A long time ago, I owned a dry cleaner. I was open from 8 AM until 6 PM. Monday through Friday. A friend told me a profound truth. I was paying for the rent even when I was closed. I had unused capacity because I wasn't using the store, or the equipment after operating hours.
I hired a man to wash restaurant linens while I was closed, and my profits soared. Why? Because my fixed costs were already covered. My costs of the equipment had already been paid, I was receiving Incremental revenue. (See my previous post about incremental revenue: http://power2negotiate.blogspot.com/2011/04/incremental-revenue.html)
What is your unused capacity? Do you have equipment that is not being used? Do your employees have downtime that you could use to generate revenue? Do you have a parking lot that you could use to host a promotion for your business? What do you have that you can use to generate additional revenue each month?
Make a list of your resources. This list does not have to be done immediately, only when you want to have additional massive profits. However, be thorough and list things that you might not "own" but are perceived as owning. (Maybe you license software and have access to use it for purposes other than your main business function? If you have designers, can you outsource design jobs to them so that they are constantly busy? If you have marketers that are knocking on doors, can you have them hand out fliers that promote your business AND couple that with a coupon of another business so that you create value for BOTH businesses? If you have people calling in, or visiting your web site, can you have banner ads on your web site that direct them to complimentary businesses? Or offer them links to coupons so that they can buy more products?
One of the best examples that I know of unused resources being tapped is the advertising space over urinals in sports bars. I wouldn't ordinarily think of the space over a urinal as where I would want my product to be placed...but you have the customers undivided attention.
If someone can sell advertising space over a urinal, what unused production capabilities do you have in YOUR business?
Here is a list of some ideas:
1) Advertisements on your phone while people are on hold. Make it fun, enjoyable, and offer savings.
2) Put high profit margin items near the cash register, so that as people are buying, they can add an impulse item without thinking of it. (Think crying kids and candy bars at all times.)
3) Can you run double shifts, or have extended hours and create more revenue? (Also be aware that you have to have an adult that is responsible to watch the store. You don't have to do it yourself, but you are always responsible.)
4) Can you do a promotion once a month, to bring new people into the store, and create return business?
5) Are you advertising over your urinals?
Every hour of the day is a potential revenue builder. Every square feet of space that you own/rent is a potential revenue source. If you don't have your items on display, can you rent advertising space to someone else.
In summary, think of what you have, and what you are perceived as having. Make a list, be crazy, and maximize returns.
Saturday, April 23, 2011
Tie downs make the sale
A tie down is one of the most powerful tools that you can use in sales. What exactly IS a tie down. A tie down asks the client to agree to a statement, and say "yes". Here is an example.
"It's a gorgeous day, isn't it?"
Of course it's a beautiful day. They will nod their head, or say "yes", just to be social. While they are doing that, they have allowed you access to their decision making process. You are now in control. As soon as you have gotten them to say "yes" once, you can do it again. Continue the process, and after you have gotten them to say yes to the little things, they will soon say yes to your product.
Here are some examples of the progression of tie downs in a conversation.
"This is a beautiful car, Isn't it?"
"This car would get great gas mileage and save you money, wouldn't it?"
"If you are looking for the best value, saving money at the gas pump saves you money each day, doesn't it?"
"Saving money each day, is more important than the initial purchase price, isn't it?"
"You want to save money, don't you?"
What you have just done, is get the customer to agree that a car that has good gas mileage is more valuable than a car that gets bad gas mileage, and that they should look for the everyday savings. By having them agree, either verbally or non-verbally, to each statement, you are leading them down a path to the sale.
The tie down asks, explicitly, for agreement on each statement. This can sometimes be seen as aggressive. It might even stop the sale.
Another technique is the "Inverted tie down". The inverted tie down puts the tie down at the front of the question, and is much more conversational.
"Isn't it a beautiful car?" By establishing a non-threatening style with the inverted tie downs, it is much easier to convert over to tie downs to close the sale.
