Goals, Leadership, Marketing, Sales, Uncategorized

The last two articles looked at how important it was to set some targets for your business and how this ultimately came down to having a profit target so that you know when you’ve won the game.

So the next question is how do we keep score?

To make a profit you need to have sales and to make sales you need to have customers.  So these are good scores to keep: number of customers every day, week, month and total sales value in the same periods.

Keeping score in your business

Keeping score in your business

There’s a problem with these scores though.  Sure they are important to measure, but you can’t do anything about them directly. There are activities that go into making these things happen which also need to be measured.

Firstly, to get more customers you have to create interest through your marketing and then convert those enquiries into customers through your sales process.

So it is also important to measure your marketing success by keeping track of the number of leads generated from each of the different marketing campaigns you have running.

Your sales success can be measured by rate of conversion of enquiries into sales.

Total sales is also dictated by how much your customers spend each time and how often they buy from you.  It’s important to measure these things as well as they are key drivers of continued sales growth and measures of customer service and satisfaction.

Do your sales staff help your customers to buy everything they need to get the best from their purchase?  There’s nothing worse than buying something only to find that you needed an accessory to make it work and having to go all the way back to the vendor to get it.  In fact, if there is an alternative supplier, I’m not likely to go back.  Ever.

Measuring average sale value and number of transactions per customer per month or year are therefore key measures of success.

Finally, it’s not just the size of the sale that’s important but the profit margin on the sale.  It doesn’t help the business if you make a £200 sale but you had to offer a £100 discount to get it reducing the profit margin to zero, when a £100 pound item would have matched the customers budget better and left you with a £50 profit.  You might say you would never do that, but it happens.  Discounts, bundling, two-for-one offers, etc. are all good ways to boost sales, but beware the effect on profit margins and calculate the profitability before making the offer.  If the offer helps to convert a sale that creates a customer that will keep on coming back and the discount can be seen as an allowable investment in that customer then go ahead.  An allowable investment is one where the acquisition cost (marketing costs, discounts, etc.) are less than the likely profit gained from that customer during their lifetime as a customer.  Which can be calculated as an average of all customers.  Ideally the acquisition cost should be less than the profit from the first purchase, but that may not always be necessary if the lifetime value has a high enough degree of certainty.

So these five measure: number of leads, conversion rate, number of transactions per customer, average value sale and profit margin (per sale, or per item, etc.) are the best scores to keep on your way to winning the game.  By measuring these you have the opportunity to improve your processes to enable you to win the game faster.

Two more measures are important though.  It’s no good making more profit faster if you go bankrupt!

How could that happen?  Well if the money starts going out faster than it’s coming in…

For example, you buy goods with 30 days to pay and then hold them in inventory for an average of 30 days before selling them on account with 30 days to pay for them.  In this case, you’ll end up paying for goods 30 days before you get paid for them, on average.

Now if you start to grow your business, selling more, faster, then you may quickly get to the point where you run out of money.  What’s more, if you stop chasing what’s owed to you because you’re too busy selling, then the cash gap could widen because your customers aren’t paying in 30 days but 45 days on average.

So as well as keeping track of the five profit building scores you also need to keep an eye on your accounts receivable, accounts payable and inventory levels so that you can be proactive in keeping them under control and keep your cashflow positive.

In service industries, productivity is more relevant than inventory, i.e. chargeable hours (hours actually charged to clients).  While in manufacturing, both productivity (widgets per day) and inventory (total work in progress including unsold stock) are important.

With those measures in place, you can start to keep score in your business which will allow you to develop and optimise all the relevant processes to reach your profit target more quickly.  As things move forward, you might want to look at other drivers and indicators in your business.  A bit like measuring assists, number of passes, yards run, corners earned, free-kicks given away in football.  They don’t immediately relate to goals scored, but they might give you clues.

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Goals, Leadership, Uncategorized

In a previous article, I discussed how to win in business, using sport as an analogy.

In this article I want to take a closer look at defining the profit target that allows you to work out when you’ve won.

