Small Business Success

Busy entrepreneurs, especially those flying solo, are often wearing too many hats and, for many, their energy is scattered on a wide variety of tasks. This leaves them at risk of losing their business focus. We look at a secret formula, which provides much needed focus and will ensure small business success - regardless of the prevailing business conditions. The Secret Formula For Business Success - Your Prime Focus is Always on Your Customers The needs of any business are best met by meeting the needs of your customers. If you concentrate on delivering the best value proposition in the market, you will keep your customers very happy (and your competitors scrambling to better their product offering). Happy customers will buy your products and will become raving fans who will volunteer their positive experiences with their family and friends. This word of mouth advertising is like having a raft of sales representatives working diligently for your business - and all for free. Continually seek the 'customer voice'. Use the actionable insights they provide, to continue to develop innovative product offerings, that satisfy your customers needs, and makes you a market leader amongst your competitors. The Secret Formula for Business Success - Build Your Sales and Your Profits For a small business to be successful in the long-term, they need to be able to sell and be profitable. If sales are through the roof but it costs more to develop and sell the product than is being sold, or the operational cost is more than the sales being generated, it is virtually guaranteed that the business will, at some point, become financially unviable. A lot of entrepreneurs make the mistake of making Sales Turnover their number one key performance indicator. Replace this with the Profit key performance indicator and watch how each element of the secret formula for business success impacts the bottom line. The Secret Formula For Business Success - Continually Acquire New Customers In the early stages in the life of a small business, entrepreneurs get busy working to get those initial sales. As the business becomes more successful, there is a tendency to rely on key customers to maintain their sales turnover. This will keep your business going but it is not going to help it to 'growing'. If a business relies on a few key customers, it puts itself at risk, should any of those customers choose to use one of your competitors or they simply go out of business. You must continually acquire new customers in order to grow. To increase your customer numbers you need to increase the number of likely or qualified prospects and then focus on improving the rate at which you convert your prospects into product-purchasing customers. The more efficient your business is at identifying, locating and qualifying prospects and then translating them into paying pundits, the faster your small business will evolve into a profitable, plus-sized business. 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Some are through natural attrition, some because they have moved or relocated, some because they have a family or friend who are able to supply them with what they need. But these represent a small percentage of the total. Research has shown that massive 68 percent of customers defect because of 'perceived indifference' i.e. that your business didn't show any real interest in them so they are indifferent to your business. This is fantastic news. Now don't fall off your chair screaming "a lost customers is never good". It is fantastic because there is every possibility you can retain these customers. As in the case of customer acquisition, the more quickly you can identify the potential loss and turn them back into paying customers the faster the rate of growth your small business will experience. To excel in customer retention it pays to again hear the 'voice of the customer' to develop appropriate processes to improve the rate of retention. Mathematically, customer retention can be represented as: Past Customers x Retention Rate = Retained Customers The Secret Formula For Business Success - Increase the Size and Quality of Your Customer Base Increasingly, the value of a business is being influenced by the size, quality, relevance and number of currently active members on its customer database. The reason being is that businesses who are on an acquisition path recognise just how much time and effort is involved in building a customer base and the potential value in that work already being done for them. They simply add the new customers to their own customer base and cross-sell their existing product line. Result - rapid business growth and significantly increased sales revenues. In terms of product sales it is important to remember that it is a numbers game. Typically, the more people to whom you can expose your product, the higher your sales are likely to be. Along with developing an extremely efficient sales conversion process, it is important to remember that when it comes to your customer base - size definitely matters. New Customers + Retained Customers = Total Customer Base The Secret Formula For Business Success - Increase Sales Frequency For businesses with repeat purchases, there is often a typical sales cycle for replenishment or replacement of a product. For example, a business may replenish stationery supplies every quarter. If you could increase this to monthly it would help increase the sales frequency from four times a year to twelve. Always work to encourage your clients to purchase on a more frequent basis. The Secret Formula For Business Success - Increase Sales Amount Every small business should be looking to up-sell, cross-sell and bundle at every opportunity in order increase the size of every single order. This is typified by the old would-you-like-fries-with-that catch-cry. It may seem such a small thing but it can have a huge impact on the bottom line. The Secret Formula for Business Success - Increase the Price I often am asked by entrepreneurs about how to best price their products. My response, "set the price at as much as your customers are willing to pay". Many business owners have to be convinced to increase the price of their products, as they believe the customer will not pay the newly inflated price and fear losing a huge amount of custom should they do so. More often than not, (provided the customer is not being gouged) sales volumes are only minimally impacted while the sales revenue is significantly increased. The Secret Formula for Business Success - Increase Sales Turnover The above three elements combine to impact on the Total Sales Revenue figure. It is represented by the following equation: Customer Base x Sales Frequency x Order Amount x Price = Sales Revenue Essentially, if you work to increase one of the elements in this equation chances are you will dramatically improve your sales turnover amount. But the magic of this secret formula is that if you focus all of your energy on all of the elements in this formula and improve them, even by the smallest amounts, you are guaranteed to grow your business at an exponential rate. But don't forget that this is a secret - don't tell anybody! Karen L. Paiyo is an Australian Small Business Counsellor, supporting and nurturing the spirit of entrepreneurship in the Asia Pacific Region. Karen empowers small business owners by transferring to them the skills and expertise needed to help them take their business ideas from creative concept to profitable reality, faster and with less risk.