Finding the “Secret Sauce”: Get There First and Get the Deal

Anytime the talk among my group of friends turns to home repairs and remodeling, which it often does, one of us has a new story of a bad experience. So I was not excited about finding a contractor to fix the door on the shower in my master bathroom that didn’t close properly. First I considered replacing the shower. I did what any consumer would do – got online and looked at replacement showers. I couldn’t find any for less than $1400 plus the labor cost. Next I visited one of the big box home improvement stores and talked with an expert in bathroom remodeling. He candidly told me even though they have a network of contractors, they have none who will repair shower doors because they can make so much more money doing replacements.

I got back online and found a home repair referral service that lets you type in what you need and provides you with three local contractors who are interested in doing the work.

The contractor I choose got there first: I made appointments with the three contractors.

  1. The first called me within two hours of the posting (Sunday). I made an appointment with him for the next day (Monday). He didn’t show up when he said he would then called but left no voicemail. He called back several days later and I let him know I’d selected someone else.
  2. The second, who got the job, called me Monday morning, made an appointment for Tuesday morning, and was on-time for his appointment.
  3. The third called Monday afternoon and made an appointment for Friday. I called them back after I’d selected the second and cancelled the appointment.

I didn’t just choose him because he got there first; however, I chose him because he convinced me no one else could do the job for less, listened to what was important to me and provided me with options which met my requirements and were less than the prices I’d expected to pay.   Let me break it down even further:

  1. He knew his business:   He came in with everything he needed to do a quote. He had an options book and knew when each supplier could have the materials to him.
  2. He offered options: He was willing to work to fix the shower door, but had an option where he could replace the twenty year old shower for less than half of just the material cost I found online at the big box store.
  3. He offered to start immediately: He said all he needed was a 50% deposit, he would order the glass, remove the current shower immediately, and be back the following Tuesday to do the installation.

The two other contractors didn’t even get the chance to bid. My contractor was as good as they get. He communicated throughout the process, showed up to do the installation when he said he would, and did a professional job with no surprises.

He’s found the “Secret Sauce”.

What’s the “Secret Sauce” that boosts your business’ sales?

Finding the “Secret Sauce”: Reducing Revenue Risk

How do you position the relationships you have with your customers and competitors to improve the probability that you’ll meet your monthly number? Business owners who can do this have often found the “Secret Sauce” for running a successful business. I recently interviewed a business owner who has done just that.

Personal Trainer’s largest barrier to business success is the venue where they train their clients. If a trainer works for a gym, the gym takes a large cut, usually 50%, of the fees the trainer earns. If they train clients at the clients’ homes, they spend many hours on the road driving between clients and are limited by the equipment the client has available and what they can carry.  If they train in their own home, they need dedicated space and there’s the safety risk when taking new clients.

The Fitness Salon’s owner, a longtime personal trainer, has opened a fully equipped gym that solves that problem.  For a set monthly fee a personal trainer can conduct as many training sessions as she can schedule.  The owner also sets up every trainer to succeed.  Included in the agreement is personal coaching on starting a personal training business, no fee for the first month and half the fee for the second month – to allow trainers time to build their clientele and put away some cash to support themselves during the transition.

This not only benefits the trainers, but reduces the revenue risk for the business:

  1. By charging a monthly fee instead of a percentage, the risk is moved from The Fitness Salon to the personal trainers who have the client relationships.  At the beginning of every month the owner knows the lowest his revenue can be for the month, based upon the rent he collects.
  2. By collecting the monthly fee from the trainers instead of collecting payments from clients, the administrative overhead is significantly reduced. The owner no longer needs to have staffing available every moment the gym is open, reducing his expense and allowing him time to grow his business.
  3. The target market for The Fitness Salon becomes personal trainers exclusively instead of being both personal trainers and people who want to be trained. Marketing to a group of accredited professionals when you have the solution to issues that have long plagued their industry is just a matter of telling them what you have to offer.

How can you do this for your business?

  1. Can you affiliate with other businesses offering the services you’re offering and forge an overflow agreement? (This helps smooth out business peaks and valleys and your reciprocal agreement can include a 10% finder’s fee.)
  2. If you’re offering your clients a service, can you move your clients from a transaction based relationship to a retainer based or monthly fee? (This reduces the overhead and helps predict revenue.)
  3. Can you bundle your services by offering a discount for paying for multiple sessions or services? (Also reduces overhead and incents your clients to return.)
  4. If you’re offer a consumable product can you set your clients up with an automatic renewal? (It’s easier to retain a customer when you’re “pushing” the product to them.)

Get more ideas for finding  “The Secret Sauce” for your business from $1,000 Start-Ups.

Leveraging Fortune 500 Business Practices for your Start-Up Business: Reduce the Need for Fire Fighting

What if when you started your business you understood that you’d make mistakes but made the decision to make each mistake only once?

What if you also decided to do your best once to insure any employees you (eventually) hire could learn from the mistakes you’ve made?

Fortune 500 companies understand how this mindset and discipline can significantly reduce the amount of time, energy, rework, and money they spend dealing with unexpected problems and issues.

In large companies, the process – typically called Root Cause, Corrective Action (RCCA) – begins with whoever is accountable in the organization for leading these events working with the manager in that part of the organization where a problem occurred to write out a succinct description of the problem.

The next step is to convene a group who has knowledge of the problem area to identify the root cause, brainstorm corrective actions, develop a corrective action plan, and implement the change.

One of the most important attributes of successful RCCA processes is that the operating change is then documented in a way that whoever does this the next time has the benefit of the analysis AND the process change is communicated to all affected employees.

This is even more essential for the micro-entrepreneur who hopes to grow his business.

By completing a RCCA every time there is a procedural problem, an entrepreneur is developing a best practice for his business, one that he’ll follow and one that can be followed by his future employees.

