If You Cut Your Costs To Zero, That Is What Your Business Will Be.

Step Back And Get A Better View

So what is more important, making more money or having the lowest costs?  Every business owner takes a different approach to managing the finances of the business.  If you read the business section of just about any paper, there is some one talking about how to reduce costs, or some executive blaming higher costs.  Generally when I work with business owners, I have very little influence on cutting costs so I focus on how to make more money with what they have.

Build the Most From the Least

This weekend I came home from Houston Texas with a plaque that I couldn’t have earned a few years ago.  This might sound a little funny, but bear with me for a moment.  If you run a business, you need a hobby.  Sometimes your hobby is purely an outlet of stress, other times it is a place where you can let your mind do some background processing and clarify problems you have in life or in your business.  This is how successful people see a way around obstacles in life.  Sometimes, your hobby is a reflection of the problems in your life that need to be corrected.

One of my longer term hobbies has been racing in the 24Hours of LeMons series.  No, that isn’t a spelling error, it really is lemons.  The cars are junk, literally junk. 

The idea in the 24 Hours of Lemons is that you are supposed to take a junk car that you paid $500 or less for, and race it.  There are a lot of safety rules and track rules and team rules.  When my friend and business associate, Gabrielle Magno of Maxxom Communications in Houston and I first came up with the idea for the team, we both tried to do everything.  We couldn’t get other people to help or pay money to be on the team.  Just like many small businesses, we were targeting the wrong customer base.  Just because someone is our friend, it doesn’t make them a team member.

What Will Your Retirement Be Like?

Will You Spend Retirement At The Beach?

I was having a conversation with one of the people I work with pretty regularly.  He is getting close to retirement so we discussed all kinds of interesting things.  He doesn’t have any children and has no desire to leave a “legacy” behind.  He is worth over a million dollars and has a healthy retirement account.

The conversation started off with his house.  He wants to sell it and buy a nicer place on the water somewhere with a very large down payment.  Because the market is down he thinks this is a good time to buy.  I couldn’t agree more.  Then he took a tangent I never expected.  He wants to take out a reverse mortgage where the payments he gets will cover the first mortgage until he dies.  Ideally he figures that when he dies he will have nothing in his home for equity.  The house will just go to the bank.

So I asked what happens if he needed the equity to buy into an assisted living facility or had some other major expense come up, or what if he outlived the reverse mortgage and had to start making payments again.  He didn’t have an answer.  He was more worried about getting to enjoy every penny, or to put it into his words, “be a mega consumer”. 

Build Your Business With Standards and Rules

He has a Destination, What is yours?

Aren’t successful businesses built with good rules?  Shouldn’t every business have rules and standards for everything to succeed?   Pilots use rules to fly, the big burger chains like McDonalds and Burger King use rules to make burgers and the government is loaded with rules.  Last I heard Pilots were doing a pretty good job getting people where they wanted to go, the burger chains were making good money because the rules create a product that people are comfortable with.  As for the government, ok I’ll skip that one.

As a commercial rated pilot for over a quarter of a century, it is pretty rare that I go flying without a purpose, reason or direction.  Even as a student pilot, I had a purpose when I went flying.  All the while I considered my flying career a success.  When I fly, there is always someplace to go, something to see, or something to do in the airplane.  Isn’t that a lot like business? When a pilot starts out, he has a destination or an aim point, a plan to get there and a few thoughts in case the plan doesn’t work out.  The rules are simply guidelines to stay in.

Who Is Your Perfect Customer? You?

Knowing your customer is critically important for a business to grow and prosper.  I work with my clients and students on this all the time.  In my book, So, Now What, I had dedicated a chapter and worksheet to helping business owners like you figure out exactly who the perfect customer is.  Every once in a while someone approaches me and they show me how they did the work, filled out the worksheet and it didn’t help them in their business.  When that happens, like any good business owner, writer or teacher, I start by looking in the mirror to see what I did wrong.  And in this case, as in most cases, it was something I did wrong.

Not Quite a Theater, a Great Media Room

When Mr. R called and went over everything happening in his business, and I could tell nothing had changed in three months, I went back and re-read the chapter in the book.  Everything looked ok there.  I revisited my notes from past conversations with Mr. R, nothing there.  Finally I looked at Mr. R’s notes on his perfect customer and I couldn’t help but laugh out loud.  My wife came running in to ask what was so funny, and even my dogs where worried.  I had her read the information on the guy’s perfect customer.  We both immediately knew what I did wrong in teaching and in the book. 

What Is Your Customer Really Worth?

Lately I have had more than one discussion on the lifetime value of a customer.  While there a few businesses that are one shot programs like wrongful death attorney’s, most other businesses have a long term value and benefit if they can maintain a customer relationship.  Every owner I talked to wanted more customers, and agreed that the customers they have are the most profitable.  So when I wanted to add a customer relationship program to the mix, why do they hesitate?

It is a very interesting phenomenon and attitude among business owners.  All of them will track how many customers are added to their “list” but they rarely track how many leave.  Online marketing is an interesting field because the total list is always a moving target.  If we forget about the existing customers for even a minute, they fall off the list faster than we can hit the refresh key.

So why is it that an owner will spend a small fortune on online advertising and not a penny to engage the existing list and make sure they don’t go anywhere else?  I don’t know.  The Harvard Business School has a pretty cool calculator to estimate the lifetime value of a customer. 

Where Are You Going?

There are some great lessons in life that everyone can learn from taking flying lessons, shooting lessons or learning how to drive a race car on the track.  All of these lessons apply to business as well.  Paul Newman was a great actor and race car driver.  John Travolta, a great pilot and actor.  Many business owners that are very successful race cars, fly airplanes or hunt.  Is there a connection here?

I think there is.  All of these skills, running a business, acting, flying, shooting and racing require planning and practice.  In the end they all have a target of some sort.  The actor wants to make you think it is really happening to him, whatever it is.  The pilot has a plan of where he is going before he ever gets in the airplane.  The race car driver knows every corner of the track and the fastest way around them.

So how does this relate to the business owner?  There is an often over looked or mis-applied rule of success.  Successful people have a direction and an aim point.  When was the last time you saw someone you thought was successful and said "he can do anything?"  I would guess never.  The best heart surgeon is a heart surgeon, not a podiatrist that does heart surgery on Saturdays.

The businesses that are the most profitable with the least effort are those that have a definite direction and aim point.  Look at any major business.  Dominoes Pizza for example.  No live music, no bar, just pizza, hot and fast.  It doesn't matter if you make the worlds best pizza if everyone thinks that you are running a bar.  And if you are running a bar, you better have some really cold beer and don't worry too much about the pizza.

So what is your direction?  If you aren't sure, I got a deal for you, I just dropped the price of my book on the Kindle to $2.99.  I wrote it to help more people figure it out, and with the economy the way it is, I figured I can reach more people at $2.99 than $16.99.  Find your direction, pick an aim point and go find success!