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Three Actions To Boost Business Revenue Right Now

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Welcome to Entrepreneur World! Owning and operating a business is an impressive achievement and those who can make it happen deserve a big round of applause. However, not all will be rosy. Becoming the steward of a business entity can be overwhelming and sometimes, even frightening. You are sure to be confronted with enough unanticipated events to make you feel as if only the strategic savvy of Hannibal could help you navigate either the obstacles or opportunities. Launching a business entity that you can build into a sustainable success demands that you figure out and put into motion a series of actions that will enable the enterprise to predictably generate sufficient revenue to become profitable (as you define it). On that note, you will be pleased to know that credible business advice is available to lead you through the obstacles and uncertainty that can block your path to success.

Whether you entertain thoughts of creating a company that will hire numerous employees and produce annual profits of seven figures or more, or your vision of entrepreneurship is a more personal reflection that will employ only you, but will nevertheless consistently generate a robust annual profit, know that there is a dependably effective formula that promotes entrepreneurial success. Trustworthy experts in the theory and practice of business entrepreneurship agree that the following activities are recognized as the pillars of a business entity and in tandem will develop a pathway that leads to a thriving and profitable company:

  • Marketing/ Sales, which can also be called business development, facilitates the introduction of prospective customers who have the money and motive to purchase the products and/or services offered
  • Operations, to facilitate back-office administrative functions and fulfill after-sale expectations; such as quality control, packaging, shipping, customer service and the customer experience
  • Finance, to ensure that there is enough money available to enable business development and operational activities

When aligned, these foundational actions—you recognize them as business strategies—have the capability to cultivate vigorous business growth that drives long-term and sustainable success. In anticipation of purchases, the marketing/sales pillar keeps the business owner focused on getting the service or product in front of the right prospects, articulating the right message to the most promising prospects and strengthening client relationships—actions that drive sales revenue and profit and support business development. Back-office administrative functions that can involve professional development and training for yourself and any employees, along with consistent quality control for products and/or services and after-sale follow-up that supports a memorably pleasant and efficiently delivered customer experience are within the realm of operations. Astute financial management, from appropriate record-keeping and analysis to financial forecasting, ensure that optimal funding of all essential business activities is available.

1.Marketing/ Sales

Marketing and sales, which collectively are the core of business development, positions you to promote consistent revenue growth, develop the dependability and trust that cultivates a strong and appealing brand and also foster beneficial client relationships that inspire repeat business, referrals of new clients and limits churn. Business development sets the stage for business growth by introducing your service and/or product to prospective clients; it is the art of identifying and encouraging sales revenue and related growth opportunities. An important objective of business development is to create a repeatable process that you can use to find new business opportunities and turn them into additional income.

Central to the development of marketing strategies will be market research, which brings data and other insights that show you the environment your product or service will enter. A client demographic info provides, for example, geographic distribution, age range, annual income range, or education level. That information will form the basis of a client persona.

To obtain credible, often actionable, boots-on-the-ground marketing and sales insights, consider investing in social listening so that you can tap into real-time conversations that take place across social media, online forums and review sites like Yelp and Trip Advisor. You can sharpen your marketing strategies and campaigns when you discover what really matters to users of your solutions (and competitors’ solutions). Unlike traditional marketing research, social listening delivers continuous, authentic, in real time user feedback that reveals customer sentiment. You might also get a heads-up on emerging trends and other developments in your industry that help you identify market opportunities. Guided by social listening info, you can refine, adjust, or discontinue certain marketing strategies, as you monitor your closest competitors—and boost the effectiveness of marketing strategies, campaigns and messaging.

The activities discussed above will also inform your development of an efficient and effective method for qualifying leads, communicating with prospects and educating prospective clients to give them the confidence to close deals. This includes implementing a follow-up structure through CRMs, ensuring that no leads fall through the cracks while providing the opportunity for timely follow-ups, which can make or break deal negotiations. Also, identify opportunities to offer additional services by upselling and cross-selling existing clients, unlocking additional revenue streams. getphyllo.com/post/social-listening-strategies-business-impact

2. Operations

While business development, supported by sales and marketing strategies and campaigns, is about obtaining clients, operations is about keeping clients happy once they agree to do business with you. Efficient operations processes ensure that an organization functions seamlessly, delivers a consistently memorable customer experience and maintains the high standards that keep clients coming back.