Practice them regularly to establish agreement. When you have mastered them among your family and friends, now use them on customers, and watch your sales soar.
"It's a gorgeous day, isn't it?"
Of course it's a beautiful day. They will nod their head, or say "yes", just to be social. While they are doing that, they have allowed you access to their decision making process. You are now in control. As soon as you have gotten them to say "yes" once, you can do it again. Continue the process, and after you have gotten them to say yes to the little things, they will soon say yes to your product.
Here are some examples of the progression of tie downs in a conversation.
"This is a beautiful car, Isn't it?"
"This car would get great gas mileage and save you money, wouldn't it?"
"If you are looking for the best value, saving money at the gas pump saves you money each day, doesn't it?"
"Saving money each day, is more important than the initial purchase price, isn't it?"
"You want to save money, don't you?"
What you have just done, is get the customer to agree that a car that has good gas mileage is more valuable than a car that gets bad gas mileage, and that they should look for the everyday savings. By having them agree, either verbally or non-verbally, to each statement, you are leading them down a path to the sale.
The tie down asks, explicitly, for agreement on each statement. This can sometimes be seen as aggressive. It might even stop the sale.
Another technique is the "Inverted tie down". The inverted tie down puts the tie down at the front of the question, and is much more conversational.
"Isn't it a beautiful car?" By establishing a non-threatening style with the inverted tie downs, it is much easier to convert over to tie downs to close the sale.
Practice them regularly to establish agreement. When you have mastered them among your family and friends, now use them on customers, and watch your sales soar.
Coupons are free money
A lot of businesses use coupons to lure guests to their stores, or to increase sales. Other businesses complain that they lose money with coupons. The business owners that complain aren't doing it correctly.
A coupon is an incentive for new customers to use your business. However, you never structure a coupon to get just a basic item. You use coupons to encourage multiple sales. (A "2 for 1" coupon where they buy one pizza, and get the second one free means that the customer just spent $20, instead of $10.) A coupon where you give away a free meal, just for showing up, might get people in the door, but it costs you money.
In a previous article, I wrote about incremental revenue. http://power2negotiate.blogspot.com/ In this post I want to talk about how to use coupons effectively.
1) A coupon should bring people to your store. If it doesn't accomplish that, it is a failure.
2) A coupon should bundle products and services so that you increase revenue. (Giving away a free taco is NOT a coupon, it is suicide.)
3) A coupon should demand immediate action. This is not an attempt to establish "awareness" but to buy. (I don't need to put expiration dates on a coupon. I need all coupons to be profit centers, every time, and for every occasion.)
4) A coupon should bundle high profit margin items with low profit margin items to increase revenue...and increase profit. ("Buy a meal, get a free beer", "Buy two, get the next one free", "Free dessert with every family meal", "Buy three pizzas, get free breadsticks") By increasing the per head (dollars spent per customer) you are exponentially increasing the profit margin, and profits.
5) You MUST know your costs. What are your fixed costs? What are your incremental costs per unit? What is your shipping costs? What is your cost per sale to a new customer? What is your cost per sale to an established customer?
6) Your coupon must be an orphan. This means that it must NOT steal profits from the rest of your business, but must add profits by itself. If it does not, a coupon could put you out of business.
7) BUNDLE, BUNDLE, BUNDLE each service with another product/service to increase revenue. Always be thinking of giving a discount on the ADDITIONAL purchase, rather than the INITIAL purchase. $20 of revenue is better than $10 of revenue.
8) Take action NOW! Each coupon should have such an attractive offer that it brings people in the door.
If you use coupons correctly, each coupon will generate additional revenue...and be profitable. If you do it incorrectly, you will lose money on each sale, but you will make up for it in volume.
A coupon is an incentive for new customers to use your business. However, you never structure a coupon to get just a basic item. You use coupons to encourage multiple sales. (A "2 for 1" coupon where they buy one pizza, and get the second one free means that the customer just spent $20, instead of $10.) A coupon where you give away a free meal, just for showing up, might get people in the door, but it costs you money.
