Small Business Profit Maximizer!

The Importance of Customer Lifetime Value For Your Small Business

As a business owner, you may have seen the term “customer lifetime value,” but not known what it meant. If your search for an answer brought you here, you’re in the right place! As it happens, customer lifetime value is perhaps the most important number that every business must know. Knowing this number not only changes your perspective on customers, but has a positive impact on how you interact with first-time customers.

What is Customer Lifetime Value?

Essentially, customer lifetime value is what a customer is worth to your business—not just in the money they spend, but across your relationship with them as a whole. For example, how reliable are they as customers? Even if they’re not big spenders, do you see them often? Do they tell their friends and relatives about your business and bring in new customers? Do they know people who can bring you more important business opportunities? The value of a customer can go far beyond what they spend in a day, and with that in mind, it’s critical to nurture relationships of value.

How Does This Look in a Practical Sense?

Business models can vary widely, so when it comes to calculating customer lifetime value, the formulas can get complicated very quickly. With that in mind, however, let’s use a basic example. Let’s say you’re the owner of a hardware store. One of your regular customers is a contractor who visits once a month and spends a minimum of $200 each visit. In those moments, he’s worth $200 to you, but over the course of a year, he’s worth $2,400! And if he’s been a long-time customer of yours, let’s say, for fifteen years, that means his customer lifetime value is $36,000!

My book, 90-Day Profit Reset: Gain Your Independence from Reduced Cash Flow, Evaporating Customers, and Shrinking Margins, contains a worksheet for helping you calculate customer lifetime value. If you want to get into the mathematical side of things, you can find the book here. It includes different options depending on your type of business, whether it be service, retail, or something else entirely. You can buy it in Kindle form or get a physical copy to take notes.

How do I Make the Most of Customer Lifetime Value?

It’s commonly known that keeping existing customers is considerably cheaper than acquiring new ones. Essentially, the money lies in building a relationship with existing customers in any way you can. For loyal customers, you should be dedicating more time to them, seeing what else you can offer them to get more out of your relationship with them.

It’s here that practices like upselling and cross-selling become critical. Normally, it’s hard to upsell and cross-sell new customers, but with existing customers with whom you’ve built trust, it’s considerably easier to get that extra revenue from going the extra mile.

Building a Relationship

One of the best bits of advice I can give you about upselling is to not sell. Even if you’re taking it easy, most customers will be turned off if they feel like you’re trying to squeeze more money out of them. Reaching that next step takes time, patience, and trust. You can build trust by offering certain perks to loyal customers. This can include discounts, free consultations, and most importantly of all, problem solving.

Get to know your customers a little bit—don’t just treat them like walking piles of money. Like everyone else, customers have problems that they want to solve, and if they’re coming to your business, they want to solve that problem. As an example, I’ll tell you a story that demonstrates not only how to do this effectively, but also how to stand out among your competition.

A client came to me looking to straighten out his finances. He told me that he was paying his CPA a certain amount for very specific services, but not much else, and as a result, he wasn’t seeing a great return on investment. I gave him a more realistic estimate of what he had to do, outlining a plan in detail to help this client save money. Almost immediately afterwards, he hired me to be his CPA.

The important factor here is that I wasn’t trying to sell this client on his services—rather, he was solving his problem. The sad thing is that the other CPA didn’t have to lose that client. The other CPA simply treated that client as a customer and nothing else. Had they put in the effort to solve that client’s problem instead of just taking orders, they would have developed a solid relationship, and that client’s customer lifetime value would have increased dramatically. Since I know this, I took the opportunity the moment I saw it. As a result, I not only helped someone out with a problem, but in doing so, I earned a new client, increased my income, and gave my reputation a boost. Most importantly, I did it by not trying to sell a product. I gave them a solution instead, and this is a strategy that has worked for him countless times.

In essence, customer lifetime value is massively important to your business, and hopefully this explanation gives you some perspective on how to make the most of it. Nurturing strong, loyal relationships could be exponentially more profitable than spending time and effort bringing in as many new customers as possible. It’s one thing to be good at selling, but it’s another thing entirely to keep your clients, and if you can do both, you’re virtually guaranteed to be successful.