Operations include everything from client onboarding, employee training, customer service, quality control and compliance. Packaging and shipping don’t exist just to deliver a product or service—these services contribute to the goal of ensuring a pleasantly memorable experience that meets or exceeds their expectations of all of your clients.

Quality control is another critical part of operations. Whether it’s a restaurant ensuring that every meal is prepared to the same standard or a service-based business following strict protocols, consistency is what builds trust and loyalty. Clients return because they know what to expect and familiarity is reassuring.

3. Finance

It’s no surprise that chief among a business leader’s responsibility is protecting the financial health of the entity. One important duty of a business owner is to you maintain good financial records, whose primary purpose is to keep yourself apprised of the financial condition of the business and also steer you into making wise business decisions. Three financial statements—Cash-flow, Profit & Loss (Income) and Balance Sheet will be your guiding star for smart planning. Timely filing of your entity’s quarterly and annual taxes are also necessary to comply with legal requirements.

Fast-track growth

Growth is the goal of every business and there are several pathways to the destination—for example, merger and acquisition, where you, business owner and leader, will negotiate a buy-out payment that could mean you either merge with or acquire another company, or agree to sell your business to another entity and allow your company to be acquired. The buy-out or merger will result in a larger client base, expanded product or service and more plentiful working capital and other financial resources that represent business growth for both parties. The merger or acquisition might result in a new management role for you in the newly configured entity; conversely, you may become “silent” and limit your post-sale commitment to accepting the sale price.

Organic business growth is the most common growth strategy. Freelancers who achieve organic growth typically do so by winning more and/or more lucrative clients. Developing additional services or products to add to your portfolio of offerings is another method of achieving organic growth for single-person Freelance entities and small or medium-sized businesses. Organic growth is a solid business growth strategy that can ultimately position a business entity for long-term future success. 

Thanks for reading,

Kim 

Image: N. Hitchcock Collection. Kaparoko, Papua New Guinea (1962)

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Rainy Day Strategies to Cushion Financial Uncertainty

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There’s been lots of talk about the U.S. economy over the past year or two and bad news has dominated the narrative. Rounds of lay-offs continue at enterprise companies: Nike announced plans to shed 1,400 jobs in April; Dell cut 10% of its workforce in March (11,000 employees), for the third year in a row; on May 5, the cryptocurrency exchange platform Coinbase announced a planned lay-off of 14% of its staff, or about 700 employees. Even the popular building contractor rating platform Angie’s List announced in January that 350 jobs would be cut this year.

Your one-person Freelance empire may be holding up despite lay-offs and rising gasoline and grocery prices but even those of you who hold the working capital needed to maintain normal business operations, pay living expenses and continue to fund your retirement account may nevertheless have a gut feeling that warns you to spend cautiously and trim expenses to bolster your savings cushion. An analysis of your financial position is how you begin your resiliency campaign.

Assess business financial condition

The road to financial resilience begins with examining the business’ financial position by conducting a cash-flow analysis. The process will reconfirm the sources of your earnings and how much you pay to keep the business rolling. The cash-flow analysis will illustrate how and when revenue streams bring money into the business (receivables) and the timing and costs of operating and other expenses (payables) that take money out of the business. You’ll take the measure of how and from which sources business revenue is derived, as well as your spend for fixed and variable expenses. You’ll also confront the business top line earnings (gross sales) and bottom line (net) earnings. Your mission is to analyze cash-flow over 12 months, and making note of seasonal variations, so that you’ll obtain a big-picture understanding of your entity’s financial rhythms.

The cash-flow analysis invites your business to “tell” you where you’re making money and where you spend perhaps too much and should consider a less-costly alternative. Identifying areas where spending has you leaking cash is especially helpful if local or national economic conditions make clients inclined to limit the billable hours that feed your revenue. Fewer billable hours will magnify those pesky financial gaps and escalate the impact of a cash crunch crisis, should it occur. Ask your accountant or bookkeeper to run the numbers, or contact your local Small Business Association SCORE to make an appointment and obtain some (probably) free and trustworthy business finance management assistance.

