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Case Study: How We Grew One $2 Million Company 72% Year Over Year in 3.5 Months

A few years back I formed a company with a partner where we’d go into companies, roll up our sleeves and actually do the work of growing them fast in trade for a piece of the upside.

One of our first clients was a trucking company that wasn’t doing badly in fact they were doing well about $2 million/yr. in sales with just under 20% margins but they’d been stuck at that level for a while and were looking to go to the next level.  This is the story of what actions worked and which didn’t, resulting in a 72% year over year growth in 3.5 months…pretty good for any business.

 

Starting Point

Initially the company was primarily relying on owner operators, people who owned their own vehicles and would do the trucking work involved.  These drivers were each paid 80% of the gross earned for each job.  The company owned a few of their own vehicles and had both the cash and cashflow to purchase others if necessary.  Most of the owner operators were Class 1 drivers meaning they could drive larger trucks but a fairly large percentage of the jobs didn’t require larger trucks being direct point A to B trucking within a 6 or so hour radius though some were multi-day trips.

Scalability in terms of trucks and drivers was relatively easy and dispatch could handle considerably more capacity so the primary goal was to increase sales and grow margins.

The industry was full of a fair number of smaller and similar sized competitors with a difficulty etching out a competitive advantage due to the low barrier to entry nature of the work.  The primary defense was the requirement of various safety programs to work for various large and lucrative clients.

 

What Didn’t Work

The owner had previously been sold on a call service to businesses within the surrounding area to generate leads and had this supposed leads list untapped.  We had a sales person call the leads to little success noticing most of them weren’t very targeted and not particularly high value.

One of the administrative operations people wanted to streamline office procedures, buy new equipment, etc.  Although we did replace the office administrator and implement the documentation of various systems, which made life somewhat easier for the owner the cost savings were minimal because the administrator needed to be around regardless so streamlined procedures didn’t reduce working hours.

Part of the graphics team wanted to implement a rebranding effort (new name, logo, and website).  This had relatively little effect in large part because it wasn’t embraced by the owner who wanted to stick to the older brand, which was recognized by existing customers.  Although the branding could have been leveraged to greater effect it’s questionable whether it was or would have ultimately been the driving force in dramatically increasing sales even if it was embraced given the relationship nature of the business.

 

What Got the Results

The real breakthroughs occurred as a result of 4 inter-related changes:

  1. We sat down and identified the 4 most profitable types of customers and created a list of the specific companies that fit within each of those 4 categories to target with direct calls and visits

 

  1. We knew we had to differentiate the question was how? The service itself is pretty commoditized and guarantees only go so far.  Knowing the clients were typically men in remote work areas for weeks at a time we hired hot girls to drive the low end trucks and branded them

 

  1. We applied a visitation rhythm of regular visits and calls (PR trips) where the girls would for example bring donuts by the target customer locations and hand out information

 

  1. By hiring the girls to drive company owned trucks we were able to reduce the cost on those loads from 80% to 65% of gross resulting in a massive boost in margins

 

Even gaining one large customer within the target categories had the potential to significantly boost sales.  Hiring the girls created industry virality where companies we hadn’t even heard of were calling.  The regular rhythm helped encourage repeat business and keep the company top of mind for when services were needed.  Finally, the boost in margins as you can imagine was significant from a profit standpoint.

 

Lessons You Can Learn

Focusing on the right target market is EVERYTHING.  It is by far the largest marketing mistake I see people make and the biggest opportunity for improvement.

All customers have a buying window and go through buying cycles.  If you don’t hit the window at the right time you won’t get the sale because they simply aren’t in the market.  There are things you can do to improve your timing and consequently your efficiency but baring this applying a regular rhythm of follow up is the best thing you can do.

Differentiation is one of the most powerful ways to increase conversions but you need to be able to do it in a compelling way.  If your customers aren’t emotional about how you’re different then you need to look to a different strategy.  This is also where knowing your target customer is very helpful and in this case allowed us to set ourselves apart when others hadn’t previously.  Also note the fundamental service remained the same the differentiator was in the form of the packaging, which is something else you should consider if you can’t improve or differentiate the core offer.

