Hard hat boosting profits & sales

Purpose of today Start of a journey … setting out the steps you need to follow on that journey, and sharing with you some HARD HAT expertise giving you the edge you need to succeed in business We are going to workshop together to build a personal Business Action Plan – giving you the edge you need for profitable growth! This plan will be the template for your future success ...

Content for today: Your Business Action Plan Business Aims and Aspirations Business Description Your Numbers Overhead Break-even point Value added Selling for Profit Strategy and Planning 90 Day Action Plan

Your objectives for today? Why am I here?!

They will transform your business! Improve sales and profitability with… … the concepts of Critical Resource Limitation , True Overhead and Value Added which are changing thinking about Pricing and Business Models in every business where they are applied. What’s In It For You?

Some big questions for today… What do you want from your business? Where are you now? Where do you want to be in 3 years time? How are you going to get there? What does your business do for its customers? What are your 5 priorities for the next 90 days?

Business Aims & Aspirations Let’s get SMART-er! What are you in business to achieve? A job? Own boss? Show ‘them’ you can do it? Get rich? A pension?

Business Aims & Aspirations SMART goals are: S pecific M easurable A greed Upon R ealistic T ime Based

To increase my turnover from £50,000 to £200,000 within 3 years time To make a profit of at least 10% of my sales on an ongoing basis within the next year To take £40,000 a year in personal drawings within 3 years To position my company so that I can sell it for at least £500,000 within 5 years To build up a company that I can hand over to my family and retire at 55 To be able to work only 3 days a week within 2 years Write your Aims and Aspirations in Part 1 of your Business Action Plan! Some ideas for SMART Business Aims and Aspirations Business Aims & Aspirations

Imagine that, by chance, you’ve stepped into a lift with a potential customer … … you’ve got just 16 seconds to describe your business… … and to show you can do something of value for them. Business Description: The Elevator Pitch It comes in three parts…

The Introduction: This is about me… The Deliverables: This is about what we do… The “so what” line : And this is what’s in it for you… Business Description: The Elevator Pitch

Business Description: The Elevator Pitch TWO things to think about…. Your “Value Proposition” (or USP) Features vs Benefits

Business Description: Features versus benefits People buy benefits not features “ People don’t buy drills, they buy holes” [Theodore Levitt, Marketing Professor, Harvard Business School] Ask the question “which means that..” until you get to the true BENEFIT.

Business Description: The Elevator Pitch - Workshop Discuss your business and share your ideas about your Value Proposition. Write it down… Craft this into an elevator pitch with: An introduction The deliverable The ‘so what?’ line

Business Description: The Elevator Pitch - Workshop YOUR CHANCE TO PITCH…!! GROUND FLOOR FIRST FLOOR LIFT

Business Description: Business Action Plan Part 2 In heading: write your name, company and other items as requested In Part 2 - Business Description summarise: Your business heritage Example: “A market gardening firm set up in 1953 by my father & now run by my family” Your business deliverables – from your elevator pitch and …. The ‘so what?’ line

Financial Performance It’s OK to be ‘uneasy’ with finance, but… … “ Finance without strategy is just numbers, and strategy without numbers is just dreaming” [E Faber, CFO, Danone] So, you need to do some SIMPLE numbers to take stock of where your business is, and outline where you want to take it. Don’t Panic!!!!

Content for today: Your Business Action Plan Business Aims and Aspirations Business Description Your Numbers Overhead Break-even point Value added These 3 numbers link Accounts, Sales and Operations to make ‘Profit Builder’

Profit Builder: Works For Every Kind of Business £27m Audio & Video Co. lost £3m – now making £500k on £18m £10m Building Services firm losing £120k/month for 15 months – turned in 120 DAYS, made £800K the next year, and STILL making profits Training firm operating at break-even – now heading for £340k @ 50% margin And for businesses like yours it’s even more effective... How will this impact on your overall strategy?

A ‘different’ way of looking at some of your numbers. The trick is in the way that these three concepts are linked together: Profit Builder – What Is It ?! Critical Resource Limitation (CRL) True Overhead (TOh) Value Added (per CRL)

Profit Builder: What is Critical Resource Limitation? Let’s look at some examples: The Critical Resource Limitation is the brake on your profitable growth. It’s that one thing that, if everything else is working, you find hardest to get more of.

Profit Builder: What is the Critical Resource Limitation for…?

Come on The Hammers!! Profit Builder: What is the Critical Resource Limitation for…?

Is it the same for a fine dining restaurant? A fast food outlet? Profit Builder: What is the Critical Resource Limitation for…?

A Hair Dresser? Profit Builder: What is the Critical Resource Limitation for…?

Machine shop? Supermarkets? (in/out of town?) Antique clocks business? Professional services? Profit Builder: What is the Critical Resource Limitation for…?

What would put the brakes on your business? Discuss... Profit Builder: What is the Critical Resource Limitation for…?

