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Pockets of profitability

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  • The State of Accounting AvoidanceWhat are your feelings when you need to work with your accounting system? Fear? Confusion? Dread? Disinterest? As a result most small business owners invest as little time, money and thought as possible into the accounting function. But we need to get over this angst for som every important reasons
  • The first reason we should care is to step back and think about the simple fact that not all dollars are green! What does that mean? It means that some sales of certain products or to certain customers actually COST us money – meaning they are not profitable. And this is a very common problem. For example a recent survey shows that …
  • Bookkeeping and accounting are generally viewed as “overhead” or non-revenue generating functions. But your accounting data is really the knowledge base of your company – the results of all of your company’s operations (good and bad) show up in the financials. Here you have a gold mine of information on customers, purchase habits and cycles - and the costs associated with delivering value to these customers. If your accounting database is designed properly, you can “drill down” into this untapped reservoir to uncover “pockets of profitability” (aka areas where you should focus your growth efforts). Properly structuring your accounting & financial reporting database can create a real strategic asset for your business.
  • So by looking at our accounting data and structuring it correctly we can answer these important questions with the bottom fact being most glaring.
  • By using the same grouping process as described above for customers, you can identify the groups of products and services to track. Again, it is best to keep it simple at the beginning with no more than 3 – 5 top categories and sub-categories within each group as necessary.
  • Understand customer’s budgets and needs“Expense” is usually gauged with reference to the original product or service.Understand concerns or fears and upsell to address.Incent sales people to upsell.Use an assumptive manner – not pushy or apologetic.Describe benefits and how it addresses their needs.Hands-on demonstration where possible.Package deals on related products.
  • Benefits:Increase incomeProtect the relationshipLeverage sales relationshipReduce finger-pointing
  • Benefits:Increase incomeProtect the relationshipLeverage sales relationshipReduce finger-pointing
  • Transcript