Finally, when it comes to cutting costs not all efficiencies are necessarily better and some carry risks (for example owning too many trucks would have created risks that having owner operators didn’t create) so you need to be sure to measure the net effect of supposed improvements to make sure there will be cost savings and these aren’t counter balanced by increased risk.

If you’re looking for assistance growing your business, please contact us.

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3 Critical Lessons No One Will Tell You About What to Start For Your First Business

I’m often asked by people about what business to get in to.  “I want to start a business but I don’t know what business to start”.  It’s worth taking a lesson from Richard Branson’s book here, businesses are disposable you’ll let them go when they no longer serve you the focus is about the people and in this case investing in yourself.

See if you go into business not concerned so much about that particular business but taking a long term view of learning to make business successful then you’ll buy yourself the freedom to go into all the businesses you want in the future.

It’s not glamourous, it’s not get rich quick, but it’s real taking a long term view will give you a better life than you ever imagined, you’ll be far less likely to be disappointed when you struggle, and you’ll be able to dramatically reduce the risk of starting something of your own.

“Who’s going to pay for the learning curve” – very wealthy businessman and investor to his ex-girlfriend when she announced she wanted to start a juice bar business.

To her the statement came across as cold but the cold hard fact is we all have a learning curve when we get into something new and there’s a cost, usually a very major one to that learning curve.  If you think college, university, or some paid training are expensive try making mistakes in real life and measure what they cost.

With that in mind I’ve learned some very critical lessons I wish I’d followed when I was getting into business that would have saved me tens or hundreds of thousands of dollars and accelerated my success DRAMATICALLY!

 

Lesson #1 – Business consists of two parts you need to learn both to succeed

What is business all about?  It’s about selling something and then delivering on it.

Most people who are getting started in business think of the business in terms of what you are delivering.  For example, it’s a yoga business, a book business, a shoe company, a supplement company, an engineering firm, etc.  Because that’s the part we mostly see and care most about as customers we tend to think of business as being the product or service being sold and this is a great detriment to the success of a new small business owner.

Pop quiz in most cases is it harder to sell something or deliver on what you sell?  For most small businesses the answer is selling.  Don’t believe me?  Go ask virtually any small business owner what do they have a shortage of?  Customers or ability to deliver to those customers?  Most of the time you’ll find their struggle is to get more customers if they had more they could provide for them.

There are exceptions of course, those who have figured out the sales and marketing equation and those are the businesses that are successful.

Statistically, something like 80% of small businesses fail mostly because they go into it thinking only about the delivery and not about the selling.

By contrast you could start a business that is identical to another in terms of what it delivers but different in terms of how it sells it and have that business thrive.

Richucation Hint – When looking to start a business pay attention to how you’re going to sell the product/service

 

 

Lesson #2 – Starting a business is going to be a learning experience your first goal should be to decrease the cost of that learning experience.

Here’s another stat the typical small business doesn’t make money for the first 3 years.  Crazy right?  That’s mostly because they haven’t figured out the sales and marketing equation.

But let’s take that information and backtrack for a minute.

Let’s assume it will take you 3 years to learn enough to actually make money in the small business…or let’s say it takes a year to build momentum regardless so it will take 2 years to learn what you need to know.  This is fairly reasonable.

What does this mean?

It means you’re paying whatever your expenses are each money for 2 years!  This is the cost of your learning curve.  Your monthly expenses multiplied by 24 months.  Possibly longer.

So if that’s the case do you want to start a business where you’ve got expensive retail space and a lease costing you $20,000/mo.?  Or do you want to start a business based from home where you’ve got no lease?  Do you want 10 staff on payroll from day 1 costing you $30,000/mo.?  Or do you want to be a sole operator maybe with one other person?  Do you want to be paying interest on a $250,000 loan or do you want to start debt free?

Consider that cost of your education.  If your monthly expenses are $50,000 vs $5000 then the cost of your education (how much you lose before you start to make money and consequently how much of a hole you have to dig yourself out of is $1.2 million vs $120,000).

In other words, when you’re starting your first business you want to minimize your monthly expenses or what are called your “burn rate” as much as possible.  Later, once you’ve learned what you’re doing you’ll probably end up with a high burn rate and a fair amount of staff in order to scale and make a lot more money but at this stage you want to keep lean…you don’t want 5 or 10 people sitting around while you’re learning…you and your mentors or coaches are the only people you want sitting during that stage.

