June 2014
Profit Focus Increase profit using customer account profitability GrowthAccelerator – is it for you? Pricing for profit – how to make sure your pricing meets your objectives ABC of Confidence by Gail Powell – what’s stopping you achieving your goals? Adwords – how to use negative keywords to reduce cost and increase click through rate Go-Giver coach Pete Evans talks about having massive impact on your clients by changing your approach
A Note from the Editor About Us Collaborative provides customer focused financial & business growth advice to small to medium enterprises with just ONE aim – to make your business cash rich and profitable. To make more profit, you first of all have to know where your profit does and will come from, which is why we focus on your customers, your products and your numbers. Our belief is that every person has the right to be successful in life and in business. By improving efficiency and focusing on the best use of time and resources, business owners can have a more balanced life and add value to their team and their clients, all of which ultimately leads to a more profitable business.
I am so excited to present the very first edition of the Collaborative digital magazine. Profit Focus is the title of our monthly magazine – it does what it says “on the tin”. It is written to give ambitious business owners the ideas, the guidance, the knowledge they need to make their businesses more profitable. Each month we will have advice from leading experts in their field, covering sales, marketing, finance, social media, leadership and management. Business growth is not all about theory – it’s about putting ideas into action, so you’ll find the articles are practical and challenging, with many of them containing video to make sure you get the most out of the advice. Customer value is our topic for this edition. We are going to explore how you can increase the profit you make from your customers, whilst also adding more value to their businesses. Enjoy!
CONTENTS
Page Number
Article
3
Pete Evans – the Go-Giver approach
4
Fruit Tree Business Growth Club
5
Pricing for Profit
6
Customer Value – how to increase sales & profit
8
Client Focus – Countersales UK Ltd
9
Adwords – negative keywords
Guest Writer Pete Evans Altum-V Ltd
Are you a
Go-Giver? Megan Rodd is an amazing person who at the age of 7 has already raised thousands of pounds for her chosen charity. Megan has a clear vision and purpose. So what can we learn from a 7 year old. From the age of 5, Megan has been raising money for Leeds Rugby Foundation. Megan whilst having completed many fundraising activities already has many more planned. Her stated aim is to raise money to make a difference to those people who are far less fortunate than she is. Meeting Megan made me think again about the five laws of stratospheric success from "The Go-Giver" by John David Mann and Bob Burg. With her clear passion, drive and commitment Megan is demonstrating all the five laws. Within this posting I want to discuss some of the key principles and how Megan is applying them. Let’s start with Law 1, the law of value which states that your true worth is determined by how much more you give in value than you take in payment. Let’s consider what Megan is doing. She has set herself a series of challenges to raise
money for her chosen charity. Whilst she is not receiving direct payment and is raising money, she is clearly offering more in value than she takes in payment. The monies raised are used to deliver projects within the heart of the community. Harnessing the power of sport to make a lasting, positive impact on individuals' lives. So let's consider law 2, which is the law of compensation which states that your income is determined by how many people you serve and how well you serve them. Let’s consider what Megan is doing. She has a number of different fund raising activities which are encouraging and motivating other people to raise money for the charity. She has also recognised the fact that the more she raises the more impact the charity can have. Law 3 is the law of influence which states that your influence is determined by how abundantly you place other people’s interests first. It is clear that Megan is putting other peoples’ interests first. As her mum, Michelle, points out, Megan never stops thinking about others. When we put others
interests first, we are capable of achieving outstanding results and this is what Megan has achieved. Law 4 is the law of authenticity which states that the most valuable gift you have to offer is yourself. Megan is completely authentic. She loves her rugby team, Leeds Rhinos. She believes that the charity of Leeds Rhinos is a very worthy cause and has a massive impact on people's lives. Megan is undertaking fundraising activity which is aligned with her vision and purpose. Finally, Law 5, the law of receptivity states that the key to effective giving is to stay open to receiving. Megan has clearly demonstrated that she is open to receiving, Her openness to receive means that she is able to continue giving by carrying on her excellent fundraising activities. When we have a clear purpose and vision we can achieve amazing results. Where we shift our focus from getting to giving and are authentic, we have massive impact. At the start of this week, ask yourself how aligned are you with your vision and how focused on providing true value to others are you? Pete Evans, Altum-V Ltd
Call us today on 07826 247856 or click here to register interest The Fruit Tree launches a second business growth club. Following the extremely successful launch of its Doncaster branch, The Fruit Tree business growth club is expanding into Pontefract. The Fruit Tree helps you grow your business quicker and easier by providing you with essential nutrients: • • • • • • •
