Now that’s a Headline that got my Attention

Dan has found something that never ceases to amaze him – leaking profits.  And I’m similarly amazed at how many ways businesses can find to leak profits.

The Dan in this case is Dan Kennedy, who has been a marketing legend for many years.  He has been publishing marketing newsletters, hosting conferences, bootcamps, intensives, and mastermind/coaching groups on a variety of marketing and business growth topics, plus developing a wide range of marketing products.  I have a number of his books.

So an article Dan wrote  identifying six holes in business’s marketing buckets which leak profits that I came across recently grabbed my attention.  I couldn’t have put it better myself (lol).  Take it away Dan.

In my 40+ years in this business I’ve found something that never ceases to amaze me.

People are more than willing to throw lots of money at new, unproven tactics when instead they would be better served spending the relatively small amount of time it’d take to fix the holes in their process that are leaking profits.

Usually directly into their competitors’ wallets.

Below I’m going to reveal the six areas I’ve found where you can quickly seal the holes in the bucket – and often double or triple your profits.

Profit Maximizer #1: Lead Generation

Most people give little to no thought about an actual lead generation strategy. They may spend, at times a lot, on advertising, but that does not equate to a lead generation strategy.

To have an actual strategy you need three things…first, a clear idea of EXACTLY who you’re trying to attract. Second, a lead magnet that instantly attracts your ideal prospect. Third, a way to measure the effectiveness of any media that you’re using.

Simply getting clear on these three things will save you thousands of dollars while putting more of the right prospects in front of you.

Profit Maximizer #2: Lead Capture

I recently went to a new restaurant outside Cleveland. I heard about it from a friend and I enjoyed it quite a bit. My waitress actually asked if we’d been there before and, when I said “no,” went on to tell us about the restaurant in a well scripted presentation.

But at no time during my visit did they even attempt to capture my information so that they could continue to communicate with me and provide me with a reason to return.

They, like many businesses are operating on a strategy of “hope”, and that’s a BAD strategy. They HOPE that I liked it enough that I’ll return. Thing is, I did. But I like a lot of restaurants, and the chance of me returning to their restaurant next time I’m going out diminishes each and every day that I don’t have contact with them. And they have no way to contact me specifically because they didn’t even attempt to get my information.

Capturing people’s information is a MUST. You can do this online, in-person, or by phone. It’s easier than ever, yet most make NO attempt and it’s costing them tens or even hundreds of thousands.

Profit Maximizer #3: Non-Buyer Follow-Up

This is the BIGGEST area of opportunity for 99% of people I work with. They don’t have a systematized, automated strategy to follow up with prospects to turn them into customers, clients or patients.

Once you’ve captured their information, you now have the ability to put a campaign together that consistently moves people who don’t immediately purchase towards the sale. This is more important the higher the cost of your product or service.

You need to put a well thought out, online AND OFFLINE follow-up campaign into place for those who are initially interested but not yet ready to say “yes.” This could include: emails, texts, phone calls, postcards, newsletters and should probably include all of these items. If you don’t have this you’re most likely letting 30%-70% of your potential customers, clients and patients buy from your competitors.

Profit Maximizer #4: Conversion in Customers, Clients or Patients 

This is an area where you can add to your bottom line without adding a single dollar of expense to your business! Imagine each day you currently have 100 people coming to your website, contacting your office, coming into your store or however people reach out to you. Can you tell me out of those 100 people what percent will do business with you? If not, you should figure that out fast.

Then you need to put in strategies to increase that number. Many times it’s as simple as putting simple processes into place to help that person buy from you, or buy MORE from you. Imagine you’re a dentist and someone comes in for teeth cleaning. Do you have scripts in place to sell them other products or services? If not, you just let them dictate their dental care. Do you assume they have the best toothbrush, the best toothpaste? That they don’t need fluoride or want whitening? How much is it costing you in lost profits to make those assumptions? 

Profit Maximizer #5: Repeat Business

I read that Domino’s Pizza has an app that customers can use to order pizza online, but it also sends notifications to those subscribed, with special offers. This allows them to turn slow nights for their stores into busy nights.

EVERY business should have in place a campaign to consistently keep in touch with their past customers, clients and patients. This is another demonstration of how most businesses run on “hope.” They hope you’ll remember them when you need another widget and not have been attracted to a competitor in the meantime.

This too should be a multi-media campaign using online and offline pieces to consistently provide value and give them a reason to return.   

Profit Maximizer #6: Referrals 

Almost no business does this well. While many stumble across ‘referrals by chance,’ almost none generate a steady stream of ‘referrals by design.’ Yet if I asked most business owners who their best leads are they will almost inevitably say it’s those that were referred to them by a past customer, client or patient. 

What if you weekly, monthly or even just quarterly provided your past customers with the tools they needed to actually become an “unpaid sales army” with useful reports, emails or gifts AND specific instructions on exactly how to introduce others to your business? It’s such an easy strategy, but virtually no one gives this the smallest iota of thought or effort.

Plugging these six holes in a leaky profit bucket will much of the time provide all the growth a company can handle and many times MORE than they’re looking for. Be warned, this is not SIMPLE, but it’s not hard. It just takes committed time and effort on your part to layer in each of these six strategies.

Thanks Dan.

You will find the full range of Dan’s offerings at

Is Your Marketing Performing?

When clients approach me for coaching, so often, they are not getting the clients they need, the right clients.  Eight times out of ten this comes down to not knowing what is working, and how to develop compelling offers for their customers.

For more than 30 years I’ve been helping small business owners plug the profit leaks in their business and restoring their cash flows by assisting them understand how to use the 80-20 rule to determine their most profitable customers, and to determine the offer to bring them on board.

If you would like to discuss with me how you might do that, book a Strategy Consult here


© Copyright 2018 Adam Gordon, The Profits Leak Detective - Except for those bits by Dan Kennedy.

Understand Why Governments Buy….And How to Take advantage of That!

If you have attended one of my “Tendering Essentials” workshops, a Tendering Webinar I’ve given, or one of my TenderWins online courses, you will know that I seek to get you to take a different view of tenders.

There’s a good reason for that.   Many find completing government tenders a bureaucratic burden.  I’ve heard all the complaints over the years:
    It’s too complex,
•    It’s too bureaucratic,
•    Everything takes too long,
•    It’s biased,
•    Tender forms are repetitive,
•    Small businesses can’t win, big business has an unfair advantage,
•    The requirements aren’t always clear, it’s confusing
•    It’s too demanding, it’s too costly

On and on and on.

So what is the Underlying Problem?

