As we continue with the second part of this three part series, I want to explore and go more in-depth on the processes that will flatten the learning curve and fast track your opportunities in effectively growing your business. You still need to answers these questions; the answers should be detailed and well thought out. Knee jerk answers that are vague will get you a zero sum gain result, this is your business, your livelihood, give it the attention it needs and deserves.
⢠How much do you want to grow?
⢠What are the current market conditions?
⢠What does your client base look like?
⢠What types of client do you currently market to?
⢠What does your bandwidth look like? (REALLY IMPORTANT)
⢠In order to grow, do you need additional staffing, and in what areas?
⢠Are you in good health: physically, mentally and spiritually? (This matters a lot!)
The list continuesâŚ
⢠What is your current sales volume? At the end of 2018, where would you like to see it?
⢠More importantly, what are your current profit margins, and where would you like to see them at the end of 2018?
Regardless of Where You Want to Grow
We mentioned four opportunities to grow your business: organically, with existing accounts. Resuscitating inactive accounts, higher level and not lower tier. New clients via prospecting and networking, and lastly through acquisition, buying or merging with an existing company. A complete review and evaluation of your current clients is a must, and that is where you MUST begin. Too many businesses dive right into ânewâ clients when an inexhaustible pool of opportunity exists within your current clients. Along with my largest client, Iâve developed an effective spreadsheet whereby your client base can be evaluated on two levels: first, by vertical markets and secondly via classification.
Why Vertical Markets
Clients want to know you are a specialist and can help their specific company in meeting their marketing and sales goals â a âgeneralistâ, someone who tried to be everything to everyone rarely has that ability. In an article from B2B Magazine on the topics of what clients really want, it was evident that clients are looking for strategic partners that âunderstand our businesses and those that have had âsuccess in our businessâ (vertical). Illustrating this would be; if you were having oral surgery, you wouldnât go to a vetâŚunless you are a horse â you get my point. Being a specialist is critical and a huge differentiator in our very crowded market.
The segmentation process should include the following by client:
- Customer Code (if you use those)
- Client Name
- Vertical Market
- Classification
- YTD Sales
- Average Order Size
- Number of Orders
- YTD Profit
- Average Profit per Order
- Overall Average Gross Profit
You should extend this out a minimum two years to get a year over year comparison and evaluation. (Email me if you would like a general Excel template.
This review will give you a true snapshot of which vertical market is performing the best financially â from a sales and profitability standpoint. You can further review where bigger and better opportunities exist. My recommendation is to focus on four to five vertical markets; at the same time, keep the other clients, but make your focus the four or five verticals youâve chosen.
Classifying Your Clients Level of Activity and WHY!
I use a sliding scale of A-F along with H, I and P, This may seem complicated and to some degree it is, but this will help you when it comes to knowing who you are going to spend the bulk of your effort working with, targeting and the resources you will devote to each area.
There is no magic bullet or formula here; YOU determine each of these levels based on criteria you determine for each classification. Remember too, you may NOT have any A or B type clients; however the goal is to seek out those types and move your existing clients in that directionâŚlet me explain. I an Ideal world, what would your ideal client look like, thatâs your âAâ listed client. Here is an example of what mine would look like.
o $40,000.00 + in gross sales
o 45%+ average gross profit
o Pays within terms
o I get 50%+ of their marketing spend
o Easy to work with
o Open to suggestions
o Does shop my ideas
o Respects the relationship
o Responds timely to my requests, questions and approvals
o Refers me to others
- B â Same holds true for the âBâ group but the dollar amount is less
o $10,000.00 to $40,000.00 in gross sales
o 40%+ average gross profit
o Pays within terms
o 35% of their spend
o Plus all of the other factors
o $2,500.00 to $10,000.00
o 40% margin
o Pays within terms
o All other factors
o $1,000.00 to $2,500.00
o 40% margin
o Pays within terms
o All other factors
o <$1,000.00
o 40% margin
o Pays within terms
o All other factors
- F â These are the customers you will NOT sell to, will NOT pick up the phone if they call. I implore you to resist the urge to sell to them, these are the bad ones, the ones that drag you down, make life hard, always bid out, complain, pay lateâŚGET them OUT of your life! Years ago, I had to fire my Dad and his company, good guy, bought a ton of products at big numbers, but I was ALWAYS chasing my money. The profits you realize when a client pays within terms are not the same when the client pays in 120 to 180 days. I canât (you canât) afford to have money sit out that long â not profitable.
