Steve Wilkinghoff | The System to Discover Hidden Money

Step 1: Know your target numbers.

• While the first step may sound simple, most business owners aren’t clear how they envision their business performance in terms of finance.

• Having a revenue target is part of the equation. However, it is also essential for business owners to have a specific amount their business should produce for them, and not just for the revenue.

• When computing, be sure that you factor in these questions:
  • How does your business serve you your dream lifestyle?
  • How much do you want to work in the business?
  • What work do you want to do?
  • How much money do you want?
  • How much time do you want to contribute to community and volunteer efforts?

• Start putting numbers around the previous questions.

• It essentially becomes a little more than budgeting.

• Clearing the questions will create hinges on everything.

Step 2: Identify the correct path to reach your target.

• This step is all about reverse-engineering the components of your performance to know the best path towards your goal.

• Know your current metrics to see how much more your business should produce to get to your target numbers.

• Enlist different ways to maximize each business factor.

• Give yourself the correct perspective based on the type of business that you have:
  • If your business is good at marketing and tends to keep attracting new customers, you should focus on this and keep welcoming new customers.
  • If your business is at a higher-end state and customers are harder to come by, you should pay attention to growing your existing customer base. Think of ways to increase how often they buy.
    • Cross-sell to them.
    • Offer them packages.
    • Change your pricing.

• In this step, you will differentiate your current customer behaviour (such as their average purchases) and your goal.

• Once you know the difference, it is now time to take a leap forward and think of ways to get your customers do to reach your goal.
  • For example, your current average customer purchase is at 1.5 a year and you need to increase it to an average of 4.

• Steve suggests that a business owner must have a system established to extract key business metrics in an instant. It doesn’t have to be high-tech and you may even use a simple spreadsheet for this system.

Step 3: Measure the paths you’re taking.

• Establish measurements to know if you’re following the correct steps.

• Once you’ve got a hold of measuring things in your business, you can try out other steps with almost no risk.

• Let’s say you’re measuring your customer efficiency and you pull up last year’s revenue record:
  • You see that Customer A paid $50,000 for five transactions while Customer B only paid $15,000 between two transactions.
  • It is true that Customer A is your highest revenue source but if you factor in the number of times they purchased, you might find out that you’re earning more from Customer B who just did fewer transactions and exhausted your manpower less than Customer A.
  • With this, you should focus on attracting the most efficient customer.

• Besides looking for your most efficient customer, watch out for these other metrics as well:
  • Most profitable customer.
  • Study which industry your most profitable customers come from and focus on attracting more from the same industry.

• Study your measurements at least after a week to find out if you’re making progress or not. If you see growth in your result, continue what you tried. If not, move on to your next plan.

Step 4: Loop through your measurements.

• Keep trying new things to improve your business. If something fails, do another step.

• If it shows growth, the new result should serve as your benchmark and do another test with it to keep it improving until the value reaches your goal.

• Keep track of your tests and results, be it improvements or failures. Utilize spreadsheets or dashboards.

• Be sure to try things out one step at a time in order to avoid risks and to know which produces the best result.

• Here are some tests you should run in your business as suggested by Steve:
  • Determine the frequency of customer purchases according to your product category.
    • Ask your customers if they’re aware that you offer the products under the category they didn’t purchase from via phone or email.
  • Have a test on raising your prices.
  • Test customer profitability.
  • Test product profitability.

• As previously mentioned, check your result at least a week after you implemented the test. You may stretch it out to two weeks. A month of duration might increase risk.

• The key to testing is being bold. To put it simply, you as the business owner know that if a test fails, it’s not going to take a toll on your business.

System Notes

• Doing anything is always better than doing nothing.

• Do not perform multiple tests at the same time. Instead, plan ahead and take one step at a time.

• When computing, be sure that you factor in these questions:
  • How does your business serve you your dream lifestyle?
  • How much do you want to work in the business?
  • What work do you want to do?
  • How much money do you want?
  • How much time do you want to contribute to community and volunteer efforts?

• Start putting numbers around the previous questions.

• It essentially becomes a little more than budgeting.

• Clearing the questions will create hinges on everything.