Once you remember what your profit drivers are, you can then refocus your efforts on figuring out how to increase the percentages or numbers for each of these profit points. And once you do that, you’ll see the multiplying effect they have on one another and how they can rapidly accelerate your profits.

That said, here they are.

1. The Size of Your Funnel. In other words, how many total leads do you have. Business is a game of numbers so if you have a small top to your funnel, everything below it will limited by that number–which means that finding a strategic and systematic lead generation system that can predictably deliver an ever-increasing number of leads is critical to any profit growing initiative.

2. The Number of Conversations or Presentations Per Month. In other words, regardless of how big the funnel is, there is always a smaller number of legitimate viable prospects who will buy that month. So figuring out how to increase the number of actual conversations or presentations you make per month is another critical profit driver. Even if your conversion rate is 100%, your total amount of profit is limited by the number of actual conversations or presentations made per month.

3. The Percentage of Prospects You Convert. All things being equal, if you can increase your conversion rate from, let’s say 30% to 40%, you have just grown your profits by 33%.

4. Your Average Transactional Value. This is the MacDonald’s approach to up-selling, cross-selling, and packaging. Yet, most companies and businesses miss out on this profit driver because they don’t take advantage of intentionally increasing the average transactional value per customer–which could easily bring about a 20-30% increase in their profits.

5. Your Profit Margin. Either by increasing the perceived value or price of what you’re selling, or by reducing the cost of goods sold or overhead, you could make substantially more profit every time you sell what you sell.

6. The Percentage of Customers You Retain. Since it costs about six times more to acquire a new customer than to sell to a current one, it just makes sense that you’d want to develop a series of strategies and tactics to ensure that you keep an ever increasing percentage of your new customers.

7. The Frequency of Customer Repurchase. In other words, if you can get your customers to buy more often, everything else being equal, your profits will soar. For example, if a men’s hair salon can get their customers to go from getting their hair cut once every five weeks to once every four weeks, that’s the difference between 10 cuts and 13 cuts–or an increase of 30% in profits.

8. The Number of Years They Continue to Buy From You. Again, if you can increase the longevity of your customers (since they have no cost of client acquisition any more–and they tend to buy more frequently), you will automatically increase the amount of your profits.

9. The Number of Referrals Your Customers Provide. Since warm leads tend to convert at a higher rate than cold leads, if you can increase the number of referrals your current customers provide, you could radically increase both your conversion rate and your profits.

So, there you have it–the Nine Profit Drivers for your business. If you’d like a pdf of these 9 Key Profit Drivers, click on this link and you can put up this graphic in front of you some place to remember that when it’s all said and done, if you focus a fair amount of your time and effort on figuring out how to systematically increase the percentages and/or raw numbers of each of these nine drivers, you could end up making a whole lot more money.

Note: Figuring out how to systematically increase those 9 Drivers isn’t necessarily easy (choosing which strategies and tactics to use, test, adjust, systemize, etc.) but the framework is. So don’t make it too difficult. Just stay focused and work on increasing each of these by a little bit and your profits will begin to soar!.

To your accelerated success!

P.S. If you need help with this, feel free to contact me. It would be an honor to help you!

I remember, shortly after my board coup several years ago, the movie “Rocky Balboa” came out and in the middle of the movie, Rocky made the following comment to his son,

“It ain’t about how hard you’re hit. It’s about how hard you can get hit and keep moving forward. How much you can take and keep moving forward–that’s how winning is done!”

I immediately put that quote up on my credenza and still look at it to this day. To me, that’s the power of a great quote. In just a few words, it can say so much.

In light of that, over the July 4th weekend, I decided to create my own favorite quote site. As a consultant and professional speaker, I’m regularly on the look out for great quotes. So, rather than horde them for myself, in the spirit of Tom Peters (when you go to the site, you’ll understand that comment), I’ve decided to make them available to everyone.

