Mike Michalowicz's Blog, page 86

Profitable Pricing in Four Steps

A jewelry store at a busy cruise ship port had a store full of items, one of which wasn’t selling, despite its relatively modest price of $25.  Frustrated and worried about getting the inventory moving, the store manager told her employee to drop the price to $18 and just close the thing out.  The manager returned from a few days off and discovered that her employee had misunderstood her and raised the price to $80.  In a panic, the manager went looking for the back inventory to change the prices, only to discover that the one piece in the case was the last in the store.  Her employee had mistakenly raised the price and sold them out.

That’s a pricing lesson.

Pricing can be more complex than we realize, and we may end up shooting ourselves in the foot, trying to figure out how cheaply we need to sell our wares, when in fact, consumers are willing to pay more!  If you’re moving lots of product at unsustainably low prices, it’s bad for your business, and you must raise your prices or perish.  Here’s how to adjust your pricing without alienating your customers.

1. Get over yourself.  You are the biggest opponent to raising your prices because you’re scared that you will lose customers.  What you must realize is that no one else actually cares that much.  The biggest barrier to charging profitable prices in in your own mind.  Get over it, and keep this in your back pocket:  if you raise prices and it flops, then you can always lower them.  You’re the boss, and you get to raise and lower prices as you see fit.  If you have a range of offerings, try experimenting with raising the price on just one or two items and track the results.  I’m telling you now that you’ll likely see little effect on sales, and your increased margin makes your bottom line look much healthier.  Think about all of the products that you purchase on a regular basis, and think about how many times the prices have gone up.  You still continue to buy the things you need and want … and your customers will to.

2. Notify your existing customers and tell them why you’re raising the price.  Customers don’t like to be surprised by price increases.   Make an announcement, give them a date for the increase to go into effect, and briefly explain why you’re raising the price.  Are you hiring a new employee to serve them better?  Are you investing in a new line of products or buying better equipment in order to improve your service?  Let your customers know where their money is going, and they’ll be much more receptive to the change.  Now you might lose a few clients over your increase, but there are actually two additional benefits of raising prices.  First, the clients who leave are nearly always the folks who are difficult and costly to you in terms of the time and resources they require.  You probably won’t even miss them.  The other benefit is that raising prices – and asking yourself if you’re charging a fair price – means that you’re reflecting and making sure that you’re offering your best product, the very best service that’s truly worth a little more.  If you believe that your product is worth every penny you’re charging, then your customers are likely to agree with you.

3. Offer a lower priced alternative.  When you decide that you simply must raise prices to remain competitive, think about bumping the price of your existing product and creating a stripped-down version at a lower cost. Consider the computer industry – the highest margins are at the extremes in the pricing strategy.  Both the high end and the low end products are the most profitable, in part because the cost to the seller is so much less for the low end items.  Cut your costs and offer your clients a deal.

4. Make your money in the margins.  Your profit is the retail price less the cost of goods sold.  If you can find ways to reduce your costs, then even if you leave the retail price the same, you’ve instantly made that product more profitable.  Step back and evaluate your pricing and costs periodically to ensure that you’re as efficient and cost effective as possible.  You’ll find bonus dollars if you can raise your prices slightly and also cut your costs a bit.

The best place to start when you’re examining your pricing structure is with the quality of the product you produce.  If you’re offering exceptional value and convenience, then your product may be worth far more than you’re charging.   Charging a fair price for your product means that you can pay your staff (including yourself) fairly, and still give good value.

8 Suggestions to Improve Your Sales Team’s Performance

A sales team is the backbone of many companies. In order for your company to profit and grow, you need an effective sales team to bring in the big bucks! But figuring out how to go about having an effective sales team can be a job in and of itself. You need them to find ways to get the business, or at least a chance to give their pitch, and following established methods just doesn’t work the way it used to.

