Category Archives: Sales

Revenue is revenue, right?

by Kelly Dies, Soundpoint Consulting

A dollar is a dollar. That’s true. And, all revenue is equal. Right? Well no, not in an investor’s or potential buyer’s eye. So what makes some revenue good and other revenue better? 

Recurring

Recurring revenue is highly desirable because is it known and predictable. The best example of this is an auto-renewal fee or service charge periodically charged directly to a customer’s credit card. Once the initial sale is complete there are no more costs to acquire a customer. The revenue stream is much like an annuity. Continue to provide the goods or services as promised and the revenue keeps coming in. 

Great examples of this are insurance premiums and streaming fees. Once customers have decided to purchase the product – and assuming they remain content, they are happy to have their credit card billed automatically. 

In contrast, consulting and attorney fees are often one-time in nature. Revenue ceases when the project is complete and the engagement ends. 

High Switching Costs

Revenue generated from products or services that have high switching costs are more reliable than from those which do not. Switching costs can vary from technical reliance to data lock-up to high start-up costs with a new vendor.

A great example of high switching costs includes services which are outsourced, such as payroll processing. The cost to bring the work in-house is significant as you would have to hire and train a staff of people for this function.  Likewise, a bank account with automatic bill pay also has high switching costs, as unwinding those (recurring) transactions is a pain in the neck!

High switching costs in combination with recurring revenue results in some very high quality revenue. Take for example, my relationship with Constant Contact which reliably sends these monthly newsletters to you on my behalf. My credit card is billed monthly. And, it would be a quite an undertaking to transfer my email list to another email provider. Do you think

Constant Contact is at risk of losing my revenue? Absolutely not!

Loyal Customers

Revenue from a loyal customer base is extremely valuable. Not only does it guarantee repeat business but it potentially means additional business from referrals, thus significantly reducing the overall need for marketing and advertising spend.  

Good examples of this are a trusted relationship with your tax preparer or a favorite clothing store. Although switching costs may not be high, loyalty keeps you from looking elsewhere.   

Consider two comparable stores with the only difference being the loyalty of the customer base. The store with the more loyal customers has less customer churn and doesn’t have to work as hard for every dollar of revenue. Conversely, the store without the loyal customers has to work hard for every dollar earned. Not surprisingly, the investor/banker/ potential buyer will value the first store more. 

What are you doing to earn and keep the loyalty of your customers? 

High Margins

All businesses have revenue streams with different margins. Revenue that generates higher gross margins is more valuable than revenue which generates lower margins. Makes sense. You cannot generate much income from a revenue stream that is saddled with large variable costs.  

And, if a revenue stream costs more to produce than the dollars it generates, well that is not good. It’s like giving someone $1 in exchange for 85¢. Do this in too often and you will soon be out of business. 

The bottom line – know and manage your unit costs. Try to divert revenue from your lower margin products to those with higher margins. 

Diversified

Just like an investment portfolio, a diversified customer and supplier base is less risky than if you are highly dependent upon a handful of them. 

If one of your largest customers were to transfer business to a competitor, how quickly can your business recover? Or, if your largest suppliers were to run into financial difficulties, could you weather the storm? 

If your business model is highly dependent upon Google, Amazon or Microsoft, what happens if they change how they do business with companies such as yours? Trust me, you do not have much negotiating power with these guys. 

A good rule of thumb is that your top 5 customers should not be responsible for more than 15% of your total revenue. A similar metric should hold for suppliers. 

If you would like assistance improving the quality of your revenue, please give me a call. I would be happy to help.

How can I keep my business going during and after this pandemic?

by Ken Sethney, Volunteer Business Mentor, SCORE Kitsap

Every business owner I’ve had a conversation with in the last month or so is struggling to answer that question. It doesn’t matter what they sell, products or services, they are struggling to find answers to very difficult questions. Almost everyone in start-up mode has simply stopped. 

So, what should they do? What should you do? My suggestion is to keep moving forward. 

One of my SCORE clients owns a well established business with several employees. She and her team provide therapeutic services, but they don’t qualify as “essential.” 

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Closing Sales Starts With Building Trust

Making the sale, especially when your small business offers products and services to other businesses, demands more than being good at what you do. It definitely requires building professional relationships. To do that, you must earn your customers’ trust. 

There’s no scientific formula for earning trust. It requires time, patience, and honest effort. 

Here are some suggestions to help you lay a foundation of trust with your potential customers: Continue reading

All Things Sales! 16 Mini-Lessons for Startup Founders

As a former CEO and software engineer (Citrix, XenSource, VERITAS, etc.), board member of GitHub (recently acquired by Microsoft), and lecturer in management at the Stanford Graduate School of Busines, a16z general partner Peter Levine is constantly asked “Why sales?” by entrepreneurs and technical founders. He himself used to hold the “engineer-centric” view that if you build a great product, customers will come. But the fact is, all world-class companies must have a strong sales force. So — how do they get there? How does a technical founder begin to build a top tier sales motion?