So, rather than bore you with more content, let me encourage you to go to the site and read some great inspirational business-oriented quotes. I think you’ll enjoy them! Oh, and the URL is pretty easy to remember

http://www.brucequotes.com

Note: I just created the site Saturday evening so some of the topics only have a few quotes, while others have quite a few. But over time, the approximately 400 quotes will grow. The site is still under 48 hours old. Just bookmark it and return to it whenever you either need some inspiration or you’re putting together a talk or training session and need the perfect quote to make the perfect point.

To your accelerated success!

http://www.brucequotes.com

Note: If you didn’t answer the question from the last post, “What are the major constraints that are hindering me (and my business/organization) from achieving my (our) potential?”, then make sure you do so before proceeding any further.

Okay, so you’ve now identified your major constraints (and as I said last time, they could be external or internal, mental or physical, systemic of situational). They could be a person or a process, a self-limiting belief or a financial limitation (for example).

The next thing you want to do is order them. You want to take each constraint and ask the question, “Where does this constraint come in the priority list of which constraint needs to be solved first?” In other words, you want to play each constraint off the others as you seek to find the major constraint that needs to be solved first.

I liken this to a playoff system (brackets) you see in sports. For simplicity’s sake we’ll call constraints “C”. So you play C1 vs. C2. Let’s say C2 needs to be solved before C1. Then you play off C3 vs. C4. Let’s say C3 needs to be solved before C4. Then you playoff C2 vs. C3 and let’s say C3 needs to be solved before C2 (which means it has to come before C1). You now know what has to happen first. In other words, once you work through this process, you’ll quickly know what the major constraint is for you (or you and your business) this year.

Using the four constraints listed above, it would be understandable to think that you need to solve the financial problem first. But that might not be true. It may be because you don’t have a systematic and methodical process in place to acquire new capital. However, it may be that the reason you don’t have a systematic and methodical process in place is because Sally is in charge of that area and she’s not very competent. She’s been at your company for ten years, she’s loved by every one, but she’s incompetent. You know you ought to let her go, but you haven’t pulled the trigger yet. Why?

Ah, it’s that self-limiting thought that keeps you from changing her out. It may be a belief that letting Sally go will demoralize your team. Or the belief that, “If I just give her some more time and training, she’ll succeed” (which could be true, but hasn’t been for the past five years). Or it could be the belief that, “She’s a single mom and she needs our help.” Or it could be the belief that, “Maybe in a year another position in our company will open up and I can move her over there.” Etc. We all have them. And those self-limiting beliefs do get in the way of making good business decisions.

The beauty of working through this process is that once you play this game, you’ll often find out that what you thought was the major constraint (in this case, “We don’t have enough access to capital”) may, in fact, not be the most important constraint to solve first.

So, before I give you the next step, why don’t we stop here for today. Take out your list of constraints and order them. Play them off against one another and see if you can reduce your constraints down to a handful of the most important constraints to solve first. And most importantly, make sure you identify what the first constraint is that you need to solve before any others!

To your accelerated success!

If so, you’ll want to immediately get your hands on the new free report I just released today entitled, “The Seven Secrets of Fast Growth Companies.”

Inside it you’ll discover,

• The number one differentiator between slow and fast growth companies
• The two key elements you need to use to create a fast growth culture
• A simple practice that can radically reduce the time it takes to implement anything
• A lesson from a Harvard professor that can change the way you think forever about your products and services
• A top team practice that can change any meeting you run—and make it more effective.
• The one metric you need to use before choosing any growth idea if you want to be an accelerated growth company
• How you can create a business that’ll scale fast
• How to avoid letting your market think you’re just like “everyone else.”
• How you can create a business that works 24/7, especially when you’re not around.

• And the number one mistake that most CEOs of small and medium-sized make

To get your copy immediately, just fill in the form in the right hand column entitled, “Interested in the 7 Secrets of Fast Growth Companies?” and then click the submit button, “Send it to me now!”

Then after you read it, post your comments below!

