Is Your Business Thriving?

Business behaviors that can increase your business value.

by Chia-Li Chien | May 07, 2012

Jim Collins’ recent book, Great by Choice: Uncertainty, Chaos and Luck—Why Some Thrive Despite Them All, contains extensive research into what I call Mission Critical Behavior to create extreme business value in terms of Shareholder Value Creation. The primary focus of the research is on public companies, although many of these behaviors are interchangeable or applicable to small to mid-sized private companies.   Collins calls these types of companies 10Xers, or in other words, companies that can create 10 times or more shareholder value over 10, 15, or even up to a 30 year time period. His research has proven that leaders of these companies, compared to those of other companies were not:

• More risk taking
• More visionary
• More creative
• More lucky

Instead, 10xers have Mission Critical Behaviors that Mr. Collins’ defines as 10X Leadership. “They (the leaders of 10X companies in the research) were more disciplined, more empirical, and more paranoid,” said Collins.

When it comes to private companies, often there are constrains in duplicating Mr. Collins’ business solutions such as 20 Mile March, Fire bullets, then cannonballs, Leading above the death line and SMaC. In my experience, private companies, especially ones with less than $25MM annual revenue, face the following:

• Lack of sustainable economic engine or misalignment of business model.
• As a result of the misalignment of business model, cash reserves and profitability often get in the way of achieving ultimate extreme business value for the entrepreneur or business owner.
• This creates significant challenges for owners seeking capital funding (both equity and debt), lines of credit (both traditional or hybrid) or even terms.

Some owners tell me they have limited resources, (people, money, technology, strategic partners, distribution channels, etc.). I often encourage them to revisit their business model. Not having the right business model often is deadly—just like climbing Mt. Everest without any idea of which path is most logical to prepare for, to execute a plan for and then to be prepared to make flexible changes on this challenging exposition.

What impacts business value? There are three broad categories of actions or goals you might consider:

A.    Increase/recast EBITDA
B.    Reduce risk
C.    Employ additional high yield capital

Remember, what buyers, investors, banks and financial institutes are looking for is to increase their ROI (return on investment)  and reduce their investment risk. If you can demonstrate those two benchmarks, then they will view your business as a good match for their investment dollars.

Your goal as an owner is to sell your business anytime it will be profitable. That being said, you must have fundamental value for merger and acquisitions (M&A or exit) regardless to whom you sell. Although not a direct route, here are my comparisons to Collin’s behaviors.

You must consciously grow your business in value in terms of these three broad categories, which impact your business value. Let me quickly review the three broad categories again:

A.    Increase /recast EBITDA
B.    Reduce risk
C.    Employ additional high yield capital

Attend my next 90-min. webinar. I will take a closer look at building business value in these three categories. Go ahead and reserve your seat now—don’t miss any opportunity to build your business in VALUE—because the goal is not only to grow your business in revenue—but also in VALUE. This objective will ultimately help you achieve your financial independence when you’re ready to cash out! You deserve to be compensated for the amount of risk, time and hard work you put into your business. I’ll talk to you soon in my webinar.

About Chia-Li Chien

Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY!” She is chief strategist of Value Growth Institute dedicated to creating business value that transforms your world. Chia-Li is also a Midas Advisor to MidasNation, a community dedicated to helping private business owners increase the value of their firms.  She is the award-winning author of Show Me The Money and faculty member of American Management Association. Her blog and newsletter was named a top small business resource by the New York Times “You’re the Boss” blog. To book Chia-Li for a workshop, keynote, or strategy session, contact her at: info@valuegrowthinstitute.com or 704-268-9378.

Get Inspired to Create Value in Your Business

A look at real-life operations of top businesses can motivate and inspire you!

by Chia-Li Chien | Apr. 30, 2012

It hurts more to see your own child in tears. I was heartbroken when I saw my daughter Con-Ning in tears on how disappointed she was about her SAT score earlier this year. “It was so unfair!! Many of my high school friends did better than me and I know they did not study as much as I did!” said sobbingly “and I want to re-take the SAT!” Sometimes peer pressure can be a better motivator. That being said, as parents, we just can’t tell her “life is not fair!”

