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Tag: Profitability

  • New Survey Find a Huge Difference in Profitability for E-Commerce Companies That Embrace AI

    Despite juggling stubbornly high prices, ever-shifting tariff policies coming out of the Trump administration, and an increasingly dour mood among shoppers, digital-first consumer brands have actually been having a good year. 

    Over the past 12 months, returns have been climbing with 73 percent of e-commerce businesses reporting a significant or moderate increase in profitability. That’s according to a new survey commissioned by Mercury, a San Francisco-based financial technology company that provides banking services to more than 200,000 startups. The report, which was released on Thursday, polled 750 leaders from e-commerce businesses in the U.S. during the months of October and November.

    The survey found that larger and younger businesses tended to overperform. Among companies with more than 500 employees, the share reporting a significant or moderate increase in profitability rose to 87 percent. Some 78 percent of businesses that had been in operation for less than 10 years said that returns rose, compared with 61 percent of businesses 

    When it came to upping margins over the past year, another major differentiator was AI adoption. Businesses that reported using AI extensively were more than two times more likely to increase profitability, compared to the businesses that reported using little to no AI. Still the report stressed, “These figures show correlation rather than causation — but they do highlight a clear divide.”

    The e-commerce companies that had adopted AI were also much more likely to have an upbeat view about the year ahead. Among business leaders that used AI, 92 percent said they were optimistic about the growth of their companies in 2026, compared with 69 percent of business leaders that did not use AI. Those that reported extensive AI use were even more confident about the year ahead with 96 percent of respondents saying they were optimistic about future growth.

    Ali Donaldson

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  • I Scaled My Company From $10 Million to Over $200 Million in 4 Years. Here Are 3 Things He Did to Lead The Company Through Market Disruptions. | Entrepreneur

    I Scaled My Company From $10 Million to Over $200 Million in 4 Years. Here Are 3 Things He Did to Lead The Company Through Market Disruptions. | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    When I started Appfire in 2005, hardware was king and companies like Dell, IBM and HP were the leaders and innovators of all things tech. Businesses relied heavily on hardware to fuel their IT infrastructure, and the idea of the cloud seemed like a utopian dream. My partner and I built our business to support traditional hardware-centric models, and it was a system that served as well in those early years.

    By 2010, I found myself at a crossroads as the rise of cloud computing was slowly shifting focus toward virtualized environments and we were deep in development to deploy new collaboration software on a hardware-based platform. VMware burst onto the scene, making virtualized software all the rage. Hardware evaporated almost overnight.

    As a business leader, I had to make a difficult decision: should I steer my team and company in a direction that would essentially abandon all the work we’d put towards our hardware-based product to jump on the virtualization trend with the rest of the market and our competitors? Or should we stay the course, pressing on with our product that was built on a hardware platform? After careful deliberation, we decided against investing in virtualization right away as the timing wasn’t right for us.

    I’m reminded of this anecdote as the AI boom continues its momentum, with no signs of slowing down. Just take a look at Nvidia’s recent earnings or Atlassian’s introduction of Rovo, an AI assistant. Someday, when we look back at the history books, this period will be marked by the incredible rush and shift we’ve seen from companies of all sizes to integrate AI into their offerings. This extends beyond merely providing AI-powered solutions. Companies are rebranding, restructuring and reinventing themselves as AI-centric to attract investment, talent, and market share.

    As business leaders, we’re constantly faced with the challenge of whether we, too, should jump on the latest trend. Do we follow the pack and shift our entire strategy and product roadmap, or remain on our current path?

    Related: 10 Growth Strategies Every Business Owner Should Know

    Through my own journey of growing and scaling a leading software company from $10 million to over $200 million ARR in four years, I’ve identified three tips that can help leaders determine whether to embrace a trend or stay the course.

    1. Ensure the shift aligns with what customers want

    Don’t lose sight of customer wants and needs during times of change. Getting it right for your customers is more important than being right. Research has found that more than 90% of people believe companies should listen to customers to drive innovation. Even if as a business leader you vastly desire to incorporate AI into your end model, if it’s not important to your customers you will fail and you won’t make a profit.

    There are several ways you can get this feedback from your customer base. Deploying customer surveys, implementing a customer advisory board and meeting with customers in person are great ways to understand if what you are building makes sense for your customers. If your company has a strong channel program, talk to your partners regularly about what they are hearing from customers

    2. Determine if you have the right resources

    It can be tempting to jump on a trend, particularly when the market demands it and competitors are already on board. In 2010, one of the main reasons we decided not to quickly shift from our hardware platform strategy to virtualization was that we didn’t have people in place with the right skill set. Because of that, we knew we couldn’t succeed in virtualization in a way that would have an immediate impact on our customers.

    When a drastic market shift happens, instead of jumping on the bandwagon, put those efforts and resources into training your staff. Many are willing and looking to expand their skill set – in fact, one study shows nearly 75% of employees are willing to learn new skills. Then once you have the right people with the right skills who can help you make an impact, you can turn your focus to innovation. When employees get the right training to gain the skills they need, the business itself will see the benefits.

    Related: Your Company Won’t Grow Until You Follow These 4 Keys to Success

    3. Stay true to your core values

    Remember the core values you established when you launched your company and use them as guiding principles as you make decisions. Nearly all employees agree that a workplace culture grounded in core values plays a critical role in long-term success.

    If the latest trend aligns with your mission, vision and purpose, it could be a valuable addition to your strategy. However, if it doesn’t, pursuing it may not help your company long term. Staying true to your foundational principles ensures that your business remains focused, authentic, and purpose-driven amidst evolving market dynamics.

    When a new trend disrupts the market, navigating a path forward can be challenging. Consider the approach Atlassian took with Rovo. While others rushed to get an AI assistant to market last year, Atlassian was intentional and strategic. It mattered more to them to release a tool that aligned with their mission of making teams more effective than being the “first.”

    Remember that getting it right for the customer matters more than conforming. Oftentimes blindly following the crowd without critical thinking can lead to conformity and a loss of innovative thinking. Don’t lose sight of your mission, vision, and purpose. These values are likely what attracted employees and customers to your organization in the first place, and what will keep them long after a trend has faded out.

    Randall Ward

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  • Another Look at the Whitney Cannabis Business Conditions Survey – Cannabis Business Executive – Cannabis and Marijuana industry news

    Another Look at the Whitney Cannabis Business Conditions Survey – Cannabis Business Executive – Cannabis and Marijuana industry news





    Another Look at the Whitney Cannabis Business Conditions Survey – Cannabis Business Executive – Cannabis and Marijuana industry news






























    Tom Hymes

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  • Take This Radical Approach to Customer Retention to Boost Employee Morale — And Your Profit | Entrepreneur

    Take This Radical Approach to Customer Retention to Boost Employee Morale — And Your Profit | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    There are few guarantees in business, but this one is certain: If you don’t keep customers, you won’t have a business for long. Yet, at a time when most companies are desperately trying to maintain customer loyalty (retention is more profitable than acquisition, after all), there’s often a missing link in their efforts: Understanding the powerful connection between customer satisfaction and employee engagement — and how to unlock it.

    As a Chief People Officer currently overseeing my company’s customer organization, I’ve seen first-hand how connected they truly are. At its most basic, losing customers can have a direct impact on employee morale and even lead to regrettable talent turnover. But there’s more nuance to this connection: nearly everything employees do has the potential to deeply impact customers. In turn, customer feedback and outcomes can have a powerful effect on an employee’s sense of purpose, achievement and satisfaction.

    Related: 7 Surefire Ways to Turn Your Low Customer Retention Rates Around

    I’ve witnessed how establishing a customer-centric approach across the entire organization can lead to growth opportunities that benefit both employees and customers. But to get there, businesses need to leverage that connection by making customer success the forefront of every employee’s experience. Here’s how.

    Make customer success everyone’s responsibility

    Most companies take a siloed approach to customer success, relegating it to a single department, while others remain largely insulated from customer interaction. But I’ve come to realize that the more we empower all of our cross-functional teams to contribute to customer success, the more purposeful, impactful and engaging their roles become, and the more they can drive customer loyalty and retention.

    For a more holistic approach, I am a fan of the bowtie model. In contrast to the traditional marketing funnel, which ends when a customer converts, the bowtie provides a more end-to-end representation of the customer journey. It’s a better way to ensure everyone in the company is maximizing engagement with the customer over the long term — whether through strategic ongoing communication and marketing efforts or more integrated processes and practices designed to deepen this relationship.

    One way we do this at my company is by encouraging every department to evaluate every task — and every ask — from the perspective of how it benefits the customer. Whether it’s marketing, sales, product or engineering, this filter is applied to all decision-making. Of course, we also look to metrics like Customer Satisfaction Score, customer retention, and revenue expansion with existing customers to ensure our efforts translate into results.

    Supercharge customer touchpoints

    I recently traveled overseas to meet with a customer, and as I was leaving, their CFO turned to me and said something I’ll never forget: “Don’t get me fired.” It’s a powerful reminder that our view on customer success must be broader than just ensuring product integration or stability. Everything we do has a ripple effect on their company’s success, which can impact their personal reputation, too.