Some of my best clients have been with me for over 30 years, and he knows it’s relationships like these that launch businesses to new heights. By solving problems for them instead of blindly selling, my best clients consider me almost “free” because I save them more money than it costs to hire me, and these relationships are mutually beneficial in a huge way.

Remember that your customers are worth more than how much they spend in one day. Spend time with them, work to solve their problems, and build trusting relationships with them to get the most out of your business. With this in mind, go out there, and make the most of customer lifetime value—you have the tools you need to succeed. As I always say: “Let’s make this our most profitable year ever!”

What Does Paid Sick Leave and Coronavirus Mean for Your Small Business?

Almost exactly a year ago, Congress passed the CARES Act to provide relief for Americans during the Coronavirus pandemic. This $2.2 Trillion stimulus package provided billions to state and local governments, a Paycheck Protection Program, direct payments to individuals, and an increase in unemployment benefits. In addition to the CARES Act, Congress also passed the FFCRA (Families First Coronavirus Response Act), which contained special provisions for paid sick leave in regards to the coronavirus. 

As a business owner, you are likely wondering what this means for you, your business, and your employees. In this guide, we’ll be breaking down what paid sick leave for the coronavirus means for you, how it works, and how this will affect you when tax season comes along.

What Qualifies an Employee for Paid Sick Leave? 

Obviously, this law doesn’t cover basic sick leave, and is geared specifically towards the coronavirus. In short, paid sick leave for coronavirus is applicable to employees who are unable to work due to federal, state, or local lockdowns. There are a number of rules that apply here, so we’ll go over a number of them right now.

• If an employee tests positive for coronavirus, they qualify for paid sick leave, even if they’re asymptomatic.
• If an employee is asymptomatic but is being advised by a health care professional to quarantine, then they qualify.
• If an employee is experiencing COVID-19 symptoms and is awaiting a diagnosis (a positive test, for example), then they qualify.
• If an employee has to care for someone under lockdown orders, like a child (especially if they’re young and the schools are closed) or an elderly person, then they qualify. The person being cared for must also be subject to quarantine or shelter-in-place orders.
• If an employee is experiencing substantially similar conditions to COVID-19 as specified by the Secretary of Health, then they qualify. However, please note that at the time of publication, no such conditions have been identified.

It’s strongly advisable to take all the necessary precautions you need, but the unfortunate reality is that sometimes, this won’t be enough. Be careful, take care of yourself and your employees, but be prepared for the worst.

How Much do I Have to Pay for Paid Sick Leave?

This number will vary, but there are specific guidelines in place in regards to how much you need to pay your employees when they take paid sick leave due to COVID-19.

Full-time employees (40 hours a week) will be covered for a two-week period of up to 80 hours. For example, if one of your employees makes $10 an hour, they will receive $800 of paid sick leave—two weeks’ worth of their time.

Part-time employees will also receive two weeks’ worth of pay. However, since their hours often vary and are not set, they will receive an amount based on the average number of hours they work over two given weeks. Much like the aforementioned full-time employee, let’s say one of your part-time employees makes $10 an hour. If the average number of hours they work over two weeks evens out to 29, then they will receive $290.

Different businesses have different needs and widely varying salaries. With this in mind, there are many employees who might make far more then $10 an hour. With this in mind, please note that the limit under the FFCRA (we’ll discuss that “limit” later) is $511 per day, up to $5,110 overall. 

Are There Exceptions? What if I Can’t Afford Paid Sick Leave?

