Third Profit Secret of Entrepreneurs
This is the third article in a series on Profit Secrets of Entrepreneurs. The first profit secret of entrepreneurs was “hope for the best, plan for the worst.” The second installment in the profit secrets of entrepreneurs was to tightly target your niche market. Now, in this, the third installment of the Profit Secret of Entrepreneurs we’re going to talk about the great equalizer: Time.
THIRD ENTREPRENEUR PROFIT SECRET:
TIME MANAGEMENT IS KEY
I’m sure you’re familiar with the Pareto Principle or the 80/20 rule. According to Wikipedia,
“The Pareto principle (also known as the 80-20 rule, the law of the vital few and the principle of factor sparsity) states that, for many events, 80% of the effects come from 20% of the causes. Business management thinker Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed that 80% of income in Italy went to 20% of the population.”
The Pareto principle is a commonly accepted truth in business, especially when it comes to TIME MANAGEMENT.
When you start thinking about the 24 hours you have available each day, and the 7 days you have in each week… then we begin to delve into a realm where the 80/20 rule truly comes into it’s own.
You only have so many hours in each day. As an entrepreneur, time is by far your greatest asset. You can always raise more capital, get more funding, sell more product or stock to get more money. The one thing you can’t beg, borrow or steal is more time.
Keep the 80/20 rule in mind as you build your business.
Using the 80/20 rule for time management means focusing your time on the most profitable activities for your business. 80% of your effort will be spent on activities that produce 20% of your income and conversely, the other 20% of your time will be spend on activities that contribute to 80% of your income.
Try to look at your daily activities through this lens. The purpose of this is to reveal what activities are most profitable for your business and for you to devote your time and energy to those activities.
If this sounds like BASIC BUSINESS 101, consider the story of the Big Mac. The Big Mac is a hamburger created by the fast food chain McDonald’s. in 1975, Charles Rosenberg, Creative Supervisor of the Dan Nichols team at Needham, Harper and Steers, Chicago came up with the catchy and popular “pre-rap” way to describe the burger.
“Two all beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun.”
It was catchy and became a complete phenomenon that is still remembered 30 years later. However, there’s something you might not know about the Big Mac: it’s the least profitable item on McDonald’s menu.
Talk about the 80/20 rule coming back to bite you! Probably the most successful and enduring ad campaigns of the 20th Century was written to promote the McDonald’s version of a loss leader.
I’m not sure the 80/20 rule is a “physical law” but it’s a great mental exercise to keep you focusing on the most profitable activities and products in your business. Focusing on the top profit producing activities and products is the best way to deliver profits to your business!
Second Profit Secret of Entrepreneurs
This is the second installment in our series of Profit Secrets of Entrepreneurs. Some people believe that entrepreneurs are born, not made. However, there’s also another saying that says, “Wisdom is learning from other people’s mistakes!” If you’re all for learning from other people’s mistakes… read on!
In our first installment of Profit Secret of Entrepreneurs is: Hope for the Best but Plan for the Worst
SECOND ENTREPRENEUR PROFIT SECRET:
IDENTIFY YOUR TARGET AUDIENCE
We entrepreneurs are big thinkers. BIG-BIG-BIGGER IS BETTER! So it’s not surprising that one of the subjects that makes most entrepreneurs “edgy” is to think of narrowing the focus for their business.
When entrepreneurs come to me to develop their website, the first question I ask is “Who is your target audience?” For many aspiring entrepreneurs the knee jerk response is, “Everyone! Everyone is a potential customer for my product or service.”
The four little words that will doom your business before it starts are these:
MY CUSTOMER IS EVERYONE.
So if you have a great product or service that you want to introduce to the world, begin by identifying WHO your target customer for that product or service will be.
There’s no doubt that people today are suffering from information overload. As a result, your potential customers’ brains are working overtime to filter out messages deemed “not relevant” at any given moment.
When an entrepreneur defines the target audience as “everyone,” that means it’s virtually impossible to create a message that can break through the filters of the mind of the target audience.
By choosing to target “everyone”, you condemn your advertising and marketing messages to promote your product or service to the junk pile, along with all the other “garbage” messages that are being filtered.
Remember, advertising never forced anyone to buy anything. If you cannot create a message that addresses the specific needs of your target customers, you simply will not make it through their filters. Instead of netting 1 out of 10 new customers using the “more eyeballs” approach, suddenly your success rate drops precipitously.
The entrepreneur who wants to go after everyone might say, “Well, even a tiny number - like .1% of 1,000,000 - is still a respectable 1000 customers. This is equal to 10% of the 10,000 of the tightly targeted message, so I’ll still get the same effect by targeting everyone, right?”
Unfortunately, the answer is no. The reasoning above disregards not only the fact that the broadly targeted message’s chances of “connecting” with customers is dramatically decreased but also the increased cost of reaching more “eyeballs” or how much it costs per-person to reach each potential customer or “eyeball.”
By tightly targeting your niche market in the beginning, you can conserve cash (see the First Profit Secret of Entrepreneurs) and make better use of your advertising and marketing dollars. Doing that is an effective way to deliver profits.
First Profit Secret of Entrepreneurs
It’s been said that entrepreneurs are born, not made . While that may or may not be true, every entrepreneur can learn the secrets to creating businesses that delivers profits.
FIRST ENTREPRENEUR PROFIT SECRET:
Hope for the Best but Plan for the Worst
Entrepreneurs are a plucky bunch. As a rule, they tend to define the glass that is half full as “practically overflowing.” This enthusiasm is a necessary trait so that the entrepreneur can endure the long hard road to profitability. However, the time to “reign in” this trait is during the planning stage.
Things will inevitably go wrong on your journey. It’s going to be harder, take longer and cost more money than you think.
As you create your business plan, it has to be a plan based on the worst case scenario. Think of creating your business plan as creating a survival strategy for your business. Most business plans are put together with the assumption that everything will go according to the plan’s projections. If that’s the case with your business plan, here’s a wake up call. That’s not a business plan, it’s a work of fantasy fiction.
If your business plan will only succeed in the “best case” scenario, scrap it now. The plan that will only work if everything goes right is bound to fail because everything won’t go right.
Instead, assume that everything will cost more than you planned - that your time to market will be 2-3 times what you think it will be and that your market share will be half of what you project.
Is there any water left in the glass? If so, THEN you’re on your way to creating a profitable business.
The First Profit Secret of Entrepreneurs is : Plan for the worst but expect the best.
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