TC (my husband) and I tasked Con-Ning to plan our spring break this year. It’s her first time to plan for a trip for us. She is aspiring to become a veterinary and there are only 28 veterinary schools in US. So it’s pretty easy to narrow down her choices at east coast to visit. She picked four universities to visit during spring break; she made the appointment with universities directly and provided us the itinerary. However, before we left for the spring break, she told me that we don’t need to go to University of Pennsylvania (ranked #5 out of 28 in veterinary and is an Ivy League university). Why bother, right? Well, I told Con-Ning on the contrary “Let’s go get inspired!”

There are plenty of public traded businesses out there that can help other businesses get inspired too. Such as a visit to Disney, Boeing, MicroSoft, Zappos.com (Amazon.com is the parent company), NYSE, etc. Many of the industry leaders take these opportunities to get inspired and ideas to help their business stay on top of their game.

In small – mid size privately-held businesses mostly rely on organizations such as Entrepreneurs' Organization (EO) or Women Presidents' Organization (WPO) to visit members’ businesses. Annually, you will see Ernst & Young entrepreneur award, Inc. 5000/500 Fastest Growing Companies, just to name a few to showcase successful privately-held businesses.

Discover and visualize the path.

“When a man does not know which harbor he is heading for, no wind is the right wind.”
~ Seneca

The idea of campus tour is no different than visiting famous or successful public traded businesses. These inspirational visits not just to inspire entrepreneurs, instead is to help them discover and visualize their own path. That been said, most of these tours are not focus on business model in “Value Growth.”  It is entirely up to the entrepreneurs to self-discover further. Unlike most of the campus tour that is structured, they map out requirements, career opportunities; walk on campus and actual discussion with current students.  Sometimes even visit the specific department and have discussion with them. There are very few that is structured for privately-held businesses to see the “Value Growth” business model. In some cases, mentors who own/run “extreme value creation” business can help entrepreneurs discover and visualize the path. In some cases, the right business strategy advisors can help entrepreneurs discover and visualize the path. The most important thing is recognize the fact that “Value Growth” needs to be carefully map out. If you can’t see it or don’t want to see it, the “extreme value creation” won’t happen for entrepreneurs.

Follow the path with an action plan.

“We cannot predict the future. But we can create it.”
~ Jim Collins & Morten T. Hansen, Great by Choice

The moment we stepped onto each of the university, Con-Ning was inspired and motivated. Her three new top 3 choices are now clearly aligned with her passion. Because she was so inspired by these universities and can visualize her in it. Now she is motivated far beyond just peer pressure or from her tiger mom.  After the visits, she prioritizes and planned a study-schedule. She can follow the path with an action plan. To retake the SAT in Oct., she is scheduled to take SAT subject tests (June), AP (May) and complete her Gold Scout Gold Award project before summer.

“Victory awaits him who has everything in order – luck people call it. Defeat is certain for him who has neglected to take the necessary precautions in time; this is called bad luck.”
~ Roald Amundsen, The South Pole

Exit is neither a bad word nor about losing your social status. It merely means re-positioning your NEXT JOURNEY®— whatever that might be. This requires fundamental business value in order to successfully and profitably exit the business regardless to whom they sell.

What if you don’t have access to EO, WPO, or any of these awards? Regardless if you visited other successful privately-held businesses or not, can you visualize your “extreme value creation” business model? Have someone help you map out the path to reward/compensate yourself with the risk you took to create/run your business?

In my BVD annual study you will see great VALUE creation privately-held businesses. Perhaps you have not taken advantage of reading these extreme value businesses. I invite you to read them at BVD annual study websites http://vgi168.com/BVD. Companies like Northwest Companies, the BENHAM Companies just to name a few to inspire you and help you visualize your “extreme value creation” business.

About Chia-Li Chien

Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY!” She is chief strategist of Value Growth Institute dedicated to creating business value that transforms your world. Chia-Li is also a Midas Advisor to MidasNation, a community dedicated to helping private business owners increase the value of their firms.  She is the award-winning author of Show Me The Money and faculty member of American Management Association. Her blog and newsletter was named a top small business resource by the New York Times “You’re the Boss” blog. To book Chia-Li for a workshop, keynote, or strategy session, contact her at: info@valuegrowthinstitute.com or 704-268-9378.

How Will You Scale Your Business and Build Value?

