Are you ready to take your business to the next level? In this series, Jim Cathcart will teach you the powerful moves necessary to advance your business in your existing market and how to expand your brand into new markets.Sign Up to Watch
-Cathcart, how are you, my friend?
JIM CATHCART: I'm profitable.
-Ooh, I like it. Then you're the right person to talk to--
JIM CATHCART: That's true.
- --because we are talking about 15 powerful specific moves to help us grow our business. And the one we're tackling today is grow your profit per sale or account.
JIM CATHCART: Yeah. In other words, every time you make a sale, make more on it.
-OK, so you're going to teach us specifically how to do that or start thinking about that.
JIM CATHCART: Yeah.
-So I've got a notable quotable here. This is actually from your book basin. So this is what you said, "Provide more value to the customer at an even lower cost to your company. Customers are assets, invest in them constantly."
JIM CATHCART: Absolutely.
-So what do you mean by that? Kind of jump on in this topic right here and break all this down for us.
JIM CATHCART: There are only a few ways to actually increase your income. One is to get more customers, another one is to make more from each customer or to get the customer to do business with you more frequently or to find other products to sell to each customer. But there's a limited number of those possibilities available to you. So I'm saying look at each account or each sale, each product transaction, and ask, how could we increase our margin on that?
Could we buy our supplies in bulk and have a lower product cost going in, maybe make a little more each time we made a sale, same sale? Could we sell some accessories as part of a package, maybe change the price a little bit higher and make a little bit of extra margin that way? Could we reduce our cost of selling-- all the time and expense it takes for the people to do the things they do to get to the point of finally making a sale-- could we streamline that process and maybe systematize it somewhat and maybe put some of it online and lose some of the expense, maybe if nothing else reduce the number of trees we kill for printing out paper?
Lets go digital. Let's move things to different locations to reduce the cost of transportation to fulfill orders from time to time. Let's just pay one bulk fee to get a bunch of stuff over there to that location and serve that area from a local site. Could we-- and just start thinking that way.
-So asking that question, though, is what stimulates that thought process.
JIM CATHCART: Yeah. Most people say, well, you mean just get them to pay more. No, I don't mean get them to pay more. I mean give them more value at a lower cost to you and whether they pay more or not becomes insignificant because either way, you're making more. And if they're paying more, cool, but make sure you're solving a bigger problem for them or satisfying them even more deeply so that they feel like, yeah, heck yeah, it's worth that extra.
-So I want to be careful because I know this isn't what you're saying, but it seems tempting to hear what you're saying and almost make changes that take away value from your customer. If you're trying to increase your margin, do you know what I'm saying?
JIM CATHCART: Yeah.
-Is that a mindset you've seen?
JIM CATHCART: Well, that's slow suicide because if you do that, if you're taking value from them and not reducing the price accordingly, then what you're doing is something dishonest. Two effects from that-- one, you're going to get caught sooner or later. Someone's going to notice and they're going to lose respect for you, but more importantly, you're going to lose respect for you. When you do dishonest things you are the first to know it and you are the first to feel it, and it shows up in subtle ways in the other parts of your life. So skip the dishonesty, go straight for adding value.
-That's huge. OK, so that is not something we are talking about. When you're increasing your margins, do not try to take away value here from the customer, that's now what we're saying. But let me ask you this, I think we're going to roll out the truth cannon here because this might get painful. But tell us honestly, why is this move so different and not very commonly seen in business owners that you've worked with? Why is it so rare to see this idea, this mindset?
JIM CATHCART: Because most people still believe that selling is about getting. God, what an unhealthy way of looking at selling. It's not a greed thing, it's a way of serving people and making a profit from it. And people say, yeah, but selling is all about money. No, it's not. Money is the product of sales, it's not the purpose of sales.
JIM CATHCART: This is a big point. Money is the byproduct of sales, not the purpose of sales. What's the purpose of selling? Problem solving. It's to provide a value, solve a problem, fill a need, OK? That's the purpose of selling. Yeah, but what about profit? Well, if you don't make a profit, guess what-- you can only solve one or two people's problems and then you're toast because you've got no profit to work with.
Profit is a noble, wonderful, great thing and you're worthy of profit from the work that you do. So when you provide service to someone, provide value to them, you've earned your profit. It's perfectly fine to get that, all right? What we're talking about here is looking for ways to give the value but incur less cost or less expense or less time requirement or less effort or whatever to reduce on your end the difficulty of having the ability of providing value to them. And then keep the value as high or even higher, so that you're still making money, even making more with less effort.
CALEB: Wow, this is so-- you're getting me fired up. This is awesome. I love this. This is so helpful.
-So if I'm a Thriver watching right now, you have just lit a fire in me. I'm pumped. I'm excited. I'm going to do this. Right now, what action items do I take? Do I need to time-block something? Do I need to write it down? What do I do right now?
-You just need to start somewhere. In other words, find a product. Find a service. Find the last sale you made, last 10 that were made by your office, whatever, the last day even. Look at the recent business and then ask yourself, where was our expense, how much energy was required, how much of our actual focused thinking was required, and how can we change that mix and still provide all that value?
