How to Cut Expenses without Killing Your Business!

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The purpose of any business is to develop a profit. There are many factors that will affect your business’s ability to generate a profit. Those include the costs of goods sold on your products, your price point on your product and services, your fixed and variable expenses.

In this economy where the sales funnel is typically wider for most businesses, meaning it will take more calls to make a sale, the knee-jerk reaction is to cut your prices to increases sales revenue to help generate overall more profits. That strategy typically will backfire (unless your up-sell process is strong and you know your numbers like clockwork).

One of the biggest issues is knowing the ratio between cutting your prices a certain percentage (like 10%) and now knowing your corresponding COGS (Cost of Goods Sold) percentage. The key question becomes, how many additional sales will you have to do at full price to make up for the one sale you gave a 10% discount? My good friend Spike Humer, has developed a very good chart that tells you the answer based on the price discount and COGS. For example, if your product or service has a 40%COGS and you cut the price by 10% the company would have to do an additional 15 sales to make up the profit lost on that one sale. This brings in revenue, but unless a strong back end exists this can lead to a fast track to being out of business.

There are a few fundamentals that we recommend you have in place before you start cutting expenses to make the best decisions.

First, you must know your numbers. There are important questions to ask yourself about your numbers. How many leads to you have each day? What is the cost per lead? What is your cost per appointment? Cost per new client? What is lifetime value of each new client?

For example, if you have 10 leads per day and you have to spend a total of $2,000 per month for marketing, and that is divided by 30 sales days (counting weekends ) or 20 sales days if you do not. That comes out to 10 leads per day x 30 sales days= 300 leads. Now take $2,000/300 leads=$6.66 per lead.

If it takes 10 leads to develop 3 appointments, that is $22.00 per appointment. If those three appointments turn into 1 sale that means it is costing you $66.66 per client (which is a low number). For many of you, it may be costing you $25 per lead that you receive. That changes the numbers dramatically.

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The Asset Protection Mindset

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A strategic asset protection mindset is one that will separate those who accumulate long term wealth, but also keep it. Most successful entrepreneurs let their big egos get in the way and they don’t take the steps to set up a complex (not simple) structure to protect their assets.

A strategic asset protection mindset is part of this important business equation; you must master two skills: first, the skill to generate profits in the shortest period possible and keep them. Many times, keeping them may be harder then creating the profits.  Keeping them focuses around the strategy of asset protection. You must protect your assets from everything, like lawsuits, taxes, creditors and bankruptcy. 

This success requires a certain mindset for survival. It requires working backwards to think through what could go wrong and how your assets would be affected.

You Must Ask Tough Questions

It requires asking some tough questions like, “What would happen if I get sued and my business insurance (if your business even has any) did not cover the legal fees and damages? What would happen to my financial fortress? If my assets were to take one direct hit (a lawsuit), what would be the outcome?  Would I lose everything? How do I mentally handle being totally unprotected?”

Develop the Right Asset Protection Mindset and Avoid Regrets

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Patterns that Create Business Failure and Success—An NLP Perspective

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Business and life do have patterns of success and failure. NLP (neuro-linguistic programming) is the study of the connection between the neurological processes (“neuro”), language (“linguistic”) and behavior patterns that have been learned through experience (“programming”) and can be organized to achieve specific goals in life and business. I like to use this simple definition: it is a study of patterns or recipes. If you have a great recipe for your favorite meatloaf, there are certain ingredients that, if are added in the correct amounts and sequence, will create a specific result. This is similar to an NLP pattern.

Patterns for Business Success -Scott Letourneau

Patterns for Business Success

For example, good spellers do one thing differently (or have one more ingredient) than bad spellers. Good spellers will first see a word visually in their mind, sound it out, and then spell it. Bad spellers will skip the step of visually seeing the word and jump right to sounding out a word, then attempting to spell it out. Good spellers have a different “recipe” than bad spellers. They have one ingredient different.

In business, there are patterns of success and failure.

