There are only 2 ways to increase profits. Either you increase sales or you reduce costs. It’s that simple!

However, the amount you can reduce costs by is limited but the amount you can increase sales by is unlimited. So there is far more potential in increasing sales.

There are only 3 ways to generate more sales…

• Increase the number of customers.
• Increase the value of each transaction.
• Increase the frequency of sale to each customer.

More importantly, if you do all 3 together, you can achieve far higher growth.

For example, lets look at the following scenario…

• You presently have 100 customers.

• The average transaction value is £100 for a product that costs you £30 to produce.

• The average frequency of purchase by a customer is 10 times a year.

• Fixed overheads are £20,000

Therefore the annual profit is presently as follows:

Sales 100 x £100 x 10                         100,000

Cost of Sales 100 x £30 x 10              30,000

Gross Profit                                           70,000

Fixed Overheads                                 20,000

Net Profit                                            50,000

If we now increase all three sales generators by 10%, we get the following results.

Sales 110 x £110 x 11                         133,100

Cost of Sales 110 x £30 x 11              36,300

Gross Profit                                           96,800

Fixed Overheads                                 20,000

Net Profit                                            76,800

So profits have now risen by £26,800, a 53.6% increase as result of improving all 3 generators by just 10%.  This shows the power of working on all 3 areas at the same time to achieve maximum results.

The marketing tools you can use to get growth in all three of these areas can be categorised in the following areas.

• Lead Generation – of quality leads.

• Lead Conversion into sales.

• Re-selling to existing customers.

An overriding factor in all these is outstanding customer service, particularly in re-selling to existing customers. Increasing your number of customers is a factor of both how many you gain and how many you don’t lose.

Remember never to sacrifice profit for growth. There is the saying “turnover is for vanity, profit is for sanity”.

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At McDonald’s…

Wouldn’t it be great if your small business…

• Worked without you. Only if your business can work without you will it have any great capital or sale value.

• Delivered its product or service consistently time and time again to the customer.

• The employees did it the same way every time, the best way.

If we’re going to learn from the small businesses that successfully do this, let’s take a look at the most successful small business in the world, McDonalds. Even if you don’t like what McDonald’s sell, there is no denying it is a hugely successful business.

At McDonald’s…

• The owners don’t work in the business flipping burgers.

• You know when you go you’re going to get the same consistent burger every time, with the same customer experience every single time, which is why people go there. They give the customer exactly what they are expecting every single time, there is no disappointment and so the customers return.

Similarly, if you went to a printer and got a great print job done the first time but the next time there were a few mistakes, you’d be far less inclined to return again. How comes it was perfect one time and not another? That doesn’t happen at McDonalds. What’s more, they manage to do it at thousands of their restaurants all over the planet.

• The burgers are the best tasting burgers made the same way every single time. They’ve found their best formula and they use it consistently, only changing it when they find an even better formula. And that is true for every part of the McDonalds experience from the food, to the greeting, to the cleanliness, to the kids packs, etc. Everything works and is done the same way until they find a better way to do it.

It doesn’t matter who does a task, they always follow a system, so that it’s then done the same way every single time and the customer gets the same experience every time they go back.

When one-person leaves and another joins, how comes it still gets done exactly the same way.

Although McDonald’s is a seemingly low quality product, it is an extremely high quality business which customers value and have great loyalty to.

McDonald’s has the entrepreneurs with the vision to move the business forward, the managers who manage the units and the technicians who work in the units and they all work together in harmony.

Of course, it’s because they have an organisational strategy, a management strategy and a system for everything they do. It is the ultimate systematized business that runs just like clockwork.

Just because your business isn’t McDonalds doesn’t mean you can’t learn from them. It is what is known as a Business Format Franchise.  This is the type of franchise operated throughout the world by many other businesses and it’s no surprise that franchises are far more likely to succeed than any other start up business.

When a McDonalds franchise is taken, the franchisee gets far more than a brand name. They get a whole way of doing things that work and not until they have learnt the way things are done, do they get the keys to the door.

Just because you are not going to franchise your business doesn’t mean you can’t learn from how they make everything inside the business consistently happen. If that happened just inside your one business unit, without you working in it, wouldn’t your business be a great place to go to work, or not work if you so chose.

When Ray Croc took the McDonald brothers burger business in 1954 and set about figuring out how he could make it work, he set about working on the business and not in the business. The business became the product to him, not the burgers and it was the business he worked on.

The key is to work ON, not IN the business. If you are a one-man business, not wanting to grow, this perhaps isn’t true to the same extent, although certain things can still be learnt from it about ensuring you deliver consistency to your customers. A one-man operation may not really have a business; they have a job, possibly a well paid one, with customers as their boss. This doesn’t mean there is anything wrong with the one-man operation. The world is reliant on many one-man operations, it’s just that some of these principles apply less to them.

For every other small business that wants to develop, you’ll only do so if you get to work on your business and stop working in it. As an extreme, you can imagine that you are going to make another 1000 just like it. What would you have to do to achieve this? You would have to completely systematize your business.

An analogy that can help with the understanding of working on, rather than in your business, is a game of monopoly. If you are the hat in the game, you are simply a piece in the game and you don’t make the decisions, you can’t influence the game at all. However, by being a player in the game and being able to see the whole board, you can start to put strategies into place that will have far more of an influence. You are now working on the game rather than being in it. It’s exactly the same for your business, you can have far more effect by working on it.

Before we get carried away, a word of warning. Some small businesses have tried to systematize their business and got so carried away with it that they spent all their time doing just that and failed almost before they got going. Some people believe the E-Myth book sets a standard that most people cannot hope to meet. Common sense is the operative word and the E-Myth is a must read book for every entrepreneur.

