Are You a High-Margin Business?

Achieving profit is the real goal of being in business. Profits are what allows a business to invest and grow. Some businesses have higher profit margins than others. That can be due to the type of industry, the competitive landscape, and economic conditions. There's often a direct correlation between the margins a business can charge and the amount of pain their products and services help to ease in the minds of the customers who buy them. Increasing this real and perceived value will directly impact profit margins. Most businesses have a mixture of customers. To become a high-margin business, your goal must be to move the needle from lower-value customers to higher-value ones. The first step is to identify the types of customers your business attracts and pursues. Here are a few general characteristics to consider. Low-Value Clients:

• A large number are required in order to sustain profitability
• Typically cause the most headaches
• Want you to lower your prices
• Make you feel like a commodity
• Position you as the lower-value provider
• Can and will leave you for a lower price at any time

High-Value Clients:

• Provide greater profitability, so fewer are needed to help you reach your financial goals
• Generate higher value with fewer headache
• Help position you as an authority and valuable partner vendor
• Give you higher credibility in the eyes of your other prospects

So how can you increase your perceived value?

• Educate - Sell by teaching and sharing your expertise. Nothing is more powerful in positioning you as a business that is worthy of higher fees than actually showing how your products and services solve problems for your customers.
• Show Results - Include testimonials and success stories from your past customers to help prospects understand what kind of real-world value you provide. Third-party validation works much better and is more believable than the same information stated as your own.
• Offer a Powerful Guarantee - Guarantees not only help remove some of the doubts your prospects may have but also show that you believe in your products and services enough to stand behind them. Strong guarantees and warranties allow you to justify charging higher margins.
• Get Endorsed - When possible, get an endorsement from a well-respected and known personality who can verify the quality and value you bring to the table. Your prospects will know that such a person would not vouch for a shoddy business or service. This increases the perceived value of your business in their eyes.
• Promote - Promote your awards, achievements, membership associations, charitable contributions, and any other resources that will speak to your involvement in the community and the values you bring. Each of these builds further trust in the eyes of your audience. Each bit of added trust allows you to charge higher fees and margins in your business.

By increasing both the real value for your customers and the perceived value seen by your prospects, you will be able to increase your profit margins. Lots of companies can solve problems for their customers. Those that are able to tell the story of what, how, and why they solved those problems -- and to do so in a way that resonates with prospects -- are the ones that achieve higher margins.

How Far Would You Go For a Customer?

There's a story told of a middle-aged man and a teenage boy who checked into a hotel together while traveling. The staff noticed that both seemed quiet and somber and that the boy appeared pale. That evening, the two had dinner at the hotel restaurant. Again, they seemed unusually quiet, and the boy barely touched his food, before excusing himself and returning to his room.

After finishing his meal, the man asked to see the hotel manager in private. Concerned that he was dissatisfied with the service he had received, the manager obliged his request.

Once alone, the man explained that he was spending the night with his son, who was set to begin chemotherapy treatments at a nearby hospital the next day. Instead of waiting for his hair to fall out on its own, the son planned to shave his head that night, and the father was doing the same. He wanted the staff to be aware of their situation, so they wouldn't be alarmed when the two showed up for breakfast with clean-shaven heads. The manager said he would let the staff know and that the man need not worry.

The next morning, the man and his son (now with shaved heads) came down for breakfast. As they walked into the restaurant, they looked around and saw the staff busy at work taking orders, clearing tables, and seating guests. But something was different than the night before. You see, while each staff member was going about their business just as they would on any day, several had taken it upon themselves to shave their own heads that morning, too.

This story (whether true or not) provides a good reminder for how each of us should treat the people we encounter throughout our day. Whether customers, coworkers, or strangers on the street, it's easy sometimes to forget that the people we meet are just that -- people -- with individual challenges and struggles we may never know or understand. How we choose to interact with them can go a long way in determining how they will interact with us (and our companies) in the future.