    The concept of radical empathy isn’t new in customer service. Cultivating a deeper understanding of customer needs is crucial for effective product development, marketing and sales, but it can easily get lost once a customer is onboarded. Building more proactive touchpoints with customers —and even baking them into the early stages of product development — can help overcome this oversight.

    For us, that means attending industry events and building out strategic channels and information-sharing communities to better understand their sticking points. We’ve also established customer segments and verticals to identify and interact with the unique needs of different types of customers to deliver a personalized service approach. When we understand how customers are using our product — and particularly their pain points — we can better target everything from our marketing and sales campaigns to all product-focused initiatives

    Everyone in our organization knows customer retention is a team sport. Reaching out to customers to help solve product issues or when launching something new is not only possible but preferable. That’s precisely why we launched a customer retention program that treats flight risks as a pipeline and leverages tightly coordinated collaboration across departments to deliver impact to those customers.

    Most importantly, these frequent and proactive touchpoints also allow us to learn what is working for our customers, which we’ve seen be a powerful motivator for our team.

    Related: 3 Ways Founders Can Connect With Their Customers to Drive Sales

    Don’t overlook the link between employee experience and customer experience

    Being on the receiving end of an exceptional customer experience can radically shift the way we perceive a business. It turns out that when an employee has a hand in making that happen, it can be just as impactful for them.

    This shouldn’t come as a surprise: today’s employees are looking for purpose in their work. Who doesn’t want to make a difference in the lives of others? Connecting this desire to customer success initiatives only makes sense — it improves the ability to deliver on customer promises and makes the workplace more satisfying for all.

    And I believe organizations can take this connection a step further: pouring the same energy into employee experience that they do in fulfilling customers. In one of my previous roles, we would actively measure customer retention against employee retention and found a strong correlation between the two. These results were interesting but not shocking: prioritizing employee experience leads to more engaged employees, who, in turn, are motivated to create better customer experiences. Simply put, boosting satisfaction in one camp can effectively raise retention and productivity levels for both.

    Of course, this balance isn’t always easy to get right. But in my experience, incremental improvements are what add up over time. Starting small is better than not at all. At the end of the day, the more your employees know, understand and care about your customers, the better they’ll serve them (and the more they’ll enjoy the results) — regardless of the role they are in. And that’s a true win-win for the bottom line.

    Christine Park

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  • Simpl sees another round of layoffs, rejigs senior leadership

    Simpl sees another round of layoffs, rejigs senior leadership

    Buy now pay later (BNPL) start-up Simpl has let go of 30 more employees a month after it laid off 160 people.

    Recently, the firm has also seen the departure of senior executives, including Vatsal Jain, Vice-President – Enterprise Business; Ashwini Ravindranath, Vice-President – Partner Success; and Ramkumar Narayanan, Vice-President – Product and Operations.

    Simpl has also revamped its leadership team. Vivek Pandey, previously a Senior Vice-President in the technology team, has been elevated to the position of Chief Technology Officer (CTO). In addition to his technology responsibilities, Pandey will also oversee the risk vertical, a role previously held by Chief Financial Officer (CFO) Russell Byrne.

    Towards profitability

    Byrne will continue as Simpl’s CFO, focusing on its capital markets function. Puneet Singh, the current CTO, will now lead the enterprise business and checkout solutions, while Khanaz KA will spearhead the expansion of Simpl’s direct-to-consumer business, along with a focus on customer experience.

    “Today’s decision to let 30 of our employees go is a continuation of our organisation-wide efforts to become a fiscally-prudent company and achieve profitability by mid-2025,” said a company spokesperson.

    The company has offered the affected employees a severance package with a fixed salary for the notice period of two months as per the employment agreement and 15 day’s salary for every year of service with the company.

    Founded in 2015, Simpl has raised more than $80 million in equity funding from the likes of Valar Ventures and IA Ventures.

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  • What It Takes to Build a Best-In-Class Company | Entrepreneur

    What It Takes to Build a Best-In-Class Company | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    More than 5 million businesses were created in the U.S. in 2022. What makes the true industry giants stand out in a world of fierce competition? What separates an average company from a top-tier organization that’s successful and pivotal in shaping the future?

    Drawing upon 20-plus years as an entrepreneur, during which I’ve witnessed numerous businesses rise and fall, I’ve gathered insights into critical factors that differentiate outstanding enterprises from the rest.

    Let’s dig into the essential elements that elevate a company to best-in-class status, exploring how ethical conduct, innovation and social responsibility are admirable goals and vital drivers of success.

    Related: How to Take Advantage of Your Underdog Status and Conquer Industry Giants

    Ethical practices: A foundation of excellence

    When we talk about ethical conduct in business, we’re not just checking boxes to comply with laws and regulations. We are establishing a compass that guides our companies’ actions, shapes culture and dictates how we interact with stakeholders. In a time when trust can shatter like glass and reputation is everything, integrity is the foundation upon which best-in-class businesses are built.

    In my enterprises, I’ve learned that cultivating a culture that values doing the right thing, even when it’s tough, is critical. This means creating an environment where your team feels empowered to make ethical decisions, with you leading by example. Weaving ethics into your company’s DNA increases credibility, fosters trust and boosts profitability.

    And here’s the magic: When customers and clients trust your company, they become loyal advocates, bolstering your reputation and driving sustainable growth through word-of-mouth referrals. Ethical practices also attract socially conscious investors, further boosting your company’s financial health.

    To establish and strengthen ethical practices:

    • Create ethics and values statements as a team and share them internally and externally.
    • Incorporate your ethics and values into your brand messaging, recruiting, and training materials.
    • Embody these in your conduct as a leader and organization.

    Related: More Than Just A Moral Compass: The Power Of Ethical Business Practices

    Pioneering business practices

    Innovation isn’t confined to new technology and cutting-edge software. Best-in-class companies view innovation as a continuous pursuit of creative solutions to problems, whether in your products, services, how you treat team members or the processes that drive your business.

    Innovation isn’t just a buzzword; it’s a significant driver of profitability. A recent McKinsey & Company study found that companies embracing innovation enjoy a substantial performance edge, outperforming their peers by a staggering 2.4 times in economic profit.

    Nurturing innovation doesn’t only mean hosting grand brainstorming sessions; it involves having a company culture where every team member feels empowered to contribute ideas regardless of their title.

    It centers on embracing diverse voices and perspectives, encouraging experimentation, and seeing failure as a stepping stone to success. Best-in-class companies are pioneers who establish themselves as thought leaders in their industry and push the boundaries of what’s possible.

    I learned these principles early in my business career through observing successful companies and leaders. After a few years of ideation and experimentation, I found what worked for my leadership style and industry. Today, I’m still trying new things and paying close attention to results and the feedback of my teams, clients and other stakeholders.

    Which approaches to innovation will work for you? You’ll only discover by jumping in fearlessly and getting creative.

    To leverage innovation in your business:

    • Look for opportunities to improve efficiency, productivity, and results.
    • Include your leadership and frontline teams in planning from the start.
    • Talk to clients, investors and other stakeholders to gather unique perspectives and discover new ideas.
    • Due your due diligence: Study a variety of strategies and solutions.
    • Take risks (measured) — don’t be afraid to disrupt the status quo.

    Related: How To Use Entrepreneurial Creativity For Innovation

    Leading the charge for positive change

    To be a best-in-class company, you can’t shy away from taking on significant challenges.

    This means fully embracing environmental, social, and governance (ESG) principles and addressing critical concerns such as sustainability, reducing your carbon footprint, promoting employee wellbeing and engaging with the community.

    It has become evident that stakeholders want, need and deserve a business approach that aligns with their values and addresses pressing global concerns.

    A recent study revealed global investors are increasingly focused on ESG issues in their investment strategies. Roughly 89% of investors considered ESG issues in some form as part of their investment approach in 2022, up from 84% in 2021.

    Equally vital is the commitment to diversity, equity and inclusion (DEI). Companies that prioritize diversity and inclusion not only contribute to a more equitable society but also reap the rewards of being able to tap into a variety of perspectives and ideas.

    When you demonstrate an unwavering commitment to positive change, you enhance employee engagement and elevate your brand’s reputation, resonating with socially conscious consumers and investors.

    To become a more conscientious organization:

    • Listen to your stakeholders and the public to learn what’s most important to them.
    • Research more into what comprises ESG and DEI initiatives.
    • Hire professionals or retain consultants with relevant expertise.
    • As with ethics, share these values across your organization and let them guide your actions.

    Related: Why ESG-Conscious Companies are Resilient Companies

    Standing the test of time

    Success goes beyond the bottom line; it hinges on a relentless pursuit of excellence. Best-in-class companies understand this truth.

    They thrive by integrating ethics into their DNA, prioritizing innovation, and leading positive change by adopting ESG and DEI initiatives.

