No matter what type of business you own, whether it be large, medium or small, your aim is often to increase sales. There appears to be so many different ways to accomplish this outcome. It could be that you have a large budget and want to undertake an extensive branding campaign. You may want to make a specific offer to your potential customers. You may spend your money on developing more innovative products or you may put the money into operations and get your products to the market faster than you competitors. Which ever method you use it is important to realize that you can’t go out and just get more sales. Sales are the result of something else.
Marketing guru Jay Abrahams says that there are only 3 main ways a business can make more money. The first is to increase the number of leads you get. The leads are the people that call you up or walk into your store. They are the potential customers with money in their wallets but are not sure who they are going to give it to you. It doesn’t matter if you are in the green industry or in the retail industry, in order to make more money you need to need to get more leads. This is where some clever marketing can come into place to get more people walking through your door.
The second way to increase profits is to increase your conversions. Conversions mean the number of leads you turn into customers (or people that actually buy your product or service). In order to improve in this area you can undertake both marketing and sales techniques. It may be offers like 10% off that will convert a lead or it could be a sales person in your team that really demonstrates the benefits of your product. I often tell my students that in order to make money you need people to give you money. Most people don’t hand over money to anyone, they need to see value. Your job as a business owner or sales person is to create value and show it to them. Only then will they feel comfortable about giving you their hard earned.
The third way to increase profits is to increase the average dollar sale. This means that for every customer you have you want to increase the amount they spend. If you increase the amount they spend then you can increase your turnover with the same amount of customers. Large food companies such as McDonalds and KFC learned this many years ago. One of the simplest ways to increase the average $ sale is to package up your products. The major fast food companies all have meals where you get a drink and chips/fries. Before this many customers would come in and purchase a burger but now they purchase a meal for more money. The customer is willing to pay more money because they see more value.
There are obviously more ways to increase profits such as reducing your expenses etc but these three are a great place to turn your business around. The important thing to remember is that sales are a result and you cannot improve a result without improving the process. So look at improving in these areas and you will be on your way to a healthier business.
Buy High or Buy Low
One of the many questions out there regarding buying a business is whether you should buy a business that is going well or a business that is going poorly. In order to answer the question there are a couple of things that you need to consider before you spend your money on a particular business. Much of your decision will depend on the type of business you are looking at purchasing as well as the structure of the business i.e. franchise or and existing company or sole trader.
- Marketing & Sales
One of the key aspects to look at when purchasing a business is its current marketing and sales or lack of. If the business has done lots of successful marketing campaigns that have converted into fantastic sales then this business has a formula that you are able to use. Many people think they have to get creative and change their marketing up all the time. If something works, then stick to it. There are many small businesses out there that run the same campaign in a local newspaper over and over again and it converts well. The problem with purchasing a business like this is that it is relatively successful and you are going to be paying a premium for this type of business. It may therefore take you longer to get a return on your investment.
On the other hand if you are looking at a business that has run very poor campaigns which resulted in poor sales, then you may have a bargain on your hands. The reason for this is that it is something that you can easily improve. You need to make sure that it is actually the poor marketing that is causing the poor sales and not the product you are selling. If it is the marketing then you may be able to make some simple changes and see the results improve dramatically. A franchise with poor marketing and sales is something to stay away from as you most likely don’t have the control to run your own campaigns. This is a licence to fail.
- Customer Service
Finding good people to hire can be a difficult task and so many businesses have poor customer service as a result. If you find a business that has a great team that really cares about their customers, the results will show in the profits. Customers will pay for great service and even more importantly they will return and become a repeat customer. These types of customers are invaluable to your business and if you find a business that has great customer service you may have a long lasting business. Again, these businesses are normally making good profits and you will pay a premium price but it is fun owning and working in a thriving business where customers are happy.
A business with very poor customer service will struggle to make money unless it has something totally unique that people will pay for it anyway. This is rare so it is likely that it is a struggling business and you can get it at a cheap price. Many people ignore these types of businesses as they see the end result rather than what can be with some improvements. Improving customer service is not all that difficult. You will need to train your employees or even hire new ones, but it can be turned around. This can be the hidden value in a business if you feel comfortable in turning it around.
These are two areas that you need to look at when looking at purchasing an existing business. Many people are happy to pay a high price for a thriving business but don’t just ignore the poor ones. It may be that they are no good, but you may also find a gem in there that you can change some small things and reap some very big rewards. Always to your homework and get advice from an appropriate adviser before you take the plunge.