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Danger: 10 Warning Signs of Trouble Ahead for Your Business

By Bigg Success Staff
03-19-08

Bigg Success in Business

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We’re told that diagnosing a medical condition early greatly increases the chances of successful treatment. The same is true for your business – seeing the warning signs early gives you the opportunity to solve minor issues before they become major problems.

Cash to a business is like blood to our bodies. It has to continue flowing or we won’t survive. The bottom line is that you can’t run out of cash. So you have to know how to diagnose and treat the source of the ailment before it spreads.

With that in mind, here are ten signs that your business may be heading for trouble:

#1 – Lost market share
Your sales may be growing, but your share of the market may be falling. Market share is precious – among other things, it provides leverage to raise prices as your costs increase. As competitors enter your market, you have to work even harder to maintain (and hopefully increase) your share or your business may get into trouble.

#2 – Declining customer counts
Your sales may be holding steady, but fewer and fewer people are making purchases. Your remaining customers are spending more, possibly because of price increases. You have to find a way to attract new customers or your business is headed for trouble. 

#3 – Low repeat and referral business
You need a healthy percentage of repeat business because it’s much less expensive to keep a customer happy than to get a new one. It also shows that your product or service is still meeting the needs of a core base of people who will refer other people to you. If your customers aren’t coming back, your business may face trouble.

#4 – Declining sales

If your sales are falling, you’re definitely headed for trouble. It may have nothing to do with you – it may be your industry that is experiencing trouble. Isolate whether it’s a problem with your business or the industry as a whole to know your best strategy.

#5 – Disproportionate sales to a small group of customers
Picture this extreme situation – all of your sales come from one customer. You’re totally at the mercy of that customer. It’s like being an employee without the safeguards that go with employment! Generally speaking, if more than ten percent of your sales are to one customer, you may face trouble at some point.

#6 – High employee turnover

When you lose employees, customers are affected – they deal with less experienced people who don’t know your business or the customer’s needs as well as long-time employees. The costs of training people so they’re fully productive are also significant. If you can’t retain employees, your business will likely face trouble.

#7 – Costs rising faster than sales (declining profit margins)
Costs rise for a number of reasons. As your sales rise, so will your costs. If they don’t, why do you need that cost at all? So rising costs are expected. However, costs that rise faster than sales means you will face trouble at some point because you’ll have less and less profit for each dollar of sales. 

#8 – Disproportionate purchases from one vendor

You don’t want to be dependent on any vendor for purchases in any category. That gives that vendor too much leverage in your business. They’ll be able to pass on costs to you that you may not be able to pass on to your customers. If you don’t have a diverse base of vendors (or at least a back-up plan), your business will probably face trouble sometime.

#9 – Unwarranted increase in receivables
It’s great to make sales, but not if you don’t get paid! That’s worse than not making the sale at all because it costs you money to make a sale. Slow paying customers also create problems because you can’t pay your bills with receivables. If you don’t control your receivables, your business may be headed for trouble.

#10 – Unjustifiable inventory build-up
Depending on your business, inventory may be even less liquid than receivables. First, you have to sell it; then you have to collect on the sale. Inventory that’s not turning over is dead-weight. So if your inventory is building up too fast, your business will likely experience a cash crunch at some point.

Hear today's lesson and laugh on The Bigg Success Show. 

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Use Your Strengths To Balance Your Life

By Bigg Success Staff
01-23-08

Work-Life Balance

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Like most professionals, you probably feel pulled almost constantly. Work demands spill over to home and vice versa. You often feel pulled in several directions at once. You try to sort things out by priority, but what do you do when everything is a high priority?

There’s a great article at the Business Week site called Custom Building a Life.
Jeff Weinstein tells his story to Nick Leiber. We give a “bigg salute” to them both! We’ll give you a summary here, but you should definitely read the article.

Jeff started The Counter, a restaurant that serves custom-made burgers at a great price, in 2003. He mentions three goals for his business at that time:

  • To earn a good income
  • To satisfy his customers by serving quality food at an affordable price.
  • To have a place to have dinner with his wife

Things didn’t turn out the way Jeff planned – they turned out much better!

He attracted attention because customers loved his place so much. Soon he started franchising. Last year, sales topped the $3.5 million mark from his seven stores. Now with 125 more stores on the table, he projects $9 million in revenue this year!

Obviously, Jeff is still focused on his growing business. However, he also wants a satisfying life outside his career. That desire is not unique. It’s HOW he’s trying to fulfill it that’s interesting.

He gives his customers what they want, when they want it. Why couldn’t he apply that to his life?

He wouldn’t segment his life anymore; that was a recipe for failure.

Instead he would flow like soda from one area of his life to the other. His wife may say something that helps him at work. His co-workers may give him insight for things at home. He would pay attention to all the important people and priorities in his life all the time!

What about your work? Is there something that works in your professional life that you can use to balance your world? Your solution may be different than Jeff’s. He’s doing what he understands … what works for him.

That’s the real lesson – use YOUR strengths to find the balance you desire.
Share your solution with us! Leave a comment below.

