The Path To Business Success

The Path To Business Success
May 19, 2012 Dmitri Stern

What Every Business Must Do To Be Successful


Take a look at the picture below. This outlines the exact steps that every business needs to use in order to be successful. We’ll go over each one in more detail.

Starting at the upper left hand corner of this picture, you see “You & Your Business” box. The arrow from this box leading off to the right says 1: Dividend Objective: And, business structure, method and system for achieving it. This first step in the process means setting a clear financial goal for your business. Lewis Carroll said, “If you don’t know where you are going, any road will get you there.” We don’t want you to wind up just anywhere. You have to know where you are going – what your dividend objective is – to know if you are making progress and how much farther you have to go. It is difficult to operate a successful business – or any business – for very long if you don’t have a clear, quantified dividend objective. You might not have attained your goal yet, and you might not be making as much progress as you want, but that’s okay. We’ll show you how to get there. But, first you must have a goal.

Outstanding Results Company - Businesses Must Take This Path To Become Success In Long-term

Let’s look in more detail about how to set that goal for your business. Only you can actually determine what that actual goal is – how big it is or how much you want to attain. But, we can show you all the details and elements that go into setting your goal. First, let’s define what we’ll refer to as your Operating Cost Budget. To run your business you need to pay or cover your costs of doing business. Part of what you need to understand, though, is that in terms of setting a goal for you and your business, the operating cost budget must include 1) a dividend or profit amount (or objective), 2) all of your variable costs, and 3) all of your fixed costs needed to run the business.

We need to define variable costs and fixed costs so that you understand exactly what goes into these amounts. Think of variable costs as the costs you have to pay to make a sale. These costs will include your marketing costs, advertising costs, and related ads like Yellow Pages and so on. The reason these are called “variable costs” is because you can vary them over time. You have more short-term control and they will go up or down depending on what you decide to do with your business expenses or spending. The point is that you need to recognize all of these variable costs when setting a dividend or profit objective for your business. Similarly, fixed costs need to be recognized. Fixed costs are expenses for things like building rent, wages, phones, cars and things that are fixed each month. Assuming you have a lease or other type of contract, you won’t see your rent go up or down each month. And, your car payments will be the same each month too. So, fixed costs and variable costs get added together with your dividend objective to make up your goal.

It might be a bit easier to look at an example. Look at the chart below. Here we assumed that you would like to make $100,000 after all of the expenses for the business have been paid. Take this example as an annual or yearly estimate too. You can fill in the box to the right for your own specific situation and business plan.

Outstanding Results Company - Operating Cost Calculation Table

Now that you have this goal set up and you understand that you must set a goal that reflects all your expenses as well, we can go another level deeper. In our example, the gross profit or Operating Cost Budget was established as $150,000. We need to look at your product sales – minus the costs of your products or services (often referred to as Cost of Goods Sold). This number on a per product or per service basis will wind up being what you use to make your goal. The net profit or contribution per product goes into meeting your expensed and helping you make your dividend objective. Another example will help here. Let’s say you sell a product (or service) for $2,500. Maybe it’s a lovely piece of furniture. Or, it’s an air conditioning unit plus installation. Suppose your cost of goods sold is $500. Then, the net contribution from each product is equal to $2,000, or the $2,500 sale minus the $500 costs. If your Operating Cost Budget is $150,000, how many of these products with this contribution do you have to sell to make your goal? The math is easy. Divide the total goal but the cost per product to get 75 ($150,000 divided by $2,000 = 75). With this operating budget and product contribution, you have to sell 75 products per year to make your goal. The chart below summarizes these numbers and you can fill in the blanks for your business.

Note the last number on the chart on the prior page. With a goal of 75 sales per year – and we’ve assumed the budgets, costs, and profits are for a one year period or per annum – you now know that to reach your goal for this year, you have to sell 1.5 products or services per week! This is a very powerful number to know. Maybe this week you had a great week and sold 3 items at $2,000 each. Does that mean you can take the next two weeks off? Maybe, but more than likely it tells you that you are a bit ahead on making your goal. You know that you have to “average” 1.5 sales per week. Most weeks will not be “average”. They will be higher or lower so it’s important to keep track over time. If, for example, you thought about this goal on a monthly basis, you would know that you have to sell 12.5 products per month to make your goal. So, even if you had 3 sales this week it’s important to track your results not only on a weekly basis but also monthly and quarterly as well. This is the only way you will know how you and your business are doing compared to the goal you set.

