Cash, Efficiency, Repeat Business

Cash FlowThere are only 2 reasons for poor Cash Flow;

  1. Not enough Sales
  2. You’re not collecting the money you’re owed well enough..

The first one is something that should be pretty obvious right? So we wont go into that now, the second though is a different matter and is something that many business owners seem to struggle with. So lets look at;

10 tips to help you to collect what you’re owed.

  1. Ask for the money, part 1.
    This is probably the most common problem of all. As crazy as this sounds, many people are reluctant to ask for money or even talk about payment. Remember the sale is not completed until you’ve been paid. There’s no point in purring over fantastic sales figures unless the money is collected.
    Make sure that your order taking process includes a discussion on you’re payment terms and/or how they will pay you. (do this when they’re placing the order). Include any details of part or staged payments too if appropriate, so that everyone is clear on what’s expected.
    Remember too that people expect to pay for the goods & services they buy so don’t be afraid to make it part of your sales process.
    Asking for the money includes producing an invoice if you provide credit terms. Make sure this is done in a timely fashion. I.e. ASAP. (Why not deliver it with the goods?) NB. Put the Payment Due Date on your invoice so that everybody’s clear..
  2. Know who holds the purse strings
    Establish a relationship with the person who actually handles payments. Get to know them and make sure they put you at the top of the pile.
  3. Understand their payment process
    If your customer is a business that only pays when they receive a statement, send them a statement. Simlarly if they only process invoices that have an official order number make sure that you comply with that when taking the order. Help them to help you get paid.
  4. Ask for the money, part 2.
    OK, so now everybody’s clear on what to expect remember to ask for the payment when it’s due. A quick call the day before the due date is perfectly fine, and will focus your customer’s mind on making the payment, plus you’ll find out if there are any reasons why they might hold back, and deal with them
  5. Don’t Offer Credit if you dont need to.
    A landscape gardener client of mine offered 14-days for his customers to pay once all of the work was completed and agreed. The customer fully expected to pay up on completion and yet he still offered them terms! Why? Take payment up-front if you can. (NB. if you dont take credit cards etc in this day and age, in most cases you’re a dead duck!)
  6. Avoid Emotion
    However angry or let down you feel, dont lose your temper. Be firm but fair and assertive, getting over emotional rarely helps. We may want this customer to come back for more. (We may not if they’re a bad payer, too much emotion though may just create a bad debt)
  7. Don’t resort to writing letters straight away
    Assuming we want to retain our customers, maintaining a good relationship with them is key. So keep it personal in the early stages of a problem. A telephone conversation or a face to face meeting are far better than a faceless letter or an email. Keep it human for as long as you can. You can talk through and understand any problems and are more likely to get a swifter resolution.
  8. Move it on swiftly
    Ok, so we want to be nice but we’re not a bank so don’t be over generous with the time allowed to pay. If its clear your not making progress escalate it to a higher level, MD to MD is always good, if still no progress then letters outlining court action may well help.
  9. Outsource collection
    If asking for cash is not your forte, there are many firms who will take on this task for you. Consider the earlier points on maintaining relations though.
  10. Know your numbers.
    One of the keys in getting paid on time is asking for the money when it’s due. The older the debt, the less likely you’ll collect.
    An Aged Debt report should be produced and checked regularly so that you know how much you’re owed and by who, and you can take timely action.

So, a few quick ideas, helpful I hope. if you need more help ask your accountant. They can usually help and advise (if they can’t, get a new one!)

If you’d like more on this drop me a line at johnsutherland@actioncoach.com or click on the right to book a free 30-minute telephone session

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Increase Profits, Increase Revenue, Repeat Business

Just Saying Thanks Can Be Worth A Lot

by John Sutherland

There’s a very simple strategy that I have seen work again and again in business. And, it’s something that has made so many companies so much money, it’s amazing how few ever use it. It’s the simple strategy of sending a “thank you” card or making some other unexpected gesture, when your customer buys from you.

So why would you do such a thing? Why should you spend some of your hard-earned profit on such a gesture?