Build a budget that reflects financial reality

Kick-off your fat-trimming budget project by reviewing variable and fixed expenses and verifying how each one contributes to maintaining operations, supporting business growth, supporting customer service and the customer experience, or enabling professional development that reinforces your standing as a thought leader and expert in your field. Whatever expenditures do not at least indirectly support the business or your professional position may need to either be funded at a more modest level or eliminated. Developing your revised budgetary focus does not, however, mean that you must slash as many expenses as possible. Your new budgeting approach should be strategic and guided by business goals and economic reality. Here are useful guide posts:

  • Cut expenses that do not support revenue generation, business operations, or the customer experience.
  • Protect spending on marketing and sales functions to encourage revenue, e.g. client acquisition and retention.
  • Build a cash reserve that can float three to six months of business operating expenses.

Use scenario planning to forecast a worse-case possibility and use that perspective to forecast the next 12 – 18 months of operations. What might your finances look like if revenue drops 10%? Next, consider a more disturbing future and forecast the financial challenges you would likely encounter if, heaven forbid, revenue drops by 25%? It doesn’t feel good, but the scenario planning component of your financial defense plan will force you to anticipate how you might manage and inspire you to think of how to cushion those harsh and stressful circumstances with some savvy advance planning. It’s always easier and more effective when difficult decisions are evaluated and potential remedies are devised when you are calm and not in a panic.

Before any storms arrive, remember that your best defense is a good offense. If at all possible, delay major capital purchases, but remind yourself to avoid severely slashing your marketing budget. You may decide to shrink it, but do not lose sight of the power of consistent marketing and its place as one of the three pillars of a healthy business. Companies that maintain their marketing presence during business downturns consistently outperform businesses that sharply limit marketing activities when the recovery arrives.

In fact, refocused marketing strategies and campaigns could surpass the effectiveness of your current, perhaps more costly, activities. Stepping back from certain paid advertisement and instead doubling down on publishing marketing content—which will cost time, that other valuable resource—could yield excellent results. To the best of your ability, and in accordance with what aligns with your business solutions and customer personae and preferences, consider one or more of the following:

  • Invite a client to participate in a written or video case study. It’s a highly persuasive tool that guides prospects to envision how your solution could resolve their challenge or help a mission-critical goal to be reached.
  • Look for opportunities to portray yourself as a thought leader; that could include moderating or appearing on a panel, speaking at a local business or industry conference or other meeting, teaching a credit or noncredit course in a subject that is aligned with the solutions your company provides, or obtaining an invitation to speak in a webinar or podcast.
  • Look for public relations opportunities that will enhance your visibility and strengthen your brand image. If you are teaching or speaking at a venue that’s open to the public, send a press release to a community newspaper or event listing sites. Also, post your speaking or teaching engagement on your website and social media platforms.

Diversify revenue streams

If your Freelance entity offers just one product or service, you are potentially quite vulnerable to the winds of economic instability. A shift in the competitive landscape, or a new tech product, for instance, can threaten your ability to make a living. Especially in a solo earner household, if revenue earning opportunities become scarce, the outcome could be difficult.

You might not see a quick fix for your problem, but you could create one by asking a question. That is, it could be worth your while to ask clients with whom you are currently engaged if they might be interested in expanding the work you do for them? Frame your proposal in a way that illustrates a desirable and tangible competitive advantage that the client’s company would obtain when your expanded work is implemented. Your clients may help you make lemonade of the lemons and provide you with a new income stream that you hadn’t considered. A complementary service that can be delivered as an add-on or upgrade might also inspire a client to envision how you might bring more value to his/her organization. Similarly, tiered pricing that offers a lower cost basic option as well as a higher-priced premium alternative that provides more extensive service, could bring a new revenue source to your organization.

Then again, it may be more feasible to develop an external revenue stream and explore the possibility of a side hustle. You may have noticed that most mentions of side hustles involve an entrepreneurial angle but that does not have to be the case. Traditionally, a side hustle was an under the radar job that wasn’t discussed with your colleagues. Just 10 years ago, a side hustle could have found you plowing snow in winter, clearing out dead leaves in autumn and performing basic yardwork such as weeding, mowing lawns and pruning forsythia and rose bushes in spring and summer.

BTW, independently or traditionally employed workers who take on a side hustle are for the most part not in financial distress. In fact, those who earn $150K annually are more likely to have a side hustle than those who earn $25K – $50K per year. But regardless of your financial circumstances, a side hustle is a way to future proof your financial position and build a cushion against financial uncertainty.

