The right question at the right time can be a magical moment in your business.
Small changes at pivotal times have great impact on your financial sustainability, giving you more freedom and certainty as you grow.
I’ve found these questions to be helpful for businesses like yours.
There are six categories – Revenues, Costs, Automation, Sensitivities, Acquisition/Retention and Service Design.
Some of them will pass you by, and others will hit a nerve – which is exactly what you need.
When a question strikes you as irrelevant or intriguing, ask yourself if it couldn’t offer something of value.
At the very least, some of these will be seeds that germinate over the next few weeks.
How can we boost our revenue streams?
This is a great question for every entrepreneur, perhaps a little broad.
They say “When it’s sunny, prepare your shelter”, and revenue streams are a great example of this principle – you have to get started before it becomes urgent.
Some people find sales to be an icky field, but boosting revenue is a much friendlier way of thinking about it – we want more happy customers.
Could we sell a different product or service?
Not many entrepreneurs like to acknowledge issues with their current product/service lineup, but think of it as dreaming up something even better.
What could you create that would further delight customers – existing or new?
Think of George Lucas going from Star Wars director to owner of a toy empire; he saw an opportunity to extend the magic from the screen into something tangible.
What would be some logical extensions of your current offerings?
Is there something that would act as a memento?
Something that could let people interact with your brand at a lower price point?
Could we charge more for what we currently sell?
Marc Andreesen tells startups to raise their prices – they try to be cheap when customers want them to be great.
This is a temptation for a lot of businesses, potentially yours too; to go in with low prices to avoid rejection.
Raising prices on your current offerings has to be done in the right way, and has the potential to boost your margins as well as your credibility.
In terms of prices, what do customers compare us to?
Dave Trott has a great story about positioning in supermarkets:
“Years back I was speaking to someone at Benton & Bowles.
They were explaining a problem they’d had on Jacobs Mallows.
These were little biscuits bases, covered in chocolate, topped with jam, then covered in marshmallow and coconut.
They weren’t selling well at the time.
No one could work out why.
They tasted great, people loved them.
So the planner did something that clever people never do: the obvious.
He went to the supermarket.
He looked at the product on the shelves, and watched how people behaved.
People would come along to the biscuit section.
They’d look at the price of Jacobs Mallows.
Then look at the price of comparative biscuits.
They’d realise they could get a packet of 16 custard creams for the same price as a packet of 6 Jacobs Mallows.
So they’d buy the custard creams.
That was the insight.
The problem wasn’t the product.
The problem wasn’t the brand.
The problem was the competitive set.
What came next was the idea.
Benton & Bowles suggested to the client that they move the Jacobs Mallows along to the cake section.
Then the planner went back and watched the shoppers.
They looked at the price of the Jacobs Mallows.
They looked at the price of comparative cakes.
They realised they could get a box of 6 Jacobs Mallows for the same price as 2 cakes.
So they bought the Jacobs Mallows.
That was an insight that lead to an idea.”
What are you being compared with?
How might you encourage customers to compare you with something else?
Something which highlights your strengths?
Could we sell to a different type of customer?
Is it possible that you have a second audience that is yet to be discovered?
Think of the iPad – originally designed for work, but turned out to be an incredible tool for distracting children in restaurants.
Or look at Old Spice, who tailored their advertising of men’s deodorant to their true customer: women in the supermarket.
We did this at The Difference Incubator, moving from people who want to be in an incubation program, to people who want us to run an entire incubator for them.
Who else could you delight?
Could we boost our market share?
This is the “knife fight in a phone box”, the battle between you and your direct competitors.
How might you increase your market share?
By getting existing customer to switch (e.g. energy providers)?
Or by diverting new customers as they enter the marketplace (e.g. Commonwealth Bank offering bank accounts for children)?
Could we increase the consumption per customer?
I believe one of the reasons Nespresso grew so quickly isn’t just that they sold cheap coffee machines – I think they tempted people into drinking more coffee.
They didn’t just replace a café or plunger, they also made it easy to have a second latte on a Saturday morning at home.
Alka Seltzer created a new jingle to encourage customers to use two tablets at a time, thus shortening the time between purchases.
How might you identify ways to give customers more of what they really want?
Could we increase the return frequency of our customers?