Well, think about this: who is the number one prospect likely to buy from you tomorrow, or in the future? That’s it, the person who bought from you yesterday right?. And that’s where this simple stragegy comes in.

Did you know that it can cost up to spend six or seven times more to chase a new customer than to get a past customer back? And the fact is, there’s the potential for the majority of profit in most companies to come from repeat business. Without repeat business a company will always struggle to grow and make profits.

So, back to the strategy – a company that doesn’t send thank you cards to its customers leaves a lot of profit on the table.

Look at it this way, when was the last time you were sent a thank you note from a company you did business with? Probably a long time ago or never, right?

Big companies, small companies, they’re all as bad as each other. They spend a small fortune getting you to come in and buy and when they have you right where they want you, they let you get away. 68% of customers change supplier because they think that their current one doesn’t care about them!

So there’s one strategy you can use to put that right and to get your customers coming back.

Here are six steps to getting your customers buying from you again and again.

1. Collect their details – and I don’t just mean their name and number, you might be suprised to learn that most business dont do this. You need to learn as much as you can about them. Preferences, birthdays and anything else that will help you turn them into a regular customer. Now obviously you’re not going to ask them about all of this stuff when you first meet them, they’d run a mile. Start by getting enough information about them so that you can at least start to market to them or send them an offer.

One thing to make sure of, you need to have a great database system, and no I’m not talking about that massive spreadsheet you’ve grown over the years, or that pile of forms you have in the box under your desk. Oh and by the way, it’s no use collecting this information if you dont do something with it.

2. Send a thank you card and invite them back – and consider  doing it in hand writing, even on something as simple as a postcard. It’s crazy how simple and inexpensive this is, yet so few ever do it. Get them to invite their friends along too.

3. Plan future buying – this is so simple yet very rarely done. What if you sat down and thought it through, or even called or met every customer and discussed their future needs. Just think of how easy it would be for a printer to remind you or even call you about the fact that you are running out of letterheads.

4. Inform your customers of your entire range – ever had customers say, ‘oh, I didn’t know you sold that’? You want every customer to know everything they can buy from you. Just think of how people have insurance with several different companies; when was the last time your insurer called and asked if they could offer you a quote on all the policies you don’t have with them? You need to be more pro-active with customers.

5. Write a monthly or at least a quarterly newsletter – with everyone now circulating email newsletters, going back to the old way of written and printed newsletters may well get the results. With so much technology, sometimes it’s the back-to-basics that work best. Remember to talk about benefits for your customer though, avoid it being full of news about YOU, (cos’ frankly who cares?)

6. Special offers – if they’re not receiving offers, carrying a VIP card, or in some way made to feel important, then you aren’t getting as much from your customers as you should be. Think of your favourite restaurant, could they send you a text every Monday with the menu specials for the week.

I’m sure you can think of dozens more ways to get your customers coming back. It’s not about ideas though, it’s about action. It’s about putting any or all of these ideas into action in your business now… and if you do nothing else… at least you sent someone, or everyone, a thank you note.

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Customer Retention, Increase Profits, Increase Revenue, Marketing, Selling

Discount Deals - a good idea?

As I’m sure you know, a popular marketing strategy at the moment is the use of Discount Coupons, those cut price deals where you buy a voucher that gives you a big discount on the usual ticket price.

They’re available in several different guises and they present offers on all sorts of stuff, from your favourite Restaurant or Beauty Salon to a Service on your Car, to a day being shot at with Balls of Paint. You know the one’s I mean..

I have read recently how the use of these actually discourages any sort of Customer Loyalty, and I guess that can be true as the people that use them could be said to be totally price focussed. But is that really the case?

I’ve also come across business owners that use them, complaining that although they do the job of attracting people to them, it’s not great, as because of the deal, they’re giving most of their profit away, (more on this later).

This leads me to a recent experience of my own.
My wife, (always on the look out for a bargain :-) ), decided to find somewhere nice to go for a weekend to celebrate our wedding anniversary.  She duly spotted a “Coupon” deal at a what looked like a really nice country-house hotel, up in the North East of England, in a great spot not far from the fantastic coastline up there. We checked out the web-site, it looked great (the hotel, not just the web-site), and we were all set for our “romantic” weekend in fine surroundings.