If you have a sales team that could use a little help, it may be time to think beyond the “smiling and dialing.” Instead, consider these eight unexpected ways to get sales booming:

1. Join a board. Have your sales team members join the board of a not-for-profit, as there are usually a lot of powerful decision-makers on the board. This will give them a chance to have at least the opportunity for an introduction and meeting.

2. Go for voicemail. You rarely get people live on the phone, so most of your competition is reverting to e-mail these days. Ironically, voicemail is the better option, as it is targeted to the person you want to talk to, and your voice message typically gets their individual attention. Plus, you can master your message (as long as it sounds personal) and leave the same message for a number of new prospects.

3. Focus on vendors. Have your team focus on calling on vendors, rather than prospects. This way, they can put their efforts into building referral networks.

4. Pitch outsourcing. Have the sales person scour the job ads of big companies. Once they locate the ads, have them place a call to the company that is looking to hire employees and suggest that perhaps your company could fill that need instead.

5. Lumpy mail. Have you ever noticed that bulky mail gets put on top of the stack? Take advantage of the fact that lumpy mail always gets noticed! Have your sales person send a piece of mail that is not a standard envelope. Maybe they can send a shoe and then include a note that says, “Now that I have one shoe in the door… let’s meet.”

6. Volunteer. Let your sales people volunteer for fundraisers or other events where your key prospects will also be in attendance. It is a great way for them to get some face time and build relationships.

7. Become a journalist. Have your sales person conduct interviews of prospects for your website or blog. The interviews must be genuine, and you should post them to your site. It will allow you to build a foundation for ongoing dialogue, which is exactly what sales people need.

8. Clip articles. When a prospect is highlighted in a newspaper or magazine, have your sales person clip the article, mail it to the prospect and congratulate them on the exposure. Have them include their business card; if nothing else, they will likely get a thank you, and it will start the dialog. Alternatively, send along an article that you think will be of interest to the prospect.

If you follow the old-school method of sales, you have your sales team making cold-calls or stopping by someone’s office. But that’s no longer the best route to take. Try using some of these other active routes. They may just bring your sale team that much need victory. Plus, if your old method of sales isn’t working, just doing more of it won’t fix things.

What Makes Great Marketing, Great?

Great marketing generates educated, filtered prospects who are convinced you have the right solution for them. Your sales team gets inquiries from qualified, knowledgeable prospects. Their job is simply to ask for the order.

Bad marketing generates general prospects that need to both be educated and filtered by your sales team.  The sales team’s job becomes a complex (and time consuming process) of both qualifying and educating random prospects. Their job is now twofold – be a marketer and a sales person.

Great marketing is efficient and results in scalable companies.  Bad marketing is sloppy and results in an ever ending quest for “rainmakers.” And, as I suspect you already know, there aren’t too many that exist and the ones that do cost more than you could ever afford.

The Deathbed Thoughts of an Entrepreneur

So you are one of those hard-core, hard-driving, workaholic entrepreneurs, right? You’re a winner! I get it. And I applaud you, or at least I would have applauded you years ago. In fact, I would have done the “I’m not worthy, I’m not worthy” hand wave dance for you back then. I might even have tried to kiss your feet. But today? None of that. Today, in fact, I feel sorry for you.

You see, I was that guy. Years ago, I was dead set on winning the entrepreneurial game. I wore the title ‘workaholic’ like a badge of courage. But one day, on a very nondescript day, I had an epiphany. It all clicked for me. On the day I die, I won’t be saying I should have worked harder. I will be asking myself if I lived life to the fullest. I will ask myself if I fulfilled my life’s purpose. I will wonder whether I loved my family and friends unabashedly.

Perhaps it was the Sam Walton story that helped me to see the error of my ways. He was a guy that I idolized for his business success, and today I still aspire to learn from the final words that he spoke on his deathbed.

Sam Walton, by any measure, is considered to be the ultimate entrepreneur. He took a small general store, revolutionized the retail industry, and built his business into the world mega-corporation that Walmart is today. During his lifetime, he was in regular contention for being the richest man in the world. I mean, the man made a five-and-dime into a world power. Yet it is what he said on his deathbed that should give us all pause.

