Ask Brad Sugars

You can create a very simple system … and start with a baseline number by literally marking down how many people come in to buy a drink every day.

Now, a couple things you can do –

Figure out your best-selling drink – and raise its price at least 10%.

If you’ve gone through the 5 Ways, you know this will go straight to your bottom line – and most of your customers won’t notice – or even care.

Next, figure out what you can offer as a “test” to literally drive people through your door.

If you don’t serve food – what kind of offers can you “offer” your target market?

If you know you typically get 10 people on a Tuesday – can you invite 100 people to a special beer tasting event (or a “buy one get one” aka “BOGO”) on a Tuesday night?

Can you set up a big screen and have a special World Cup qualifying viewing party for your best customers – with special drinks and light appetizers?

Can you add appetizers on a Friday or weekend to see if you get more people through your door?

Can you add signage in and around the pub to let people know what’s going on?

It may sound too simple … but you can (unlike other businesses) count as a “lead” anyone who walks in your pub.

Now … if you have 20 people turning up at your special, closed door beer tasting event, you’ve doubled your Tuesday leads, and got a 20% conversion on your 100 invite “offer.”

How many beers they buy at the higher price point will give you an idea of your average value sale – a return coupon or offer or invite to another event will help drive repeat business.

Hope this helps your thought process –

All the best,
Brad Sugars

The problem doesn’t lie with your team; it lies in your training. How do you train you team? Do you give them enough time to study the scripts until they know them backwards and forward? Do you do regular team trainings? Do you teach them how to up-sell, down-sell and cross-sell?

You’ve got to give your team the tools in their toolbox to help them be successful, but more importantly, you have to make these tools vital and relevant to their success and be sure they know where to find them and how to use them.

This is why I believe very strongly in consistent team trainings. You should also have regular meetings with your team so both you and them can understand what is going on in the business and how best to take advantage of your opportunities.

And at the beginning of each quarter, take a half a day and do extensive team training. Find out what they were proudest of over the previous quarter and what they want to accomplish in the next and give them goals (Key Performance Indicators) that will help you figure out who is performing and who isn’t.

Begin with those steps and you should see improvement straight away and if you want to learn hundreds of strategies for team building and training, check out my book, Instant Team Building.

All the best,
Brad Sugars

The idea of austerity versus growth in tough times has been debated for generations. Business owners, like economists and politicians, have differing opinions.  Business owners on one side believe that in tough times they should continue to market and invest in their business while the other side believes you can’t spend what you don’t have and you need to cut expenditures in all areas to get through tough times.

Global economic theories aside, when it comes to your business the answer is simple, you have to always be looking for ways to grow.  In fact, companies that are able to grow in tough times often find themselves far ahead of the competition when the economic cycle moves from winter to summer.

For someone in a retail business like yourself, that doesn’t necessarily mean you need to build more locations, hire new team members or even raise your prices.

What it does mean is you have to be smart in your investments and build a structure that will allow you to generate more customers, while keeping your expenses and overhead in line with where they have been.

Think about it this way, if your fear is that many of your customers won’t have the money to spend with you, should you lower your prices, or find more customers that can afford your existing prices? Lowering your prices will only lower your profitability and move you closer to closing your doors, while finding more customers can take your business to another level despite the economic times.

So how can you add value to your customers’ experience with you? Why would they buy from you and why would they tell your friends about your business?

If you can answer these questions you’ll be able to bring in more customers, customers who already have a good opinion about your business because their friends have told them about you. This is a great way to save money on advertising and bring in quality customers who will buy from you time and again.

The first step is to figure out who your best, existing customers are and create referral programs that will keep them coming back, and bringing friends.

If you’re spending resources in advertising without knowing the return in profit you’re getting from those activities, your shooting in the dark and most likely wasting money.  This is one area where you can start to see immediate returns.  Start testing different marketing campaigns and measuring all your results right away.

You can’t improve what you don’t measure.  Start thinking of your marketing as an investment, not as an expense.

In addition to only doing advertising that has good measurable returns, profitability can be grown in a slow economy by systematizing your operations and becoming more efficient.  Figure out what works well … and what doesn’t, and you will be positioned well for the boom economy when it arrives.

