Very few business owners analyse the comparative value of their customers, then cater to, sell to, price to different customers differently.
Few business owners carefully analyse the comparative contribution to net profit of different products, services, sales reps, employees, departments, their own activities, then keep some, jettison others accordingly.
Few entrepreneurs manage their time half as militantly as I do.
Why? Because few business owners ever get THAT THEY ARE IN THE MONEY BUSINESS. If they did, they’d be constantly equating everything to money, measuring everything in monetary terms, making decisions based on the money.
There are 8 main money factors to think about constantly in business, to be constantly trying to improve:
Price Customer Value
Transaction Size Business Value
Margin Income Extracted
Frequency or Continuation of Purchase 80/20, 95/5 Rules
With PRICE, we look at elasticity, premium levels or add-ons, even target markets that might accept higher prices.
With TRANSACTION SIZE, we look to up the average. In fast food, it was Super-Sizing and packaging. In the hotel business, the $2.00 added to the bill for the newspaper, the extra internet access and phone charge, the $5.00 Mars Bar, the $4.00 bottle of water consumed all bump the total average transaction size.
With MARGIN, we look to control costs, raising selling price, lowering buying price and increasing the spread between both.
With FREQUENCY or CONTINUATION, we either have continuity, or we monitor and work to increase frequency, which may mean sourcing more products, creating more offers, communicating more often.
With CUSTOMER VALUE, we measure the value of each customer in gross, contribution to net; try to improve many: clone the best.
With BUSINESS VALUE, we look to create proprietary goods, intellectual properties, location, systems or other advantages, as well as control of customers, continuity of income, etc. to equate to equity.
We must also focus on the INCOME EXTRACTED from the business by the business owner. Captive dollars that are non-working or at risk. Put another way focus on taking income from your business and invest it in less risky environments than business has become today. It’s an illusion and dangerous to think that your business is your biggest asset.