As it happens, there are exceptions for paid sick leave for businesses under very specific circumstances. The most notable examples are:

• If you have work for your employees to do. This may cause some to scratch their heads, but the explanation is simpler than it may seem. Basically, if you shut down your business (or were forced to shut down by legal restrictions), you don’t have to pay sick leave, since there is no work for your employees to perform. However, if you’re still operating your business (hopefully with the necessary precautions in place), you need your employees to perform their tasks, they will therefore qualify if they need to take sick leave. This also applies if you’re open and your employees can work from home. In reality, this qualifier doesn’t make a difference for most businesses, but the information is still good to know going forward.
• If your business has fewer than 50 employees. The law applies to businesses with fewer than 500 employees, but for particularly small businesses with less than 50 employees, they are not required by law to pay for sick leave. This is likely a relief to read if you’re a small business owner.
• If you cannot pay sick leave without jeopardizing your business as a going concern. In particular, this exception applies when “such leave would cause employers’ expenses and financial obligations to exceed available business revenue and cause small employers to cease operations at a minimal capacity at the absence of the employer” being able to prove that the “employee requesting such leave will pose a substantial risk to the financial health of the business,” or if the employer can’t find a replacement employee to do the work. Essentially, if you literally can’t pay sick leave without your business going under, you’re off the hook. However, you MUST have documentation to prove this should the Department of Labor ask you for proof. 

Where Does This Money Come From? Do I Get it Back?

If you’re worried about having to pay too much sick leave for coronavirus, don’t be—when tax season comes by, you’ll be getting the money back! As an employer, when you fill out your 941 form, you’ll be getting a dollar-for-dollar credit on your payroll taxes. The aforementioned $5,110, for example, is all coming back to you, so don’t fret if you have to pay that much. Keep in mind that this is retroactive—the law was passed in March 2020, so if you paid sick leave for coronavirus before then, you can still apply for that tax credit.

Regardless, these tax laws can be complicated, so if you’re struggling to make sense of it, don’t hesitate to hire a professional CPA to help you along the way. In summary, if one of your employees has to take sick leave due to coronavirus, you have to pay for it (with a few exceptions). However, you will be getting that money back in the form of payroll tax credits up to $5,110. Be mindful, be safe, and like I always say: “Let’s make this our most profitable year ever!”

SBA changes PPP rules to Finally Help Sole Proprietors, independent contractors and the self employed. But Hurry--Time Running Out!

In Today’s video you’ll learn about the new PPP rules issued by the SBA can greatly help sole proprietors, independent contractors and self-employed.

Before the SBA changes many small business owners who didn’t have payroll had to calculate on net income now can use gross sales.

If you already filed under old rules- Tough luck. But if you haven’t can make a big difference.

Example – before one of my clients didn't qualify because their net income was zero after depreciation write-offs. Now we can use gross income of $150K and qualify for $31,250 in PPP loans.

Must use the new forms (2483-C for the first draw and 2483-SD-C for the second draw)

Warning- SBA has announced that they will look closely at loans of $150K or more to make sure you had a real need for the funds.

Forgiveness rules are the normal rules for sole proprietors that I covered in earlier videos.

All of this is very confusing so get help if you think this is something that will help you

 

 

Referrals the Right Way- Part 1

I’ve said it before, and I’ll say it again…

The most valuable asset a business has is its existing customers.

But what is a business’ second most valuable asset? Customers by referral! If you want your business to grow and your sales to increase, use your current perfect customers to bring in even more new perfect customers.

In other words, when we use our loyal customers to gain more loyal customers, we create a system that guarantees sales, and our business grows exponentially because of it. Sometimes, however, this is easier said than done.

In my decades of experience, I have become an expert in the art of referrals, and there is a right way and a wrong way to do this. Don’t waste your precious time and money on strategies that won’t help your business grow.

Let’s have a conversation and make sure we prioritize the right customers so this year can be our most profitable one yet!

 

 

Referrals the Right Way - Part 2

Had a glitch that shut down my live video. Here is the completion of how to get referrals the correct way

 

 

How the 8020 Rule Can Massively Increase Profits

Do you want to improve your profit and re-engage customers?

Obviously, the answer is yes, but how do we do this while juggling a cacophony of other tasks and obligations as busy entrepreneurs? The best way to grow profits is with the 80/20 rule. This rule states that 80% of your output comes from only 20% of your input. In other words, if we want to grow, we only need to focus on the top 20% of our customers and 80% of our profits will grow.

Especially during the times in our lives in which we have other obligations that take us away from focusing on our business, the 80/20 rule can help.

By focusing on your growing your top customers, you can double or triple your revenue without having to search for new prospects or develop new services.

