Bigg 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.”
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
While we’re talking about your existing customers, can you segment them into smaller groups so you can tailor your communications more precisely?
I 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!
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!
Direct link to The Bigg Success Show audio file:
(Image in today's post from hisks)
Bigg 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.
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 877.988.BIGG(2444) or sending an e-mail to email@example.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!
Direct link to The Bigg Success Show audio file:
(Image in today's post by svilen001)
We are continuing our discussion on how to make 55-percent more money.
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.
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 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.
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.