His final words, uttered prior to his death, were “I blew it.”

How could that be?, you ask. He was a full-time, always-there business man. But that is where the problem lies because, when it came to the rest of his life, he was never so dedicated or “there.” He was never there as a father, husband and friend. He had the wealthiest pockets, but he had the poorest soul. And, in the last minutes of his life, he realized where he had failed.

I wonder if the same would be true for a man or woman who dies, having lived the richest life with family and friends they loved, yet didn’t have a business success story. I suspect that they won’t say, “I blew it.”

Here’s the hard truth: you and I are on our deathbed. Of course, I hope I am being figurative here, not literal. I hope you and I still have time. But I can guarantee you that we will eventually experience it. We are all going to die. And for all of us it will happen sooner than we want, if we don’t start working on the life part way more than the entrepreneurial part.

Sam Walton left us with the greatest entrepreneurial lesson of all time. It is better to have an incomplete business life than an incomplete human life. Keep that in mind as you work on your business. It may be important to you to have business success and reach goals, but it is more important to build loving and meaningful relationships.

On your deathbed, it is the people you loved and with whom you built relationships that will be there, providing you comfort, not a business or a bank account. In the end, they are what will matter, not how big your company is, or how much money you have stashed away in the bank. And Sam Walton is proof of that.

Episode 31: Business Relationships and Profitability Scott Weintraub and Jennifer Dawn

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Show Summary

Business founders Scott Weintraub and Jennifer Dawn join us for Episode 31 of the Profit First Podcast. Scott shares his method of networking. Jennifer shares her coaching experience in helping business owners put their Profit First.

 

Our Guests

Scott Weintraub (left)

Scott is a founding principal of Healthcare Regional Marketing, playing a lead role in all aspects of the business, including product development, new business development, and HRM brand management. Since its launch in March 2007, HRM has enjoyed impressive revenue and profit growth.

Prior to HRM, Scott’s career began at Procter & Gamble, where he quickly excelled in brand management on national brands such as Cover Girl cosmetics, Coast and Safeguard bar soap, and Secret antiperspirant.

Scott joined Pfizer, where he was responsible for brand management, marketing and P&L for more than half of Pfizer’s over-the-counter brands, including Dramamine, Kaopectate, Cortaid, Micatin, Surfak, Doxidan, and Emetrol. After a successful run of managing these OTC brands, he transitioned to the company’s pharmaceutical division.

Scott has experience on all aspects of the prescription drug business, specializing in direct-to-physician marketing, KOL management, direct-to-consumer marketing, managed care, and sales force and customer relations. He has worked on billion-dollar, blockbuster brands (Lipitor, Norvasc, Zoloft, and Celebrex), along with smaller brands, and is a recognized expert in driving product performance in regional markets.

Scott earned a master’s degree in business administration from the University of Cincinnati and is a graduate of Pennsylvania State University.

Jennifer Dawn (right)

Jennifer Dawn began her career working for IBM and the Governor of Florida. At age 23 she founded her first business, a software company providing Point of Sale systems to amusement parks. She grew it from nothing to seven figures while traveling the world. She went on to become the Software Division President for a $54M manufacturing firm and then led national accountability & mastermind groups for a network of women entrepreneurs. Now, Jennifer mentors business owners to grow healthy and profitable companies.  She is the proud mother of three beautiful children and married to Douglas Robbins, a fiction author.

 

Show Quotes 

Instead of cold calling, focus on networking and asking your clients for referrals.

Put the effort in to build a trust element with your clients.

If you do not have a sound financial system in place it does not matter how much money you are bringing in. It’s important to understand how to get your money working for you.

Our questions dictate what we see. Here’s question 1 of 4 you can ask your clients to become more profitable:

Meet with your best customer and ask “What am I doing right?” Your customer will give you feedback. Here is the key: they are not telling you are doing right – they are telling you what they are observing, the color that they are looking for. Now you know what you can improve on.