So off we go, braving the Friday afternoon “poets-day” traffic, (that’s a northern english joke I think), discovering that the place was fashionably difficult to find, (a good sign surely, we thought). Eventually via the gift of Sat Nav, we found it. Beautiful grounds, fabulous looking buildings, nice decor etc, they even had Red Squirrels in the gardens, what could be finer?

Our experience changed though as soon as we checked in. “Oh, you’re on the “xxxxx” deal”, the lady at the check-in desk announced in what seemed like a loud voice. “Here’s a list of the limited things you can choose from in the bar/restaurant. Oh and if you want to use our nicer restaurant, you’ll have to upgrade.”

Well we immeadiately felt like second-class citizens. Here we were in these fine surroundings being firmly told that, oh yes you can stay but you can’t have the full experience I’m afraid, (these are my words of course, it wasn’t that bad!)

So that was it. It didnt spoil our weekend, in fact we sat in the bar and had a good laugh about it, But we both agreed, that it was a missed opportunity for the hotel. A missed opportunity to really wow us with all they had to offer, so that we’d go away and tell all of our friends about what a fantastic place it was, about the great time that we’d had, and actually encourage us to want to come back, bringing our friends with us!.

Instead they were too focussed on not giving too much away. Shame.

So the moral is to remember what the purpose of coupon deals is. They are to attract people to you, to give them the opportunity of buying your products or services and have such a great experience that they’ll not only come back for more and happily pay the full price, they’ll tell their friends about you too.

You may have seen elsewhere on this blog, my ramblings about Lifetime Value. If you haven’t, check it out. This is a prime example of when you need to remember that. So don’t just use coupon deals to fill up your hotel/restaurant/beauty parlour etc. Look upon them as an opportunity to invite a new customer in, and to give them such a great experience that they come back for more and become a Raving Fan.

Anyway, rant over. Hope you found it useful…. :-)

 

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Customer Retention, Increase Profits, Increase Revenue, Marketing

The Ladder of Loyalty

There are two aspects to increase the value of your marketing which in turn creates profits in your business.  What are they?

In short, they are Acquisition Cost and Lifetime Value.

The goal of Marketing in the business should be to reduce the Acquisition Cost and increase the Lifetime Value.  We will reserve Acquisition Cost for another time, for now we’ll focus on how you develop the Lifetime value of your customers.

By lifetime value, we mean the amount of money a customer will spend with you over the time period that they remain a customer.

Think about that. What’s the average lifetime value of your customers? How much could someone spend with you and for how long? What does that make a customer worth to you? You might be surprised.

I know of one supermarket chain that trains it staff to imagine a multi-thousand pound note stuck to the forehead of their customers. To remind them of their value to the business. Do you think that this improves their customer service?

Once you’ve worked out the lifetime value of your customers, you’re probably more likely to look after them better, and you may well be encouraged to invest a little more in your marketing to get them in the door and to keep them, yes?

The Ladder of Loyalty
So, lets introduce this concept, the Ladder of Loyalty.

Based on the knowledge that it is six times more expensive to acquire a new customer than to sell more products and services into your current customer base, we can organise our prospects/customers on what we call “The Ladder of Loyalty”, a system to build customer loyalty.  The idea is to increase lifetime value by using this ladder. It looks like this;

RAVING FAN
ADVOCATE
MEMBER
CUSTOMER
SHOPPER
PROSPECT
SUSPECT

The concept is to categorise each and every name in your prospect and customer database, (you do have one of these, right?),  into levels according to their loyalty to your business.

You start with SUSPECTS, these are people that fit into what you have defined as your target market(s).  Any name that you obtain through marketing efforts that fits your criteria enters the Ladder of Loyalty at the SUSPECT level. i.e. It’s someone who may well be interested in your products or services.

Once the SUSPECT shows an  interest and makes an enquiry, they move up to the PROSPECT level.

Next, a SHOPPER would be someone that buys once from you but isn’t sure yet, that you are a supplier he or she wants to do business with again.

