7 Brilliant Methods to Increase Profitability

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Method 1 – Higher Frequency Questions

The Law of Octaves™ states that every note on a musical scale doubles in frequency with each increase in octave. 

For example the note ‘A’ has a resonant frequency of 440Hrtz on most electronic tuners for guitar. So in the major scale of A (A – B – C# – D – E – F# – G# – A) the next A in the scale (one octave up) will have a frequency of 880Hrtz. The following A would be 1760Hrtz, then 3520Hrtz and so on as you go up the octaves.

You may wonder what at all this has to do with business, and the answer is EVERYTHING.

The fact is that most entrepreneurs ask very low frequency questions. A low frequency question has little context, and means that the answerer has to guess or really add their own prejudices to the answer. Here are some examples of pretty low frequency questions.

  • How do I create more revenue?
  • How do I break into a new market?
  • How do I get better quality staff?

You will also notice that all of these questions start with HOW. 

Based on the I-Ching (The book of Changes), a 5,000 year old book of oracles, relating yin & yang (male & female) and the five elements of water, wood, fire, earth and metal, the book provides dramatic and profound insights into entrepreneurship – a much higher frequency question would start with WHY.

  • Why do I feel I need to create more revenue?
  • Why should I break into a new market?
  • Why would better quality staff make a difference?

Coupling these questions which are a ‘level one’ frequency with more articulation by utilising the second question entrepreneurs should ask would create a much higher frequency question.

  • Why do I feel I need to create more revenue and what specifically would be the best way to do this today?
  • Why do I need to break into a new market and what would I offer it that would make me stand out?
  • Why would better quality staff make a difference and what would I need to do with my current staff to see them as higher quality?

Already you see that we have a higher frequency question than the ‘nowhere’ how question. Now lets really get articulate, choose our words and raise the frequency.

  • Why do I need more revenue? What specifically would I allocate the profits from this revenue to? Who is the best person or people to assist me to gain this revenue in the least possible time?
  • Why would breaking into a new market be of value? Specifically what market would be the most profitable and simple fast?
  • Why do I need better quality staff? What can I do this month to improve the staff I have, empower them and get them focussed on revenue and profit? Specifically who do I need to take my staff to high quality immediately?

By raising the frequency of a question you will get clarity of answers that make sense, are simple to initiate and manage.

Quality questions give quality answers, which gives you quality information on which to make quality decisions. So what techniques do you use to ask a high frequency quality question?

  1. Focus on questions in this sequence – why, what, who, when and finally how
  2. Get ‘specific’ – ask things like: What is the one action… or who is the best person I can connect with…. 
  3. Don’t just take the answer on face value. Always dig a little deeper. IE. Specifically why is that person the best…. Or What is the one thing that stands that strategy above the rest.
  4. Finally – look for the simple answers. They are most often the best, yet we have been trained to overlook them for the more complex. Life was meant to be simple.

Finally – the reason this is ‘THE NUMBER ONE TECHNIQUE’ is because it’s the most important. After running literally close to 2,000 events over ten years in over forty countries, we are undisputedly qualified to state the following:

“ 95% plus of every entrepreneur we have come across asks lousy low frequency questions and obtains low quality answers by which they make all their decisions on… and wonder why they never succeed as well as they wished.”

There may be no such thing as a bad question, unless it’s the only one you ask.

Technique 2. – The Magic of Marginal Improvement

Almost every entrepreneur we come across is looking for the golden nugget, the one big grand slam that will make them yet information originated by Paul Dunn and taught for years by Action Coaching is a profound way to maximise your business and profit.

The magic of marginal improvement is simple. Imagine you simply spoke to one more prospect each day. In a normal working year that is 220 more prospects.

Run the numbers on your business but consider these marginal improvements:

  1. Increase your price by 10%
  2. Increase your prospecting by 10%
  3. Increase your closing ratio by 10%
  4. Increase your upsell by 10%
  5. Decrease your expenses by 10%

Lets look at a really simple business and see what happens when we do this:

Imagine your business had the following numbers in the last year.

  • 1,000 people were prospects for your business
  • 200 people bought your product
  • Your average sale was $2,000
  • Your average upsell was a further $200 on each client
  • Your gross profit was 50% of everything sold
  • You spent 25% on expenses to run your business every year
  • Your cost of sales was 25%

In short that would mean your business revenue would be $440,000, at a GP of $220,000, costing you $110,000 in both overhead and cost of sales.

Now lets run the magic of marginal improvement (MMI) over that model.

By applying 1 – 5 above the new numbers for your business would be:

  • $585,640 Gross revenue
  • $131,769 Overhead
  • $146,410 Cost of sales.

Your GP would now be $307,461, which is a massive increase of 39.75%

Do your own numbers, you may be blown away by the results. 

