Making a Connection

Being in business means making a connection with your target market, then strengthening that connection over time. Almost everything you say or do can change the strength of the connection, and in this series of posts we’ll focus on the activities you perform to widen your base. Some people call that “networking”, but it’s far more than that.

In this first post we’ll cover the different kinds of activities, then they will be covered in a little more detail in the posts that follow.

You can meet people face to face. This usually means going to an event where you are likely to meet people who need what you sell. It doesn’t mean trying to sell them at the meeting though. Well, certainly not during the first conversation.

You can meet new people by telephone. This just means that instead of attending a function in person that you can call people who you have identified that are likely to be interested in what you sell. The important feature here is they they must be likely to be interested and your script has to be written from their perspective, not yours. That just means that your intent is probably to make a sale, and taking a few seconds more to get there is probably better than being quick but missing out.

The current favourite/favorite is of course via the internet. Interestingly enough the basic rules don’t change. You first need to make a connection, allow them to discover your expertise,  then make an offer. What has changed is the geographic reach and the presence of trolls if you say something that someone might consider inappropriate. An example of this is a recent post on a business page I’m a member of was considered to be an advert by some, and they were quick to point out that overt adverts were not allowed in that arena.

Whatever you do to meet new people there are some things that you must do first. One is to prepare your opening statement. Remember that it is designed to make a connection not a sale, and you want to get them talking about themselves so you can ascertain if you can help them, and if so how. That information is useful in leading to a sale.

You will need different “conversation starters”, and be practised in their delivery because you can’t sell somebody something unless you are first in a conversation with them. (OK, normal retail stores are an exception to this rule!)

You need to know the stages of the journey you want to take your new friend through. Connection, identify with, fact finding, and solution for example. That will be easier if you understand how people communicate. (It’s OK, probably 90% of people don’t really know how people communicate. For example most people think others communicate “Like I do”.)

We’ll cover the different communication styles later, for now we’ll focus on different networking activities you might take part in. See you in the next post.

What Use Are KPI’s?

KPI’s give you insights into your business, and they allow you to track your progress. A better way to explain it might be: Would you know if asking one question when people walk into your premises increased your sales by 16%? Would you know if your sales increased by that amount because of the new question?

Most sales people ask “Can I help?”, “How can I help?” or something touchy-feely like “How are you today?”. The point is to get a conversation started, because only once a conversation has started can you sell something. The trouble is those questions are too easy to shrug off, or they only work where the customer is very regular – for example buying their daily (or hourly) coffee fix.

For those in direct sales, where the customer only visits on an irregular basis, try saying “Hello! Have you shopped here before?”

No matter what they say it will result in an answer that means “Yes” or “No”. For those that say “Yes” you then say “Great! We have some special deals for returning shoppers. Let me tell you about them”. For anyone who says “No” you respond “Great! We have some special deals for new shoppers. Let me tell you about them”.

Not everyone will happily enter into a conversation, but asking that question and following up with the appropriate response increased sales in one retail outlet by 16%.

The thing is: you only know what the increase was if you track the numbers in your business, and you have some control over the way your team interacts with your customers. Otherwise sales may have randomly jumped, but you won’t know why. And that means you can’t replicate the increase.

But not every increase will be 16%. You might not even believe that your sales can increase 16% in one step. Maybe only 5%, year on year. that’s still worth doing.

You might also increase your customer base by 5% in a year. That’s also not a big step.

However now you have 5% more sales to 5% more customers. Because one metric affects the other your profit has jumped by more than the combined 10%. Let’s further assume that your expenses reduce by 5%. Each of these goals is achievable in a year.

It will depend upon your starting point: your current profit margin, your current average sale, and your current expenses – your profit for the year will increase by at least 15%. But you can only do that if you can accurately measure your current metrics and track the results of the new things you try.

You need to track the results because a change might result in worse figures. You need to identify that and return to the old way as soon as possible! If a change makes a positive difference then you also need to identify that and spread the word as quickly as possible.

Most of us say that “We don’t know how to work ON our business”. That’s in large part because we don’t have the metrics in the first place. If you were a carpenter – could you cut the wood to size without measuring? Of course not, or if you did it would be an amazing coincidence!

By the same token you can’t improve your business in any meaningful way unless you know what is really happening now.

There are many factors that you can adjust in your search for better profits – more sales, lower expenses and higher profit margins are obvious. You might also present a more professional image by the use of a uniform, you might redecorate your premises – perhaps even adding some privacy so clients don’t have to explain their problem in front of other clients, or go all in and move location. Maybe you can improve your results by training your team in better ways. Or build a better reputation by becoming involved with community causes or not for profit organisations.

Each of these (and lots more) can have a positive effect on your business turnover and profit margins. All you have to do is get control and then make these small adjustments. And to do that you need your business metrics.

Which KPI’s Are Important?

The KPI’s of your business are important because they tell you what is actually happening inside your business, even if you are a one-person business – provided you measure the right things.

If you have read the earlier posts then you already know that KPI’s can be captured with almost zero effort, and that not all KPI’s are equal: profit is the most important of them all. That said, the others can give you an early warning that your profit may be about to nose dive. Here’s how they can help.

While profit is important, so is the overall income. What activities/products are generating the biggest share of your income and profit? Can you focus on those and reduce the effort you put into the worst profit generators? If you can’t reduce what you offer your market can you change the way that you make the offer? Perhaps by taking orders and then manufacturing the item rather than maintaining a selection on the shelves for instant sale?

Income is only a part of the profit story – the other half of the story is your out goings. That’s everything you spend money on, either as an investment, cost of goods sold, other costs of doing business, or as an expense item.

