Dale’s Top Seven Ways to Increase Business Revenue, Profits and Value
Dale’s Top Seven Ways to Increase Your Business Value
There should be rewards for performance. At all levels. Profit sharing, bonuses, and specific milestone accomplish can trigger a reward. The important parts of rewards system are:
- Performance based
- All participate commensurate to their responsibilities and achievement
- “80/20 – Customer Gold Program.” TM
How can you use the 80/20 principle to PROACTIVELY increase your revenue by 10% – 200%?First, you must find out who the top 20% of the customers are. Take your customer sales data for the last two or three years and download this data to a spreadsheet. Once it is downloaded sort from highest revenue to lowest. (You should also look at
First, you must find out who the top 20% of the customers are. Take your customer sales data for the last two or three years and download this data to a spreadsheet. Once it is downloaded sort from highest revenue to lowest. (You should also look at customer by margin.) Add a column for cumulative percent on the side of the revenue sort. Sum each row until you reach 80% of the total revenue. Now you know the top customers.
- Dash Board: A/R, A/P, Cash Flow, Contribution Margin (CM), Productivity $Rev/FTE, $CM/FTE, NI/FTE
Finding all the variable expenses and determine your contribution margin. Once the CM is calculated, it is a magic number to determine the break-even for the company, division, project, department or other category.
BREAK-EVEN = Fixed Expenses / CM%
To change a company’s accounting system and bookkeeping procedures to CM basis takes 3-9 months. Your accountant may not like this concept very much because this process takes 3-9 months to change the accounting system and requires more bookkeeper work. When the credit card bill comes in, it may be part variable and part fixed. Then more data entries are required. When the salary check goes out, if it is part variable and part fixed, more entries are required. But proper project, product, or division break-even calculations are critical to account for profitability and provides way to improve performance.
- “Why do Customers Buy” – Build Brand for free
If you have implemented the “80/20 Customer Gold ProgramTM” then there is a specific opportunity to proactively interact with key personnel at your customer’s companies. While you interact, ask them “Why do you buy from us?” or “Why do you not buy from our competitors?”Make a detailed list of the responses and prioritize them based upon the number of responses.Then have your key managers list why they think customers buy from you? A fun exercise is to give them each three sticky post notes and make a histogram of their responses. Take the top three responses and quantify the responses.Some typical reasons may include:
- Good customer service
- Positive reputation
- High-value products
- Strong relationship
- On-time delivery
Are your competitors saying the same thing? Of course, YES.
- Systems – Processes
Is tribal knowledge (experienced management) more or less important than systems in an acquisition or merger? Both can be important but systems are significantly more important than tribal knowledge. However, tribal knowledge is needed to create quality systems.
- Reoccurring Revenue
Reoccurring or Recurring Revenue vs. One Time Sales. Reoccurring or Recurring revenue occurs when a company is able to resell products or services repeatedly to the same customer. If you sell an asset, try to sell a consumable product or maintenance contract along with the asset.
- Rifle vs. Shotgun Marketing Approach
Rifle vs. Shotgun Marketing combines industry segment growth rates and gross margin for each segment to help determine the highest value segments. This leads to a focused marketing/sales strategy can yield more high-value customers.
Dale’s overall business performance improvement ideas were of great value for Greg in Minneapolis
Dale’s overall business performance improvements ideas were of great value for Greg in Minneapolis. Dale has his top 7 ways to increase revenue, profits and value that work. Greg, learned these key business concepts from Dale Richards’ presentation on Business Valuation Principles – How to Increase Your Business Value, Financially, Operational and Strategically. Listen and learn.