Root Causes to Problems and their Corrective Actions are not often rocket science, even in organizations that produce rockets. They typically address some of the most common issues:

  1. I forgot to … (create a checklist for that process)
  2. I did THIS before THAT and … (create a process chart for that process)
  3. I couldn’t find or I spent an hour looking for … (a place for everything)
  4. I didn’t know who to call when … (point of contact list)
  5. I forgot to verify … (process checkpoint)

Remember YOU made this mistake and it’s a business you started and probably know more about than anyone you’ll hire. Is the impact of having every employee you every hire make the same mistake more or less costly to your business than the time it takes to document the learning and make it available at the right place, at the right time?

$1,000 Start-Ups has a host of ideas on how to get your business started and operating successfully.

Leverage Fortune 500 Business Practices: Understanding and Reducing Your Cost of Goods Sold

Regardless of how long you’ve been in business and whether you’re building your first or hundredth unit, understanding what it costs to produce your product and producing it profitably is one step in assuring your business is profitable.

Fortune 500 Companies live by the numbers. They know the optimum sales price, what it costs to produce each unit, and the profit from each sale. As an entrepreneur, borrow this practice from their playbook and be sure you understand your numbers.

You’ve no doubt done your market research to determine the optimum sales price – often the price the competition is charging for a similar product. Your costs should follow the rule of thirds: 1/3 cost of goods sold, 1/3 sales and marketing costs, and 1/3 overhead costs and profit.

It’s that first 1/3, the cost of goods sold, we’re focused on at this point. These costs are made up of labor and materials.  Even if you’re not paying yourself for your labor at this point, it goes without saying, your time is your businesses most valuable resource.

Reducing Labor Costs through Brown Paper Mapping:

When working with a Fortune 500 client one of the processes management consultants use is brown paper mapping. Using a roll of brown paper that’s typically three feet wide and the length of whatever free wall is available we affix a sheet to the wall.   We then work with the client to lay out the process sequentially and prepare it for analysis by gluing a rectangle on the brown paper for each step in the process and annotating the current time it takes for each step.

Fortune 500 companies typically have a small team of people map out the process and then bring in different groups to identify the problems and brainstorm solutions. Each idea is recorded on a post-it and affixed to the brown paper. The team then gets together and puts it into an action plan.

As a micro-entrepreneur you can replicate this by creating a brown paper of the current process, analyzing each step for problems and opportunities, and developing a plan.  For each subsequent unit select which of the process changes you’re going to implement and keep track of the time reduction as you’re building.

Reducing Material Costs by Understanding Demand:

Fortune 500 companies understand the demand for their product. They have the ability to estimate how many need to be produced to satisfy demand each week, each month, each year. They also know the peak periods and slow periods.

As a  micro-entrepreneur you might not yet have the sales history to know your long-term demand; however, you can still reduce your material costs by buying the optimum material quantity to get the lowest price possible without tying up too much of your working capital, yet insuring you have the material on hand when you need to build the next unit.

As your sales and sales channels grow you’ll have the opportunity to further understand your material and inventory demands.

Learn more about low cost business start-up strategies in $1,000 Start-Ups.

Setting Yourself Up for Success: Identifying the Skills You Need to Succeed … and Learning Those Skills

Understanding the knowledge you’ll need when you start your business can prevent the “I didn’t know what I didn’t know” phenomena that stalls and derails many start-ups. Factoring in the time it will take you to learn the new skills necessary for launching, operating, and marketing your business also leads to more realistic expectations and can keep you from getting frustrated while learning the new skills. The first step, of course, is to think through what you will need to know in order to produce and market your product or service and get your business started.

There are at least three types of knowledge an entrepreneur needs:

  1. Basic Knowledge: This is the knowledge required for any business of the general type being launched. Some examples:
    1. If the business provides a service such as appointment management or any type of administrative support, knowing how to use a computer and office software is basic knowledge that’s needed.
    2. If the business produces a product or product line, understanding supply chain and inventory management is required.
    3. If the business relies on social media and the Internet for product sales, the business owner must have enough basic Internet skills to be able to communicate effectively.

Basic knowledge is readily available at a low cost. You can buy or borrow a book, take an online tutorial or a community college course, or both.

  1. Specialized Knowledge: This is the knowledge required for the specific type of business. Some examples:
    1. If the business involves writing and self-publishing books, the business owner will have to learn how to format books for publication, where to publish, how to do order fulfillment, and the skills necessary to market the book.
    2. If the business involves cookie baking or cake decorating, the business owner will need to understand the best ingredients to use, how to produce predictable results, how to price their products and where to sell them.
    3. If the business targets seniors, the business owner will need to understand the issues facing that population, what programs and services are available, and the best approached for marketing to seniors and their families.

Specialized knowledge is also readily available. With the wealth of information available on the Internet today it can be time consuming to sift through all of the information. Organizing your approach, then breaking it down into steps helps you target what information you’re seeking.

You can also gain a host of information by taking a part time job in a business that offers the same products or services you’ll be offering or by starting or joining a networking group for people in the same business.

  1. Start-Up Knowledge: This is the knowledge needed to start-up the business. Some examples include:
    1. The registration and licensing requirements for the business selected.
    2. How to write an effective business plan.
    3. The insurance that is needed to protect the business.

This information is readily available often at a low or no cost. In the US you can start at the Small Business Administration’s website:   www.sba.gov.

Once you’ve learned a new skill, the best way to master it is to teach it to someone else, maybe another micro-entrepreneur who’s starting a business.

In $1,000 Start-Ups I’ve provided a list of the Basic, Specialized, and Start-Up information you need for each of the 60 businesses. I hope it saves you some time and frustration when you launch your new business.