Don’t get overwhelmed by trying to grow your profits. Just make sure your focus is in the right spot!

 

 

How Eliminating the "What If" dramatically increases sales

In this video I discuss how a strong guarantee will dramatically increase sales from both your current customers and prospects.

 

 

8 Tax Breaks in the New Stimulus Bill for 1040 filers

It’s been over six weeks since the second stimulus bill has passed, and most people have yet to understand the entire scope of these changes.

As we kick off the 2021 tax season, it’s important to understand the new tax breaks in the second round of stimulus.

Your taxes will look a little different this year, but if you do it right, this means more money in your pocket.

The stimulus bill is designed to offer assistance during these trying times. Let’s have a conversation about these tax breaks so we can take full advantage and get more money in our pockets.

 

 

Huge Changes to the Employee Credit Can Mean BIG Money from the IRS!

The new law passed in Late December of 2020 created the possibility to get both the PPP loan and the Employee Retention Credit at the same time. It also extended and expanded the credit into 2021.

This can equal a large credit which will reduce your payroll taxes equal to the dollar amount of the credit amount you qualify for. In this video I discuss the rules and how this can mean reducing your payroll taxes substantially. For one of my clients I estimate it can be up to $50,000.

 

 

How to Beat the COVID Economy & Build a Better & Smarter Business!

It’s been 312 days since our COVID lockdown began, and the economy has undeniably been affected in the long term.

While this health crisis has ravaged some communities and businesses, you don’t have to let the COVID economy beat you.

If you have been in this industry for as long as I have, you would know there is a way to build a better and smarter business in the COVID economy by prioritizing certain improvements and taking strategic action to increase sales.

Watch this video where I discuss how to beat the COVID economy in order to build a better and smarter business.

Don’t try to endure the COVID economy alone; let’s work together, and come out the other side stronger than ever!

 

 

New Tax Breaks in the Latest Stimulus Bill

In this video I cover the tax breaks passed due to COVID that will affect your 2020 & 2021 returns.

 

 

PPP Loans 2.0: What You Need to Know!

In this video we discuss the new PPP loans (tax free money) that are available to you, how to qualify and how to get the loan forgiveness.

 

 

Why You?

 

Why You?

Within the world of sales and marketing, this is the MOST important question you must answer! Out of all of the choices a person has, including doing nothing, you must communicate to your prospects that you are the best option and why that is the case.

In this video I discuss why this so important and why your answer to this question for your prospect must be so compelling that they can't go anywhere else to get the solution to their problem. 

 

 

Do I have to pay my employees sick pay due to COVID?

 

Back in March of 2020, the CARES Act was passed in an attempt to provide assistance to workers, families, and communities during such unstable times. 

While it has helped millions of Americans so far, it is also incredibly complicated to fully understand. 

For example, under this act, small businesses are required to pay for their employees’ sick leave. 

Sounds simple enough, but there is much more depth behind this requirement. 

If used properly, the CARES Act can truly help you, your employees, and your business. And while few can claim a full understanding of such a complicated policy, I can. 

Join me for an exclusive Facebook LIVE event right here in the Facebook group as I walk you through what, as a small business owner, you need to do for your employees, what the benefits of these requirements are, and how the tax credits function. 

It can be overwhelming to try to fully understand such a broad and complicated policy but allow me to help you understand everything you need to know so you can benefit from this act, not suffer from it. Join me!

 

Everything You Need to Know About Raising Your Prices

When I tell small business owners that they need to be raising their prices… they balk.

“I can’t do that!” they say. “Not in the middle of a pandemic! Not so close to the holidays!”

The excuses are endless. However, I can say with certainty that raising your prices is 100% what you should be doing.

It raises a lot of questions, though. Why? How much should I raise them by? How do I add value without adding costs?

 

 

Why You Need to Stop Discounting & Raise Your Prices Instead!

 

Every business owner has been faced with a customer carrying a competitor’s ad or invoice with a lower price.  Your immediate reaction is to match the price.

When you are trying to increase gross profit, the fastest route to putting more cash in your bank account, price matching is a profit-killing error.

