Introduction
In our last Business Bite, we explored how smart CEOs make vacation a priority to recover, recharge, and refocus. This time, we’re diving deep into a crucial aspect of business success: strategies to increase revenue!
Profit = Revenue – Cost
The secret to increasing profits is simple: increase revenue and decrease costs wherever possible. Today, we’re going to focus on increasing revenue, and in two weeks, we will discuss decreasing costs.
As entrepreneurs, our goal is to make as much profit as possible. Profit measures how much your customers value your products and services and how efficiently you deliver that value. At Malloy Industries, our North Star Metric is gross profit.
Profits benefit all of us! Profits provide cash for shareholders, for managers’ and employees’ compensation, and for investment which creates growth, which in turn creates rewarding career path opportunities. When profits slow down, everyone suffers.
Quick vocab lesson (with gross profit margin and net profit margin formulas at the bottom):
Revenue is the amount of income generated from the sale of a company’s goods and services.
Gross profit is the income remaining after Costs Of Goods Sold (COGS) have been subtracted from revenue.
Net income is the profit that remains after all expenses, interest on debt, and taxes have been subtracted from revenue.
1. Focus on Strategic Costs and Activities
Profit is the most accurate measure of success, and to maximize it, you need to spend intelligently. Strategic costs, those that directly bring in business such as salespeople and effective advertising, must be a priority. Great organizations will outspend competitors on strategic costs (as % of revenue) in good times and bad times. This requires intelligence and judgment. Whoever can spend more to acquire the customer, wins. Likewise, strategic time is any time spent on activities that produce profits.
Pro Tip: Begin each workday by dividing your tasks into 3 lists:
- Tasks to bring in new business or expand the lifetime value of existing customers (i.e., increases revenue)
- Tasks to maintain existing business or keep an existing internal operating system running
- Tasks that someone expects or wants me to do (i.e., your email inbox), but which really adds no value to the bottom line
You never start on your second list until you’ve done everything on the first list. You never start the third list until you’ve done everything on the second list. You have to make sure that the most important things are completed with the most urgency, intensity, and zest.
2. Don’t Waffle…Decide.
1. Prioritize Strategic Costs and Activities
A major barrier to revenue growth is overanalyzing decisions and waiting for all the perfect information. You will never have all the information. If you’ve got ~50-70% of the information, then it’s time to decide. Decide literally means “to cut off.”
Here’s a trick from a Harvard professor: Any time you are faced with a decision and can’t make up your mind, give yourself 2 seconds to decide. Not later, right now. 9/10 times the ‘2 second’ and the ‘heavily researched’ answers are the same. Entrepreneurs need to avoid getting stuck in analysis paralysis.
Pro Tip: Next time you’re feeling stuck, make a 2 second decision and see what happens. Speed is a force. Do it now. You’ll be amazed by how much more productive your company can be when you create a culture that sets tight deadlines for decisions.
2. Don’t Waffle…Decide!
Indecision can be a major obstacle to growth. Learn to make decisions efficiently.
A major barrier to revenue growth is overanalyzing decisions and waiting for all the perfect information. You will never have all the information. If you’ve got ~50-70% of the information, then it’s time to decide. Decide literally means “to cut off.”
Here’s a trick from a Harvard professor: Any time you are faced with a decision and can’t make up your mind, give yourself 2 seconds to decide. Not later, right now. 9/10 times the ‘2 second’ and the ‘heavily researched’ answers are the same. Entrepreneurs need to avoid getting stuck in analysis paralysis.
Pro Tip: Next time you’re feeling stuck, make a 2 second decision and see what happens. Speed is a force. Do it now. You’ll be amazed by how much more productive your company can be when you create a culture that sets tight deadlines for decisions.
3. Sell the Value, Not Just the Product
Here’s what you need to know about marketing: You’re not selling a 3/8 drill. You’re selling a 3/8 hole. And what you’re really selling is a beautiful picture hanging on the wall after you create the 3/8 hole for them.
Your customers aren’t buying a product. They’re buying the solution and the transformation it provides. Focus on the value and results your product or services delivers. It differentiates you from competitors to justify a higher price point.
