COVID Funding Tips for Small Businesses
The only purpose of a business is to generate profits.
As you know, it is not to generate more net income, more clients, leads, opt-ins…it is certainly not to work longer hours, see your family less and have more stress and lose money (unfortunately, that is what most experience).
If we start with the premise that your business’s focus is to generate a profit, what is the best way to get there in 2021?
It starts with measurement.
You must be able to measure your numbers and results. Most people who run a business only measure a few numbers, like the number of leads, clients, and website traffic.
They don’t measure things like their profit and loss, cost of goods sold, break-even, cash flow…I believe there is a separation between “marketing numbers,” things like how many web site visitors, opt-ins…likes on Facebook vs. “accounting numbers” that were already mentioned.
You do need both. Let me share the numbers taught by ActionCoach, the world’s #1 business coaching firm. They teach these important numbers (they call it the “chassis for growth”):
Leads x conversation rate (%) x # of transactions x average sale = revenue. Then take that revenue x the margin = gross profit.
Example: 100 leads x 10% conversion = 10 clients x 2 transactions during the year = 20 x $500 average sale = $10,000 in revenue. $10,000 x 40% margin = $4,000 in gross profit.
If you focused each quarter this year on improving each category by 10%, it would increase your gross profits by 46% for the year!
If you improve each category by about 17%, you will double your gross profits for the year.
The next step is to determine the 3-5 strategic action steps you can take in each area to improve each category. Again, you first much be able to measure to get results.
There are several marketing strategies to increase leads.
I would recommend starting with ones that do not warrant spending more marketing funds on leads.
For example, what type of referral program do you have in place with current clients to generate more leads? Do you have more than one referral program? How are you asking for referrals?
Most people ask a lousy question. They ask, “do you know anyone who would benefit from our services?”
The immediate reaction is always to say, “no one comes to mind.” A much better question is to ask, “who do you know that may benefit from my product or service?” “Who do you know” is a major difference from “Do you know anyone?”
This strategy I learned from my good friend Michael Price who wrote the book, Questions are the Answers.
I find that most businesses don’t even ask for referrals. Are you following up with your past leads on the phone, or do you rely upon e-mail?
What about implementing the host-beneficiary relationship strategy (the most powerful joint venture strategy) where you provide value to someone who has access to your ideal market at no cost to you?
This is the most powerful lead strategy that may bring massive leads to your business. What about improving the conversion on your website that may trigger more leads?
Have you improved the copy, pictures, and flow of your site to generate more leads, whether through a phone call or an opt in? As you can see, there are many areas you can improve your lead generation process without spending a lot more money.
If you have the money to advertise, that is a good idea and start with the low hanging fruit.
When looking at conversion, you have to separate online and offline.
I remember Dan Kennedy (a top marketer) saying at an event, you can have the best online marketing, best copy, great ONLINE conversion, but if you have Negative Nellie answering the phone scaring off potential clients, you will conclude none of the marketing worked.
That is a generalization and a mistake that is common. You have to isolate what parts are working and what parts are not in your conversion.
The biggest killer is any offline process involving you or your team.
In fact, you may be the one who is screwing things up with how you are positioning the phone call.
I have seen this over the years in the direct sales industry where a new distributor will say, “I am doing the same thing as the top producer,” but I am not getting the same results.
I am using the same lead source, the same funnel process; I am calling each prospect after they opt-in…but the one huge difference is what you say when you get on the phone vs. what the top producer says.
Even if you are using the “same script,” the inflections, tonality will be different. With your online conversation, you have to measure every aspect. It may be your headline, copy, offer…may need tweaking.
It is recommended you do some A/B split testing on pages and test one variable at a time. You can search Google and find different software that will help you with this task. The software will give every other visitor a different page with one variable different.
You will be testing one headline against the other, and you will know within a few days or sooner, depending upon the level of your traffic, which one is outperforming. Once you know that, that new headline becomes A, and you test against another one B. Or you go on to test another variable in your copy, it could be with a male or female picture on the page. It may be the headline’s color, the offer…
Almost everyone had in their opt-in box something that says we will protect your privacy and not share your email address with everyone.
One top marketer decided to test to determine if they took that off how they would opt-in rate?
You would think it would go down, but it actually went up! Why? The guess is that by reminding people that you will not spam them or share the information, they may be on another list, so why opt-in. This way of testing is critical.
Offline conversion is really a matter of having scripts. Yes, scripts. No professional ever wings any presentation. I did not say you or your team should sound like they are reading a script. It should not. But there must be a certain order and sequence of the presentation that will help get more results.