I have included an Excel spreadsheet to help you determine how big of a mistake you would be making if you price matched.  You use it to determine how much your sales must increase just to achieve the same level of profit without the discount.  You do this by locating your profit margin across the top and your planned discount percentage down the side.

Allow me to illustrate.  Assume that I have a 40% profit margin (sales minus cost of goods sold) and I am going to discount my product by 10%.  The intersection of these two numbers shows that I must increase sales by 33% just to break even.  And this assumes that a 33% increase in sales of this product won’t result in any increases in operating expenses—a rather unlikely occurrence.

A better approach is to follow Dan Kennedy’s advice.  “See what your competitors are doing and do the opposite.”  Raise prices instead.

Every time I say this to my clients, I hear some variation of the following:  “I can’t do that!  I will lose my shirt!”  I too have been (and still sometimes am) guilty of this thinking.  Will you lose customers if you raise prices?  Of course you will lose customers, but will it hurt you?

The second table attached shows the amount that your sales would need to decline following a price increase before your gross profit is reduced below your current level.  At a 40% margin and a 10% increase in price, you could lose 20% of your sales before you experienced a drop in profit.  You could literally lose one out of every five customers and still be even!

Knowing this will still be a problem for you if are a business owner who thinks price is the only factor influencing a buyer’s purchases.  That type of business owner will clearly reject raising prices.  This means that they also reject the concept of value selling.  Their standard response is, “That may work for some businesses, but it sure won’t work for me!”

In my experience, there is no business that doesn’t have a way of commanding a premium price on its products or services.  They do this by marketing their products and services in such a way that the customer perceives an added value over the lower-cost items offered by the competition.  Of course, this is the catch—you must do the hard work of determining what this added value is and communicating it to your customers

If all of your marketing and advertising is based on price, you should be very afraid.  You only have a business until a competitor comes along who is willing to sell to your customer at a lower price.

The only way to get out of this pricing trap is to focus your marketing and advertising on other features and benefits.  Such as?  That will be different for every business, but some common ones are better quality, better service, longer warranties, a comprehensive warranty, more convenient location, 24-hour access, etc. You may already offer all or some of these.  But if you don’t focus your advertising and marketing on it, how will the prospects know?

Your job as a business owner (who by definition is a marketer) is to design and market your products and services with a high perceived value and deliver them with service that wows the customer.  Price is only important if all other things are equal.

Yes, there are customers who only care about price.  Let your competitors compete with Amazon, Walmart, Sam’s Club, Costco, and an ever-growing list of internet sites for those price-is-everything customers.  If you want to grow a profitable business, you must build your business on those customers who are willing and able to pay for value.

The key is to first create value and then educate your customers so that they are aware of this higher value they will receive from buying from you, rather than going with the low-cost alternative.

Cash is King! (and where to find it hiding in your business)

Your business can be profitable and still run out of cash. That is because the cash is hiding everywhere in your business but is not in your bank account. In this video I discuss where to find it and how to get it back into your account.

 

 

PPP Loan Changes You Need to Know About Before You Ask for Forgiveness

Though the pandemic continues on, the immediate urgency has died down, and many small business owners like you are now filing the required paperwork to have their PPP loans forgiven.

Unfortunately, the rules for and details of loans like these are always changing and updating, and more likely than not, there have been some changes since you first filed the PPP loan paperwork.

As a business owner, you aren’t in the trenches of tax law or staying up-to-date on all the little nuances of loans like these—which can make the process of applying for forgiveness a very overwhelming one.

I can help clear some of this up for you.

Join me for this important Facebook LIVE right here in the Facebook group as I walk you through some of the recent changes to these PPP loans as well as a few other items like the confusion around retirement benefits, how loan forgiveness will affect your tax return, and much more.

Ultimately, if there is anything you are unclear about, you need to sit down and have a discussion with your CPA. However, this live should help clear some items up for you so you can work on obtaining PPP loan forgiveness with confidence!

 

 

5 Reasons Your Small Business Will Fail and How to Avoid Them

These days, there’s more of a risk than ever that a small business will fail.

Between the pandemic impacting how businesses operate day-to-day, changes in the economy as we adjust to this new normal, and myriad other factors, it can seem like it’s impossible for a small business to get off the ground—or even stay afloat.