All the best,
Brad Sugars

Many small business owners confuse cashflow with profitability, and you need to have a firm understanding of both so you don’t run into trouble in your business.

Your business can run quite nicely for a time without profit as long as you have positive cashflow. However, you can be profitable month after month but soon go out of business without good cashflow.

Cashflow quite literally is the flow of funds in and out of your business.  It can be positive or negative.  If you receive a lot of cash payments, checks and electronic payments from customers in a given month and pay out relatively little for rent, supplies, services, and salaries, you will have positive cash flow for the month.

Profitability is the number at the bottom of your Profit & Loss Statement.  It’s the primary number your tax accountant needs to see at the end of the year to figure your taxes.  Profitability definitely affects the cashflow in your business, but it doesn’t tell the whole story.  You can’t spend profits, only cash.

As you have realized in your business, fast growth is one of the number one situations where small businesses run out of “operating cash”.  You find yourself growing and billing more and more customers so you buy that extra furniture and office equipment, purchase those needed supplies and hire that extra employee to handle all the new business you’re doing.  Things are great until you realize that your bank balance is almost zero.

Cashflow must be managed and it requires a thorough understanding of the different accounting terms and tools such as cash basis verses accrual basis methods of accounting, receivables, inventory, depreciation, balance sheets, income statements, and cash flow statements to name a few.

A cashflow projection is a useful tool for forecasting if you will run into trouble in future months or years based upon certain decisions.

So what can be done now?

The first thing you need to do is arm yourself with knowledge.  There are a number of great financial books and articles including those on the ActionCOACH website that you should read immediately.

Change your cashflow situation now by receiving payments from your customers as fast as possible and paying your vendors as slowly as possible, without damaging your credit.  Take steps to change the terms with your customers so you get payment quicker or get payments up front.  Invoice immediately when you do work.  Get partial or full payments in advance for projects as well as installments if you’re a service provider.  Deposit checks daily, hold off on capital expenditures, rent instead of buying.  Get loan approval before you need it.

If the immediate steps you take don’t solve the problem, get help from an ActionCOACH Business Coach who will help you make additional changes.

All the best,
Brad Sugars

For some, social media comes easy and they are quick to “get it” and jump in. For others, it’s like a foreign language and something you tend to avoid.

No matter which category you’re in, the marketing benefits of social media can only be avoided at the peril of your own business.

Realize that learning social media skills is going to require a time commitment on your part.  Try to embrace it and have fun.

You will be more inclined to put in the time learning about social media once you understand the benefits it can offer your business.  For the sake of this post, I am going to limit my comments just to Facebook.

Currently (April, 2013), there are a little over 1 billion active users of Facebook and around 680 million of those are mobile users.  As a business owner with local customers, your aim is to connect with the Facebook users in your area.

Having a website, using e-mail and traditional mail marketing is more important than your Facebook page.  However, getting a Facebook page working for you probably comes next in order of marketing importance.

The implications of an effective Facebook page for a pizza restaurant or any small business are huge.  Your existing loyal customers will use your Facebook page to stay up to date on your promotions and announcements and share them with their friends.  This is what makes social media so exciting for a business, it’s a powerful referral system and free when used this way.

Start by creating your own Facebook profile.  After you have your own personal profile, you can setup a Facebook page for your business.  Your Facebook profile is more like two-way communication between you and your friends and can be very personal, while a Facebook page is very public and more like one-way communication from your business to anyone who “Likes” your page.  Your fans are able to comment on your page posts, and you can comment back.

Facebook Ads are paid advertisements that appear on the Facebook profiles of people with very specific demographics.  You pay for the ad when somebody clicks on the ad and is taken to the URL you specify.  You can create an ad for your “Tuesday Night 2 for 1 Pizza Deal” that targets just people in a specific ZIP code, age group, gender, with specific interests (like pizza, and your competitor’s pizza).  No other advertising medium allows such specific targeting.

