What are your company's sales goals?
You have one, right? Ok, I am going to go out on a limb here and say you do have a sales goal for your business. If you don't, no problem. I am going to explain to you the best way to set it.
For those of you who do have a sales goal, how did you arrive at that number? Was it based on past or current performance? What you have seen others achieve? What you thought sounded good? Something else?
I'll be totally honest. When I set the revenue goals for our gym, it was driven by nothing more than ego. In fact, in the beginning, it wasn't a revenue goal at all, it was the total number of clients. I figured when I hit 100 clients I'd be golden, never even taking the time to think what that actually meant revenue wise for the business. Or even more importantly, for me. (Yeah, I like to eat too).
It wasn't until I actually got to the "cord-cutting" stage until I considered it. In other words, I had been working another job that I relied on to pay the bills. I knew my take home and what I was making from that job. But how does that translate to the business? After all, $10,000/mo in revenue didn't mean I was going to be shoving $10k into my pocket. But what did it mean?
And that's where Lifestyle Congruence comes in. Fancy term, simple concept.
All it means is "How much does the business need to be generating for me to take home what I need to?"
In reality it's probably the simplest of all the Fix This Next questions to figure out. But that doesn't mean it's going to be easy.
First you need to figure out the personal income you need to support your personal level of comfort. This is a need based number, not necessarily wants - not yet. For instance, when I calculated this number, I found I actually needed less than what the old job was paying me which meant my goal could be lower.
After you have calculated your personal income number, you need to know how much business sales income you need to be able to do that. Here's an example:
You find that your personal comfort number is $5,000/mo - a nice round number.
Then you calculate how much you are paying yourself as a percentage of your business sales income.
Let's say your current revenues are $10,000/mo and you are paying yourself $2,000/mo.
That means your Owner's Pay% is 20%. (($2,000 / $10000) x 100%)
So to pay yourself $5,000/mo at that percentage you would have to generate $25,000/mo in sales revenue ($5000/20%)
$25,000/mo = $300,000/yr. You now have a sales number that is congruent with what your personal lifestyle number is. It is a realistic calculation of what your sales goal needs to be. Not a guess, or a hope or a dream. Real Life.
And of course that number can be adjusted and modified. Think of what can happen if you run your business leaner, and now can pay yourself 25%, or 30% or more? That is where the magic happens.
But you gotta know your numbers first. We have the tools and coaching to help you make that happen. Let's talk about it.
At the foundational level of the Business Hierarchy of Needs (BHN) is the creation of cash, otherwise known as Sales.
Does that word bug you? If so, as a business owner, you have got to get over it. You can have the best product or service in the world, but until there is an exchange of value - your customers money for your products and/or services, you don't even have a business.
And there is a lot more to sales than just getting the credit card number. In fact I would consider that somewhere in the middle of the whole process, especially for a service based business. My observation and experience has shown me that most sales and marketing strategies focus on two primary things; attracting prospect and converting them to clients. Makes sense, I mean that is what sales and marketing does, right? Yes, but on the other side of that are two very important "commitments" that must be kept.
1) Your Commitment To Your Client
The Fix This Next assessment asks this critical question: Do you fully deliver on your commitments to your clients?
In other words, do you consistently deliver your brand promise, and is the client getting what they paid for? In a gym setting, your retention % and churn rate are good indicators on how you are doing.
2) Your Clients Commitment To You
Do your clients pay on time, every time? Do you have to chase people for money? Do you have systems in place for getting paid and follow up processes for overdue clients? This is all part of the sales process. A sale is not complete unless and until both parties "keep their end of the bargain".
Remember I said "the sale" is the middle of the process? The back end of the process is the two commitments, so now let's talk about the starting point of the sales process.
The very first question on the Sales level of the BHN is also the one I see answered "no" to most often. Here it is:
"Do you know what the company's sales performance must be to support your (the business owners) personal comfort?"
This is what Fix This Next calls "Lifestyle Congruence", and it's the number you want to know first.
I'm not pointing fingers here. If you had asked me that question when I started my business I would have had no idea, or how to figure it out.
But without that number, your sales goals (and mine) are arbitrary at best. Heck when I started my gym I thought if I could just get reach $10,000 in sales a month I would be living large, without even thinking about how much that put in my pocket. Reality caught up with me pretty fast. Bills are real.
So here's how the Fix This Next sales "funnel" flows...
