Last week I kicked off with 'part one' in a series of articles based on the outstanding book 'Good to Great', by Jim Collins. I'll continue with this series, but not necessarily in a contiguous sense. This week I want to interrupt the series with an article on 'getting more money through the door'. There's a very limited number of ways to do this - something which I believe many people either don't recognise in the first place, or simply loose sight of during the daily grind. 

The relationship between income and profit

Many businesses have a complex relationship between income (turnover) and profit, arising from multiple and complex fixed costs. For many micro and small businesses - and here I'm thinking particularly of speakers, trainers, coaches, consultants, web site designers, graphic artists, copywriters, etc - the situation is very clear and very simple:

The costs in the business are to a large extent (a) modest and (b) fixed. For example, a few computers, decent internet access, some good web sites and some online advertising.

With modest and fixed costs, it therefore follows that there is a pretty constant relationship between work and profit. The more money that comes through the door each day, the more profit there is at the end of the week.

Clearly, we ought to nod in the direction of the text books and acknowledge that increasing profit can come from reducing costs, but frankly, our costs are pretty trivial - so here's the message:

Grow your profit by increasing your turnover

I fully agree with the saying "Turnover is vanity, profit sanity and cash reality", but for so many small operators the relationship between turnover and profit is so close and so linear that a focus on getting more money through the door will naturally lead to increased profit. The question remains, how to do this? There are only three ways to increase your turnover - here they are. 

Get more customers
Sounds obvious, but I have some simple questions to test your relationship with this phrase:

• How many separate initiatives are you taking this month specifically aimed at introducing you to people with whom you don't currently do business?
• What are they?
• What is your hoped for (target) result?

Get existing customers to buy more often
Just like you, I'm not immune to loving the adrenaline rush of winning a new client - but what about those currently on your books? They're an easier sell and already like you.

• Do you have an analysis of your client base, segmented by offering?
• Do you know who bought what, when?
• What are you doing this month to introduce all your clients to all your offerings?

Get existing customers to buy bigger ticket items
Like me, you probably have clients who have bought 'bits and pieces' from you in the past. The fact that they've only nibbled at the totality of what you can do is no reason to ignore them.

• How many different 'things' can people buy from you? (In posh, marketing speak, 'How many items are in your catalogue?')
• Are all your items set out on a price scale from 'free' to 'expensive', in steps which seem reasonable and could be shown to represent good value for money?
• Assuming you have a good range of stuff to sell and assuming that it's available in reasonable steps, then what are you doing this month to persuade previous buyers of cheap ticket items to buy your more expensive stuff?

More than anything else, what this review will show are the holes in what you take to market. The lack of cheaper products perhaps, or maybe lack of choice when it comes to the really big-ticket item.

While I'm not one to whine about the apparently tough economic times in many economies around the world, I do believe that if we all had our houses in order and could honestly and fairly respond to all the above questions, all our businesses would be in better shape - so off you go then, no time to loose, let's get busy.

That's it folks for this week - as usual, your comments welcomed and appreciated, particularly with reference as to what you'd like to hear about. I do get quite a few emails by the way, and I read them all, so please don't feel shy about getting in contact.