Of course you could just pull a number out of the air.  How about £200K per year, so that’s £1 million in 5 years?

But why £1 million, other than the obvious reason that everyone wants to be a millionaire.  Don’t they?  Do they, really?

How do you know if you've won in the game of business?

How do you know if you've won in the game of business?

So here’s an alternative suggestion.

  1. Make a list of all the things you’d like to have, places you’d like to go, people you’d like to meet, things you’d like to do and see.
  2. Next, put them in a rough date order: 1, 2, 3, 5, 10 years.  What things are you going to want to do in retirement?  And what provision do you need to make for those retirement years: pension, carers, residential care and nursing?
  3. Of the things you’d like to do this year, how much disposable income do you need to have on top of what you’ve already got to enable you to do it?  That’s your profit target for this year
  4. Of the things you’d like to do in 2-10 years and in retirement, work out how much disposable income you’ll need in years 2-10 and in retirement for all those goals to become a reality.  Add on say 5% for every year out you go because today’s money won’t be worth as much in the future.  In simple terms that’s your profit target for those subsequent years.

How much do you really want those things on the list?  Will they inspire you every day to hit your profit target?

Even coming second in sport usually results in you scoring some points, rarely do you score nothing.  And so it is in business.  Setting your sights on the goal will result in you getting at least some of the way there.

OK.  So that’s how to win the game.  Now we need a scoring system for the game…

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Leadership, Time Management

A comment I hear a lot when the topic of time management comes up is something along the lines of:

“I’d like to be more organised with my time, but it’s just not possible around here.  Things go wrong or something or someone needs my attention.  So I can’t block out my time to deal with the things I know need to be done because I don’t know how long it will take to deal with the things I don’t yet know about! ”

That’s Murphy’s Law in action, isn’t it.  Murphy hits everyone of us almost everyday.  Whatever can go wrong will go wrong!

An emergency happens and we have to put down what we’re doing and go and deal with it.

A customer comes in with a complaint which throws out the next two hours of our day.

An urgent job comes in that we weren’t expecting.

We have a bad experience on the phone with a potential customer and for the next 30 minutes you just keep on running the conversation through your head and you can’t think about anything else.

And a hundred other different scenarios that upset our plans.

So what do we do?  Well if you’re like me, you may be guilty of just not planning your day.  I’ve heard myself say something like “What’s the point in planning out my day when my plans just keep on getting disrupted by interruptions and emergencies?”

So I go along just doing what falls to hand next.  Sure I’ll make some assessment of what’s the most important thing to do next.  And I have specific appointments which have to be kept all planned in my calendar.  But other than that, if I’m not careful I end up pretty much with an unstructured day.

But if Murphy hits, I haven’t committed to doing things that didn’t get done, my plans haven’t been disrupted and I haven’t wasted time making any plans…

Great!  But is it?  Have I been as productive as I could be?

It’s become a cliche in time management that most people are more productive on the day before they go on holiday than on any other day.  And it’s probably true.  You plan that day more meticulously than any other day.  You avoid emergencies, interruptions and distractions.  You ask for calls to be diverted or screened out.  You put a do not disturb sign on your door.  And you only do what absolutely has to get done, with a laser focus on results and outcomes delegation next actions to someone else.

So the time management gurus will have you run every day like that day before you go on holiday.  Plan meticulously, avoid disruption and distraction and be disciplined.

Back in the real world is that even possible or desirable for most of us?  We can’t keep a Do Not Disturb sign on the door all day every day.  We can’t ignore the phone all the time.  And how many opportunities will me miss if we focus 100% on what’s in front of us, never looking to the side?

So in reality treating every day like a pre-vacation day may be counter-productive.  That’s not to say we shouldn’t try to be more like that.  And the problem is that practice makes perfect and a working style like that needs to be practiced daily to turn it into a habit.

So we need to practice it.

So here’s a thought.  Let’s accept that Murphy is going to hit.  We will get distracted, there will be disruptions and emergencies.  They happen every day.  We know it.