One core pattern for business success is the Disney pattern, modeled after the famous Walt Disney. Walt and his team of Imagineers were able to accomplish amazing results with their meetings. Walt did not run a meeting like most business meetings. He would separate meetings into different types. In the first meeting, called “the dreaming room,” you are allowed to come up with ideas and that is it. There is no evaluation or organization of ideas. That is a separate meeting! Why? If you start allowing your staff or yourself to evaluate ideas in the meeting, it will often stifle new ideas. People will start to think, “Maybe my idea is not such a good idea.” That is NOT how Walt Disney conducted meetings.

I recommend you adopt this pattern for your business meetings. Here are the four meetings Walt would run: First is the “in the dreaming room” – all brainstorming. Second is organizing the ideas. Third is to evaluate the ideas. Fourth would be to implement the ideas.  That was his brilliant pattern for business success.

This is especially important if you are a solo business owner. You may be sabotaging your own success by coming up with great ideas and immediately thinking how it’s not going to work. That will stifle even your own ideas.

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Where Did My New Years’ Resolution Go? 9 Strategies To Rescue Those Resolutions!

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Resolve comes easily on December 31st.

By March of the new year, the resolutions made are in disarray, compromised, abandoned. And the resolute determination to make this year, finally, the year you stick to ‘em, forgotten altogether.

This is not about guilt over this abandonment. Instead, it is about the real reasons resolutions and the determination to achieve them are lost, year after year after year, and how to change – yet this year – and get on track to systematically set and achieve new goals.

Big Idea #1: you can’t achieve new goals or make desired changes without allocating time to do so. Check out page 63 of my NO B.S. TIME MANAGEMENT FOR ENTREPRENEURS BOOK* for ‘time-blocking’ strategy instructions. A big reason that resolutions never become reality is no room made for them in the daily schedule! If your days are already full, and you resolve to get in a 1/2 hour a day on the treadmill or on your laptop, writing that book, that 1/2 hour has to come from somewhere. Something’s gotta give! You have to find something or things currently consuming time you can cut 5 or 10 or 15 minutes from.

Big Idea #2: priorities should govern schedule, the schedule shouldn’t govern priorities. On pages 69-74 and 103-111 of the same book, I talk about the mistake made by the vast majority of business owners and entrepreneurs – they operate like workers instead of bosses and leaders. They report to a workplace, then they let people and events ad interruptions come at them all day, take control of their day. You have to est control away from others’ priorities and govern by your priorities. President Bush cited Social Security reform and tax reform as top priorities of his second term, presumably accompanied by a resolution of the mess in Iraq. Then along came the tsunami. Still, he organized his tax reform panel. It’s hard to judge from outside looking in, but my belief about W. is that he’s determined to govern by his priorities. Are you?

Big Idea #3: resolutions aren’t resolutions without resolve. Only you can decide what really matters to you. You shouldn’t bother with ‘lip service’ faux resolutions, made to appease or satisfy others. Honesty with self is a pre-requisite for success.

Big Idea #4: resolutions require resources. Almost anything you decide to do, any change you decide to make,
any goal you set out to achieve requires new or different resources. That might be a piece of home exercise equipment or different food in the cupboard, a private work environment outside the office, information, people. You aren’t really serious about a resolution unless you invest in and gather the required resources.

Sometimes investment motivates follow-through, too.

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Extreme Productivity for Your Business and Life

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We are living in a time where our life and business is constantly getting interrupted with thousands of commercial messages every day, from e-mails, texts, instant messages, phone calls, social media, appointments, family, kids, staff….interruptions all over the place!

For many, it is becoming hard to believe what was life like before FaceBook, where so many people are addicted to checking out what all their “friends” are up to, or who liked your post multiple times per day. This was similar to how e-mail was 10 years ago when each new e-mail had a little ding that would tell you that you have mail, and most would stop what they are doing to check that email. That is now happening with texting. With all this happening no wonder it has become more difficult than ever to become productive, much less experience extreme productivity

Let’s go for ideal. I have learned a lot from the marketing guru, Dan Kennedy in this area, who is prolific at cranking out a ton of content, getting a lot of accomplished and still has plenty of time to play (for him it is harness horse racing-he actually rides in the races).