The underlying problem is usually the requirement for COMPLIANCE.  That is where the complexity, detail and time comes in.  Compliance with the Request for Tender (RFT) specifications, compliance with the Conditions of Tender, compliance with the Conditions of Contract

Governments can be rigorous in requiring compliance with their (ever increasing) policies with which you must comply – a definite pain in the posterior.

There seems to be an almost instinctive, sub-conscious reaction to this drudgery – how to avoid it? People tend to hurry through their Response with as little thought as possible.   They seek to MINIMISE the time, content and effort required.   Just get it done and out of the road, so you can get on with doing what you do!

The result is a boring document almost indistinguishable from the competition.  Another match in a matchbox.

The Assessors are scarcely likely to sit up and take notice of a response that is the antithesis of “engaging and compelling”.

And that is why I teach that in responding, you need to take an alternative view.  Think of the Assessors & all those submissions in front of them – all boring!  Your challenge is to capture their attention, hold it, & then convince them that your offering is the only logical choice.

Compliance merely gets you through the starting gate.  To win the job you have to be the best on the day.  The challenge is to draft a persuasive tender or proposal, not just a compliant one.

Is there an Alternative Way of Looking at This?

But what if you looked at that tender response in another way, not as a bureaucratic compliance burden, but a Sales Tool to be used for your advantage?  If you were making a sales pitch to a prospective customer, you would be going all out, with all the evidence, demonstrated capability and capacity, and proof you could do the job, that you were the only logical choice.

If you were pitching for a sale, I’m sure you would make every effort to present a solid case that removes all doubts the buyer may have, eliminates the risk in their minds, leaves the prospect with one clear choice…. you!

I have found, dealing with countless clients over the years, that changing the viewpoint of the tenderer completely changes the way they approach. their response

But there is an additional twist to this approach, one that will further change the way you view your approach to drafting a persuasive and compelling response.

To do that, you first need to understand why governments call tenders in the first place.  Of course, it is not just governments; businesses of all sizes request proposals or quotations, but I’ll refer to government throughout this posting, because they are the most ridged and complex for reasons I’ll address shortly.

But the principles apply to Requests for Proposals (RFP) and requests for Quotation (RFQ) from a broad range of potential customers, and what you learn can be profitably applied to these.

An RFT is usually an open invitation for suppliers to respond to a defined need as opposed to a request being sent to selected potential suppliers.  An RFP, which, since public money is not involved, typically has a less rigid structure. 

Governments and other potential clients call for tenders or quotations to meet a need, to solve a problem.  The need or problem may be:
•    Immediate – an unexpected event, often a tragedy or weather event
•    long term – such as infrastructure
•    precautionary - the result of a Gap Analysis – future obligations vs current capability

“No business buys a solution for a problem they don’t have.”  Seth Godin

The procurement process may be required and determined in detail by law to ensure that competition for the use of public funds is open, fair and free, i.e. impartial.

Just to avoid rejection in the first cut, a tender must be compliant and answer every single requirement.  To go on to win, it must also be competitive and persuasive

It must show, clearly and persuasively, your difference, why you rather than the competition should get the contract.  To win, you must submit a tender which is the best on the day.

You will have an advantage if you address their problem right up front, rather than talk about how good you are, which so many people do.  Assessors always feel more comfortable with respondents who recognize the buyer’s problem and what they are seeking to achieve.

You will score lots of points by showing you understand their objectives, and demonstrate your experience in handling projects of a similar scope, value and size.

And this is where that additional twist comes in

You’re solving, no selling.  Be much more explicit in your response, and show just HOW you will solve their problem, and back that up with Proof that you will – testimonials that support your solution.

Craft a Value Proposition that clearly describes how you can solve the client’s problem in the most competitive and efficient way.

The most compelling value propositions are those that address the high-priority concerns of the agency, and solve htheir problem.

Clear & concise, promise quantifiable outcomes – i.e. they solve the problem - clearly distinguish the value of your product or service, and provide a reason or incentive for acting right away.

Develop a well-rounded process to enable you submit compelling, persuasive tenders that demonstrate you will solve their problem.  You will win more tenders, and to do so without the time pressures you currently are subject to, and remove the stress from submitting fully compliant tenders on time.

Does your Value Proposition Solve the Problem?

There’s nothing like an outside view of your Value Proposition?

Very often when we read something we’ve written, we read what we expect to see.  And miss the mistakes, or lack of logic, or lack of persuasiveness.  
If you would like to discuss how this might help you, This email address is being protected from spambots. You need JavaScript enabled to view it..  There’s no cost for a consultation.  It is my gift to you.

Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

Is Your Offer Compelling?

As the old saying goesbusiness is what, if you don’t have, you go out of!”  As Michael Masterson said in “Ready, Fire, Aim”, your primary concern has to be making sales.

Without sales, you don’t have a business.  But it starts with your offer which in turn leads to a sale. 

An Offer is a way of communicating the value of your product or service to a potential customer.  A good offer is one that focuses on what people want, and NOT on what people need.  If you wish to create a good sign-up offer, produce something people desire.  To make a profit, you must satisfy your customers. 

There are two related issues here:

•    Understanding what drives their desire

•    The outcome – the results the customer will gain if they accept your offer.

Driving the Desire

Their desire is driven by more than just features and benefits.  Sure, the benefits are what the features will do for the customer, but you must dig deeper. 

But there is more to benefits than straight forward ‘cause’ and ‘effect’.  Robert Imbriale (Motivational Marketing) suggests that there are in fact at least two levels of benefits.  Direct benefits are what people usually talk about.  You go on a diet, and if you maintain some discipline, you lose weight.  Cause and effect.

Let’s take this a step further.  You need to drill down to the key desire that will have the greatest emotional impact on the buyer - the indirect benefits.  It comes down to emotional factors, how they will feel having used your product or service.

Losing weight is the direct benefit, but what is the subsequent effect of having done so?  Now that is where things get interesting, because the ‘indirect benefits’ can take a number of different paths.  You may:

•    just feel good about yourself again, and that’s not a bad situation to be in;

•    have more energy, more get up and go;

•    take up a recreation again;

•    get work done more promptly and as a result, be able to spend more time with your family;

•    be more attractive to your partner;

and so on. 

Did you notice that all these indirect benefits are about how you feel, rather than something strictly measurable like the weight you have lost?  Because they are about how you feel, you tend to judge them in emotional terms. 

So many advertisements today endeavour to tap our emotions.  They ask us to put ourselves in the situation being promoted.  And they often show us with pictures – ‘before’ and ‘after’ = the transformation.  Very clever, because most people make decisions for emotional reasons, although they justify them in more logical terms (I’ve lost 5 kilos!).