There are a few more important parts of background that you need to know before we move on to the next step in the system. Keep your goal in hand – and you should write down your goal and review it often. You know your business well enough to know if you need to review your goal once per month or once per quarter. If you are tracking your weekly and monthly sales as you go, then reviewing your goal for the year becomes an easy exercise.All you need to do is look at your business performance and see where you are compared to where you want to be. It may be the case – and in fact it will be the case after we show you the rest of the system – you will want to change your goal and increase it after a few months. Or, after a couple of quarters working with what you learn here you can go back and see if your goal is too conservative or too aggressive.

In fact, as we look at all the different parts that went into calculating your weekly (or monthly) sales goal, if the system we show you can increase each of those elements by only 10% you will see a dramatic increase in your profits. Let’s look at an example to see how that works.

Outstanding Results Company - 10% Increase Chart

A 10% increase in each part of your business that contributes to your dividend goal results in a 61% increase in your gross profit! That is a BIG increase in the bottom line for small changes in the way you do business. For example, if you were able to generate a 10% increase in the number of leads or enquiries you received you would have 300 more prospects. You can see how the math works. With only a slight increase in the contributing elements, you can realize big gains in profits and be closer to your goal. We’ll show you how to address each of these elements in more detail. But at this point, don’t worry too much about whether your goal is too big or not big enough. After you have a bit more experience with the marketing and sales practices we show you, you will want to go back and revise your goals and objectives. Really the point here is to have one. You need a place to start and a clear goal to focus on.

Another foundational element of the system involves not just you but the people you have around you. It’s very important to surround yourself with people that support your goal. Or, stated another way, people that support you reaching your goal can help you get there. Part of the reason to do this is to help you. None of us is really capable of doing everything ourselves. As much as you (and I) would like to believe that we can do everything and that we have unlimited capacity to get things done, that is not true. On a practical level, we only have a few hours each day to tend to our business. At the outside, you might be one of those people that can consistently work 10-12 hours a day for several months in a row. More than likely, though, you are like everyone else and 8-10 hours is probably your maximum. So, it’s important to have supportive people around you – and that includes your employees – so that you can divide up the work.

Having a great support group also helps you prepare yourself and build your stamina. About 80% of your success will be the direct result of your mental staying power or stamina. A great support group will help you develop a positive attitude and get you through the tough times. And, there will certainly be tough times. We all know that some weeks are great sales weeks and some are not. Once you decide on a goal and decide to achieve that goal, getting there usually becomes a matter of sticking with it. Sure, there are circumstances and uncontrollable events that can derail even the best plans. For example, do you know how many times Donald Trump’s corporate business has declared bankruptcy? Donald Trump is a well-recognized name (and brand for that matter) and is typically associated with business success. In fact, his company has been through bankruptcy proceedings three times. A relatively recent Chapter 11 filing was in February 2009 when the company reorganized and Trump walked away from his leadership position. Even the big names in business struggle sometimes. Note though that Mr. Trump’s company went through bankruptcy which has not affected his personal wealth or wellbeing. He is still estimated to be worth about $3 billion.

The people you choose to be part of your support group – and remember it is your choice who to associate with – can help feed you the right information when you need it. Some people are always positive no matter what. You need a few of those people. Some people are always realistic and practical. You need a few of those people too. Ask them for advice when you are struggling or when you have a big decision to make. They can help you weigh all the facts before you decide. Still others have been successful both in their business and in their personal lives. You need a few of them around too. The point is that you can and should surround yourself with a support network to help build your stamina. You can and will achieve your results with the help of a great support group.

Time is your precious commodity. Do you believe that statement? You know as well as I do that everyone has a fixed amount of hours in the day. If you work more than you play is that a bad thing? Not necessarily but we must all balance the hours we have with the things we want to do. We have some advice on exactly how to do get that balance. From the business perspective, you have your goal identified and you know where you want to go. That is a very important first step. Not everyone can do that part or do it well. If you did not actually go through the process and calculations in the first part of this book and actually estimate and write down a goal for your business, please do so now. Quit reading until you have done this exercise.