Hear today's lesson and laugh on The Bigg Success Show. 

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How To Get Your Customers To Finance Your Business

By Bigg Success Staff
01-18-08 

Bigg on Small Business

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You either treasure your customers or you go out of business. Ultimately, customers pay your bills, one transaction at a time. In addition to that, customers can finance your business.

Of course, all industries have standard protocols within which you must remain. Or do you? What if you thought creatively? What if you could find a way to win customers and get funding for your business at the same time?

Look at related industries for ideas. Do they follow the same practices as yours? Talk to your customers. What would entice them to consider a creative payment arrangement?

It may be that the customer helps finance your business by the strength of their credit and the commitments they have given you. You don’t care where the money comes from … as long as it comes!

4 ways customers can get you money fast, even if you have bad credit.

#1 – Customer deposits
Wouldn’t it be nice if your customers paid you in advance? Many businesses operate under this model, if you think about it! Even if only a portion of your revenue is prepaid, wouldn’t it make a huge difference to your cash flow?

A marina owner we know employs this concept. One of his primary sources of revenue is dock rentals. He offers his customers a huge discount if they pay for their entire year’s rental a year ahead. Most of his customers take advantage of this offer. He never worries about cash flow.

#2 – Purchase order financing
What if the customer isn’t willing to pay in advance? You may still be able to get funded upfront by using their purchase order as collateral. This won’t work for just any customer – they need to be a company with good credit. 

To turn this pre-receivable into funding, your purchase order must pass two tests. First, it must be non-cancelable and verifiable. Second, you need a gross profit margin of at least 20 percent.

This is not cheap financing – expect a discount between four and seven percent of the purchase order amount. However, isn’t 93% of an order better than no order at all?

You’ll need to pay your purchase order financier off once the order turns from a pre-receivable to a receivable. That’s where the next source comes in.

#3 – Factoring
If you accept credit cards, you’re familiar with the concept of factoring. You get paid now by a financier who gets paid by your mutual customer later. Factoring is only slightly different. 

Factoring can work in a number of ways – let’s assume that you want to completely outsource your credit and collection process. This is expensive money, but you don’t have to worry about payment. The factor takes care of it! You’ll need customers with good credit ratings.

Depending on a number of factors, expect a discount between one and fifteen percent of the invoice amount. Sounds expensive, doesn’t it? However, you won’t wait for your money. You don’t need a credit and collections department. You won’t write off any bad debt. Is it starting to sound reasonable?

#4 – Strategic partnering
What if your customer became your partner? This arrangement has worked for a lot of businesses. Be careful because your relationships with other customers may be affected.

We know a man who owned a specialty printing company. His largest customer was a fundraising company – they sold goods through organizations wanting to raise money. His customer wanted to offer a new product that required special equipment. He negotiated for them to pay for the equipment in exchange for a royalty on all sales produced by that equipment.

The customer effectively got a rebate on all their purchases of that product. Plus, a participation in sales from the machine they bought. The owner had a whole new profit center, with no financial risk.

So look to your customers if you need money for your business. You might get paid even before you make the sale!

How have your customers financed your business? Share your bigg ideas with us!

Hear today's lesson and laugh on The Bigg Success Show. 

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What’s Your Pick-Up Line?

We know … we know … pick-up lines are for social settings. However, a great opening line helps you professionally as well.

Listen to the show to hear our opening line. It doesn’t translate well to print. Mary-Lynn also shares the “cheesiest” pick-up line she ever heard.

The paperboy who became a billionaire
W. Clement Stone sold papers as a kid. He became a billionaire by selling insurance door-to-door. He documented what he learned in his great book, The Success System That Never Fails.

Picture this – you respond to a knock at your door. You open it to see a young man pointing to a list of names. You recognize quite a few of them – they’re your friends and neighbors. All this has happened within a split second as he begins to speak:

“I believe this will interest you also.”

He didn’t tell them his name or say, “Hello.” He didn’t ask them how they were doing or talk about the weather. No! He had tested … and tested … and tested.  He knew this was his best opening line. It was part of his success system.

Let’s look at three essential components to a great opening line.

#1 – Take the “you” view.
You have to think from the other person’s point of view if you want their attention. You’re probably familiar with the acronym WIIFM – what’s in it for me? Immediately address it because everybody is so busy.

#2 – Engage them.
W. Clement Stone’s opener is intriguing, isn’t it?

You ask yourself, “Why does he think that I’ll be interested? Why were my friends and neighbors interested?”

It’s a disturbing comment! That’s one way to engage people. You may also ask a disturbing question. “Ever notice” how Andy Rooney, with 60 Minutes, does this? Can you hear his voice?

One example of a disturbing question is to ask something that doesn’t ring true. We recently did a show / blog entitled 112 Does It Pay Be Smart]?

You say to yourself, “Well, of course it does! So why are they questioning it? What‘s the rest of the story?” Go ahead … check it out …. you know you want to!

You can also engage people by telling a short story that is humorous, gripping, or inspirational.