So why don’t we plan for it!

How much time on average do you spend dealing with unexpected events, interruptions and distractions (call it opportunity testing if you will)?  One hour?  Two?

Why not keep a log for a few weeks and see what’s happening.  Then plan some time into your daily schedule.  Let’s say on average you have two hours of Murphy time.  Take a daily planner and block out 1 hour in the morning and 1 hour in the afternoon.  These are your buffers.  It doesn’t mean you expect Murphy to strike at these times.  Or that if Murphy hasn’t struck then these times are playtime.  They are there to allow over-runs in the rest of your schedule.  Block out time to do all the other things you need to do.  Then if Murphy hits and you have an over-run on a task, then your buffer will take up the slack.  If Murphy doesn’t hit, then you can start the next task early.  If you get to the end of your planned work with time to spare at the end of the day then you have time to work on that someday-maybe project you’ve had filed away and never expected to get to!

So by all means plan every day as meticulously as you would the day before vacation, but do it by building in buffers that allow for Murphy’s Law.

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Goals, Leadership

The other night I was watching my son playing an Under 11s tennis match.  It’s amazing how competitive nine and ten year olds can be – they hate to loose, even a single point.

But what was interesting was that they needed constant, gentle reminders to keep score.  Not because they didn’t want to know who was winning or because they didn’t know how.  No, it was because they were concentrating so much on the game and hitting the ball and winning the point they were playing that they forgot to track the overall score.

You could say they lost sight of the bigger picture – what they were trying to achieve in the long run.

I see the same thing in businesses every day.

How do you know if you've won in the game of business?

How do you know if you've won in the game of business?

Business is similar to sports in this respect.  How do you know if you are winning in business if you don’t know what the goal is and you’re not keeping score?

What is the score in your business right now?

How many points have you scored this week?

How many do you need to score to win this year?

Do you know how to answer those questions?

The great thing is that in business, just as in children’s games, you have the opportunity to decide for yourself what winning means.

So where should you start? How about setting a goal: a target which means you’ve won the game…

Business is a vehicle for creating wealth and at some point you will leave the business.

So why not define what those two realities will mean to you?  Define those and you’ve defined how you finish the game.

For the purpose of this discussion let’s define wealth as: having an income that you don’t have to work for that is sufficient to support all the things you want to do and have.  It could be a pension.  It could be income from investments.  It could be dividends from your shares in the business you no longer work in.  How much do you need and how do you wish it to be delivered?  That will define how big and profitable you need the business to be.

Next, let’s look at exit strategies.  There are only about four or five ways to leave a business, e.g.:

  1. to die in service
  2. to retire without a pension relying on the state to provide for you in retirement
  3. to retire with a pension
  4. put a general manager in place and take an income in dividends from your shares in the business
  5. sell the business to someone else creating a pot of cash to invest in other assets to create the income

Out of these exit strategies only the most confirmed, persistent and delusional workaholic is likely to choose death in service.  And no one particularly wants to retire on a state pension these days.

And the other three really just come down to choosing a profit target that supports the wealth target.

Define those and you’ll know how to reach match point.

Of course, there is resistance to doing this for all sorts of reasons.  Not least of which is the level of uncertainty involved in running a business that tends to knock you off course as soon as you’ve defined your course.  How can you set a profit target based on a wealth target 20 years or more from now when you’ve no idea what’s going to happen between now and then.

Well sure, things are going to happen.  Economies are going to boom and bust.  Banks will stop lending and then start lending too much again.  Governments will swing from left to right and back again.  They will all have some impact on your ability to achieve your target.

But let’s say your business is making a £50,000 profit today.  Is it more likely to make a £500,000 profit in 7 years time if you don’t set that as a target or if you do set it as a target.  And then plan your business growth accordingly.  Sure there’ll be wobbles along the way where you achieve more than you hoped and where you achieve less.  But let’s face it, you’ll have the same wobbles due to external influences regardless of whether you have a plan or not.

