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A Costly Cost Cutting Measure

cutting_costs.jpgBigg Success is life on your own terms. Today, we’ll focus on one of the five elements of bigg success – money.

We’re all looking for more ways to save money. That’s understandable. However, we need to think about not just survival, but “surthrival.”

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Many business owners and managers, small and large, are cutting back on their advertising. This cost-cutting practice can be very costly in the long run.

Could not advertising cost you $1.5 million?

A McGraw-Hill study, about the recession in the early 1980s, found that companies that maintained or increased their advertising had sales 256% higher three years after the recession ended.

Think about that … two companies, each with a million dollars in sales go into a recession. The company that holds tight on its advertising, or perhaps even increases it, will do over $2.5 million within a few years after the recession ends if the second company, the one that cut its advertising, treads water.

Signaling the end of your business

A recent study by Ad-ology found that 56% of the people surveyed thought that retail stores that cut back on advertising must be struggling.

In other words, your advertising sends a “signal” to both your existing and potential customers. Just like a company cutting back on its dividend, you’re telling the public you don’t expect your future to be bright when you cut back on advertising.

The signal is so strong that 15% of the people surveyed thought it meant that the firm who cut back on its advertising wouldn’t be in business much longer.

The time – money trade-off

One of the other elements of bigg success is time. If you’re a regular here you’ve heard it before, but it bears repeating:

If you don’t have money, you have to spend time. It’s part of the price of bigg success.

So if you really feel the need to cut back on how much money you spend on advertising, it will pay to spend more time promoting your business.

That means networking

Depending on your business, you may primarily build relationships offline or online. However, you will probably be well-served to do both. Integration is one of the keys to success in business today.

If you have employees with down time, make good use of it. Tell them that you want to keep spreading the word so you all surthrive.

What you ask them to do will also depend upon your business. You may have them put out door knob hangers or give away free samples of your product. Perhaps they can make some phone calls or send e-mails to your list of customers.

Where to place your focus

We stated it subtly in that last sentence. We should emphasize it – focus on your existing customers to get the best return on your investment (of money and time).

Research has shown that it costs between five to eight times as much to get a new customer as it takes to keep an existing one. So, at the very least, make sure you’re communicating with your existing customers at least four to six 6 times a year.

Find out what their problems are. Find a solution – even if you can’t solve it directly, help them find the answer to build your relationship.

The most cost-effective way to grow your business

Building relationships with your best customers is the most cost-effective way to grow your business. When you can “wow” your customers, they will …

  • buy more
  • buy more often
  • tell others

Segment & tailor

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marylynnWhile we’re talking about your existing customers, can you segment them into smaller groups so you can tailor your communications more precisely?

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georgeI used to own a heating and cooling service company. We got our technicians to note the age of the furnace or air conditioner when they were in our customer’s home or business. Then we wrote a letter specifically to this group. We generated over $300 of sales for every letter we mailed!

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This highlights another point we alluded to earlier – get your staff involved. Help them understand how it not only makes their jobs more secure, it also means you continue to grow as a company so there will be more opportunities for everybody. That’s bigg success!

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Thanks so much for reading our post today. Please join us next time when we discuss what the underlying meaning of “I don’t have enough time.” Until then, here’s to your bigg success!

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Should I Pay Down My Mortgage or Make Home Improvements

bigg_question.jpgBigg success is life on your own terms. The five elements of bigg success are money, time, growth, work and play. Today our focus will be on money.

One of our listeners, Bob, called us with a bigg question. He and his wife have some extra money and they are wondering whether they should use it to pay down their mortgage or make some home improvements.

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Both options are very illiquid

You can’t get your money back once you spend it with either option. So make sure you have enough extra cash to cover between six to twelve months of living expenses before you do either one.

A guaranteed return

Paying down your mortgage is one of the safest investments you can make. It’s a guaranteed return equal to your mortgage rate.

For example, if your mortgage rate is 6% and you pay it down early, you’re essentially earning 6% on your money guaranteed!

That’s a decent rate of return right now.

Returns on home improvements are often more sketchy. Start by asking yourself this question:

How does the value of your home compare to other homes in your neighborhood?

If you’re one of the most expensive homes already, making improvements probably won’t do you a lot of good financially. However, this is your home. It’s more than just an investment. So ask yourself a second question:

How long do you plan to live there?

The longer you plan to stay put, the higher the emotional returns – an important point to consider because money isn’t everything. What types of improvements yield the best financial returns? Most major outlays don’t return much if anything. Cosmetic improvements usually show a better return – paint, new floor coverings, landscaping, and those sorts of things. Remodeling the kitchen or bath can yield a reasonable return, particularly if they look a little outdated, as long as you don’t go over-the-top.

Weighing your options

Determine how much it will cost for your desired improvements. Then ask a Realtor or an appraiser to find out the expected increase in your home’s value. Now calculate your return:

Return = (Increased Value – Cost of Improvements) ÷ Cost of Improvements

Compare that to your mortgage rate. If the return for making the home improvements is significantly higher, you might consider making the improvements instead of paying down your mortgage.

