Build Recurring Revenue

Andy will be speaking on the subject of ‘Profit’ at three ‘Love Business’ breakfast workshops to be held in Leicester, Nottingham and Derby on the mornings of 23rd, 24th and 25th June 2015 respectively, and he has written a series of blogs to set the scene for the workshops. If you’re in business entry is free. Each one will be packed with dozens of ideas around the theme of doing great business in the new age of the millennial buyer. Click here for more details and a registration form.

Most businesses survive on their next order. If the order doesn’t materialise, their business is dead.

But it doesn’t have to be this way. There is usually scope to focus on building recurring revenue as the route to higher profits, greater predictability of income, and more capital value in your business.

What product, service or benefit will your customer enter into a contract with you to provide? Could you make your life – and, more importantly, your customer’s life – easier by agreeing the details now?

I’m constantly amazed by how many businesses completely fail to capitalise on this future revenue stream. For example, for many years we have used the services of a heating engineer to carry out an annual gas safety check on property we own.

Has the engineer ever suggested a regular contract to guarantee that this important check will never be missed? Perhaps offering priority attention in the event of breakdown or emergency? Maybe even special ‘favoured customer’ terms on other work?

You can guess the answer.

We’ve periodically required our offices to be refurbished and painted. Has the contractor ever offered to schedule future work in advance to an agreed schedule on a regular monthly payment scheme? If so, might there have been other work that could have been included on the schedule – other properties, or maybe our home?

I’ll let you speculate on whether this ever happened.

When we’ve taken a car for service, did the garage recommend a service plan to cover the cost of future work and guarantee a high standard? No – although the very same garage offers a five year service plan on a new car we bought from them.

I could go on and on (and as my wife tells me, I often do!).

But you get the idea.

Some businesses don’t lend themselves to this type of regular-payment arrangement, but in my experience they are the exception, not the rule .

So let’s say you achieved this, and were successful in getting a substantial part of your work onto a recurring, contractual basis. What implications would that have for your work scheduling? For your staffing needs? For your ability to seek efficiencies in delivery as a result of your new focus on consistently repeated processes?

Being able to predict revenues, costs and profitability in advance, what effect would there be on the value of your business to a potential purchaser?

Of course, if you’re going to make promises you need to match them with great performance. Don’t offer what you can’t deliver.

But for many customers seeking great service from a business they can trust, entering into a long term contract is one less thing to worry about. And one more step towards your highly successful business.

Income Less Expenses Equals Profit

Andy will be speaking on the subject of ‘Profit’ at three ‘Love Business’ breakfast workshops to be held in Leicester, Nottingham and Derby on the mornings of 23rd, 24th and 25th June 2015 respectively, and he has written a series of blogs to set the scene for the workshops. If you’re in business entry is free. Each one will be packed with dozens of ideas around the theme of doing great business in the new age of the millennial buyer. Click here for more details and a registration form.

I have a friend and long-standing client who is focused on cost reduction in his business, and has been for years. Over time his business has become more efficient, leaner and better run.

His problem is that, in all of that time, his turnover has remained stationery. He now delivers his service for less money than he did ten years ago. His business is slowly, inexorably, strangling him to death.

He hasn’t learned the lesson that Ken Blanchard expressed in his seminal book, ‘Big Bucks,’ the third of his cardinal rules of business. It’s a simple rule, and it says ‘Income Less Expenses Equals Profit.’

Now you might imagine that is just what my friend is practising. If you do, you’ve missed the most important part of the equation.

There are two variables in play here; Income and Expenses. One has limited application. The other is completely without limits. Which will you spend your time working on?

Let me expand. You cannot cut your expenses by more than 100% of their current level. The more you cut, the harder it will be to grow. A business spending nothing is unlikely to move forward (although if you know of a way to run a business with zero costs, I’m all ears!).

Income, on the other hand, can be expanded exponentially without limit. Yes, this expansion is likely to mean higher costs, but my point is that the fastest way to more profit in your business is more income, not lower costs. That’s why the world’s great companies devote so much of their revenue to marketing and revenue expansion.

My friend lives in the shadow of the stigma of failure. Yet unless he changes his ways, failure is inevitable. In your business, are you prepared to countenance the risk of success by focusing on growth?

Profit is a Way of Being

Andy will be speaking on the subject of ‘Profit’ at three ‘Love Business’ breakfast workshops to be held in Leicester, Nottingham and Derby on the mornings of 23rd, 24th and 25th June 2015 respectively, and he has written a series of blogs to set the scene for the workshops. If you’re in business entry is free. Each one will be packed with dozens of ideas around the theme of doing great business in the new age of the millennial buyer. Click here for more details and a registration form.