Identify resources that will yield substantial value creation

by Chia-Li Chien | Apr. 02, 2012

We’re in the Aggregation Age! The Aggregation Age marks the ability of a business to leverage their intellectual property on a scalable platform.  The business owns minimum resources with tightly controlled processes over profits, human capital and integrated supply chain, yielding substantial value creation for the owners.

Mr. Gregory J. Tigani, President of Northwest Companies, has deployed a plug-and-play business model since 2008. The Northwest Companies have grown organically an average of 25% annually for the past three years, while most businesses have struggled to survive in tough economic conditions.

The Northwest Companies essentially have been in business since 1984. In 2008, it acquired Northwest Landscape Management Inc. and Northwest Snow Management Inc., then merged them together and implemented their strategies to scale the business and broaden the market and verticals to where things are today. In the first full-year of operations, the company more than tripled the top line revenue from operations and had expanded the service footprint from a 9-state region to over 40 states with operations. Today it operates in 48 states and is continuing to expand its client base nationally.

Northwest Companies service corporations with multiple locations, such as restaurant chains, banks, regional daycare centers, hospitals and utility companies. Most of their customers are Fortune 500 firms. They handle exterior facilities management as well as exterior facilities development and snow management.

Mr. Tigani leverages one of their intellectual properties, a Service Reporting System (SRS), which provides real-time status and reporting to his customers, as well as manages subcontractors in job delivery.  At the time of this writing, the Northwest Companies has 32 employees and 1,200 sub-contractors (per 1099 info). Mr. Tigani is projecting to more than double his business by 2015. That means double the number of employees and triple the number of sub-contractors.

A tight control on niche, relationships, cost, risk and processes on a scalable platform allows Mr. Tigani to grow in substantial value without diminishing the capital base. Within this system that scales well, he is able to maintain or even increase the level of performance or efficiency when tested by larger operational demands. (In a corporate sense, a scalable company can maintain or improve profit margins while sales volume increases.)

With a one-year long sales cycle, Mr. Tigani’s sales team has a full pipeline to bring in works beyond their current capacity. Their supply chain is equipped with a streamlined subcontractors vetting process. It allows them to build up top quality inventory to meet their customer contracts. With a three-tier structure for service providers or subcontractors, the better subcontractors perform the more protected stream of income for these small businesses.  Each of these small businesses or subcontractors has a minimum of 12 people in their team.

Essentially, Northwest Companies takes care of all the sales and marketing for these subcontractors. This powerful platform not only creates jobs throughout the U.S. but also allows an attractive buying power for any of their supplies such as premium Anti/De-icing Clean Tech products. Not to my surprise, another global player in the industry is currently using the SRS. Absolutely brilliant!!

Mr. Tigani has five children, a cancer survivor and an ex-executive of Jefferies & Company. He relies on his deep roots of M&A leadership experience to successfully scale his business. His wealth of knowledge and experience in measuring business success, its structure and team, has allowed him to create this successful venture in a very short time. As a Business Architect, Mr. Tigani humbly credits his success through active learning in leadership, operations and strategy.

“My goal as the visionary and CEO is to provide sustainability of the organization through the leveraging of systems, technology and skilled management,” said Mr. Tigani. His focus in human capital development creates a solid foundation of management infrastructure, which allows him to scale rapidly.

Leveraging Mr. Tigani’s core competencies, including a good judge of character, trusting his instinct in management, knowing daily cash reserve position and being proactive in actions from Key Performance Indicators truly make him the ultimate solution guy. He has become an expert in the business of substantial VALUE creation (by my definition of more than 5X of current value).

Mr. Tigani recommends three critical success factors for all entrepreneurs:

•    Build great customer relationships beyond the current network and consciously diversify your customer base.
•    Leverage competencies and dedicated talents or human capital, including employees and subcontractors.
•    Control value growth without diminishing capital base.

Just like any other great investor, Mr. Tigani is already planning beyond 2015. His vision is to have more companies like Northwest Companies in his future venture portfolio. With solid customer relations, substantial financial value (from the investors’ point of view) and management infrastructure (from employees/contractors’ perspective), this secret and powerful Triple Bottom Line formula solidly exists on the scalable platform Mr. Tigani has created. 

