I am not usually one to make New Year's resolutions, but truly, one that I did make to myself was that I decided to be more consistent in posting on my blog. Looking back at the post date of my last blog, I clearly did not deliver on that one and for that I apologize to my loyal readers.
The good news is that as I look back at how I have spent my time in the three weeks that this blog has been "dark", I know that I am focused and "digging the deep
This metaphor comes from a blog that Seth Godin wrote called the "Law of the Little Shovel".
I will paraphrase (and at the same time elaborate).
In this story, my seeds are my dreams and the shovel is what is needed to plant them. My neighbor
As I have seen this story play out in my own life, I have been the one that comes out of her house in the morning, bright and early, bag of seeds and shovel in hand, loading the car and heading out to "do my work".
As I leave the house, I see my neighbor's house. His shovel is leaning against his garage and he is no where to be seen. Deep inside my head, I congratulate myself for getting out and doing something about my dreams.
I stop all over town, digging a little hole here and there and planting seeds. As I plant each one, I hope it will grow and some, I vow to water regularly and others I leave to the rain to water and nourish. At the end of the day, I am tired and can't see the fruit of my labor. Ever so briefly, I voice the word discouragement in my head, but just as quickly begin thinking about the seeds that I will plant tomorrow and which ones I will go back and water and which ones will get the precious amount of fertilizer that I have in my trunk. It is hot, and I am thirsty.
When I get home, I see my neighbor out in front of his house, sitting under the shade of a tree that I don't remember seeing when I left. The sod at its base is disturbed a bit and I realize that while I was gone, he must have planted the tree. He is sipping on cool lemonade. As I unload my shovel and seeds, I am at once jealous and envious, but push those thoughts down as I complement him on his tree.
You see, the neighbor focused his energy on digging one deep hole and instead of planting a seed, he went out and bought a mature tree. That tree required the deep hole to accommodate the mature root ball. He was able to plant it (likely with a little help) and restore the ground and the sod around it and was able to enjoy the shade it provided.
This blog and the other things that keep me busy most days are the seeds that I continue to plant around town. And because of who I am, the most important of those seeds (the blog, the Executive Girlfriends' Group and helping friends with early stage companies) will still get water and fertilizer. And grow they will. No doubt about it. But none of them will provide the much needed shade from the heat of the day or shelter and respite for the birds of the air.
My deep hole is TripPlanz, a technology tool set that got its start with the launch of HotelsbyHospitals.com, back in 2007. I have invested a significant amount of time and money in rebuilding the platform so that it can be implemented by organizations on a private label basis for their venues and events and this is the year for that business to flourish. In 2013 we did a pilot with Tributes.com, trip-enabling their obituary product for people wanting to travel to funerals. We are about to launch a pilot with Children's Miracle Network for people needing to get to someone's side due to illness or an accident. We are also investing in building out some new modules to allow us to expand into building out microsites for various categories and also for event venues and the events hosted there.
Soon, you will definitely see me sitting under my shade tree, drinking lemonade.
What is the deep hole that you should be digging right now? What are you doing to make that happen? What do you need to stop doing to get there?
Stay tuned for stories about my progress.
Friday, January 31, 2014
Tuesday, January 07, 2014
If you don't have a dashboard, we recommend that you build one and make it a part of your business review process. That review should happen at minimum monthly, but in businesses with more activity, it could be weekly or even daily with a subset of the metric elements listed below.
Every business is different, so you will want to customize your own list of key performance indicators (KPIs).
Here are some of the things that we recommend for your dashboard. Where possible you will want to have a goal or target number to aspire to, so that you can see how you are doing.
- Number of transactions and average value per transaction Take your total revenue and divide by the number of total transactions.
- Graph with total revenues by month for the last year, compared to previous year (unless you are a new company)This visual allows you to see and understand your seasonality. Comparing year over year is a better metric in most businesses than comparing month over month growth.
- Graph with total transactions by month for the last year, compared to previous year (unless you are a new company)This visual allows you to see and understand your seasonality. Comparing year over year is a better metric in most businesses than comparing month over month growth.
- Average revenues generated per employee
Take your total revenues and divide it by the number of employees in the company. If your company uses contractors for daily tasks (versus just special projects), include that headcount in your calculation. This is known as revenue productivity and it should be compared to your goal. You can also do this geographically or by product line.
To develop your goal, we recommend that you go back historically to your most profitable time in the last decade and do the baseline for that period, looking at the headcount and the total revenue generated. Use that as your target number moving forward for your revenue productivity goal.
- Number of new customers, lost customers and the total number of customers
- Customer service staff to customer ratio
For those organizations with a customer service department, the ratio of service people to customers is also a key metric. If this number goes up over time, you may need to evaluate the complexity of your product or the effectiveness of your staff. It is also possible to have your product team work to impact this metric by reducing the complexity of your product or automating certain functions.
- Cost of acquiring customers (or a transaction)
This will vary depending on what kind of a business you operate. Many companies report this on a per transaction basis versus a per customer basis. For online companies, this would be your cost of advertising and keyword buying and any other marketing effort directly concentrated on attracting customers, divided by the number of sales.
- Conversion Rate (for online companies)
In online travel, we refer to this as the look to book ratio. In this metric, we measure the number of transactions versus the number of unique visitors.
- Average Length of Stay (for companies with informational sites)For many companies, getting someone to stay on the site longer can actually impact the average transaction value, or the amount that they can charge advertisers to the site. This information is generally available from your web analytics company.
Tomorrow, we'll talk about rewards for your staff (and for your customers).
Monday, January 06, 2014
The premise: Can you cut costs and become more profitable?