One point to always remember is that people do business with those whom they KNOW, LIKE, and TRUST.  Social media is a powerful tool for getting customers to that stage of the relationship with you and your business.

Before you dive in and create your own Facebook page, start learning about Facebook from the experts.  Try Social Media Examiner and my friend Mari Smith for two places on the Internet with great resources.  Buy some books on Facebook and social media and you will soon be ready to create your Facebook page.

Don’t want to do it on your own?  Have somebody help you setup and run your Facebook page for you.

All the best,
Brad Sugars

It’s not uncommon for most startup businesses to take over a year to start running in the red.  It is always a good idea to do a cashflow projection before starting a business to have a guideline for becoming profitable.  Profitability is the difference between cashflow in and cashflow out.

If your costs are relatively fixed (cashflow out), then you have to work on cashflow in by getting more customers for your business fast.  Pick up a copy of my book Instant Cashflow for 282 marketing and sales strategies.

What is your ideal client base?  If your gym is typical, it’s young males under 35; maybe young females under 30.

Your referral and recruiter programs have not achieved the client base you need yet, so you probably need to additionally go after customers directly.

If you still have enough cash to do some direct marketing, you need to target your ideal clients and convince them to visit your gym.  Most cities have a local paper aimed at young adults.  An ad in this type of paper could be what you need to reach your target market.

Remember when writing an ad to focus on Target, Offer, and Copy.  Your Target market is most important, followed by the Offer in your ad, and lastly the actual Copy of the ad where you differentiate your business and provide information.

The Title for your ad might be something like: “Young Men and Women – Get in the Shape of Your Lives”.   Try writing a number of different titles that directly target your ideal customer.  Test and measure different ads to determine which one works best.

The Offer might be something like: “VISITORS GET 2 FREE 1-HOUR VISITS”.

The Copy needs to explain the details about your business, your location, contact info, why you’re the nicest gym around.   Remember, the Copy is the least important aspect of your ad, so focus on the Target and Offer.

Don’t forget a nice picture that describes the gym for your ideal client and your business name and logo.

Remember, as the owner of the business.  You need to be working ON the business more than you are working IN the business.  By this, I mean you can’t spend too much time training clients on their weight lifting routines and neglect the marketing of the business.  Your primary concern has to be marketing and cashflow.

Other ways to increase profitability are increasing the average dollar sale with your existing customers by selling them more products, and by increasing the number of transactions or frequency at which they buy from you.

All the best,
Brad Sugars

So many small business owners started their own business because they thought they would have freedom, only to find that they are slaves to their business.

I say “you need to be lazy to be truly successful in business.”  What? How can this be?  Well, if you go back to my definition of what a business is, you will understand.

My definition of a business is “a commercial, profitable enterprise that works without me.”  Does your small business run without you being there 60 hours or more a week?   Obviously not.  You’re what I call “self-employed”.  You have a job in the company where you are your own boss.  You may have employees doing much of the work, but the business still depends on you being there, holding it all together.  Your business is probably running you more than you’re running the business.

If you called in to your business tomorrow and said: “I’m taking the next 6 months off, keep everything running smoothly while I’m gone.”  Would your business exist when you got back?

If you answered no, you need to take your business to the next level to get out of the situation you’re in.  You need to work smarter, not harder.

Building a profitable business that works without its owner has been the goal of ActionCOACH since I started it.  The training I’ve developed and taught my Business Coaches enable them to help business owners like yourself.

Working ON the business means you will work on mastering four areas in your business, developing a niche, leveraging resources, building a team, and developing synergy that leads to results.

I have developed what I call the 6 Steps to Massive Results which are rungs on a ladder that you take your business through.  Each step is dependent on the other and will propel your business to a point where you won’t even have to be there to enjoy greater cashflow from your business.

Working with an ActionCOACH Business Coach is the fastest way to get freedom back in your life where you can spend more time with your family while making your business successful.

All the best,
Brad Sugars

Having control of the merchandise in your store is important for maximizing profit.  In fact, Merchandise is one of the 4 M’s of Profit.  There are a number of merchandising strategies you can use to improve your bottom line profit.