It is not IF— it is WHEN—can a business owner exit profitably in his or her own terms? I want to remind all privately-held owners out there to take a closer look at your own business(es). Regardless of the performance of your Triple Bottom Line formula, you must you look beyond three years into the future. Have you done that yet? If yes, what is your definition of substantial VALUE creation from your business? And can it actually meet or exceed your financial independence expectations? If your business is not built on a scalable platform, then how will you build it in value in order to embark on your NEXT JOURNEY®?

Nominate a business!

This featured business, Northwest Companies, was nominated by Rene & Dick Timpone of NuSkin/Pharmanex. Would you like to nominate customers, business colleagues or other businesses you are associated with? If chosen, these businesses could be featured in our blog just like the business you read about above. Check out our annual BVD study/interview at http://vgi168.com/BVD.

About Chia-Li Chien

Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY!” She is chief strategist of Value Growth Institute dedicated to creating business value that transforms your world. Chia-Li is also a Midas Advisor to MidasNation, a community dedicated to helping private business owners increase the value of their firms.  She is the award-winning author of Show Me The Money and faculty member of American Management Association. Her blog and newsletter was named a top small business resource by the New York Times “You’re the Boss” blog. To book Chia-Li for a workshop, keynote, or strategy session, contact her at: info@valuegrowthinstitute.com or 704-268-9378.

How To Attract The Right Customers With Effective Pricing Strategy?

by CHIA-LI CHIEN | Mar. 24, 2012

Entrepreneurs Supporting Entrepreneurs networking event. March 24, 2012 9:00 am to 1:00pm (ET)

Presented by Chia-Li Chien Value Growth Institute

[Sample Clip]

Presentation Handout:

Striving for Excellence in Every Aspect of Life and Business

The Benham Brothers set an example for every business owner

by Chia-Li Chien | Mar. 15, 2012

What does a typical famous sports figure usually do when coming out of retirement? Well, the famous David and Jason Benham (see picture on left for Jason's family), the identical twin brothers who retired from the St. Louis Cardinals, know their path with more clarity than anyone else.

“God favors and opens the doors, but business excellence keeps you there!” said Jason Benham. Both brothers strive for excellence in every aspect in life including business, family, community and spirituality.

See below for a timeline of accomplishments from the team best known as the Benham Brothers of the BENHAM Companies.

Spotting a need and meeting a need. The Benhams began to notice billboards with messages such as “Bankrupt OK,” or “Zero money down to move you into your dream home.” "Even while already involved in conducting typical real estate transactions, the Benham brothers spotted this need in the marketplace in 2003."  This need is not defined well in the story.  It is explained later on in the paragraph:  Suggestion:  the Benham brothers anticipated the need for liquidation and foreclosure specialists in the marketplace back in 2003.

What would banks do if they had an influx of inventories they needed to liquidate? At the time, the answer they got from the banks was. “That’ll never happened, and even if it did, we’ll have real estate brokers sell it for us.” Once the brothers spotted the need, they specialized their business in liquidation and foreclosure properties for banks.

Leveraging Market Makers. In addition to the niche market the Benham brothers entered in real estate industry, they leveraged and built solid relationship with their market makers. Market makers are entities that have exactly your ideal target customers (in their case, domestic banks). The Benham brothers became a key relationship management tool for the market makers in their business.

Capitalizing on their know how – The now formidable real estate team began to automate liquidation and foreclosure management, and tracking processes. “Process before profits,” vowed David Benham, when they knew had to have the ability to process forty foreclosure properties as fast as 400. They intuitively knew to have a system in place that could manage all details of foreclosure properties and its tracking. Why? Their brand promise was to handle liquidation for banks in a quarter of the time of any other brokers in town. Having a solid system as a foundation allows them to speed to response with every bank they work with, regardless of the profitability of the properties.

“I never thought about exit strategy before” David Benham told me during my third annual BVD study/interview with them. They learned that term while both David and Jason filled out the on-line BVD assessment. If you take a close look at the timeline above, you will notice the Benham brothers had already at this point used four different exit/transfer methods without realizing it.

Scale the business model with a solid foundation to handle volume. The Benham brothers have leveraged their solid proprietary online business management system, which they can scale easily. They franchised their business model in 2007, using one of twenty-even exit strategy methods:

1) External Transfer - Outside (Continued). Credit their solid foundation of a system or their know how, but within two and a half years, the brothers had reached the mark of 100 offices nationwide. (See Exit 1 in above table.) (Note: you can see all twenty-seven exit/transfer methods in one of my recent articles Plan for the End Game and Reward Yourself for the Risk.)