With your goal in hand, there are really on a few simple things to do with your time to help you get there. First, stay focused. Keep your attention focused on one thing at a time. We hear a lot about “multi-tasking” these days. Everyone seems to be trying to do more all at once. If you’ve tried this or if you are trying it now let’s take a look at what happens. Say for example, you have an office phone ringing, a text message coming in on your cell phone, your administrative assistant knocking on the door of your office, last week’s sales report on your desk, and your wedding anniversary dinner with your wife to plan. It’s 1 pm in the afternoon. What do you do? If you are like nearly all of us, you take on one thing at a time. And, you will try to speed up your pace so you can take care of more things in a shorter amount of time. For example, you might think to yourself “The phone call will go to voice mail, the text message I can answer later, and I’ll plan our dinner later this afternoon. Better see who is at the door and what they want. Then I’ll look at the sales report.” And, this thought process usually takes 1 or 2 seconds, but in that time you have prioritized what you need to do and shifted your focus to the one or two things that need immediate attention.

This scenario could be described as reactionary. You are simply reacting to a series of events and deciding what to do next. The point you need to act on relative to your business goal and dividend objective for this year is that you always need to have that top of mind. Let that goal be the one thing you focus on during the day. There will be interruptions. There will be other things you have to do. But, these are temporary. Some you can anticipate and some you cannot. If, though, through all the clutter you can stay focused on the “one thing” of achieving your business goal, this will help you achieve that goal. Don’t get distracted by other things. And, use your support group for encouragement, accountability, and to help you stay focused.

The second thing you need to do about your time situation is make sure you discriminate. By this we mean that you should clearly decide what you will work on (to achieve your goal) and what you will not work on. Only work on those activities and processes that generate money! To illustrate, think about everything you did yesterday. Make a list and let’s go through it. How many of the actual things on your list generated any money for you and your business? If you did not choose to do those activities that make money, how can you reach your goal? We’ll show you more details about testing and measuring everything you do for your business. This way you will know for sure that what you do actually generates money for your business. And, unless you focus on these things – the ones that get you closer to your goal and dividend objective – it’s a simple fact that it will take you longer to reach your goal. We want to emphasize that what you will learn about gets BIG results. But, it also gets those results FAST!

To be able to effectively discriminate and pick the money-generating activities you want to work on, you must be organized. So, part of your time each day must be spent on organizing. Organization is the key to having a productive day tomorrow. One thing we all know for certain is that tomorrow will bring a new set of events and challenges. We don’t know for certain what will happen tomorrow. Without planning and organization, though, you know as well as I do that events can take over your day. Go back to the situation we describe earlier … the phone is ringing, cell phone is going off, secretary at the door, sales report to read and anniversary party to plan. Which of these events are unplanned? Maybe all of them were unplanned or maybe none of them were unplanned. Perhaps the phone call and cell phone message are connecting to the same meeting, and your administrative support person is coming in to let you know the meeting is about to start. You knew about the meeting yesterday and the sales report on your desk is what you will be talking about in the meeting. As long as you planned for and got organized for the meeting, you can be effective in that meeting. What would that scenario look like, though, if you had not taken the time to get organized? Chaos! If you are like us, you know that feeling too. So, it will happen even to the best of us. But, the point needs to be made that you need to stay organized. That’s the only way to stay focused on achieving your goal.

You also need to block out some time each week to spend on innovation. The best way to innovate or develop innovative solutions for you and your business is to answer the following questions.

Outstanding Results Company - Innovative Questions For Business Development

First, pick one or two things you would like to improve about your business. These things should be tied directly to your sales, revenue, profitability and achieving your dividend goal. For example, you could choose to improve your marketing materials. Perhaps you have a postcard mailing that you send to former customers to entice them back into your store. As part of your innovation idea, you would like to improve this marketing piece. Answering the above questions, you will go through the current process and describe how the marketing piece was or has been put together. If you want the innovation to be centered on the marketing and communications with your former customers you would go through the details of how you create that material. If you want the innovation to be on improving the actual mailing part – say for example you want to reduce the undeliverable rate – you would go through each part of the actual ways you use to collect mailing addresses from your customers. Importantly, too, you would want to think about how those addresses are updated if they are at all.