Similarly, you have probably heard of Perato’s Principle. The 80/20 rule which states that 80% of your business comes from 20% of your people. Assuming that is the case you may be interested to know what would happen if you simply cut out the bottom 20% of your customer base. Fired them.

If you spend 80% of your time with the bottom 20%, you would free up around 32 hrs per week. If you simply studied your database and sought only those clients that make up your top 20% (see Technique 3), then you would see the most unique and incredible difference.

To illustrate this consider these numbers based again on our scenario above:

80% of your 200 customers = 160. That means you have 40 customers that produce 80% of your revenue (and 160 that produce 20%)

The average revenue of those 40 is:

$400,000 x 80% divided by 40 = $8,000 per customer.

If you are spending 20% of your time to get those deals, then by cutting out the bottom 80% of your clients and focussing just on the top 20% makes sense. If all you did with the extra 32hrs per week is double what you have, your revenue would go to $640,000 (and overall increase of 60%)

The magic of marginal improvement works at the top and bottom end of your client list.

Method 3 – If you give, you will receive.

Here we are going to focus on three ways you can give:

  1. By being socially responsible and giving back
  2. By providing incentives to staff
  3. By providing incentives to customers

Social Responsibility

There is a hub called Buy One Give One (www.b1g1.com). This hub is based on the premise of when a customer transacts with you it triggers a transaction that provides something of value going to someone needy somewhere in the world.

Corporate social responsibility is no longer just a bunch of words. In fact it is an area where you will attract mentors and individuals who want to help you give. 

For example, we partner with and market B1G1 wherever we are and whatever we do. One of our clients sells blinds. For every contract he gets a light is put into school in India giving light. Given a simple transaction of buying a blind for your home to control light provides light in a school in India, lets look at the result of that. A light will last a couple of years, sometimes much longer. During that time, hundreds of children will be better educated and less stressed in their studies. Those children will have a better chance making more money in later life because of their ability to concentrate better at school. This will not only help them but help their families as well. The simple act of you buying a blind from our client could profoundly affect the lives of well in excess of 1,000 people positively. Why would you buy a blind from anyone else? …and would you really worry if it was just a few dollars more expensive? Recent statistics show that 35% of people are even prepared to pay a premium to be eco friendly or socially responsible.

For us, we feel good as we are promoting the facility to do that so if we have hundreds of clients who do similar work, we are positively affecting millions of people every year. Wow.

79% of companies would rather buy from companies positively impacting the planet (CNBC 2011). So going green and being socially responsible is one way to get a share of that dollar, and Buy One Give One is the perfect hub to do that.

Incentivise staff

This is simple math. But most businesses miss the important part. Not everyone is driven by money. In fact few really are. Chocolate bars can sometimes get a lot more done than a few dollars.

Regardsless, let’s assume you turn over $1,000,000 each year and your wages bill is $100,000 or 10% and your Net Profit is 20%

That means that if you want to get to $1.2m in turn over you have an extra $20,000 that you would have paid in wages to get there, why not provide some incentives to the amount of $10,000 instead of rehiring more people and taking on more fixed cost. How you split up that $10,000 is a separate issue, but maybe you could do $3,000 in cash, $3,000 in travel and the balance in key chunks based on targets.

When you get the next $200,000 your net profit will now be $50,000 which is an increase to 25%.

Depending on what laws govern your country, you may even be able to negotiate packages with staff. So that when you hire a new person you may pay a lower base salary (say 20% lower) but provide an incentive that is very attractive if they hit certain targets. This is low risk for you and high return.

Incentivise customers

We have all heard of loyalty programs (how many coffee cards do you have?), however what about paying customers for introducing new ones. Again you have a cost of acquisition of a customer. Lets say its 10%, Instead of paying it to the newspaper or radio station hoping it will generate business, pay it to existing customers for referrals. You could have a tiered program that ensures you gain more profitability with each new referral you get.

You generally have less work to do on referrals as well so that makes it even more profitable to manage and integrate that customer, and it locks existing customers to you.

Method 4 – Know who your customer is

Most businesses have no idea who their customer is. What I mean by that is that they haven’t profiled them. Over 20 years ago when I began in financial services as a very young man, my boss said: ‘Everyone is a prospect – get on the phone and call them.’ In the first 13 weeks in the job I had called over 700 people, got around 80 appointments and 13 sales. The average size of my sale was $500. A whole $6,500 in revenue.

More to the point, I was exhausted. I then noticed that out of my 13 sales, 6 of them had come from referrals. In fact those referrals had been very similar types of people to the people who had referred them. I started to see a pattern. I vowed again to never make another cold call.