You have to operate and generate enough income to put food on the table, pay the mortgage, etc. This has to be the first priority. After that, look to work on the systems for your business that will …

• Give consistency to everyone – your customers, suppliers, and employees.

• Be operated by people with the lowest possible skill level. This enables you to find staff when you need them at the lowest possible price. You don’t want systems that can be operated by only high quality people, because when that person leaves, you will have trouble getting a replacement.

Sure, you say McDonalds is not like your business. So let’s take a far more complicated business such as a firm of solicitors. If a firm of solicitors was to employ only the brightest legal brains it would be extremely difficult to consistently offer their level of legal knowledge, as it becomes very difficult to find a replacement should they leave, be ill, etc.  However, if they were to develop services that could be provided by anyone with an average legal brain, they would be able to grow and leverage the business far more.

• Enable you to eventually not work in the business at all.

Even if you just focus on the most critical things you do in your business and systematize these, your business will be far better for it.

So what you need is a systems dependant rather than a people dependant business. The systems run the business and the people run the systems. You can’t do without people, but the more you systematize, the less dependant you become on people.

Organisational Strategy

If you are going to develop a business that is not people dependant, you need to have an organisational chart that starts not with peoples names on it but with the positions that need filling.

It helps to draw an organisation chart based on what you want your business to look like rather than how it is at present.

The positions on the chart should relate to employee functions (managing director, sales director, accounts, etc) rather than named people. This ensures it’s the system that you’re concentrating on.

Once you’ve decided the functions you need in each box, then you can allocate people to fit those functions.

Let’s say there are three owners of the business but there is only one position for managing director. Instead of having 3 people all trying to be the managing director that creates conflict, duplication of resources and nobody knowing what their responsibilities are, you agree who is likely to be best suited to that position and put them into it. The other two, take other positions. They still all own the business equally but now they are starting to organise the business far more effectively.

To start with, you may be the only one in the business. That doesn’t matter – just put your name in each box. As the business grows you move out of some boxes and get other people to move into the box. However, in the box will be a system for them to follow so that they do it the same as you. Now you’re starting to build a business that works.

Look at each position in the chart and outline what is expected of each position. In the most profitable businesses, people know what is expected of them.

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I started to read Boom! by Emma Wimhurst on the tube. I felt slightly embarrassed as a man because I think cover is targeted at the female market.

Having said all this, this is a practical and helpful business book with substance that will be read by both men and women rather than just be displayed on a book shelf to be read some day. The layout and style of the book makes it a very easy to read and refer to it time and time again. It covers all the key business disciplines to run and expand your business.

Emma’s explanation of Business Strategy is one of the better explanation I have read. Thinking strategically is crucial to business success.

I will be recommending this book to all my clients to be used as an accessible business bible. Furthermore, it will also make my life easier since Emma has done a great job of explaining how to manage business finances and also how best to work with accountants.

The following link provides information about the book:

http://www.boompreneur.co.uk

I did not learn anything new from this book. It has all been said before- to be financially successful, invest in property and go into business rather than work for someone else. Rehash of books like Rich Dad, Poor Dad.

I did not like the approach Shemin took on people with education – they think in a straight line rather than thinking differently to others. This clearly is a gross generalisation since in all fields they are a variety of thinking types.

Overall this book not is not worth the read.

This can only be described as a fantastic audio programme. It is worth every penny and deserves to be listened several times.

Anyone who has any doubts of leaving their secure job with a pension for a risky life as an entrepreneur should listen to this programme. Further, if you are an entrepreneur listen to your successful colleagues and learn from those who have actually done it. Cordock got together self made multi millionaires to talk about their experience. They have all failed on their road to success. It is how they handle failure that is an important factor to their success. Furthermore, it was great to hear these multi millionaires are no better than you or I. Another key factors to their success is their absolute courage of their convictions.

This programme is available from http://www.audible.co.uk/aduk/site/product.jsp?p=BK_MMBA_000001UK&BV_UseBVCookie=Yes

This is a well known Covey’s book. I found it a heavy read. I forced myself to complete the book. It made a lot of sense, but I did not apply his suggestions. After a few months, I heard the audio version of the book. This again was not an easy listen. I found his ideas and concepts very helpful. To fully understand Covey, I will need to listen to his audio book several times.

The area that I related to most was his inside-out approach – my interpretation of this – to be successful we need to start looking at ourselves first . “The way we see things is the source of the way we think and the way we act.’’ These paradigms are the source of our attitudes and behaviors. We cannot act with integrity outside of them. We simply cannot maintain wholeness if we talk and walk differently than we see. To try to change outward attitudes and behaviours does very little good in the long run if we fail to examine the basic paradigms from which those attitudes and behaviours flow.

Covey says achieving insight involves making a ’’paradigm shift’’ which causes us to perceive things differently. He notes that life threatening experiences or a major role change in a person’s life can change a person’s paradigm. Sometimes, just a little more knowledge might help us examine our paradigms.

I read Eat That Frog by Brain Tracey a few months ago and only this week I listend to unabridged audio book read by Brian Tracy. I found it a very helpful business book. It is far more than just about time management; it is about ensuring tasks that really matter to our success are done first.

Tracy rightly says we can all be busy with tasks that are easy and do not contribute to our main goals. To achieve what we want we should list everthing we need to do and then rank the “frog” tasks in order of worst frogs. Frog tasks are important to our success. They are also the ones we keep putting off since they are challenging. We need to plan for frog tasks (worst frogs take a higher priority) and do these first- before doing anything else. Your day can only improve after this. The link below to a video is a good introduction to the book.

http://www.eatthatfrogmovie.com/