App of the week: KeePass Password Safe

 

Show Links

Scott Weintraub

Website: http://www.hrmexperts.com/ 

Jennifer Dawn

Website:  http://jenniferdawncoaching.com/

Twitter:  https://twitter.com/JenniferDawn8

Facebook: https://www.facebook.com/JenniferDawn8

LinkedIn: https://www.linkedin.com/in/jenniferdawn

 

Corporate Partners

Nextiva – VOIP phone providers for small businesses.

Fundera – Single source online funding for entrepreneurs. Also offers an adviser program for CPAs, bookkeepers and business coaches.

TSheets – The #1 customer rated time tracking solution!

The Poem Of The Struggling Entrepreneur

One. Two. There’s anything I’ll do…

Three. Four. To serve the next knock at the door..

Five. Six. Even if it’s outside my offering mix…

Seven. Eight. Any opportunity of any type is great…

Nine. Ten. I’ll repeat this process over and over again.

Should You Raise Your Prices?

There is a danger when you raise your prices. You may lose customers.  It can (and does) happen. But you also need to realize that higher prices only result in the loss of certain customers called Price Shopper.

Customers that complain about price increases are called Price Shoppers. Customers who seek value are called Value Shoppers.  They both exist in all markets. Even you are both. Sometimes you just want the cheap solution, making you a Price Shopper in that situation. And other times you want the best solution, making you a value shopper.

When you raise your prices, your customers will reveal which category they fall in.

Price Shoppers want cheap. Value shoppers want value. The question is, who do you want? If you want customers to see you as cheap (I hope you don’t, but in some case it applies) then you need to reconsider your pricing if people leave. If you want customers who see you as valuable you should be grateful when the Price Shoppers leave to be cheap elsewhere.

Unlimited Wealth from One Simple Method

Have you heard the old story of the Mexican Fisherman and the American Tourist? It goes a little something like this:

Once upon a time, in a land far, far away…just kidding.

An American tourist was at the pier of a little coastal Mexican village when a rinky-dink fishing boat with just one fisherman docked.

Inside the little boat were several large Yellow-fin tuna. The tourist complimented the Mexican on the quality of his fish and asked him how long it took to catch them.

The Mexican replied, “Only a little while.”

The tourist then asked, “Well, why didn’t you stay out longer and catch some more fish?”

The Mexican said, “With this I have more than enough for my family.”

The tourist then asked, “But what on earth could you possibly do with the rest of your time?”

The Mexican fisherman replied, “I sleep late, fish a little, have fun with my children, take a siesta with my wife, stroll into the village each evening where I throw back some beers and play guitar with my amigos. I have quite a full and busy life.”

The tourist scoffed, “You need help and I can help you. You should spend more time fishing; and with the money you make from fishing, buy a bigger boat, a better boat, maybe even a yacht. With the proceeds from the bigger boat, you could buy a boatload of boats. Eventually you would have a fleet of fishing boats. Instead of selling your fish to a middleman, you would sell directly to the processor; by doing that you could eventually open your own cannery and name it something awesome like, “Oh My Cod!”. You would control the product, processing and distribution. You could leave this boring old coastal village and move to Mexico City, then Los Angeles and eventually New York where you could run your ever-expanding fish enterprise!”

The Mexican fisherman asked, “But, how long will this all take?”

The tourist replied, “15 to 20 years, maybe a few more.”

“But what would I do then?” asked the Mexican.

The tourist laughed and said, “That’s the best part! When the time is right you would sell your company stock to the public and become very rich. You would make millions!”

“Millions?…Then what?”

The American said, “Then you could sleep late, fish a little, have fun with your children, take a siesta with your wife, stroll into the village each evening where you’d throw back some beers and play guitar with your amigos.”

