How to Combat Employee Turnover

One unfortunate aspect of management is turnover.  Many of your hires simply won’t work out.  A new worker may develop personality clashes with coworkers, turn out to be incompatible in temperament or values, or may not fit in with the rest of the staff.  Or they may not develop the required skill set rapidly enough.

You want to counsel out any employee who is a poor fit culturally to achieve a smooth running organization. Even the geniuses must go if they aren't team players. Like Netflix asserts: No brilliant jerks! But what do you do if an otherwise acculturated employee doesn’t ramp up quickly enough? Do you show them the door or continue to try and train them?

Cherish Your Acculturated Employees

I’ve written in a previous article that you want to do everything you can to retain your employees who are a cultural fit. Even those who cannot perform their job at present, you want to find a way to keep. But how do you accomplish this and still achieve the organization's objectives?  You want your people to be competent, even expert, at their jobs.  So how can you handle under-performers and lessen turnover?

Be open to change their role within the organization.  Maybe they can perform most of their duties but there are specific areas in which they are deficient.  If so, explore changing the job description and can hand off the weak areas to other individuals.  Return something else to their plate to compensate.

Good personnel managers ensure they overlap people’s skills to ensure several people are available to complete mission critical tasks.  Creative managers adjust responsibilities to assign the best person to each job.

As long as you can accomplish your objectives does it matter who does each task?  If you are willing to move people around to best suit their individual needs and the needs of the company, you will develop stronger, happier subordinates.

Also, you will be giving your staff the ability to stretch their comfort zone within the company.  If you get a reputation for stretching workers’ professional development, you may find your people taking initiative and accepting responsibility outside their own niches.

Next week we’ll discuss how to use METRICS to train your people.  And I’ll delve into another Ingenious Sales Technique called “Follow the Leader.”  It’s a terrific way to pack convention halls and ensure your seminars and presentations are standing room only.  Later I’ll talk about how to turn costly fees for things like credit card transactions into a profit center.  Look for it starting next week.  Until then,

profitable business All!

The Ingenious Executive- Create a Turnkey Operation

Have you been promoted lately? Most likely, your workload has increased. Employers often ask their workers to take on additional responsibility, especially during a recession where funds for extra labor is scarce. So how do you handle the additional work? With Ingenious Time Management you can hand off your overflow and preserve your relationships, all while increasing the skill level of your junior staff.

Let’s say your duties have expanded and you’ve just accepted a greater workload.  You have relationships with a select group of contacts– customers, vendors, or partners.  These relationships still need to be managed.  And you don’t want to burn any bridges.  Maybe some of them are even friends.

You know some coworkers in the same boat who just accepted the new work without transferring any of the old.  But you can see they’re now overloaded and headed for burnout.  You don’t want that to happen to you.  Because you're an Ingenious Executive you know you can grow the company. So you must find  a way to lighten the load somehow.

Last week we discussed how to encourage a customer to fire himself by gradually decreasing the value you provide.

How to Train the Organization

Ask your supervisor to allow you to delegate certain of your old contacts to junior personnel.  Suggest in this way you’ll be giving these junior workers valuable on-the-job training them while freeing up your schedule so you can excel in your new duties.  Agree to oversee the process.  Positioned this way, most bosses will see the benefit and agree to your proposal.

Start by informing your contacts of your new responsibilities and invite them to celebrate your new role with the company.  Mention that one benefit of the promotion is additional staff that can help you fulfill your new responsibilities.  Reiterate that you have always strived to provide the very best service.  Stress to your contacts that they can rely on your delegate to handle the daily routine calls but that you'll still be overseeing the account.  Afterward route through every call from these people to your staff.

In the same way you fire customers, you then delegate your old contacts.  Gradually make it less convenient for your old contacts to deal directly with you.  At the same time, ensure your delegate provides greater convenience when dealing with them.  Similar to removing value an outgoing customer receives, you gradually decrease the convenience in dealing directly with you while providing a comfortable alternative.

The key is to do this gradually, in stages.  You want your contact to feel they ultimately make the decision to deal with your subordinate, not have it thrust on them.

Initially have your delegate act solely like a receptionist, answering and transferring the call to you.  Then in the following calls instruct your staff members to engage lightly and pleasantly on the phone, perhaps letting them know how much they’re looking forward to working with them before passing the call on to you.

They for each call, delegate will increase the level of interaction with the contact while prolonging the time it takes to reach you.  Now they won't transfer the call; they'll take a message. Again gradually increase the time it takes for you to get back to them.  At the same time, during each call your delegate will offer to handle the matter in your stead.

As they prove their competence, your old contacts will start to rely more upon them.  Soon after they’ll stop approaching you and deal directly with the delegate.  Then you can manage the relationship from a high level while your delegate handles the daily interaction.

[Note: Don't make them wait long enough to irritate them, just to make them aware that you are getting busier.  And in any emergent situations, respond promptly.  Use your judgment.]

Why This Delegation Technique Succeeds

People fall into ruts.  Your contacts want to continue to deal with the same person out of habit, and to avoid retreading already covered ground.  So some contacts may take a long time to accept the delegation.  That’s fine; eventually they will.  Handled properly, at some point the contact will accept the help of your delegate. 

In this way you get your contacts to fire themselves while still maintaining the integrity of the association.  Each contact you delegate frees up a little more of your time to handle your new duties, make more sales, add more partnerships, add more staff, and build the organization.  You can scale an organization very rapidly this way.

Have you found a better way to scale?  What do you think of this method?  Leave a comment and let me know.

Later this week I’ll share Ingenious Sales Training, a way for you to institute a free training program that will improve each rep in your sales department.  And in a later article I’ll reveal how you can eliminate the headache of those annoying variable expenses like merchant card fees.  It starts next week, so stay tuned!  Until then,

profitable business All! 

Ingenious Sales Management:7 Ways to Promote a High-Performing Culture

Often, salespeople are viewed like standard employees.  They’re asked to answer the phone when it rings, handle paperwork, and do a myriad of tasks unrelated to selling.  The rationale by the rest of the staff for having the salespeople handle these duties is: “they’re already in the office; why not assign them to do it?” 

Your salespeople have only a few hours in the day to get in front of customers.  As their manager, it's your job to help them maximize their selling time.  This means implementing processes that allow them to focus only on sales-related duties.

By instituting only a few guidelines, you’ll be on your way to creating a high-performance culture and readying your organization for an inevitable spike in revenue.