Just keep in mind, this is not an apples-to-apples comparison. Paying down your mortgage offers a guaranteed return. Making home improvements does not.

Choosing between improvements

If they go with the improvements, Bob wants to replace the windows. His wife wants to remodel the kitchen. Which would be better for the money?

We wonder why you want to replace the windows, Bob. Is it for cosmetic reasons or are you thinking about energy-efficiency? Perhaps it’s both.

Stimulus for you

We hate to disappoint your wife, but right how is a great time to replace windows or make other energy-efficiency improvements. The Economic Stimulus Act extended and improved the tax credit for these types of repairs.

You get a 30% tax credit up to a $1,500 limit. So you can spend up to $4,500 on qualified improvements.

A tax credit is better than the deduction you’re used to getting on Schedule A. Deductions reduce your taxes by the amount of your marginal rate. Credits reduce your taxes dollar for dollar.

So $1,500 of your new windows could be paid for by the government!

The one cash outlay that pays you back year-after-year

However, it doesn’t stop there. It’s amazing how much air can leak out through poor windows. You’ll save money on your utility bills for years with the right windows.

Your returns for making any energy-efficiency improvements aren’t guaranteed but they’re close. They may also be higher than the returns on a lot of other investments these days. Improving your energy-efficiency is a cash outlay that pays you back year after year!

Thanks for your bigg question, Bob!

Do you have a bigg question?

Please share it with us by calling us 888.455.BIGG (2444) or sending an e-mail to bigginfo@biggsuccess.com.

Please join us next time when we talk about two recent examples of saying, “We’re sorry.”

Thank you for sharing your time with us today. Until next time, here’s to your bigg success!

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Direct link to The Bigg Success Show audio file:
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Make 55 Percent More Money – Part 2

watch_time Last time, we discussed using the way a venture capitalist invests as a model for how we invest our time. We talked about a 4-step process to create a portfolio of activities that generates the greatest return.

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The example

Now we want to look at an example. Let’s say that you make $100,000 a year. You invest 2,500 hours a year – 50 hours a week for 50 weeks – to earn that money. We immediately see that you’re making $40 an hour.

We’ll simplify the 4-step process we discussed last time. Let’s say that you found that 20 percent of your activities generate 80 percent of your income. The old 80/20 rule. We’ll call these your highest-value activities.

So while you earn $40 an hour from your entire portfolio of activities, you’re actually making $160 an hour from your highest-value activities.

Also assume that further analysis showed that you aren’t making any money from 20 percent of your tasks. These are your lowest-value activities, which are really weighing down the overall return on your invested time.

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A bigg jump in income

Looking at the lowest-value activities, ask yourself if you can eliminate any of them. Let’s say you determine that all those activities are a complete waste of your time. Further assume that you could spend all of that time on your highest value activities. It’s unlikely that this would be the case, but it illustrates our point simply so let’s go with it.

Under our assumptions here, your income would increase 80 percent. You would make $180,000 instead of $100,000. Instead of making $40 an hour, you’re making $72 an hour. Sounds pretty good, huh?

But it’s really just making sure you’re allocating your time – your most precious resource – most effectively.

after-snapshot1 

Make 55 percent more

The problem is it’s not realistic to think that 20 percent of your time is completely wasted. In fact, we bet you waste very little. A more realistic assumption is that you would have to pay someone to do some portion of these lowest-value activities. But you can afford it now!

In fact, we found that you could pay up to $160 an hour for those activities and still break-even. But we want to do better than break-even.

So we assumed you would pay $50 an hour on average for those activities. In that case, you would make 55% more even after paying someone!

Synergy

Now think about it, you’re paying someone $50 an hour and before you were only making $40 an hour. This is consistent with things we’ve seen in our own businesses as we focus on higher-value activities.

But here’s something else we’ve found – your highest value activities may our lowest value activities. This is where synergy comes in. By partnering with people and organizations around core strengths – we work together, with you doing what you do best while we do what we do best – everyone makes more money without investing more time.

The importance of testing

But what if you just don’t have the money to hire someone to do these things for you? It’s important to test. Just try investing a little more time on your highest value activity.

You may have to give up something – even a little downtime – while you’re doing this. See if you make more money. If you do, keep feeding that task. To do that, find ways to delegate those lower-value activities for you, even if it costs a little money.

Just like a venture capitalist, if you keep funding those activities that generate the highest return and you move away from things that don’t, you’ll make that bigg money you know you’re worth!

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Thank you so much for reading our post today. Until next time, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00328-021109.mp3

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Make 55 Percent More Money – Part 1

watch_time We recently did a couple of posts about project selection – how to choose the projects that are best for you. First, we talked about knowing if you should invest your money in a project. Then we integrated the value of our time into the project selection methods.

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Now we want to extend that concept. We hear a lot about the right mix of assets when it comes to investing in our retirement portfolios. But we don’t often think of the activities we perform – how we invest our time – as a mix of assets.