Just like sport.  You start the game intending to win the match.  But you have no control over how well your opponent is going to play.  It shouldn’t stop you setting the goal of winning the match though.  You’re much more likely to win it if you aim to win than if you just go out to play…

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Leadership

We hear it all the time.  On TV. In the papers.

And we can feel it in our businesses.  We might not always recognise it, but we can feel something that is different.  Changing.

It is neither a good nor a bad thing.  It is a part of the natural cycle of business.  Despite what some of the scaremongers say in the news.

Which course are you on in your business?

Which course are you on in your business?

However, many businesses are faltering and some are failing altogether.  On the other hand, many are also prospering.

So what is it that separates those that fail from those that prosper?

If there is one over-riding factor it has to be adaptability.  A willingness to change your business model or your customer base or your product line up or your team to adapt to the prevailing conditions and prepare for new horizons.

Just like the captain of a ship trimming the sales in a storm, the business owner has to set their sails and modify their course according to the prevailing business weather (not the economic climate) in order to make progress.

Those that falter and fail do so for a number of reasons:

  1. They were in the wrong vessel in the first place.
  2. They push through the storm too aggressively ignoring the conditions and end up losing their mast to a crashing wave.
  3. They batten down the hatches and ride out the storm without sail and no-one manning the rudder – they drift passively on the waves and tides until they hit an unseen reef.

I’ve met all three recently.

The first, an entrepreneur in the wrong business, was heart-breaking.  The business had been a good business but it just isn’t suited to the current market or even its current premises, owner and customers.  The owner has a great deal of pride in what they had achieved (in the past) and their resilience in the face of the changing market place.  This is stopping him from making the decision to find a different ship.  He needs to find a different way of doing business in that sector before he runs out of the money required to make it happen.  In the end, tragically, the decision will be made for him, and he’ll lose the business he has so proudly run for many years.

The second has recognised that the market has changed and has asked for help to identify new target markets and new ways of reaching them.  He has ambitious plans and he has shrewdly observed that as long as he is charting his course with careful measurements (key drivers of his profitability, productivity and cashflow) then he can react quickly moving generally in the right direction towards his chosen destination and avoiding reefs and sandbanks.

The third business owner faces having to make half his team redundant if “things don’t change soon”. Unfortunately, we can’t rely on things changing soon.  This particular business owner, running a second generation family business, has recognised that his current target market no longer holds the same profitability for him.  He also recognised that there may be opportunities to find other markets, but he was too busy over-servicing his current C- and D-grade clients and dealing with the consequences to spend time finding new A-grade clients.  He was locked onto his current course.  All his attention was on maintaining that course despite the shift in his industry.  And so he had no attention left to change direction even slightly.

Now, this is a shrewd and intelligent person, who has run a successful business for many years.  And, unfortunately, that past success is acting as a heavy anchor stopping him from leaving his comfort zone to succeed again.

He has been sensible and created a reserve which may see him survive the current situation for as long as it takes for relative prosperity to return to his industry.  But it would be a shame for all his reserves to be used up just to survive when a few simple course corrections would lead to revival and growth.

You can’t ignore the changes in the global economy.  But you can decide what to do about it.  Or you can push on regardless and hope you don’t come to a sticky end.

The key to success in the changing business environment is to adapt.  This may seem obvious.  But adaptation takes many forms and adapting in the most effective way is not always so obvious.

It takes:

  • careful analysis of strengths and weaknesses
  • careful monitoring of your course: how well is your new marketing working
  • measuring and honing your sales performance
  • making course corrections if your heading off target
  • keeping track of your financial health
  • monitoring your competitors, customers, team and suppliers
  • careful development of systems that are robust to changes in your business, but not rigid.

As the owner of a business, how many hours are you spending on this stuff?

To finish with the sailing theme, ships are safest in harbour but that’s not what they are built for…decide on your destination and set sail..

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Leadership

In the final part of this series we’ll look at a way to articulate the Vision and Mission of your business.  But first lets look at what Vision and Mission means.