In a previous article, I wrote about incremental revenue. http://power2negotiate.blogspot.com/ In this post I want to talk about how to use coupons effectively.
1) A coupon should bring people to your store. If it doesn't accomplish that, it is a failure.
2) A coupon should bundle products and services so that you increase revenue. (Giving away a free taco is NOT a coupon, it is suicide.)
3) A coupon should demand immediate action. This is not an attempt to establish "awareness" but to buy. (I don't need to put expiration dates on a coupon. I need all coupons to be profit centers, every time, and for every occasion.)
4) A coupon should bundle high profit margin items with low profit margin items to increase revenue...and increase profit. ("Buy a meal, get a free beer", "Buy two, get the next one free", "Free dessert with every family meal", "Buy three pizzas, get free breadsticks") By increasing the per head (dollars spent per customer) you are exponentially increasing the profit margin, and profits.
5) You MUST know your costs. What are your fixed costs? What are your incremental costs per unit? What is your shipping costs? What is your cost per sale to a new customer? What is your cost per sale to an established customer?
6) Your coupon must be an orphan. This means that it must NOT steal profits from the rest of your business, but must add profits by itself. If it does not, a coupon could put you out of business.
7) BUNDLE, BUNDLE, BUNDLE each service with another product/service to increase revenue. Always be thinking of giving a discount on the ADDITIONAL purchase, rather than the INITIAL purchase. $20 of revenue is better than $10 of revenue.
8) Take action NOW! Each coupon should have such an attractive offer that it brings people in the door.
If you use coupons correctly, each coupon will generate additional revenue...and be profitable. If you do it incorrectly, you will lose money on each sale, but you will make up for it in volume.
Incremental Revenue
In a previous post, I mentioned incremental revenue opportunities. http://power2negotiate.blogspot.com/2011/04/business-plan-versus-mantra.html.
What IS an incremental revenue opportunity. If I can use a ubiquitous example, "Do you want fries with that?" is the definition of an incremental revenue opportunity.
It is simply doing a side sell, or an upsell to an existing customer. They are already purchasing, and, at the point of purchase, you persuade them to add an additional product or service to the purchase, increasing profit.
What are your costs for doing this?
Absolutely zero? You have already PAID the advertising costs to get the client into your store/site/office. You have already PAID all of your rent/fixed costs/overhead to run your business. You have already completed the hardest part, getting them to purchase the first item. Now, all you have to do it have them increase the sale.
The added revenue is "free money" with only your cost of goods assigned to it. It has NO overhead costs, advertising costs, or commission costs, because it is an incremental sale.
My family had an RV park. During the winter, we would have more guests than sites. So, we would park the additional campers around our house, hook them up to our electric and water, and let them stay there for a few months.
I HATED it. I couldn't open my window for fear of seeing a retiree looking back at me. I complained to my Aunt Betty.
She explained, "Reed, we don't have any additional costs for those campers. That is VACATION money." When she explained it that way, it made sense.
You want to encourage your employees to always ask, "Do you want fries with that?" with EVERY purchase, because the profit percentage on incremental revenue is tremendous. If your employees are not asking for the additional sale, you are losing money. You are losing VACATION money.
What IS an incremental revenue opportunity. If I can use a ubiquitous example, "Do you want fries with that?" is the definition of an incremental revenue opportunity.
It is simply doing a side sell, or an upsell to an existing customer. They are already purchasing, and, at the point of purchase, you persuade them to add an additional product or service to the purchase, increasing profit.
What are your costs for doing this?
Absolutely zero? You have already PAID the advertising costs to get the client into your store/site/office. You have already PAID all of your rent/fixed costs/overhead to run your business. You have already completed the hardest part, getting them to purchase the first item. Now, all you have to do it have them increase the sale.
The added revenue is "free money" with only your cost of goods assigned to it. It has NO overhead costs, advertising costs, or commission costs, because it is an incremental sale.
My family had an RV park. During the winter, we would have more guests than sites. So, we would park the additional campers around our house, hook them up to our electric and water, and let them stay there for a few months.