You might set a target of losing 5 kilos, but underneath that there are “feelings” such as those above.  It will be those feelings (emotions) that are most likely to lead your prospect to take up your offer.

The benefit part of the value equation is not simple, but you need to understand it to ‘balance the equation’ when making an offer to your prospective customers.

So we come to the Transformation - the Outcome

For most people, the top reason that someone will chose to buy a product or service is that it will do what they want it to do.

It’s the Transformation - the before and after evolution that your customer will go through after using your product or service.

Every offer boils down to a transformation. Regardless of what you’re selling, it starts with a before picture, which is less than ideal in some way.  Then your offer intervenes, and that takes people to the after picture…

The transformation is the core of your Offer.  Your prospect probably won’t tell you why they want to lose 5 kilos.  That is why you have to dig down.

Stop selling your product and start selling your outcome.  It’s not earth shattering, but it is easy to forget. We get so wrapped up in the great stuff we have to offer, we forget it’s really all about the prospect and what they want. 

So be very clear about the outcome you’re trying to create for your prospect.   Try rewording your offering in outcome terms, not product or service terms.  Make it compelling.

You need to get inside the mind of your prospect, and understand their discontent, and to be able to show you understand it.

Now obviously, you can’t do this for each individual out there.  That is why market segments are important; niches with similar problems and desires to change.  And the niche has to be big enough for you to prosper – see my blog post “Does your marketing tail stretch to the sea?

Let’s now look at Value

Value arises because the direct and indirect benefits your product offers solves a problem for your customer for a price they are willing to pay to gain those benefits.

Too high a price, then the benefits will not be seen to offer value, and the customer won’t buy, or at least, they won’t buy from you.  Instead they may well go to a competitor who offers a superior value as perceived by the customer.

The greater the benefits in terms of the problem they solve for the customer, the more the customer will be willing to pay to obtain those benefits.

Too low a price will offer increased value to the customer, but at the expense of your profits.

The difficulty in getting the balance right is that very often the assessment the customer makes is likely to be carried out in their mind – at the emotional level.  It is a perceived value, and each customer will form their own perceptions, but to be compelling you must reach down to that emotional driver.

Is Your Marketing Performing?

When clients approach me for coaching, so often, they are not getting the clients they need, the right clients.  Eight times out of ten this comes down to not knowing what is working, and how to develop compelling offers for their customers.

For more than 30 years I’ve been helping small business owners plug the profit leaks in their business and restoring their cash flows by assisting them understand how to use the 80-20 rule to determine their most profitable customers, and to determine the offer to bring them on board.

If you would like to discuss with me how you might do that, book a Strategy Consult here. 

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

The Dangers of Building Value on Price alone

You will know people buy based on perceived value.  It’s all part of the Value Equation:  Value = Benefits – Cost.  Whether it’s done formally, or more likely as an informal, subconscious mental decision.  When someone is making a purchase decision, they make a value decision.  It doesn’t matter whether the “buy” under consideration is a consumer purchase, or a business purchase, the ValueEquation will come into play – “will I get value for the money I spend?”.

It’s about the “Transformation” -  the before and after evolution that your customer will go through after using your product or service.  This is the core of your offer, the change it will make for them.  At its core, every offer boils down to a transformation. That’s where the real value lies.

If there was one thing that really annoyed me in all my years consulting it was winning a job, whether it was a straight client quotation, or a government tender, it was winning the job because I had the lowest price, as if price was the main differentiator that set me apart from my competitors.

Do you understand what constitutes “value” in each of your market segments?

Do you have a clear idea about what makes up your customer’s value equations?  Value is rarely only price, it is about what your product/service will do for them (the benefits); their value equation. 

Do you have a value proposition for each of your key market segments – a compelling statement that clearly identifies why customers should ONLY buy from you, and not your competitors; a clear statement of the tangible results a customer gets from using your products or services?  If you can’t clearly communicate this, of course you will struggle.

Some years ago I blogged on “What is happening with your customers?”  Here are some points:

“Whether it is three years of depressed economic activity kicked off by the Global Financial Crisis (GFC), the on-going uncertainty about Europe’s ability to pull itself out of their quagmire, or doubts about the US economy reviving, people seem uncertain about the future.

A recent newspaper report suggested that Australian retailers have been forced to extend their summer clearance sales, as shoppers have left them with piles of unsold stock.

And people are responding to uncertainty with thrift, both on a personal and a business level. Australia's savings rate is at a two-decade high, due to consumers remaining fearful over the future of the global economy.”

Price became key driver in the Value Equation with fear and thrift driving people’s decisions.  Retailers responded accordingly, both in Australia, and overseas.  Neither businesses nor consumers could afford to be indulgent. 

A number of reports suggested customer behaviour was changing, and that this was not a temporary change, but more likely a permanent change.  

To maintain healthy sales, businesses adopted price-driven marketing strategies. 

So in Australia we had what were dubbed the “Supermarket Wars”, with staples like milk and bread reduced to ridiculously low levels, led by Coles.  Woolworths retaliated.  The slogans were “Down, Down!” and “Cheap, Cheap”.  The Supermarket Wars lasted seven years.

The Penalty - retailers suffered losses in terms of margins, consumer loyalty and an inability to pull out of the downward cycle. Research shows that if price becomes the main selling point, customer loyalty decreases.  Operational costs don’t go down, so if prices keep coming down, businesses run out of margin.  Price conscious consumers and thin grocery margins are a problem.

But there has been a change!  It was intriguing to read recently that the two major retailers in Australia were moving away from price as their main differentiator.  And just as intriguing to read the reasoning was based on similar experience elsewhere.  The ultimate cost of price wars on retailers is currently being played out in the UK, a retail market which shares many commonalities with Australia’s.

A Dutch study examined the market impact when the leading Dutch grocery chain Albert Heijn slashed its prices in response to Aldi and Lidl, finding that there was an 8.2% reduction in food prices. This cost Dutch supermarkets €900 million in one year alone and more than 30,000 employees lost their jobs.

As a result of the losses, Woolworths pulled out of the “War” two years ago, and has reaped a good increase in earnings from their supermarket business.   Coles has now blinked as well, having seen a continuing drop in earnings. 

They are changing the Value Equation

If Price can’t be used to create value, then the benefits have to be upped.

Coles and Woollies have shifted their focus to service quality, social programs and connecting with the community.

By moving away from price and focusing on a story telling strategy, both supermarkets can engage consumers with a process called “internalisation”. This is where people accept the endorser’s position on an issue as their own.