In your business and mine, profit is a state of mind and a way of being. It derives from how you see the world, which in turn reflects in the actions you take and the results you achieve.

It sounds obvious to say that making more profit is the first objective of business, but in my experience that most often isn’t true, especially in smaller businesses. Ultimately you are driven by your values, which are the keys to your world. Understanding your own values is essential if you are to leverage your effectiveness.

For example, if you are in business, will you act to put more money in your bank before you focus on producing a great product? Before excellent design? Before building a first class reputation and the respect of your customers?

Is profit more important to you than working with a great team? Enjoying turning up for work each day? More important than doing work that fulfils you and gives your life purpose?

Or do you believe that doing these things will lead to profit? If so, how will you know?

Do you actually believe that making high profits is a ‘good thing?’ Or do you carry a secret belief around with you that suggests that companies that are highly profitable are somehow unethical, devious or self-serving? If you do, you’re not alone.

Who knows, you may be right.

If you’re running a registered charity.

Assuming that you’re not, perhaps it’s time to get your thinking straight about profit.

Here’s my view;

The level of profitability in a business reflects the value that the business delivers to its customers multiplied by the efficiency with which it delivers it.

That efficiency extends into all areas of business activity, encompassing production, finance, sales and marketing, people, etc. It’s what makes for the day to day challenge of running a successful enterprise. It has to be at the heart of everything you do, or eventually your business will fail or, much more likely, it will be completely without teeth in the fight to deliver your best work to the widest audience.

Which is where your profit will come from.

Ken Blanchard expresses this superbly in his excellent book ‘Big Bucks.’ In it, he describes the three cardinal rules of business.

Firstly, your business must be about something much more important than just making money.

Secondly, making money has to be the most important thing.

The resolution of this apparent dichotomy is what makes good businesses great. My advice is to get very clear about what your business brings to the world in words that are meaningful and inspiring to both you and your customers before you try to figure out how to deliver it profitably.

And the third of Blanchard’s cardinal rules? That’s for another blog.

 

 

Lost in Thought

I’ve read many books in my lifetime, but there are only a handful that are ‘stand outs’ that I will happily return to again and again.

One of these is ‘The Power of Now’ by Eckhart Tolle which has lived by my bed for several years now. Its simple message, that by living in the present moment all of our problems drop away, is not one that inspires everyone who first reads the book. If you are wedded to thinking, then it’s a message you won’t ‘get’ at first, and you might consider it misguided or irrelevant to everyday life.

Maybe though, like me, you will come to appreciate that the present moment is all we have, because it’s all there ever is. If you aren’t here now, where are you?

Of course, there are times when it’s much easier to be present than others. Sitting here on the balcony looking out over the Adriatic in the warm sunshine with beach sounds rising up from the happy people below, this moment is one crying out to be noticed.

But even here – or perhaps especially here – other thoughts soon come sliding in. The warmth, the peace and the gentle lapping of the sea are the perfect cocktail for contemplation. As the mind slows down, the endless loop of thought continues to unwind. There’s a small boat in the harbour, picking up passengers. I didn’t see it arrive even though it’s directly in my field of view. I must have been somewhere else.

Staying fully present is hard work.

Dubrovnik balcony view

It’s not that I don’t value thought. Creative thinking is the root of all human progress, and clearly we need it to function.

But most thought isn’t creative, it’s reactive, and if you’re like me you’ve probably had the experience of drowning in thought – your head so full and busy that you feel as though a fuse will blow.

When you feel that way too, try switching your attention to the present. Bring your focus to the Now. Listen, see, touch, feel the moment. Be here totally. Let yourself experience your own life.

If you were to ask me, I would say that, compared to presence, thought is a poor substitute.

Sarah is Mrs Bolt!

Sarah just texted to tell us they had arrived in Tucson, 18 hours after we dropped them at Heathrow. It’s 3.30 in the morning, and we’ve just woken to catch our own flight to Dubrovnik where we will recuperate from exertions of the last few days.

It was a great wedding. Sarah met James a few weeks into her Uni experience over 11 years ago. They roomed together as she completed not one but two degrees as she pursued her lifetime ambition of becoming a veterinary surgeon. Sarah Jervis, MRCVS is now Mrs Sarah Bolt and very pleased she is to be so. As proud parents and parents-in-law, we’re delighted too.

 Sarah & James Wedding

It seemed inevitable from the earliest days that Sarah and James would be a long term item. The two of them have an easy grace to their relationship that feels right. I’m sure they’ve had their ups and downs, but seeing them on Saturday, so obviously proud and full of love for each other, made the day a very special one for everyone who was there. We will all remember it for a very long time to come. Congratulations to you both!