To use our new insight into the Critical Resource Limitation we need to establish the True Overhead of operating the business… … NOT those used in a traditional profit and loss account. Profit Builder: What is the True Overhead?

Profit Builder: Example – True Overhead Labour “ TRUE OVERHEAD” Traditional P&L BUILDING COMPANY Sales £300,000 Materials £180,000 Labour £45,000 Gross Profit £75,000 25% Overheads : Staff Wages £25,000 Other Costs £50,000 Total overheads £75,000 Profit £0 £45,000 £50,000 £120,000 £0 Operating P&L £300,000 £180,000 £120,000 40% £25,000

If Break-Even turnover is >90% of actual = then very high probability of failure If Break-Even turnover is between 80 – 90% of actual then probable survival – but difficult to grow If Break-Even turnover is <80% of actual then survival is likely and self-funded growth is possible Profit Builder: Added Value - Some Vital Statistics… Source = Warnes B. “Genghis Khan Guide to Business”

30% of businesses fail within 3 years – scary but true! Profit Builder: Added Value - Some Scary Statistics… Source = Small Business Service Analytical unit (2006), Survival rates of VAT registered businesses, 1994-2003 key results www.sbs.gov.uk/survival (Feb) Only 92% of all new businesses that register for VAT survive their first year! HARD HAT and Business Link are on a mission…

How much is needed to pay for your true overheads (including what you need to pay yourself!) so you don’t lose money? (This is the Break-Even Value Added ) Profit Builder: Break-Even and Target Value Added How much money should you be making? How much is reasonable for you to want to make? (This is the Target Value Added )

Break Even Value Added per Hour: True Overhead of £120,000 divided by 3,000 hours = £40/Hr £45,000 of labour represents 3,000 Hrs of saleable work Target Value Added per Hour: True Overhead of £120,000 divided by 3,000 hours = £40/Hr x 1.25 (So that break-even turnover = 80% of actual turnover) = £50/Hr In this example from a building company: This adds £30,000 to the bottom line! Profit Builder: Break-Even and Target Value Added

Profit Builder: Identifying Maximal Value Adding Products & Customers Good Job or Bad Job? Labour required is 20Hrs So Value Added/Hr = £20! (3,000 x £20 = £60k  ) Labour required is only 4Hrs So Value Added/Hr = £50 (3,000 x £50 = £150k  ) Job A Job B Sales £1,000 Sales £1,000 Materials £600 Materials £800 Gross Profit £400 40% Gross Profit £200 20%

The key to increasing profitability is: NOT Gross Margin % But Maximising the Value Added for the Critical Resource Limitation! Profit Builder – The Key Point… If You Only Take Away One Thing From Today:

Identify those products and customers that produce most Value Added and focus on them To understand and use Dynamic Pricing tactics... Profit Builder: Dynamic Pricing

£50.00 £60.00 £40.00 Is Pricing Fixed? £70.00 It’s all about designing a mix of prices! The Keys to Profit Builder: Dynamic Pricing

Profit Builder: Dynamic Pricing Plan Total £150,000 Gross Profit Av. VA/HR Used Resources Trade Value £21,000 >£60 300 10% Platinum £36,000 £60 600 20% Gold £60,000 £50 1,200 40% Silver £24,000 £40 600 20% Bronze £9,000 <£40 300 10% Lead

Old St. Andrews Whisky... Added Value c £1.00 per Litre TOTAL: £60,000 Added Value c £15.00 per Litre TOTAL £900,000 Where would YOU focus….?! Profit Builder: What is the Critical Resource Limitation for…? CRITICAL RESOURCE LIMITATION 60,000 litres of whisky

Profit Builder: The Outcome for Old St Andrews…

Establish the TRUE overhead Determine break-even Identify the Critical Resource Limitation (CRL) Target value added/CRL Identify maximal value adding products & customers Optimise customer/product combinations using dynamic pricing tactics Profit Builder Prescription:

All of which creates an instinctive feel to running the business, and… And the Point is…? Understanding both your Critical Resource Limitation and Value Added means you can… Design the business to operate within its capacity (the Critical Resource Limitation) Simplify price setting and tracking by removing labour from the pricing calculation (put it in overheads) Maximise profitability with appropriate responses to market conditions

...it makes you more money!! So what have you got to do to get at it? You guessed! Sell More… And the Point is…?

Sales Builder: Existing Customers The first key to selling more is to exploit your existing customer base as much as you can (because it is easiest) … Identify the most profitable customers you have using the value added model Can you sell them a meal deal (complimentary product)? Try and super-size them (more of the same)? Add a different product sale (Apple pie!) Get them to buy again sooner? Think about lifetime customer value: Find out why customers leave What can you fix? Can you create exit barriers?