Here are 7 steps to promote an environment that nurtures and creates top performers:

1. Focus on results, not activities
   When you bring in a new hire, you must supervise them to ensure they are performing at the right activity level to meet quota.  But once they’ve proven themselves, shift your focus to results, not activity.  Your best salespeople can spend a few hours on the golf course and bring in a huge win.  If a rep consistently surpasses quota, do you care how many calls he made or how much he's in the office?  Drill down to activity only when one of your reps miss his productivity goal.  Then work with him to improve deficient areas.
2. Monitor unobtrusively
   In the next post, we'll develop metrics based on your sales process.  Employ a cloud based web solution like Salesforce.com or another Customer Relationship Manager.  It will enable you to unobtrusively monitor transactions and generate metrics.  This way your reps can worry less about writing reports and maximize their time in front of prospects.
3. Individual continual improvement by drill training
   Use the results of your reports to determine weak areas and share these with your rep.  Next week I'll share how to derive each rep's performance measures. And later I’ll explain how you can use drill training to train deficiencies. Your reps will prefer this type of training because they can see how it directly impacts their pay.
4. Pay ratcheted commission on total volume
   Setup your commission percentages to escalate as they increase sales.  Let’s assume a rep’s quota is 500K per quarter.  And you pay 5% commission on sales at that level.  At 750K, increase it to 6% commission.  If you pay higher commissions on the entire volume, not just the incremental difference, you will powerfully motivate your reps to shoot for each next level.  An extra 1% of increased commission on the entire volume will drive your reps to shoot for the next level.  And the next, and the next.  They’ll be motivated to hit successive levels.
5. Delegate non-selling tasks
   Maximize selling time.  Remove anything that doesn’t contribute directly to the sales process.  Transfer administrative chores to an hourly employee.  Don’t interfere with face time in front of prospective clients.  The increased earnings your laser-focused reps bring in will more than offset the labor cost.  Minimize sales meetings: use technology to collaborate and keep meetings short and positive.  Announce new wins and offer motivating training.  Make non-urgent announcements using email or departmental bulletin board.
6. Embrace virtualization
   Your salespeople need to be out of the office, not polishing their chair with their rumps.  Create performance-based, not time-based policies.  Support their choice as to how they bring in business and make their schedule flexible unless it’s impractical to do so.  If you’re worried about giving them too much latitude, apportioning increased freedom as their sales increase is a great motivator.  Inbound call center reps can handle calls from home with a remote connection.
7. Trumpet victories
   Salespeople are ego-driven.  Announce major wins at the end of sales meetings.  Appoint “Salesperson of the Month” type awards based on productivity.  Your reps will appreciate the accolades  even though they seem cheesy.  Organize a President’s Club.  If you can afford it, present coveted awards for overachievers: a vacation trip to a great place they’ll talk about all next year.  This will set the tone for future incoming employees.

A tip: First-class travel and accommodations at a domestic resort is much more coveted than an economy trip to an exotic isle.

It's your job as sales manager to shield your people. A portion of that is deciding how you think your sales department should be run and persuading management to let you do it. Most senior managers who haven't been in sales don't know the first thing about how to run a sales department. It's your job to explain it to them. If you succeed in instituting the above items, you'll find your workplace productivity soaring and you’ll be breaking records in no time.  You’ll also notice your job will become much easier because your reps will not be around the office stirring up trouble.

In Thursday's article, we’ll discuss a great method to create a self-running organization while lightening your schedule to give you more free time.  And next week I’ll share Ingenious Sales Training to further improve the overall productivity of your office.  If you embrace the principles of these four sales management articles, you should be earning respect from your peers and supervisor soon.  It’s all coming up in the next week so stay tuned.  Until then,

profitable business All!

Customer Service for Dummies

Sometimes you just need to let a customer go. If a client is abusive to staff, or demanding but you're unable to satisfy or reason with them, you may have to show them the door.

But this article goes deeper. It can be valuable to periodically evaluate your customer base and jettison the ones that are no longer a fit. Many companies routinely rid themselves of their "D" class unprofitable customers. It is a valuable strategic practice that will not harm customer relationships provided you do it correctly.

In the last column I shared a compensation plan that creates top sales performers. Now I want to explain a way to provide Ingenious Customer Service.

Excluding outright abuse from an out-of-control client, decide whether to terminate only after you've had a chance to reflect and cool down. Tell the client you need to check on something and will tell them later how (not if) you will solve their problem. Don't stall them, just find a reason to get back to them. Then make the decision when you're rational.

The Wrong Way to Fire Customers

Unfortunately companies often terminate clients at the wrong time, stating inflexible policies as ultimatums or offering tactless suggestions during a fevered disagreement, and this can sully a good reputation. Handled improperly, disagreements can also cause former customers to feel betrayed and act vindictively. Read about the Rule of 200 to learn the ramifications of a heated exchange. This is where excellent companies differ, proactively heading off this behavior before it begins.

The Right Way to Fire Customers

When you've chosen to discharge clients, the best practice is to allow them to fire themselves. How do you do this? By progressively removing value from the business relationship.

In an earlier column I shared a technique to handle a customer complaint. You'll remember I suggested you can avoid ill will by putting the decision in the customer's hands. In this same way, put the decision to terminate the business relationship in their hands.

A business relationship is like a playground teeter-totter.  As the supplier, you sit on one side and the customer sits on the other. You load your side with goods and services and the client loads his side with money. In this way the teeter balances.

If the totter becomes angled and you notice that you are dragging the ground, how do you right the teeter? Either by lightening your load (removing services) or increasing the customer's (increasing payment.)

In the same way, gradually make the business relationship less valuable for them and more valuable for you.  For instance, when you raise prices with the Grandfather Discount, exclude them from the offer.

Of course you will continue to provide the customary excellent service you give everyone, but gradually remove enough value from them while increasing the value to you so that ultimately the teeter-totter will right itself.  Or the customer will get off the teeter. Simply put, he'll terminate himself.

Will he leave immediately?  Maybe not - and this method won't leave you with the satisfying feeling of instant closure. But even when a customer is incredibly difficult to deal with, the decision to terminate should be made rationally, not emotionally.

Will he leave upset?  No.  Not if you put the choice to quit in his hands and he exercises it. You can even recommend an alternate vendor if you wish. And if he does choose to get upset, he won't have anything concrete with which to slander you.

Case Study: the Dance Studio

As a teenager I took dance lessons at the local studio. We middle class college students loved it because it was inexpensive and near the University. As a result of word of mouth of the students, the business grew rapidly. However, the owners soon discovered the college students were on a fixed budget and chose to attend the less expensive group classes. Hence, they were "D" class clients compared to the "A" and "B" class clients who could shell out for expensive private lessons.

The owners chose to cultivate a more affluent demographic by moving the studio to a wealthier part of town. The new owners found themselves in a dilemma: the D-lister's word of mouth had built their reputation and they didn't want to risk damaging it. So they implemented policies that caused us to jettison ourselves.

They handled it the right way. They didn't ask us to leave. But over time they made the services so inconvenient that we no longer found attending worth the trouble. The owners began decreasing the frequency of the group lessons we attended, from three times a week originally to twice a week, then weekly, and finally every other week. The owners justified the reductions by claiming that the regular classes had filled the available time slots and it was all they were able to provide.

The class winnowed itself down and eventually we all left. But there was no animosity because we had made the choice. And had we been miffed, what could we say? That the studio had become so popular that we felt shut out? We had nothing concrete with which any of us might damage their reputation. The studio flourished after we left with a new clientele, and the owners enjoyed an unblemished name.

