The third secret to creating a sustainable business is having a business with recurring revenue. For lots of businesses this is a challenge. If you want to have a business that will last past you, this might be the most important secret you need to learn.
You see, the next owner of your company will be more interested in the cash flow from the business than anything else. There is one exception to this rule and that’s if you have a business where the next owner is more interested in the intellectual property your business has created than the cash flow from the business. Otherwise, just be aware that without recurring revenue there isn’t much for you to transfer.
This is where you wake up on January 1st and you know you can count on a certain amount of sales. If you have contracts like I did in the vending business, I could count on a range of sales that would happen every week. In the wealth management business, it’s the same. I know within a certain range what my revenue will be.
What if you own a business like a consulting company or a construction company? These businesses traditionally don’t have recurring revenue. They are as good as the last project they have. It seems the majority of businesses I run across fall into this category…..a business where the owner wakes up on January 1st and there is no assurance that any sales will happen.
When you own a business, I bet you want to know how much cash your business will create.
If you own one of those businesses where you’re not guaranteed your next piece of business you still want to know your business will create a certain amount of cash. And, you probably think the more sales the better off your company is.
For many of us the challenge comes down to how do I create a sustainable level of sales that will allow me to have a healthy, successful and hopefully sustainable business.
This is where it gets interesting. You see there is a way to create a business that has recurring revenue or at least acts like a business that has recurring revenue. What, you ask, might that be?
It’s really very simple. You just need to put together a marketing and sale process that creates customers on a predictable basis. The sad fact is most of the time, businesses that could have predictable sales don’t. It’s not that they can’t, it’s that the owners haven’t set their businesses up for sustainability. In fact, most of the time these owners haven’t even thought about how to do so.
Before we get into what you need to do let’s talk about a huge problem I see way too often. Most business owners I talk with think marketing and sales are the same thing. The truth is they are completely different activities. Most of the time someone who is good at marketing won’t be good at sales and the same is true for someone who is a good salesperson. They probably won’t be very good at marketing.
The purpose of marketing is to create awareness of who you are. The purpose of sales is to create revenue for a business. If you can only afford to do one, you must focus on sales. If you don’t have revenue, your business can’t have profits. Without profits your business won’t exist. (Kind of obvious, isn’t it?)
If you have enough money and bandwidth you want to start with marketing. The reason is very simple, your sales process is much easier if those you’re approaching have put their hand up or you’ve done something to make them aware of your business.
Once a potential customer is aware of who you are and you’ve helped them understand that you know what the job to be done is, that potential customer will most likely be interested in what it is that you sell.
Here’s a caveat for both marketing and sales. If you’re talking about all of the cool things your product does, you’re likely missing the mark. Your customer really wants some benefit that your product or service provides. Your job is to identify what that benefit is and find ways for potential customers to figure out they need to be talking with you.
You’ve now put together a basic marketing program. You know who you best customers are and you know where they hang out. This is where it gets hard. And, we’ll cover this when we move from marketing to sales.
Your assignment is to read The Illustrated Book Yourself Solid and do the exercises. After you’re done you’ll have a fully fleshed out marketing plan.
Remember that perfect customer we just identified. Your sales team is going to push back. They’re going to say you need to allow them to call on other customers if they are ever to hit their quota.
This is one of the worst things you could ever allow. When your sales team calls on anyone but potential A Customers you’re allowing your sales team to make your company inefficient. And this costs you money.
Instead, develop a sales system that supports your sales team in selling to your best customer, not any customer. Your best customer will be interested in a solution that’s different than others in their industry.
You’ll have answered two crucial questions that will arm your sales team with a secret weapon. You ask, what are these questions?
Answering these two questions is harder than you think. Make sure you go past the obvious first answer. Make sure you drill down at least five levels on each question. This will allow you to get to a core reason your company can uniquely provide for your customers.
Book to read: Competing Against Luck by Clayton Christiansen
In the book The Challenger Sale, the authors discovered the very best sales people are not relationship builders, but challengers. This type of sales person challenges their customers to think differently about their problems and more importantly, the solutions for those challenges.
If you’ve done your job properly, you’ve provided the challenger answers for your team. And, this is the important part, you’ve put together a solution for that challenge that you’re asking your sales people to present. If you can do this, you’ve put your company in a different place than your competition.
If your sales team is a little prickly here, that’s OK. You want to disturb your potential customers and you want them to think differently about what your company does. When your team sells this way, you become much more valuable to your potential customers than the sales person who want to create a personal relationship, but doesn’t have a solution. These sales people will have great conversations, but won’t bring much business back to your company.
Following these ten steps will help your business create a predictable source of revenue and after all, isn’t that what you want in the first place?
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