A support system Business coaching Personal development Peer mentoring Cost savings Referrals Strategic alliances “The Fruit Tree has generated over £60,000 of sales in 8 months for my business.” Malcolm Saul, Travel Counsellor
“The training has helped me improve the way I work and has increased the referrals I receive.” Andrew Austwick, Donbac
“The Fruit Tree is the most effective and comprehensive type of business development networking we have ever used….and we won’t use any other.” Jon Lister, Managing Partner Enterprise Chartered Certified Accountants
“Since joining the Fruit Tree not only have I met brilliant and friendly business associates, the Fruit Tree has improved my confidence in a business environment.” Kerry Maddison, Commercial Property Lawyer, Taylor Bracewell Solicitors
Pricing for
Profit
Click here for the video which accompanies this article In this article we’re going to examine ways in which you can optimise our prices in order to make the profit figure you need. The first thing you need to do in determining price is to know your cost base and the profit you need to make. The second thing is to ensure your price helps you achieve your chosen strategy. For example, if you want to build market share you may decide to reduce your prices for a while in order to do that. Once you have this in place, and you know the numbers behind the prices, you can begin to use a few “tricks of the trade” in order to flex your prices to maximise your profit.
Pricing is very subjective – what one person will pay for something can be very different from another. So it’s key to understand what your target client values prior to deciding on the right price for your particular product or service.
It’s your job to make sure you understand those influences.
Knowledge plays a key factor also. For example, if I wanted to buy a car and previously bought VWs, if I went to buy an Audi I might not know the RRP. The level of your client’s knowledge about “normal prices” will influence what they’re willing to pay.
An indicative price at the outset of your negotiations will influence the decision the buyer makes on your final price.
When they need it will also influence their decision. If your boiler breaks and floods the house with water, you’re more likely to pay more than if it’s just a routine upgrade.
Positioning:
There are many factors which influence price -
You can also use clever techniques to use your pricing as a profit tool. Price Anchoring:
Bundling: Where you package products together at a discounted price.
The way in which you present a comparison between one product and another. For more detailed guidance click on the video link here.
Customer Profit Profit = Sale less cost. But can you attribute this profit to each of your customers? In the first of our Smart Profit Growth series, Michelle Reynolds looks at how to calculate customer profitability and why it’s such an important measure to have in any business.
Customer Profit – why is it necessary to calculate it?
If your business doesn’t have customers, then you don’t have a business.
And yet so few companies have a real handle on which of their customers are most profitable.
You’ve heard of Pareto’s law I assume? The theory is that 80% of your profits come from 20% of your customers. It follows, therefore, that if you can establish which clients make up that 20% you can find more of those types of client. It also makes sense to review the remaining 80% and figure out whether you want to keep them, work on reducing the cost of serving them, or ditch them!
The way in which you can calculate customer profitability is relatively straightforward. You simply have to follow the 3 point process I’m outlining in this article. So here goes…
Gross Profit In order to calculate gross profit, you need to take the cost of sale away from the sale value. For example, the selling price less material and carriage costs. Cost of sale will also include labour costs if they are genuinely variable with sale. If you pay your staff regardless of whether you sell anything, then do not include their costs.
It is usually easier to work out gross profit by each product you sell, record how many of each product you have sold to each customer, and multiply the quantity sold by the gross profit per product.
No of Products sold x Gross Profit per Product At this stage we have a great picture of how much gross profit we have made out of each of our customers, which in itself can be extremely useful information. But ideally, we need to take it a step
further and include the cost of actually gaining and retaining that particular client (as that’s usually where some customers can become a little costly). Customer Service Costs Think about it – how many times have you had to take a call from a client to resolve a problem with their order and thought “not them again, these guys just aren’t worth the hassle”? Well, now is the time to work out whether your assumptions are based on hard fact! Start by making a list of all the cash you pay out in order to gain and retain clients. Costs including: • Productive labour • Administration costs • Premises costs • Sales team
bank of sales guys, in which case you could assume that the more you sell to each client, the more cost you should allocate to them. Or you might record how much time they spend with each client and allocate their costs based on time (this is the best way by the way). The drivers will be specific to each type of cost. Try not to cut corners at this stage and make it as realistic as possible to get the most accurate answer. Non Value Added Costs When you’ve gone down your list of costs and established which ones help you gain and retain customers, you will find that you have a bank of costs left which add no growth value. We call those “non valueadded costs”. Given that you are in business to gain and retain clients, then by definition these costs add no value to your business.