While food prices won’t necessarily go up any time soon, consumers shouldn’t expect to see any further significant price drops. Instead, Coles and Woolworths will draw attention to other important attributes.  They will build on the benefits.

Let’s talk about You!

Building value on price alone is, to me, nothing but a profit leak.  Once you start focusing on Price as your discriminator to build value, the only way is down - at the expense of your margins.

As Rashid Kotwal said, “many businesses operate on two assumptions that are often never tested and end up costing them dearly.

The first is assuming their clients know and fully understand the value they get for their money. The second is assuming what they themselves believe is valuable to their clients is actually the case.”

What you think you're doing for your clients and what they truly value can be poles apart.  And if that's the case you spend more and more effort and money promoting aspects which don't advance sales, rather than spending your effort in areas which will.

The only way to differentiate yourself is to explain the value you provide.  Explain in great detail how you get your results and what they mean in real terms for your clients.

Don't assume your customers know all this.  They don't.  What's obvious to you because you do it day in and day out is not obvious to them.  And yes, it is about blowing your own trumpet.

You want to make more sales so that your business can grow and stay sustainable...
...but you also know that you don’t want to resort to cheap attention-seeking or sleazy sales tactics with low margins to get you there.

The value has to be in your Offer.  The Benefits the Offer extols must be more than superficial benefits; they must be deeper than that, benefits that meet an emotional need for the buyer.  How it will transform them.

Can you add additional benefits? More clearly state the existing benefits? Create more value for the prospect?  When you make your offer irresistible, the sales will follow.

Simply having a great product with awesome features and desirable benefits isn’t enough. You need a great offer - one that walks your customer through the logical *and* psychological journey from "I don't really think I need this" to "This is exactly what I need! Can I buy it from you right NOW?"

What are the additional factors what will allow you to charge a price commensurate with that Value Equation?

When you have the right offer, that builds Perceived Value based on the real benefits you offer, here's what happens:

  • People are excited to talk to you about it
  • You don't need to lean on persuasion and pressure tactics
  • You raise your sales conversion rate (which means more revenue, even with a small audience)
  • Sales get much easier to make, and your customers are happier than ever!

All because you crafted the right value offer, one that speaks directly to your market without sounding fake, pushy, or salesy.

If you struggle to communicate the value of what you offer, it's often because you haven't identified the key transformation your target market is seeking.

Could your Value Equation be Improved?

There’s nothing like an outside view of your Value Equation?

Very often when we read something we’ve written, we read what we expect to see.  And miss the mistakes, or lack of logic, or lack of persuasiveness.  

If you would like to discuss how this might help you, This email address is being protected from spambots. You need JavaScript enabled to view it..  There’s no cost for a consultation.  It is my gift to you.

Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

And there’s one big disadvantage of emails

In a Not-for-Profit Committee I chair we have been going through a dilemma about the best way to make sales.  Now I say sales deliberately, even though we are a Not-for-Profits (NFP) because to operate, like many NFPs, we need sponsors.  And getting sponsors means making a sale.  Making a sale is not so different from the dilemma we all face in business; making a sale requires persuading the prospect that there are genuine benefits to them, benefits which outweigh the cost.

In effect, we have to find their “Hot Buttons” and use them to help make a decision – to make a “buy” decision. 

But how do you get the leads in the first place? 

You need leads to talk to before you can find the hot button.  That’s the challenge when you are marketing for a NFP as well as a business.

There are some tools you will use in your business that apply equally here, and there are some tools you won’t.

But in the end, you have to make the sale, and that is what I want to discuss.  Recently I came across some interesting research you might find useful.  It applies just as much to most businesses as it does to NFPs.

First, let’s look at the tools you may use to generate leads for your business.  They include:

  • Emails - and I’m a fan of email marketing.  But first build your list!
  • Social media such a Facebook, Twitter, Instagram
  • SEO etc on your website
  • Online funnels – offer something of value at a low price, then upsell to higher priced products
  • Networking (if your market is local)
  • Speaking at events
  • Direct mail – research to identify your targets, then write them a letter
  • Cold calling – which may require a telephone call to set up a meeting

The one we all hate the most is the last, cold calling.  Cold calling may require opening the door to make yourself known.  It may require making that telephone call.  It also requires an understanding of the urgency, consistency, follow up and repetitiveness of sales.  In my time with a farm machinery manufacturer, our sales team were adamant that success was dependent on the number of farm gates you opened.

Of course, you also had to have a clear understanding of the benefits of your product, and being able to articulate them, a sales conversation, but sales as they saw it, was a numbers game.

The first tool on this list will always be important.  You need to communicate regularly with your clients and prospective clients, and keep your brand front-of-mind with them.  There’s a real skill in drafting emails that sell, and in particular in crafting Subject Lines that will get your email opened.

Now I know you’ll worry that you will lose your list if you send “too many” emails.  Don’t – I addressed this fear in “How many emails are too many”. 

Research tells us that email marketing is still the number one way for businesses to communicate directly with customers.

But there’s one big disadvantage of emails; even if they get opened it is too easy for your prospect to defer consideration, to put it off, to procrastinate – “I’ll look at it tomorrow”.  But of course, as the old song said, “let’s forget about tomorrow, for tomorrow never comes”.

That’s why I found some research carried out in the US comparing the effectiveness of emails versus face-to-face requests to get people to donate to a cause.  Getting donations is also a sales process. 

Here are some of the findings:

  • Despite the reach of email, asking in person is the significantly more effective approach; you need to ask six people in person to equal the power of a 200-recipient email blast. Still, most people tend to think the email ask will be more effective.
  • Face-to-face requests were 34 times more effective than emailed ones.
  • People tend to overestimate the power of their persuasiveness via text-based communication, and underestimate the power of their persuasiveness via face-to-face communication.
  • In the studies, participants were highly attuned to their own trustworthiness and the legitimacy of the action they were asking others to take when they sent their emails. Anchored on this information, they failed to anticipate what the recipients of their emails were likely to see: an untrustworthy email asking them to click on a suspicious link.
  • The nonverbal cues requesters conveyed during a face-to-face interaction made all the difference in how people viewed the legitimacy of their requests, but requesters were oblivious to this fact.

From a business perspective, what can you learn from this? 

You are much more likely to get a positive result if you get in front of your prospect when asking for the sale.  For those of you who have been through a tendering workshop or webinar of mine will know I stress the importance of getting in front of the buyer calling the tender.  Nice to have this confirmed.

Having a planned “sales conversation” helps even more.  Some people see “selling” as being pushy, but without sales you don’t have a business. 

Salesmanship is a skill, a skill which can be developed.  It is not about pressure on the prospect.  It is about educating the customer. Without sales, you don’t have a business.