You have to know your numbers with respect to every item you stock in your store.  How long does a particular paint brush sit on the shelf before being sold?  What is the profit margin on that paint brush?  If it is a quick seller, can you save money by buying it in bulk from the manufacturer directly?

Once you know your numbers, you can begin to implement strategies to improve the overall profit of the business from a merchandising point of view.

This brings us to merchandising strategies.  In my book “Instant Profit”, I outline many merchandising strategies, but I am going to just mention a few here.

You are correct that products that are just sitting on the shelves of your store are costing you money.  Once you measure the turnover rate for all your products over a period of time, you will know exactly which products are slow movers.  Slow moving merchandise wastes money, ties up capital that can be used better elsewhere, has less margin over time, and forces you to discount it to move it.

The first merchandising strategy is to ONLY SELL FAST-MOVING STOCK.  If you can get rid of the stock that simply doesn’t move, you will free up room for stock that does move quickly.  Try dumping stock that doesn’t move or packaging it with high-margin items to add value.

Another strategy is to SELL MORE HIGH-MARGIN GOODS or services in your store to maximize overall profit.  Identify your high-margin merchandise and focus on them.  Place them prominently in your store, move them to the front and advertise them.

STOCK MORE HIGH-PRICED LINES is a strategy that will give you an easy profit boost.  You don’t have to have as high a margin or sell them as frequently to make good profit from higher priced products.  Products with exceptional quality and reputation will achieve this strategy.  As long as they are turning over at a reasonable rate, high priced merchandise will provide a boost to your bottom line.

There are many other merchandise related strategies that you will want to implement in your business to boost your bottom line profits.  Try one at a time and measure the difference each strategy makes in your business profits before moving on to another strategy.

Buy only what you need and cut the middleman out of the picture wherever possible when buying merchandise.

All the best,
Brad Sugars

Some people just don’t make good employees.  I was like that when I was young and you sound like you might fit that description also.

If you want to be your own boss, you need to learn the skills to run a business.  I always say: “you have to learn before you earn.” Too many people start businesses with a specific professional skill but no business skills. Learning about business is best done as an employee because you are being paid while you learn.  If you can move around in a company learning different areas of business that you have little experience in, that is very helpful.  The fact that you have been learning marketing skills is fantastic.  The more you learn, the more confidence you will have when you start your own business.

Another way to learn as much as you can about business is by becoming a voracious reader.  Jim Rohn told me when I was young if I read one book every week, I would be a success.  Look at my list of recommended books for a good start.

Another excellent source of business knowledge is my Profit Masters online program which contains about 10 years of business knowledge that can be learned in one year.

In addition to learning as much as you can now, you should be saving as much money as possible so you can fund your business later.  This is preferable to borrowing money. You have to think of your first business as training for your second business. You are going to make mistakes and that’s OK.

You can ease into a business that will teach you about systems and sales by joining an MLM organization while continuing to work in your job.  Or, consider purchasing a low cost franchise business to learn valuable business skills without having to figure out everything yourself.

Buying an existing business that is struggling under bad management is another excellent way to get into business without spending a lot of money. The business will already have customers and systems in place.  You can fix the bad marketing and other problems to dramatically multiply profits in a short amount of time.

I usually discourage first time business owners from doing a startup.  This is the most challenging and slowest way to grow a business because you have to make hundreds of decisions about how the business will be operated and start from nothing.

Good luck with your new business and have a great time becoming a business owner.

All the best,
Brad Sugars

Have you ever seen the movie Field Of Dreams?  There is a line in the movie where Kevin Costner’s character hears the words “if you build it, he will come”.  A lot of business owners mistakenly build websites thinking, “if I build it, my customers will come”.

This is definitely not the case.  Just building a great website with great content selling a great product will not insure success.  Traffic will just pass you by in most cases.

There are many factors that determine how much traffic you will get to your website.  Having good Search Engine Optimization (SEO) on your site is basic and crucial with the right keywords and descriptions.  You cannot rely solely on search engine traffic.  Read The Beginners Guide to SEO on the seomoz.org website.