When the downturn occurred, what did most chip makers do? Exactly, they cut production, closed down plants, and went into survival mode. The problem, of course, is that it takes months to bring dormant factories back to life. So, what’s happening now?

If you remember that today’s solutions ALWAYS create tomorrow’s problems, you’ll know exactly what’s happening. Now, companies like Nokia are reporting losses for their handsets saying,“We could have sold more phones in the third quarter [if it wasn’t for] the capacity constraints (i.e. if we could have purchased more component parts, we could have sold more).” And chip makers and others are losing out on revenue they could have been making had they not done everything they did over the last two years to reduce capacity.

Interestingly, the article highlights one company, Linear Technology, that made a different choice. Instead of closing down a plant or two, they decided to keep all four of their plants open and all of their employees on payroll–unlike their competitors, Instead, what they did was to stage a rolling factory shut down, which has allowed them to get back online and fill NEW orders within two to four weeks.

• Remember, today’s solutions always create tomorrow’s problems.

It doesn’t matter what choice is made. In a closed system, every choice has both positive and negative implications (some of which we can anticipate and others which we can’t). The trick is to make sure you’re actually evaluating the possible future implications (both positive and negative) when you’re making a decision.

For example, if you decide to take on a big client (let’s say a Walmart or GE kind of client), that could be good. But the first rule of entrepreneurial finance is that growth sucks cash. Even worse, a lot of elephant clients like to manage their cash conversion cycles on the backs of smaller companies (often paying from 100-200 days late–which, of course, your banker discounts because anything past 90 days doesn’t count).

In other words, while pursuing and landing that big account might have driven you and your company for the past twelve months, if you haven’t stockpiled cash or secured access to cash beforehand, the next six months may be devastating. On the other hand, not landing that big client, may have significant consequences of its own.

So, every time you’re faced with an important decision, especially a strategic decision, as the CEO, you need to make sure you’re looking at the potential negative outcomes from that decision–and not just the positive ones (because they are there).

As the Business Week article points out, it’s currently taking 18 weeks (four and a half months) to fill orders for megahertz crystals (a key component of cell phones). And why is that? Because too many players decided to cut production by closing down plants over the past two years. Now, if we went back in time I’m sure the CEOs of those company’s thought that was the wisest course of action–but was it?

To your accelerated success!

Well, one simple practice you can engage in, that’ll keep you focused on managing the money, is to get a DAILY cash report. Not a once a week or worse, once a month cash report, but a once a day cash report. You can have your bookkeeper or CFO or accountant send you the amount or you can create a dashboard that automatically updates that number every day, but regardless of what system you use, you really ought to set one up.

A great example of the power of this practice can be found on Verne Harnish’s blog this week. He writes about John Ratliff, the founder of Appletree who for years had relied on a big line of credit that he would access two or three times a month to get his company through each month. For years he had heard Verne talk about getting a daily cash report, but hadn’t acted on it. Finally annoyed by his company’s practice, he decided to start receiving a daily cash report. He then wrote the following to Verne.

“I started getting cash reports daily (only took 15 years!) and wow what an insight that is. Today is September 30th, close of the 3rd quarter (hard to believe) and we just finished the best quarter in our history, and maybe more importantly our best cash position ever! No LOC use this month and a killer cash position. Thanks for finally getting the cash message through my thick head.”

So, if you’d rather not wait fifteen years or keep dipping into your LOC, why don’t you try this simple practice of receiving a daily cash report. It’ll force you to think about revenues, expenses and cash flow on a daily basis–and that will take you to a new place that not knowing won’t. Avoiding or not knowing is almost always a bad strategy. However, knowing and being able to act quickly are almost always winning strategies.

To your accelerated success!

If you didn’t read the Business Week article (Sept. 28, 2009) on “At Amazon, Marketing is for Dummies,” you missed a compelling argument for thinking long-term, especially during a recession.