Next week I'll share a way to use a variation of this technique to hand off customers and vendors to junior staff, furthering your ability to delegate and create a turn-key organization. You can even pass off close, long term relationships without risking losing clients. Done properly, this method will free up a lot of your time and allow your organization to grow rapidly. And later we'll continue discussing Ingenious Sales Management, developing a training program that nurtures top performers who stay with you for life. It's coming up next week. Until then,

profitable business All! 

How to Keep Key Employees - an Ingenious Turn-key Organization pt iv

This is the last of a four-part series of articles on Developing a Self-Running Organization.  In the last post we discussed how to develop the leadership skills of your mid-managers.  By involving them in strategic planning, you can prepare your company to run in your absence even during a crisis.

Turn Line Workers into Managers

Okay, you're regularly involving your senior execs in planning and confident they're participants in your company succession plan. But how do you provide for succession of your line workers?  These may be senior people without any formal managerial responsibility but they know the ins and the outs of the organization.  Tenured employees who might be topped out in pay and marginally challenged, they are highly at risk for leaving.  They may have special skills that would be difficult, if not impossible, to replace. If they see themselves in a dead end position the threat of departure can be great.

You realize you could fix this if you could offer them upward mobility.  Unfortunately because of the structure of the organization or their particular role, while you recognize their value, they're unpromotable.  So what can you do to prevent losing these key employees?

There is a way to provide your line employees leadership responsibility in a manner that achieves a number of benefits to the organization:

• increased productivity
• cheap labor 
• clone irreplaceable employees 
• an extended interview of new employees to determine cultural and skills fit within the organization

Can you guess what it is?  It's offering internships!

Work with the local University

By working with the career center of your local college, you can offer internships to students in undergraduate and graduate programs.  Done properly, you can achieve all these benefits and more.

Assign a new intern to a senior line employee you think may need a new challenge.  Your seasoned vet gets an additional role and becomes a manager by virtue of their supervisory role over the intern.

The company benefits from the productivity of an additional employee at a fraction of the cost of a regular worker and this intern gets to learn your business during this time.   Your labor output increases and you can assess how well a potential employee would fit your organization and perform their assigned job.

Most interns won't prove a fit, but that's fine.  Most employees don't either and end up leaving.  But by utilizing interns in your employee screening program, you won't have the expenses of a new employee.

Executed properly, an intern program can relieve you of many costly burdens.  Think of the typical expense and upheaval when an employee- even a brand new one - departs:  initial training costs, training salary, benefits, incidental issues.  Often you worry about the impact on sympathetic coworkers.  Rarely, you may have legal issues based on discrimination or other matters.

With interns, you won't have all these expenses and you don't have to worry about the affect on coworkers.  Interns are typically temporary so if they don't work out you just don't invite them back.  And done properly, you invest only time.  Regardless of the outcome, your senior employee will still have reaped the valuable experience of managing and training the intern.

Extend a Job Offer to a Promising Intern

When one of your interns proves a good candidate, you can offer them a position upon graduation.  Since they'll already know the job, they'll hit the ground running and require less supervision.  Their retention probability will be much higher than if you had hired someone without a trial period.  After all, you already know they're a cultural fit.  They'll probably get to know their direct supervisor. Since a poor relationship with the boss is the top reason an employee leaves you'll have a better chance of holding onto them.

Bonus: since your new hire interned under a seasoned employee with a valuable and possibly critical skill set, you'll have taken a giant step forward to shoring up that gap.  If you had the foresight to instruct your grizzled vet to train the intern to do their job, you have another employee on their way to adding that skill to their toolkit.

There's a lot more to structuring a successful internship program - how to supervise, how to manage the project, what to stress to all parties, how to ensure your line workers are enthusiastic and competent to manage interns, how to measure results, etc. etc.   It's way too much for this short article.  If you are interested, the author is available for consulting on how to best implement this strategic advantage.  The benefit far outweighs the cost.  For additional help, feel free to contact the author.

This is the final article of this series.  You now have the tools necessary to set up your company to become self-running.  You can add any number of staff for free by using interns; your line employees will view the upward mobility and you'll lock in retention of your key employees; your senior and line managers are practicing strategic planning and delegation which lowers the costs of the company; and you and every other leader can be content the organization will run smoothly in your absence.

And isn't that what every business leader wants?  To set up a business that throws off cash without demanding a lot of time?  Now you can take that trip around the world, right?  Write in the comments and tell me what you think.  Have you used interns?  What was your experience?

Next I'll share another Ingenious Sales Technique.  Have you ever tried to reach a top executive at a company but you were simply unable to reach them?  I used this technique to reach Warren Buffet's administrator at Berkshire-Hathaway Corporation.  It's a fantastic skill from a book that I tweaked.  Stay glued.  I'll share it in the next column.  Until then,

profitable business All!

Simple Marketing, pt VI: Test Marketing

Earlier this week we explored how to formalize training within your organization to empower your key employees to become strong leaders inducing them to stay with your company as long as you wish. After you implement last week's Ingenious TechniqueTM, you may find that your attrition decreases significantly.

This is the last of a six-part series on developing an advertising campaign. In this column we'll test market your ad so you can improve results and ultimately develop an extremely effective advertisement.

In the first four articles of this six-part series, you answered four questions - 1) Who is your ideal client; 2) where do you find more of 'em; 3) what do you tell 'em to lure them to your offering; and 4) what are they worth to the company. In the last post we calculated your most cost-effective advertising medium.

You have developed a basic design for your ad. From Part 3 of this series, you decided what your message should be and from Part 4 you determined what medium to use. This determined what and how you wrote your advertising copy. You engaged a skilled marketing specialist to help you write it. If you were unable to find help, you can review some of the Guerilla Marketing books by Levinson for assistance. If you prefer to work with someone directly, contact me and I'll provide a referral to a reputable marketing specialist.

If it's a written ad you're using a coupon or some form of discount code that you're tracking. If you're running an incoming telephone campaign, you are using a special number that you're tracking as well. You've been determining the effectiveness of the number of people who've responded to your offer, and you've determined how much net profit each run of your ad is generating. Now we'll begin tweaking the ad.

How to Test Market

After running it, change one aspect of it just a little bit. See whether it does better or worse than before. If it pulls better, try tweaking whatever aspect you changed a little more. If it pulls worse, return that variable to the last configuration and tweak some other variable. Change one variable at a time and keep doing this increasing the effectiveness until you're satisfied.

There are many aspects of an advertisement you can change. If it's a print advertisement, for instance, you can change the message, layout, paper type, font, size, color, location, frequency, and a number of other attributes. Try playing with each one until you get a bulletproof ad. Then run it until it no longer pulls effectively.

Congratulations! You now have the most cost-effective advertising campaign your could devise. Write in and tell me: what is your best advertising method and medium?

In the next column I'll share how to add productivity to your organization while saving money, and giving leadership training to your line employees. It's the final of a four-part series on Developing a Turnkey Organization. You will definitely want to catch it. And if you haven't yet checked out the podcast, feel free to download it. More exciting stuff coming up. Stay tuned! Until then,

profitable business All! 