    Through these pillars, they enhance profitability, but more importantly, create a lasting positive impact that solidifies their best-in-class status, setting a high standard for all who follow.

    Robert Finlay

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  • To Maximize Your Profits This Black Friday, You Need to Collect More Than Your Customers Dollars | Entrepreneur

    To Maximize Your Profits This Black Friday, You Need to Collect More Than Your Customers Dollars | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    Black Friday — the day after Thanksgiving — is the biggest shopping day of the year and the start of the holiday season, which, for many retailers, can contribute as much as 30% of their annual sales. So it’s a big day. But if you think Black Friday is just about the holiday season, you’re wrong.

    Of course, the day is important for the holidays. Black Friday was the biggest day for in-store shopping in the U.S. in 2022, reaching 72.9 million consumers, up almost 15% year over year. But it’s just as important for after the holidays. That’s because Black Friday isn’t just about sales. It’s really about data.

    My smartest clients know this. And they make it a priority to leverage Black Friday as a way to collect as much information as they can from everyone entering their store. Why? Because the data they collect will help drive sales long after the holidays have ended.

    Retailers of all sizes face a significant drop-off in sales after the holidays, and it’s always a struggle to generate demand. But it doesn’t have to be that way. The data you collect from your Black Friday traffic can boost your sales in those slow winter months. So, how to do this? You need a reason for the customer to stay engaged.

    For starters, collect an email at checkout. Asking for a “like” or a positive online review is great, but you’re not collecting data that way. Asking for an email is a way for you to control the engagement. It’s true that sometimes some won’t want to share, and that’s fine, too, because people have to opt in if you’re going to market to them online. So encourage them. Say that you’ll add them to your special “VIP Customer Club,” which will make them eligible to receive future discounts and special promotions. Some retailers ask if a customer would like a receipt emailed, and that’s another good way to collect that information.

    Another strategy is to push your visitors to your website. Hopefully, you’re selling your products not just in your store but also via an ecommerce platform. If you don’t, you really should because my most successful clients sell products through multiple channels. On Black Friday, offer a special promotion for customers who choose to purchase products online or special products that are only offered online. When someone buys from you online, you’re collecting their data, and you can give them the option to have their email added to your VIP club at checkout. At the very least, you’ll be collecting physical shipping/ordering data that can be used for future postcard mailings.

    Consider a raffle. It’s simple and old school, but it’s an effective way to collect an email address or physical mailing address. Have them drop a business card or fill out a form to get a product or service for free and, of course, ask on that form for permission to add to your VIP Club. Your cost of giving away free stuff is minimal compared to the benefit of using that data for future marketing.

    Many of my retail clients do events. These are the businesses that generally offer experiences or lifestyle products, and they enjoy doing in-store events to further educate their community. The pandemic taught us that doing these events online can also work. Schedule an event for January or February and promote it in your store. People would need to sign up for this event, so have an online or physical way to do this in order to capture their information.

    Partner with others. All of the above activities can be replicated by friends of yours on the Main Street. By offering co-promotions with some of them, you can pool your resources and share your data. This way, you can potentially double the amount of information you’re collecting on Black Friday.

    Finally, use a loyalty program. The suggestions I’ve made above would incur minimal cost. But if you want to step things up – and pay more — you can subscribe to retail loyalty platforms like Clutch, Recharge, Smile.io and others. These platforms — which are mainly designed for mobile use — allow your customers to accumulate points, get access to gift cards, belong to a recurring program, join certain membership tiers and take advantage of VIP “exclusive” offerings. They provide real-time data analysis of program usage, can be customized, and also integrate with other software.

    These are all great ways to collect the data you need. But the most important thing is what to do with the data once you have it. And for this, you need a good customer relationship management (CRM) program.

    A CRM is merely a database that will store whatever information you obtain about anyone who’s walked into your store. Some loyalty platforms and most point-of-sale systems either offer this capability or can be integrated with a standalone CRM system, and there are many platforms available at an affordable price. You will use this database to build demographics and sales history about your customers.

    When a CRM system is used the right way, no customer — or prospective customer — falls through the cracks. Using the data you’ve collected on Black Friday and throughout the holiday season, they should be receiving regular (opt-in) emails or postcards from you about product offerings, events or other activities at your store. You can leverage the data to target specific customers based on what they’ve purchased from you. You can use the data to create lookalike campaigns on both Facebook and Google, where you can target online ads directly to them. As you build this database, you’ll build a community of customers that you can go back to year after year.

    And that’s the most important thing about Black Friday. It’s not just one day of sales. It’s also a day to collect data for future sales. If you approach it that way, you’ll see a revenue increase that can extend far beyond the holiday season.

    Gene Marks

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  • Why Shrinkflation Is A Great Pricing Strategy In Inflationary Times | Entrepreneur

    Why Shrinkflation Is A Great Pricing Strategy In Inflationary Times | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    Want to make more money this year? Or at least protect your profits? Consider shrinkflation. You may have heard of this — or maybe not. But shrinkflation is a powerful pricing strategy that you should consider in these times of higher costs that are cutting into your margins.

    So, what is shrinkflation? It’s when you charge the same price for something that you’ve always charged, but this time, you deliver just a little bit less. If that sounds unethical or immoral, it’s not. In fact, it’s being practiced all over the place by some of the world’s largest brands.

    Take Walmart, for example. Their Great Value Paper Towels used to be 168 sheets per roll, but now it’s 120 sheets. Did the price change? Nope. Charmin toilet paper used to be 650 sheets per roll and now only contains half of that — at the same price. A bag of Doritos used to be 9.75 ounces, and now it’s 9.25 ounces, which means you’re getting fewer chips at no discount. Hefty’s Mega Pak went from 90 to 80 bags without changing the price. Burger King includes fewer nuggets, and Domino’s is delivering fewer chicken wings, but all at the same price (who’s getting chicken wings from Domino’s anyway? It’s a pizza chain!)

    Gene Marks

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  • How I Built A Multi-6 Figure Coaching Business And Achieved 3-Day Work Weeks | Entrepreneur

    How I Built A Multi-6 Figure Coaching Business And Achieved 3-Day Work Weeks | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    Eight years ago, I started my Rise Lean from scratch. I had a mission: Helping people end a toxic relationship with food while losing weight effortlessly, using Asian wisdom. As a new online entrepreneur, I encountered a series of challenges in turning will into success.

    First, I’ve never developed a coaching program. I’ve also never sold a thing. And considering the U.S. weight loss industry was incredibly saturated, I felt anonymous and unseen.

    Today, my company magnetizes a consistent stream of ideal clients from around the world. And with its client acquisition, delivery and support systems built for scale, it’s seeing 20-40% growth month after month while working three days a week. This article will cover five major components that have shaped my company’s core foundation and readiness to beautifully thrive and scale.

    Related: 7 Innovative Online Business Ideas for Digital Entrepreneurship

    Create a remarkable and irresistible product

    People want massive, real and lasting results that come quickly with the least amount of effort needed. If your product can bring them that experience, it’s remarkable and irresistible. When I first started, I immediately wanted my program to be that way. To ensure that, I interviewed 155 prospects to get a deep understanding of what they truly needed, took on 30 clients for a low price and built the first version of my company’s formula, informed by their experience, challenges and needs.

    Throughout the past eight years, I’ve upgraded the course 12 times. Today, I still ask myself these two questions periodically:

    • Can it be better?
    • Can it be easier for my clients?

    Turning your product into a masterpiece should be an unstoppable obsession. When you have a remarkable and irresistible product, it becomes a source of unshakable faith for you — even as you navigate market volatility.

    1. Make competition irrelevant with an irreplaceable brand

    I don’t prefer easy games, that’s why I headed into the weight loss industry despite the crazy competition within. What made me confident? A unique and strong brand identity, which is highly recognizable by my audience. If you can make your target audience fall in love with you, competition is irrelevant and you are irreplaceable. Whether you can have a successful brand identity depends on your ability to really understand your clients, articulate the problem they are facing and tell your story compellingly.

    Who are they? Can you describe their traits, stories, life stages, emotional states, pain points, dreams, fears and inner needs? If it’s challenging for you at this moment, do what I did. Collect customer feedback to get a better understanding of their needs.

    What exactly is the problem you solve? Be very specific and clear about it. On my website, I describe every main symptom and problem my target audience experience. I echo the thoughts in their head to become more relatable and drive a stronger connection.

    What’s your story? What makes you different and amazing? And what makes you irreplaceable for your audience?

    During the first year of running my business, I intentionally hid my story of losing the 50 pounds I’d gained in the U.S. organically, using the wisdom and knowledge I gained from my travels in China. Huge mistake.

    My personal, uniquely Asian experience is my golden competitive advantage. Because of it, I’m able to have a distinctive message in a highly crowded market based on real-life experience. As soon as I loudly shared my story in my own voice, my company’s growth spiked. Your story, when articulated well, can make your competition irrelevant. Check-in with yourself: Are you telling your story without holding back?

    Remember, you don’t need to attract everyone — only the selected group of people you desire to work with. And your brand identity, when optimized, magnetizes only the right people and makes you irreplaceable to them.