Vision is the strategic intent of your business.  It must have a higher purpose than simply making more monet.  It can be considered as the ultimate goal, capturing the essence of success in a specific and measurable way.  In a world full of change it is the consistent element that helps you and the others in your team to make decisions

Your mission is a practical, credible and attractive description of how you will achieve the ultimate goal.  If the vision defines why the business exists, then the mission defines how the business will go about achieving it.  It needs to encapsulate its competitive advantage and how it will maintain it.  Implicit within the mission is how the business will interact with others: employees, competitors, suppliers, customers, etc.

Purpose can be described as why the chosen mission and vision are important

It often helps to look at an example to understand these distinctions.

The vision of ActionCOACH is:

“World Abundance through Business Re-Education”

ActionCOACH’s mission is:

“A coach in every business”

Why would we want to do that?  We believe that too many businesses and business owners struggle to achieve their full potential because of inadequate business education in our schools.  As a result, and through no fault of their owners, a significant number of small and medium sized business don’t make the full contribution to their communities that they could.  That is why we want to put a coach in every business.  That’s out purpose.

Our vision is a grand vision of World Abundance.  This sets the tone for all decisions made by everyone in the organisation.  It is no good just having a few coaches.  We need multiple coaches all round the world.  We need to use modern communication tools to reach millions of people not just hundreds.  It guides how ActionCOACH is led and managed and operated.

Is it worthwhile spending time creating Vision and Mission Statements?

We’ve all seen vision and mission statements that sound great but just don’t function in reality, and this tends to put us off spending time on this strategic level thinking and we focus instead on operational aspects.

However, articulating your vision can have many benefits:

  • Breaks you out of boundary thinking.
  • Provides continuity and avoids the stutter effect of planning fits and starts.
  • Identifies direction and purpose.
  • Alerts stakeholders to needed change.
  • Promotes interest, commitment and focus.
  • Encourages openness to unique opportunities and creative solutions.
  • Encourages and builds confidence.
  • Builds loyalty through involvement (ownership).
  • Results in efficiency and productivity.

Take a moment to answer the following questions:

  1. What does your product or service do for your clients/customers?  (Note: This is not what you do to provide it – but what it does for them.  How does it fill their need, alleviate their pain, or help to move them toward their goals?)
  2. Who do you provide your product or service to?  Be specific.  (For example: Geography, Age, Gender, Income Level, etc.)
  3. What is the driving force behind your business and how it positions itself in the marketplace?  Prioritize the following: Product Mix, Market Served (filling certain needs), Cutting Edge Technology, Low Cost, Operations Capability (eg Fast Delivery), Method of Distribution (Internet?  Face-to-Face? Etc.), Profit, Others…
  4. How do you or will you differentiate yourself from your competitors in the deliveryof your product or service?  (For example: Technology driven; Marketing (“low-cost provider”, “innovative solutions”, etc.); Production/Distribution (partner relationship, ease of delivery, warehousing)
  5. Describe the kind of relationships you wish to have with: Your customers, Your suppliers, Your shareholders, Your competitors, Your community, Your employees
  6. The newspaper honors your company as “Company of the Year”.  In an article they highlight your…
  7. Your services are meeting what critical need in the: community, market place, region, world.
  8. At sometime in the future, you have changed the history of: the community, marketplace, region, world, ther… (which apply to your Mission)
  9. How have you done this?

Based on your answers to these questions you can make a first draft of your mission statement – what you do, the state of your organisation and what you wish to achieve.

To help you craft your Mission Statement, here is a checklist:

  • Is the Mission future-oriented?
  • Is the Mission likely to lead to a better future for the organization?
  • Is the Mission consistent with the organization’s values?
  • Is the Mission consistent with your beliefs but not limited by them?
  • Does the Mission set standards of excellence?
  • Does the Mission clarify purpose and direction?
  • Does the mission focus on one common purpose?
  • Does the Mission inspire enthusiasm and encourage commitment?
  • Does the Mission set the company apart from the competition?
  • Is the mission specific to the organisation, not generic?
  • Is the Mission ambitious enough?
  • Am I excited about the Mission?
  • Is the Mission Statement no more than 1 – 2 sentences long?