Here’s a link to the research:

Could your Sales Response be Improved?

There’s nothing like an outside view, a second opinion of your response to a Request for Quotation or Request for Tender.  Have you identified their Hot Buttons, and responded to them effectively?

Very often when we read something we’ve written, we read what we expect to see.  And miss the mistakes, or lack of logic, or lack of persuasiveness.  

I have an upcoming online course, TenderWins, a 4-week intensive course designed to help you win more tenders, without the stress and time issues that currently hold you back!

If you would like to discuss how this might help you,This email address is being protected from spambots. You need JavaScript enabled to view it..  There’s no cost for a consultation.  It is my gift to you.

Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

And How Do You Use Them to make a Sale?

You often hear the phrase, “find and press their Hot Buttons”, and I certainly use it when I help people write tenders, or in my TenderWins workshops.

Do a little research online and you will find it being used in all sorts of situations.  The Miriam-Webster dictionary defines them as “an emotional and usually controversial issue or concern that triggers immediate intense reaction”.  Now that could be applied anywhere; from the office, to the home, politics, whatever.

‘To make a sale’ is the only situation I’m interested in, and I’d like to narrow than down even further in a minute.

What exactly are hot buttons?

Here’s a definition:

“A problem, need, urgent desire or source of pain that stirs enough emotion in the prospect to motivate the prospect to want to take immediate action to solve the issue.”

In this case, the action you are seeking is for them to say “Yes”, to make a “buy” decision.

The key words to remember are emotion and intense.  They drive the need to take action to solve the problem, met the need, urgent desire or remove the source of pain.

Why are Hot Buttons important in a sales situation?

You’re pitching for a sale.  It may be face-to-face, it may be a proposal a prospect has asked you to submit.  Or you may be in a more formal situation, writing a tender for a government body.  No doubt you’ve also been schooled in not just demonstrating the features of your offering, but in also explaining the benefits those features bring.

Now you certainly have to do that.  People don’t want the product per se, they want what the product will do for them.

But there’s an issue here - A benefit does not always create an emotional reaction that leads to a buying decision.  Emotion is certainly important.  As has been said many times, people buy for emotional reasons, and rationalise their decision with the facts (the features). 

However, are those emotional benefits you put to the prospect the ones that are really important to them?  You have to dig deep to find, and understand, the real pain the prospect is feeling, or fearing.  You have to find their “hot buttons”.

So how do you find these hot buttons?

Emotional triggers are not always easy to find.  To find the prospect’s emotional triggers, you need to find their problems.  Some digging is required to find the real need or source of pain. 

Having a prospect express an interest in your offering is one thing, but interest in itself will not lead to “immediate action”

How you find them will depend on the situation you are in, whether you are selling face-to-face, or responding to a Request for Quotation (RFQ) or a Request for Tender (RFT).

You need to have a systematic method of asking questions to uncover the prospect’s problems. Find areas the prospect is losing, hurting or suffering in some way due to the lack of your product or service.  Exemplify those areas of problems and pain, and then present your solution and you will hit the hot buttons on the head.

The best way to find out what your customers hot buttons are is to ask them. 

In a face-to-face situation let the prospect do the talking.  It is easy to find your prospects’ hot buttons once you have gained their interest and allowed them to open up.  If you do all the talking they will mentally close down.

As copywriting pioneer Claude Hopkins says, “any…attempt to sell, if apparent, creates sales resistance.”  

There’s an old sales saying that you should listen twice as long as you talk – "We have two ears and one tongue so that we would listen more and talk less."  Some people are slow learners.  

Of course you need to listen as well as hear.  Slow down, allow the client to talk, and they’ll reveal their dominant desire – their hot buttons.

If you are in a more formal RFQ or RFT situation more is required.  You need to capture as much as possible about the buyer’s driving force for the RFT.

If you can get to talk to the buyer, please do so.  You will learn a lot, maybe something your competition does not pick up (like the hot buttons) and you will more than just a company name when they are assessing the responses they receive.  I’ve been amazed over the years the number of times I’ve been the only person who has gone to see the person putting out the RFT in their office.

If you can’t get to see them, research is required.   Go to their website and look for connections between the purchase being sought in the RFT and what they are saying about themselves.  Bring out the connections in your response.  I’ve won tenders doing just that. recommends a strategy session with people in your business who have had meaningful contact with the buyer. They could be technical, sales, accounts people, or whatever.

  • List any concerns your team has been able to ascertain the buyer might have about the purchase being sought, what might delay or cause it to fail, or potential problems the buyer sees.  Remember, you are looking at this from the buyer’s perspective.
  • Prioritise those concerns from the highest to the lowest.  The hot buttons will be those concerns that have the highest priority.
  • Now you have a good idea what the customer is most concerned with and what you need to make sure you address. 
  • Then brainstorm what you can offer the customer to resolve each and every one of his concerns.

Unearth the prospect’s problems and pain and you will discover their hot buttons. Then present how your product or service will solve those problems, and you will be pushing those hot buttons.

If the RFT is from a government agency, remember you are dealing with bureaucrats – and you want to have their attention.  They are risk averse, but also want to be seen to get the best possible result.  Understand that the particularly for bureaucrats, fear of loss is a far more intense emotion than the desire for gain.

Note that a prospect’s Hot Buttons can vary, depending on their requirement and the situation they are in.  What is a burning issue this month may not be next month.

How to Push the Hot Buttons

As they say, “Sell the sizzle, not the sausage”

Recognition of the hot button/s and your solution must be placed in the lead of your response.  It cannot be lingering on page three or page 33.  It must be up front, so the buyer can have his a-ha! moment before he mentally dismisses your proposal.  It is the effect it has on the intellect and the heart of the buyer that you need. 

Please do not open your response talking about how wonderful your business/product is.  Talk about them, their problem that they are trying to solve, and what is critical to them (hot button).  Let them know you understand, and that you have a solution.  Only then do you go on to describe your solution, the hot button pushing results it provides.

Could your Sales Response be Improved?

There’s nothing like an outside view, a second opinion of your response to a Request for Quotation or Request for Tender.  Have you identified their Hot Buttons, and responded to them effectively?

Very often when we read something we’ve written, we read what we expect to see.  And miss the mistakes, or lack of logic, or lack of persuasiveness.  

I have an upcoming online course, TenderWins, a 4-week intensive course designed to help you win more tenders, without the stress and time issues that currently hold you back!

If you would like to discuss how this might help you, This email address is being protected from spambots. You need JavaScript enabled to view it..  There’s no cost for a consultation.  It is my gift to you.
Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

What Might be More Important?

