Thrive, Survive or Dive - Kevin
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Thrive, Survive or Dive - Kevin

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Essential tools that every business owner must know and use to forge a profitable business.

Essential tools that every business owner must know and use to forge a profitable business.

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Thrive, Survive or Dive - Kevin Thrive, Survive or Dive - Kevin Presentation Transcript

  • Kevin Nott , M.A. Business Strategy Coach [email_address] (801) 850-1716 www.GetProfitPointed.com
  • Thrive, Survive or Dive Keys to Building a Profitable Business
  • Recommended Reading
  • What is a Business Worth?
    • Net Present Value of all projected future cash flows
      • Approximately five times your current annual net profit
    • IF
      • Your business can run in your absence
    • Otherwise
      • Your business has little value
  • Build a Business of Value
    • Profitability
      • Consistent
      • Maximized
    • Systems
      • That drive the business
      • That can be managed by others
  • Would you expect someone without the proper tools and adequate training to build a house?
  • Is it reasonable to expect someone to build and manage a successful business without the right tools and knowledge?
    • Lack of business knowledge and skills is the primary reason most businesses fail and others rarely achieve their potential
  • Key Questions to Ask
    • What is the current value of my business?
    • What would I like it to be worth?
    • How do I get from here to there?
  • Thrive, Survive or Dive?
    • Diving companies
      • Losing money
      • Sales are dropping
  • Thrive, Survive or Dive?
    • Surviving companies
      • Covering costs with revenues
      • Sales are unstable
  • Thrive, Survive or Dive?
    • Thriving companies
      • Making strong profits
      • Growing Sales
  • What Makes the Difference?
    • Thriving companies understand the concept of Profit Point
    • They manage their business around the key driving principles.
  • What is Profit Point?
    • The point where revenue is sufficient to cover all costs to that point and the company starts to make a profit
    • Gross profit equals fixed costs
    • Can be measured in sales dollars or units
    • Can be utilized to measure performance of separate business units or revenue types
  • Profit Point
  • Key Profit Point Factors
    • Revenue:
      • Amount billed to customer
    • Direct Costs:
      • Costs directly associated with a specific sale
    • Gross Profit:
      • Revenue less all Direct Costs
    • Gross Margin:
      • Gross Profit expressed as a percent of revenue
    • Fixed Costs (Overhead):
      • Costs that do not directly fluctuate with sales volume
  • Profit Point Question
    • If profit does not occur until the profit point, what does it take to reach the profit point?
  • Profit Point Revenue Formula Fixed Cost $ ---------------------- Gross Margin %
  • Profit Point Example $10,000 (Fixed Costs) ----------------------------- 50% (Gross Margin) = $20,000
  • Profit Point Unit Formula Profit Point Revenue ---------------------- Price per Unit
  • Profit Point Example $20,000 (Profit Point $) ----------------------------- $1000 (Unit Price) = 20 Units
  • Test Yourself
    • Unit Selling Price: $200
    • Unit Costs: $100
    • What is the Gross Profit per Unit?
    • What is Gross Margin Percentage?
    • Fixed Costs: $8,000
    • What is the Profit Point in Dollars?
    • What is the Profit Point in Units?
  • How Did You Do?
  • Profit Point
  • Furnaces, Inc.
    • What is the Gross Profit?
    • What is the Gross Margin?
    • Fixed Costs = $20,000
    • What is the profit point revenue in dollars?
    • How many furnaces do you need to sell to reach the profit point?
  • Profit Point Example $20,000 (Fixed Costs) ----------------------------------- 40% (Gross Margin) = $50,000 $50,000 (Sales) -------------------------- $2,500 (Unit Price) = 20 Furnaces
  • But I don't want to just break even!
    • I want to make money!!
  • Profit Dollar Revenue Target Fixed Cost $ + Profit $ --------------------------- Gross Margin %
  • Furnaces, Inc. $20,000 + $5,000 (Profit) ----------------------------------- 40% = $62,500 $62,500 -------------------------- $2,500 = 25 Furnaces
  • Profit Percent Revenue Target Fixed Cost $ ---------------------------- Gross Margin % - Profit %
  • Furnaces, Inc. $20,000 ----------------------------------- 40% - 10% (Profit) = $66,667 $66,667 -------------------------- $2,500 = 27 Furnaces
  • Managing the Profit Point
    • Increase Number of Unit Sales (Volume)
      • More sales opportunities
      • Increase the close rate on sales opportunities
    • Increase the Gross Margin Percentage
      • Increase and manage selling price
      • Reduce and manage direct costs
    • Reduce fixed costs
  • Profit Point Calculator
  • Comparing Competing Products Fixed Costs = $20,000 Desired Profit = $5,000
  • Let's Take a Closer Look
  • Items that must be considered
    • Capacity
    • Availability of leads
    • Cost per lead
    • Sales closing rate
  • It's About Profit
    • Get there quickly
    • Maximize every opportunity
    • Every sale after the goal is gravy
  • Take a Break!
  • Key Driving Principles of Profit Point
    • Know Your Numbers
    • Set Your Course
    • Create Opportunities
    • Sell for Profit
    • Manage the Work
  • Step 1: Know Your Numbers
    • What you need
    • What they are
    • Where they come from
    • How to use them
  • Numbers You Need to Know
    • Accounting
    • Marketing
    • Sales
    • Production
  • What you need to know about Accounting
    • What goes where
    • How to read financial statements
    • Basic financial analysis
  • Marketing Numbers
    • Market share
    • Advertising
      • Cost of advertising by medium
      • Response rate by medium
