Sunday, July 31, 2011

Measure What You Expect!!

“Common sense is the collection of prejudices acquired by age eighteen.” ~Albert Einstein

Being an effective leader requires that you measure your expectations, otherwise there will be no way of evaluating your success or that of your business. In addition, things that are not measured typically get relegated to a low priority by staff. Finally, if you are not measuring all aspects of your business, you can make grievous errors in your decision-making, which can be so costly.

One way to measure outcomes or expectations is by using profit centers. Identifying profit centers helps you evaluate how effective each part of your organization is.

We were helping an aircraft servicing company develop a strategic plan. During these planning sessions, we discovered that 50 percent of the firm’s profits came from airplane sales, yet they had no one assigned to this activity full time.
When they saw the hard numbers, they redistributed their personnel to better support their sales efforts. Once they had employees devoted to selling, their sales soared. If they had profit centers or some other method of measurement in place, they could have acted on this much earlier.

For another example, a service company was struggling with sales that were falling at a rate of 15 percent a year. They just did not know how to stop the red ink from flowing. Part of the problem was that they had gotten so used to business coming to them they just did not know how to respond when this changed.

During a strategic planning session with the staff, it became apparent that they were drowning in red ink. Sessions also showed that they were currently devoting less than 1 percent of their total revenue to sales. Once they were able to see how the lack of support for their sales efforts was sinking their business, they decided to implement a very aggressive sales program.

One caveat with measurement is that you must make sure you are measuring the right thing. Quantifying operations is so important, but they must be tied to the mission of the organization. For instance, one firm spent so much time trying to quantify its bad debts that they missed the important fact that bad debts would naturally increase as their sales did. By focusing only on minimizing bad debts, they were greatly restricting sales by making credit standards too tight.

The Florida Sterling Council, with which I serve as a member of the board, offers great training on measurement and process improvement. I encourage you to look into these resources.

Now go out and make sure that you are measuring as much as you can without getting too deep in the details. The more you measure the effectiveness of activities congruent with your mission, the more successful your organization will be.

You can do this.

Monday, July 25, 2011

Fast Tracking Your Staff

Fast Tracking Your Staff

“The future belongs to those who prepare for it!”
~Jim Moran~

As an entrepreneur, one of your most important tasks is planning for the future of your business. Most know that marketing, new products, finance and growth are important components of this task, but many overlook the most critical element: staff.

Your staff will not just wake up one day with the skills they need for the new position you want them to hold. Having your staff appropriately trained and ready to go when you need them is so important for the future of your business.

I was meeting with the very successful CEO of a business that had about 100 employees. When I asked him how he was going to acquire the staff he needed to lead his company in the next 10 years, he recognized it was a valid question but did not have a very good answer. He had never taken the time to think about what the business would need in terms of staffing and skills.

To nurture future leaders, some businesses identify staff members they feel have potential and put them on a fast-track program. These employees rotate through many different assignments and are intensely mentored to ensure they will be ready to assume greater responsibility down the road. Every year, they meet with the CEO to discuss their progress.

Another very successful method is to assign employees a senior staff member who can mentor and advise them throughout their entire career. The mentor is responsible for ensuring their mentee has the training they need, both from a knowledge perspective and a technology standpoint. Additional training is also provided with input from both the mentor and the mentee.

As part of the program, participants are given assignments that force them out of their comfort zone and expose them to other areas of the company. For instance, if the person is in the finance department, they spend time in marketing to give them a more complete understanding of the firm.

Many entrepreneurs are reluctant to implement fast-track programs because they fear it will show favoritism and alienate the staff members not selected. While this is true, it is still important to identify and train the employees that are capable of managing your business in the future. Without a fast-track program, you will not have the necessary staff in place and your business will not be ready to reach the next level.

Now go out and evaluate the skill sets your company will need for the next five to 10 years and do an honest assessment of your staff. If you do not have the requisite staff in place (most firms will not), consider implementing a fast-track program to groom your company’s future leaders.

You can do this.

Sunday, July 17, 2011

Pricing for Profits

“It is the superfluous things for which men sweat.”
~Seneca the Elder~

One of the most difficult tasks an entrepreneur has is pricing their products. Pricing is one of those things that requires experience and experimentation. Set prices too high, and revenues fall. Set them too low, and though revenues increase, profits plummet.

I was at a large flea market in South Florida one early Sunday morning and was carefully watching the vendors at the various booths. Every so often, a customer would come in, look at a product and make an offer below the listed price. Certain vendors would turn down the offer outright, and the customer would walk away. Some other vendors, however, took a different approach to selling the same type of product. These vendors would answer the low-ball price with a counteroffer, which typically led to a deal.

The first set of vendors clearly thought they were preserving their margin by not negotiating on price, where the other set of vendors was willing to give up some margin in order to make the sale. In both cases, there was very little chance of repeat business.

The lesson here is that if you are selling a homogeneous product with little chance of repeat business, anything you can negotiate above your cost is gravy. Obviously, you want to get as much as you can without losing the customer.
We were helping a neat lady who owns a catering business that has not been doing well financially. When we started talking about pricing, she said she takes her food cost and doubles it to determine the price she will charge for a given event. However, most restaurants want food costs to be under 30 percent of the price charged. This entrepreneur was charging $200 for an event that cost her $100 in food when, according to industry standards, she should have been charging more than $300.