Meanwhile, the Benham brothers knew to stay focused on only investing in their core competency. They used another of the twenty-seven exit strategy methods: 2) External Transfer - Outside (Retire). They profitably sold an entity that was not their core competency. (See Exit 2 in above table.)

In 2009, the Benhams used another one of the twenty-seven exit strategy methods: 3) Internal Transfer - Charitable Trusts to create the BENHAM Foundation that allows them to continue on their Reverse Missioneering quest to spread their spirituality message around the globe. (See Exit 3 in above table) They re-circulate portions of their profit back into the local community where their facility is located. They currently have one model company fully functioning with seventy-five employees in Davao City, Philippines. They will soon to break ground on a Ghana location.

In 2010, they used another one of the twenty-seven exit strategy methods: 4) External Transfer - Outside (Continued), by merging their shared service outsourcing entity with Flatworld Solutions. (See Exit 4 in above table)

If you are like me, you are by now wondering how the Benham brothers always knew what to do and how to continuously be successful in all aspects of life. They humbly credit their success to their father, Flip Benham, who leads Kerygma Church in Concord, NC.

“My father taught me everything in life; not to be just a business man but to be a biblical thinker,” Jason Benham says. Because of their devotion to their purpose and passion in life to make an impact, they created and still follow the three core values of Benham Companies:

•    Produce Value
•    Be Faithful in the Little Things
•    Breathe Life

These three core values are the calipers used to measure the BENHAM Company’s success.

David Benham is a father of five and married to Lori (see the picture on the left). Jason Benham is a father of four and married to Tori (see the picture top of this article). They have already started passing on their beliefs to their children by not only having them involved in their philanthropy efforts but also these core values. The couples strive to position the next generation for continuous success in life as well as for making impact in the world.

The Benham brothers drive their business value up by consistently re-aligning the three business value factors, which include 1) personal timing 2) business timing and 3) economic timing. They stay true to their three core values and use them as the rule for their journey.  Along the way, they are leveraging as many exit/transfer strategy methods as possible to properly claim their reward by compensating themselves for the risk they took in creating and running their businesses. Meanwhile, they continue to re-circulate portions of the profit back into the local community where their businesses operate.

“Exit” is neither a bad word nor losing your social status or ego. It merely means to re-position yourself for your NEXT JOURNEY®! With several business entities,  the Benham brothers had already used four different exit/transfer methods without realizing it. Think about it—how many exit/transfer methods can you use in your business(es) so that you too can properly claim the reward by compensating yourself for the risk you took in creating and running your business(es)? Perhaps just like the Benham brothers, you too can be a part of or create a movement to better our community at the same time.

Nominate a business!

This featured business, Benham Companies, was nominated by Chia-Li Chien, Chief Strategist of Value Growth Institute http://valuegrowthinstitute.com. Would you like to nominate chamber members, customers, business colleagues or other businesses you are associated with? If chosen, these businesses could be featured in our blog just like the business you read about above. Check out our annual BVD study/interview at http://vgi168.com/BVD.

About Chia-Li Chien

Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY!” A passionate leader of small business strategic equity value creation and implementation mastery. She is a globetrotting strategist, speaker and author. She is CEO and chief strategist of Value Growth Institute dedicated to creating business value that transforms your world. Capture meaningful personal wealth. Position your business for future transitioning.

Chia-Li is also a Midas Advisor to MidasNation, a community dedicated to helping private business owners increase the value of their firms.  She is the award-winning author of Show Me The Money and faculty member of American Management Association. Her blog and newsletter was recently named a top small business resource by the New York Times “You’re the Boss” blog. You can watch a FREE video entitled "Navigating Through Today's Turbulent Business Waters!" at http://valuegrowthinstitute.com/vgi/webinar

Use Pricing Strategy to Build Your Business in Value

Determine the best strategy for your business, because profits matter!

by Chia-Li Chien | Mar. 07, 2012

What is the most innovative company in the world? My answer would be “Apple!” Most of Apple’s competitors basically just follow Apple’s lead in consumer electronic and technology trends. This allows Apple to set future trends—which means they continue to keep a majority share of the market. Apple does a lot more than make products. Their continued product innovation keeps their buyers loyal and interested.