Delivering on Commitments
Collecting on Commitments
Having these 5 core sales needs satisfied is absolutely necessary to create the cash flow every business needs to establish a solid foundation. In fact this blog post is part of that whole flow. We are looking to attract business owners who are ready to take the next step and looking for guidance to solve their biggest business challenge.
If that's you, and you aren't absolutely sure what your biggest challenge is, take the free Fix This Next evaluation here, and I'll follow up so we have an opportunity talk about how to solve it. Let's get fixing!
Are you confident that you are making the best decisions and working on the right things to move your business forward, especially during these turbulent times?
Face it. The "Coronavirus Crisis" is real. I don't use the word crisis lightly. Small business is suffering. Fitness businesses are suffering. Your business is very likely suffering to some extent. Some of my clients have seen revenues drop 50% or more. I don't care how stone cold you are, that can cause a crisis of confidence.
The reality is that for many businesses, COVID-19 revealed shaky foundations. For over a decade, we have seen a largely thriving economy, credit has been easy to get and is cheap, and consumers have had a lot of disposable income. Because of that, many of the basics of good business got ignored; keeping a low debt-load, running expenses lean, building an emergency savings fund. All things that would make a big difference now. It is my hope those businesses that survive learn those lessons for next time. Yes, there will be a next time.
It is not my intent to pile on. We can't change the past. But we can chart a better path forward. The question is not "what did we do?", but "what can we do now to create even better businesses as we recover from the present crisis?"
During the best of times the biggest challenge business owners face is not knowing what their biggest challenge is. That certainly has been true in my business. We are subject to the "tyranny of the urgent", running around trying to put out fires, while never getting a handle on what should be the priority. This is called "The Survival Trap".
Does this look familiar?
There is a crisis in your business. You have run into a cash crunch. Your bank account is getting low and you need to raise cash fast. The obvious thing you need is more sales, right? So you try a bunch of different things to generate cash, focusing all your efforts on sales to cover your bills - for now. But you can only run so many sales, or deal with so many crappy clients, or hire so many outside experts. What are you going to do when it happens again next month, or a couple months down the road? Are you SURE it was a sales problem to begin with?
You can be.
A couple of weeks ago we posted an article about the Business Hierarchy of Needs, which outlined the five different core functions found in every business, and every fitness business.
Sales - The Creation of Cash
Profit - The Creation of Stability
Order - The Creation of Efficiency
Impact - The Creation of Transformations
Legacy - The Creation of Permanence
The goal is to have each one of these core functions working together seamlessly, so you can achieve permanent, healthy growth and move toward your company's vision.
In our example above, the low bank account may not have been a sales problem at all, but a cash management problem (the Profit level) or an efficiency problem (the Order level).
So how do you know? How can you create the confidence that the action you are taking is actually solving the real problem, not just covering it with a band-aid?
That's where the "Fix This Next" Assessment comes in. This powerful tool identifies the Next Vital Need in your business, so you can immediately know where to focus to level your business up. THAT is how you create confidence during crisis. Once you have identified your vital need, you can immediately put into action a plan to resolve that need.
So here's my ask. Take the Fix This Next assessment by clicking the button below. It's a series of 25 questions that covers all the levels of the BHN, and it won't take you more than 10 minutes. Stop guessing what your fitness business needs to level up and take action now.
Download the PDF for the for the best guide I've seen yet to decipher the CARES Act for business owners. Thank you to Verne Harnish for sending it over, and to Greg Crabtree of Simple Numbers, for sharing this resource.
Produced by our partners at MikeMichalowicz.com, The Recession Response is an action plan for small businesses to implement now to preserve and manage cash flow. I appreciate Mike and the team for responding so quickly to the current conditions caused by the Coronavirus pandemic
Guest post by Mike Michalowicz, author Profit First, The Pumpkin Plan, and Clockwork
What is the next problem you must address or opportunity you must meet in order to grow your business? Do you know the answer? And, can you be sure that you have the right answer, the one that will truly move your business forward?
In the past, I repeatedly fell into the trap of fixing whatever problem was in front of me. Whether I was saving the day, or just trying to get my company to the next level, I rushed to the apparent problems. You know, the obvious stuff and the squeaky wheels. At any given time there are always a boatload of problems that need your attention. So, trusting my gut instincts, I would just pick the one that felt like the most urgent and focus on that. In this process of addressing the apparent issues, I disregarded the most impactful one. What resulted was a continuous run of problem solving, and yet my business remained stuck.
The biggest problem business owners have is that we don’t know what our biggest problem is. We can’t be sure that we are focusing on the area of our business that, when addressed, will yield the best results.