The next steps involve quantifying the current processes so that you know how much you benefit from the innovation. Let’s stay with the example of developing innovative ways to reduce your undeliverable rate in your mailing. When you go through the current processes and quantify results you discover that your current undeliverable rate is 15%. Through innovation and improvements, you decide to target a rate of 7-8% for undeliverable addresses. That would be a goal or target of cutting your undeliverable rate in half. As part of the current process, you discover that once you collect customer addresses there are no parts of the process dedicated to either validating or updating those addresses. In this case, your mailings are bound to generate some undeliverable pieces when you try to contact former customers. People move or change addresses for a variety of reasons. You need to find a new way to review and update customer addresses before the mailing.

At this point you have quantified results, and analyzed the part of the process you want to change. Step 4 above suggests that you change one thing only and in this case you have isolated the address review and update process as the one thing you will change. Suppose for example that you find an online source on the internet of current, valid addresses with individual’s names. Your innovation then will be to use this online source to review and verify customer addresses before you send out mailings each month.

Now you are ready for Steps 5, 6 and 7. Test this one change, quantify the results and assess whether the results meet your objectives. On testing, we suggest you start with a small test, measure the results and then move to a bigger part of the business if the change was successful. For example, you might divide your customer list into mailing zones. Go through the online review and update process with one zone first. Send out mailings for this one zone based on the updated files and measure the undeliverable rate. If that rate is between 7 and 8 percent for this one zone – based on all the new address information – then you know you have a successful innovation. You decided up front what your success criteria were, implemented an innovative solution in only one part of your process, measured the results and met your objectives. At this point, then, you can orchestrate the successful process change in bigger parts of your mailing program. You can decide if you want to make the change for the entire mailing database or if you want to continue to test parts or zones of the lists.

On the other hand, if the first test is not successful, then you will need to go back to an evaluation of the current process. You have to go back far enough in the process to look for other things to change or ways to develop innovation. Let’s say, for example, that reviewing and updating addresses online did not have an impact on the undeliverable rate for your mailing. You would then go back to consider how else you might change the current process. Suppose that when you ask customers for their address when they buy from you they are filling out a form by hand. This may result in handwriting that your staff cannot read. Rather than leave out that customer, they are guessing on what the right postal code is based on how they interpret the customer’s handwriting. So, for your innovation process you decide to ask customers to enter their address information online. You provide a laptop or computer terminal at one store’s checkout location where customers can enter their information. You decide to use only one of your stores to test the impact before you put computers in all the stores. For the next mailing, you use the customer information entered at the store and find that the undeliverable count drops from 10% to 5%. This would be a successful change and you can implement throughout your chain of stores.

First, though, you would probably go through a cost-benefit analysis to make sure the additional computers in each store are paid for in extra sales by using more accurate addresses. This would be simple enough to do. Let’s say your mailing includes 1,000 former customers. With the innovative solution you reach an extra 5% or 50 customers by using more accurate address information. If you close a sale with half of these – another 25 sales – and your average transaction is $100 then you generated an incremental $2,500 in sales revenue. If your fixed and variable costs are half of your revenue, then you have $1,200 to pay for other costs and still contribute to your dividend objective.

Let’s say the additional marketing costs of having more deliverable mailings is $25 (about 50 cents per new deliverable) and a new computer with internet connection in each of your 5 stores costs $500 (computers and internet connections do not cost much in today’s market). In this case you would have an incremental $675 to contribute to your dividend objective ($1,200 – $25 – $500) from one month. Next month with the same innovation in place, the only extra costs you have would be the extra mailing costs, $25. So, in the second month with additional sales of $2,500 your incremental contribution to meeting your goal is $2,475 ($2,500 – $25). And so on for each successive month that you implement the new solution. Clearly this innovation is worth doing. You’ve reduced your undeliverable rate and in the process generated incremental profit that will help you meet your goal for this year.

Would you stop there with your innovation process and improvements? No, you probably won’t. Like every other businessman and entrepreneur you have tons of ideas about how to make your business better and more successful. Some of these ideas will be good ones and some will be not so good. As you develop your own innovation process you will be able to figure out which ones work and which ones don’t. As you grow you will find yourself with a process that yields continual incremental improvement in your business and your business results. These improved results will help you reach your business goal and dividend objective that much faster.

Now we can divide the process and system into two major parts – marketing and sales. To recap and summarize, you have a clear goal and dividend objective for your business. You know how to think about profit multipliers and you are building a great support team. You also recognize that time is precious and you can focus on improving one thing at a time. We need to focus next on your external business environment. This area is typically thought of as “marketing”.

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