      • Lead conversion rate by medium
      • Cost per response by medium
      • Sales close rate by medium
      • Cost per sale by medium
    • Inbound call conversion rate
  • Sales Numbers
    • Average ticket
    • Sales Closing rate
    • Financing rate
    • Referrals
  • Production Numbers
    • On-time completions
    • Call backs
    • Labor efficiency rates
    • Material and equipment cost (usage) rates
    • Gross profit per man-day
  • Profit Point Exercise Estimating Revenue
  • Step 2: Set Your Course
    • Identify where you are now
    • Decide where you want to go
    • Establish a plan to get there
  • Strategic Planning
    • Situation analysis
      • Customers
      • Vendors
      • Competitors
      • Economy
      • Regulatory issues
      • Competitive products
      • Barriers to entry
    • Internal Analysis
      • Market share
      • Image
      • Capabilities
      • Products
      • Culture
      • Goals
  • Strategic Direction
    • Grand Focus
      • Customer
      • Product
      • Capacity
    • Basis of Competition
      • Low price
      • Quality
      • Speed
      • Service
  • Strategy Selection Matrix Price Speed Quality Service Customer / Market Product Capacity
    • Customers
      • Who is?
      • Who is not?
    • Products
      • What are?
      • What are not?
    Define the Business
  • Identify Strategy Drivers
    • Processes that are performed in the business that
    • Create distinctiveness
    • Critical to the success of the strategy
    • Must be a priority
    • Must be performed very well
  • Strategy Fit Matrix Meets Customer Wants / Needs High Low Internal Capabilities High Winner Temptation (Solution seeking a problem) Low Challenge Foolish
  • Aligning around the Strategy
    • Structure
    • Systems
    • Staffing
    • Style
    • Skills
    • Shared Values
  • Step 3: Create Opportunities
    • Increase the number of new customer opportunities
    • Increase the number of opportunities from existing customers
    • Increase perception of value
  • We Call it Marketing
    • Creating, communicating, and delivering goods and services that satisfy customer needs
    • Developing an identity with customers
      • Positive
      • Distinguishable
      • Memorable
  • What You Need to Know
    • The need you are planning to satisfy
    • Who your customer is
    • How your customer thinks
    • Your product features and benefits
    • How your product meets the needs of your customer
    • How to reach your customer
  • The Marketing Process
    • Focus on the strategy
    • Create the product
    • Create a marketing plan
    • Communicate message to customer
  • Create the Product
    • Image
    • Uniforms
    • How you answer the phones
    • Logo
    • Scripts
    • Vehicles
    • Product Lines
    • What you think of the customer
    • The work you will do
    • How you do the work
    • Literature
    • Policies and procedures
  • Marketing Plan
    • Who will we market to?
    • How do we reach our customer?
    • When?
    • How much will we spend?
    • What will the message be?
    • How frequently will market?
  • Tools for Communicating with Customers
    • Advertising
    • Public relations
    • Internet
    • Top-of-the-mind awareness
    • Referrals
    • Repeat customers
    • Cross selling
    • Educating
  • Profit Point Exercise
    • Establishing a Marketing Culture
  • Step 4: Sell for Profit
    • Increase the rate that opportunities are converted to sales (Close Rate)
    • Get more profit from every sales
    • Get more sales opportunities
  • Getting a customer to buy
    • Purchase decision is made when price is less than or equal to perceived value
    • Value is established by the customer
    • Move customer to buying decision by
      • Lowering price
      • Increasing perceived value
  • What You Need to Know
    • Why people buy
    • Your product's benefit
    • You and your company
    • How your product meets a customer's needs
    • How to logically and effectively present ideas
    • How to encourage a customer to make a decision
    • How to overcome objections
  • The Sales Process
    • Establishing selling opportunity
    • Establish explicit needs
    • Demonstrate capability to meet need
    • Offer to satisfy need
    • Gain commitment
  • Formal Sales Presentation
    • Introduction and warm up
    • Customer assessment
    • Company presentation
    • Needs resolution
    • Commitment
  • Profit Point Exercise Sales Process
  • Step 5: Manage the Work
    • Maximize amount of work performed
    • Ensure quality of work meets or exceed standards
    • Minimize costs
      • Labor
      • Materials
      • Other
  • The Key is Labor Management
    • Systems for
    • Attracting
    • Retaining
    • Motivating
    • the right people to do the right thing at the right time for the right price again and again
  • Labor Management and Profit Point
    • Labor is a primary resource in every marketable product
    • Quantity of labor time (Capacity)
    • Quality of labor time (Productivity)
    • Cost of labor
  • What You Need to Know about Labor Management
    • Motivation
    • Planning
    • Training
    • Hiring
    • Retention
    • Team building
    • Compensation
    • Employment laws and regulations
  • Employment Tools
    • Management Systems
    • Clearly understood job expectations
    • Competitive compensation
    • Safe working environment
    • Management systems
    • Time sheets
    • Employee reviews
    • Commissions and bonuses
  • Key Driving Principles of Profit Point
    • Know Your Numbers
    • Set Your Course
    • Create Opportunities
    • Sell for Profit
    • Manage the Work
  • Get to the Point!
    • Find your profit point
    • Make changes needed to get there quicker
    • Track your performance daily
    • Make daily management decisions
  • Kevin Nott , M.A. Business Strategy Coach [email_address] (801) 850-1716 www.GetProfitPointed.com