    • 1. Finding Pockets of ProfitabilitySCORE
      Presented by:
      Jeanne Rossomme
      jeanne@RoadMapMarketing.com
      RoadMap Marketing
      www.RoadMapMarketing.com
    • 2. Agenda
      Why should you care?
      Case Study
      5 Simple Steps to Create an Accounting Knowledge Center
      Resources
      Your Questions
      Copyright 2010 RoadMap Marketing LLC
    • 3. Your feelings about tax prep
      Copyright 2010 RoadMap Marketing LLC
    • 4. All Roads Do Not Lead To Profitable Growth
      All dollars are not green
      It’s 4x easier to sell to an existing customer than to acquire one
      The 80/20 rule applies to customers and products
      53% of owners don’t track customer retention
      81% of owners don’t track profits by markets
      Most owners don’t track profits by customer or product
      Source: SunTrust survey of business owners
      Copyright 2010 RoadMap Marketing LLC
    • 5. The Value of Your Customers
      They cost less.
      They spend more.
      They can be your best sales force.
      They can provide new ideas for services and products.
      They are more profitable.
      Copyright 2010 RoadMap Marketing LLC
      A 5% increase in customer retention yields an increase in profits of 25%-100%.
    • 6. Your accounting system is a gold mine
      Copyright 2010 RoadMap Marketing LLC
    • 7. Key Questions you can answer:
      What market segments or customer groups are most profitable and which are the most price sensitive?
      Who are your company’s most profitable customers? And which customers actually cost you money?
      What are your company’s most profitable products and/or services? Which are your loss leaders?
      Which customers, products and services offer you the greatest future value?
      Copyright 2010 RoadMap Marketing LLC
      Studies indicate over 50% of customers do NOT generate sufficient profits to sustain operations.
    • 8. Case Study
      Copyright 2010 RoadMap Marketing LLC
    • 9. Profit and Loss Statement
      Copyright 2010 RoadMap Marketing LLC
    • 10. Current Situation - Finance
      Copyright 2010 RoadMap Marketing LLC
    • 11. Current Situation - Marketing
      Copyright 2010 RoadMap Marketing LLC
    • 12. Which Market Segments?
      Set up “Customer Type” in QuickBooks by Market Segment
      Copyright 2010 RoadMap Marketing LLC
    • 13. Structure QuickBooks to align expenses with income
      Copyright 2010 RoadMap Marketing LLC
      Which Products/Services?
    • 14. Which Customers?
      “Fire” unprofitable customers
      Link expenses to each client
      Copyright 2010 RoadMap Marketing LLC
    • 15. 5 Simple Steps
      Use Accounting History to Create Meaningful Customer Groups.
      Start rating and tracking your marketing efforts and customer loyalty.
      Decide on Product and/or Service Groupings.
      Assign direct costs to customers and jobs to track profitability.
      Use Customer, Product or Service Level Financial Reports To Focus On Pockets of Profitability.
      Copyright 2010 RoadMap Marketing LLC
    • 16. Step 1: Use Accounting History to Create Meaningful Customer Groups
      Copyright 2010 RoadMap Marketing LLC
    • 17. Step 2: Start rating and tracking your marketing efforts and customer loyalty
      Copyright 2010 RoadMap Marketing LLC
    • 18. Step 3: Decide on Product and/or Service Groupings
      Copyright 2010 RoadMap Marketing LLC
    • 19. Step 4: Assign direct costs to customers and jobs to track profits
      Copyright 2010 RoadMap Marketing LLC
    • 20. Step 5: Use Customer, Product or Service Level Financial Reports
      Copyright 2010 RoadMap Marketing LLC
    • 21. Quickbooks Company Snapshot
      Copyright 2010 RoadMap Marketing LLC
    • 22. Example of Revised P&L
      Copyright 2010 RoadMap Marketing LLC
    • 23. Establish benchmarks
      Copyright 2010 RoadMap Marketing LLC
    • 24. Extracting the Gold
      Copyright 2010 RoadMap Marketing LLC
      • Cut or convert unprofitable products and services
      • 25. Focus your marketing $ on those segments where you get the most gains
      • 26. Look at Customer Lifetime value
    • Copyright 2010 RoadMap Marketing LLC
      Up-sell, Cross-sell, Re-sell
    • 27. Up-Sell
      Copyright 2010 RoadMap Marketing LLC
    • 28. Copyright 2010 RoadMap Marketing LLC
      Up sell
      Proactive, priority
      Service
      High
      Medium
      Level of Service
      Scheduled calls
      Security software
      and monitoring
      On-call
      Low
      IT Services
      Security
      Service Offering
    • 29. Up-Sell
      Copyright 2010 RoadMap Marketing LLC
      Definition: Presenting the customer with more expensive items, upgrades or add-ons to make a more profitable sale.
    • 30. Cross-Sell
      Copyright 2010 RoadMap Marketing LLC
    • 31. Copyright 2010 RoadMap Marketing LLC
      Cross-sell
      Proactive, priority
      Service
      High
      Medium
      Level of Service
      Scheduled calls
      Security software
      and monitoring
      On-call
      Low
      IT Services
      Security
      Service Offering
    • 32. Cross-sell
      Definition: Selling an additional product or service to an existing customer
      Copyright 2010 RoadMap Marketing LLC
    • 33. Re-Sell
      Copyright 2010 RoadMap Marketing LLC
    • 34. Copyright 2010 RoadMap Marketing LLC
      Re-Sell
      Proactive, priority
      Service
      High
      Medium
      Level of Service
      Scheduled calls
      Security software
      and monitoring
      On-call
      Low
      IT Services
      Security
      Service Offering
    • 35. Re-sell
      Definition: structuring sales and offers to encourage and reward repeat or quantity purchases
      • Frequent buyer coupons
      • 36. Preferred customer card with regular discounts and offers
      • 37. Increased level of personalized customer service
      • 38. Quantity discounts
      • 39. Free add-ons (such as shipping, delivery)
      • 40. Participation in customer council; advance notification of events and new technologies
      Copyright 2010 RoadMap Marketing LLC
    • 41. Next Stepswww.RoadMapMarketing.com
      DIY: Get this presentation, article and worksheet on Pockets of Profitability:
      under Sign Up for ToolKit
      and get a SCORE counselor
      Tools: Dashboards and other
      resources.
      Hands-on Help: References for training and direct assistance
      Copyright 2010 RoadMap Marketing LLC
    • 42. Let’s keep up the conversation:
      RoadMap Marketing blog
      @RoadMapMarketin
      RoadMap Marketing
      Upcoming SCORE webinars:
      April 22: Low Cost/No Cost Marketing
      April 29: Savvy Social Media
      Copyright 2010 RoadMap Marketing LLC
      Jeanne Rossomme
      jeanne@RoadMapMarketing.com
      RoadMap Marketing
      www.RoadMapMarketing.com
      (202) 257-0663

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