Many years ago, I was General Manager of a government agency tasked with attracting industrial investment to our state/territory.  Before then I had worked my way up the management tree in a variety of manufacturing industries.  My Chairman had been in the Public Service since he was 17, but he was backed by a Board of experienced business people, including a very senior person with significant international sales experience whom I recruited.

It was the latter who placed little value on the number of leads the Chairman would trumpet.  To him, the key measurement was not leads, but conversions.  My Chairman squirmed under this repeated question – “How many have you converted?

The reality was that he had not the sales experience to understand the key measure was results, not prospective results,

My friend Rashid Kotwal of Revealed Resources has some interesting thoughts about this very topic.  As always, Rashid gets to the heart of the problem.  Here’s his take on “leads” versus “conversions”.

Why leads alone aren’t the answer

I’m getting dozens of emails promoting the next best lead generation flavour of the month.  This week it’s LinkedIn.  Last week it was Facebook.  Who knows what it’ll be next week.  (And I have the same flood – AG)

Sure, every business needs leads.  But nothing happens until you sell something.  i.e. Convert qualified leads into clients.

So if the majority of people you talk to don’t become clients, focusing on generating more leads is simply a waste of time (and advertising dollars).
Instead, first concentrate on improving your conversion rate.  So more prospects become clients.  Only then bring in more leads.

So how do you go about it?

Sell the result not the process!

I know what you do is complex.  It took years to master.  And you love to solve problems when in front of a potential clients.

If that’s you, stop it.  NOW!

Your prospect is sitting in front of you because they have a problem.  They’re in some kind of hell.  They want a solution, but have no idea how to achieve it. They’re looking at a mountain confronting them, feeling overwhelmed.

Your job is to take them by the hand over the mountain, to their promised land.

But first, you really have to have your prospect articulate their own private hell.

Why?  Because unless the pain is great enough they won’t want to expend the time and money on a solution.

Then have them describe what they really want instead.  Their "why".  Delve deep.  Find out the underlying emotional reasons.  How they’d feel then.

Now comes the critical part.

Have them tell you the cost of not changing.  Not solving the problem.  Ask them to give you at least 10 things that would happen if they kept the status quo.

Then reverse it.  Take all 10 (or as many as they can come up with) and ask how they’d feel if these issues were fixed.

Have them bask in the positive emotions.

This is selling the result.

Only now ask if they’d like to work with you to achieve this.

If yes, now you can lay out your program and costs.  Answer any questions and get commitment.

Thanks Rashid – that is very useful.

Here are some Takeaways

  • Nothing happens until you sell something
  • Convert qualified leads into clients – note the word “qualified”.  Very important in saving you from wasting your time.
  • Improve your conversion rate, before you increase the number of leads.
  • What you are selling is the result, not how you achieve it.
  • But first you have to find out “why” they really want/need that result.

And I like Rashid’s steps for selling the result.

Could your Sales Process be Improved?

There’s nothing like an outside view, a second opinion.  Very often when we read something we’ve written, we read what we expect to see.  And miss the mistakes, or lack of logic, or lack of persuasiveness.  

If you would like to discuss how you could improve your sales process, contact me.  There’s no cost for a consultation.  It is my gift to you.
Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

Four More Actions you can Take

I’ve been looking at whether using “fear” has a role in your sales message?  If it does, there are two approaches:

The first is creating a “fear of missing out”; something is so good, others are doing it, and unless you catch up, you’ll miss out.

The second isfear of a villain”.  In this case, the bad guy is seen as a real threat, nasty and harmful to your prospects future.  Getting that clear in your prospect’s mind is up to you in your sales message.  Regardless of what you sell (product, service, fundraising, etc., doesn't matter) or whom you sell to, your product is the hero, riding in on his noble steed and slaying the bad guy.

You then need to demonstrate, and provide proof, that your product will be an effective solution to your prospect’s problem.

So following on from the last blog, let’s take apart how your sales message might convey either of these “fears”.

Let’s See where you can convey “fear”!

Don’t you just hate it – you write your sales proposal, submit it, and wait for a response, and wait, and wait, only to get a NO.

It’s simple really; a Sales Proposal that doesn’t lead to action is ineffective.  And being ineffective is a waste of your time, effort, and money. 

It doesn’t have to be that way.  Avoid the simple mistakes that so many make.  Fear may be part of the solution, but you will also need more.

My last blog examined the first three of seven common mistakes.  Here are four more actions you can take to make your Sales Proposal more effective.  And there’s an offer at the end.

Remove the Risk

The prospect is uncertain, she has doubts in her mind.  It all sounds very good, but ……   How can she be sure?

There are two things you can do to remove the risk; provide “Social Proof”, and a Guarantee.

Social Proof

As master copywriter John Forde wrote “Used right (morally as well as strategically), it [social proof] is a powerful tool for selling.”

Social proof is more than just word-of-mouth over the backyard fence in today’s on-line world.  In fact, there are four types of social proof you can use to strengthen your marketing, and you can use them whether you are writing sales letters, emails content for your website or advertisements.

I’ve written about Social Proof in an earlier blog “How to Use Social Proof to Increase Sales”

(Comment - Use Social Proof to demonstrate either Fear 1 – using your product/service they assuredly won’t miss out, in fact they’ll be ahead of the pack!

Use Fear 2 and demonstrate/prove that if they don’t use your product or service, the villain will win.  Use social proof to demonstrate how your clients have used your product, and triumphed!)


Somewhere, either just before the offer, or just after, when the prospect is hesitating, “Will I or won’t I”, remove the doubt that your product or service might not deliver what it promises by offering a guarantee.  This backs up the earlier social proof.

It might be a money back if not satisfied, or if it doesn’t do what it is supposed to do guarantee.  The important thing is that, while your guarantee could possibly be called on, you are much more likely to get increased sales.

(Comment – applies to both Fear 1 and Fear 2 in removing the risk.)


You know your reaction when you get a badly written document – your thoughts are negative from the start.

(Comment – think really hard about this one.  Show through your presentation that you are ahead of the pack – Fear 1 – and your words, fonts, headers and images are confident, show leadership, and inspire confidence – see ‘Benefits’, and ‘Word Graphics’ below.   Leave people felling inspired.)

What will your proposal look like, visually that is?  Presentation is important.  And how will it read. 

A good presentation will make you look so much more professional, and the buyer feel more comfortable about dealing with you.  If the way your industry does things is a simple “price, quality, delivery” quotation here is your chance to make yourself different, and stand out. 

