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The “Sales Hourglass” – The Most Important Concepts You Must Know and Embrace to Create a Profitable Business

Graphic of a "sales funnel" illustrating the importance of customer lifetime value

Gasp! But, Terry, it looks soooo complicated!

Take a deep breath. Walk with me, talk with me. I’m goint to make a video about this in a bit to drill deeper, but right now I just want to impress upon you some critical key concepts. Because if you understand the key concepts that this one little ole diagram conveys, you will be more savvy about how to make money than 98% of small business owners!

Key Concept #1: Few businesses can survive on one-time sales to customers, because the cost of acquiring a new customer is far greater than what it costs to keep and “grow” one. I’m going to say that again: Few businesses can surve on one-time sales to customers. So you have to gear your business to repeat sales.

The purple hourglass simply represents that acquiring, keeping and growing process: a) leads come in the top, b) you get a first-time sale with a certain percentage of those – that’s the neck of the funnel, then c) you work to sell more/other products and service to those first-time customers.

Key Concept #2 (the also pretty, baby-blue boxes down the left side): This will astonish you, but you will welcome it, because it makes simple what the world tries to make oh, so complicated.

There are only three basic ways to grow any business:

1. Get more customers.
2. Increase the average sale amount (of either or both of your first-time sales and repeat sales).
3. Increase the number of times that customers return and buy again from you. (Notice that repeat sales can be two types: if you sell consumables, repeat sales can be replenishing what customers “use up”. If not, it means selling them other usually related – but not necessarily – products and services. )

That’s it! Now, here’s another little secret that will put you head and shoulders above “the pack”:  Very close to 100% of all small businesses focus 100% of their marketing efforts on first-time sales only!!! Why? Because 95% of all marketing babble is about “acquiring customers.” And only 5% of the babbly addresses keeping and growing customers. (Those are my numbers – I have no idea what they really are, but it wouldn’t change my point.)

You know why it is that way? Because the vast majority of marketing babble is propagated by people trying to sell you customer-acquisition services. NOT customer acquisition and growing services.

Be smarter than the rest: put something like, say, 30% of your marketing emphasis on growing and retaining existing customers.

Key Concept #3: The lifeblood of your business will be understanding and increasing your average “customer lifetime value” (you’ll also see it expressed as “lifetime customer value”, but I have my reasons for my preference).

“Customer lifetime value” is the entire gross profit that you make, on average, from a customer over the life of their relationiship with you.

Manage your business so as to maximize that, my friend, and you will live in a rarified atmosphere.


Related Resources:

If you are one whose job is portable and you are interested in a better quality of life and adapting to the new realities of making a living, here are some great resources to get you started:

  1. If you need help working through family decisions, weighing the pros and cons of remote working, creating an online business of your own, or if you just want to clarify your passions that point to your ideal job, you would do well to get a little help from a life coach. One of the best places to link- up with a coach that’s right for you is the free life coach matching service provided by Wainwright Global.

  2. If you’re drawn to remote working but don’t know how to get startedthe Laptop Lifestyle Academy is perfect program for learning the ropes.

  3. If your preference is  starting an online business of your own now or soon, there’s no better place to start than the free course at My Online Startup. It provides a great basis of knowledge and tools that will be relevant no matter what type of online venture you choose to pursue.

Yes, times are certainly challenging right now. But such developments can also be the catalyst that triggers overdue changes for the better in your life. There are plenty of great resources – like the above – to help you make them.

Related Posts:

“The “Sales Hourglass” – The Most Important Concepts You Must Know and Embrace to Create a Profitable Business”

“The Hidden Aspects of the 80/20 Rule That Can Transform Your Business…Let Alone Your Entire Life”

“Somebody “Out There” Has Whatever You Need for Your Business – Find Out Who It Is and Make It Worth Their While to Share It With You”

“Why Services are More Challenging to Sell Than Products”

“Why the Pricing of Services is Far More “Flexible” Than the Pricing of Products

“Why You Usually See Three-Tiered Service Pricing”

“The Tyranny of Lowest Price”

“MBA Degree in a Blog Post

What is a Brand? Really. You Wouldn’t Believe What a Time Marketers and Entrepreneurs Have Trying to Define It

An Oft-Overlooked but Critical Thing to Understand About Keyword Search Advertising”

“The Short-Sightedness of ‘Just Making Sales'”

Why It’s So Smart for Entrepreneurs to “Fail Fast”!

“Strategies for Practicing Customer-Centeredness”

“Differentiation and Positioning – The Keys to the Value Proposition of Your Business

“The Concept of “Exchange” and How It Impacts the Value Proposition of Your Business”

“What the Internet’s Elimination of the “Information Deficit” Means to Every Business”

A Principle You’ll Never Regret Adhering To

“What is ‘Quality’ Anyway?”

“On Being Customer-Centered – the Lifeblood of Your Business”


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