There are 5 BASKETS you MUST be putting money into if you own a business. Without putting your money into these 5 baskets you will suffer greatly. Listen to today’s podcast to find out these 5 buckets!
These are the five baskets that you need to be systematically putting money into. Too many small business owners fleece the accounts every Friday of all the profits. And that’s a fool’s game. It’s a very limited business and it’s not how I run a business. Until you start putting money in these baskets, you’re basically just an employee of a very small gradual business. Any one of these situations can put you out of business.
So what are the five baskets?
How are you growing your customer base? How are you requiring new customers? Do you have a systematic plan in place that you are funding with money to grow your customer base, to expand that customer base, and to attract your target customer? If you don’t have a marketing plan in place that requires a budget, you’re a little social media campaign that your niece is running is not going to cut it.
I’m talking about putting money into growing your customer base, into promoting your brand, into building a brand, into expanding your target market, into expanding your demographics so more people that want to buy from you. All those things. You’ve got to put money into marketing.
The illustration I use is, is that during the Super Bowl, were constantly reminded that Budweiser sells beer, and they spent a fortune telling you that though all of us know already. It’s called Marketing. Successful companies put money in a basket for marketing.
Your most successful companies are constantly growing.
Maybe that’s Google buying YouTube. Amazon buying Ring Doorbell, Zappos and Whole Foods, the list is endless. Maybe it’s Walmart buying Bonobos. I could keep going on and on.
But even as a small business, you have to look for growth opportunities. Maybe it’s just expanding your product line, maybe it’s expanding your services, maybe it’s expanding your reach just within your geographical area, but if you’re not putting money away, there’s just no way that you can take advantage of a growth opportunity.
Maybe it’s the opportunity to buy out your competitor because they don’t have a transition plan in place and the founder is getting up in age. I have found there are great opportunities to buy out my competitor, and every few years, I bring one in for a meeting to see what their transition plan is and whether I could purchase them and purchase their customer base and eliminate a competitor. So again, you need to look for growth opportunities.
What do you mean by that?
In one of my companies we do, let’s say $4 million in services, so let’s say I take 10% of that for conversation’s sake, take that be $400k. So let’s say take 1% of that, that would be $40k. I think half of 1%, that would be $20k.
I’m happy to put $20k a way to make problems go away that customers have. They might be above and beyond the scope of what really we should be giving to them, but sometimes it’s just, you know what, send so-and-so there and put it the bed, given this, give them that.
So I have a third basket that just makes customers fall in love with us, where we do above and beyond what they expected. My partners can say to them, “Hey, what can we do to make you happy?” And they go, “I thought you were going to do this.” We have our constant line, “we don’t give you what you thought, we give you what’s in the contract”, but there are times when it’s just easier just to throw them a bone, and if you put money aside to do this, it’s effortless when the situation arises.
I read the story of Nordstrom at one point. An elderly customer came in, and obviously Nordstrom sells clothing and things of that nature and wanted to return a set of tires and they took them. They just gave him money. They looked up the value of the tires. Why? Because they know the value of a customer.
Obviously, Nordstrom goes above and beyond anybody’s imagination on how they handle returns and what they do for their customers, but that’s an example of it. If you’re systematically putting money into this third basket that I’m talking about for customer service issues when that situation arises, it’s fairly effortless for you to address it.
If you’re going to be a business, you’re going to have legal issues at some point…
I wish they didn’t happen, but I found the bigger my company got, the easier I was as a target for either a customer or an employee or whatever the case may be. I have learned to put money aside for legal issues, to put them to bed when they arise, maybe something needs to go into mediation, maybe something just needs to be just handled. However, if you’re not putting money away when you have a legal issue, you have to be in a defensive posture because you’re afraid of it.
I remember dealing with a client and what they were requesting was well above their contract, and I just could not make them happy. It just got really exhausting. And she just kept going on and on. I finally took out my phone and I scrolled to my attorney and I showed it to her. I said THIS is who is going to handle the next part of this. It was an extremely reputable law firm that she was extremely familiar with. She lived in our area, and she got extremely quiet when she saw it, because I was just like, I’m not going to deal with this anymore, I’ve done everything I can to make you happy. The next conversation is going to be a very expensive conversation.
I never heard from that client again in a negative posture regarding that AND her expectations really got in line. That’s why we had him on retainer and we put money away for legal issues. Welcome to being in the big leagues.
Listen, nobody could have planned for a coronavirus, so I don’t even want to be pious and act like you should have had money aside for this, but you should have money aside in general.
You should be able to withstand a downturn of some nature. They just happen. If you’re over the age of 30, you’ve seen ’em. 2008, 9-11, There are just downturns. 1991, we go to war, 1988, stock market.
There are just downturns, they happen. Industries change. If you’re in retail, they changed dramatically, sometimes faster than you ever imagined, so you need to prepare for a downturn, and the only way that I know to do that is to put money in reserves.
You just got it. put money aside.
So again, I shared with you these baskets that I highly encourage you to put money in:
- Marketing. You need to grow your customer base.
- Growth opportunities. Expand products, your services, maybe by a company that’s available things of that nature.
- Customer service. If you systematically put money aside on every job knowing that it’s reasonable that you’re going to have customer service issues, they’re not a problem when they arise.
- Legal Issues. If you’re in business, you’re going to have legal issues, it’d be great if they didn’t happen, but they do. So if you have a law firm that you’re relationship with a retainer and or least money put aside, knowing that the issue comes up, maybe you have a legal your legal paperwork looked over once a year, maybe your contracts are updated with mediation agreements and things of that nation, arbitration agreement, maybe NDAs, I don’t know what you need for your business. Maybe there’s some intellectual property that needs to be better protected, but if you’re not putting any money aside in that fourth basket for legal matters, you’re making a huge mistake.
- Economic downturns. Industry down terms, industry changes, or when there’s naturally a drop off in business.