• Account managers
The aim is to reduce these non value added costs by improving efficiency and either bank the cash or invest it back into activities that will grow your business.
• Quality control costs
Conclusion
These are typical costs incurred to service a client, but you may have more or less costs.
Customer Account Profitability can be relatively straightforward to introduce and will help you identify which customers are worth dealing with, will focus your marketing efforts, increase your efficiency and ultimately increase your profit and improve your cash flow.
• Marketing & advertising
For each of these costs, think about how you could allocate them to each of your customers. It’s good to think about what “drives” each cost – why are they incurred. For example, each member of your sales team may have their own key accounts in which case you would allocate their costs specifically to those clients. However, it may be that you have a
For more information, get in touch with Michelle at Collaborative.
Client Focus In this section we introduce one of our clients, each of whom will share some of their hints and tips for building a successful business. Client: David Paley, Countersales UK Ltd www.countersales.co.uk
Background of the Company
How did we help?
The company we’ve been working with sells electronic products to wholesalers, manufacturers, engineers and designers. He sells thousands of products to thousands of clients in the UK & Europe.
In order to advise David on where to invest his time and money for the greatest return, I needed to have a good look through the numbers.
It has been in operation for over 10 years and is successful.
I showed David where the sales opportunities were – the profitable ones.
However, in recent years its gross margin has been under pressure which has resulted in a reduction in absolute profit.
My review encouraged David to invest in software which automated the sales order & invoicing process to make it much less labour intensive.
The Owner of the Company
David changed his marketing strategy to focus on the right products and customers.
The managing director, David, has been in this industry now for over 25 years. He bought the business over 10 years ago and has increased revenue by 20% year on year. He has an MA in Marketing so is very aware of how he needs to focus on getting his products out there in order to bring in the sales. David also understands the importance of setting targets and monitoring his financial performance, which he does every month. The Numbers He is pleased with the fact that over 80% of his monthly orders come from new customers. A great achievement in itself. His costs are under control (he sees to that). Sales are increasing. But the gross margin is falling. A situation that “goes against the grain”.
I established which of his products and customers (market sectors) were most profitable.
He spent more time with his customers and suppliers in order to increase loyalty. Colin now works with David’s company each week to monitor his Adwords campaigns, stay in touch with existing customers regularly and make new contacts via LinkedIn. In just 6 months we’ve seen: • Bounce rate reduce from 65% to 27% • Cost per click reduce from 69p to 47p • Sales per Click increase by 185% • Average order value increase by 250%
David has recorded a video with marketing tips for other business owners. Click here to watch it.
Adwords How do you minimise cost and maximise the benefit?
At Collaborative we focus on helping clients make more profit from their marketing spend. In this article we’re looking at how to use Adwords to drive profitable traffic. Did you know that, sometimes, particular keywords can drive the wrong traffic? For example, say you sell glasses – you’re an optician. You don’t sell wine glasses or drinking glasses. If you simply use the word glasses in your Adwords campaign you can end up paying for click throughs from people who actually wanted to find wine glasses. You may think that this wouldn’t happen – why would a consumer click on your advert when it was clear from the description that you were an optician. But you’d be surprised how many clicks you can get if you don’t add the negative keywords “wine glasses” to your campaign.
3 top tips for identifying negative keywords
1. Use Google keyword tools. Using the search tool within keyword planner you can type in your keyword and ask Google to suggest ideas (via the get ideas button). This will list down all the keywords it associates with your word. Scan down the list and make a note of the words which don’t relate to your campaign. These are the negative keywords you can add to your campaign. 2. Google analytics. When you have an Adwords campaign and traffic is coming to your website, your Google analytics account will tell you which keywords are being used to get to your website. Go through this list regularly to add those keywords which are not relevant to your product or service. 3. Use your own knowledge. Take time to think about the intent behind someone buying your particular product or service. For example, if someone is looking for repairs for a particular product, but you only sell (not repair), then phrases including the word “repair” should be added to your list of negative keywords.