If they buy more than once, then the SHOPPER becomes a CUSTOMER.

Once the CUSTOMER becomes a consistent buyer of your products and services, you may at this point begin offering incentives and privileges to them so that they become MEMBERS. At this point, they are so impressed by you that they no longer look elsewhere for competitive products or services.  MEMBERS do business with you because of the relationship and trust that you have developed with them.

An ADVOCATE is where your MEMBERS begin selling for you through testimonials and referrals.

An ADVOCATE becomes a RAVING FAN when they cannot stop selling for you.  Anytime a RAVING FAN is out in the community they are promoting you to everyone, about how wonderful you are.

Increase Your Profits

Now, here is the question.  How many RAVING FANS do you have in your customer base?  What would happen to your business if you moved everyone in your database up one level?

Massive profits do not necessarily occur by bringing more SUSPECTS or PROSPECTS into your database but rather by moving MEMBERS to ADVOCATES and then to RAVING FANS.

Massive profits occur at the RAVING FAN level.

As a project, go into your prospect and customer database and determine how many you have at each level.  You will create a world of opportunity once you begin to implement strategies for each level on the Ladder of Loyalty.

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Increase Profits, Increase Revenue, Marketing, Selling

“Customers usually come from many sources, and to make your marketing really work, you need to find out .how they heard about you.”

If you don’t know what’s working and what’s not, you can’t possibly make informed decisions about your business, right?  So how can you find out?

You can create a tick sheet, listing the ways someone may have heard about you: newspaper ads, direct mail, fliers, phone directory, web-site,  referrals, walk-by traffic, social media, etc

Every time someone buys, or even just enquires,  ask them this question, “By the way, can I just ask where you heard about my business?”

Make a mark on your tick sheet in the relevant column. Keep track, and ensure every member of your team does the same, (give them a script to follow if necessary to make it easy for them). At the end of a reasonable period of time, a few weeks or maybe a month, count up the scores and use the figures to decide which method of marketing is giving you the best return on your investment.

By doing this you can see what’s not working and change it.

If an ad is getting a very low response, while others with the same offer and copy are doing well, you may decide to kill it straight away or maybe you’ll want to change the target of the ad. The point is, when you know what is working and what isn’t, you can look deeper and make better decisions about how to run your marketing, and get a better return on your spend.

Here are a couple of things you can do to make the task simpler.

  • Go back over your past ads and think about how well each one worked. Pull out the best couple and see if you can pick out what gave them their edge. Look at what your competitors are doing. Do they have an ad which they can run every week? What can you learn from it?
  • Next, go through this process with each marketing piece that you are currently using and run through each of the strategies you know are working in depth, examining why these are producing results and the others aren’t.

Can you pick the one important attractive point about each? This in itself will teach you a massive amount about your business and the more you know and understand, the stronger your business will be in the long run.

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Increase Profits, Increase Revenue, Marketing, Selling

Customer Lifetime Value

“If you can get a customer to buy from you once, It would make sense for you to keep them coming back to buy again, yeah?”

If you can keep them coming back again and again, week after week, month after month, year after year, what would that be worth in revenue and profit for your business?

Equally, what if we could get them to like us so much that they recommended us to everyone they knew and got them to buy from us too?

Unfortunately, most businesses don’t treat their customers like they have this lifetime value. Instead they treat them as a single sale. You have to turn them into lifetime value for your business.

Here’s an example of a dog food business. It was a high quality product with high quality service and they charged a high quality price which led to lots of profits.

They figured out that they made £38 of pure profit on each sale, so anything under £38 could be spent to buy more customers.

If my marketing “bought” me customers for £24, how often could I run them? I’d run them all the time, as long as they were effective.

How often would you spend 24 if you knew you were going to get back 38? Every time you could, right?

One of the guarantees the dog food business made was if your dog died while you were a customer, they would buy you a new dog.

Why?

They found that their customers spent an average of £800 a year and, on average they bought for three years. That gave each customer a lifetime value of £2400, well below the cost of the dog you’d buy them.

But then they also found that typically, each customer was referring them to two of their friends, and each of those referrals was introducing them to two more potential customers.