Believe it or not, the actual appearance of your website is one of the least important factors in determining how much traffic comes to your website, although it may affect how long somebody stays on your site.

Links to other relevant sites and reciprocal links back to your website will go a long way to raise your rankings in the search engines.

And then there is advertising.  You may need to actually pay for customers to come to your website.  Google AdWords, Facebook Ads, banner ads on other websites are some of the marketing tactics to capture traffic.  My book Buying Customers addresses the concept of why buying customers makes sense for most businesses.

Try putting a video on YouTube that is exciting and informative with links to your website.

Target niche markets such as the UK, the USA and other areas where people are interested in coming to New Zealand.

Whenever possible, capture people’s information (name and e-mail) so you can start marketing to them through e-mail.  Somebody might visit your website, be interested, but leave your site and forget to come back.  If you don’t capture their info through a form, you can’t remind them to come back and buy from you later.

Create a blog site that discusses travel in New Zealand and have it link to your website.  Give away advice and information.  Provide value for free.  Start a Facebook page that provides event information and link it to your website.

You have to go after people wherever they can be found and give them every opportunity to visit your website.  You have to establish yourself as the expert in your field.

Test and measure all the different approaches you try, and find out which ones work best and how many visitors you attract and how many you actually sell to.

Take the best method and make it better, testing and measuring the different approaches.

Most of all, read up on the latest online marketing strategies because they are continually changing.  Don’t be afraid to try new things.

Have fun becoming an expert online marketer.

All the best,
Brad Sugars

Your situation is common for many business owners; your heart just isn’t in it anymore.

If this is your only business and you need the cash flow it is generating, it would be risky to sell it so you can purchase or start another business.  I recommend keeping one business at all times for the cash flow it generates while building additional businesses.

Try having your manager systematize the business further, so you don’t even have to deal with it.  An ActionCOACH can help you get your business to this point in short order.  Once your accounting business is working so you don’t have to; you’ll have a situation where you’re receiving monthly payments without ever having to be there.  This will free you up to run another business.

You can start another business as a start-up, or buy an existing business.  I usually recommend buying an existing business that is undervalued.  It is much quicker than a start-up.  Take a look at some of the business brokers in your area, or go online.  I describe how to buy, build and sell businesses in my Profit Masters program.  Once you have two profitable businesses with good cash flow, you can sell your accounting business for some real profit because it’s running itself under management.

In my Billionaire in Training Webinar, I talk about how there is much more money to be made owning businesses than working in the business.  Most of your real wealth will be acquired when you make a very smart purchase, build the business to a well run profitable enterprise, and then sell it at a high multiple.

You will need to learn how to do the due diligence and get some negotiation skills.  You need a set of strict rules that you adhere to when buying a business and keep your emotions out of the deal.

It is not uncommon to look at 20 to 30 businesses before you find one that is a great deal.  You may even have to do the due diligence on a few of them until you find the one you want to act on.  It has to be a deal you can brag about.

Look into Profit Masters where you will find the business education you will need to get you ready for this next step in your wealth creation.  Have fun building your next business!

All the best,
Brad Sugars

The first thing you have to ask yourself is whether you are working in the business, or working on the business.  If you and your business partner are doing all the work in the business yourselves, you have no room for growth.  You both have jobs and will only ever make as much money as there are hours in the week times your hourly rate.

It’s difficult for many business owners to let go and let others do the work while they work at managing and growing the business.  If this is your situation, change it by hiring some additional young photographers and start sending them out on photo shoots and teaching them how to work in the studio.  Start doing the owner’s work of growing the business, creating systems, developing strategies and plans for expansion.  It is far better to keep 40% of 10 people’s work than 100% of one person’s work.  That is one strategy for quadrupling your business profits.  You may need more customers to keep 10 employees busy, but maybe you just need to do more for the customers you have.

That brings us to another area where many service-based businesses can grow profits by increasing the Number of Transactions.  This is the number of times a customer buys from you in a year, and it’s a key factor in determining bottom line profit using my 5 Ways formula.  How many times do you sell a service to your average customer in a year?  Is it once, perhaps twice?  What would your business look like if you doubled that to 2 to 4 times per year?  It would double your profits.