#3 – Appeal to their emotions.
Let’s go back to the W. Clement Stone story. Picture him at your door again. He delivers his opening line – “I believe this will interest you also” – as he points to his list of your friends and neighbors.

Do you start to worry that you might be left out? That fear of being excluded gets you into the conversation.

This great opening line worked wonders for retailers
Michael Gerber wrote the phenomenal book, The E-Myth Revisited. The “E” stands for entrepreneur, by the way. He talked about opening lines that sales clerks use.

When you walk into a store, if you’re greeted by a clerk, what do they say?

“May I help you?”

How do you respond? Perhaps something like …

“No, thanks … I’m just looking.”

Gerber advised his retail clients to change the question to:

“Have you visited our store before?”

That’s still a simple “yes” or “no”. However, if the customer said, “Yes”, the sales associate would respond:

“Let me show you our specials for regular customers.”

If the customer said, “No”, the clerk replied:

“Let me show you our specials for first-time customers.”

Doesn’t seem like much of a change, does it? The results were anything but small …

Sales increased 16 percent, on average!

What’s your opening line? What works for you? Leave your suggestions in our comment’s section.

Our Bigg Quote was made over 2,500 years ago by Pythagoras, the mathematician and philosopher.

“Do not say a little in many words but a great deal in a few.”

A great opening line will open doors for you. Next time, we’ll discuss how to tap into your hidden potential. Until then, here’s to your bigg success!

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Do Your Customers Trust You?

Recently, the Better Business Bureau released the results their first Trust in Business Index. They found that trust in business is down and cite contributing factors such as:

  • toy recalls
  • the sub-prime mortgage crisis
  • ethical lapses in leadership
  • declining customer service

All of these things affect a company’s reputation. Stephen Covey, in his great book, The 7 Habits of Highly Effective People, talks about “emotional bank accounts”. When we do good things, deposits are made into our emotional bank account; when we do bad things, withdrawals are made.

Trust is built as we make more deposits. Relationships are built on trust. According to BBB, the single biggest factor in earning customer trust is honesty, closely followed by dependability.

Today, we’ll look at three things that you can do to increase your customers’ trust.

  • Under-promise, then over-deliver
  • Unfortunately, we usually see the opposite. In most cases, the intentions are good. However, good intentions don’t build relationships. Good actions do. One of the keys here is to manage expectations to make sure you don’t over commit.

    On the show, George talked about a customer who wanted him to commit to something he didn’t he could do. After much prodding, he told the customer that he could lie to her now, and make her happy. But she would probably be disappointed later.

    Or she could accept what he’s saying, and be happy when he was able to do it. He asked which one she preferred. She understood.

    Tell me now and it’s an explanation. Tell me later and it’s an excuse. Customers accept explanations; nobody likes excuses. Once you have set the proper expectations, you can work to exceed them. That’s where it gets fun!

  • Follow-through
  • This is closely related to the first point, but it’s so important that we thought it deserved to be separate. Say what you’ll do, and then do what you say. We’re all so busy these days; it’s easy to make promises that we don’t keep. Don’t be one of those people! Follow-through.

    Develop a personal system that tracks your promises so you rarely “drop the ball”.

    During the show, George talked a friend who’s in sales. When he called prospects, they often told him to call back some time later. He developed a system to notify him when he should call them back. Then he called them!

    George liked this idea. He started testing sales people by agreeing to a follow-up date. A very small percentage actually did it! If someone won’t live up to their promises before they sell you something, how do you think they’ll do afterwards?

    Follow-through won’t always make you money, but it always builds trust.

  • Address the needs of your customer first, then worry about your needs.
  • On the show, Mary-Lynn talked about her sister, who recently saw some fraudulent activity on her credit card. When she called the credit card company, they tried to sell her another credit card and additional services on her current credit card.

    She explained that she didn’t care about that right now; she was stressed out that someone was using her credit card. The service representative just kept pitching her on other services.

    It’s hard to understand why anyone would design a process that way. If someone comes to you with a need, you won’t get anywhere until that need is addressed.

 

How do you build trust with your customers?
As a customer, what do you wish businesses would do?
Leave us a comment.

 

Going back to the survey, we talked about honesty and dependability, which finished first and second in building trust. In case you’re wondering, here are the next three:

#3 – safe products
#4 – value
#5 – price

There’s one more thing that we found interesting from this survey:

67% of the respondents would rather patronize a small business than a large one.

That’s good news for all you small business owners. You have an edge – consumers trust you more! And now may be a good time to start that business you’ve been dreaming about. Check out 117 10 Signs That You’re Ready To Quit Your Job And Start A Business].

Our Bigg Quote today comes from Ray Kroc, the founder of McDonald’s.

“If you work just for money, you’ll never make it, but if you love what you’re doing and you always put the customer first, success will be yours.”

Remember that your customers will last if they feel like you put them first. Your honesty and dependability leads to their loyalty.

Next time, we’ll talk about the marshmallow test. Can you resist sweet temptations? Until then, here’s to your bigg success!