So, while you may never shave your head for a customer like the staff members in our story did, going out of your way to treat the people around you with kindness, dignity, and respect is more than just good manners. It's good business.

Are You Strategic or Are You Tactical?

Strategic planning and thinking are critical to success in business -- and in sales. Strategic thought focuses on the big picture. It looks at building sustainable, long-term relationships with clients who can benefit from what you have to provide. Tactical thinking, however, focuses on the here and now. It cares only for making the quick sale and staying afloat. Without a strategy behind it, tactical thinking can often lead to reactionary planning that provides little or no long-term viability. If you find yourself in any of these positions, you may be too tactical:

• Prospects are taking too long to make a decision and stringing you along to get lower pricing.
• You're unclear on exactly who you are selling to.
• Your sales efforts are not focused on a specific product or service you should be selling.
• You're selling almost exclusively to the type of customers who buy one-time projects.
• You're selling to the type of customers who will switch to lower-priced competitors at the drop of a hat (or price).

Being overly tactical can force you to become desperate for work. That desperation shows through to prospects, who are either scared off by it or use it to force a much lower-price sale. Being overly tactical forces you to be reactive to the marketplace around you, rather than proactive in growing sales. This can also lead to taking on clients at unsustainable prices -- often clients you really should have declined in the first place. Most owners and executives who find themselves in this position will try:

• Hiring a new salesperson who knows what they are doing
• Creating an incredible new offer or service package
• Offering a brand new capability
• Lowering prices to increase volume

While these tactics can work, they often won't unless you first learn to start selling strategically in your business. Strategic selling means creating a sales process that is based on:

• Positioning your company as the expert for what you sell
• Creating real relationships with prospects who truly value what you offer
• Attracting prospects who can afford to pay for what you sell
• Working with prospects and customers on their business goals and challenges, so you're not seen as a commodity vendor

This is what it means to change from a tactical business to a strategic business. Broke companies look for the cheapest, while successful companies are looking for value and strategic partners. Being tactical means having commodity conversations about commodity services and products. This leads to attracting customers who view you as a commodity and end up paying you commodity prices. On the other hand, having strategic conversations with strategically minded businesses means that you attract higher-quality clients who value and pay for the services they seek. As a strategic business, you'll begin to have conversations with prospects who truly value what you bring to the table. You'll talk about not just the tactical things but also how your services can help them grow. This type of client doesn't leave quickly and will gladly pay you for the work you do. This in turn will lead to a much higher client value and will allow you to provide better service to attract more clients just like them. So how do you move to having strategic conversations? Start by asking the type of questions that generate the answers you're looking for.

• What are your biggest challenges?
• Is your business growing as fast as you'd like?
• What's working for you?
• What's not working for you?
• What are your biggest challenges?
• What are you currently doing to market and grow your business?

The beauty is in the simplicity. No magic needed. Ask questions that are designed to let your prospects open up and share their challenges. Moving from a tactical business to a strategic one starts with a mindset shift. It takes time and effort to change the culture of a tactical business. It starts with being clear that you need to seek clients who value and can pay for what you sell. Then you must have strategic conversations to prove the worth of what you bring to the table. Having strategic conversations separates you from your competition. Being strategic is one way to command and get higher prices.

Beware the Cycle of Doom

The cycle of doom is the nightmare of every business owner and salesperson who works to attract prospects and customers. It occurs when you find yourself without a steady, predictable stream of high-quality prospects that turn into customers. As the cycle progresses, every day can feel like a challenge. Where are the next leads coming from? Where are the customers you're looking to gain?

"Your present circumstances don't determine where you can go; they merely determine where you start." - Nido Qubein

If you're stuck in a cycle of doom, you need to establish a system for attracting your ideal leads -- the people in your market who are looking for what you sell. Rest assured, such people do exist. The problem is that not enough of them know about your services and products.

That's where your lead-generation system will come into play.