Leverage external financial resources

Grants, SBA loans and alternative lending programs are created to support business leaders as they plan to scale or aim to increase working capital that’s intended to protect viability during difficult business conditions. If rumors of possible economic uncertainty reach your ears, envisioning what a survival plan for your entity might look like is smart thinking. Sooner rather than later, make it a point to research your options, so that you are apprised of eligibility requirements and timelines that will allow you to prepare and survive.

If your business is carrying significant debt, understanding the landscape of small business debt relief options, including what’s available through programs like those outlined by the Consumer Financial Protection Bureau, can be the difference between survival and losing your beloved business. Also, revisit external financing strategies that match your repayment timeline to your cash-flow cycle.

In closing, be aware that economic instability that periodically occurs in your marketplace is not unusual. Every independently employed professional, traditional business owner and even employees will experience financial challenges at least once. Business leaders who consider financial resilience a given for which they consistently prepare, instead of an emergency response that’s cobbled together in a panic not only survive financial fluctuations, but often emerge stronger once “normal” business conditions return.

Thanks for reading,

Kim

Image: © New England Coin Exchange Cranston, RI

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To Court Your Competitors’ Customers

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Motivating prospective customers to do business with you is the leading function of independent Freelance professionals and business owners. You may not look at it this way, but recognize that your pool of potential customers also includes those who are currently doing business with one of your competitors. Think about it—how many B2B customers are buying within your category of services or products for the first time? Unless your solution is new to the market and not available from others, your customers have been someone else’s customers and every once in a while some of them might decide to look around to see what’s new or a better fit for their needs.

While it’s true that getting your unique selling proposition in front of prospective customers is essential to converting them into paying customers, there are messaging refinements you can make to strengthen your appeal to prospects who are currently active in a competitor’s camp. Some in that cohort might be dissatisfied with the experience they’ve had when using a certain service or product, or maybe the vendor relationship was underwhelming. Others might simply feel a little restless and inclined to look around and find out who else is out there (you!). Here are tactics that will be useful for your outreach to competitors’ customers.

Analyze the competitive landscape

You need to learn who your competitors’ customers are from a demographic standpoint and obtain insight into what motivated them to choose a competitor. Among the information you’ll appreciate understanding are factors that cause competitors’ customers to become one-off users and factors that lead them to become loyal customers—what are the triggers for each cohort? Study the websites and social media platforms of your primary competitors as a way to learn what might matters to competitors’ customers.

Conducting a competitor analysis will help you understand the Unique Sales Proposition (USP) and perceived advantages of products and services offered by your rivals and get a handle on what it could mean to their customers. What persuades their prospects to choose those offerings instead of yours’ and what can you do to make your offerings more appealing to them? How and where your competitors market their services or products, their pricing strategy, payment options, market visibility and brand popularity are certain to be integral to attracting and keeping those customers. By analyzing the strengths and potential weaknesses of competitors and comparing them to the strengths and weaknesses of your organization, you may be able to identify gaps in the market and find ways to promote what it is that rivals’ customers might be persuaded to perceive as a better on your side of the fence.

Identify gaps in the market

Does your competitive analysis reveal incompletely addressed customer needs or preferences? Those factors might crack open a window that lets you pull in a few of your rivals’ customers. Incisive competitive research may lead you to discover that a cohort of competitors’ customers would appreciate a more comprehensive customer service package—maybe after-sale training, for example? Or perhaps, in this era of rising prices, a couple of payment options that you’ve never bothered to promote, could turn the tide in your favor and carry in a few of your competitors’ customers.

Because you will not be able to research the pain points and priorities of your competitors’ customers because it’s almost certain that you cannot access their contact info. Unless someone visits your social media or website and chooses to reveal an email address—you cannot send a survey and hope for a response. So, you’ll have to get creative to learn about the unaddressed needs of your competitors’ customers.

Visit your competitors’ social media accounts and do some social listening by checking out comment sections. There you may learn of pain points or perceived inconveniences that you can address in your marketing messages. You will also be wise to read industry articles and visit the social media platforms of those organizations to read market research published by major market research firms that report on your industry sector.