Many people seem to confuse wealth with money. To be wealthy, to many and perhaps even you, means to have an excess of money – more money than you need to accommodate your lifestyle. People (perhaps you, too) feel that financial wealth brings comfort, happiness and most importantly the ability to do what you really want. Here’s the irony, almost all of us sacrifice comfort and happiness to make money. We put our lives on hold for 20 or even 30 years. Maybe we end up putting our lives on hold for our entire life. All in the quest to make enough money to give us the freedom to be comfortable and happy. The actual definition of wealth, is a wealthy life. To be happy, secure, comfortable, safe and appreciative of ones own life experience.

I have had the good fortune of experiencing the lowest of financial lows and boat loads of cash… and guess what, I wasn’t happier or more comfortable at any of those times. Money didn’t bring happiness (can I say, duh?). My wealth (and yours) has always been direct result of my happiness, my security, my comfort and most importantly my appreciation for my own life experience. Now don’t get me wrong, when you experience a wealthy life AND you have financial wealth, that is a GREAT combination. It gives you the freedom to do even more with your wealthy life.

Now I know what you’re probably thinking. “I’ve been cheated! This article isn’t about wealth… this is total BS. I want to know how to get rich!” If you feel that way, I get it. I felt that same way for years, until one day it finally clicked. A dollar richer, a dollar poorer. A million richer and a million poorer makes no difference in the wealthy life.

If you want a wealthy life, do everything to be truly yourself. Do your calling. Don’t know what your calling is? Make your calling finding your calling. Do everything to bring happiness to yourself (with the caveat of never hurting anyone else, of course). Be the Mexican Fisherman…. it will bring you unlimited wealth. And in some strange way, people who live an unlimited wealthy life, seem to always bring enough financial wealth into their life, too.

Helpful Money Metrics to Help Monitor The Health of Your Company

When most people want to know how they’re doing financially, they look at their bank balance and see what’s there.  Bank balance accounting – although wildly popular – is a lousy method for accurately assessing the health of a business.  Here are eight better ways to monitor how your company, or any company, is doing.

1. Current ratio = Current assets/Current liabilities.  While lots of folks get themselves needlessly worked up over five years’ worth of financial projections, an incredibly useful metric can be a company’s immediate ability to pay its bills.  If you divide current assets by current liabilities, you get the current ratio – a measure of a company’s liquidity.  If a business has little-to-no liquid value, that can be a red flag.

2. Profit Margin = Net Income/Sales.  If you divide income after expenses by total sales, you get an idea of what percentage of every dollar a company keeps – basically, the profitability of a company.  If you’re comparing several businesses, keep in mind that standard profit margins vary widely from industry to industry.  A profit margin that’s far too low indicates inefficiency and is a warning sign for sure.

3. AR Turnover Ratio = Sales/Average Accounts Receivable.  Knowing whether or not a company handles its accounts receivable in an efficient manner is a huge part of assessing that company’s health.  A high ratio demonstrates that a company extends credit carefully and collects receivables in a timely fashion.  A low ratio indicates that a company is extended too far and needs to step up its collection practices.

4. Debt To Equity Ratio = Total Liabilities/Total Stockholder’s Equity.  Dividing a company’s liabilities by the total of the stockholder’s equity gives you a read on how much debt the company is carrying compared to what the company is currently worth.  It shows you if a company is overextended or undervalued.

Metrics 1-4 are traditional accounting practices, but there’s more to assessing a company’s health than a look at where they are at any given moment.  What about the future and getting a general idea of where they’re headed?  Let’s look at the four steps to predicting future revenue.

5. Days To Convert A Lead To A Client.  This figure is based on the date of the first significant contact with a potential client and tracks how long it took your company to convert them to an actual client.  Perform this calculation for all your new clients, and you’ll get an average, a calculation – expressed in days – that you’ll use to arrive at other figures.

6. Conversion Rate.  Since no one converts every lead into a client, you need to know what you success rate actually is.  Divide clients by prospects to get this ratio.

7. Weekly Lead Generation.  How many leads per week do you have to work with.  For B2C businesses – like a coffee shop – this figure may be calculated daily, based on the high volume of small dollar purchases.  For B2B companies, you may be looking at a monthly, or even yearly figure.