Over the past three years, Amazon’s stock price has doubled, while the S & P has gone down 20%. Over the past six months, Amazon revenue has been up 16%, while most retailers have been negative. And, as per the section in BW that the article ran (the 100 Best Global Brands), Amazon has moved up 13 spots this year to No. 43.

So, what’s behind this magic? Bezos’ commitment to invest in infrastructure and technology. In fact, I thought the best paragraph from the article was,

“The performance is something of a vindication for Chief Executive and founder Jeffrey Bezos. After the dot-com bubble burst, critics hammered him for investing so much in technology and physical distribution centers. Some investors called for Bezos to pull back and produce more short-term profits. Now, those heavy investments are paying off big time, helping the company sell an ever-widening range of products to more than 94 million customers.”

Did you catch that? During the last downturn, rather than give into short-term thinking, Bezos opted for the long-term approach–even though his critics and other investors were urging him to focus on short-term profits. It was that decision, during a market that was fixated on the short-term, that has allowed Amazon to do so well now–during this economic downturn.

So, as you look at the decisions you’re making this month, are you thinking short-term? Or long-term? Are you allowing the siren song of the recession to keep your eyes and investments off the long-term? And finally, do you need to make any adjustments to how you’re currently operating so that you can prosper, not just in the coming months, but for years to come?

To your accelerated success!

The basic story line goes like this (note: hang in there, this has a great ending).

To test their ideas, the Washington Post had Joshua Bell, dress like a street musician and play six Bach violin concertos for 45 minutes on a cold January morning at a DC Metro stop. During that time frame, approximately 2,000 people passed by him on their way to work–only a few of whom stopped to listen.

All totaled, by the time he was finished 45 minutes later, only six people had stopped long enough to listen for any length of time and only 20 people had given him any money. The total take for 45 minutes of Joshua Bell’s playing time that morning at the DC Metro stop, $32. The applause, none.

Now, what makes that so remarkable, is that Bell often plays to sold-out audiences in the best performance halls around the world, he’s undoubtedly one of the best violinists on planet earth, he plays on a $3.5 million violin, he normally charges around $100 per person to hear him perform (e.g. 1500 people x $100 = $150,000), and he normally plays to standing ovations (I know, I’ve seen him play).

So, let’s recap what happened. The same Joshua Bell, playing on the same $3.5M violin, playing six of the most beautiful violin concertos of all time–and with the same brilliance as he normally does in a performance hall (where the receipts might be anywhere from $100K-$150K) only walked away with $32 and a few people willing to stop for a few minutes to listen.

So, what made the difference? It wasn’t the product (Bell playing Bach on his $3.5M violin), was it? No! It was the context, the perception of value, and the packaging of the product that made the difference–NOT the product itself.

But isn’t that exactly the mistake that most businesses make. They keep thinking it’s about their product or service. So they keep talking about their product or service as though that were everything–but it’s not. Whenever anyone gets sucked into focusing on how great their product or service is, they’re almost always sucked into a commodity mindset (and they end up with $32 playing on a DC Metro stop).

However, there is another alternative. The other alternative is to boost the perceived value. Looking at Bell’s normal marketing plan, changing the venue (i.e. the packaging) to a first-class performance hall, like the Kennedy Center, changes his perceived value immensely. Raising his ticket prices, changes his perceived value.

Doing PR on TV and radio, increases his perceived value. Winning competitions increases his perceived value. Being the featured violinist in Hollywood films increases his perceived value. Playing alongside some of the greatest violinists and conductors, increases his perceived value. Letting people know he plays on a $3.5M violin increases his perceived value. Sharing testimonials of listeners, conductors, and famous people increases his perceived value. Etc.

In other words, it’s not the product itself that creates the value. Whether Bell is playing at a DC Metro Stop or at the Kennedy Center, it’s still the same product. However, the difference in perceived value is the difference between $32 and $150,000.