The starting point is to be clear on what your outcome or goal is that you want to achieve. If you are not clear on your outcome for your business and personal life that is the first challenge. That alone would cause you to jump from one thing on your checklist to the next allowing for a lot of interruptions that totally destroy your productivity.

Let’s assume you have your outcome and goals organized. The next step is your belief system as to why you are continuing to allow someone to consistently interrupt your time. Most of you, if you are really honest, may find out that you are your own worst enemy when it comes to interrupting yourself consistently. If, I am being very honest, I will fall into this group from time to time and immediately look to get back on track to being focused and productive.

It is always important to look for a great person to model when it comes to any skill set or goal you want to accomplish. When you do you are in a better position to calibrate what is different from what you are doing vs the person that has what you want. There is where you have to be really honest with yourself.

For example, do you think Donald Trump always answers cell phone calls, IMs, during meetings or other engagements? Do you think you can just call him up and interrupt him and get him on the phone? Or do you think his day is very structured? The reality is that those who are highly productive are extremely structured in their schedule. I know that some of you do not like structure because somehow it means you are giving up flexibility or your creativity. Again, this is a belief system shift. Those who are extremely productive are very structured. If you have a 30-minute consulting call with Dan Kennedy and are 5 minutes late, you will end 5 minutes early. Right at 30 minutes, you will hear the phone hang up. You can be in mid-sentence, but he will not take an extra 2-3 minutes with you. He is very structured and very productive.

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How to Work Backwards to Solve Any Business Problem

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Short and long-term success in your business will be the result of your ability to solve business problems which may include everything from legal, tax, management, marketing, lead and client issues. Successful entrepreneurs make decisions quickly and are slow to change their mind and unsuccessful people are slow to make a decision and change their mind quickly and often.

The first step is to look at any problem as an opportunity. If you have a client who complains about a portion of your website that does not work, instead of getting frustrated at the client, look at that as a real opportunity to improve your website. When you think about it, you are not even paying these people to point out your flaws and areas you need to improve. You are receiving free advice on areas that need fixing! Reframing what the problem means is step 1. You are changing the meaning to be that of an opportunity to improve!

One of the main reasons business owners do not solve many problems and it feels and looks like their business is not moving forward, they immediately conclude that is not working so let’s do something else.

A common example if your business is looking for more lead generation and you put more time and energy into social media this past month and you notice you have very little results and you immediately stop that next month and focus on article writing. After that does not work you invest your time in video marketing. You are consistently jumping around from one lead generation strategy to the next vs. digging deeper into “what part” of the first strategy did not work to the level you were hoping it would.

Here is my formula to solve any business problem

1. Clearly, define the problem and avoid generalization. Example, my lead generation is not working vs. my Facebook ads are not working to the level I had estimated. I am only receiving 100 clicks per week but only 10 opt into my list.
2. State your goal specifically and a time frame. My goal is to receive 100 opt-ins to my list per week starting in three weeks.
3. Focus on what part you can change (or test three parts at one time) to determine if that will help solve your problem. If you do have a team or a group to mastermind, allow others to give input to solve the challenge. I would recommend you use the Disney approach and when you brainstorm solutions allow for those ideas to flow without evaluation in the moment. If you start to evaluate ideas while people are still offering solutions you will find that many will shut down because their idea may be “dumb” or of no value.
4. Implement the new ideas to solve your problem.
5. Measure if you are getting closer to solving your problem. Specific measurement is a must. If you have leads you are looking to manage you may want to measure the ratios between a call to approach, approach to presentation, and presentation to close. Measuring ratios will help you isolate what part of your presentation is not working for you and where you need to focus your improvements.
6. Repeat steps 4 and 5 until you solve at least a PART of the problem or the entire problem. Other tips for success:

  • Model someone else who has solved the problem already. Find out what they are doing differently than you.
  • Find a coach or mentor who has experience in the area where you have problems. For me I did not have any management experience so I hired mentors in the area of management.
  • Focus on making small improvements in your business!
  • Allow yourself to win the game!
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