    Related: An Entrepreneur’s Guide to Startup Pricing Strategies

    2. Price for success — for both you and your clients

    The best pricing model is the one which sets both your clients and your business for success. There are two questions you need to ask yourself when thinking about your pricing:

    • Question #1. What number reflects the level of commitment, services and outcomes from you?

    For instance, if you run a life coaching program priced at $150, I’d imagine this is primarily an information product with minimal personalized coaching. On the other hand, if your offer is helping established businesses get into a seven-figure revenue through 1:1 coaching with a top expert, that implies a multiple five-figure price tag.

    As always, your pricing sends the signal to your target client regarding what to expect, the level of services and the outcome delivered.

    • Question #2. What number will inspire your clients to be serious about your offer and co-creating the desired outcome with you?

    I priced the earliest version of my program at $500 during a test run. I quickly encountered one problem: A significant number of my clients weren’t showing up for the calls or doing their homework. After talking to them, I found they weren’t prioritizing the program.

    I immediately realized two things: First, I’d attracted the wrong buyers who weren’t committed to the work. Second, my price didn’t convey the magnitude of the outcome and commitment from my end. Charging a price that attracted the wrong buyers meant low engagement, morale and client success rate. If I let that cycle continue, it’d kill my business and drain my passion for it.

    Right now, I run my program with a pricing model that ensures I work with the most committed, responsible and coachable clients worldwide. They are incredibly enthusiastic about achieving the milestones set in the course. They are natural action-takers, accomplished in their professions and roles, humble and excited in front of the opportunities to have better life experiences. I never worry if they attend the coaching calls and do their homework. And deep, colorful and high-energy conversations keep flourishing during our live sessions, elevating the coaching experience to new dimensions.

    This dynamic drives me to be the best version of myself whenever I do my work. I wake up in the morning looking forward to our calls. And I never ever feel tired. When combined, all these pieces maximize my clients’ success rate and happiness throughout the experience, which tirelessly fuels the success of my business and my sense of fulfillment as an entrepreneur.

    In this experience, my clients and I contribute to each other’s victories.

    #4. Build a multi-channel scaling ecosystem

    Relying on just one funnel was the biggest risk I’ve taken in my business. Before 2020, I was only running Facebook ads which worked wonderfully for me. I was blinded by the ease and thought I’d never need a Plan B.

    Then, Facebook implemented an upgrade. The next thing I knew? The same funnel no longer worked. Lead flow immediately stopped and it was scary because I thought I was going to lose my business.

    My company bounced back in a few months and ever since I’ve started building a multi-channel lead generation ecosystem that generates multiple streams of leads in parallel. Here are the main components of this system I’ve built:

    How much does it cost to be seen (without clicking through) by 10 million ideal clients through ads? Easily $1 million. However, you don’t need to spend $1 million to reach millions of clients. Getting onto five to ten major podcasts in your niche can help you accomplish that, likely with greater results because a 30-minute podcast interview can gain you a lot more trust than an ad.

    They are similar to podcast interviews, in a different format.

    Investing in SEO is worthwhile for those who desire to build an epic brand that stands out from a whole crowd of competitors. It can take eight to 12 months to take off. However, once established, it brings a consistent stream of ready clients throughout the year.

    My TikTok channel is where I talk to my audience “face-to-face.” It’s not a lead generation platform yet. However, it serves as a powerful source of confirmation for people — building trust before we talk.

    Meanwhile, don’t forget your email list. People sign up for my email list through various sources, and I use it to build relationships and trust with my audience.

    Building a multi-channel scaling ecosystem indeed requires a lot of work. But if you start today and be consistent, in three years, you’ll have a client-attraction system as powerful as a tank.

    Related: Does Richard Branson’s 3-Day Workweek Actually Work?

    Lastly, how did I achieve a three-day workweek lifestyle?

    It’s because of all of these components above. Thanks to the multi-channel scaling system, I now have a semi-automated lead-generation system that brings me a steady flow of interested people. Having established organic funnels saves me from spending hours chasing after people.

    Meanwhile, my brand message ensures that those who approach me are the type of clients you want to work with. It means I’m not wasting time speaking to irrelevant people. With a strong conversion rate, I can sustain this revenue without running ads. Because of that, I’m not spending hours and days creating, maintaining, refreshing ads and analyzing ad-related data. And since my program features an online group coaching experience, I can deliver well to my current clients without significantly expanding my coaching hours.

    At this moment, most of my working hours during the week are split among doing group coaching calls (two hours a week), talking to potential clients (six to eight hours a week), and generating new content — whether it’s new TikTok videos or a product interview (around five hours a week). Every week, I write one to two email newsletters, with each taking between 15 minutes to an hour, thanks to how much I understand my audience. I use automation as much as possible for the remaining miscellaneous work. I also outsource work whenever needed.

    All the groundwork, from product development to funnel building, was developed over eight years since the launch of my business. And I sure have had many 80-hour work weeks in the first couple of years. But thankfully, the majority of the work I did was intended to generate evergreen, compounding results. All of that has allowed me to enjoy my business along with many other things in life — from motherhood to traveling and equestrian.

    Leslie Chen

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  • Challenger banks: profitability and cost efficiency in uncertain times – Banking blog

    Challenger banks: profitability and cost efficiency in uncertain times – Banking blog

    This blog is the second publication in our blog series. In our previous blog entitled ‘Challenger banks: Disrupting the Swiss market’, we outlined the history of banks, the different categories of Challenger banks and how they can mitigate the risks they are facing. In this blog, we further explore the various obstacles that Challenger banks are facing today, such as economic and political difficulties, and provide recommendations on how to navigate these hurdles and grow in the years to come.

    Challenger banks are facing significant threats to their survival due to economic obstacles. Their growth has slowed, and most have not yet achieved profitability or are currently operating at a loss. Overall business development strategy, regulatory & compliance, and data security have developed into important focus areas if they are to become sustainably profitable and compliant. To withstand the current economic and geopolitical uncertainties, Challenger banks should act promptly by revaluating their strategic course.

    The financial sector is grappling with challenges posed by major players such as FTX, BlockFi, and Celsius, resulting in a “crypto winter” that wiped out over $2 trillion in market value. This not only impacted the digital asset market but also affected the broader financial industry, including challenger banks . In addition, two California-based financial institutions, SVB and First Republic, experienced a sudden exodus of customer deposits, thereby indirectly threatening the banking sector’s stability. Finally, UBS acquired Credit Suisse amidst the financial turmoil caused by the collapse of the two US banks.

    Furthermore, macroeconomic setbacks such as high inflation and increasing interest rates, coupled with microeconomic factors like rising energy costs, have arisen from global geopolitical tensions. This resulted in a slowdown in investments and increased risk aversion, impacting Challenger banks. This stands in stark contrast to the high valuations seen in Fintech firms at the end of 2021. With decreased investor participation and public scepticism, Challenger banks must now address profitability issues, improve customer retention, ensure compliance, and enhance data security.

    Challenger Banks and Profitability Issues

    In recent years, Challenger banks have been confronted with the reality that once abundant investor funding is now dwindling, down by 45% in 2022 as compared to 2021. In addition, the number of global Challenger banks launched has dropped to an all-time low (a 46% decline between 2020 and 2022), as the market matures and becomes more consolidated and less attractive for new entrants.

    The decline in funding can be attributed to decreased investor appetite and major players reaching maturity, hence not needing further investments. Early pioneers, like Revolut, have secured enough backing to focus on profitability rather than raising new funds.

    Challenger bank blog 1

    Profits of Challenger banks are linked to scale: generating revenue from an expanding global customer base across diverse products and services while minimizing prospect acquisition costs.

    In recent years, there has been a rise in M&A deals, which has led to market consolidation, indicating that some Challenger banks depend on financial acquisitions to achieve the necessary scale and profitability. Prominent examples include Starling Bank’s purchase of buy-to-let mortgage provider Fleet Mortgages Ltd. in 2021. From 2021-2022, the number of annual Challenger banks launches has steadily declined and so have the number of M&A deals completed (a drop of 43%). Regulators have also played a role by implementing regulations (e.g., PSD2) that aim to level the playing field, challenging the dominance of established players.

    Uncertain Times and Pressurized Margins

    It can be argued that the core issue lies in revenue generation. According to industry experts, the estimated revenue per active customer is around $30 per year. Challenger banks, such as Monzo, Revolut, and N26, offer limited product portfolios with lower fees, including subscription fees, foreign exchange fees, and card fees. They lack more lucrative products like mortgages, business loans, or investment products, which traditional banks typically offer. This limited range may constrain their revenue potential. Recent economic situations have also strained consumer spending, further affecting digital bank revenues.

    Despite Challenger banks’ popularity, many retail customers are still hesitant to use them as their primary account. According to industry surveys, 25% of respondents cited data security as their main concern, followed by fraud (22%) and “not being perceived as a bank” (20%).