Pro Tip: Make it clear to your prospects that your solution will not only meet but exceed their expectations. Memorize this phase to include in the end of your emails, “I am certain that we will more than meet your needs.”
4. Invest in Your Sales Team
No investment will yield a greater return. Salespeople sell. Every salesperson has a built-in and financially motivated need to sell. Salespeople communicate with future customers and generate sales. The best salespeople are coin-operated.
Make sure you have enough salespeople. Make sure the salespeople spend their time with the customer, and not doing administrative work or other things. Hire enough relatively low-paid clerical people to support the salesforce. This frees up the salespeople to spend time with customers.
Hire salespeople who understand how to sell and how to make a profit, not people who know the product. People who truly know how to sell are the rare and valuable ones. Anyone can learn the product line. Invest in sales training, focused on true selling and profit-making skills, not just product facts.
Pro Tip: Get a fractional sales executive from Malloy Industries to train or coach your salesforce about the tactics and strategies they can use to increase your revenue. Your salesforce is your most important asset and your engine for growth! Investing in your salesforce is a strategic cost that will pay dividends.
5. Key Ingredients for Completing a Sale
- You must show your competence. Your product is good, you’re reasonably smart and a nice person, you’ll provide good service. Most basic ingredient.
- You must show you empathize with the customer personally. You are selling to a person, not a company. People buy from people. When you become a father or mother, you also become a much better salesperson because you can empathize with the joys and anxieties that many clients feel as parents, and can form a better bond with them in that initial conversation when you walk in the room.
- You must convince them you’ll stand in front of a truck for them. Make them feel like you are absolutely dedicated to meeting their needs by applying all of your skill and energy single-mindedly to support them. “If you hire me, you will have the most dedicated, energetic, loyal support person you’ve ever had. I will be even more driven to meet your needs than you are yourself. I’ll stand in front of a truck for you if that’s what it takes.”
- You must make it clear that you don’t need them. To say it another way, you sell by making yourself scarce.
- Use reciprocity to transform your personal interest and empathy into their personal obligation to you. Almost all people on the planet think of themselves as fair and ethical. As a salesperson, you need to hold them to that fairness standard. If you’re going the extra mile for them, then it’s fair to give you monetary return for your efforts.
Pro Tip: During your sales process, focus on your client’s personal needs and the real reasons they want your product or service. People’s true agendas could include: leave work earlier for more family time, coach kid’s sports team, get a promotion, avoid being fired, educate others, sleep better at night, or other personal reasons. Learn what drives them, and speak to those needs.
Transform Profitability, Transform Your Business
Doubling your profits means increasing your sales revenue, and sales is the attraction business. Each of us buys things from people we like, are attracted to, or at least intrigued by in some way. Part of a successful sales process is to project attractiveness (broadly defined) to the future customer. Attractiveness means charisma, manners, likeable personality, sense of humor (how many dad jokes have you heard from me…), good listener, easy to talk to, dressed well and appropriately, in good shape, and properly groomed. Attractiveness all by itself won’t do it for you, but it’s absence will definitely hurt you.
A profit-driven culture requires a shift in focus to improve financial health. It also simplifies operations, empowers your team, and creates focus on what truly matters. By prioritizing strategic costs and activities, making quick decisions, selling the value, investing in your sales team, and remembering the 5 key ingredients for completing a sale you will increase your bottom line and nurture a more effective and motivated team.
Would it be helpful to double your profits?
Book a free 30-minute Scalability Audit
P.S. Whenever you’re ready, here’s how we can help:
1) See if a Fractional Executive is right for you to scale your company with top-tier talent on your terms. No pressure to hire, just the chance to talk about your unique situation and interview 2 vetted candidates (plus a third on request) who could help.
2) 1:1 CEO Coaching to lead your company more effectively and work through challenges. Email us if you’re interested because we only have 1 coaching spot open this quarter.
3) Free Entrepreneur Roundtables for entrepreneurs seeking advice at any stage to come in with problems and leave with a new lens to examine their business, helpful DIY resources, and potential solutions. Join me on Wednesdays in October at 4pm ET on Zoom.