8. Predicted Revenue = Conversion Rate X Weekly Lead Average.  Once you have numbers 5-7, you can calculate your anticipated revenue.  Multiply your conversion rate by your average leads per week, and based on your days that it takes to convert a client, you can predict when your revenue will come in.

So what do these numbers actually tell you, other than that you’ve passed our little basic accounting class?  If you’re looking at your own company, you’ll be searching for ways to assess what you’re doing well, and what you need to improve.  If your debt’s low, your sales high, and your predicted revenue looks great, but your AR Turnover Ratio is lousy, then you’ve learned that by improving your collections practices that you can make your company healthier.

If you’re looking at a competitor who’s really giving you a run for your money – fighting you hard for clients and bringing in large amounts of cash – discovering that they’re leveraged to their eyeballs – owing way more than the company’s worth – may tell you that if you’re strong and steady, you’ll win that war.  You’ll be in it for the long haul, while their unsustainable model falls apart.

Episode 30: Social Media Marketing with Shama Hyder and Tim Knox

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Show Summary

Shama Hyder and Tim Knox join us for Episode 30 of the Profit First Podcast. Shama and Tim discuss how you can use social media marketing to turn your business into a profitable one.

 

Our Guests

Shama Hyder (left)

Known as the “Zen Master of Marketing” by Entrepreneur Magazine and the “Millennial Master of the Universe” by Fast Company, Shama Hyder is a visionary strategist for the digital age.

She is the bestselling author of the Zen of Social Media Marketing and an acclaimed international keynote speaker who’s been invited to share the stage with the world’s top leaders, including President Obama and the Dalai Lama.

As the CEO of the award-winning Marketing Zen Group, an integrated online marketing and digital PR firm, she’s led the organization through explosive growth, averaging 400% growth annually since its start in 2009. Shama was named as one of the “Top 30 Under 30” Entrepreneurs in America by Inc Magazine in 2013 and was honored at the White House as one of the top 100 U.S. companies to be run by a young entrepreneur by Empact100.

A trusted media expert and sought-after TV personality, Shama has frequently appeared on Fox Business, CBS, CW33 and Fox News. As a thought leader, she’s been featured in many major publications, including The New York Times, The Wall Street Journal, Entrepreneur, Inc Magazine and Forbes.

She was recently named to the Forbes 30 Under 30 list of movers and shakers for 2015.

 

Tim Knox (right)

Tim Knox is a serial entrepreneur, bestselling author, syndicated columnist, and a nationally recognized expert and speaker on the topics of marketing, leadership, and entrepreneurship. He is also the host of the popular podcast Interviewing Authors, which features interviews with authors, agents, publishers, and other publishing industry veterans.

 

Show Quotes 

Start with the “Why” and the “What” when starting to use social media.

Use the ACT Model: How do you get a stranger to become a customer/client? Attract, Convert, Transform.

Social media is great for sharing your success stories and attracting people to what you do.

It’s all about the engagement. If you’re B to B company, LinkedIn is a great targeting opportunity to bring in clients. If you’re a B to C company, take advantage of reaching out to people on Facebook and Twitter.

If you have a lot of information you want to set out into the world, using certain apps like Buffer and Hootsuite to help with time management is essential.

 

Show Links

Shama Hyder

Personal Website: http://shamahyder.com/

Company Website: http://marketingzen.com/

Twitter: @Shama

LinkedIn: https://www.linkedin.com/in/shamahyder

Tim Knox

Personal Website: http://www.timknox.com/

Company Website: http://interviewingauthors.com/

Twitter: @timknox

LinkedIn: https://www.linkedin.com/in/timwknox

 

Corporate Partners

Nextiva – VOIP phone providers for small businesses.

Fundera – Single source online funding for entrepreneurs. Also offers an adviser program for CPAs, bookkeepers and business coaches.

TSheets – The #1 customer rated time tracking solution!