So, as you look at your products and services, what can you start doing NOW to increase the perceived value of what you offer? Remember, you don’t want to focus on your product or service alone. You want to focus on increasing the perceived value of what you offer–and when you do that, you’ll immediately begin making more and more money for the same product or service–just like Joshua Bell!

To your accelerated success!

The author continues,

Now, I don’t this invalidates the necessity of high EI. Rather it puts it in context. If given the choice between hiring a high results-oriented leader or a high EI leader, you would normally want to choose the high results-oriented leader–unless that leader’s EI is low (the Topgrading recommendation is that an EQ of 7 or higher is good, while a 6 or lower is bad).

Geoff Smart (of Topgrading) says that while soft skills are important, the existence of hard skills is what differentiates CEO performance. And the ultimate proof is that “cheetah” CEOs meet or exceed their financial targets TWICE as often as the “lamb” CEOs.

If you haven’t read the article yet, why don’t you do so now. It’s worth the read.

In addition, I think you’ll also like the discussion on the cost of CEO turnover and some interesting guidelines (from an article in Chief Executive magazine). For example,

• Cost of a sales rep mis-hire = 5x salary.
• Cost of a senior manager mis-hire = 27x base comp.
• Avg. cost of a CEO of a large company is $53M
• Avg. cost of a CEO of a mid-range company is $22M
• Avg. cost of a CEO of a small company is $13M
• A CEO change usually means a 25% departure of other execs
• Average severance for large company CEO is 3 times salary
• Average severance for a mid-size company CEO is 2 times salary
• 40% of CEOs are gone within 18 months

Plus more. So head over to topgrading and read the whole article. It’s worth the time!

http://blog.smarttopgrading.com/cheetah-ceos-outperform-lamb-ceos/2009/01/14/

P.S. This may also explain why so many non-profits and religious organizations, like churches, have a hard time growing. Just a thought!

According to the article, since Greg Brenneman took over last year, he’s made a couple of key strategic decisions for Quiznos. 

1. He slashed discounting.
2. He simplified the menu from 29 items down to 21
3. He found new suppliers for everything from meat to cookies
4. He introduced a new low end product (the Sammie, a small flatbread sandwich, for $2 to compete with Subway et al.)
5. He reconnected with his franchisees.
6. He added online ordering

Now, I’ll freely admit, none of these ideas seems like a blow me out of the water idea. However, none of them were being done before (even though the company had a lot of bright people working for it). In other words, turnarounds don’t always require radically new ideas. Often they simply require the application of existing ideas which aren’t being implemented at that moment.

Furthermore, each one of these top level decisions has made a huge difference on the bottom line. For example, by adding online ordering (not necessarily a new idea :-), one franchisee reported that 25% of his orders now come online.  The new sandwich, the Sammie, not only allows Quiznos to compete with Subway and others for price-sensitive customers, it also costs less to make, thereby increasing profits. 

Cutting out discounting was key because it was training customers to only come in when they had a coupon (something Bed, Bath and Beyond should probably reconsider :-). Reducing the menu got rid of their menu "dogs" (i.e. they eliminated the eight least profitable items), which again increased their profitability (plus speed). And, of course, renegotiating their vendors reduced their costs.

In retrospect, these all seem like such obvious moves to make. But they weren’t–until someone from the outside came in, made some assessments, and then said, "Here are a few obvious things that need to change." And then executed on those changes.

So as you look at your business, what "obvious" changes do you need to make?  Or when was the last time you took an entire day or two away just to think about the big picture of your business, analyze the data, and then make five or six big decisions that could radically affect your business? One of the reasons why strategy consultants like myself love to do strategy work is because we know that turnarounds usually reduce themselves down to just a handful of key decisions made at the top. Knowing which ones to make is the hard part. But when you make the right ones, there are few things more rewarding to watch.

So what do you think are the five most important changes you need to make this year in your small business that’ll have the greatest impact on your bottom line? Take it from Quiznos. A few key decisions can make all the difference!