Get visible

Today’s buyer journey is not like it was even a year or two ago; prospects may not contact vendors until they are well into the buyer journey. Prospects now explore potential vendors for the solutions they need and on their own compare offerings, get an idea of costs and only then will they reach out to two or three candidates to get details and create a shortlist.

Your strategy is to be proactive. Find out where competitors’ customers discover new products or services—do they watch product or service reviews on YouTube? Do they follow industry experts or influencers on Instagram or TikTok? Customers trust brands that meet them where they already are and provide value before the sale even happens. Once you’ve learned who their guiding stars are, establish a presence for your entity in those spaces.

You want to get into organic search results with helpful content that answers questions that are important to prospects and that can include getting out in front of hesitation by addressing common objections. Showcase the outcomes your service or products can produce and how to achieve them. Blog posts, short videos, webinars, or educational product Q & A guides may be effective. The more consistently you show up with the right message, the more likely you will be able to win over your competitor’s customers—as well as finding a few new customers for yourself.

Promote your USPs

Once you understand what differentiates your brand from its competitors, as well as the evolving shopping habits of your target market, you can begin to promote the desirable and unique qualities that make your brand stand out. These might include your prices, delivery time, product availability, convenience, quality, or customer service.

These traits, which are part of the USP, should be consistently promoted across your entire business, including your website, marketing and PR, packaging and customer experience from buyer journey to post-sale. By upholding these values throughout your organization’s customer experience, you can ensure that potential buyers will know why they should switch to your brand.

Nurture brand loyalty

Acquiring new customers is much more expensive than retaining an existing one, as research has shown. Once a customer has made his/her first purchase, it’s essential to encourage repeat visits if you want to see a strong return on your investment. Building these connections will instill consumer trust and brand loyalty, ensuring that you’ve won a customer for life.

Email marketing is a time-tested way to nurture customer loyalty and it is easy to personalize—a feeling that customers value. Brand loyalty starts with how you onboard people. When you acquire a new customer, put yourself in that individual’s seat and envision a customer journey that will resonate. For example, customer’s are inclined to appreciate a discount code but in the immediate aftermath of post-sale, they’ll likely appreciate more a welcome from you that explains who you are, what the customer can expect regarding the initial stages of working together, a request to meet and discuss the product or service purchased, invoicing and payment options. In other words, you can show your value by providing relevant information that also teaches them why they should open your emails. Set the tone early, and they’ll stay engaged longer and that is one of the pathways to loyalty.

Final thoughts

Customers leave brands—your competitors or you—that stop serving their needs. They leave because someone else made it easier to understand, easier to trust, or easier to buy. That can be you.

You may need to set up a marketing complicated funnel. You may not need a sizeable marketing budget. You do need to research and learn the pain points, hot buttons, priorities and emerging next big thing—way of doing business, customer service needs, buyer journey, payment options, or whatever else. You also need to pay attention to customers and prospects consistently, to help yourself make smart improvements and prove your value where it matters most. When you do that, you don’t have to out-shout your competition. You just have to be their obvious choice.

Thanks for reading,

Kim

Image: © Courtesy of Brimfield Antique Flea Markets. Featuring 5,000 dealers, Brimfield Antique Flea Markets is believed to be the most popular and largest such event in the U.S.

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Customer Data: Collecting and Utilizing

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Big data and data mining are buzzwords that have echoed frequently in the business press during the past three or four  years.   The noise level has caused business leaders to feel obligated to collect data from as many customer interactions as possible.   OK,  that’s very ambitious of them,  but now what? There is a lot of talk about big data and data mining and increasingly there is some action,  but the dust has not yet settled.  Many organizations are struggling with how to interpret,  utilize and store the copious amounts of customer data now in their possession.

Customer information is always useful,  but does data collection have meaning for small businesses and Freelance solopreneurs?  What information should a Freelancer collect and what do we do with it once we have it?  Do big data and data mining have any use for the little people?  The answer is yes,  but no.  Big data and data mining are of most use to the bigger players,  who use the costly to acquire information to fine-tune product offers to millions of current and potential customers.

Freelancers and small business owners can start with their client list.  Who has done business with you over the past five years? Who are your repeat customers?  What do they buy from you and when do they buy it?  If you have not done business with a B2B or B2G client in the past two years,  is your contact still at the organization and is s/he still in the same position? Are B2C physical and email addresses current?  Visit company websites and view the staff lists to confirm email addresses,  telephone numbers and job titles.