Instituting a Learning Culture - an Ingenious Turn-key Organization pt iii

Act Strategically by Training Tactically

In the last post I wrote about delegation. Teaching your executives this one skill can increase their effectiveness measurably. I also asserted that to be a great leader you should train your employees to replace you. We'll continue talking about what it takes to develop a turnkey organization: a business or department that you run, not a job that runs you.

To achieve your ultimate goal - that of creating a self-running entity that doesn’t require your constant supervision - requires you to implement long-term strategies, not rely solely on short-term tactics.  To define the two: a tactic is giving a man a fish; a strategy is teaching him how to fish. The tactical approach requires you to perform the task yourself each time you need it done. The strategic one allows you to leave and it will continue to happen without your involvement.  Your objective is to set up as many tasks as possible so they will happen without your direct involvement.

Delegation is a tactic. Instructing your managers how to train their people in delegation is a strategy. By leading your people in top-down delegation and instructing them to copy your training methods, you encourage them to think and act strategically. This is the essence of creating a turnkey organization, one that functions in your absence.

What’s the #1 Reason an Employee Leaves?

Many research firms have studied why employees stay or leave a company. In fact, pay isn’t even in the top three reasons and often not even in the top five. The number one reason surprises most leaders. Do you know what it is?

Poor management.  

It's well known among human resource professionals that Employees leave managers, not companies. For further reading on this topic, pick up a copy of The 7 Hidden Reasons Employees Leave by Leigh Branham.

So what’s the implication? Can you keep your best people if you provide good leadership, upward mobility, challenging work, and praise? The data suggests it. Guess what? These are all things you can provide your people without added expense to your organization.
As a recent McKinsey white paper shows, larger companies are also adopting more non-monetary strategies to attract and retain the best employees.

How to Cultivate Employee Loyalty?

At the consulting firm when starting a job, we routinely surveyed the senior management of our clients. One series of questions that always drew similar answers had to do with employees.When we asked why employees departed, almost all managers listed inadequate compensation, poor or inappropriate benefits, and lack of upward mobility. When asked how they were able to retain those employees that remained, these same managers reported: good pay and benefits, good company culture, and challenging work. The managers were always very confident in the accuracy of these answers.

Why Involve Subordinates in Strategic Planning?

Here's a way to forge intense bonds of loyalty in your subordinates even if the company is small, pays below market salary rates, has high turnover, and the job and industry are very difficult.  You can continue building your direct reports’ critical thinking skills by having them practice strategic planning.

Give each subordinate a copy of your business plan and have them read it thoroughly.  Then brainstorm What If? scenarios with your people and have them devise solutions.  Write down all the scenarios and their proposed solutions in your business plan. Institutionalize critical thinking in your organization to develop action plans that your team can instantly implement in a crisis.

There’s a natural gravitas, an air of stuffiness that arises when a company starts to practice strategic planning. Many executives think that only the highest ranking employees should be let in on the future view, that the whole process should be approached ultra-seriously, ultra-secretively, that everyone should walk on eggshells, and all that failure to design the right plan equals corporate death.
Balderdash! Make it fun. Be as outrageous and childlike as you can. Encourage your people to devise their own what if? scenarios and make a game of it. Give cute prizes for creativity. The best way to cement knowledge it to play with it.

By enabling your subordinates to brainstorm and solve scenario problems, you're giving them the absolute best leadership training you could.  They'll be ready to think and act on their feet when they encounter real-world problems. They won't act paralyzed as do so many managers when confronted with a problem they haven't encountered before.

A manager confronted with a crisis is a more effective leader when s/he has a plan.  And either they'll already have solved a similar problem and have a ready action plan which they can apply or modify.  In the rare event they confront an entirely new problem, they'll be so accustomed to brainstorming because of your scenario training that they'll proceed to solve it.  Eventually you won't even need to manage the process!

If your direct reports are themselves managers, encourage them to run strategic planning groups with their people. By doing this you get everybody on the same page and start to develop a turnkey organization.

Compile all the contingent scenarios and their respective solutions into an annex of your business plan to develop a truly comprehensive strategy that can serve as a future action plan - or a great starting point during crisis.  Imagine having the wealth of brainstorming when you most need it, codified into your business plan.

Having your teams brainstorm What If? scenario planning can be a terrifically valuable and enjoyable aspect of a corporate retreat.  Employees become distant when they’re disengaged and out of the loop. By having them participate in future planning, you invite your people to see the longterm objectives of the company and encourage them to help plan its future. They’ll feel they belong to the company and their work will take on renewed meaning.  What is your most prized management technique to develop subordinates?  Comment and let me know.

In the next article, the fourth and last in this series, I’ll share a way to offer upward mobility to anyone within your organization, even your line workers who might be stagnating. This Ingenious TechniqueTM will increase your productivity while saving money.  It will also develop management skills in these workers giving them leadership responsibility. Do you have a guess what it is? Stay tuned next week to find out. Until then,

profitable business All!

Ingenious Sales Tip: Breezing Through to the Decision Maker

The Infamous Gatekeeper

You've got your eye on the top sales spot at your company someday.  You know to get there you must make a bunch of cold telephone calls today.

Steeling your resolve, you reach for the telephone and dial the first name on your sheet.  The phone rings, and you await the inevitable, palms sweating.

Because you know to get to this person you must first get past the gatekeeper.  Maybe the call will go to voice mail and you'll be spared the agony, you wonder.  Or maybe the receptionist will put you right through without interrogating you for a change.  That'd be nice, wouldn't it?  You continue to wait as the phone rings... a woman answers!  She spouts the standard company greeting, and you ask for the name of your target.  She asks if he's expecting the call.  Darn!  What to do?  Fudge and give a vague answer or admit you're calling without an appointment?

You give a short answer that you know Mr. C-level Executive will want to talk with you.  The receptionist is relentless: she asks how do you know Mr. Executive, does he know what this is about, is he expecting your call? 

You pause and the gatekeeper delivers the kill: "Is this a sales call?," she asks.  Dejected, you admit you are calling to schedule an appointment.  Her voice turns frosty as she snaps the person you're trying to reach isn't available for an unsolicited call.  Would you like to leave a voice mail, she asks brusquely.  You agree and allow her to put you through so you can leave a message.  You hope for a return call but you doubt one will come.  Terminating the call, you imagine there must be a better way.

Has this ever happened to you?  When calling into a prospect the receptionist, the secretary, or the random person who picks up the phone... all these people can stop you from reaching the decision maker.

Psychology of the Gatekeeper

What is the job of the gatekeeper?  Is it to block everybody from access? Of course not.  But it is to block anybody with whom the decision maker has no interest.  How does the gatekeeper determine this?  By pattern recognition.  She knows unsolicited sales calls will be unwelcome.  And she presumes an incoming call into the main switchboard from a stranger asking for a C-level executive likely falls into this bucket.  So she already presumes you're a sales rep.  It's your job to disabuse her.

She certainly wants to avoid accidentally mislabeling and possibly offending someone important.  So much like a search engine looks for keywords in an online document, she looks for clues to confirm her suspicions.  The types of questions you ask, the way you treat her (as an ally or an obstacle), and the way you project yourself (confident or fearful)... all these factors paint a picture of how she will see you.