But it’s not about referrals, it’s about the right referrals, and to know that, you must know your customer. Over time I realised that my customer was very different from most of the other sales people’s customers. In fact in 1991 I sat down and did the following exercise. This is the same exercise you should do.

  1. I studied my top 20 clients. What was similar about them? (By the way my top 20 was decided by the top 20 I commissions I had earned)
  2. I created a matrix that was that profile of the similarities. In my top 20 almost all of them had these characteristics.
  • Age 35 – 55
  • Married with Children
  • Owned a business in the service area (no retail or manufacturing)
  • Turnover $500k – $2m
  • Up to 10 staff
  • Interested in sports (either active players or coaching)
  • Loved to travel
  • Had a great sense of humour
  • Not at all analytical, but very personable
  1. I decided that I got on really well with these types, so I then made the next choice. That choice was to only deal with those people and no one else.
  2. Over the next year I had my best year ever, qualifying for the prestigious Europe convention at the top level and having a great life. I simply went and asked my top 20 to recommend people who had the attributes I have listed above. Like knows Like, so that wasn’t a challenge and that started the ball rolling. I concentrated on 1 – 2 products and became an expert in them. By the end of that year my ratios had gone from

55 calls to 6 appointments to 1 sale at $500

to

11 calls to 10 appointments to 10 sales at $1500

You simply must know who your customer is. By knowing who that top 20 is and seeking more of those people, you will absolutely improve your business out of sight. What’s more is you will waste much less time and the business will become a lot more fun than it ever has been for you.

Method 5 – Customer Advocacy

Just imagine you had a host of customers and advocates promoting your business all the time…wow.

You have heard that when something goes wrong people tell 20 others and when something goes right, they are lucky to tell at least one. Let’s change that.

Firstly, do you actually know who is happy with you and who is not? If no, it’s time to change that. There are three ways you can gain testimonials:

  1. Written
  2. Voice Recording
  3. Video

And the order above is the order of powerfulness as well. For example: We collect mainly written and video testimonials. Here is a sample written testimonial:

“Mike is an amazing guy. He walks the talk. He is one of the worlds leading change experts.” – Kevin Mayall

The testimonial is great, no doubt, and it has some impact. What is more impactful is that we have over 200 just like it and we show people. However, go and cut and paste this link into your browser:

http://www.youtube.com/watch?v=u4NqQPeZhBs

You will soon see how much more powerful the video testimonials are. Why, because they come with an energy and emotion that cant be touched in writing.

Invest in a small flipcam or smartphone and grab some testimonials from your customers.

Justin Herald built a business he sold for tens of millions of dollars based on asking customers to send their friends to buy his product. He gave out business cards and asked people to literally give them to friends if they were happy with the product. He asked people to ring their friends and talk about him and the product. It worked.

Sometimes customers don’t know what went right. You have to remind them:

“We pride ourselves on not only a great product but incredible service. Here are the yardsticks we use:

  1. We answer calls within 3 rings
  2. We respond to questions within 2 hrs
  3. We never leave your site or home untidy, we always clean up
  4. We won’t interrupt your family or business by implementing your solutions
  5. We have a fixed price quoted at outset
  6. There are no surprises
  7. We treat you with respect

On a scale of 1 – 10 how did we go against these yardsticks?

Great. I am glad we met all the key indicators and/or exceeded them. On that basis we would ask one thing of you. Knowing how well and professionally we go about things who can you refer us to who meets the following criteria?:

(Your Profile from method 4)

Thank you. Are you able to pick up the phone now to introduce us, while I am here, or otherwise could you send this email to them and copy me in please?:

(Sample Email)

Hi Bill,

I just had some services carried out for myself by XYZ limited. I have to say, they exceeded my expectation. Little things like – being on time, within budget, attention to detail and the best, the minimum interruption to my business and family. They have asked me to refer them to others whom I know and trust who have a similar situation to mine, so I am introducing you. John from XYZ is a cool guy and will be in touch within 48hrs. If you really are not interested in chatting with him just drop him a note and he won’t waste his time. Have a great day

The email and approach will differ with your products and services, but the psychology is it goes to the profile of customer you want, as a very personal recommendation and connection and gives them an out as well, but to take the out they have to take action, and very few people will.

If every customer became a champion for your business and led you to 3 more just like them, how fast would your business grow?

Method 6 – Profile Your Team

Most businesses we come across have people in the wrong jobs, and hire CV’s instead of profiles. Changing this will impact the profitability of your business.

Let’s consider CV’s. few of the are remotely accurate, referrals are tainted and even qualifications can be manufactured. They are a sea of sameness. In fact just because some one is an MBA with 5 years managing a bank, doesn’t mean they have any idea about finance, numbers or people at all. 