What’s worse and partially takes people out in business is as we mentioned 80% of businesses fail.  So imagine you put in that time with that expensive learning curve only to have the business fail and then what was all that expense for?

It goes further do you think a business losing $50,000/mo. is more or less likely than a business losing $5000/mo. to fail?

Richucation Hint – consider your first business your education for your second and stay lean while learning

 

Lesson #3 – You can get away without learning delivery but not without learning sales and marketing

Remember how I said earlier that you needed to learn both sides?  That’s not entirely true, to go to the highest level it’s true but when getting started you can get by without knowing much about the delivery side.

Remember how I said most businesses are starved for customers but have no problems delivering to those customers?  Well if you got to virtually any company and offer to send them customers they will pay you for this.  You should make sure you negotiate a good deal for each customer but the point is they’ll pay you.  Literally, businesses will line up for you to send them customers.

By contrast if you’ve got some product or service you can deliver are there people lining up to sell it for you?  No!  Not a chance.  Why?  Because people who know how to sell are mostly selling their own stuff or selling the premiere providers on the market, which is why if you focus on delivery you’ve still got to learn sales and marketing but if you learn sales and marketing you don’t necessarily have to learn delivery.

Now let’s put this in the context of lesson #2 about minimizing the learning cost.

How long will the learning curve be if you have to learn 2 things vs 1 thing?  Theoretically twice as long.  So let’s say of that 2 year learning curve 1 year is spent learning delivery and another is spent learning sales and marketing…now imagine you only had to learn sales and marketing…your learning curve (the amount of time you spend losing money) just dropped from 2-3 years to 1 year.

If you’re spending $5000/mo. that means your cost of learning (the hole you need to dig yourself out of once you start making money) just went from $120k-$180k down to $60k maybe less.  Is that a good thing?  You bet it is!

In other words, yes at some point you’d like to start all your dream businesses maybe you imagine one in gardening and one in architecture and one in fashion and one in media but none of those will succeed without good sales and marketing whereas virtually any of them can succeed with really good sales and marketing.  So learning sales and marketing first is your ticket to freedom.

So how do you do this?

Think of a product or service you already use and already love…ideally one that isn’t already incredibly well marketed.  Now, approach the company that provides they product or service to sell on their behalf.  Almost any company will take you that’s the great part.

Think of how wonderful this is.  You get to promote something you already know is good because you use it, vs having to worry about mastering creating and delivering the product, hiring and managing staff, providing customer service, dealing with warrantees and returns, inventory, theft, etc.  All of those problems are out of your mind and you’re free just to learn to promote something you love and the moment you make your first sale you’ll make money.  It might not be enough initially to cover your costs but you’re already ahead of the game whereas if you were delivering your own product or service you’d still be busy figuring out what to call it, how to design the logo, hiring the customer service staff, figuring out how to train them, getting the phone lines and website set up, etc.

I’m not a huge fan of MLM or network marketing but this is the advantage of those business models.  You don’t have to worry about product development, manufacturing, quality control, inventory, shipping, returns, customer service, invoicing, etc.  All of that is taken care of for you and you just focus on selling, building a team, and training to replicate.  What we’re suggesting you do here is similar but with much higher margins, which makes making money faster much easier.  In other words, instead of getting $5 for every $100 sale you get $30 for every $100 sale.

Be sure you don’t just accept the first offer of what they want to give you to sell their product they’ll be inclined to throw out a number like 10% or something like that.  Generally, you want much higher and you ideally want a residual on the value of the customer as well or some way to get the customer’s repeat orders to come through you but that isn’t always possible.  If you can get it you’ll start to build a residual income that will buy you long term freedom of your time even without needing a team because the company with the product or the service is your team and they’ve got a vested interest in your success.

Richucation Hint – find a product or service you love and sell it as your first business

 

Can you do otherwise?  Certainly, you can start something from scratch inventing a product, you can build your own store, try to do it all from the beginning, etc.  But that’s a short sited approach and will give you a lot more risk and cost you a lot more money.  If you take this approach then once you’re selling one thing successfully you can expand to sell another, then another and so on and eventually add your own products or sell it all under your own brand.  Think about a company like Amazon.  They make very few of their own products mostly they are just a great brand selling the products of others.