What makes your customers come back to you?
Some brands use clever prompts to spark an idea, like dentists sending reminders in the mail, or websites that send you promo codes for 15% off your next purchase.
Retaining customers is cheaper and easier than attracting new ones, what offer could entice your old customers back in the door?
Could we create a higher value product or service?
Cirque Du Soleil was famously created around the question of a $100 circus ticket, and anyone who has seen their show knows they overdeliver on that promise.
What could be the equivalent for your industry?
What could you create that sits at a higher price point, that is so good that people will be thrilled to buy it?
How can we reduce our costs?
Costs are like fingernails – you have to trim them constantly.
You’re going to have to summon the strength to do this, there are very few convenient times to cut back your expenses, especially when the reduction means changing your daily routines or your staffing.
It might be done in broad sweeping cuts, or shrinking all costs at the micro level.
Could we completely drop some expenses?
Some expenses can be cut altogether – subscriptions you aren’t using, roles that don’t require staffing,
professional services you no longer need.
Maybe you drop a product or service, or exit a market that you aren’t able to dominate.
Greg McKeown calls this “Essentialism”, scaling back your energy on all the secondary projects in order to double down on what’s most important.
Could we shrink some expenses?
Where might a 10% trim be an option?
American Airlines removed one olive from each business class salad, saving $40,000 a year.
Delta went from cutting their limes into 1/10ths to 1/16ths, saving $500,000 a year.
UPS plot their driver’s routes using software that gave only right turns – saving 20 million miles off their deliveries and gaining an extra 350,000 packages delivered a year.
IKEA design their furniture to fit in flat packs and use interchangeable parts, massively shrinking their shipping and inventory costs.
Each of these approaches stemmed from the same root idea – what do our customers care about, and what don’t they see?
You can use this to avoid layoffs and painful decisions, but you have to apply it broadly.
A small cut to a small expense doesn’t have much impact.
Could we change the format of some expenses?
Once you understand your competitive advantage, you can outsource your non-core tasks to specialists, and to start offering other groups the chance to use your services for a wholesale price.
This saves you money, and makes the most of your spare capacity.
We’re not only focused on the total costs, but the ways in which your cash gets tied up.
E.g. expensive equipment might be the lowest total cost over a five-year period, but it requires huge upfront investment and gives you very little room to move.
Renting equipment might seem costlier over the long run, but it gives you the freedom to change your business model based on market feedback, and means someone else carries the risks associated with the machinery breaking.
What might benefit from a change in cost structure?
How can we make money while we sleep?
Michael Caine once told his friend Vidal Sassoon the secret to wealth:
“It’s simple. You must have something that is working for you while you are asleep. For instance, successful musicians have got it made, their records or music are being played all the time, every day, somewhere in the world. No matter what they are doing, they are still making money. You are a great hair-dresser, but you can only charge so much for a hair-do and you can only stand on your feet for so long so there is a ceiling on the amount of money that you can make. So, you’ve got to make shampoos and other products that work for you while you are asleep”
That’s some brilliant advice.
What’s your way of making money while you sleep?
How do we automate customer acquisition?
The wonderful thing about digital marketing is the ability to rapidly acquire new customers.
e.g. if every 100 ads gets five clicks, then 1,000 ads will probably get 50 clicks.
That means the decision to add money to your advertising budget can lead to very fast results, and if you structure a campaign properly, it can be expanded with little extra effort.
This works for in-person processes too; how might you systematise the way you naturally meet new prospective customers?
Can you teach your team a process that can be replicated without you being at each meeting or each call?
How do we automate the “engage” stage?
Once your customers have signed up, how might you treat them well without your direct involvement?
Could a series of emails, reminders, online resources, videos or templates replace you?
This reduction in cost can allow you to reduce prices, boost margins, accept more customers, hire more staff, and scale your organisation.
It has the added benefit of ensuring all customers receive the same high standard of service.
How do we replicate the skills of our most pivotal resources?
Bottlenecks are dangerous for a growing business like yours, so it’s less painful to redesign your resources now rather than when you’re much bigger.
Your business does not own anybody, and people are bound to come and go for good reasons.
You need a reliable way of creating or recruiting good staff, and need to work out how to capture the insights of your best people in order to train their future counterparts.
