“Can I make this business profitable?” Jim from Kansas City, Kansas asked me a few weeks ago.
Jim installs glass into existing steel or fiberglass front doors, bringing much needed light into homes and increasing their resale value. He has a steady stream of customers and has increased his customer base each of the 8 years he’s been in business.
Yet he was just breaking even before the recession and is now losing money.
What’s the problem?
Any small business marketing that is built around selling just one product or service is going to struggle. In Jim’s case, his only opportunity to resell to past customers is when — or if— they move into a new home. He has to find a new customer to make almost every sale.
Finding new prospects and converting them to customers is the hardest part of growing your business.
Once you have a satisfied customer you can sell to them again and again. To run a profitable business, you want to offer a number of related products or services or a service or product that people need more than one time.
Once you have a satisfied customer, you can sell to them again and again. It’s ten times easier to sell an existing customer than to start from scratch with a new one.
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I asked my barber what his life would be like if he had to find sixteen new customers every day. He looked at me as if I were crazy. He only needs to attract new customers periodically when an existing customer moves away or goes bald.
Jim simply does not have a profitable business model. Instead of using each sale to a new customer to generate additional sales, he’s stuck on a permanent treadmill, constantly needing to find new customers and trying to close the next first sale.
Is It A Hobby?
If you only have one product or service to sell and it’s not something people need over and over, you don’t have a business, you have a hobby. There is no way to grow your business and your income. You’ll always be struggling to make a profit.
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To be profitable, you need to attract first time customers and then sell them multiple products and services or help them buy again and again.
Here’s the sequence that generates profits:
1. Attract prospects to your mailing list
2. First time sale
3. Up-sell or cross-sell a higher price point product,
4. Sign them up for an on-going service and help them
5. Create customers for life (well at least for a year at a time).
Of course there are many variations, but the goal is the same; leverage the first sale into additional revenue so you maximize the value of each customer.
That’s what my trainer did when he signed me for an annual season pass to the gym. That’s what my HVAC company did when they signed us up for an annual maintenance contract.
That’s what the phone company does too. They get you in the funnel with an incredible deal on a cell phone and then sign you up for a two-year contract.
WalMart uses the same strategy. They put the lowest, practically free item at the end of the aisle to get you in to the store. Most people buy a higher priced more feature-laden version, and pick up a handful of other items while they are in the store.
Without a marketing funnel, a way of up-selling or cross-selling – you’ll be permanently frustrated and perpetually broke.
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Is there anything Jim can do to turn his “hobby” into a business?
Absolutely. Jim could expand the services and products he offers to meet more of his customers’ needs. He could offer replacement windows and window washing, for example, and have sales partnerships with people who clean carpets, refinish floors, and do home renovations.
By offering just a few of these related services he could easily double his income within a month or two and have a wildly profitable business. But he didn’t want to change his business model. Last I heard he was headed for bankruptcy instead.
If you just want to be busy, get a hobby.
If you want to make money, your business model needs to systematically help first time customers buy from you again and again so that you make more with less effort. It’s not complicated, and you can easily increase your income by 50% or more within weeks.
P.S. Tired of just being busy? Want to find how to find out the proven formula for attracting clients and profits?
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P.P.S. I’ve known people who worked 50 to 80 hours a week just to make ends meet, when they had an untapped goldmine in their hands. Find out how easy it is to get all the business you want and see your income grow.
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