Branching out into other areas of service and targeting your existing customer base for repeat business will provide a huge increase in sales revenue.  The Number of Transactions for a customer is the third factor in the 5 Ways formula that determines your business profit.  It costs 6 to 7 times more to acquire a new customer than to sell additional products or services to an existing customer.  In my book Instant Cashflow, I outline 50 strategies for increasing the Number of Transactions for your customers.

I am amazed at how many small business owners fail to communicate with their past customers about their full range of products and services.  It’s insane not to communicate with your past customers, if you want to grow your business.  Your past little league baseball photo customers can also become your family portrait customers, your senior picture clients, wedding clients, and event clients.  You have to communicate what services you offer to all your past customers and remind them to come to you for all their photography needs.  Start treating your customers like precious jewels that you have purchased at great cost and look for ways to maximize their Lifetime Value in your business.

Building a solid team is essential for any business.  My father taught me something at a time in my life when I was struggling to get good employees for one of my early businesses.  He said “You only ever get the staff you deserve.”

That took awhile to sink in, but now it makes complete sense.  If you want to attract excellent employees, you have to be excellent yourself.  Your business and your staff are a reflection of yourself and your own leadership and business skills. If you focus on turning yourself into a great person, a great businessman, and a great leader, you will attract great people who will want to work for you.  You won’t even have to go looking for them.  Jim Rohn was fond of saying “you have to work harder on yourself than you do on your job”.  This is especially true for business leaders.

You say you are looking for good sales people.  That will require great systems being put into place that reward your sales team with commissions and incentives.  As I mention in my book Instant Team Building, the first area of focus must be the business itself starting with your Vision, Mission and Culture.  These statements must be clearly communicated to all prospective and current staff members because they define what your business is and what you are aiming for.  You have to create a great sales environment for your staff to operate in.

Your sales people don’t operate in a vacuum.  They have to work well with each other and with the other employees in your business. You’ve heard it said, that one rotten apple spoils the whole batch.  Well, that can certainly be true in business too.  Test your staff and prospective hires with DISC and VAK personality tests to make sure they can work together in the roles they are applying for.

There are six keys to a winning team that I mention in another post on this blog site, and in Instant Team Building.  Get to know these 6 keys.  One of the 6 keys is called “Rules of the Game”.  That rule is going to be crucial for a sales team because it will affect how the sales staff interacts with clients, represents your company, and excels within the structure you have created.

Be sure you get good references for your prospective sales staff and check them out.  You want staff that have a great belief system and operate “above the line” with a “victor” mentality, not a “victim” mentality.  Invest in training your staff.  This will require expense and having your systems in place, but know that it is an investment that will pay off.

If you follow these guidelines and work at making yourself the best you can be, you will attract the right staff and develop the team you’ve been dreaming of.

All the best,
Brad Sugars

In my latest book, Buying Customers, I devote an entire chapter to The Principle of Lifetime Value.  You see, every customer has a lifetime value to your business.  Some will have a high value and generate tremendous profits over their lifetime, while others may generate very little profit for you.

It is in your best interest to increase the average lifetime value of your clients.  One way to do this is to focus on your best customers and “fire your bad customers”.

If you are familiar with the Pareto Principle or 80-20 rule, then you know that perhaps 80% of your profit comes from 20% of your customers.  I might also add that 80% of your headaches probably come from 20% of your customers!  Now, this exact ratio may not hold true, but you seem to be indicating that these numbers might be close to the truth.  In fact, it is hard to measure the true costs of dealing with problems that arise from a client’s repeated requests for changes to a project, or all the time and effort spent trying to collect from the late payers.

So why not just let them go?  If you can let the customers go who create nothing but misery for you without doing any damage to your business, by all means do it.  Then take that new found time and energy you have and focus it on your best customers, encouraging them to participate in a referral program for getting new customers, and developing better systems in your business that bring in the kind of customers you want.