This might involve documenting processes, splitting roles into smaller parts, or dropping parts of the business that are dependent on the skills of a particular individual.
What are our sensitivities?
Your business will have some elements that are “sensitive” – small changes which have unusually large impacts on your bottom line.
Some businesses are highly sensitive to production costs (like manufacturers), price increases (like petrol stations or mortgage brokers), sensitive to staff departures (Tesla losing Elon Musk, Apple losing Steve Jobs), sensitive to order volumes (car dealerships, restaurants) or sensitive to quality drops (Melbourne cafes, mobile phone companies).
The important thing is that you know what your sensitivities are, so that you can proactively reinforce them.
It might be through building your customer pipeline before things become urgent, actively recruiting for additional team members, vigilantly monitoring production costs, or implementing a Toyota style focus on quality control.
Financial models are good for identifying these sensitivities – start adjusting numbers up or down, and see the impact on the bottom line.
Any area where a small adjustment creates a large swing will require your attention.
The three areas I’d look at first are cost of production, customer relationships and key staff members.
What small changes can ramp up or decimate our margins?
The forces of business will see customers look for discounts, and suppliers push for cost increases.
These aren’t always easy to spot, and your margins can be subtly eroded by a few minor changes.
Could you focus on high margin goods and services?
Low margin businesses require high volumes of sales, so they are sensitive to small changes and competitors.
The secret of high margin businesses is identifying a large gap between cost and value.
Cost is what your business pays to make something, value is what it’s worth to your customer.
What could that look like for your industry?
Acquisition & Retention
Which acquisition mechanisms would help us grow?
The default assumption of most entrepreneurs is that customers will continue to show up in the same channels that they’ve used so far.
Could an acquisition mechanism give you more customers with less effort and in less time?
What sort of campaign or tool could make this possible?
e.g. dedicating energy to social media, freeing up sales staff, partnering with other brands, driving online traffic to a landing page, increasing your advertising presence, or even creating an entry level product?
Where are we stealing our customers from?
Your next 1,000 customers are shopping somewhere else right now.
Perhaps they’re not yet in the market for what you sell, perhaps they’re shopping with a competitor.
Either way, what persuades customers to try something new?
There are switching costs involved in moving to your business (either financial costs or mental energy costs), so you’re going to have to approach these customers with an enticing offer.
Why do people choose us over the competition?
Do you have know how customers evaluate their options?
The ones who picked you – how did their decision making process work?
The ones who almost picked you – what was their process like?
It might be that customers aren’t fully understanding the strengths of your company, or are setting expectations too high.
It might be that customers are drawn to irrelevant details, or are led astray by short term incentives.
By understanding their processes, you can change your marketing to put your best foot forward.
What can we do to increase our customer retention?
It’s not nice to admit, but a lot of us don’t think about keeping the customers we already have.
We measure the probability of acquiring new customers or winning new deals, but don’t apply that same thought process to the probability of retaining customers.
Small acts of thoughtfulness (discounts, rewards, conversations) can have a massive payoff in the future.
Are we taking steps to retain our most valuable customers?
This is doubly true for your most valuable customers – the small handful of people who are responsible for the majority of your profits.
Are you paying particular attention to their happiness?
Where could you spend some time and money on them, even before you know if it will pay dividends?
How do people feel when they shop with us?
We tend to measure purchases, clicks and foot traffic, but this misses an important dimension – the customer’s emotions.
Are they excited? Confused? Nervous? Aspirational?
There’s a good chance our sales process can be improved, particularly to make our prospective customers feel more comfortable as they assess their options.
What can we do to improve how we’re perceived?
Once you know what labels customers are assigning you (e.g. cheap, weird, hippy, overpriced, confusing, old fashioned), you might consider ways of changing these perceptions.
This might alter your branding, choice of partners, sales channels, or how you frame your products and services.
What can we do to further delight our customers?
Are there ways in which you could turn wavering customers into fans, or content customers into ambassadors?
By thinking creatively about how you treat people, you’ll indirectly improve your word of mouth, reputation and retention.
I suspect that a few of these questions intrigued you or annoyed you.
My suggestion is to follow these rabbit holes, and use them to make changes to your businesses.
They are inexpensive to test, and incredibly lucrative if they work out.