This post is the final installment of my interview with Dan Kennedy. Click on these links to read the first three parts:
ROB: I’ve, of course, read the book – several times, and I was struck by three things I’d like you to talk about, that I would call: process improvement, people improvement and profit improvement. Let’s touch on each one.
DAN: Rob, that’s a good way of putting it. It all starts with accurate measurement of what’s really happening versus having or establishing standards for what’s supposed to be happening. For three or four years, I was on a speaking tour, at seminars with 10,000 to as many as 35,000 people in the audiences, and I frequently followed – and got to know – General Norm Schwarzkopf. A line I wrote down from him is: shined shoes save lives. What he means is, being undisciplined, casual, sloppy about seemingly little things inevitably permeates to affect all things, and on the business battlefield where we operate just as on the actual battlefield, it’ll get you killed in tough times. So, you need standards for everything. And everybody. Number of rings before phone is answered. Number of referrals per client per 90 days, a certain ‘under’ triggering a series of pre-planned actions. Etc. Etc. In other words, you have to measure to manage, and what you can’t or aren’t measuring, you can’t be managing. Face it. Get real about it. That’s foundational to all three opportunities for improvement you named: process, people, profits.
So, as an example, let’s take the sales process, which I write about extensively in the RUTHLESS MANAGEMENT book. I have a client with this process: leads are generated by advertising; leads are moved to the setting of appointments; salespeople make presentations at those appointments; some buy, many don’t. There are lots of things to be measured here. Conversions of visitors to the web site to requests for information; percentage of those sent info setting appointments; percentage of those setting then keeping appointments; and, of course, percentage buying vs. not buying. And there are many variables that can be worked on, to try and improve each of those results. If, for example, the percentage of appointments kept is 72% when they speak with Betty when they call in, but only 64% if they speak with Helen, we either find out what Betty’s saying or doing differently than Helen and keep training and coaching Helen until she gets her efficacy up to Betty’s, or we get Helen off the darn phones. We definitely measure both in real time, day to day; don’t keep the results a secret. If there’s a script getting Betty the 72% we insist that it be memorized, practiced and used by Helen….we “mystery shop” and record her calls….and if she won’t get with The Program within a reasonable probation period, we fire her. But here’s a big, hidden opportunity found in this business. The non-buyers, left to the salespeople for follow-up, were nearly worthless; fewer than 5% came back and bought within 60 days. Mostly because the salespeople believed them worthless and wouldn’t do – and lied about doing – the prescribed follow-up, let alone working earnestly on finding ways to improve the result. Taking that away from the salespeople and implementing a series of three follow-up letters over six weeks, we got 16% back to buy. That’s a gain of 11 buyers per 100 sales presentations. That’s big. This company had been doing “just fine” tolerating the 5% when 16% was available during the generous economy. They can’t afford it during the turned-grumpy-and-intolerant economy. They shouldn’t tolerate it at all. So, that’s process improvement. The Helen-Betty situation might be resolved by process improvement, a better script, training, better supervision. Or it might require people improvement. Now, given the 5% to 16% improvement created, this business can actually afford a dip in first presentation sales that might be caused by a price increase. Let’s play. As example, if their salespeople average 20% sold, plus 5% after the fact, at $1,000.00 each, that’s $25,000.00 per 100 people getting presentations…if at a 50% profit: $12,500.00 profit. If I raise the price to $1,500.00 (thus DOUBLING the profit from $500.00 to $1,000.00)….the percentage buying at presentation drops from 20% to 15%, and that 16% drops to 9%, I’m at 24% vs. the old 25% (down only 1%)…24 x $1,500.00 gross, $36,000.00 instead of $25,000.00, and more importantly $24,000.00 profit vs. $12,500.00 profit. That’s profit improvement. And, by the way, contrary to common fear, price increases do not necessarily cause significant drops in sales made. Then we can go back around the horn, to try to improve the at-presentation sales with better scripts, new answers to price objections, new financing options, sales training and/or new and better salespeople. And, of course, we could combine all this with deliberately seeking more affluent buyers. That’s what my RUTHLESS MANAGEMENT book is all about. In short, squeezing a lot more good juice out of each orange you have, so even if, temporarily, your tree produces fewer oranges – the recession effect, you still get more juice, not less.
And please don’t say: that example doesn’t apply to me because – because whatever. I don’t use that business model. I don’t have salespeople. Yada yada. You just have to be smarter than that. The principles apply everywhere. And ruthless management starts with ruthlessly managing yourself.
ROB: We’ve been plugging your book, but I know you have blatant and crass commercial messages…
DAN: I’m willing to sing for my supper – but I want my supper. And I think I’ve done a lot of singing here, don’t you? So. First, the books; they are available at amazon.com, BN.com, Barnes & Noble, Borders, other booksellers, and free info about the entire No B.S. book series is perpetually up-dated at www.NoBSBooks.com. If you want bulk quantity discounts, if you’re buying dozens or hundreds of copies, try 1-800-CEO-BOOKS, or your local Barnes & Noble store has a corporate/business discount program. Both books have audio CD’s included right inside, plus online resources at web sites provided in the books. Second, your real estate agents can get a terrific Free Gift Collection of other recession-busting resources of mine including three webinars, my Income Explosion Guide, two months of my No B.s. Marketing Letter, and more, all FREE… www.FreeGiftFrom.com/robminton. These are resources that can be of immediate and dramatic help. It is my firm belief based not on ‘positive thinking’ but on experience – mine and countless clients – that attending and being adversely affected by the economic storms of the moment, and likely well into or through 2009, is OPTIONAL. The antidote is: awareness, decision, resources and bold action. These two books are, I think, the most timely I’ve ever written. And, thanks for the opportunity to shamelessly push them on your blog.
ROB: My pleasure – because I really believe they will benefit. I’ve benefited a great deal from all of your books! And I have my own shameless commercial announcement: real estate agents looking to grow their businesses should stay tuned to my blog because I’ll be announcing something in August that only a limited number of agents will have access to. You’ll have to act quickly when my announcement is made! I’ll write more about this in the next week or two. Now, Dan, any closing thoughts?
DAN: Kate Hepburn said: old age isn’t for sissies. The older I get, the more I appreciate the remark. Business success, especially in difficult economic times, isn’t for sissies either. This is a time to ruthlessly hold yourself, your every process, every employee, entire business and its profits accountable. To have a zero tolerance approach to anything or anyone depressing profits. This is also a time for new thinking, new approaches, new initiatives, and bold action. And this is a time when it is more important than ever to be cautious of toxic influences of relentlessly negative pessimists, cry-babies, complainers as well as media mouths and politicians magnifying crisis and gloom for their own purposes – and to seek out and associate in every way possible with tough-minded, creative, innovative, forward-thinking people in your field, leaders of your field, as well as qualified, credible advisors outside your specific field who keep you focused on opportunity. That’s why participating in everything you offer, Rob, is so important at this time. Frankly, the tendency, the temptation thoughtlessly given into by so many is to cut back on that which should never be cut back on, drop out of what should never be dropped out of, to isolate. Whatever small savings comes of it, the true cost is infinitely higher. Conservation has its place, but never as substitute for investment.