« March 2006 | Main | June 2006 »

April 3, 2006

For Small A Business Owner Who Wants To Increase His Income

Here are eight way a small business owner can increase income.

Few business owners analyze the comparative value of their customers, then cater to, sell to, price to different customers differently.

Few business owners carefully analyze 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 eight main money factors to think about constantly in business, to be constantly trying to improve:

1. Price
2. Customer Value
3. Transaction Size
4. Business Value
5. Margin
6. Income Extracted
7. Frequency or Continuation Of Purchase
8. 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 CUSTOMER VALUE, we measure the value of each customer in gross, contribution to net; try to improve many; clone the best.

With TRANSACTION SIZE, we look to up the average. In volume businesses, even dimes back differences. In fast food, it was Super-Sizing. In the hotel business, the 50-cents added to the bill for the newspaper, the $2.00 local phone access charge, the $3.00 bottle of water consumed all bump the total, average transaction size.

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 by the business owner, because captive dollars are non-working and at-risk dollars; illusion.

With MARGIN, we look to control costs, raise selling price, create the greatest possible spread.

With INCOME EXTRACTED, we look at the long term value of each customer by optimizing the maximum value that can be extracted from the relationshp over time.

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.

Stay tuned for more about the 80-20 and 95-5 rule.

Dan Kennedy

Posted by David at 4:39 PM