By profiling your team you will see where the gaps are. Suitable profiles are Wealth Profiles, Myers Briggs, DISC etc. What you need to know is who people are. There are some different dynamics that come into play. Here is a few, and you cant tell these from an interview, CV or perhaps even if they have been with you for a couple of years, but they will stand out in a profiling test.

  • Extrovert or Introvert
  • Likes to work in teams or by themselves
  • Leader or follower
  • Analytical or people focused
  • Task orientated or people orientated
  • Sensory or Intuitive
  • Energy is spring, summer, autumn or winter
  • Best at Ideas, Branding, Teams, Negotiating, Service, Technical, Numbers or Systems

In fact the last is often wrong. You hire a sales professional for your company and find out they have zero technical ability or process ability and you sell high tech intricate software. You hire a PA, to find out she wants to be the boss and acts like it. You cant tell these things from a CV.

Create a list of mandatory skills and then a list of desirable skills. Include Education, Experience, Character, People Skills etc. Only interview those who meet all of the mandatory skills. Don’t hire anyone who doesn’t have all the mandatories.

Then profile the top three and pick the person with the profile most suitable for the role, regardless of age, colour, race or any other stereotype individuals might have (ie. Some people wouldn’t hire someone who looks like their mother in law)

If you profile your existing team, you may find some of them are not in the jobs they should be. I once was part of a senior management team of a large corporate where 7 out of the 8 of us were the same profile. Nothing ever got decided on or done.

Offer to shift staff around when you can and get them in roles that suit their profile and that they will enjoy and watch your business flourish.

Method 7 – Acquisition

One of the fastest ways to grow profit and equity in your business is acquisition. So what can you acquire:

  • people
  • another business
  • new products
  • a different location
  • new technology
  • new systems
  • a facelift

You can either buy or rent people. Buying them means having them on salary, renting is on contract. That way you can try them out. Outsourcing is a highly used way of renting staff, and through such sites as www.upwork.com you can get many of the mundane tasks done cheaply by a new member of your team living overseas over the internet.

You can acquire new products and services, but make sure they don’t interrupt your overall strategy. Our jeweller client can see an opening for cheap jewelry in the market, but to do it will acquire a whole new brand as he doesn’t want to dirty his current brand by cheapening it. New products and services keeps you up to date and moving. Stagnancy significant affects profit in changing times. Sometimes the products don’t need to be new, they just need to be packaged differently.

You can acquire another business. Look at competitors that are doing something complimentary that might fit with your branding. Sometimes you can pick them up for almost nothing. Tony Fernandez bought Air Asia for 1 Malaysian Ringit and turned it into one of the most profitable airlines in the world. Negotiate terms and pay by performance factors when buying businesses. Make payments reliant on performance criteria. Often simply buying a business doesn’t mean 1 + 1 = 2. In many industries doing that can mean a new game so 1 + 1 may = 2.5 giving you substantially more value than you had before.

New technology, such as Cloud Computing is rapaidly expanding. This means there are cheaper ways to do things all of the time. Even look at repricing some of the technological services you have been paying for. Our on-line shop used to cost $250pm, but by changing suppliers and now everyone has one it is down to $20pm. Those savings go straight to your bottom line. Be aware of what new technologies come out that you can use.

Are you in the right location, or even the right country. IE: In New Zealand as I write this the property market is in winter, yet in Malaysia it is in Spring. In the USA it is in dire straights. A 3 bedroom house in LA in an average suberb is around $500,000. The same house in Singapore is now $4,000,000. Are you in the right location? What else is coming into your area? What is leaving? What is happening with infrastructure, schools, roads, technology etc that can affect your business?

New Systems: There are new ways to do things occurring all the time. Digital TV, increased internet, smartphones are just a tip of the iceberg. What can you do to improve your system to be more cost effective and drive your profit higher today? Is your quoting system out of date. One hotel I was just in has no signage for the conference rooms. This one system flaw means reception staff tell 200+ people a day how to find it, saving that should save staff time and get them more productive. Where is productivity lacking in your business? What can you do to change and update the system?

Sometime you just need a facelift to ensure and show you are changing and up to date. Banks and financial services companies do it all the time. Tweak the logo, the mission statements, the paintwork of the buildings, the cars. When you facelift, and not always does it need to be expensive (ie Logos and letterhead) you create and new and shited position with clients. It gives you access to create a new product or service and when launched with a facelift can often have a sensational impact on the bottom line.

Finally

We hope you have enjoyed these tips, they are brilliant and we have many more. We work with over 30 experts in their field from all over the world. You can access all of them via us. Join us on www.rockyourlife.net 

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Author: Mike Handcock

Mike Handcock is the Chairman and Founder of Rock Your Life, a global transformational company focussing on helping everyone play a bigger game and have a more extraordinary life. We work with some incredible people globally and create the most extraordinary adventures, workshops, books and programs.

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