    Players are addressing higher cost base due to…

    Increased business development and client attraction expenditures

    Revolut’s 25 million client milestone is an exception, as many Challenger banks face difficulties acquiring new clients. Traditional banks now offer similar services and products after significant investment in digital user experience. For example, UBS’s commission-free “key4” credit card appeals to frequent travellers, while Zak by Bank Cler and CSX by Credit Suisse provide more options for clients in Switzerland. Additionally, unified mobile wallet solutions like TWINT, offered by most major Swiss banks and used by 5 million users, cover various financial needs, leaving few unfulfilled niches.

    Challenger banks face fierce competition, constantly introducing new features. However, recent scandals involving digital asset firms such as FTX, including some Challenger banks, have eroded public trust. Industry experts don’t consider them “proper banks” and express concerns over fraud, resulting in low penetration rates in certain regions (e.g., US) and some banks exiting markets (e.g., N26 exited UK and US).

    Tighter Compliance, New Regulations – and Costs

    One major cost driver for Challenger banks is increased spending on regulatory compliance. As these banks attract more users, their responsibilities towards regulators and clients expand. They have made progress in financial crime control measures, but regulators expect further improvements in areas like customer due diligence, transaction monitoring, and Suspicious Activity Reporting (SAR). The Financial Conduct Authority (FCA) states that financial crime control resources, processes, and technology should match a bank’s expansion. To address this, Challenger banks are creating new positions in their Compliance department.

    Challenger banks must also manage requirements related to their banking license, such as renewing a license from FINMA (the Swiss regulator). This can be challenging due to capital requirements, which depend on the bank’s category and risk profile. A minimum of 8% of total Risk-Weighted Assets (RWA) and suitable financing sources are required. Management must find a balance between the significant regulatory costs of maintaining their banking license and managing costs for scalability purposes.

    Intensified Data Security and Fraud Risks

    Challenger banks have long operated with a “scale first” approach, often overlooking other critical aspects of their business, such as fraud prevention and cybersecurity. Traditional banks allocate around 20% of their annual budgets to IT-related expenses, including data protection, according to a J.P. Morgan study. In contrast, some rapidly growing Challenger banks struggle to maintain a strong technological and security infrastructure for customer data protection.

    These banks also face a shortage of skilled back-office employees, like fraud and cybersecurity specialists. Consequently, many rely on third-party vendors, increasing their vulnerability and dependency due to insufficient internal cybersecurity capabilities. As a result, numerous Challenger banks have encountered security challenges, including fraud attempts, scams, phishing, and client data breaches. For example, in September 2022, Revolut suffered a cyber-attack that affected around 50,000 clients, representing 0.2% of its 25 million customers. Although the percentage is small, such attacks have significant privacy and reputational consequences.

    Challenger bank blog 2

    Challenger Banks and Future Outlook

    Challenger banks, particularly in the Swiss market, must implement a strategic approach to sustain growth and maintain competitiveness.

    Firstly, they can boost revenues by revising pricing models, such as Spain’s Bnext, which created a marketplace offering for not only financial products but also travel and energy services. They can also target more premium clients, akin to Revolut’s “Ultra” subscription plan aimed at higher income client segments.

    Secondly, cost control is critical, encompassing measures such as reviewing cost structures, automating processes, and exiting non-strategic markets, as seen with N26’s decision to leave the US and UK markets.

    Thirdly, Challenger banks need to differentiate themselves to attract customers. This can be done through strategies such as offering competitive and profitable products, exceptional support, and implementing client retention initiatives. The introduction of Apple’s high-yield savings account, which offers an impressive 4.15% annual return, is a notable advancement in the financial industry that can significantly disrupt the landscape. This innovative product, initially launched for US customers in April 2023 and accessible via the Apple Card in the Apple Wallet mobile app, not only signifies a transformative step in the financial industry, but also holds the potential for expansion into other global markets, bringing its potential for disruption to a worldwide scale.

    Lastly, enhancing data security is paramount to reduce data breach risks, as highlighted by Deloitte’s Global Future of Cyber Survey 2023. A combination of these strategies, including the introduction of new products, cost control, customer attraction, and enhanced data security, will be key to surviving and thriving in the ever-evolving Swiss banking landscape.

    Conclusion

    As Challenger banks face key operational hurdles on their road to success, they should carefully evaluate the root cause of their profitability challenges and fraud and cyber risks to reframe their company strategy. By adopting strategic options such as revising pricing models, reviewing cost structures, offering new products and services and partnering with other companies, Challenger banks can navigate the challenges they face. In a highly competitive and rapidly evolving challenger banks landscape, they must keep agile and innovative to stay ahead of the curve.

    Sergio Cruz

    Sergio Cruz, Partner, Consulting

    Sergio is the lead Partner of Deloitte’s Business Operations practice in Zurich and has more than 25 year of experience in Consulting. He focuses on large scale front-to-back digitalisation programs in financial services and has worked on several large assignments both in Switzerland and abroad, covering the implementation of regulatory requirements and the definition as well as implementation of target operating models and process optimisations.

    Email | LinkedIn

    David Klidjian_3 (002)

    David Klidjian, Partner, Consulting

    David is a Partner in Consulting and leads Deloitte’s Business Operations Banking Industry for Switzerland. He has significant experience of Investment Banking and Wealth Management working in the UK, US, Asia and Switzerland. His focus area is on large Front-to-back operations transformations and setup and expansion of new banking operating models.

    Email  | LinkedIn

      Soheil

    Soheil Modheji, Digital Assets and Cryptocurrencies Lead 

    Soheil is a Director within Deloitte Consulting Switzerland. He is engaged in formulating strategies for banks and developing target operating models as well as leading business, regulatory and IT/Ops strategy-driven banking projects. In the DLT space, he has been involved in projects and initiatives for implementing crypto asset trading and custody solutions at banks.

    Email| Linked

      Katerina blog_

    Katerina Kochova, Senior Consultant, Consulting

    Katerina is a Senior Consultant at Deloitte Switzerland in the Business Operations team. She is specialized in banking and FinTechs working in France, Luxembourg and Switzerland. Katerina has experience on large digital transformation, process excellence setups and Target Operating Models definition projects in Retail Banking, Private Banking and Wealth Management.

    Email| LinkedIn 

      Hong blog

    Hongming Li, Consultant, Consulting

    Hongming is a Consultant at Deloitte Switzerland in the Business Operations team with focus on the banking industry. Mainly engaged in business testing activities, client risk scoring and client onboardings, Hongming has supported major Swiss Banks in its client life cycle management efforts.

    Email| LinkedIn

    Lena Woodward

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  • 3 Ways to Predictably Boost Revenue and Drive Profitability | Entrepreneur

    3 Ways to Predictably Boost Revenue and Drive Profitability | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    If you ask the majority of marketing teams what their main focus is, they will probably tell you it’s to “acquire customers.”

    Getting new people to visit your website and buy your products or services for the first time is definitely one of the most important things a business must focus on. But one mistake I see entrepreneurs make all the time is obsessing about acquiring customers at a profit.

    Here’s what I mean: They will endlessly tweak their ads and landing pages, split test commas in their headlines and keep fiddling with their pricing in the hope that they’ll be able to earn more with the first sale than it cost them to attract that new customer.

    But the truth is, this is a losing game. Very few companies are able to make a profit with their first sale. Instead, they will build their backend sales first, so they can keep advertising and acquiring new customers even at a loss.

    Backend sales — those products and services that are sold to existing customers — are the lifeblood of every business. They will help you increase revenue predictably without spending more on advertising, improve your margins, strengthen your relationship with your customer, build customer loyalty and ultimately give you an edge against your competitors.

    So, how exactly do you build a backend sales infrastructure that can help you grow your business? Here are three ideas that can help you increase your revenue in the next quarter at a higher profit:

    Related: 3 Ways To Boost Sales With Existing Customers

    1. Upselling and cross-selling

    This is one of the quickest ways to start building your backend sales. Upselling and cross-selling are two marketing practices that involve offering additional or complementary products or services to existing customers. The secret to making these effective is to deeply understand what your customers want and identify what can get them closer to their goals.

    For example, we have a range of done-for-you marketing products where my team builds assets like Facebook™ ads, press releases or high-ticket funnels for our customers. Many of those clients ended up liking our work so much that they naturally asked us if we had a more in-depth program where we could follow their growth over a longer period of time. This is how our Accelerator was born — an upsell that allows our existing clients to get 1-1 help from us and grow their business faster.

    As you build your upsells, think about ways you can get your existing customers to achieve their goals faster or more easily. This will give you a good foundation for building your first upsell product.

    2. Loyalty programs

    Think about your local supermarket. Why do you keep going back there? Sure, it might be placed conveniently and you might like its products. But many of them also offer you discounts, gifts and other incentives the more you buy from them.

    This is one of the most effective ways to get your customers to buy from you over and over, and so you increase revenue and profits at the same time.

    However, this comes with a word of warning — don’t overuse discounts and coupons, as that might make your customers start to expect them, making it harder to increase prices later on.