Customer data might give you ideas on how to improve customer service,  cause you to re-think your pricing strategy,  or help you to discover unexpected talking points for your next email marketing campaign or monthly newsletter.  Your customer data might prompt you to reconsider good customers of years past and get you thinking about how to win them back.  Updated customer information will make it easy for you to send out holiday cards in December to your B2B and B2G clients and do some relationship-building,  an important element of customer retention.

Online customer surveys that are accessible on your website and also emailed to your customer list have the potential to bring in still more useful customer data.  Learn how to devise a survey that makes it easy for customers to share the information that you want.  Keep the questions simple and don’t ask more than 10 to achieve the highest rate of participation.  Freelancers may also want to send out post-project surveys with the final invoice.

Social media outlets are another excellent source of customer data.  Social media have a way of bringing out uncensored thoughts and you might be surprised by what you learn.  Are your customers willing to engage with you on Facebook,  Instagram,  LinkedIn or Twitter?  Will any join in a Google + Hangout and join in a voice and video live chat?

Collecting data from many touch points is potentially very useful for every business entity,  but what you make of it and do with it are what matters.  Freelancers and small business owners can use customer info to improve revenue by way of expanding billable hours or sales of current customers;  re-establishing business with lapsed customers;  new customer acquisition and relationship-building.  Small data can yield big results when properly interpreted and utilized.

Thanks for reading,

Kim

 

 

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The Break-Even Analysis: Find the Pricing Sweet Spot

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To continue the topic of pricing,  in this case pricing a new product or service,  it is a must to know when fixed costs will be covered by unit sales at a given price and determine when in time the item or service breaks into profitability.  Performing a break-even analysis will reveal how many units must be sold,  or how many times the workshop must be delivered,  at a given price,  before production costs are behind you.  Integral to that question is unit selling price.  Costs are recouped faster when selling at $100.00 rather than $50.00.  Also related to pricing is what customers expect and agree to pay.  Appropriate pricing can increase profits faster than increasing sales volume.  One can sell fewer items and make more money per item.  Conducting a break-even analysis is Step 1 in locating your ideal price range.  Here’s the Break Even Volume (BEV) formula:

Fixed costs                                                      Fixed costs

BEV     = ______________________________        =         __________

Revenue per unit – Variable cost per unit                         Unit margin

Let’s add some numbers to the formula and assume that the fixed costs associated with delivery of your service is $5, 500.00: $1,700.00 went to the graphic artist for Power Point slides; $1,300.00 paid to the wordsmithing wizard for marketing collaterals used for promoting the service; and $2,500.00 for the wholesale value of your labor,  the time you spent crafting the intangible service.  These costs are fixed because they will not change,  no matter how many times the service will be delivered.  Variable costs associated with service delivery would be printing hand-outs for participants ($50.00) and the advertisement placed in an industry newsletter read by the target audience ($400.00),  meaning that the unit variable cost =$450.00.  If the service is priced at $750.00,  the profit,  or unit margin,  is $300.00 each time the service is delivered at that price.

$5,500.00

BEV     =        _________     =   18.33

$300.00/unit

At a per unit price of $750.00,  the service must be delivered 18+ times before a profit will be made.  From there,  a series of  “what if”  scenarios can be floated.  Chiefly,  what are competitors charging or is there a spike in demand that makes the product more valuable and can you increase the price?  Also,  can you lower fixed costs and obtain graphics services for a couple of hundred dollars less?  What if the marketing collaterals text was produced in-house by you and not outsourced?  How much will that increase the price of the time you spent developing the service,  another fixed cost?

Let’s say that you find graphics services for $1,500.00 and ask a marketing communications wizard to edit text that you write yourself for $800.00 (your personal labor increases: 6 hours writing at $50.00/hour = $300.00 + $2,500.00 = $2, 800.00).  Now,  the fixed cost is $5,100.00 and you think that $950.00 is a price that clients just might accept.  The variable costs will remain unchanged at $450.00,  because your printer is good,  his price is right and you’ll definitely need to advertise since you may want to charge more for the service.  At a unit price of $950.00,  the unit margin would be $500.00.   As shown,  by raising the price of the service by $200.00,  fixed costs are covered by delivering the goods 10+ times,  rather than 18+ times.