Call us today on 07826 247856 What is Growth Accelerator? “GrowthAccelerator is a unique service led by some of the country’s most successful growth specialists – where you’ll find new connections, new routes to investment and the new ideas and strategy you’ll need for your business to achieve its full potential.” The aim of the service is to help you get to the heart of the barriers that are holding your business back and work alongside you to identify the critical steps you need to take to achieve your next phase of growth – rapidly and sustainably.
How could Growth Accelerator benefit your business? Using interactive tools, you will assess the current direction of your business versus its future vision and work to a bespoke high growth plan. You’ll be able to lead your team with a clear vision, plan and structure, and empower everyone to make planned growth happen. Learn company-wide review and improvement processes to refresh your approach to people management and financial control. You’ll have access of up to £2,000 match funding for senior managers to undertake leadership and management training to help motivate your team in the drive for higher growth.
Is your business eligible? Simply answer the following questions to see if you’re eligible: • Are you determined to grow? • Is your business registered in the UK & based in England? • Do you have fewer than 250 employees? • Is your annual turnover under £40 million?
To find out more click here.
For those of you into golf, check out this article to find out how to improve your game
I am going to share with you the amazing secret discovered by a golfer with a very strange affliction! You will learn how you can use your natural ability to really commit to every drive with almost 100% more power overnight… achieving shot after shot exactly where you want it, as accurate as clockwork, and taking loads of shots off your next round! Impossible I hear you cry? Not if you listen to the story I am about to tell you concerning the amazing golfer who played with all the consistency that would drive any Golf Pro nuts to find out his secret! If you have ever wanted to drive a golf ball with the all the explosive velocity of placing an unopened can of beans in a microwave…whilst hitting all your fairways and greens with masterful precision…then you had better listen closely! Here’s what this is all about: A golfing friend of mine, Simon, was asked to join up with a guy for a tournament at his Club. He appeared to be having trouble finding someone to partner him. Being the amiable kind of fellow my mate Simon is, he was quite happy to oblige; he was also somewhat intrigued as to what could be so offputting about Tommy Jones that no-one wanted to pair up with him. Fortunately, Simon was the sort of guy who would use any situation to learn what he could to help him to improve his game! What his story revealed is an amazing secret that can be used by ANY golfer to improve his game, but firstly back to the story... Simon realised, as he wondered over to the first tee to meet Tommy that they had met earlier and had passed a few words at breakfast. ‘Hi’ Simon called as he approached and Tommy nodded – Simon put out his hand in a gesture to shake and reminded Tommy about their earlier meeting. Simon was completely confused by Tommy’s very bizarre response to him. Simon spent the first three holes trying to decide whether Tommy was completely rude, not very bright, or there was some other reason for his seemingly very strange behaviour. All Simon was really interested in though was how Tommy managed to play such fantastically consistent golf! Doesn’t it drive you nuts though? That issue of consistency – you have a short run of playing amazingly well and then out of the blue the most hideous shot appears! Then another … then another … and then a really good one saves you just before you are ready to wrap that 6 iron around the nearest tree. Tommy did not suffer from any such inconsistency to his game at all. So what was Tommy’s secret? How did this guy manage to play such consistent golf and what was behind his bizarre behaviour? I would like to tell you, but I have now run out of space to do the story justice. Fortunately, I have written up the whole story for you in a FREE REPORT; giving away his secrets to help you to start achieving the consistent results you seek. If you go to the Home Page of www.golfmindguru.com and sign up for my FREE Newsletter you will also be sent the rest of Tommy’s Story for FREE – no strings, no obligation … just fascinating reading!
About Us Collaborative provides customer focused financial & business growth advice to small to medium enterprises with just ONE aim – to make your business cash rich and profitable. To make more profit, you first of all have to know where your profit does and will come from, which is why we focus on your customers, your products and your numbers. Our belief is that every person has the right to be successful in life and in business. By improving efficiency and focusing on the best use of time and resources, business owners can have a more balanced life and add value to their team and their clients, all of which ultimately leads to a more profitable business.
Here’s how to contact us: Phone Michelle on 07826 247856 – she deals with profit improvement & business growth. Phone Colin on 07779 644749 – he deals with Adwords and social media strategy. Websites & Social Media: Website: www.improve-your-profit.com Facebook: http://www.facebook.com/smartprofitgrowth Twitter: http://www.twitter.com/collaborativeuk LinkedIn: http://uk.linkedin.com/in/michelleatcollaborative/