Here you need to look at Value For Money. If you are buying product or materials then you don’t necessarily need “the cheapest”, you need the one that maximises your profit. It may be that a difference in quality may cost you 5% more and you can sell it for 10% more. Some funds spent on staff morale will most likely reduce your staff turnover – and therefore your hiring and training costs though there is no need to buy everyone a Bentley company car, or provide the best French champagne for staff drinks every Friday after work.

Higher sales prices can reduce the overall number of sales, which just means that higher sales prices don’t necessarily lead to higher overall profits. Likewise the lowest cost purchase may result in a higher failure rate in your products, in which case a lower purchase price may lead to higher expenses as your warranty take effect.

It follows that you need to consider your income and outgoings in the context of “Whole of Business”.

Other early warning signs can be derived from activity. Most of us have heard that the more calls you make the more presentations you get to make, and the more presentations you make the more sales you make. There is more to it than just numbers – for example one rep might make twice the sales calls but be only 25% as effective as another. Of those two – which would you rather hire?

The point here is that some metrics are easy to measure – you just need to know that the KPI actually means something.

You also need to consider the morale of your team. How many (or what percentage of) staff have resigned in the four weeks/quarter/six months? Why have they resigned? Consider the cost to the business of staff turnover: the cost of advertising the position, interviewing and selecting the best candidate, training them (at least in how you do things) and monitoring their progress until you trust them to work without higher supervision levels. Now add the lost opportunity cost where an experienced staff member was training or supervising a new hire instead of making their usual quota of sales. Or maybe just fixing up the mistakes of the wrong hire. Low morale and high turnover of staff can cost your business big time.

It probably pays to be nice to your staff and customers!

It also pays to keep track of what your competitors are doing. Have they invented a better way? Is their market share increasing or decreasing? Are they opening new outlets or closing some existing outlets? Have they made a dramatic change to the way they do business?

Can you see how these measures provide indications of the health of your business? IF not then use the contact us form to leave any questions you may have.

Why You Need To Measure This

The previous post was all about the importance of actually measuring what is happening in your business and how simple that can be. This post is about the single most important item to track. Your profit.

You profit may be the easiest item to track – your accounting application almost certainly has a Profit and Loss Report. So you don’t have to do much other than read it (and take appropriate action, depending upon what it says).

The real importance of a focus on your profit is that a profit is what separates your business from a hobby. A hobby is something you do because you enjoy it, and most likely it costs you money. Your business has to make money, otherwise you eventually run out and then you close your business doors and walk away.

The trick is that you must consider profit every time you quote a price. That’s not saying that you have to be mercenary, far from it. You just need to consider your profit margin in every quote. Let’s look at that in more detail.

You have decided (you did think about it and decide, didn’t you?) what your profit margin has to be to cover your costs, provide you with a living and still deliver good value for money for your customers. So that’s your base.

Regular customer’s may be given a small reduction, meaning that they pay a little less each time but pay more often, meaning that you still make a good margin on their activity.

You might also decide to provide a good cause (for example a local not for profit organisation) with a reduced rate as art of your contribution to your community. If the profit on your other transactions allows it then you might even consider selling for at or near your cost price.

Then maybe your father-in-law hires you – maybe you consider that you need to sell to him at a little below cost!

The point is that reductions in the profit margin on one sale have to be supported by the profit on your remaining sales. Strictly speaking you don’t need to make a profit on every single transaction, and to that end you really should be thinking of the lifetime value of a customer rather than just the current transaction. It’s just that you need to keep in mind the food you need to put on your own table when you quote a price. Being in business means providing for your own family first, because if you don’t look after them first you can’t look after anyone else either.

Can You Tell If Your Business Improves?

Most people probably just said “Yes”, however there is more to that question than you might first think.

What if the improvement was only slight? Would you know? Would you be able to tell that a new way of welcoming people to your premises increased your profit by 5%? What about if it was only 1%? If not then maybe you are already ignoring increased profits.

“Measuring your business” conjures up images of reams of paperwork, and time taken away from actually doing the job. That isn’t necessarily the case. Most aspects of a business can be measured for almost zero additional effort, and even then the effort is only in first setting up the monitoring system and then viewing or printing the reports when needed.

As an example you can measure your income and expenditure by looking at your bank account summary. Yes, that assumes that you don’t do a lot of undocumented cash jobs, but if you do that kind of work then sooner or later you will want to borrow to expand your business or just to replace equipment and you won’t be able to justify the loan on your declared income. (This actually happened to a client of mine a few years ago – he was refused a loan to redevelop his site because his stated income could not cover the loan repayments. By the way, he only became a client a month or so before he applied for the loan.)

You can see what products or services are popular by looking at summaries of your invoices and the invoice line items. You can monitor your team by looking at when they login (or sign in) and what sales they made by again looking at your invoice information.

If you have a Customer Relationship Management (CRM) system you can monitor the activity of your sales staff by looking at the volume of notes they create. Sales people have to keep records of what they said to clients so they can continue the conversation in the next phone call – so give them a tool that works for them and make it easy for both of you.

Can you see how you are most likely already capturing nearly everything you need to measure, you just aren’t measuring it yet? The records you create just by doing business describes your business. All you have to do is look at what they say and use that information to guide your decision making.

If you use your computer to record your business results then the chances are that you are already collecting the information you need to monitor to be able to improve your business. That’s true if you utilize a professional package or something like a spreadsheet – either way you have the base information available. And that means you can work “on”, not just “in” your business for very little effort, which in turn means that you can spot those 1% ideas and accumulate them into extra profits for you.