Finally, draft your vision statement.  This is your 10 year goal, and incorporates the most compelling elements of everything you’ve done so far.

When creating your vision, keep in mind the question: “What is our preferred outcome?” and draw on the beliefs, mission and environment of the organisation.  Your vision statement, like your mission, should be specific to you.  Take care that you don’t limit your vision to the system, framework or environment that exists today, and be open to dramatic modifications to the current organisation, methodologies, technology and facilities.  To create a great vision avoid tradition, stereotypes and short-term thinking.  Also be aware that the grander your vision, the more likely you will be faced by nay-sayers and ridicule.  Don’t succumb to this.  In fact the more you hear negative reactions to the sheer grandness of the vision, the more likely you are to be on the right track.

Once you have your vision and mission statements drafted go back to your points of culture – your values.  Are they consistent?  What have you learned about your values and beliefs that may help in articulating your values better?  Answer these questions and refine your mission, vision and value statements.

Finally, start using these statements in meetings.  Don’t read them out.  That’s not what I mean.  But do mention them during discussions.  Ask “Is this course of action consistent with our culture?”, “Does this decision take us closer to our vision?”, “Is our mission being served by doing this?”, etc.  You get the picture.  Allow your staff to make decisions based on the culture.  Coach your staff to use the Vision, Mission and Values to make decisions.  Ask them what they would do to solve a problem.  Then ask them how that fits with your Vision, Mission and Values.

By doing this, your culture will come alive in your business.  This creates the kind of culture that allows business owners to step back from the day-to-day operations and concentrate on strategic decisions and business ownership.

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Leadership

Businesses are mirrors of their owners in many ways.  Often they mirror their owners personalities and the way they work.  If the owner is disorganised and untidy, then the business will often look and operate the same way.  A small business will reflect all the strengths and weaknesses of it’s leaders.  I know this from personal experience too!

In the last article, we talked about culture and how it is defined by your vision, mission and values.  In this article we will look at how to define your culture starting with your values.  For your vision and mission to be compelling and inspiring they have to be consistent with your values – those things that you hold to be valuable in life in general.  However, to enrol and inspire others they also have to be consistent with the values of your team, customers, suppliers, shareholders, etc.

You will naturally attract and recruit people who value similar things to you, and so, by default, the values of the people around you may well be similar.  However, it is worthwhile asking because you may uncover some distinctions and subtleties.

Your values will determine the characteristics and behaviours of you, your business and your employees.  They will also define which behaviours will not be tolerated.

Putting words to your values can often be difficult.  However, values are often best defined by adjectives and adverbs.  So find a list and highlight the ones that are most important to you.  You may also find it useful to highlight ones that repel you, and then consider the opposite.  At this stage, go for volume, because the next steps will help you to refine the list to the most important.  Ask yourself these questions and use the list you have created as a prompt:

  • What are the most important characteristics each team member must have in your business?
  • What must we all focus on as an organisation in order to be our very best?
  • What qualities must we look for in the people we hire?
  • Which qualities do we want each team member to value the most?
  • What qualities would conflict with the ability of the organisation to operate at it’s best.

Get your employees to do this exercise too, then go through the lists and derive a common view and agree on the most important values for your company.

You may come up with a list of 8-12 values that act as your points of culture.  Describe what each of these means to you, the organisation, how you operate and what you hope to achieve.

We started by suggesting that that your Mission and Vision had to be consistent with your values.  It may happen that following the subsequent exercises to define vision and mission you uncover hidden values or explanations about why certain qualities are important to you.  So the final step is to revisit your draft points of culture in light of your mission and vision and then to describe what each of these points mean to you and the organisation, how you operate (Mission) and what you intend to achieve (Vision).

