Taking your current products and services to new markets;

• Developing new products or services for your current markets.

But it may also mean different ways of doing things.  Imagine, for example :

• if you got serious about marketing in your business and learnt how to address the key drivers in your various market niches (or even what were the niches you serviced);
  

• or developed proper systems and procedures so people did not keep on making the same mistake over and over again.

Improve, change, profit! Asking "why not" can indeed lead to an interesting year.

© Copyright 2010 Adam Gordon, Profits Leak Detective

Would you think better?

Meeting successful entrepreneurial types is always an interesting experience. What drives them, how do they achieve their success, how do they stay on top of what they do?

I met a couple of very successful such people the other day, brothers actually, and in separate conversations with them a number of factors emerged.  By the way these were general conversations, not interrogations.

Hard work - to build the foundation of their first business they worked hard, very hard.  One talked about the number of years they had worked 100 hours per week over peak periods.  Not everybody is prepared to put that kind of effort in, and they don't do those kinds of hours now, but it was the building block for their future.

Good advice - whether it was legal advice, financial advice or accounting advice they made sure they accessed the best possible advice they could find.  They described it as underpinning their businesses.  Good advice is another foundation block for business success.  Although not mentioned by these entrepreneurs having access to good business mentors is strongly recommended to start up businesses.  You are less likely to make mistakes and when problems arise, as they will, are more likely to find your way out of the mire.

Information - both brothers talked about their use of information.  One referred to the spreadsheets he used to collect and analyse what was happening in the business, and to make his business decisions.  The other brother, when asked about how he kept control of the myriad of disparate businesses they had built referred to the eagle eye he kept on them through the reports he required.

As regular readers of this blog and of the Profits Leak Detective newsletter know lack of management information is a key factor holding back most small businesses and the cause of many of their profit leaks.  In fact it is frightening how uninformed so many small businesses are.  

To quote the late American business success philosopher, Jim Rohn:

"If we were to ask people why they feel the way they do about certain issues, we would probably discover that the reason why they FEEL the way they do is because they don't really KNOW a great deal about those issues.  

Lacking all the information, they form conclusions based upon bits and pieces that have come their way (not that they sought).  With their limited knowledge, they often make poor decisions about how things are.  If they knew better they would think better."  

Hard work, good advice and information, three foundation stones to business success. If you have them you will both know better and think better about your business.  Something to ponder on over Christmas.  

Thank you for following my thoughts this year.  My best wishes to you and your family for a wonderful Christmas and a happy New Year.

© Copyight 2009 Adam Gordon, Profits Leak Detective