In this series of snack-sized videos — which you can watch all together, or mix-and-match for your particular questions and needs — Levine distills the fundamentals that every founder should know about sales. The 16 lessons in this “mini-MOOC” offer everything from definitions to concrete guidance for the following:

1. All Things Sales! 16 Mini-Lessons for Startup Founders [Introduction]

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The End of Credit Card Signatures

What Does It Mean for Your Small Business?

By Andrey Bobrovskiy, smallbizdaily.com

Have you noticed something different about your in-store transactions recently? If so, that’s likely because the end of the signature requirement announced by Visa, Mastercard, American Express and Discover is finally coming into effect. Although it affects just one step in the payment process, it means a lot more for your small business in the long run.

It Makes Checkouts More Convenient

The payment card industry has been moving toward simplicity and convenience for years. Customers want seamless and secure methods of paying for goods and services, while merchants seek reliable and flexible ways to process these payments across a variety of channels. This paved the way to innovative forms of payments, including those using near-field communication and virtual reality.

However, convenience isn’t always about adding new features. Oftentimes less is more, and this happens to be the case with credit card signatures. By now, they’ve simply outlived their usefulness, a fact supported by Mastercard’s revelation that it already didn’t require signatures for 80 percent of its transactions even before the changes went into effect. Continue reading

What makes or breaks a successful small business?

business colleagues high fiving

What makes or breaks a successful small business? There are several key commonalities among businesses that succeed, according to several studies polling entrepreneurs.

Here’s a closer look at four things successful business owners do right—and one thing they need to do better.

What successful entrepreneurs do right

  1. They start strong. In a poll of 500 successful entrepreneurs, a whopping 84% of respondents say their companies achieved profitability within their first four years in business. In fact, 68% became profitable within the first year. Only 8% became profitable after their fifth year in business, suggesting that the first years in business are make-or-break ones for most entrepreneurs.
  2. They focus on finding new customers. Small business owners in the survey say finding new customers is their top business challenge—far ahead of cash flow issues or dealing with the competition. Smart entrepreneurs stay focused on continually generating new leads and closing new business.
  3. They put cash back into the business. Forty percent of business owners say whenever they have surplus cash, they put it back into the business rather than paying themselves, a separate study found. What’s more, 47% tap into personal savings to finance their businesses at one point or another.
  4. They work hard. Never let it be said small business owners are slackers. Some 86% work on the weekends; 23% take fewer than two vacation days total all year long; and of those who do take vacations, 75% work during their time “off.” Continue reading

Ask SCORE: How can I increase sales productivity?

by Ken Sethney, Volunteer Mentor, Kitsap SCORE 

Let me begin by saying that I have tremendous respect for sales people. They have an extremely difficult and vitally important job. When they are successful, everyone wins —customers, owners, managers, widget makers, support staff, and consultants.

Therefore, it is in everyone’s interest that sales people are given the support, encouragement and tools they need to succeed. To that end, I offer the following strategies for increasing sales productivity. When they are successfully implemented, your customers and everyone in your organization will benefit.  Continue reading

Ask SCORE: How can I improve my selling skills?

As the owner of a small business, you may be struggling with a frustrating reality. You are confident that you have excellent products and services, but people aren’t just lining up to buy them.

You know that you can solve problems for your customers and deliver significant value for a reasonable price. All you have to do is convince them to place an order.

Unfortunately, sales skills don’t come naturally to everyone, but they are essential if you want to build relationships with potential customers and generate orders for your products and services.  Continue reading

What Online Marketing Tactics Generate the Best B2B Leads?

The days of B2B businesses generating leads via sales letters and cold calls are long gone. Today, savvy B2B marketers use online marketing to attract qualified leads. But which digital marketing tactics work the best for this purpose?

Here’s what a recent survey of B2B marketers in the 2017 State of B2B Digital Marketing has to say.

Social media, email and search are the most popular lead generation tactics…

Some digital lead generation tactics are almost universally employed. For example, 95 percent of B2B marketers surveyed use social media to generate leads, 93 percent use email marketing and 91 percent use organic search.

…but that doesn’t mean they’re the most effective.

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It’s time you learned about the art of referrals.

You have a business, but are people talking about it?

man holding card referralsWord-of-mouth is just as relevant today as it has ever been. When a business asks you to talk about how great they are on Facebook, Twitter, Instagram and so on, that’sword-of-mouth. When you provide good content that others can share, that is also word of mouth. Today, potential customers are more likely to pay attention to people they know and a large general following (e.g., Yelp) than if they see the same commentary in a company advertisement.

In fact, they’ll pay much more attention. The Word of Mouth Marketing Association published some research a couple years ago that found “the value of a word of mouth impression is from five to 100+ times more valuable than a paid media impression.”

You don’t have to spend all day convincing people to spread the word about your new business on social media.

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