And then, you go to the other side of the equation. You step across the table and you say, OK, what else does he or she feel the need for that we could provide and increase the size of this sale so we're making even more profit by providing even more value? I'll give you an example of this.
CALEB: And can I clarify the action items real quick. I want to make sure we got this. Action item one, you're saying evaluate previous sales that you have.
-But specifically, look at the systems and the process of getting that product to them.
-CoGS, Cost of Goods Sold.
-That's what we're doing. That's the first action item. The second one is, while you're looking at those recent sales, now think, how can we add value? How can we up-serve this customer specifically?
-How can we help them even more?
-Those are two specific action items. I love it. And now, what is this ample example?
-Well, the ample example is from my own career as a speaker. Years ago, I lived here in Tulsa and that's where I started my speaking career and I was doing about 120 dates a year, 240 round trips.
-240 trips if you don't consider it round.
CALEB: Oh my gosh.
-And yeah, so I was gone a lot. But I was speaking all over the country, for that matter, all over the world. And I started thinking, I'm working awfully hard to earn this income. I wonder if I could reduce the amount of work. How can I do that? Well, first thing is notice more, right? I'm always going to start there. Notice more. In other words, pause, breathe, observe, be more intelligent about it.
CALEB: Which is another specific move we go into. If you haven't seen that episode, you need to see it.
-And you'll hear that from me again and again and again. So I started noticing more about my speaking. And I said, how many ways am I engaged with that speech in Omaha, Nebraska on November the fifth of whatever year? Hmm. Well, there's the talking with the client in the first place, gathering information on the client, having a meeting with their decision making team, sending the materials, da-da-da-- I would go all the way through.
Then, we book the engagement. I go to the engagement so there's air travel. There's reviewing my notes once again. There's getting on site and notifying the client that I'm there so that they don't lose sleep over this. That's adding more value. I'd go to the meeting room, check out the meeting room. I'd get my slides to my presentation prepared, da-da-da, and then afterwards, there's follow-through. Well, I figured it out and there were, for each engagement--
CALEB: Every time--
-120 a year at that time, 28 hours when the only thing my mind was focused on was that client.
-I was thinking, this is a one-hour speech. How big of a deal is that?
-How long are you speaking?
-And you're getting paid that much for an hour? Heck no. Heck no. I'm getting paid this much for an hour. I'm getting paid for 28 hours, 27 of which determine whether that one's worthwhile.
-That's so good. So what did you do then?
-Well, I started saying, is there a better way to do this to get that from 28 to 26 or to 12 or whatever? Can I systematize some of that? Can I be even less of a burden on the client so that there are fewer needs to contact them. I get more done in each contact and I did. So I was able to reduce that a little bit.
But still, there were many hours in each engagement where the only thing I needed to be thinking about was that person or that client or that event or that speech or those slides or that meeting room or that audience or that shipment of information afterwards to follow-through whatever it happened to be.
-People say, well, you don't bill for your travel time. Well, heck no, I don't bill for my travel time, because I'm traveling. But during travel time, I'm not watching movies. I'm not playing games on my computer or my cell phone. During travel time, I'm either resting or I'm rereading industry information from that particular client's field. I'm rereading client brochures or I'm going through their website one more time or I'm looking through all of our correspondence over the last several weeks and making sure there's not even a tiny little detail that I didn't remember.
And then, when I get on-site and I say, hey, Clay, I'm here, then he says, great. Now I can rest easy because I booked you and I was worried whether you were going to show up or I was going to have to get Caleb to step in as my stand-in speaker.
CALEB: Which would definitely be a downgrade. You don't want to have to do that. You don't want to just have to drop down a little.
-Be an enhancement, but none the less-- so anyway, I put him to rest. And then, I say, OK, now what am I going to do? I'm going to go see what the meeting room looks like because that's where I work tomorrow. And then, I'm going to go up to my room. I'm going to relax and read through my presentation one last time, go to sleep. Get up in the morning-- I'm going to have breakfast alone. I'm going to read through the details one more time. When I walk into that room, I'm loaded for bear.
CALEB: You're ready to go.
-I don't have to check any last-minute notes. I can look at the people, shake hands--
-This is so huge--
-Learn names, understand their products. So all of this is about up-serving but it's in looking at what I do in such a comprehensive way that I find efficiencies so that I reduce the cost of goods sold or services provided and still provide as much or more, which is the real goal, more value for the same price or even a higher price.
-I love that example because that gave me a specific idea of what you're talking about. This increased your profit per engagement because it didn't require as much of your time. But there's no doubt in the world that you added value to the customer because now, we're not doing 10 meetings. We're doing three beforehand. I love this. This is huge.
And I love that you gave us specific action items. Use that Note tab right there, write those down, and then translate those into actual action items that you schedule, because if we don't actually do these action items, I guess there's not much good there. As impressive as you are with your wisdom, you can only help that much. But thank you so much for your time.
-This has been incredible, Jim. Thank you.
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