If you come off like a confident caller, she lumps you in with that group.  If she can't determine you're not legitimate, she will usually pass you on.

So how do you get passed through?  Put yourself in her shoes: what strangers that would call the main number unsolicited, might be considered important calls to the boss? Clients, service professionals like CPAs, attorneys, current vendors?  What questions do they typically ask to be put through?  What is their demeanor when they call?  How do they treat the receptionist?

Don't get me wrong: don't lie. It's unethical and stupid. Do not pretend to be a customer or a vendor. 
Deceit will always return to haunt you.

But how do you project an air of importance while remaining truthful?

Use Jargon to Paint a Picture

One of my favorite techniques to bypass the gatekeeper is to use language that only the person I'm trying to reach will understand.  Maybe I'm trying to reach the Chief Financial Officer but don't know his or her name.  In a professional but friendly voice, I'll ask the receptionist: "Who is the person in charge of ensuring return on equity this quarter is in line with financial projections?"   If she acts confused for a moment, I help her out: "Would that be the CFO, you think?"

Because I use the language of the person I'm trying to reach, the gatekeeper will associate me with the person I'm trying to reach.  And because people are often uncomfortable passing judgment on subjects they don't understand and are intimidated by experts who do, she'll probably want to pass me through quickly.

To reach the VP Marketing I might ask: "With whom would I speak to discuss the market research from the focus groups...?"   By using the language of the person you want to reach, you remove yourself from looking like a sales rep. If the gatekeeper can't label you as a sales rep, she must assume you're legitimate. If you're upbeat and confident as a legitimate professional would be, she will pass you on to your target.

Do you see how this can help you reach a decision maker in any area of the company?  

Get Put on a Prospect's Calendar

If you're dealing with an executive who has an assistant, you can use the same technique to encourage them to put you on their boss's calendar. I once used this technique and in thirty seconds, I was talking with the CEO of a Fortune 100 computer company. All because the assistant couldn't figure out what I was talking about.  

Try it and let me know how it works for you. Leave your comments and questions below.  Until then,

profitable business All!

Time Management for Managers- an Ingenious Turn-key Organization pt ii

Developing Leadership Ability Within a Company

Just as you need to acculturate your entry-level hires, you must also train new managers.  If you hire a seasoned manager from outside the firm (a practice I strongly discourage) you will need to acculturate your new hire too.

Your strongest practice is almost always to promote from within.  The reasons for this are numerous.  Most importantly, you'll sap employee loyalty and dull the edge of your most ambitious leaders if you give a senior role to an outsider.  But your newer managers are already acculturated to your organization; why would you want to throw away that training?  Your current employees already know your current policies and the way to do things within the company.  And they already have existing relationships that will help them do their job.  Further, an insider is always more loyal to the company than an outsider.

The only reason to hire outside the firm is if your culture is weak and needs to be shaken up badly.  Occasionally a large company board will hire from outside the company.  It weakens morale but sometimes a board feels desperate.  The strategy is tremendously risky and most outside hires leave after a short time.

Best Methods of Training Subordinate Leaders

As a manager, it's my job to train each of my subordinate managers to perform my job.  Similarly, my instructions to my direct reports is to train each of their subordinates to take over their job.

Too many managers prefer to perform a task because they claim it's easier than handing it off.  But this deprives subordinate leaders of learning and growing within the company.  The first thing I drill into my subordinates is that they must delegate.  I want them to give their subordinates the opportunity to learn as well.

A leader quick to delegate is an effective time manager.  And an effective time manager effectively manages their workload so rarely experiences burnout.  As a result they can remain calm and unfrazzled in a crisis.  This is a benefit of good leadership.

To teach delegation I issue my subordinates one instruction. For every piece of paper that arrives on their desk, or every task they're handed, I insist they ask themselves: "Who of my direct reports can I hand this off to?  Who has responsibility for or is affected by this?" 
How do I do this?   By modeling this desired behavior.

Grooming a New Leader

Assume you're the CEO of your company.  You've just hired a new sales and marketing VP.   This role oversees a sales manager and a marketing director.  They both have direct reports as well.  You need to get your new hire up to speed quickly to lead their department.

Had you promoted from within, your new VP would already know and practice these techniques I'm explaining.  But let's assume you've hired outside the company.

To emphasize the need for rigorous delegation, I assign this new manager every task and swamp them with every piece of paper related to sales or marketing.  I scan a letter or email, or review a task only enough to determine the department head directly below me to whom I can send it.  Ultimately, I want each task to be delegated down to the lowest rung that can perform it, and for that procession to happen one rung at a time.  Only after I am unable to further subdivide a task, will I own it.  I instruct her to act the same way.

If my new hire tries to keep a job that a subordinate could handle, for instance a sales-only task, then I will reinforce my instructions.  She should have delegated that task to her sales manager who then further tries to subdivide it.  Similarly, she will delegate anything related solely to marketing directly to her marketing manager, bypassing sales entirely.  I will also tell her to immediately return an item back to me if I've erred and the item is broader than her department and is thereby my responsibility.

I will continue to deluge my new hire until she gets it.  Then I can start copying her on items I send to people farther down the chain of command obviously the responsibility of that billet.  For instance, I will send a question about a California sale directly to the Western Sales manager.  And she can then start leapfrogging too.

I guide my people to act rapidly on each task to prevent bottlenecks.  They will learn to speed read emails and make quick critical judgments, they learn to divorce emotion from content.

Handling assignments in this manner, the only thing on your new hire's calendar will be those items that directly affect both sales and marketing but not either one or the other.  This means the only thing on your list will be tasks that affect more than one division of the company but not a single division.

If you train yourself and your subordinates to act this way, you will discover your daily calendar freeing up tremendously.  Delegating in this manner will end up moving responsibility and activity down the chain of command.  Let's look at what this accomplishes:

• By training your people all the way down the line to delegate, they become effective time managers.  Ensuring everything runs through your new hire temporarily will also strengthen the chain of command allowing your leaders to forge stronger bonds with their people.
• For each task, the employee on the lowest rung possible will handle it.  This empowers everyone down the line, preventing information from being sequestered, and frees up the time of senior management.  This will make the organization efficient and everyone will be learning.
• If the lowest paid employees do each task, your cost of labor will decrease.
• You free up your senior people's time to react to and plan for unexpected challenges and crises.  You essentially take your managers out of crisis manager mode empowering them to become strategic planners.
• You create a company-wide delegating culture where nobody is irreplaceable.  This means anyone can get sick, take vacation, leave the company, telecommute as needed, or get promoted.  All without throwing the organization into chaos.

In the next article we'll discuss how to develop virtually bulletproof strategy while empowering your employees.  And later I'll disclose a way you can provide upward mobility to every employee in even the smallest organizations while sharpening your peoples' skills.  It's all coming your way in the next few weeks.  Until then,

profitable business All!