Some guidelines:

  • Headlines – it needs to be distinctive.  Size, colour, bolding.  It’s the contrast.  A headline must make the reader want to find out more, and not reveal so much they might not feel they need to read the proposal.  They break up the page and make your proposal easier to read.
  • Sub-heads – ditto but smaller.  The same comment as above applies.  Customers often scan a document before they read it.  The sub-heads will guide them and let them know what is coming.  They can be a different font from the headlines or paragraphs which assists the scan.  And they make it easier to find specific information.
  • Sentences - make your sentences short.  The easiest sentence to take in is only eight words long.  A sensible average is 14 words.  Any sentence of more than 32 words is hard to follow.
  • Paragraphs – keeping them short and punchy makes them easier to read.  No more than 2-3 sentences.  A long paragraph is daunting.  It should be kept to one subject.
  • Never use a long word where a short one will do.
  • Begin sentences with benefits (when possible):

o    Instead of...Moving your money now will help you avoid major losses.

o    Try...You can avoid major losses IF you move your money now!

  • Dot points – make it easier to scan and grasp the points you are making, just as I have done here.
  • Word graphics – depending on what you are quoting, painting a word picture can help.  (Can you see yourself in that gleaming new, spotlessly clean stainless steel kitchen?) or (imagine if you had all the information you needed for that benches quote). 
  • Picture graphics – a diagram or photograph of what you are delivering will help clarify other questions they might have and help reduce the risk and increase the like factor.  “Before and after” photographs emphasise the benefits you are delivering.

o    Don’t forget the Captions – tell them what the photo is.  More risk reduction.

  • Spelling and grammar errors – they distract, and cause the reader to stop, and consider the correction.  Once they stop they lose the flow.

Just remember - as Dr. Johnson remarked over 200 years ago - "That which is written to please the writer rarely pleases the reader." You're not writing for yourself but for the prospect.  Make it easy for them!

Let it rest for a day and re-read it.  Does it still make sense?

Conclude with a Specific Call to Action

You need to explicitly tell them to do it, and why.   Don’t finish with a general “If you have any questions ….”  I used to do that.  It’s horrible.

You may tell you will contact them; date and time.  Or create urgency by limiting the time of the offer.  Be specific.

Use a P.S.

PSs are very powerful.  They can be used to summarise the benefits of your proposal, reinforce the proof, or the urgency or scarcity. 

Here are several reasons you need to add a P.S. in virtually everything you do, print, online, and email:

  • The P.S. is meant for those who are attention-challenged, and those who prefer to scan rather than read.
  • Many people often read the headline and then jump right to the P.S.  They concentrate on the beginning and the end, but hardly anyone ever jumps to the middle.
  • The P.S. can serve as a platform for the most important benefit. It’s just another way to reaffirm and drive home what is the most attractive aspect of your product or service.
  • For added urgency, the P.S. can be used to state a specific deadline or expiration date and increase the likelihood of a response.   “Act Now!”

(Comment - The PS is a great spot to reinforce your “Overcoming Fear” message.)

Could your Sales Message be Improved?

There’s nothing like an outside view, a second opinion.  Very often when we read something we’ve written, we read what we expect to see.  And miss the mistakes, or lack of logic, or lack of persuasiveness.  

If you would like to discuss how you could improve your sales letters of proposals, contact me before the end of February.  There’s no cost for a consultation.  It is my gift to you.

Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

© Copyright 2016 Adam Gordon, The Profits Leak Detective 

And is it Persuasive?

It was the struggle a client was having writing effective sales emails that lead me to resurrect a blog from some time ago.  The issue was to what extent “fear” should be used to drive sales.

There are two versions of this conflict:

  • Using a Subject line of “Who Else Wants … ?”  With this technique, you're making the implication that everyone else is doing it. And also playing on the fear of being left out. The "it" is the solution your client's product or service offers.  Fear of loss is a powerful trigger.
  • Having a “villain” in your message.  It's the villain who determines how much you like the good guys. And, it's the villain who is #1 in any story. And guess what? It's the exact same in your emails, too.

Regardless of what you sell (product, service, fundraising, etc., doesn't matter) or whom you sell to, your product is the hero, riding in on his noble steed and slaying the bad guy.

But, if the bad guy is not seen as a truly credible threat, something evil and malicious, and who will destroy the world (or, rather, the prospect's world), then your product will not look nearly as effective as it really is.

What do your clients think of denigrating the competition?  That’s the risk!  Do they find it off-putting?  Some do, but it has been said "C-level" copywriters fall back on the 'old reliables' of fear and greed. And while those two emotions can power some successful promotions, you'll miss huge opportunities to write successful copy if they're the only emotions in your toolbox.

As the great copywriter Clayton Makepeace says, your sales message should activate a relevant and actionable DOMINANT EMOTION in the prospect. Because human beings almost never make purchases for logical reasons, but as their emotions dictate, the copy should activate a fear, frustration and/or desire that the prospect already has, then offer him a way to fulfil or assuage that emotion.”

I’ll come right out and say the principles expounded in this blog post are based on the first version.  They are useful not just for emails, but also sales letters, and indeed quotations, proposals and tenders. 

But would the second be more effective?  After all, effectiveness is what counts when you are after sales!

I’ve added some additional comments.

So here we go.

Do you know what is NOT effective in a Sales Proposal or Sales Letter?  You should, because these mistakes are far from rare.   They occur time and time again.  And they are so off-putting.

The first mistake occurs right at the beginning of the pitch.  It’s where the business starts talking about themselves, how good they are, how they are unique, unmatchable in every respect, the “ant’s pants” in fact.

I call these ME-ME proposals.

So let’s look at what you can do to change all that, and write a sales email or proposal that works.

Start with the Headline

If your headline doesn’t grab them, then they are not going to read on.  So it has to be meaningful to them.

The Hook - you need to grab your prospect’s attention.  Headlines are the advertisement for your promotion, so you need to create an impact.  The headline has to have a hook that leads the reader on.  You only get one chance to grab their attention before they file your message in the round file.

And then the Key - the key to understanding headlines is that what grabs attention is personal benefit, known as WIIFM – What’s In It For Me.  So you need to highlight a key benefit, preferably backed by a promise. 

An example:  Low Maintenance School Uniforms – That Last

So in this example the benefit is Low Maintenance School Uniforms and the promise is That Last. 

There are some classic headlines leads that are used over and over again ….. because they work.  Some have benefits and promise, others just benefit.  Swipe and deploy!

(Comment – should “fear” – either V1 or V2 -be used in the Headline?)

The First 50 Words

What comes next is also very important; the opening paragraph.  This is where the ME-ME shouldn’t come in, but so often does.

