Everyone wants passive income
When was the last time you dug deep? You decided you were going to do something, you buckled down and got it done? This weekend, my husband and I planned a six hour business development strategy session. We own a haircutting business that’s been in business for eight years. It’s running really well, but after eight years a lot of the passion is gone. The excitement and anticipation of great success has fizzled and the business has been on auto pilot for a while.
I talk to so many people and “passive income” is more than a buzzword, it seems to be the first thing out of peoples mouths. Everyone wants passive income. If we could all start businesses that generated boat loads of passive income we’d all be set, right? Well, all that to say our haircutting business does generate a certain amount of passive income. The problem with passive income is that when you passively receive income it’s easy to overlook the business. Our strategy session was designed to focus our attention on this business, what could we do to increase the income that business is producing.
First we looked at our average dollar sale. We raised the prices about six months ago, so although price increases are usually a good idea (research shows that the number of customer you loose from a price increase is more than compensated for by the increase in the price, thus making a price increase not a bad option). However, since we recently did increase our prices that was out of the question. We turned our attention to increasing our average dollar sale. If we can increase our A.D.S. by even $1 a transaction and with the idea that we generally get in about 1,200 clients a month, that quickly raises our monthly sales by $1,500. Over a year that $18,000. Not too bad for just increasing our average dollar sale.
Next we examined our product offerings. Are we offering products and services that our customers want to buy? Are they set at an appropriate price point? If we lowered the prices of some of our higher end services might more customers be interested in taking advantage of those services? How many of our clients are buying hair care products? Do enough of them leave the shop with a product in their hands? And if not in their hands at least in their hair? Our business is simple, there aren’t that many products or services to offer, that makes it nice, but it can also limit our ability to increase sales.
That was the next topic of discussion. How is our marketing looking? Are we hitting enough new customers? Are we reaching out effectively to our past clients via email and text messaging. How is our retention rate? How many past customers are regular customers. How many new customers are we getting every day, week, month? What are some new ideas for reaching more new customers? What advertising or marketing vehicle is serving us best? How is our social media presence? All of these questions led to deep discussions about how our marketing is positively or negatively effecting our customer flow.
The business is run by a great team and we needed to discuss these folks. Are they offering the best customer service possible? Are they feeling valued as members of our team? What can we do to make them feel more valued? How can we inspire each stylist to feel a sense of ownership and have a desire to always provide excellent service and product recommendations? How do we continue to cultivate a culture of growth and development within the organization? Should we be offering more training to our employees? How can we be an organization that people dream of working with?
And, finally we discussed finances. How could we as a business stay focused on the numbers? How can we know the numbers inside and out? How can we set higher expectations for revenue growth and stay focused on manifesting these numbers? Where has our attention been in the past few years? Has that served us well? If we took a more active, less passive role in the business might it be worth the growth we see in revenue? Many people want to generate passive income, but it’s important to remember that your income is always directly related to the amount of effort you contribute. Passive income doesn’t just fall into your lap. You can’t just record a few videos and expect people to flock to you and throw money at you. It’s the same principle with our haircutting business. It’s never going to exceed the status quo without leadership to stir the pot and inspire growth.
At the end of the meeting we both knew that it’s not about always having the resources, it’s about being resourceful. Having the focus to create a higher level of organization, and being real with our expectations of ourselves and our employees. Taking a business to the next level is often more challenging than starting a company. When you start everything is upside, it’s when you plateau that things get difficult. What can you do to give yourself, your business and your community that shot in the arm to move you to true prosperity?
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