    Related: How Brands Can Turn Short-Term Rewards Into Long-Term Loyalty

    3. Exceptional customer support

    Finally, one of the least discussed ways to keep your customers buying from you is by providing exceptional customer support after the sale is made.

    According to HubSpot, 93% of customers are more likely to be repeat customers at companies with excellent customer service.

    Supporting your existing customers isn’t just a matter of replying to their complaints in time or refunding them when they didn’t like your product or service. It’s going above and beyond to make sure they are satisfied with what they purchased.

    This can be done by sending them additional guides that help them get the best out of your product, providing them with extra coaching to make sure they succeed in your programs and sharing any resource that can help them have an outstanding experience with you.

    Backend sales are a fundamental part of every business’ success. Building one might sometimes feel hard, as you don’t know what exactly you should be offering to your clients. Hopefully, this short guide gave you some ideas on how to keep selling to your existing customers so you can predictably increase revenue, get higher profit margins and put some distance between your business and your competitors.

    Related: 3 Strategies to Improve Your Customer Service Experience

    Rudy Mawer

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  • How to Identify a Good Investment (Even During Economic Uncertainty) | Entrepreneur

    How to Identify a Good Investment (Even During Economic Uncertainty) | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    Rising inflation. Ongoing supply chain problems. International conflict.

    There’s a lot of volatility in the market today, which has many entrepreneurs and investors feeling stressed. With this much uncertainty, choosing how to allocate money and being confident in those choices can be challenging. Too often, people get trapped in analysis paralysis or needlessly lose sleep second-guessing themselves.

    One of the best ways to ease that stress is to take the emotion out of your decision-making. And the best way to take emotion out of the equation is to establish a clear set of investing criteria. By knowing precisely what a good investment looks like, you’ll be able to make wise decisions quickly, efficiently and confidently, no matter what else is happening in the world.

    Related: Why the Current Volatile Market is an Opportune Time for Impact Investing in Undercapitalized Entrepreneurs

    Step 1: Understand who you are and what you want

    Investing is not a one-size-fits-all process. An excellent opportunity for you may not be great for someone who doesn’t share your interests, risk profile and goals. This means establishing your investing criteria begins with introspection.

    Spend time answering the following questions:

    • What kind of lifestyle do you want your investments to fund? The answer to this question will help you begin to create accurate financial targets.
    • Are there certain types of assets you enjoy more than others? Some people love buying and managing real estate, while others prefer commodities or currency. Some people are deeply involved in a single business, while others enjoy the thrill of serial entrepreneurship.
    • How do you feel about using leverage? The extent to which you’re willing to use borrowed capital as a source of funding will impact the types of investments that make it onto your preferred list. Strategically using leverage can dramatically increase your opportunities to generate returns, but this technique isn’t a good fit for everyone.

    Step 2: Use the tax law to your advantage

    I always tell my clients: The tax law is a series of incentives. It is the government’s way of telling you what it wants you to do, and when you listen, the government is willing to invest with you. So, while there are a lot of investments that will increase your taxes as you earn more money, there are some excellent options that the government is so excited to have you make it is willing to reduce or even eliminate your taxes.

    How does this work? Governments around the world recognize their societies are better off when businesses and private citizens invest in things like creating jobs, building housing and growing food. So, they create tax incentives to promote these investments.

    I recently wrapped up an in-depth study of these incentives in the U.S. and 14 other countries and identified seven categories of investments that every government supports. The categories are:

    • Business
    • Technology, research and development
    • Real estate
    • Energy
    • Agriculture
    • Insurance
    • Retirement savings

    Which of these categories matches the criteria you established in step 1? Spend time learning more about what incentives the government offers to investors in the categories that interest you most. When you use these incentives, you’re putting yourself in a position to build wealth faster by decreasing the amount of money you’re paying in taxes.

    Choose the category that fits you best. Then, double down on your research. Ideally, you will become narrowly focused on a specific niche within your chosen category. The more you learn about a specific investment and the more focused you become, the more you will increase your expertise. The greater your expertise, the lower your risk.

    Related: 7 Best Types Of Investments In 2023

    Step 3: Make a checklist

    Now that you have clarified what you’re looking for in an investment and identified the tax-effective categories in which you’ll invest, you can finalize the specific criteria you’ll use for evaluating each option. Your goal is to create a detailed checklist that lets you quickly and confidently determine which investments suit you best. Once you have established this framework within your investing niche, you’ll be able to scale your investment process.

    Your list should include the prospective investments:

    • Target rate of return
    • Expected cash flow
    • Leverage requirements
    • Exit strategy
    • And, of course, tax repercussions

    Creating this framework isn’t a black-and-white task. Your goals, circumstances and values will determine what makes an investment a good fit for you.

    You absolutely can and should do this work with the support of your CPA and other financial advisors. They can help you navigate the technical requirements on the tax side and make more precise financial estimates. Having the right team in place, alongside a proven wealth and tax strategy, serves as extra protection from making poor choices in high-stress situations.

    At the end of the day, you’ll have the peace of mind that comes from knowing you are making investment decisions based on where you are in life, where you want to go and how you’d like to get there. Plus, when you build your investing strategy in connection with your tax strategy, you’ll be able to make more money, more quickly and pay fewer taxes at the same time.

    Tom Wheelwright

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  • How to Identify Upsell Opportunities to Maximize Your Profitability | Entrepreneur

    How to Identify Upsell Opportunities to Maximize Your Profitability | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    For agencies and other service consultancies that specialize in small businesses, few things can be more helpful for increasing revenue and the lifetime value of your clients than making the most of upselling opportunities.

    The business-to-business equivalent of a McDonald’s employee asking if you’d like to upgrade from small to medium fries, upselling is your way of offering more to clients so they deepen their commitment to your agency. By better understanding what upselling opportunities look like, why they matter and how to better implement them in your own agency, you can maximize your earning potential like never before.

    What do upsell opportunities look like?

    There’s no one size fits all approach to upselling. Some of the most common types of upsells include a product or service upgrade, encouraging customers to buy products in multiple quantities, offering product or service customizations and extended service periods.

    For agencies, this provides valuable flexibility — and multiple ways to upsell.

    For example, an agency could offer monthly marketing service plans but upsell to its clients by also offering an annual plan. This annual plan could be offered at a slight discount compared to the monthly plan but has the advantage of keeping clients “locked in” with the agency for an extended period of time.

    Another option could be encouraging clients to purchase additional marketing services. For example, a small business client might come to an agency seeking a new graphic or logo, and the agency could also offer to provide web design services so that the company’s website matches its new graphics. With each of these upsell opportunities, the end goal should be finding ways to create additional value for your clients.

    Are there services adjacent to the ones you already offer that makes sense for clients but aren’t in your wheelhouse? For example, maybe your agency writes great content but lacks the ability to optimize it for search. Or maybe you capture new leads for your small business clients but don’t use triggered automation to nurture those leads. In cases like these, it might make sense to team up with other providers and technology partners so you can white-label their services.

    Related: Customer Service Is the New Upsell

    Why upselling matters for agencies

    In a survey of small businesses conducted by vcita, over 68% of respondents said they handle all of their own marketing, compared to under 24% that outsource their marketing to an agency. This is indicative of the fact that agencies often struggle to offer value to small business clients — or to effectively communicate how they can offer value — and it points to major opportunities for agencies that excel in this regard.

    Upselling is easier for agencies that are great at communicating their unique value propositions and that can tailor their packages to the specific needs of potential clients on an agile basis. Depending on the type of upselling offer you make, it can showcase the extent to which you’re paying attention to the needs of your clients. It also helps highlight the versatility your agency offers — how you can become a true “one-stop shop” for clients to effectively manage all of their marketing needs.

    Then, of course, there’s the fact that upselling can be a powerful driver of revenue. A survey by HubSpot found that 72% of salespeople who upsell report that it drives up to 30% of their company’s revenue.

    The 80-20 rule (or Pareto Principle) also applies here — where 80% of revenue is derived from the top 20% of clients. Upselling can help you maximize the profitability of your agency’s top clients, ensuring more focused sales efforts that deliver stronger results.

    How to maximize your upselling potential

    The previously cited HubSpot survey found that 88% of salespeople try to upsell their clients. Of course, this doesn’t mean that every upselling attempt is going to be successful. The most effective agencies focus on ways that their upsell offers create genuine value for the customer rather than just getting a one-time profit increase.

    This requires truly understanding the SMBs you work with and their unique pain points. Analytics are only part of the story. You need to take the time to talk to prospects and understand their specific needs. Listen to their feedback so you can build trust and strengthen your relationship.

    By taking the time to know your clients and prospects, and pairing that with a deep knowledge of your diverse network’s capabilities and services, you can then provide tailored, compelling upsell recommendations. When recommendations are truly aligned with a client or prospect’s needs and pain points, they will see your ability to provide relevant service that truly adds value.

    To do this successfully, Adobe recommends limiting how many upsell options you provide a client. Too many options can ultimately lead to analysis paralysis that makes it harder to reach a decision — or could drive a client away entirely. Upsell recommendations should also strive to remain within 25% of the SMB’s planned budget, as a dramatic price increase can similarly deter clients.