P.S. One of my favorite books on time management is Morgenstern's "Organizing from the Inside Out"

Simple Marketing, pt V: Designing your Ad Campaign

Developing a Media Ad Budget

In our last article we calculated how much profit your ideal client brought into the business.  Multiplying this figure by the number of clients you expect each advertising medium to pull, you can calculate your budget for a given ad campaign.

Perform this calculation to calculate your cost-effectiveness for each medium.  You will initially test market the most cost-effective one, or the one with the highest client value per dollar spent.

Continuing with our previous example from the last column, your calculations reveal that your most cost-effective medium is a monthly print advertisement in a specialty publication read by many of your ideal clients.  Based on your estimate and rough surveying of a few of your ideal clients, you expect this ad will attract several prospective clients each run, two of whom will be an ideal client.  From our earlier calculations, we know that an ideal client is worth $500 to us.

The maximum you can afford to spend on any medium is the profit (not income) you expect to earn from new acquisitions of your ideal client type.  In this case, the value of each client ($500) multiplied by the number of clients expected per ad run (2) is $1000. Thus your ad budget for this campaign that you expect to bring in one new ideal client is $1000.  How does this information help us?

Selecting your Media

It's important to realize that all media are not equal.  First estimate the pull rate on each medium you can select.  Then by dividing the ad cost by the number of new clients expected, calculate your cost per acquisition for each medium.  The lowest one will be the one you choose as your first test medium..  For now, ignore scale: an ad that costs $50 and pulls only 1 client is twice as cost-effective as one that costs $500 and pulls 5 clients.  Why choose the smaller?  Because running the first ad brings you new clients at $50 each; the second costs $100.  Don't concern yourself with how many people are pulled by an advertisement; you only care about per client costs.  Later you can run as many ads as you like to vary scale.  But first you want to select the most cost-effective medium.

If several media tie for acquisition cost or if you're completely unsure about your estimates, choose the one with the greatest audience that make up your ideal clients.  You will exhaust a smaller pool more quickly and have to start over in your testing.  As long as you are acquiring ideal clients, pick the medium with the largest readership you can find.  You can sometimes get better pricing on media if you go through an agency, especially if you're buying a lot.

Test Marketing Your Ad

I encourage you to engage a professional copywriter.  Designing a winning ad is a specialized skill, and writing marketing copy belies the 80/20 rule.  You with your 80% of general marketing knowledge will likely get nowhere near the response than will a true marketing pro with her remaining 20% of specialized marketing knowledge.  I once had a potential client refuse copywriting assistance because she had enjoyed her marketing class in college.  Don't be that client.

To test an ad you must track it.  There are two ways I like to track an advertisement inexpensively, one for print ads and the other for call centers.  If you're running a print ad, make it a coupon or include a special offer.  To redeem this offer the buyer must provide the code or coupon on your advertisement.  Each time the discount is redeemed, you know it's as a result of that advertisement.  At the end of the campaign you add up the coupons or count the codes to track effectiveness.

If your ad urges people to call, use a separate telephone number issued by a telephone marketing service agency.  The service provider logs each call and forwards it to your normal business line.  Then at the end of the promotion they provide you a log of incoming calls.  A little research will help you find a call center marketing service provider.

Tracking Your Ad Campaign

You'll track the advertisement using a matrix chart.  You can download a call sheet template or use your Customer Relationship Management software or you can get a simple piece of graph paper and draw columns and rows.  Your objective is to keep track of the activity and its results.  Each business will use a slightly different format but basically you need to add up how much profit each ad campaign brings in.  Count your net profit before taxes, not gross sales.

Once you have a baseline then fine-tune your ad campaign budget.  If an ad pulls only half as well as you had expected and your max buy is now lower than what you're paying, revise your cost per acquisition for that medium.  If an ad turns out to cost more than it's bringing in, abandon it and try a different medium.

Only retry an abandoned medium after having exhausted every other avenue.  Your goal is to determine the best raw statistics for an unrefined advertisement.  If you try every medium you can think of and none of them pull very well, then choose the one with the lowest ad cost per client acquired and start refining it.  An advertising agency can advise you.  In this case it might be best if you contracted with one for a few hours of consulting time.  You're probably in a very challenging environment and may need specialized guidance.
The rest of us hopefully have our selected medium.  Next week we'll explore how to fine-tune your campaign and gradually improve results to ultimately develop a top drawer ad.  And in a later column we'll talk about how to formalize training within your organization so your key employees become strong empowered leaders who will stay with your company as long as you want.  After practicing this Ingenious Business Technique your attrition will decrease significantly.  And if you haven't yet checked out the podcast, feel free to download it.  More exciting stuff coming up.  Stay tuned!  Until then,

profitable business All!

Acculturate your new hires- an Ingenious Turn-key Organization pt i

New employees must be acculturated

Last week I explained how to lead your customers.  This week we’ll explore how to lead your new employees and fold them quickly into your company culture. 

What is some of the scuttlebutt that employees grumble about their managers around the water cooler?   They’re overbearing, indecisive, lazy, oblivious, etc. If you sift through all the criticisms, you’ll likely discover the complaints fall into two piles: micromanagement and failure of leadership.  Both of these traits stem from fear: fear of losing control, or fear of appearing too militant.  And they're each sides of the same coin. 

Very few employees realize the difficulty involved in being a manager until they become one.  Management if often considered a thankless, arduous, and vilifying role within a company.  But approached the right way, it can be a motivating, energizing, satisfying responsibility.  With a few tools, any manager can become expert at unobtrusive supervision and grow their position into a highly respected billet within the company.

Recognizing the challenge of leadership, many companies have tried to banish the concept, flattening their organizations, or in a supreme pacifying effort, chosen to label each individual a manager… even if they manage equipment, resources, or just their own workload.  In this article we're concerned with personnel management.  Whether you manage a department of individuals or other managers, this article is for you.

You can usually determine a manager's satisfaction by gauging how they view their job.  Do they perceive the role as mainly keeping people in line, ensuring they do their darn job so they don’t have the chance to slack off?  If so, their corporate life will be bleak.  The best managers empower their subordinates – consisting primarily of getting out of the way – and ensuring they have the support necessary to do their job.

Great Managers

Do you want to be a great manager?  Then flip the hierarchical organization chart upside down and view the true essence of leadership: that you as a boss support your people; your boss supports you; his boss supports him; and so on.  You each empower your subordinates, not preside over them.

Surprising to most managers, your job is not to ensure that your employees do their job.  A boss is not a kindergarten teacher.  Your two tasks are making sure your employees have the tools and support (including training) necessary to accomplish their job; and ensuring each employee is a good fit for the company culture.

It’s more important for an employee to be a good fit culturally than be skilled at their job.  As a manager, your first priority is ascertaining whether your new hire will fit in with and preserve the company culture.  We're assuming you hire individuals with the best ability, especially in today's job employer-skewed market.  So assuming you did a decent job of hiring, if an individual is a good cultural fit for your organization, she can always be taught or, if necessary, be transferred to a more suitable billet within the organization.

Let’s take the example of a customer service rep.  He’s dynamite on the phones and gets results.   However, it turns out your new hire is a maverick, not a team player, and your organization embraces team culture.  You’ve just discovered the disconnect after hiring him.  What should you do?