In the end, they realised that each customer was potentially worth almost £17000 over the course of the three year average. A new dog is a small price to pay for that kind of lifetime value.

How much do you spend at your favourite restaurant every year? Do they treat you like a single sale or a lifelong customer?

How do you treat your customers? Are you always chasing the new guy, not caring too much about your existing people?

Ask yourself, how much of your business is from repeat customers? If you don’t know, it’s time to work it out because repeat business equals profit. There is a direct connection.

Think about it, you spend so much money buying customers doesn’t it make sense to keep them coming back forever?

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People, Productivity, Recruitment

 

 

It’s amazing how many people miss out the most important step when they’re looking for new staff.

It’s equally amazing because without this first crucial step, we reduce our chances of getting the right person dramatically!

What is this magical step?, well it’s actually just taking the time to work out exactly what we want in our new recruit, before we set out to try and find them.

Often we’ll take on our sister’s uncle’s brother’s cousin who just happens to be out of work right now. Yeah, he or she will do, (and anyway I get some family brownie points).

What do you mean you dont know how to sell, that’s what I employed you for, and you said you could do it! Then horror of horrors, you’re faced with sacking a family member, or someone who’s not easy to part company with. Sound familiar?

Consider the cost of poor hiring.

You’ll have spent some of your valuable time interviewing them etc. You may have paid out money for job ads or agencies. You’ll have paid them a salary during their probation period, (you have one of those right?), or until you found out they weren’t what you wanted, you may have even spent some money training them.
Think about it, it can cost you hundreds, if not thousands to get it wrong.

So it’s probably worth taking some time and maybe even having a recruitment process to increase your chances of getting it right, yeah?
Of course recruitment is a risky business, the chances of getting it 100% right are slim, if not impossible. The fact is though, our chances increase massively when we put some thought into it.

So, back to this first step. It’s vital to take the time to think about what you actually want and need in your new team member. Consider these things:

  • What does the role involve, what will they actually be doing?
  • Based on that, what are the essential skills they must have?
  • What other skills are you looking for?
  • What responsibilities will they have?
  • How will you measure their performance?
  • What sort of temperament & personality should they have? (they may have to work with your existing staff and/or customers or need certain qualities to fulfil the role)
  • How many hours will they work and what will you pay them

This is not a definitive list of course, and it’s not the answer to all of the things we need to consider when looking for new people. It is an essential and arguably a “common sense” first step.

So many people say to me, “you just can’t get good people”, the fact is, they’re out there, perhaps we’ve just got to be smarter at finding them.

 

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Business Partners, People, Planning

Even when they are successful, partnerships aren’t easy.

Nearly half of all marriages end in divorce and those relationships are between two people that presumably love each other. Business partnerships don’t usually involve people in love, so it’s no surprise that those relationships can go bad so quickly and irreparably.
So what can you do to protect yourself when the partnership for your small business goes bad?

The best way to avoid a bad business partnership is by protecting yourself BEFORE it starts by not getting into one, because once your partnership turns bad, your options are limited.

If you end up in a business partnership anyway, here are some things to think about.

Both you and your partner need to seriously consider all decisions beforehand and create a detailed operating agreement. This should be the source to turn to when you and your partner have issues that can’t be easily settled. Don’t think that because you’re friends it wont happen. We all know that strange things can happen when there’s money involved.

Once you’re in the partnership, if you don’t have an agreement that spells out how to handle issues, you may be in serious trouble.

You can’t simply ask your partner to go away or vote them off the business like a reality show. You will have to continue working with them or buy them out of their piece of the business if things go sour. Both of those situations can be impossible to deal with, so spelling out any and all eventualities ahead of time is key.

Remember, a partnership is a legal engagement and if you are partnering with someone who doesn’t pull their weight or fulfill their end of the bargain, you may have little to no recourse. You could end up spending months in court, suffering financially, losing your small or medium sized business, or worse.

If you’re already in a partnership, don’t have any written agreement with your partner and things are going downhill, what can you do?

