Imagine if you could increase your turnover significantly by a small, no cost improvement in just one area of your business. Would that be worthwhile investigating, spending some time thinking through how it could be applied to your business?
That one area is your success or conversion rate from the quotations, bids or proposals you submit. Most small businesses have to submit some form of quotation or bid unless they are in retail.
Let me give a specific example. I have a client who is a manufacturer, just a small business with about 8 employees. It is a good business, with a well run operation, although like most small businesses he doesn't pay much attention to marketing. His expertise is in his operations.
Pretty much all their business comes from quotations or proposal he submits. He wins about 30% of those; sometimes he is beaten by the competition, sometimes the prospect defers or decides not to proceed.
That 30% gives a reasonable turnover, and because he is a good operator, a satisfactory level of profits.
Now just suppose he could lift his success rate from 30% to 40%, from roughly 1 in 3 to 1 in 2.5. Assuming the average value in each sale didn't change that would increase his turnover by 33%, and do so without any increase in his marketing costs.
And that doesn't even take into account improvements through converting enquiries or sales leads into requests for a quote.
Sounds a lot, so how can he do that?
The one thing he shouldn't do is to try and achieve the increased success rate by reducing price. That would defeat the whole purpose of lifting turnover, and that is to increase profits. I've written often enough of the dangers of discounting for small businesses.
If the price is the problem, you've done a not so-good job in your marketing. All reducing prices does, apart from destroying profitability, is to turn your business into a commodity. If you do that, customers will treat it as a commodity and not of something of value.
It's not just one thing that works in quoting i.e. not just price; it is a number of things.
It is an unfortunate fact of life that a lot of small businesses don't spend much time on their quotations or proposals. In fact many regard submitting quotes as something to be hurried through so they can get on with their main job, doing.
So we see the quick hand-written quote scribbled into a carbon-copy booklet, or a poorly laid out typed quotation, replete with typos, providing the minimum of information on price and delivery.
Think about it. What will stop a customer buying? It is uncertainty, too many doubts or objections in their mind; a feeling of too much risk.
Surely a quotation, sales pitch or proposal deserves more than something that just has to be hurried through. After all, it is the prerequisite to your next order.
So spend a little more time on it and:
© Copyright 2011 Adam Gordon, Profits Leak Detective
Some profit losses are pretty obvious - so you fix them.
BUT, what if you don't know profits are leaking, cash out the door?
Possible leaks could be anywhere.
Are there some clues or symptoms that are tell-tales?