That’s not the truth. It IS possible for a small business to succeed, even during a year as intense and crazy as 2020 has been. So the question is: HOW does a small business succeed?

A good place to start is by understanding the main reasons why small businesses fail so that you can be aware of and avoid those pitfalls.

 

A study by CBInsights listed the top 20 reasons startups fail.  (Full study at https://www.cbinsights.com/blog/startup-failure-post-mortem)  This isn’t the first study about startup failure, but it is different from others in that it provided a much higher level of detail.

Though it focused on startups, I believe its lessons apply to every business that is not growing to the level the owner expects.  Here are the study’s top five reasons businesses fail:

1. No market need was listed by 42%. Almost half the failures were caused because their product didn’t solve a customer problem.  This is why we spend so much time in our Sales & Marketing Boot Camps pushing our clients to really discover their customers’ true need

2. Running out of cash was listed by 29%. A third of the businesses simply ran out of cash.  This is why the business owner must become an expert in raising cash, keeping cash, and budgeting.  This is also why the business owner must have good accounting records.

3. Not having the right team was listed by 23%. Too often a small business owner can’t grow a viable business independently and fails to bring in qualified help.  Sooner or later this kills the business.

4. Being outcompeted was listed by 19%. You are often told to ignore the competition and just put out good work.  But if they have a solution to the customer’s problem that is much easier to use, or they simply out-market you, they will become the leader in your niche and you will lose. 

5. Pricing/cost issues were listed by 18%. Many businesses have trouble determining what to charge and what pricing model to use.  They often build a product or service and say, “This is what I need to charge to make money.”  This approach ignores the customer.  What is the customer willing and able to pay to solve their problem?  Only after you discover this information can you determine if you have a profitable solution (product or service) to offer.

This brings me back to where I mentioned that businesses seem to be either doing very well or simply surviving.  If you aren’t doing as well as you think you should be, these five things may be a large part of the problem.  Read the full study with the comments and I guarantee you will find ideas and solutions that you can apply to your business.

Finding the Cash Hiding in Your Business

Increasing sales is important to any profit enhancement plan. But cost cutting cannot be left out. In this video I cover the 3 rules for successfully cutting costs.

 

Increasing sales is important to any profit enhancement plan.  But cost cutting cannot be left out.  If you are operating on a 10 percent net profit margin, a $1 cost reduction is equal to a $10 increase in sales.

In order to achieve lower costs, you should perform a cost-cutting audit annually.  First, identify your biggest costs and assign them to cost centers.  Then use those centers to allocate the remaining costs.  Once you categorize your costs and understand their relationship to your business, you can implement cost cutting.  All companies attempt to do cost cutting, but they often fail.

Successful cost cutting requires you to follow three simple but painful rules:

1. Make cost cutting a continuous activity. Most companies have cost-cutting drives at intervals of several years, and generally only during business downturns.  In between, only a token effort is made to run economically.  You can win big by having all of your managers work on cost cutting every day.  Require a written report on their progress on cost reduction every quarter.  This not only reduces problems in bad times, but can substantially increase your cash flow during the boom times.  This is a much more efficient way to cut costs.  Crash programs tend to result in process hang-ups and quality problems because the measures taken are not thought out and are implemented in a hurry.  Continuous cost cutting gives you the opportunity to carefully test results and avoid false economies.

2. Cut the major costs first. It seems obvious to start where the money is.  Unfortunately, I have sat through countless meetings where the cost cutting applied to as little as one percent of the total costs.  Be creative!  Look for ways to cut costs that don’t affect efficiency or reduce your product’s quality.

3. Cut costs by eliminating, not reducing, activities wherever you can. As you examine each cost and cost center, the first question you should ask is, “Can we get rid of this entirely?”  The answer of course will probably be “No!”  You can jar your people out of that rut by rephrasing your question like this:  “Okay, suppose we were forced to stop doing it.  What would we do instead?  Would it be cheaper?”  Don't even consider your options for reducing the cost of an activity until you have convincing evidence that it is impossible to eliminate it altogether.