Step Two: Double the Conversion Rates of Transactions
Money is a fabulous timesaver. Those who know how to make money more efficiently can leverage it in a way that lets you enjoy all that life has to offer.
The key to increasing profits is to convert unprofitable interactions into profitable ones. That is a foolproof formula for saving more hours each day without compromising productivity or earnings.
Maximising profits is not as difficult as most so-called business gurus make it sound, but neither is it a quick and easy process. Nobody is going to leap to the top without hard work and dedication. Fortunately, anyone who is focused on making positive progress can accomplish that goal – whether your business is newly established or an institution in its community, there is always a chance to do better.
Remember this: the road may be long, but those with a faster stride arrive at the desired destination much sooner. Most people crawl toward retirement; innovative entrepreneurs sprint there in record time. It does not have to take years to make the money needed to free up an extra 10 hours a week. Invest in a mutual fund or pension plan, and it may take decades to get enough of a nest egg to semi-retire and spend time with your loved ones. Increasing profits in a business can be done in a matter of days or weeks. With more money coming in at a faster rate, it is possible to take time off to enjoy life now, rather than years down the road.
To prepare for a profit-boosting initiative, start by gathering accounting and sales data. This will help you get a clearer picture of where profits are coming from, how many contacts are made with customers each month, and how many customers make actual purchases. An easy way to harvest such information is by using software connected to point-of-sale terminals or cash registers.
Next, launch a marketing and advertising push in order to generate new customer leads, encourage existing customers to buy more, and to promote the most profitable products or services in the inventory. Part of this effort should involve a new way of looking at the business model – most entrepreneurs see the future of their companies in terms of products and services that fill a particular market need or niche.
Find the right merchandise, and the customers will come. Build the best resort, and it will be booked a year in advance. Invent a better mousetrap, and you’ll make millions. This is not the only tactic to make money, though – another way to view the marketplace of opportunity is to reverse the point of view. Instead of looking for the ideal items to buy, invest in purchasing the loyalty of the perfect customer. Rather than chasing market share, chase “wallet share” – or more profitable customer-based transactions. No matter what a business sells, it is ultimately the customers – and how many times they spend money – that generate the profits. Invest in attracting and retaining good customers, and the rest will take care of itself automatically. Instead
of reinventing the wheel, find out who is buying wheels and make them your steady customers. Then sell them a premium wheel with a wider profit margin. Finally, ask clients to bring in their friends so that you can sell them a set of wheels.
Once an expanding customer base is established, use incentives such as superior customer service, in-house financing, exclusive product lines, and preferential customer perks to inspire clients to double their number of monthly transactions. Up- sell customers to premium products. Cross-sell them to accessories or add-on features. Even down-sell to them by offering a more economical version of the product they can’t yet afford, so that they don’t take their business to a competitor. At the same time, continually make a choreographed effort to generate fresh leads for potential new customers.
Now let’s examine an example based on our goal of wanting to work 10 fewer hours a week without sacrificing productivity or profits:
For the purpose of our example, we will assume that the business is open 40 hours per week, or approximately 160 hours per month.
- To gain 10 hours per week – or take 10 hours off without losing money – it is necessary to reap 40 hours’ worth of extra profits per month (10 hours a week times 4 weeks = 40 hours).
- In other words, 40 hours of profits per month is the financial equivalent of 40 extra hours of work per month, or 10 extra hours of work each week in a typical 4-week month.
- One week is 25 percent of a 4-week month. So to gain 10 hours per week worth of profits, it is therefore necessary to increase conversion rates – in other words, sales and profits – by a mere 25 percent.
Any business can cut its hours of operation by 10 hours a week without sacrificing productivity or compromising profits, as long as it increases its conversation rate by just 25 percent. Do it by attracting more customers, by making an extra quarter of profit margin on each dollar in sales, or by lowering overhead by 25 percent.
Alternatively, you can get rid of bad customers who are wasting 25 percent of employee time; cut out discount coupons and unnecessary giveaways, and institute in- house financing to capture extra sales and interest rate revenues. There are numerous ways to gain that extra 25 percent – and to free up an extra 10 hours per week by focusing on profits.
Apply enough effort and energy to the task, and it is possible to double profits in a single month. By doing so, an entrepreneur can afford to take an entire week off each and every month.
This blog post is part of our ActionCOACH guide ‘Working Fewer Hours’ that can be downloaded here