If he doesn't fit in with your culture and you’re sure you can’t indoctrinate him, terminate.  Conversely, a customer service rep who is struggling with the skills of the job but has the right attitude you must continue to train and support until he progresses enough to do the job.  Will he become a star?  Maybe not, but the question is will he become better than your least competent employee?  If the answer is yes, then keep him and terminate the least competent or find another place for them.  If the answer remains no after a suitable ramp up time, then consider a related position within the company where he will be a better fit.  Do your best to retain an employee who is a cultural fit with your company.

A manager is like the captain of a ship.  It's easier and less chaotic when everyone's rowing the same direction.  You can individually upgrade each person's rowing skills over time.  But it would be bedlam to make a dramatic course correction because one guy's rowing the wrong way, no matter how strongly he rows.

Netflix has a hiring slogan: “No brilliant jerks!”  It’s more important to have the right attitudes in your people than the right skill sets.

Next week I’ll discuss how to correct an employee's behavior so neither the manager nor the employee wind up with hurt feelings.  And we’ll continue exploring the market plan.  Until then,

profitable business All!

An excellent tool that discusses cultural fit: "StrengthsFinder" by Gallup 

These Ads Work Amazingly Well

Last week we discussed why sales should not handle billing. I also touched on an inexpensive method to eliminate typos in expensive handouts and advertisements. I'd like to discuss another area of marketing – advertising - and how you can get the greatest return on your investment.

Create your own “Golden Oldies”

When you watch TV, which commercials in particular do you rush to mute?  Not because they're offensive, but because you just don't want to suffer through watching them again?

Guess what?  That means they're working.  When you need that merchant's product in the future, you’ll remember 'em, won't you?

Many companies stopped airing commercials we enjoyed years ago that could still work today to pull in new customers.  Managers get tired of their own ads long before they lose their appeal for prospective customers.

How many "golden oldies" advertisements can you recall?  I remember a jewelry store radio spot years ago that ran so often every time I heard it I cringed.  I knew it so well I could hum the jingle.  I got so sick of it that whenever it played I desperately looked for another station to listen to.

Business owners and marketing managers become bored from their ads more quickly than their audience.  Often they’ll make the mistake to change them prematurely.  While an ad still pulls customers, allow yourself to get good and sick of it.  In most cases you'll get bored long before it stops being effective.

Large advertisers often switch media frequently so you may think that's the rule.   But a small business has different advertising needs than a giant. As a manager, I’d rather get sick of an ad that my customers adore than the other way around.  Don’t we still use clichés in conversations?

Don’t presume distribution = exposure = increased sales

These days too many managers advertise for the wrong reasons.  You run an ad to increase sales by urging your targeted audience to buy, not so your ad will go viral on YouTube.  It's fine if that happens, but keep in mind that your advertising is a means to greater profit, not an end in itself.  Creativity for creativity's sake is pointless unless you specifically sell that type of creativity.  Focus on the end – sales - not the means.

Change an advertisement only after it stops attracting more customers.  Most ad campaigns are costly and time-consuming.  Whenever you produce an ad - whether it be a homemade flyer or an elaborate commercial - use it until it's no longer effective.  Remember your goal: maximizing the return on your campaign and thereby increasing net profit.

Later this week I'll explain the four questions you must answer to begin targeting your market strategy to achieve the best returns.  And next week I'll discuss an easy way you can design your ad campaign that'll make a huge impact.  Until then,

profitable business All!

Salespeople Should Never Receive Payments

In the corporate world, sales managers often assign the responsibility of receiving payment to their salespeople.  One of our portfolio companies paid commissions out upon receipt.  They had no receivables support and they encouraged their reps to collect payments.

On its face the idea seems sound.  A salesperson gets paid for the sale, so why not have her collect payment?  When a rep collects payment, it even provides an excuse to stay connected.  However, this policy has unintended consequences and can result in huge customer service fallout.

Your reps act as client advocates.  By contrast, debt collectors are bearers of bad news.  By putting a rep in the roll of debt collector, the company has removed a valuable buffer.  A rep can play mediator to quickly resolve misunderstandings and settle frazzled nerves to ensure the business relationship endures.  If the rep must also act as bill collector, he cannot feign detachment; he must include delinquencies in the sphere of the relationship.

People want to keep their dignity so they'll often ignore sales calls if they are unsure whether a rep is calling as sales advocate or debt collector.  The cumulative effect?  Reps focused on billing divide their sales efforts and customers duck their calls.  This decreases sales department efficiency which lowers productivity and resulting commission.  This also increases bad debt which leads to even lower commissions.  And this can cause a drop in staff morale, crippling the company's profitability.

Case Study: Advertising Agency
We suggested our customer hire receivables clerks to encourage their reps to focus on selling.  Billing clerks could then handle receivables and note in the system any customers that were in default.   On average, a sales rep is better compensated than a billing agent.  So, we suggested it makes sense to delegate these tasks to a lower paid employe.  In a later column I’ll explain an easy way to optimize each employee's duties throughout the organization to achieve maximum efficiency.

The result?  Because the reps ignored billing issues they had more time to sell.  Reorders increased.  The extra revenue on additional sales that reps could make more than compensated the company for the salaries of the new billing personnel.

When a rep happened upon a client delinquency,  he ignored it until the client's credit line was restricted by the credit department.  If the client addressed it with the rep, he recommended the client call billing to resolve it as a prerequisite to reordering.  The rep deliberately feigned ignorance instead of addressing it directly with the customer.  In this way, he played the advocate and preserved the client’s dignity. 

Managers and organizations need to realize: the best sales reps are not mere order takers.  They’re client advocates, subject matter experts, and executive advisers.

Yesterday I explained how to eliminate those nasty typos from expensive commercial printing jobs and save on your printing expense.  Next week begins the first of a series of articles on a novel step-by-step approach to developing an integrated marketing strategy.  You can use this as a basis to plan your most cost-effective advertising methods.

This will take a little bit of time but you’ll find it’s worth it.  Upon completing the process, you’ll calculate your ideal cost-effective advertising and know exactly how to spend your budget.  You’ll never question whether you should spend money on a particular newspaper, coupon, flyer, or yellow page ad again.  Stay tuned.  Until then,

profitable business All!

Dramatically Reduce Your Printing Costs

Have you ever gone through the trouble and expense to create a beautiful brochure only to discover a typo after you'd printed ten thousand?  I once printed five thousand letterhead envelopes only to discover upon receipt the zip code was truncated to four digits!  All that time and money for layout, a copywriter, graphic designer, printer... down the drain.  What a headache.

Has this ever happened to you?  If so, your enthusiasm at handing out your gorgeous new brochures probably waned.  You were stuck with a mess of less than ideal material and had to decide: do you suck it up and use the substandard material or repeat the ordeal and expense to reprint the job?

In this internet age businesses need a digital form of their printed material.  Use it to entice visitors to download brochures and information from your website.  Instruct your sales reps to email them to prospective clients.  Send them to web publishers as camera-ready artwork.  Use whenever possible in lieu of printed material.