In the chart below, you’ll find “Quality” on the Y-axis and “Convenience” on the X-axis. Where do you see Apple in this chart—Box A, B, C or D? If you answered Box A or on the top zone of “Quality” axis, you’re correct! This allows Apple not only to be the trendsetter for their competition (such as Android technology) but also allows Apple to set the PRICE in the market.

When was the last time you went into a Walmart? Where do you see Walmart in this chart—Box A, B, C or D? If you answered Box D or the far right zone of the “Convenience” axis, you’re correct! Walmart is classic example for profit on volume—very large volume. They compete in both convenience and price.

Where do you see your business in this chart? Is it in box A, B, C or D? Wherever you place your business, please don’t find it in Box B or Box C. Why? Because in Box B, high quality and high convenience really don’t mix well. Are you competing in price or not? Box C, low convenience and low quality—who wants to be there?

I’ve worked with many clients over the years, and have noticed that entrepreneurs play in two pricing zones. One is to declare a price war with competitors. The other is to name your price in a narrow niche with a subculture. 

If you enter a price war, then you are in competition for “convenience” (or Box D.) Make it convenient to buy from you—but you must be prepared with volume if you want to protect your profit margin. If you are in the “name your price zone” (Box A), then you should be focused on providing the quality, aura and experience your buyers want. No matter which pricing zone you’re currently in, it comes down to how much profit margin you, as the business owner, want to protect.

The bottom line is that buyers, customers and/or clients are armed with the knowledge of where to get the goods and services they want, regardless of the economic condition. People are really smart and savvy when it comes to recognizing the right product for them. 

So whether you play in Box A: Quality or Box D :Convenience, do you see how your price is quickly determined depending on which axis you play in? In the other words, you either want to be the Apple of your industry or the Walmart of your industry. The choice is yours.

<=====Case Study P1=====>
Ann (not her real name) has owned a heavy cutting machinery shop (not her real product) since 2001. She typically sells forty pieces of machinery a year, and the average price of the machine is $100,000. To compete in her industry, she wants the sales process to sell 40 the same as 400. She implemented a process and automated a system to handle this volume. In addition, she capitalized her business process by implementing a franchise distribution channel. Three years after implementing the systems and distribution channels, she now sells on average 5,000 pieces of machinery a year. Which Box (A or D) do you think she plays in?
<=====End Case Study P1====>

The Role of Your Business Model

Even if you’re clear on which zone you play in, before you jump to the question of “how should I price my products (include services)?”, let’s take a look at one big picture—your business model map. 

If I were to ask, "What does your business do?" you could probably answer in thirty seconds. However, if I were to ask, "What is your business model?" you might pause a while before coming up with an answer. It’s not just you. A lot of business owners can't effectively answer this question.

There are three components in a business model:

1) Your business purpose
2) A list of your core competencies
3) The profit formula

Most businesses have misaligned their business model, so they don't have a sustainable economic engine regardless which price zone they play in.

The first component in a business model is your business purpose. Business purpose has two parts:

1) Value Propositions (why they buy from you)
2) Customer Segments (whom you sell to)

Leverage a Customer Proposition

“Price affects positioning and the kind of customers you attract,” says author Dan S. Kennedy in his book No B.S. Price Strategy. This book describes the concept of five kinds of propositions and how to incorporate them into your business:

1) Unique Selling Proposition (USP)

•    Why should your prospect buy from you vs. any and every other option available?
•    Why should your prospect buy from you you regardless of price, be unconcerned about price, and never consider comparison shopping based on price?

2) Unique Value Proposition (UVP)

•    The value of the benefits to the user. For example, low price, design, brand, new, performance, customization or just “getting the job done.”
•    Money to be made or saved through ownership of the product (include service). For example: cost reduction, risk reduction.

3) Irresistible Offer. What do your customers find irresistible to buy from you?

4) Unique Safety Proposition (USP) for example “money back guarantee.”

5) Unique Experience Proposition (UEP) for example coffee at Starbucks vs. coffee at A gas station. iPhone vs. LG smart phone, etc.

* Reference: No B.S. Price Strategy by Dan S. Kennedy

The effective use of these five propositions can boost conversion ratio and ultimately result in more revenue for your business.

