Two weeks ago in the article, “The National Economy and Coachella Valley Business”, I mentioned that the problem with the American economy can be traced to two major issues. The first is a long period of excessive consumer spending that drained our economy. The second is the continual loss of productive jobs to other countries. The second factor is a serious, long term issue and does not present an easy solution. The first factor can change rather quickly and in fact it has.
Two years ago personal consumption was so high that our savings rate went to zero, the lowest level in American history. Now it’s back to 5% of income, which is better but still short of the 7% to 10% norm. We can’t and shouldn’t expect consumers to go back to their extravagant spending again. This is a sobering fact for many businesses and areas like the Coachella Valley which depend heavily on discretionary spending. That rather quickly leaves a lot of businesses going after a smaller pool of dollars.
I think it’s clear to many people that a major change has occurred and it can no longer be “business as usual.” Most owners see this; they just aren’t sure exactly what changes they should make. Some have cut costs and increased advertising – this buys needed time. Now operational changes are needed. If done right a new business should emerge that should do quite well even if the recovery reverses, which is what we are expecting. What’s the correct formula for change? Is there a key business concept that will guide an owner in the right direction?
The Key Business Concept
The key that points the owner to the right formula is contained in the full application and understanding of what “TO ECONOMIZE” means. To economize doesn’t mean you don’t spend money. It means that when you do spend it make sure you’re getting the maximum benefit from every dollar spent. The word also means that you get maximum return from every resource you have and from every action you and your employees take. If you have a happy customer in front of you and you don’t try to get a referral, you are not maximizing your resources. If the customer is buying some things and you sense they are just about through, and you don’t offer them a discount to buy one additional item, you are not maximizing your resources. It also means you economize your time – that you discipline yourself and your staff to make maximum use of every hour you have.
This idea of economizing – the idea of getting the maximum result from every dollar spent - is especially true in advertising. No one should ever engage in an advertising program without having in place a way to measure the performance of that program. This is always true but especially so today. When times were flush, inefficient and bad advertising could be absorbed, but not now.
This doesn’t mean you have to go to an advertising agency, which, however, might not be a bad idea for many businesses. It just means that all those clever ads you came up with were somewhat wasted simply because you didn’t spend equal time on how you were going to measure its performance, which brings up a similar but much broader subject.
If you do not have a system in place that tells you exactly how you got every one of your prospects and customers, you are missing a key element to success. You should also have in your possession a complete age and demographics breakdown of the Coachella Valley provided by Wheelers. This is vital to any successful advertising campaign. You may be in the XYZ business but you are just as much in the information gathering business too. You may think you know the answers to these questions but unless you have the actual data, and the structure in place to gather it, you don’t. Anytime you do something new or make any change to your business you need a system in place that will measure its effect.
Such a system will also keep you current and appraised of any outside changes. Do you know that just as many people now find businesses in your area using Google searches as they do the yellow pages? If you don’t your competitor probably does.
Now here is the good news in all this. The changes businesses should make to become more profitable in this difficult economic period should be able to be done at little additional expense. How do you do this? How do you make more money but not spend more money?
What Every Business Owner Wants
What is every business owner trying to accomplish but doesn’t exactly know how to achieve? They want to know how to accomplish the following. They want to know how to get more customers who will pay them more money more often, and who will continue doing business with them longer, beginning right now and at minimal additional expense! Well, how do you accomplish this ideal goal?
One moves toward it by first doing a very painstaking, in-depth review. This is where the detailed information gathering finally pays off. It’s done by analyzing every minute step it takes to first get a prospect or customer into the store, and then each step it takes to get a sale. One then carefully figures out how each one of the small step in this process can be done more efficiently. That’s followed up by analyzing all the little steps afterwards which keep that customer happy and coming back, hopefully bringing along his or her friends because you made it in his best interest to do so. Success is found in careful attention to all the individual steps and procedures that make all this happen.
Success in business isn’t one thing or two things or even three things; it’s really the sum of twenty or thirty small actions, all working together and reinforcing one another, each adding its little bit; this is what produces the overwhelming final result. If you work at increasing each small step in the process by just 5%, the final numbers can become staggering huge. You often end up doubling or tripling your revenue and income, and it seems like nothing major was done. Nothing major was done; it was the sum of a lot of little things. And best of all it didn’t take a lot of money to do it; you just made more efficient use of what you already had and of your time. I didn’t say it was easy; it takes hard work but it can and is being done. |