It is a scary thing for most small business owners to deliberately let go of even the worst customer, but you and your team will be happier and your company more profitable if you do some pruning of your customer base.  But remember, it is crucial to get a firm grasp on the numbers in your business such as average dollar sale, number of transactions, number of change requests, hours spent trying to collect, etc. before you make these decisions.

Have fun firing your misery-inducing customers and increasing the lifetime value of your best customers.  Be sure to pick up a copy of Buying Customers on Amazon.

All the best,
Brad Sugars

This is a great question about the important topics of customer acquisition cost and lifetime value. Most of your business profits should be coming from repeat purchases from your customers and it sounds like you are not seeing this.

In my latest book “Buying Customers“, I discuss the difference between Allowable Acquisition Cost and Investment Acquisition Cost in great detail. An Allowable Acquisition Cost is a marketing expense resulting in the acquisition of a customer that is recouped in profit with the very first purchase made by that customer. For example, a list of leads purchased for $500 resulting in 5 new customers has an acquisition cost of $100 per customer. If the average customer purchases $225 in product with a profit of $115, the business is making $15 profit on each customer with the very first sale. A business can invest in this type of customer acquisition all day, every day, making money hand over fist with no limit as long as the business can handle the volume of new customers. If they come back and buy again, each additional purchase results in pure profit for the business. This type of acquisition cost is what most small business owners look for.

Large corporations like Coca Cola or Apple can afford to spend huge sums of money acquiring individual customers because they are investing in the long term return from lifetime loyal customers. If Coca Cola spends $1000 to acquire a single customer through months or years of advertising, they know they will make twice that amount back in profit in the next 10 years from that customer. Companies like this have deep cash reserves to invest in long term customer acquisition. This “Investment Acquisition Cost” is not for small business owners.

You find yourself somewhere in between these two extremes with your MLM. You’re in an “Investment Acquisition Cost” situation where you only break even after several months of customer purchases, and you’re concerned you’re losing customers after just one month because of a lack of perceived benefit from the product.

You have to determine two things. First, what is the current “Lifetime Value” on average of the customers you are buying from the company right now? This is determined by multiplying the “Average Dollar Sale” (what they purchase every month), and the “Number of Purchases Over a Lifetime”. Secondly, can you increase the “Lifetime Value” of your customers to a point where you will be making high profits? I don’t know if you can do much about the amount each customer purchases in a month, but if you can, focus on ways to increase the Average Dollar Sale. You know you have a problem losing customers after just one month because of unmet expectations about the product. If the majority of your customers are in this category, focus efforts there. If it is a small percentage, let them go and focus on increasing the Lifetime Value of your other customers who are staying with you for several months. Let’s say you are losing a large percentage of your customers after just one month. This has to be fixed or this business will fail.

Starting a low cost marketing effort aimed at addressing unrealistic customer expectations could keep them on the hook longer and increase the Lifetime Value to a point where you are making a solid profit. Glowing testimonials from longtime product users delivered to your new customers through e-mail campaigns, social media, newsletters or postal mailings could prove useful for resetting their expectations so they buy the product several months or a year before making a decision to stay or go. I devote an entire chapter to boosting lifetime value of customers in my new Buying Customers book. Test and measure different approaches to discover which methods work best. Divide your new customers up into groups and try different measurable approaches with each group measuring the effectiveness in boosting the Number of Purchases.

Because you are buying customers at a fixed cost through the company media program, you can only work on Lifetime Value to generate more profit from those customers. But maybe you can acquire customers on your own for significantly less money. That is a topic for another blog post.

Achieving high “Lifetime Value” from your customers through marketing will deliver the profit you need. Fortunately, the type of marketing is inexpensive compared to the TV advertising being done by the MLM company to acquire customers to sell to you.

If the product of your MLM and your marketing efforts to your existing customers are not capable of lifting the Lifetime Value of your customers to the level you require, then you need to find a better business. Any business based solely on buying new customers and hoping they stay long enough for you to get your investment back is not worth being in. I have an upcoming free 1-hour webinar entitled “Buying Customers” that all MLM owners should attend that addresses this issue just as I do in my book. Additionally, it may be time to look at acquiring your own customers for this business instead of buying them from the company.

All the best,
Brad Sugars