The Ultimate Profit Producing Formula

Why do some small businesses become glorified jobs for the business owner, often earning the owner less money per hour than if they had a job?

I see this happening very often in small businesses. The owners start out enthusiastically, then experience all the extra paperwork, organising and chasing that needs to be done and slowly the novelty wears off. For the majority of business owners it gets too hard and they give up, adding to the high failure rate of small businesses in the first 12 months.

It doesn't have to be like that!

There may be some tough times in any small business and there is nothing worse than wondering if you are going to sell something today. Wondering if the sales in the month will be enough to cover the bills. As a business owner you need to know, with a level of certainty, what your income will be next week, next month.

In lean times it may seem that the only solution is to cut costs, like cutting back on the advertising budget. But by cutting back on costs you may save 10% or maybe even 20% but it is far better to improve your income by 50% or 60%? There is a limit to how much you can cut costs but there is no limit to how much you can improve your income.

Take the time and energy that you would normally use to try and save money and refocus it on 4 areas of your business:

1. Improving enquiries
2. Improving the conversion of those enquiries
3. Improving the average transaction size
4. Improving the average transactions per year
   

Focusing on these 4 areas of your small business is guaranteed to ensure success. A 10% improvement in each area will multiply to a huge increase in profit.

Start measuring these 4 areas and keep a record of the results on a weekly basis. Your goal should be to gradually improve all 4 areas by 10% per month.

Improving enquiries - being creative in generating enquiries is the secret to customer attraction. The coffee shop offering a free muffin will win over the coffee shop next door without the free muffin. Find a point of difference... ask yourself "what will make a customer choose me over my competitor?" And when you find your unique selling proposition shout it out in every way you can possibly think of.

Improving the conversion of those enquiries - after all the cost and effort of attracting a customer it's now up to you to sell them something. You need to answer every objection, have a strong risk reversal guarantee with a product and service range for all their needs. Often this area can be dramatically improved in many businesses. I ask businesses what they believe their conversion rate to be and they usually say around 50%... They are always shocked when they start to measure it and it is less than 20%. This is a good thing though, as it leaves lots of room for improvement!

Improving the average transaction size - your total sales over the last year divided by the amount of transactions will give you your average transaction size. Again it comes down to creativity - how can you get customers to spend more. The easiest way is to offer a freebie if they spend over a certain amount. Look at McDonalds with their "Would you like chips with that?"

Improving the average transactions per year - your customer may buy from you several times a year, once a year or even once every 7 years. So how could you encourage them to come in more often and buy from you? What other product or service could you offer them?

Whether you are a plumber, a salon owner or a dentist, focusing and improving on these 4 areas will guide you to business happiness and prosperity.

Copyright 2006 Ian McConnell

Ian McConnell is the author of Instant Small Business Profits - compulsory reading for any small business owner. This step by step guide contains valuable information on... "How To Dominate Sales In Your Marketplace, Create a Flood of Customers Chasing You For Your Product or Services And Turn Your Business Into a Powerful Profit Magnet!"

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