Your opening paragraph must be about your prospect, and their problem.  Show that you understand them, their problem, and the difficulties it causes them.  Empathise with them.  Remember, it’s about them, not you.   You can’t be persuasive if there is no empathy.

A typical way to do that is to highlight the gap between where your prospect is right now, and the benefit and promise of the headline. 

After all, if there wasn’t a gap they wouldn’t be interested.

Staying with school uniforms: “Are you sick and tired of always having to buy expensive school uniforms only to find they are high maintenance; they pick-up dirt marks so easily, those dirt marks are hard to remove, they always requiring ironing.  And they don’t last.  It doesn’t have to be that way.” 

The prospect is now being troubled by the problems they are facing.  You’ve brought the problems to front of mind.

(Comment – “fear” could agitate the problem, bring it to more of the forefront of the mind)

Now you are need to develop Interest 

Remember the task of the opening paragraph is to build on your headline to lead the prospect to read on. 

I like using the acronym PIPES:

P – Problem; we started with that.

I – Implications; what are the implications for them if they don’t solve their problem.  Use emotional concepts.  Remember, people buy on emotions, and rationalise their decision with the facts.  “Fear” in either version could have a real role here.

P – Potential; what can they achieve/do/enjoy when their problem is solved.  Again, emotions help.  Ask them to visualise their situation once the problem has gone – Imagine this …..

(Comment – without the villain on the scene, what could be achieved?)

E- Explanation;  This is where the facts come in.  Why there is a solution, and how it will work.  This is not yet your solution, but why the type of service/product you provide will solve their problem. 

(Comment – Version 1, what is needed to not be left behind, Version 2 – how to vanquish the villain!)

S – Solution;  Now you are going to lead the reader into all the benefits of your product or service, why your solution is the only logical choice.  You are telling them you have the solution to their problem, that your product will close the gap referred to above – guaranteed.

(Comment – why your product/service will overcome the problem in V1 or V2)

Introduce all the benefits of your product or service and why they offer the desired solution.  It is about the end results.

To have the greatest impact use bullet points to illustrate each benefit.  Bullet points are built for flyers and a lot of other promotional messages.  So often people skim through your copy.  Bullet points make skimming easy. 

You don’t have to use a lot of writing tricks like connectors and other means of transition; just load the bullets, one after another.

Don’t just list the features (what your product is or has) of your product or service.  Tell them what the feature will do for them.  That’s the benefit.  It tells them WIIFM.  “Our uniforms are all made from XYZ Wonder Fabric.  This means:”

But there is more to your persuasive sales email or proposal.  We haven’t finished yet. 

Next week I’ll look at four more steps.

Could your Sales Emails, Proposals or Tenders be Improved?

There’s nothing like an outside view, a second opinion.  Very often when we read something we’ve written, we read what we expect to see.  And miss the mistakes, or lack of logic, or lack of persuasiveness.   Are you fighting villains, or seeking to stay in front?

If you would like to discuss how you could improve your sales letters, proposals or tenders, contact me.  There’s no cost for a consultation.  It is my gift to you.

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

Gross Margins versus Sales

It is easy lose sight of the difference between margins and sales.  Many businesses talk in terms of the sales they make.  But the figure you should really be interested in is the volume of Gross Profits your business delivers.

The Gross Profit Margin you make over the cost of providing a product or service (the Cost of Sales) is the money left to contribute to pay overheads (relatively fixed), and then when you have covered those, becomes your profits.  

I want to touch upon two examples where it is easy to get confused by the impact of the Sales you generate, versus Gross Margins they return.  I’ll talk about breakeven another time

These examples relate to:

•    Bad debts, and

•    Promotional campaigns.

Let’s take bad debts first. 

Of course, this does not apply to you if you get cash payments on delivery, or better still, payment before delivery.  However, a significant proportion of small businesses invoice their clients on delivery of the product of the service. 

Your Terms of Trade may vary anywhere between 7 days to 6o days.  I’m talking about when you require payment, not when you actually get paid.  Unfortunately, we often find that the bigger the client, the slower the payment. 

What happens when you have a bad debt?

Say your sale was $1,000 and your Gross Margin was 35% ($350).  The sale goes bad for whatever reason, and the client does not pay.  It is easy to assumethat you all you have to do is make another sale of $1,000 to recover your position. 

Easy to assume, but wrong!

To recover that $1,000, you have to make enough profit to get the sales value back, because a significant proportion of the new sale will be, as before, the Cost of Sales – the cost of providing goods or service. 

And that amount we can calculate by dividing the sales figure ($1,000) by the Gross Margin (35%).  And that gives the princely sum of $2,857, and that’s without the cost and effort of achieving the new sale.

It makes sense to set yourself up so that this situation does not arise.   Policies and procedures help, as does getting paid up front, or at least a reasonable down payment.  In these days of multiple credit cards, securing a credit card imprint can be useful.  In other words, get the client or someone else to cover the debt. 

You are not in the banking business.

And so to promotional campaigns. 

Much the same situation applies, except that it is harder to measure.

If you do decide to calculate return on a marketing campaign: when comparing cost to returns, "returns" should be your profit, not your gross sales. If you spend $1,000 on a marketing effort and generate $1,000 in sales, you are losing money; you are out the direct cost of product or services that you sold for $1,000.  And you have no contribution to other overheads.

You have only broken even on a marketing campaign that costs $1,000 when you have sold enough product or services to generate a $1,000 PROFIT.  How much sales that requires depends completely on your products, and your profit margin.

There is a further complication!

Your business will undoubtedly have a number of product/service lines.  I’m sure you know the sales each generates, but do you know their profitability?  In nearly thirty years of working with small businesses, the biggest problem I’ve found hindering their prosperity and growth is not knowing what is going on in their business, where the money was being made, or lost. 

What hinders, and what helps?

So often the profitability of one or two lines is masking the lack of profitability of others.

Here are a couple of articles you might find useful.


Are you inflicting failure on your business?

When clients approach me for coaching, clients with businesses that are underperforming despite the crippling hours and effort the owner is putting into them, they are sometimes held back by lack of knowledge of what is happening in their business. 

A lack of focus of potential improvements leads to a lack of control over their business, and eight times out of ten that lack of control comes down to a lack of knowledge of what is happening in the business, and what their peers are achieving.

For more than 29 years I’ve been helping small business owners plug the profit leaks in their business and restoring their cash flows by assisting them understand where and how they may change their business to be a leader in profitability, productivity, and competitive advantage. 

If you would like to discuss with me how you might do that, book a Strategy Consult here

© Copyright 2018 Adam Gordon, The Profits Leak Detective

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