Here’s a question for you:
If you had to pick one move that you’ve made in your business (past or present business) that had the biggest impact on profitability, what would it be?
Just as for other articles here in the Small Business Success Center, I once again polled several entrepreneurs. This is how they answered the question:
“Turning a service into a product,” says John Jantsch, DuctTapeMarketing
I guess I would have to say it was committing to the concept of turning what has always been considered a custom service into an innovative product and brand. That decision, in hindsight of course, set in motion so many of the positive things that have occurred since in terms of profitability. Marketing for the small business, and for the small business marketing consultant who provides it, was commonly viewed as a highly creative and personalized endeavor. By turning marketing into a system
and packaging it with set of deliverables and a set price, we were able to replicate results much more easily, create a differentiating element in the marketplace, and impact profitability tremendously. Determining to call all of this Duct Tape Marketing turned out to be a pretty good decision as well.
“Partnering with others,” says Scott Belsky, Behance
The most important “move” we made related to profitability was the realization that “we can’t do it alone.”
Businesses are often obsessed with protecting margins and trying to cut out middle-men — and for good reason. However, small businesses gain credibility when they have deal flow – regardless of whether or not some of the deal is being shared with a source. Whether it is selling subscriptions, filling ad inventory, or distributing products, it often pays to involve (and incentivize) others to help you generate revenues and, more importantly, examples. The most valuable testimonial in an early stage business is a happy customer and a recognizable customer — or better yet, both!
We decided early on that we would give up some margin on our products and services in order to involve other partners. As a result, we have a number of thought partners that are committed to growing our business. Nothing beats the value of committed partners that are generating early revenues and opportunities for your business.
“Recognizing what we were worth,” says Andru Edwards of GearLive:
I have to say that, if I could just pick one, then the one thing I did in business that had the biggest impact on profitability was recognizing what we were worth. In the beginning of our ad-supported online business, I was just happy with anything that any advertiser was willing to give us, and happily gave them ad real estate for bargain prices. It took me a little bit, but there was a day where the lightbulb went off, and everything clicked. I was way underselling our ad inventory, and pretty much, we were being taken advantage of.
I immediately started asking advertisers for what I thought we were worth, rather than being happy with what they were willing to pay. Once I did that, the number of advertisers we had diminished — but the goal wasn’t to have a bunch of advertisers. We wanted a few good advertisers that paid well. The good thing is that these advertisers still felt we were worth it to their advertising budgets, and they didn’t even question our rates. We moved our rates to be in line with other top Internet sites, because we felt that our content could match up. Luckily, advertisers agreed.
This is actually a good overall business tip – know what you are worth. Don’t undervalue yourself — and, please, don’t overvalue yourself either. Have a realistic mindset of where your business stands in your industry, and then make sure you are getting what you are worth.
“Registering my name as my domain,” says Ed Bott, Ed Bott’s Windows Expertise
Without question, the best move I made was back in the dark ages of the Internet (1995 or so), when I registered my own domain name. Through the years, I’ve had it drummed into my head by marketing experts that building a memorable brand is one of the most important things you can do for a business. Well, they were right. Much of my consulting and writing business is based on my personal brand, so being able to refer potential clients to my website at edbott.com means they’re more likely to remember how to come back. It also means I can control my incoming and outgoing e-mail addresses to make my business look as professional as possible. It helps make certain that people are able to find me easily using search engines as well.
Whenever I see a business that uses an AOL or Yahoo or Google e-mail address or a canned website hosted at someone else’s domain, I’m immediately suspicious. Do they have a long-term commitment to their business? Are their other business processes equally unsophisticated?
“Deciding when to be a tightwad, and when to spend,” says Harry McCracken, Technologizer
My site, Technologizer, is just a few weeks old — so rather than aiming for instant riches, I’m working hard to get into habits that will help profitability come sooner rather than later. And I’m finding that it’s essential to know when to be a tightwad, and know when to spend.
When I began planning Technologizer, I told folks that I intended to rent office space early on. Bad idea — I’m perfectly happy working out of my home when I’m there, and roaming from improvised workspace to improvised workspace when I’m out and about. (I spent a remarkable amount of time in the lobby of one conveniently-located hotel that has a comfy sofa, and I’m writing these words from a Starbucks that I consider my branch office near San Francisco’s Moscone Center.) End result: I’m saving the thousands of dollars that even the most basic real office would cost.
But there are times when it doesn’t pay to be a cheapskate. My biggest expense so far: Hiring a lawyer who helped with contracts and incorporating my company. I also bought a new laptop with a larger screen that lets me work faster. And after years of futzing with Wi-Fi hotspots, I finally broke down and signed up for a wireless data plan, assuring that I have Internet connectivity wherever my work takes me. I think all these moves improve my odds of success — and are therefore investments rather than expenses.
“Hiring my first employee,” says Jeremy Gutsche, TrendHunter.com
Hiring talented people provides enormous leverage. Accordingly, the best move would have to be hiring my first employee, Trend Hunter’s editor, Bianca. In my case, the example is even more pronounced because I hired Bianca 8 months before I quit my full time job. Given that I only had 40 hours of evenings and weekends, her full time dedication enabled my work to be focused and strategic. For aspiring entrepreneurs caught in the corporate ladder, the move to hire a first employee can help get your start-up running.
“Hiring someone to help with email,” says Dane Carlson, Business Opportunities Blog
I’ve hired an assistant to help me sort and process email.
Like almost everyone who’s ever ventured online, I receive an enormous amount of email. Spam, mailing lists, and automated reminders I can filter and deal with. It’s the email from real people who want to do business that I have trouble with.
My entire business is online, so it’s no surprise that the vast majority of all of my business communication is over email. Recently, though, I realized that I was missing out on revenue because I was having a difficult time figuring out which emails were most profitable to respond to first. Some valuable messages were from people who wanted to give me money directly for a service while others were from people that wanted to give me free content that I could monetize later. My email assistant now helps me to sort through the chaff and find the wheat.
And now for my own answer to what made the biggest positive impact on MY business’s profitability:
“Spending on talented service providers,” says Anita Campbell, Small Business Trends:
It sounds crazy, but spending money to hire service providers made my business more profitable. This is how it works: you hire contractors to round out your virtual company, and you get more done. When you have the capacity to get more done, you can go after bigger opportunities. Bigger revenue opportunities brings more money in on the top line. More money coming in on the top line (sales), allows more money to drop to the bottom line (profit).
Of course, your hiring has to be aligned with sales increases, and you can’t let hiring get too far ahead of your sales. And you must have a solid business model and pricing model to begin with. But spending on the right things works!
So, now you’ve heard from several seasoned entrepreneurs. What say you? What made your business more profitable? Leave a comment and share your wisdom.