    Upsell can (and should) be a priority with current clients — those who already have some level of trust in your agency. Something as simple as a quarterly or semi-annual check-in can help gauge whether a client is satisfied with your agency’s services, as well as provide opportunities to identify new ways your agency can add more value through upselling. Active listening during these client conversations can be especially crucial for identifying upsell options your sales team can pitch at the moment.

    Related: 4 Things That Make for Unforgettable Customer Experiences

    Make the most of your sales opportunities

    Regardless of the client, you should consider potential upselling opportunities with every sales interaction. Whether that’s getting a client to order additional deliverables or having them upgrade to a higher “tier” of service, upselling isn’t just a chance to get a one-time bump in revenue from a client.

    It is also a way for you to further showcase your best work — and why you’re worth partnering with for the long haul. When you upsell effectively and then deliver on the promises you made during the sales process, you will set your agency up for lasting success.

    Lucas Miller

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  • Contribution Margin: What It Is & How To Calculate It

    Contribution Margin: What It Is & How To Calculate It

    To run a company successfully, you need to know everything about your business, including its financials. One of the most critical financial metrics to grasp is the contribution margin, which can help you determine how much money you’ll make by selling specific products or services.

    More importantly, your company’s contribution margin can tell you how much profit potential a product has after accounting for specific costs.

    Below is a breakdown of contribution margins in detail, including how to calculate them.

    What is a contribution margin?

    A contribution margin represents the money made by selling a product or unit after subtracting the variable costs to run your business.

    Consider its name — the contribution margin is how much the sale of a particular product or service contributes to your company’s overall profitability. It’s how valuable the sale of a specific product or product line is.

    Related: How to Price Your Staffing Services

    In a contribution margin calculation, you determine the selling price per unit (such as the sales price for a car) and subtract the variable cost per unit or the variable expenses that go into making each product.

    You may need to use the contribution margin formula for your company’s net income statements, net sales or net profit sheets, gross margin, cash flow, and other financial statements or financial ratios.

    What does a contribution margin tell you?

    The contribution margin is one of the critical parts of a break-even analysis. A break-even analysis is a financial calculation weighing costs of production against the unit sell price to determine the break-even point, the point at which total cost and total revenue are equal. Break-even analysis can help you with risk management

    Break-even analyses are useful in determining how much capital you’ll need for a new product and calculating how much risk will be involved in new business activities. They are often used to determine production cost and sales price plans for different products, such as:

    • How much you should price specific products for.
    • How many products you need to sell to turn a profit (the number of units can determine whether you have a low contribution margin or high contribution margin).
    • How much product revenue you will generate.

    The contribution margin further tells you how to separate total fixed cost and profit elements or components from product sales. On top of that, contribution margins help you determine the selling price range for a product or the possible prices at which you can sell that product wisely.

    Other things the unit contribution margin tells you include the following:

    • Profit levels you can expect from the sales of specific products.
    • Sales commission structures you should pay to sales team members.
    • Sales commission structures you should pay to agents or distributors.

    How to calculate a contribution margin

    Luckily, you can calculate a contribution margin with a basic formula:

    C = R – V

    “C” stands for contribution margin. “R” stands for total revenue, and “V” stands for variable costs. With these definitions, the equation goes like this:

    Contribution margin = total revenue – variable costs

    Note that you can also express your contribution margin in terms of a fraction of your business’s total amount of revenue. The contribution margin ratio or CR would then be expressed with the following formula:

    CR = (R – V) / R or contribution margin = (total revenue – variable costs) / total revenue

    Fixed costs vs. variable costs

    Crucial to understanding contribution margin are fixed costs and variable costs.

    Fixed costs are one-time purchases for things like machinery, equipment or business real estate.

    Fixed costs usually stay the same no matter how many units you create or sell. The fixed costs for a contribution margin equation become a smaller percentage of each unit’s cost as you make or sell more of those units.

    Variable costs are the opposite. These can fluctuate from time to time, such as the cost of electricity or certain supplies that depend on supply chain status.

    Contribution margin example

    Imagine that you have a machine that creates new cups, and it costs $20,000. To make a new cup, you have to spend $2 for the raw materials, like ceramics, and electricity to power the machine and labor to make each product.

    If you were to manufacture 100 new cups, your total variable cost would be $200. However, you have to remember that you need the $20,000 machine to make all those cups as well. The machine represents your fixed costs.

    Now imagine that you make those cups to be sold at three dollars per unit. You can now determine the profit per unit by plugging in the above numbers:

    • SP – TC = Profit per unit, where SP is the sales price, and TC is the total cost.
    • $3 – $2 = $1 profit per unit.

    In this example, the profit per unit is the same as the contribution margin. It’s how much each cup sale contributes to “real” profits.

    How can you use contribution margin?

    You can use contribution margin to help you make intelligent business decisions, especially concerning the kinds of products you make and how you price those products.

    A contribution margin analysis can help your company choose from different products that it can use to compete in a specific niche based on available resources and labor.

    Related: Determining Your Break-Even Point

    For instance, you can make a pricier version of a general product if you project that it’ll better use your limited resources given your fixed and variable costs.

    You can also use contribution margin to tell you whether you have priced a product accurately relative to your profit goals.

    For instance, if the contribution margin for a specific product is too low, that could be a sign that you need to either increase the price as you sell the product. It could also indicate that you need to reduce the variable (i.e., manufacturing and supply-related) costs associated with that product to turn more of a profit.

    Contribution margin compared to gross profit margin

    Contribution margins are often compared to gross profit margins, but they differ. Gross profit margin is the difference between your sales revenue and the cost of goods sold.

    When calculating the contribution margin, you only count the variable costs it takes to make a product. Gross profit margin includes all the costs you incur to make a sale, including both the variable costs and the fixed costs, like the cost of machinery or equipment.

    Related: How to Calculate Gross Profit

    Furthermore, a contribution margin tells you how much extra revenue you make by creating additional units after reaching your break-even point.

    Put more simply, a contribution margin tells you how much money every extra sale contributes to your total profits after hitting a specific profitability point.

    This is one reason economies of scale are so popular and effective; at a certain point, even expensive products can become profitable if you make and sell enough.

    When should you use contribution margin?

    Generally, you should use contribution margin to tell you:

    • If you have priced a product incorrectly.
    • How many products you need to sell to make a profit based on variable costs.
    • Whether you need to reduce operating or labor expenses related to making a product.

    A negative contribution margin tends to indicate negative performance for a product or service, while a positive contribution margin indicates the inverse.

    However, it may be best to avoid using a contribution margin by itself, particularly if you want to evaluate the financial health of your entire operation. Instead, consider using contribution margin as an element in a comprehensive financial analysis.

    Use contribution margin alongside gross profit margin, your balance sheet, and other financial metrics and analyses. This is the only real way to determine whether your company is profitable in the short and long term and if you need to make widespread changes to your profit models.

    Related: Understanding the Difference between Gross Margin and Markup

    You may also use contribution margin as an investor. Investors and analysts use contribution margins for a company’s staple or primary products.

    They can use that information to determine whether the company prices its products accurately or is likely to turn a profit without looking at that company’s balance sheet or other financial information.

    For instance, if a company has a low contribution margin for its essential products, it could be spending more money than it is bringing in.

    Conversely, a good contribution margin may indicate that the company is an excellent operation and uses its resources wisely.

    Related: The 5 Myths of Mastering Profit Margins

    So, what are the takeaways about contribution margins?

    As you can see, contribution margin is an important metric to calculate and keep in mind when determining whether to make or provide a specific product or service.

    Once you calculate your contribution margin, you can determine whether one product or another is ultimately better for your bottom line. Still, of course, this is just one of the critical financial metrics you need to master as a business owner.

    Interested in more resources like this? Check out Entrepreneur’s vast and ever-growing library of guides and resources to help you on your path to professional success.

    Entrepreneur Staff

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  • Should You Prioritize Growth or Profitability in a Recession? The Answer May Surprise You.

    Should You Prioritize Growth or Profitability in a Recession? The Answer May Surprise You.

    Opinions expressed by Entrepreneur contributors are their own.

    This year has seen economic slowdown, inflation and war combine into a cocktail that’s now fueling fears of a recession across business sectors, driving uncertainty in everyone from business leaders to investors to employees. Such uncertainty is forcing business leaders to reprioritize and scale back their once-ambitious growth plans. And now, as interest rates go up and valuations go down, more and more businesses are returning to prioritize what was once the only way to ensure a business’s success — positive free cash flow.

    All of this is a very strong reminder for all businesses, but particularly startups and small businesses, that it’s vital to build a company to make money — in both good times and bad. Prioritizing free cash flow is the only way to manage against forces outside of your direct control.