Why wouldn't you?  An electronic pamphlet costs nothing to reproduce compared to a printed version, and the recipient receives it instantly for immediate gratification.

You can still print handouts.  But you'll obtain a significant cost advantage when creating any printed material beforehand by producing short runs from a digital file.  Even if you never intend to distribute it electronically this will save you money.  As a bonus, you won't stockpile hoards of dated material.

Suppose you're creating a new full-color brochure and you want ten thousand copies commercially printed.  Before going through the expense of mass printing, create a digital version.  Until you're certain you have what you want, run off only as many copies as needed at a color copy store like Kinkos.

Printing small batches allows you to fix typos before printing large quantities.  Printing copies as needed also allows you to test multiple formats.  You can tweak all aspects of the flyer - layout, content, color, style, paper quality - to discover what combination draws the best.  Only after you've determined the optimum mix should you then print at quantity.  You'll never print a brochure with a typo again if you test your marketing.  And this way your print ads will be much more effective.

In the next article I'll share with you one job duty your salespeople should never perform.  And shortly, I'll tell you how to inexpensively test your marketing, and how the printing process often works against you if you're uninformed.  After reading this post, you'll never see a marketing firm, service bureau, or publisher the same way again.  And you'll stop throwing away your money on advertising that doesn't work.  Look for it in the next couple of days.  

Until then,
profitable business All!

Raise Prices Without Losing Customers

In the last post, I shared why your prices were probably too low and how you're leaving money on the table.  If you've ever worked at a business when it raised its prices, you probably endured grumbles from customers.  Justifying the increase becomes so exhausting that many merchants take the path of least resistance and swallow the increased expenses.  But what if you could raise prices and avoid the grumbles?

One way to increase prices without risking upsetting or losing clients I call the Grandfather Discount.  It works like this:

1. Raise prices immediately.  
2. Tell the customers you want to keep that you're grandfathering them under the old rate for six months.  
3. Discount the new price back to the old.

Here's why this works:

• When your client receives the bill, your new price will stare at them from the top line with the discounted price displaying at the bottom.  Your customers won't be angry about the increase because you aren't asking them to pay it yet.  Those who do complain will be polite and you can receive it as feedback.
• Each repurchase during this time your bill subtly reminds them of the imminent price change.  The grandfather gives them  time to get used to the new price.  And they'll subconsciously revise the value they are receiving upward to reflect this higher price.
• After six months, eliminate the discount as agreed.  By removing a discount instead of adding an increase, the customer feels (and you can remind them) the benefit they received for six months.  This is in contrast to feeling penalized going forward.  
• Because you raise prices immediately all new customers will pay your new price.  This adds extra profit to every new sale starting immediately.  

You may find some clients stock up to buy before the price discount expires.  From day one you'll start booking additional sales.

This simple re-framing technique improved the bottom line of many corporate clients, even some big ones.  Try it!  Do you think this will work for your business?
 
Are you tired of shelling out money for unreimbursed costs?  In a future post I'll explain how to deal with merchant card fees and other surcharges.  I'll show you how to eliminate these cash drains and turn them into profit centers.  Stay tuned!   Until then,

profitable business All!

Your Prices Are Too Low!

Would you rather earn $100 each on ten customers or $10 each on one hundred?

If you answered ten customers, you’re an efficient businessperson.  Why expend extra effort dealing with ninety more people for no extra income?  You are in business to make a profit, right?

In the same way, you might be leaving money on the table, charging less to sell more volume but earning a lower net profit if your prices aren't high enough.  Ultimately, you want to charge as high a price as your most price-sensitive customers will pay.  So if everyone can easily afford to buy your product, your prices are too low.  Your most price-sensitive customers should feel the pinch.  If you never encounter any price resistance, you’re leaving money on the table.

If it’s your job to set prices, I understand you don’t want to deal with customers endlessly grumbling over increases.  But there’s an equilibrium between too high and too low, and it’s the manager’s job to determine where that point lies.  Learn to justify your value.

If the last time you raised prices was during the Bush administration – especially the first one – it’s time to do it again.  In the next post I’ll explain how to increase prices painlessly using a technique I named the Grandfather Technique.

You should raise prices each time your supplier does, and every time your market improves.  In the next post, I’ll discuss exactly how to do this.  Learn how to earn optimum profit without irritating or losing customers.  In the next few weeks I'll share how you can design advertisements that work; avoid high printing charges; learn how to calculate your clients' value to your business, and much more.

Until then,
profitable business All!

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An Ingenious Method to Add Profit

Have you ever had a client ask for a discount? What a pickle. Do you: 1) give in and feel taken advantage of; or 2) refuse and risk losing the client.

The other day I was at the service station D & S Auto where I took my car in for a $40 oil change. I asked Denny, the owner: "Can I get a discount?" He looked down at the floor, shuffled his feet, and caved. He grudgingly agreed to knock $5 off the bill.

I asked him how he felt about acquiescing. He confessed he disliked it but was afraid declining would upset me. "Besides," he added "$5 won't break me."

The Impact of this paltry $5 Discount

Would you believe me if I said that Denny was about to give away most of his profit? I detail this below but let me share a way to offer a discount that saves your blood pressure while offering the customer a supposed concession. All while adding profit to your bottom line.

The Discounted Upsell

We've all experienced the upsell. This is when the drive-in asks you "Do you want fries with that burger?" You give a discounted upsell by offering a discount off an additional purchase. But it can also be used effectively when a client asks for a concession.

Instead of shaving profit off an already booked sale, offer an additional purchase at a discount. In the case of my oil change, Denny could have asked to rotate my tires and offered to reduce the normal price by $5.

Choose a service with an ultra-high margin and the firm books additional profit for additional work it wouldn't normally perform. The customer leaves satisfied because they feel you gave them a concession. And you can feel satisfied too.

The Mathness Behind the Method

• Denny employs a skilled mechanic at roughly $50/hour. We'll ignore payroll taxes and benefits that increase costs. Let's assume that a half hour oil change is $25 in labor costs.

• My vehicle is occupying one of his bays on the floor. Denny sells this time slot only once. So we must apportion overhead. The company pays rent, utilities, office supplies, telephone, advertising, and other expenses. We'll allocate $5 for overhead. So far his costs are $30.

• Other costs: interest on bank loans and credit cards, bad debt, equipment, and any other unexpected or unusual costs eat up profits. These easily make up 5% of gross sales. That costs $2 leaving $8. A 20% margin isn't terrible. However, after taxes Denny's left with net profit of $5.

By Denny discounting $5, he relinquished all his profit. Scary, huh?

In a future post I'll explain how you can use a variation of this technique to placate an irate customer. With this simple gimmick, they'll usually settle down immediately. And there are additional ways to use this tip to dramatically boost net profitability. But more on that in the next and future postings.

Request

These tidbits are from my time at the consulting firm. I'll post at least weekly.

I appreciate all your comments. Let me know if there are any particular business issues you've experienced and I'll write about them and credit you. Until then,

profitable business All!