"The fact is, everyone is in sales. Whatever area you work in, you do have clients, and you do need to sell." - Jay Abraham

Thousands of books and articles are written each year about the marketing and selling process. There are many variations and specific nuisances, but most of these resources can be distilled down to three relatively simple, uncomplicated steps.

The first is to determine exactly who your ideal customer is. The next is to make them aware of the solutions your products and services provide to solve their pain. The final step is to engage and answer any questions and objections before closing the sale.

Any lead-generation system you create needs to employ these strategies in order to make it a predictable source of continuous, high-quality prospects. Testing and measuring for what works best for your business is a never-ending and continual process. The important thing is to have an actual framework and base system in place to build upon.

Outbound marketing (direct mail, telemarketing, and traditional media) still works today, but you need to have a strategy in place first to attract and convert the type of audience you are hoping to reach. Blasting out unwanted information to the wrong audience didn't work well in the past, and it doesn't work today either.

Many businesses have learned that non-strategic social media posts and email blasts have the same characteristics as any other marketing fail. Offering low-value content leads to non-engagement, which ends up producing low-quality leads and zero customers.

The scariest feeling in business is not knowing where your next sale and customer are coming from. Everything is unsettled. You don't have the necessary confidence, and you don't control the conversation. As a result, you end up bending and twisting on price just to get a sale.

"Discipline is the bridge between goals and accomplishments." - Jim Rohn

Getting out of the cycle of doom requires strategic thinking. Who do you want as a customer? What does this customer need in order to make decisions before they purchase what you sell? Where are the places you can communicate these messages with this customer?

Creating a system sets the groundwork for a predictable pipeline -- one that allows for a reserve of prospects and suspects you can rely on and pull from as needed. It also has the added benefit of giving you the luxury of turning down prospects who are not a good fit for your business.

When you have a systematic approach and tweak it until it works predictably, you control the process. Your business is in demand, and your services are valuable and scarce.

Become a valuable resource for the prospects you seek. Let them know on a consistent basis about the value you provide. Make it easy for them to find your valuable information. Systematize your process, and the cycle of doom will be an old nightmare that gets buried for good.

Is Your Business Sellable?

One of the goals of every business owner should be to build a company that is worth selling. Whether it is actually put on the market or not is another matter.

A business that is worth selling is growing, vibrant, and healthy. That's why it's in the best interest of everyone involved in the company to continually work toward building a sellable business.

Many metrics are used to measure the worth of a sellable business. One of the key metrics is the ability of the business to generate recurring revenue.

There are several ways to achieve a consistent, recurring revenue stream. Not all will work for every type of business, product, or service. Here are a few ideas to consider, depending on the types of services and products you provide.

Long-Term Sales Contracts

One method of building recurring revenue is to offer contracts that tie a client to a long-term engagement. A customer could be enticed to sign a contract if they are offered preferred pricing and services. An example of this can be seen with most cell phone contracts. The multi-year contracts are offered as a way to get a free or discounted cell phone in exchange for signing a two or three year contract. The buyer gets the cell phone quicker, and the cell phone provider locks in a guaranteed, predictable revenue stream.

Service and Maintenance Contracts

Some businesses can offer service contracts for after-sale support. For example, an IT company will charge for installing and setting up a network in a business but could also charge a yearly support fee to keep the network up and running free of viruses. Maintenance contracts can be a great source of additional revenue throughout the year. In many automotive dealerships, the service bays bring in much higher profits than the car sales departments.

Product and Service Training Fees

If your product or service involves a learning curve, customers would get more value from their purchase if you also offer training and certification after the sale. Product training becomes a true win-win, as the customer gets better use of their purchase, while you get additional revenue from an existing client. Many software companies offer training for their products to help their buyers understand and use the software to its potential.

When your business can generate sales from multiple revenue streams that support each other, the risk to a potential buyer is reduced dramatically. The business becomes a much more attractive candidate.

Predictable, recurring, multiple income streams make a business seem less risky to a potential buyer. So the sooner you start building recurring revenue streams in your business, the better your position will be if and when the time comes to sell.