<=====Case Study P2====>
To attract prospects or distributors (franchisees), Ann focuses on “speed of response.” This means her team can close a deal in a quarter of the time of her competitors. She offers a double your money back guarantee if her machine doesn’t demonstrate a positive ROI for the buyer within a one-year period. Given this information, which of the five proposition(s) above would you say she used?
<=====End Case Study P2====>

Revenue Streams

When tackling the right pricing strategy for your business, you must consider leveraging four types of revenue in your business in order to create business value or wealth for you, the owner. There are four types of revenue:

1.    New Business – This is the typical revenue generated by your business. For example, if you build houses for your clients, that is your regular revenue business. If you also sell pool products, those products create new business revenue.

2.    Repeat Business – Don’t we all love repeat business from the same clients? We spend so much time and money chasing new clients, but retaining them is key. Building a loyal customer base gives you more time and money to streamline and improve your customer services, which improves your customer loyalty ... which gives you more ... well, you get the picture.

3.    Residual Income – If you sell auto insurance, your policyholders pay their premiums each year. When they renew, you receive the residual income without really working too hard, except to maintain that relationship. That is residual income.

4.    Non-Residual Income – If you have a virtual sales force, chances are you will have non-residual income. For example, if you’re in a multitier marketing business of let’s say, vitamins, when your downstream salespeople sell products, you get the non-residual income. But to ensure they continue to sell on your behalf, you have to maintain the relationship and continue to offer sales support to them. But you don’t actually have to sell the products. Franchise businesses and software licensing are similar in this way as well.

* Reference: Show Me The Money: Run Your Business like a Prosperous Investor by Chia-Li Chien.

<=====Case Study P3====>
When Ann structured her revenue streams, in addition just selling to one customer at a time, she created a small franchised annual loyalty fee. Now she has a profit sharing model in place with her franchisees. She also gives every new customer who buys a piece of her machinery a 10% discount on any parts. So, what types of revenue streams did Ann use in her business model?
<=====End Case Study P3====>

At this point we’ve been through the things that impact pricing strategy and eventually attract the right type of customer to you. Remember the three components:

1.    Quality vs. convenience zone
2.    Five types of selling propositions within your business model/business purpose
3.    Four types of revenue to incorporate into your pricing strategy

How many tools from this article can you use today? Join us for further discussion by signing up for our ninety-minute webinar that will help you increase revenue and your business value.

Join Chia-Li for the ninety-minute live webinar!

In this 90-minute webinar, Chia-Li will cover three things pivotal to your business success:

1. What makes a business valuable? (from investors’/buyers' perspective)
2. Mistakes to avoid while building your business
3. Strategies you can put to use today to begin building value for your business

In the webinar, we will also examine another question—do Profits Matter?
How can you build your business in value now for future financial independence?

And, we take a closer look at these core questions about how you can build business value:

Why are you in business?
Are you really making more money?

If you are serious about putting in the time and work required to build your business in value so that you can have financial independence in the future, then the ninety minutes you set aside for this webinar could be priceless.

And exclusively for those of you who have read this article and who want to know more about how to put these principles to practice in your own business, click here now for $160 off the webinar registration fee: http://vgimbv091511.eventbrite.com/?discount=pmlive168

Being a business owner is challenging. Being a successful business owner is even more challenging. This webinar can help you build value in your business—whether you’re just beginning or are ready to go to the next level.

Register today and receive $160 off for priceless advice and information from Chia-Li’s unique and valuable perspective!

Ask Jolly about your business question!

Do you have a question about your business for Chia-Li? Tweet your question to @ChiaLiChien on Twitter, using the hashtag #ProfitsMatter and she will answer you there or via email if the answer is detailed.

About Chia-Li Chien

Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li like “JOLLY!” She is Chief Strategist at Value Growth Institute, dedicated to creating business value that transforms your world. Chia-Li is also a Midas Advisor to MidasNation, a community dedicated to helping private business owners increase the value of their firms. She is the award-winning author of Show Me The Money and faculty member of American Management Association. Her business blog and newsletter was recently named a top small business resource by the New York Times “You’re the Boss” blog.

Answers to case studies:

P1: D
P2: USP, UVP, Irresistible Offer & USP
P3: New business, Repeat business, Residual income & Non-residual income