Certainly spending less than you make is a key component to profitability. And the beginning of the year is a great time to look at your spending and make sure that you are spending smartly, in line with your goals for business growth.
There is definitely a smart way to cut costs that leads to profitable growth (i.e. still allowing revenue generation) and another way that will stifle progress (i.e. business stagnation).
As in most things that we do at Solutionz, we urge you to take a customer centric view of everything, including cost cutting. That is what we did to get through our own tough times.
NOTE: If you didn't read yesterday's blog about Customer Intimacy and Profitability, we recommending doing that before you continue, as we refer to the exercise from that blog.
I'd like to share a personal story from the economic crisis. When the crisis began, like most industries, companies in the travel industry just flat out stopped spending on anything non-essential. Oddly, consulting fell into this category, including growth and strategic consulting, which is my focus.
As a result of the corresponding impact on our company's revenues, by 2011 my Controller asked me to cut back on my travel and conference attendance in order to save money. His premise was that I could use Skype or other teleconferencing tools to meet with prospective clients and just spend more time talking to people on the phone. While on the surface that made sense, in order to jump start my consulting business, face to face dialogue was essential, as was attending industry conferences.
If you will remember, in 2011, we were finally seeing some signs of recovery. Since companies had made such deep cuts in 2009 and 2010, they were actually needing consultants to bridge the gap until they could replace the seasoned people that they had laid off. So while my Controllers intentions were good, his approach would actually have stifled our recovery. I had to strike while the iron was hot and I had to get creative in order to get some new business. I didn't stop traveling, but I did stay with friends, versus staying in a hotel and I planned further ahead to get advanced purchase airfares. I rented a house for conferences and shared with business colleagues, saving us all money on a per night basis. A friend who lived locally would then give us a ride to the conference, to save on car rental expenses. While these things may be a bit extreme for your team, I can assure you that if you ask them to find a way to still be customer (and revenue generation) centric, they can find ways to be creative and still get the job done.
Your people are your greatest asset and your greatest resource to get you to the next level of profitability. Empowering them to do so will have amazing positive consequences on your company's culture.
So here is your checklist for tweaking your profits:
- First evaluate your non-essential costs, starting from the outside of the circle inward (see yesterday's exercise). In looking at their impact on the inner circle, determine what would happen if you simply did not spend in this area, or if you shifted something else, such as eliminating multiple levels of permission for certain decisions or multiple steps in a process that may not be adding value to the customer.
- Think long and hard before you eliminate your front line (either in sales or service), as supporting customers and tapping into them for new revenue streams is never "non-essential". Longer term business development may be able to be deferred, but never ever cut new sales, as it is the lifeblood of any business. If you didn't read yesterday's blog about distribution channels, we recommend you go back and look at whether you can sell your product through third parties that may reduce your direct salary expenses, without the loss of revenue.
- See if you need to re-allocate any expenses to revenue generation, making sure that your headcount and expenses in business development and sales are in line with your growth goals.
So can you cut your way to profitability? Be smart about it. Cut from the outside in if at all possible. And if you haven't done this exercise, put it on the agenda for your next staff meeting.
Sunday, January 05, 2014
Thanks to Bob and Kristi for having me on their show TruNorth Global. My apologies to Bob for getting his name wrong on the show. I definitely needed a vacation!
New Business Podcasts with TruTalk Live on BlogTalkRadio
Friday, January 03, 2014
This week our Success Checklist series begins with looking at your channel choices for product distribution.
Whether you are selling shoes, electronics, airline tickets or hotel rooms, how you distribute your product does matter.
If you sell anything, your New Year's Resolution should be to improve your overall profitability. There are lots of ways to be more profitable, such as spending less than you make, but for the purpose of this blog, we are going to talk about distribution.
So you should just sell more. Right? Wrong. All channels are not equal and pricing is a key factor of distribution. You need to arm yourself with information to make smart distribution choices.
- Find out what channels that you are using to sell your product. Include every possible way that people can buy from you, including one or more retail stores, catalog(s), phone/call center, your website, links on social media (Facebook, Pinterest, etc.), third party retailers, wholesalers (that may package your product in with other products). If you are not distributing your product through third parties, ask yourself why. Then look at your options. Bigger actually can be better, but not if the cost is too high or the terms are too onerous or too strict (e.g. demanding exclusivity before they prove their worth to you).
- If you do distribute through multiple channels, make sure that you are tracking what channel your sales originate from (even if the original inquiry is made on another channel). There should be a field in your sales database for Referral Channel and Sales Channel. If you are not sure, go ask your CFO is this is tracked. If not, see if you can add it.
- Know your average unit price for each channel. While one channel may have huge volume, it may be at your lowest price, in which case, it is not necessarily your best channel. If you sell multiple products, you can track this by type of product, or you can average all of your products together. Take the total sales for the group and divide it by the total number sold. That is your average unit price.
- Know all of the costs for each channel. Do you have a sales rep that calls on third parties? What is the cost of your call center to support your website? How much do you spend to produce and mail your catalog/brochure? You may be driving business to your website, but may be offering a lowest price guarantee and you may have higher costs than third party channels. This is a classic mistake. Take your total direct costs by channel and divide it by the units sold through that channel and that is your unit cost.
- Know the conversion rate for each channel. Quite simply, conversion rate is the percentage of people that buy your product versus those that just come in (or come online) to look. Online, it is sales divided by the number of unique visitors. In catalog sales, if you distribute 100,000 catalogs, but only get 10,000 orders, that is a 10% conversion rate. For the call center, it is the number of people that buy divided by the total number of calls.
Here's to a more profitable, smarter 2014.
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