Investing time like a venture capitalist allocates money

We should because the things we do should add value to our lives or we shouldn’t do them. So we want to approach our investment of time like it’s a portfolio … specifically, a venture capitalist’s portfolio.

A venture capitalist invests in a bunch of companies. Then they see how they perform and make decisions. If a company is hitting its marks, they keep funding it. If not, they don’t. They are constantly allocating money to the companies that look like they will generate the greatest return.

We can use this as a model for how we invest our time.

Find your highest value mix of activities

We’ve come up with a four-step process to determine those activities which deserve more of our investment of time and those tasks that should get less. So we can make more money without investing more time.

Step 1: List all the activities you perform.

Step 2: Place a dollar value on each of those activities.
It’s relatively easy to figure out the value of activities that make you money, but what do you do with those tasks that don’t? You want to look at two scenarios:

  • How much would it cost to pay someone to do it for you?
  • How much could you make in that time?

For example, spring is about here. It will be time to get out the lawn mower. For the sake of simplification, we’ll ignore the cost of owning and maintaining a mower. Say you could find someone to mow your yard for $50. In that time, you could earn $75 after-taxes. Under these assumptions, mowing your own yard costs you $25.

Step 3: Rank your activities from high to low.

Step 4: Create a portfolio of activities that generate the highest return.
Just like a venture capitalist, you want to invest more time in those activities at the top of your list. You want to “fund” the winners (i.e. invest more time in them).

To find the time for those activities, look at the bottom of your list and find ways to eliminate or delegate those tasks. One by one, you’ll find more time to invest in your higher value activities. 

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Limitations

Admittedly, there are limitations to this process. Some activities cannot be measured with money. Going back to our example about mowing the yard, you may really enjoy that task.

It also doesn’t account for the fact that you need some down time to recharge. This is definitely a quantitative, not a qualitative, process.

This was the set-up. Next time we’ll discuss an example so you see how powerful this process can be. You’ll see how to make 55 percent more money without investing any more time.

Thanks so much for stopping by our site today. Until next time, here’s to your bigg success!

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Subscribe to The Bigg Success Show in iTunes. 

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Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00327-021009.mp3

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Success in a Can

can_of_success Today we want to talk about a miracle solution that we just discovered. You can use this magical elixir for any problem you may have.

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If we were to create an infomercial for this wonderful product, we’d want Billy Mays, the spokesperson of all spokespersons, to be our pitchman. We can hear him now …


Billy Mays here with a product that I’m excited to tell you about. Success in a Can. If
you have problems staring you in the face; it will make them disappear without a trace.

For a demonstration, he could offer real-life example after real-life example.

So are you interested in knowing where you can buy this incredible product?

Well, it’s not sold in stores as the saying goes. You won’t find it online either. You see, it’s very exclusive. We can hear you now … you really want this product, don’t you? But there’s something you should know …

No one can get it for you. No one can give it to you. You have to get it yourself. But people who have used this product say that it is priceless.

So, we can hear you asking again … only more impatiently now … where can you find Success in a Can and how much it will cost?

Here’s the secret – you have to mix this magical solution yourself. The good news is that you already have all the ingredients.

Ingredient #1 – Self-awareness

Do you believe in yourself? We mean really truly believe deep down. Listen carefully to your talk – both your conversations with others and those internal chats you have with yourself.

How often “can” you? How many times “can’t” you?

Can’t is a limiting word. If you think you can’t, you’re right. And that’s just wrong!

Now we don’t think you should eliminate the word “can’t”, but you should be aware of it. You should limit its use to situations that don’t limit you. Because it reinforces what you truly believe. 

Ingredient #2 – Self-assessment

Think about your strengths and your weaknesses. You may think that’s odd – why would you think about your weaknesses if you’re trying to limit the use of the word “can’t”?

That’s a good question. Let’s see if we can come up with a good answer …

It’s important to be realistic. Because Success in a Can doesn’t mean playing to your weaknesses. It means knowing what you’re best at. It also means working with other people doing what they’re best at because you know they can! There, how did we do?

Ingredient #3 – Focus

Focus on what you can do, not what you can’t do. Whenever you hear yourself saying that you “can’t” do something, quickly start thinking about what you “can” do about the situation. By focusing your thoughts on what you can do, you’ll feel more energy to work on the issue at hand.

Ingredient #4 – Reinforcement

When you wake up in the morning, tell yourself you can do it. When you face a difficult challenge, tell yourself you can find a way. When you see an opportunity, remind yourself that you can make it happen.

If you don’t believe in yourself, nobody will. Success in a Can does come with a price … you have to change the way you think. But if you do, you’ll pop the top for bigg success. 

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Get the tips and tools you need to be a BIGG success.
Subscribe to the Bigg Success Weekly – it’s FREE!

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Thank you for sharing your time with us today. You’re the reason we can! Until next time, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00323-020409.mp3

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