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Leadership

The best businesses have a great culture and a compelling vision.  Most often these businesses start without clearly defining their vision, mission, purpose, values and culture because they are deeply ingrained in who the founders are.  However, as the business grows, it is important to properly define and articulate these characteristics of your business.  It enables you, the founders, to step back from day-to-day decision making safe in the knowledge that your team are selected with the right attitude and qualities and understand how to make decisions consistent with the business values, mission and vision.

Culture

If you don’t set the culture in your business then your team, suppliers or customers will do it for you.  And it may not be the culture you want.  So in this series of articles we are going to explore how you can be proactive in creating the culture of your business in a way that helps you to serve your customers better, now and in the future…

This is all well and good, but does it affect the bottom-line, I hear you ask.

Well it certainly can.  As an example, with one client, we spent time creating the vision, mission and culture of his business, together with other aspects of his business plan.  As a result, this SME was successful in a competitive tender bid put out by a large blue chip company because they could see that their values were aligned with the values and culture of our client.

The culture in your business is determined by the success with which the day to day running of your business is guided by deliberately defined mission, vision and values.  If you are unsuccessful at doing this, the culture of your business will be created by default, by an accumulation of the ad hoc responses to events, incidents and crises.  And those responses may well depend upon who is on the scene at the time.  If you are successful on the other hand, the culture of your business will guide the responses to those same events, incidents and crises.  As a result, it has often been said that if you don’t define the culture of your business, your people will do it for you.  If you have the right people, that may not be a problem, but if you are not deliberate about the culture in your business, how can you be sure you are hiring the right people?

It doesn’t have to be chicken and egg… Next step: deliberately setting the culture of your business…

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Profitability, Sales

Yesterday, the tactic discussed was surveying your competition.  One of the aims of this is to allow you to define your pricing strategy more precisely, and avoiding being average.

Today’s post is related to this: when was the last time you increased your prices?  If it was more than six months ago, then you should think about putting them up, regardless of what your competition are doing.

Increasing your prices immediately increases your profit margin and your bottom line.  And while it’s a simple change to make in your business, it’s often hard to do.

Psychologically you may resist putting your prices up because you’re scared of losing customers or because you don’t want to “feel like you are ripping them off” – something I hear a lot of business owners say.

Increasing prices

Is time to increase your prices?

In reality, most people won’t notice you’ve put your prices up.  And your business may be better off without those that do anyway (more on that in a later post).

Secondly, why would your customers feel ripped off if you’re providing great value and customer service?  Value is not the same as price, so concentrate on giving your customers great value and service and price will become less of an issue.

If you believe you give a better service than your competition, or you can’t keep up with demand, or just that you are undervaluing your service then it’s time to review your pricing.  Perhaps increase your prices by a few percent to start with.  Focus on items that are not price sensitive – this is often luxuries or peripherals and add-ons to main purchases. Then monitor your sales.  Did your sales volumes go down?  If not, the value you are offering still exceeds the price, so you can increase even further.  When your sales volume starts to dip, you can drop your prices back a notch.

 

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Marketing, Marketing Plan

When was the last time you checked what your competitors are up to – their prices, service quality, guarantees, premises, web-site, marketing materials?

Being the cheapest is a valid strategy (although one that can be very hard to maintain), particularly if you are selling commodities.  Being the most expensive is generally a much more attractive option and customers often perceive higher value when the prices are higher (even if there is none).  Strive for exceptional customer service levels, market-leading delivery times, or whatever it is in your industry that is important to customers, and you’ll be able to charge market-leading prices.

Check out your competition

Check out your competition

Of course, the aim should not be to just top your competition but do everything to the best of your ability and to do something uniquely different.

It goes without saying that your products and services are far better than those of your competitors, aren’t they.  So your customers should be willing to support a higher price than their customers… If they’re not, you need to rethink what it is that your customers value.  And then do it.

Your action for today: find out what your competition is up to.  Check their adverts, do some mystery shopping (one to delegate, perhaps), ask your customers.  And then work out how you can offer something more to attract customers so that you can justify a premium price strategy.

 

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