$5,100.00

BEV=             ________      =   10.2

$500.00/unit

As you can see,  the impact of other values such as increased advertising or higher quality materials or labor,  can also be assessed for impact on the pricing sweet spot and timeline for reaching BEV.  When bringing a new product or service to market,  take steps to identify the ideal pricing structure.

It is also useful to calculate the profit margin,  that is the percentage of sales revenues retained after all expenses are paid,  for each product and for the total line.  From the P & L Statement,  divide net profits by total sales revenues  (bottom line divided by top line).

 

Thanks for reading,

Kim

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The Data Driven Payoff

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Because the February-March session sold out,  I have been invited to reprise my three-part workshop  “Become Your Own Boss: Effective Business Plan Writing”  at Boston Center for Adult Education 122 Arlington Street Boston MA on three Mondays,  May 9, 16 & 23 from 5:30 PM – 7:30 PM.  For more information or to register please visit http://bit.ly/becomeyourown59  or call 617.267.4430.

As Freelance consultants,  we know that information is nearly as valuable to us as our skill set.  Information leads us to make smart decisions about all aspects of business: what services to offer,  identifying target client groups,  determining a profitable business model,  understanding how to market our services,  gaining a competitive edge.  That good information is integral to all that we do comes as no surprise,  but until now there was no scientific evidence to support that belief.

New research done by Erik Brynjolfsson,  economist at the Massachusetts Institute of Technology Sloan School of Business,  Heekyung Kim,  graduate student in economics at MIT Sloan School and Lorin Hitt,  economist at the University of Pennsylvania Wharton School of Business proves that good information really does put money in your pocket.

The three studied 179 large businesses and found that when decisions enacted were based on reliable data,  companies achieved a 5+ % higher productivity level than businesses that relied more on “experience and intuition” for decision making.  The higher productivity could not be attributed to other factors,  such as the use of more sophisticated technology.

In the study,  data driven decision making was not primarily based on merely collecting data,  but was closely linked to how the data was utilized.  In the April 24, 2011 New York Times,  Mr. Brynolfsson stated that business decisions based on data and analysis “have huge implications for competitiveness and growth”.

Thomas Davenport,  professor of information technology and management at Babson College in Massachusetts supported the conclusions reached regarding data driven business decisions in a book written with Jeanne Harris and Robert Morison, “Analytics at Work: Smarter Results” (2010),  concluding that companies that rely heavily on data analysis are likely to outperform those that do not.

The big question is,  which data do we choose to collect and analyze and how do we best apply it?  Curating data is big business.  “The biggest change facing corporations is the explosion of data”,  said David Grossman,  technology analyst at Stifel Nicolaus in the April 24 NY Times.  “The best business is in helping customers analyze and manage all that data”.

How does a Freelancer decide what to do with data available to us?  I propose that data presented here would guide readers with excellent proficiency in mathematics and possessed of an advanced degree in the subject to become data analysts!  All others might take a look at our P & L statements and examine gross revenue and fixed and variable expenses and analyze how much it costs to generate income and what can be trimmed to make the bottom line better.

Speaking of revenue,  do some research on the services that your target clients are contracting for these days.  Are you retaining clients and signing new ones, too?  How does your 2Q 2011 active client roster compare to 2Q 2010?  Do you need to tweak your business model to maintain your competitive edge,  or might it be wiser to seek a strategic partnership?

To help figure things out,  do a free online search of Google’s Key Word Tool or Wonder Wheel and type in a descriptive phrase of your core service.  How many prospects in your locale are searching for what you sell?  Next,  type in a phrase that describes the service you think might interest clients and see how many local searches it gets.  There you have it,  data driven analysis to guide your business decisions.

Use Google Analytics to track hits to your website and report which pages receive the most attention.  You can correlate that data to the number of follow-up requests you receive and  the conversion of that follow-up to new business.  Make further use of that data to evaluate the efficacy of your website and learn how you can enhance this important marketing tool.  Will adding multimedia to your website be useful?  Or will adding pages to give more information do the trick?  Or maybe you should just simplify the text and clarify and strengthen your message?  Listen to the data and find your answers.

Thanks for reading,

Kim