Sales Builder: Finding New Customers The second (and more important!) key to selling more is finding new customers is by exploiting as many routes to market as you can… Most only use one or two You need at least 6 Preferably 8 or more

Sales Builder: Routes To Market Consider these routes to market for your business… YOU CAN INCREASE THE EFFECTIVENESS OF EACH OF THESE BY FOLLOWING UP WITH ONE OF THE OTHERS Networking Web site Emails Telesales Referrals Co-op marketing Postal campaigns Advertisements (direct response) Trade fairs PR (free) Public speaking Joint ventures Affiliates

Sales Builder: Test and Measure all your marketing! Check out Boosting Sales!

Sales Builder: The Sales Funnel Clouds of opportunity Fog of suspects Rain of unqualified prospects Qualified prospects Quoted prospects Customers

Sales Builder: Example Sales Funnel Opportunity Pipeline 18/06/2009 25 Identified Opportunities 12 First meetings booked 10 Needs Assessment 5 Quoted Proposals 8 Signed Contracts

Bringing it all together – the Business Chassis Developed by Hard Hat Business Advice from “The Business Chassis” by Bradley J Sugars Profit Overheads = Gross Profit - Margin = Turnover x Av Sales Value = Freq of Purchase x Customers x Conversion Rate = Prospects x £10,800 £18,000 £28,800 30% £96,000 £12.00 8 1,000 50% 2,000 £31,237 £16,200 £47,437 33% £143,748 £13.20 9 1,210 55% 2,200

Recap – what we have covered so far… So we have talked about… Aims, aspirations & financial goals What your business does Improving profitability Increasing sales to existing customers Adding new customers What does this mean for achieving your aims and aspirations for your business?

Key Issues & Opportunities What is your Overall Strategy? Then look at it from four key perspectives: Customers & Markets Operations and Productivity People & Skills Finance & Systems

Go back to your aims and aspirations. Create a forecast in Part 3 How you will go about achieving those aims and aspirations? For example: Key Issues & Opportunities: Strategy & Planning Sell more to selected existing customers Attract new more profitable customers Will lead to improved profitability and less reliance on existing large customers -> we can achieve our goals within our existing capacity

Key Issues & Opportunities : Customers & Markets MARKET MEDIA MESSAGE Leverage existing customers? Segment your market? (size, industry, location?) Which markets/products are most attractive? What are your competitors doing? Which routes will you be using? How will you to test and measure? How much prospecting do you need to do? (remember the sales funnel) How will you track prospects through your sales process? What is your USP/”unique perceived benefit”? How will you highlight benefits? How will you get testimonials? How will you ensure your message is clear and consistent with your brand?

Key Issues & Opportunities : Operations & Productivity Operations and Productivity Efficiency Critical Resource Limitation Outsourcing What is your CRL? How does it impact operations? How can you release CLR? Getting more out of each unit? Additional income streams? Possible tasks to outsource? (identify non critical tasks) Cost versus benefit? Risks? (financial, operational, reputational) How will interfaces work (internal, customer)? Documented procedures? Systemise processes? Workflow and layout? Templates/pro-formas? Disaster recovery?

Key Issues & Opportunities : People & Skills People and Skills Managing Recruiting Developing Impact of strategy – need more people? Get the right ATTITUDE. Teach skills. Proper role profile and person spec. Can you afford mistakes? Do you have to get anyone off the bus? Is your appraisal/review process fit for purpose? What commitment do you give to training your people? (training budget?) Do you properly assess training needs? How do you enrich people’s jobs? Do you invest in your people? IiP? How do you set the right example? Do your people know what you expect? (job descs?) Do you communicate targets, values? Do you celebrate success? Is your reward system ok?

Key Issues & Opportunities : Finance & Systems Finance Impact of your strategy on cash flow? Are you making best use of internal and external financing? (“Cash Builder”) What operational numbers do you need to see? Break even and target VA/CLR Critical resource loading (capacity) Dynamic pricing model & tracking What reports do you need? (new KPIs, dashboard/non-financial, timing…) What reports do your people need to hit their numbers? Systems Impact of strategy on IT/systems? Are your financial systems adequate? Do you need to invest in new reporting capability? Do your systems adequately support your marketing efforts (eg CRM?) Do your systems hinder your communication? (email? telecoms?) Does your website need beefing up? (transaction capability? Link to CRM? Order processing?)

Actions to be Taken in next 90 days Commit to 5 Goals in 90 days What are the five things you can tackle now that in 90 days will affect: Cash Profit – increase profit by… Sales – increase sales turnover by… Team effectiveness Your time effectiveness Make them SMART: Specific Measurable Agreed Upon Realistic Time Based

Have we covered the things you wanted to get out of this workshop today? Any questions? Your Objectives Revisited…….

Wrap Up Complete your business action plan Fill out evaluation sheet Complete a referral card Collect your copy of “Boosting Sales”

HARD HAT Business Advice: 0870 066 2940 Email: enquiries@hardhatbusiness.com Web: www.hardhatbusiness.com Thank you and good luck!!

Hard hat boosting profits & sales

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