- H â New clients, these are held for 120 days to determine where they will reside
- I â Inactive clients that you have not worked with in six months or more
- P â Prospects
As mentioned, this information will allow you to see which vertical market is most profitable. Additionally you have the ability to now assess the amount of marketing dollars you will allocate to each category.
Marketing Dollar Allocation
While not scientific, I have always used the formula, for every dollar you spend on marketing you should generate a 25x multiple in profitable sales. i.e., if you spend $100.00 for a specific marketing, you should get $2,500.00 in profitable business. While not scientific this formula has served me well.
I also look at creating a budget and determine the allocation of the overall budget:
Your marketing budget should be a percentage of your gross sales. Analysts vary in their opinion on what that percentage should be; I generally use 4% of gross sales. Example: $4,000.00 for every $100,000.00 in sales. Some of my clients have stated they feel that number is high, yet Iâve found others that use a 6% to 8% as their percentage to determine their budget. Remember, youâre not required to spend it, however when itâs allocated and you know the number you then have a barometer from which to measure your success.
It is important to note that you must stay connected to all of your A-E listed clients, how you allocate those funds is entirely up to you. I look at inexpensive ways to market to the C-E clients using email blasts & postcards for instance with a frequency of twice a month.
The major focus of my allocation is toward the A/B listed clients. Ways I may market to them would be email blast, twice a month, that are NOT product based but more along the line of creative campaign type information, these clients are more likely to use these types of programs. Additionally, I will use, custom packaged spec samples, 3D direct marketing campaigns, and descriptive white papers. When it comes to prospecting my A/B type clients I may have as part of my marketing budget I may exhibit at relevant trade shows, do luncheons that support those vertical markets in addition to other touch points mentioned.
When it comes to resuscitating old accounts, donât waste your time on the C-E level past clients, remember you want to sell and market to those clients where you will see the greatest sales and most importantly, the highest profitability. When reviewing your list you may have multiple past clients that are inactive, and you may say, ââŚtheyâre inactive for a reason; I donât
want to work with themâŚâ Good, donât! Making the decision not to work with bad clients will open up extra time for you to focus on the ârightâ clients. I had a client that after reviewing her list fired a client that did $30,000.00 a year with him â scary; but literally, within two months he was able to fill that void with a client with a projected spend of over $50,000.00 a year and one that has all of the qualities my client deemed as an âAâ list client!
âWhen one door closes, generally two openâ
At the Point of Acquisition
If youâve determined acquiring a company is the right for you, the information you have regarding your clients will serve you well in determining if the proposed client base is a good fit.
In next monthâs article I will share a few relevant case histories that will give you a real-life view of relevant marketing in action; featuring the clientâs objective, strategy and execution and the overall results.
Growing your business is important doing it right is most important. Should you have any questions about how to do this effectively, feel free to reach out! Additionally if you have plans to attend PPAI EXPO in Vegas this January, I will be doing an in-depth, 3 hour workshop on this very subjectâŚhope to see you there.
Wishing you the best and continued good selling in 2018!
For more than 30 years, Cliff has been speaking, training and consulting internationally to associations and national business groups on more effective ways to market themselves, their products and services, as well as motivating their personnel. Recognized by PPAI for his creativity, he has won the prestigious PPAI Pyramid award 25 times and the Printing Industry's PSDAâs Peak Award for creativity five times in three years. He has also received PPAI's Ambassador Speaker of the Year Award six consecutive years and was the inaugural recipient of PPAI's Distinguished Service Award. Named one of top six industry speakers and trainers, he also was recognized by PPAI in the book, "PPAI at 100," as having a significant influence in education. He has also been recognized by Counselor Magazine as one of the Top 50 Most Influential People in the Promotional Products Industry. You can engage with Cliff at http://www.myengagepage5.com/cliff-quicksell-1associates.