Once I gave her the formula to determine the appropriate price (food cost times 3.2), her revenue fell by about 10 percent, but her profits rose out of the red and she made more money than ever before in a six-month period.

There are three general pricing methods. With the first, you take all of your costs and add an amount for overhead and profits to determine price. I call this the “cost plus” approach. A second method is to evaluate what your competitors are charging and set your price accordingly. A third method is to consider perceived value, which is the value your customers assign to your products and services.

As a general rule, you want your prices to be neither the highest in the market nor the lowest. Just higher than the average price for a similar product is probably a good place to be as consumers typically see a higher price as an indicator of greater value.

Clearly, your objective is to land on a price that is fair for your customers but also capable of earning you the maximum possible profit. Finding this optimal figure takes constant tinkering and continual monitoring.

Now go out and make sure your prices are appropriate and that you are monitoring them constantly to ensure they remain at the optimal level for your business.

You can do this.

Sunday, July 10, 2011

Really thanking your customers!!!

“No one ever attains very eminent success by simply doing what is required of him; it is the amount and excellence of what is over and above the required that determines the greatness of ultimate distinction.” ~Charles Francis Adams

Showing your customers you appreciate them goes a long way to instilling loyalty, yet so few businesses make this extra effort. Just look at it from the customer’s perspective. If all you ever see or hear from a company is a bill, you are not going to feel a particularly strong sense of endearment to that company.

Some business owners think an occasional e-mail to clients is adequate, especially if it is sent by one of their staff members. However, I strongly recommend that you, the owner, personally call and thank your clients.

A sporting goods store in Georgia sold all kinds of athletic equipment, from footballs to running shoes. One day, a woman stopped in and bought a single can of tennis balls. That night, the store owner called the woman personally to tell her how much he appreciated her purchase.

About two weeks later, the store received an order from the local university’s athletic program that more than doubled their total sales for the year. Come to find out, the lady that bought the can of tennis balls was the wife of the university athletic director. She had been so impressed by the owner’s phone call that she convinced her husband to use the store to supply all the university’s athletic equipment. I think anyone would agree this result was well worth the few moments the owner spent on the phone with this client.

Another firm we were working with followed this policy and saw a 30 percent increase in sales just from making these calls. The owner, who at first was very resistant to the calls, adopted this process as part of his daily routine after he saw how much fun they were and how his customers responded.

Keep in mind that a voicemail will not suffice. You really need to keep on trying until you are able to talk to the customer in person. It does not have to be a long conversation. All you really need to say is, “I really appreciate your business and I just wanted to call to say thank you very much.” This one little gesture will give you such a competitive advantage, as very few other business owners take time to make these calls.

Now go out and make sure you adopt the practice of calling your customers each day to thank them for their patronage. Once you get into the routine, you will see the results reflected in your bottom line.

You can do this.

Sunday, July 3, 2011

The Importance of Eye Contact

“I feel that in-person contact with people is the most important thing in comedy. While I'm up on stage, I can actually put myself into the audience and adjust my pace and tuning to them. I can get into their heads through their ears and through their eyes. Only through this total communication can I really achieve what I'm trying to do.” ~Bill Cosby~

Making eye contact with the person you are talking to is so important. It does not matter if the person is an employee, a customer or some other acquaintance. You are constantly being evaluated by your sincere eye contact.

I was at a seminar recently where the speaker, who conducts customer surveys, shared that people’s evaluations of salesmen were greatly enhanced when the salesmen made eye contact. The more eye contact they made, the more professional they were perceived.

Being interested in empirical analysis, I decided to run my own test and went out of my way to make sincere eye contact with the next 10 people I talked to. I quickly learned that, while eye contact is so important, it can easily be overdone.
When I made too much eye contact—in effect, stared—or appeared to be too aggressive, the person would turn away or disengage. However, if I made genuine eye contact, the person seemed to open up like a flower bud and a strong connection was made.

When I made soft but deep eye contact, people just seemed to melt and open up with amazing warmth. You could actually watch their eyes, and if they became dilated, you knew they were genuinely and deeply engaged in our conversation.
On the other hand, if I did not make eye contact or allowed my eyes to wander, the person I was talking to would never really engage. I could almost feel them drifting off. These general reactions were true of everyone, regardless of who they were.

I was in a drug store getting a prescription refilled, and we were having trouble getting the insurance company to agree to pay for the prescription. While discussing the issue with the clerk, I made sincere eye contact with her, and she went from just tolerating me to becoming my advocate with the insurance company. It was so amazing to me that this one small thing could make such an abrupt and powerful change in her behavior towards me. I went from being just another customer to someone she had a deep connection with.

That same day, I went out of my way to make quality eye contact with a cashier at the grocery store. At first, she was uncomfortable with the eye contact and she kept looking away, but as I persisted, you could see her barriers going down. She started returning the eye contact and then began to smile, which was a dramatic change from her initial mood.

What these exercises clearly illustrated is that eye contact does matter in a significant way.

Like most things, having great eye contact takes practice. The more I went out of my way to have eye contact with the people I encountered, the easier and more effective it became. I gave a seminar recently, and as the group worked in pairs to improve their eye contact, you could actually see and feel the relationships deepening.

Now go out and do two things. First, make sure that your sales force has great eye contact with their customers. Second, develop and practice great eye contact techniques in your interactions.

You can do this.