To solve that problem, I developed a model based on Abraham Maslow’s hierarchy of needs, which states that there are five categories of human need. From the most basic and essential needs for survival to the highest needs for happiness and fulfillment: physiological, safety, belongingness, esteem, and self-actualization. In order for us to attend to something higher on the list, we first need to make sure that our needs are met in the categories below it. So, for example, before you can focus on meeting your needs for love and belonging, you first need the basics: air to breathe, adequate hydration and nutrition, and a safe place to sleep. It’s pretty tough to deal with your self-actualization when you’re hangry and tired.
Looking at Maslow’s hierarchy of needs, I realized that it has a direct correlation to entrepreneurial progress: what drives your business, what keeps your company trapped, and how you fix the roadblocks along the way to achieve the highest levels of success as you, the entrepreneur, define it.
The key to climbing the hierarchy is simple: fully satisfy your business’s current level of needs, not by rushing to the apparent daily demands, not by addressing advanced needs before basic needs, and certainly not by trying to fix everything at once. To do this, we will use what I call the Business Hierarchy of Needs.
Sales: At this foundational level, the business must focus on the creation of cash. Just as humans can’t survive without oxygen, food, and water, if you don’t have sales, your company will not be able to survive for long. Heck, without sales, you won’t have a business at all.
The five core needs at the sales level are:
• Lifestyle congruence
• Prospect attraction,
• Client conversion,
• Delivering on commitments
• Collecting on commitments
Profit: Here, the company’s focus shifts to the creation of stability. Here, our businesses’ needs line up pretty closely with our human needs for health, financial stability, and a secure and safe environment. Massive revenue doesn’t mean much when you have no profit, no cash reserves, and are drowning in debt.
The five core needs at the profit level are:
• Debt eradication
• Margin health
• Transaction frequency
• Profitable leverage
• Cash reserves.
Order: At this level, the focus is on the creation of efficiency, and the needs are related to ensuring that everything runs like clockwork. With all of its organizational efficiency needs met, your business can run—and yes, even grow—no matter who is on your team. It can even grow without you, the entrepreneur.
The five core needs at the order level are:
• Minimized wasted effort
• Role alignment
• Outcome delegation
• Linchpin redundancy
• Mastery reputation.
Impact: The focus now is on the creation of transformation. Many businesses never properly address the needs at this level, because they either don’t know this level exists, or misunderstand what it’s all about. When we think of impact, we think of how our business impacts the world. However, the needs that must be addressed at this level are related to client transformation, and how your company aligns with your staff, vendors, and your community, not to the wider world.
The five core needs at the impact level are:
• Transformation orientation
• Mission motivation
• Dream alignment
• Feedback integrity
• Complementary network
Legacy: At this highest level, the focus is on the creation of permanence. Ensuring that your business and the impact it delivers will live on after you move on requires that specific needs are met. If you want your business to continue to thrive for generations to come, you’ll have to consider the big questions, such as your long-term vision for your company is, and how your business will adapt to changes in your industry, in consumer demand, and in the world.
Here are the five core needs at the legacy level:
• Community continuance
• Intentional leadership turn
• Heart-based promoters
• Quarterly dynamics
• Ongoing adaptation
To be clear, the Business Hierarchy of Needs levels does not represent stages in business growth. They are levels of needs. Your business will not climb the hierarchy in a linear fashion, but move up and down levels as it progresses. Like building and renovating structures, you don’t just go up. You go back down to the foundation, shore it up, so you can build higher. So, for example, while you may be dealing with a need in the SALES level, that does not mean your company is still in the SALES stage. You are simply strengthening the foundation.
The Business Hierarchy of Needs gets you out of guessing mode and into fast, impactful, deliberate action. It took me the better part of three years to perfect it, testing it out in my own business and with other entrepreneurs through multiple iterations. Once I figured out how to pinpoint what to focus on next, my businesses grew faster and healthier. Since creating the tool, I’ve stopped relying on my instinct alone and have started using this system to listen and respond to my company’s true needs.
Now, when you get stuck, all you have to do is start at the bottom of the pyramid and address the core needs you have not yet met. It’s back to basics, baby. Basic needs, that is. The tool never stops working. You can always return to it to pinpoint your biggest challenge, fix it next, and then pinpoint the next one after that as you build your beautiful business.
Learn more about the Fix This Next Eval or Fix This Next Book here: https://fixthisnext.com/