Price is a typical issue with almost any product or service, and you should have the language to handle that upfront when it comes up. If your team is doing outbound follow-up calls to your list, I recommend you measure the call to approach, the approach to the presentation, and the presentation to the close. Then look at the ratios to look for improvements.
The goal is to lower the ratio between each area. For example, if you have a call to approach a ratio of 20 to 1.
That means you make 20 calls to make one approach. That means you only spoke to 1 person and left 19 messages.
Maybe you need to test the time of the day you are calling. The next step is to measure the approach to presentation. Maybe you made 20 calls, had 15 approaches but only 1 presentation.
That means your approach stinks (that is a technical term). Suppose you had 20 presentations and 10 closes. That is a 2 to 1 ratio, which is outstanding.
Now maybe you need more calls at this point. You can look at a number of leads and conversation that has been suggested before. Still, if you take it to the next level and measure these parts of the call, you will zero in on the area that needs to be improved vs. concluding nothing is working because the conversion is so low.
I learned this strategy from one of my mentors, Vince Zirpoli, who is in his 80s and ran his business for over 60 years, and not once did his sales drop (through 11 different recessions).
You will learn that the narrower your funnel means fewer calls required to make each sale, the more profit you make on fewer calls.
If you are working with leads from a joint venture or referral partner, the funnel should be narrower on how many leads it will require to make one sale. If you have a cold market, the funnel will be vast.
Take the time to schedule your joint venture calls weekly and to master this important subject.
Number of Transactions
If your client has a great experience and you go back to offer them another product or service, you are more likely to make another sale with the same client.
It is 6-7 times easier to sell to an existing client than a new lead. Several areas go into improving these results for your business.
Assuming you measure how is the customer service experience on the first product you are selling? Did the sales rep have to over promise to get the sale?
Is your client or customer most likely unhappy because of the over-promising required to get them in the door in the first place?
If that is the case, it is likely that when you send out another offer, your client is unlikely to take advantage of it.
That may be problem #1.
The next step is to improve your customer service experience and follow up.
If you are only following up by e-mail, why not add a follow-up call? Are you sending out any surprise bonuses to help your client out? Do you do any proactive follow up, or are you only available if they have questions?
Do you send updates and tips? All these parts will help enhance your client’s experience on the front end.
Now, when a well-timed offer or educational event comes along that is a natural fit to what they invested in with you on the front end, your client may be more likely to invest in what you recommend next.
This is harder than it sounds because we all think we have a great product and great customer service. Us included.
Recently we have brainstormed many different ways to improve our product and our customer service experience to go to an entirely new level. We are updating and developing many steps, checklists, and templates to make it an even smoother transition for someone to form a new corporation or LLC.
Ideally, if you have one, two, or three upsells or other products or services that will add value to your lead product or service next, educate your client from the beginning on the big picture of how you can help.
If they cannot start with your biggest package, they should hear about it, and why the steps are important, and to fit their budget, you may start them with a lower package.
The important part is to match future copy with what services your clients have not invested in yet, so they are getting a message on how that will benefit them.
Remember not to get lazy and only rely upon e-mail follow up. Getting testimonials along the way will help, not just on your lead product or service, but your back end as well. That will help position each one with great feedback, so it will be easier when you are looking to add transactions to your business (adding value to your client and making their life easier or to help them get more results).
This refers to the gross profit margin. If you have a 40% margin, you will have a 40% gross profit on each product or service you sell.
The items that affect your gross profit are the cost of goods sold and labor to produce your product or service.
Your ability to lower the cost of goods sold involves negotiating with vendors on supplies needed to produce your product or service, get better pricing by buying in volume, finding a more efficient lower-cost way of producing your product or service.
Increasing your sales price with the COGS the same will, of course, increase your margins. That is why most marketers will say, take step 1, and increase your prices by 10%.
That should result in an automatic 10% more profit to the bottom line.
This all equals gross profit, which will be needed to cover your business’s operating overhead to determine if you are operating at a profit or loss.
Where do you start for improvements?
Most will make a mistake and say, “we need more leads.”
Actually, the best place to start is to find ways to improve your margins, which may include raising your price.
Improving your conversion would be the next natural place to improve your results.
Again, most want to jump to generating more leads.
Paying money for more leads with a poor back end system will be expensive over time.
That last point is pretty amazing.
If you make a small percentage improvement in each area, you will experience a quantum leap in results!
A 10% increase across the board will equal more than a 46% increase in your gross profits!
It is about taking small action steps in each area monthly to transform your business. You have to be disciplined and organized enough to plan this out.
Please don’t be lazy and think I need to spend more money on leads.
Take the next step and list out the top 1-3 things you can do in this next 30 days to improve each of these areas for your business.
Now schedule the time on your calendar to implement each of these steps and enjoy your results!