Your goal should be to negotiate some sort of compromise with your partner. After all, they are in virtually the same position you’re in and will probably want to get out as well.

Start by talking to your partner, who may also be unhappy and looking for a way out. If leaving isn’t an option for either of you, you may want to think about restructuring the business to better reflect the work each of you do.

The simplest thing to do is to buyout the other owner, but there are some issues with that strategy. Buyouts can destroy your cash flow and those that leave, at times do so with valuable assets, leaving the business short-handed for a time.

And if you don’t have a buy-sell agreement in place, an angry partner can demand that a court set the price the business will be sold at. A judge can even order partners to stay together, even if both want out.

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Increase Revenue, Marketing

If you don’t know what’s working and what’s not, it’s difficult to  make informed decisions about your business.

Customers usually come from many sources, but to make your marketing really work, you need to find out how they heard about you.”

So how can you find out?

You can create a tick sheet, listing the ways someone may have heard about you: newspaper ads, direct mail, fliers, phone directory, referrals, walk-by traffic, social media, etc

Every time someone buys or even enquires, ask them this question, “By the way, can I just ask where you heard about my business?”

Make a mark on your tick sheet in the relevant column. Keep track, and ensure every member of your team does the same. (Give them a script to follow to make it easier for them if necessary)

At the end of a given period of time, a few weeks or maybe a month, count up the scores and use the figures to decide which method of your marketing is giving you the best return on your investment.

By doing this you can see what’s not working and try to change it.

If an ad is getting a very low response, while others with the same offer and copy are doing well, you may decide to kill it straight away or maybe you’ll want to change the target of the ad. The point is, when you know what is working and what isn’t, you can look deeper and make better decisions about how to run your advertising.

Here are a couple of things you can do to make the task simpler.

  • Go back over your past ads and think about how well each one worked. Pull out the best couple and see if you can pick what gave them their edge. Look at what your competitors are doing. Do they have an ad which they can run every week? What can you learn from it?
  • Next, go through this process with each marketing piece that you are currently using and run through each of the strategies you know are working in depth, examining why these are producing results and the others aren’t.

Can you pick the one important attractive point about each? This in itself will teach you a massive amount about your small business and the more you know and understand, the stronger your business will be in the long run.

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Increase Profits, Increase Revenue, Mindset, Selling

Educate on Value, not Price …

This is all about concentrating on your product or service and the benefits, not how much you’re selling it for.

This is essential in most businesses, especially those with hungry competitors willing to sell for below cost to win the business.  It’s also important for businesses that charge more, yet have a much better product or service to justify the high price.

We need to get your client focused on the benefits of the product and not the price. This is very important when dealing with bargain hunters or when selling higher priced and luxury items. To use it effectively, skip over your customers price queries by immediately coming back at them with a benefit.

Remember, if you are no different and no better, why would a customer pay any more to deal with you.

Remember too that, surprising as it may seem, most people buy on Value, and not price.
Buying is an 80% emotional decision, and only 20% logic. Appeal to the benefits, (usually emotional if you think about it), your client will get when he/she buys from you.

Everyone, even you, wants a good deal, and not necessarily the cheapest.  They will be happier spending the money to get something that does exactly what they want, rather than spending less on a service that only does half the job.

When you get a price challenge, or even up front, (raising it before they do can be really effective), explain why some people charge less, and what the prospect will miss out on if they do it on the cheap.

A good way to go about this is to write all the benefits down so you have them clear in your mind. You might even consider printing these on a fact sheet which you can then hand to your prospects. Don’t simply write ‘This is why we’re better than they are …’, be a little more subtle but still make sure that your clients know that they can’t get the same quality and service from your opposition. Avoid attacking your competitor directly i.e. by name, it’s not big and it’s not clever, and will be frowned upon and viewed as unprofessional, to say the least. There are many subtle, and fun, ways you can do it without naming names.

Things such as one-on-one skills, technique building and specifically designed programs are a good starting point when you’re listing your benefits.

Identify the areas that the customer may have concerns about and then demonstrate how, by dealing with you, they won’t have those problems.

Make sense?

Spend some time on this, it will be well worth it….

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