    Related: Never Worry About Cash Flow Again by Using These 5 Strategies

    Positive free cash flow isn’t a luxury

    Many entrepreneurs, especially as they start their businesses, begin at a deficit. While this is expected (“You’ve got to spend money to make money,” as the saying goes), too many businesses, especially in the last decade or so, have spent too long in the unprofitable growth stage. Many notable companies in tech are now faced with hard decisions with real consequential and disruptive effects, including dramatically curtailing investments and layoffs.

    This recent and too-common strategy of sacrificing profitability for growth’s sake can and has worked for some companies. Private and public capital markets faced with a low-interest rate environment have been heavily anchored on the high growth segments of the economy to deploy their capital. This capital glut has distorted long-term value drivers of business, i.e., the relationship between revenue growth rate and free cash flow margins. Given the valuation rewards, too many have solely built their businesses for high growth at all costs.

    For most companies, prioritizing profitability and free cash flow should be seen as the norm. Many business leaders might be surprised that doing so doesn’t materially impact revenue growth.

    Speaking frankly, if you’re running a $100+ million organization that is just burning cash, it is a hobby. That doesn’t mean leaders shouldn’t invest in the business, it’s simply a question of prioritizing investment with the goal of also generating positive free cash flow.

    Businesses are meant to turn a profit. While Wall Street has recently been exceptionally forgiving to growing but unprofitable companies, this historically has not been the case. With extremely low interest rates since the financial crisis of 2007-08, there have been little to no penalties for taking risks on fast-growing but heavily cash-burning companies. The phrase TINA — there is no alternative — came about as a result of the extremely low interest rates providing a significant incentive for investors to chase growth without considering risk, as they had few opportunities to realize returns with lower risk. With interest rates normalizing, however, there are very real investment alternatives to high growth, and valuations for growth are down substantially as a result.

    Now that we’re trending towards a “normal” economy as interest rates return to something approaching long-term historical levels, it’s time for business leaders to return to managing their business operations for these “normal” times. Capital access is going to be tougher now, and investors will demand more balance between growth and free cash flow after the initial phases of product-market fit are established.

    Related: How to Maintain Profitability in a Changing Market

    Prioritizing what’s important

    For small business owners and startup founders who have been less concerned with generating free cash flow and are looking to bolster their balance sheet, there are a few things you can and should do immediately.

    First, you must determine the math that will allow you to control your burn. You and your team need to find a realistic revenue trajectory and break-even point. Without realistic expectations for your near and long-term revenue and fixed expenses, you and your team can never plan for responsible, realistic and profitable growth.

    Once you have your revenue and break-even point, you should be able to figure out what you can plan to spend. Armed with that spend number, it’s time for leadership at all levels to take a look at how their activities connect to revenue. This is where you need complete buy-in from your team and likely a significant change in mindset.

    People get sloppy in good times, which we’ve all been fortunate to enjoy for the last decade. There’s more room for experimentation when horizons are far out, but now as horizons shorten, pies shrink and forecasting becomes less sunny, business leaders must get ruthless about prioritizing projects that are driving revenue — everything else must be seen as a luxury. Projects outside revenue drivers will likely need to either operate off a slimmed-down budget and with more creativity or put on the shelf until sunnier days come.

    Being honest is going to be important here. Be honest with yourself as the business leader about your growth and spending trajectories, with your team about what can and will be prioritized and with investors about what you’re doing to generate cash flow. Setting these expectations will be key to keeping your employees motivated and engaged during what can be a stressful time.

    Related: Positive Cash Flow and Smart Financing Solutions

    Focus on productivity

    As I’ve seen various economic cycles come and go, there are always two terms that seem to come back with a vengeance at every downturn — efficiency and productivity. While there is nothing wrong with having an efficient operation, it seems to me that many companies and leaders only prioritize efficiency when times get tough.

    Instead, I wish leaders focused more on productivity. For many, it will be a return to early startup days when teams were lean and scrappy. It’s incredible what teams can do when focused on making the highest impact on the highest priority work. Get your teams focused and aligned on the right things, and cut out the low-priority items. You’ll be amazed at what can be accomplished.

    There is nothing wrong with making operations more efficient, but this can’t and shouldn’t be a short-term fix that goes out the window the second things look brighter, and neither should a focus on productivity. If and when we climb out of inflationary and recessionary periods, and your team goes right back to prioritizing growth over cash flow, you will likely find yourself in a similar situation the next time the markets begin to dip.

    Related: Why Founders Should Focus on Productivity Instead of Efficiency

    It is easier to burn cash than to generate positive free cash flow. That is to say, it’s easier to defer hard decisions instead of making them now. If the last few years have taught us anything, it’s that the future is unpredictable, and businesses — especially SMBs and startups — would be wise to shore up a safety net built on a foundation of profitability. Be realistic with your revenue and spending expectations, and prioritize projects that represent the best opportunities to drive growth and efficiency. This will enable long-term sustainability in good and bad times.

    Yancey Spruill

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  • The Critical Role of System Integration In Digital Transformation

    The Critical Role of System Integration In Digital Transformation

    Opinions expressed by Entrepreneur contributors are their own.

    In recent years, businesses of all sizes have increasingly relied on digital tools and technologies. There has been a rapid increase in adopting the newest trends to enhance productivity and efficiency and improve processes and outputs.

    In their quest to go digital, many organizations are forced to give up their old ways and welcome contemporary processes and systems with open arms. Some traditions are hard to let go of. Thus, business owners and employees alike might be apprehensive of the changes that come with digital transformation.

    How can your business make sure to switch it up without losing existing data, systems, processes, techniques or people? An integrated system will address all your troubles and concerns.

    What system integration means

    Every business, at any point in time, often has a combination of manual and automated online and offline systems to manage each aspect of its operation. To reap maximal benefits from global technological advancements, businesses must fully embrace the digital age. However, going digital can take time.

    Many organizations that started early on took each process or department through digitalization. Others wanted to undergo digital transformation in one go — a tiresome, high-risk and expensive process. To take a cautious, calculated approach to digital transformation, there is one integral part of the process you cannot ignore — system integration.

    System integration refers to collecting the various separate modules, processes and data systems and having them work in a unified manner. It enables organizations to streamline operations, strengthen collaboration between departments, and improve operational efficiency. This process not only facilitates the introduction of new IT systems to existing digital environments but can also help combine modern systems with dated legacy ones.

    Related: Why You Should Speed Up Your Digital Transformation During the Crisis

    The benefits of system integration

    In recent years, the global system integration market has been growing at impressive rates, and Grandview Research predicts an upward trend for the next few years. Let us explore why system integration is vital to the digital transformation journey and how it can benefit your business.

    1. Lower costs

    Installing and maintaining multiple disparate subsystems can be expensive. The costs can quickly rack up to staggering amounts over the years. With an integrated modern system, your organization will no longer have to host and manage multiple systems and their individual data stores. A consolidated system will reduce redundancy and repetition and allow valuable resources to be reallocated toward more critical tasks or areas of operation.

    Additionally, without a proper system integration strategy, the thought of undergoing digital transformation can be daunting. Introducing a highly complex state-of-the-art digital system to be implemented across the entire organization at once will incur significant financial damage, not to mention the intimidation and doubt it will cast over the workforce. System integration can help assuage the impact of digital transformation by putting existing systems to their best use and only introducing new elements where necessary.

    2. Improved efficiencies

    Working with many systems — some of which may be entirely isolated — negatively impacts performances and subsequent results. There can be a sizable gap in communication and collaboration. Isolated systems may have to be manually updated with new incoming data. And let us not forget the hassle you would have to go through every time some important information needed to be retrieved. A lot of time would be wasted on interdepartmental communication for the simplest exchange of data, further delaying time-critical resolutions. Even minor errors could cause catastrophic outcomes.

    With a consolidated digital platform, you will get many benefits in terms of higher efficiency.

    Firstly, system integration will facilitate knowledge transfer by providing a high level of connectivity between teams and departments. This leads us to the second benefit — massive time-saving. Introducing a digital system would open up new possibilities for automating mundane and critical tasks. Urgent decisions could be made in real time. Each member of your organization would then be able to focus their efforts and energies on more important things, boosting the team’s collective productivity and efficiency.

    Related: 3 Key Steps to Make Your Business More Efficient and More Profitable

    3. New insights

    With disparate subsystems all handling different data stores, there is a certain gap that can sometimes be difficult or impossible to bridge. Businesses could miss out on a goldmine of valuable insights and reports that high volumes of data could potentially provide. Consequently, they likely make pivotal decisions based on incomplete or inaccurate data.

    With an integrated system, all the relevant people can access any data they need at any time. This data can then be used to analyze employee, department or overall business performance. The insights you gain into your business’s operations can then be used to make any changes needed to improve outputs and outcomes.

    Wrapping up

    System integration is an essential part of the digital transformation process, a phase without which businesses will not be able to experience the true advantages of going digital. Thus, your end goal should be not just introducing newer, more innovative IT systems in the workplace but also making room for any adjustments necessary for a truly digital, smooth and unified experience.

    Related: Why Enterprise Application Integration for Businesses is an Absolute Necessity?

    Yasin Altaf

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