I HATED it. I couldn't open my window for fear of seeing a retiree looking back at me. I complained to my Aunt Betty.
She explained, "Reed, we don't have any additional costs for those campers. That is VACATION money." When she explained it that way, it made sense.
You want to encourage your employees to always ask, "Do you want fries with that?" with EVERY purchase, because the profit percentage on incremental revenue is tremendous. If your employees are not asking for the additional sale, you are losing money. You are losing VACATION money.
Business plan versus mantra
A lot of new entrepreneurs believe that they MUST have a "Business Plan". They think that a business plan is the answer to all of their problems, and that it must be followed religiously.
Unfortunately, they are wrong.
You DO need to have your plans written down, and it would be nice if they were in detail, but you must be free to modify...on the fly, or die.
My family moved from Michigan to Florida in 1971 and established an RV park. At the time, people had huge cars, and would tow their travel trailers on vacation all across the country. The conditions were perfect for this type of RV park.
We built the park, and then the world changed.
In 1972 there was a Mid-East oil embargo. Gas prices went up 100% in less than a year, and there were gas shortages around the world. An unprecedented change in the world changed our business plan. We modified our plan by servicing retirees that wanted to bring their RV's to Florida, and spend the winter here as snowbirds. Suddenly, we weren't a park catering to Disney guests, but a long term destination park. After a few lean years, we grew the business from 40 sites to 450 sites, and during the winter months we consistently ran at 110% capacity. (More on incremental revenue opportunities on a later post.)
In other words, when your business changes, you MUST be willing to modify, on the fly, or die.
Your business plan should be able to be expressed in a single sentence. I call it a motto. You MUST have a business plan that you can explain in one sentence...or less. If you can't articulate your business in one sentence, how will anyone else be able to understand it...or want your products?
For example: SLAID Centers, "Affordable legal services for every need".
Brainstorm Capital Group: "Expertise, capital, and ventures to help you arrive at the best business solutions."
Enterprise Rent a Car: "We drive you there".
If you can simplify your business motto into a sentence and have it be so powerful that people will remember it forever, they might just try you.
You are looking for a shot. An opportunity to get their business, and then wow them with world class service.
Don't be afraid to revise your business motto, because change happens, and you must change with it. You must be able to modify, on the fly, or die.
Unfortunately, they are wrong.
You DO need to have your plans written down, and it would be nice if they were in detail, but you must be free to modify...on the fly, or die.
My family moved from Michigan to Florida in 1971 and established an RV park. At the time, people had huge cars, and would tow their travel trailers on vacation all across the country. The conditions were perfect for this type of RV park.
We built the park, and then the world changed.
In 1972 there was a Mid-East oil embargo. Gas prices went up 100% in less than a year, and there were gas shortages around the world. An unprecedented change in the world changed our business plan. We modified our plan by servicing retirees that wanted to bring their RV's to Florida, and spend the winter here as snowbirds. Suddenly, we weren't a park catering to Disney guests, but a long term destination park. After a few lean years, we grew the business from 40 sites to 450 sites, and during the winter months we consistently ran at 110% capacity. (More on incremental revenue opportunities on a later post.)
In other words, when your business changes, you MUST be willing to modify, on the fly, or die.
Your business plan should be able to be expressed in a single sentence. I call it a motto. You MUST have a business plan that you can explain in one sentence...or less. If you can't articulate your business in one sentence, how will anyone else be able to understand it...or want your products?
For example: SLAID Centers, "Affordable legal services for every need".
Brainstorm Capital Group: "Expertise, capital, and ventures to help you arrive at the best business solutions."
Enterprise Rent a Car: "We drive you there".
If you can simplify your business motto into a sentence and have it be so powerful that people will remember it forever, they might just try you.
You are looking for a shot. An opportunity to get their business, and then wow them with world class service.
Don't be afraid to revise your business motto, because change happens, and you must change with it. You must be able to modify, on the fly, or die.
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