5. They will transform your business! Improve sales and profitability with… … the concepts of Critical Resource Limitation , True Overhead and Value Added which are changing thinking about Pricing and Business Models in every business where they are applied. What’s In It For You?
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12. Imagine that, by chance, you’ve stepped into a lift with a potential customer … … you’ve got just 16 seconds to describe your business… … and to show you can do something of value for them. Business Description: The Elevator Pitch It comes in three parts…
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17. Business Description: The Elevator Pitch - Workshop YOUR CHANCE TO PITCH…!! GROUND FLOOR FIRST FLOOR LIFT
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20. Financial Performance It’s OK to be ‘uneasy’ with finance, but… … “ Finance without strategy is just numbers, and strategy without numbers is just dreaming” [E Faber, CFO, Danone] So, you need to do some SIMPLE numbers to take stock of where your business is, and outline where you want to take it. Don’t Panic!!!!
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25. Profit Builder: What is the Critical Resource Limitation for…?
26. Come on The Hammers!! Profit Builder: What is the Critical Resource Limitation for…?
27. Is it the same for a fine dining restaurant? A fast food outlet? Profit Builder: What is the Critical Resource Limitation for…?
28. A Hair Dresser? Profit Builder: What is the Critical Resource Limitation for…?
29. Machine shop? Supermarkets? (in/out of town?) Antique clocks business? Professional services? Profit Builder: What is the Critical Resource Limitation for…?
30. What would put the brakes on your business? Discuss... Profit Builder: What is the Critical Resource Limitation for…?
31. To use our new insight into the Critical Resource Limitation we need to establish the True Overhead of operating the business… … NOT those used in a traditional profit and loss account. Profit Builder: What is the True Overhead?
32. Profit Builder: Example – True Overhead Labour “ TRUE OVERHEAD” Traditional P&L BUILDING COMPANY Sales £300,000 Materials £180,000 Labour £45,000 Gross Profit £75,000 25% Overheads : Staff Wages £25,000 Other Costs £50,000 Total overheads £75,000 Profit £0 £45,000 £50,000 £120,000 £0 Operating P&L £300,000 £180,000 £120,000 40% £25,000
33. If Break-Even turnover is >90% of actual = then very high probability of failure If Break-Even turnover is between 80 – 90% of actual then probable survival – but difficult to grow If Break-Even turnover is <80% of actual then survival is likely and self-funded growth is possible Profit Builder: Added Value - Some Vital Statistics… Source = Warnes B. “Genghis Khan Guide to Business”
34. 30% of businesses fail within 3 years – scary but true! Profit Builder: Added Value - Some Scary Statistics… Source = Small Business Service Analytical unit (2006), Survival rates of VAT registered businesses, 1994-2003 key results www.sbs.gov.uk/survival (Feb) Only 92% of all new businesses that register for VAT survive their first year! HARD HAT and Business Link are on a mission…
35. How much is needed to pay for your true overheads (including what you need to pay yourself!) so you don’t lose money? (This is the Break-Even Value Added ) Profit Builder: Break-Even and Target Value Added How much money should you be making? How much is reasonable for you to want to make? (This is the Target Value Added )
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37. Profit Builder: Identifying Maximal Value Adding Products & Customers Good Job or Bad Job? Labour required is 20Hrs So Value Added/Hr = £20! (3,000 x £20 = £60k ) Labour required is only 4Hrs So Value Added/Hr = £50 (3,000 x £50 = £150k ) Job A Job B Sales £1,000 Sales £1,000 Materials £600 Materials £800 Gross Profit £400 40% Gross Profit £200 20%
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39. Identify those products and customers that produce most Value Added and focus on them To understand and use Dynamic Pricing tactics... Profit Builder: Dynamic Pricing
40. £50.00 £60.00 £40.00 Is Pricing Fixed? £70.00 It’s all about designing a mix of prices! The Keys to Profit Builder: Dynamic Pricing
41. Profit Builder: Dynamic Pricing Plan Total £150,000 Gross Profit Av. VA/HR Used Resources Trade Value £21,000 >£60 300 10% Platinum £36,000 £60 600 20% Gold £60,000 £50 1,200 40% Silver £24,000 £40 600 20% Bronze £9,000 <£40 300 10% Lead
42. Old St. Andrews Whisky... Added Value c £1.00 per Litre TOTAL: £60,000 Added Value c £15.00 per Litre TOTAL £900,000 Where would YOU focus….?! Profit Builder: What is the Critical Resource Limitation for…? CRITICAL RESOURCE LIMITATION 60,000 litres of whisky
49. Sales Builder: Finding New Customers The second (and more important!) key to selling more is finding new customers is by exploiting as many routes to market as you can… Most only use one or two You need at least 6 Preferably 8 or more
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51. Sales Builder: Test and Measure all your marketing! Check out Boosting Sales!
52. Sales Builder: The Sales Funnel Clouds of opportunity Fog of suspects Rain of unqualified prospects Qualified prospects Quoted prospects Customers
53. Sales Builder: Example Sales Funnel Opportunity Pipeline 18/06/2009 25 Identified Opportunities 12 First meetings booked 10 Needs Assessment 5 Quoted Proposals 8 Signed Contracts
54. Bringing it all together – the Business Chassis Developed by Hard Hat Business Advice from “The Business Chassis” by Bradley J Sugars Profit Overheads = Gross Profit - Margin = Turnover x Av Sales Value = Freq of Purchase x Customers x Conversion Rate = Prospects x £10,800 £18,000 £28,800 30% £96,000 £12.00 8 1,000 50% 2,000 £31,237 £16,200 £47,437 33% £143,748 £13.20 9 1,210 55% 2,200
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67. HARD HAT Business Advice: 0870 066 2940 Email: enquiries@hardhatbusiness.com Web: www.hardhatbusiness.com Thank you and good luck!!