MAKE SURE YOU’RE AN ENTREPRENEUR BEFORE YOU BUY A FRANCHISE
Advice on franchising by Pieter Scholtz, Master Licensee for ActionCOACH SA. ActionCOACH is one of the fastest growing and most successful business coaching franchises in the world today.
Before you jump in and buy a franchise, there’s one very important question you must ask: “Am I an entrepreneur”?
Success in business comes down to one fundamental characteristic that you absolutely must have, and that is an entrepreneurial mindset.
What exactly is an entrepreneur? An entrepreneur can be defined as a person who organizes a business venture and assumes the risk for it. If you do not possess a natural, built in instinct for business, running a company will be a challenge.
Achieving profitability means keeping a keen eye on the five main business areas that impact turnover, what we call the Business Chassis. Below we explain the parts of the Chassis. Think of it as your formula for success.
1. NUMBER OF LEADS
This is the total number of potential buyers that you had contact with in the last year. People often confuse the number of responses or potential buyers with results. Just because the phone is ringing doesn’t mean the cash register is. Very few business people know how many leads they receive a week, let alone from each and every marketing campaign. While receiving leads is great, remember that it is the conversion rate that counts.
2. CONVERSION RATE
The conversion rate is a potential goldmine in every business. This is the percentage of people who did buy as opposed to those who could have bought. For example, if you had ten people walk into your store today and you sold to only three of them, your conversion rate was three out of ten or 30 percent. When asking business owners what their conversion rate is, most take a stab in the dark and judge it between 60 and 70 percent. When asked to measure it over the next couple of weeks they find it closer to 20 or 30 percent. You should be excited with those figures because it means you are still getting by at that rate. Now imagine how your business would run at a 60 percent conversion rate. Double your conversion rate and you potentially double your turnover.
3. NUMBER OF CUSTOMERS
This is the total number of potential buyers that you came into contact with in a one year period. This can be calculated by multiplying the total number of leads by the conversion rate. Remember, it’s not about getting more customers, you can’t change that number. It’s about getting more leads and then improving your conversion rate. These are the variables that lead to the result.
4. NUMBER OF TRANSACTIONS
Some customers will purchase weekly and some monthly, while others purchase only on the odd occasion or just once in a lifetime. What you want to know now is the average. Not your best or worst, but the average number of times customers buy from you in a year. Once again, this is another potential goldmine, yet most business people never collect a database of their past customers, let alone contacting them with an incentive offer to return.
5. YOUR AVERAGE RAND SALE
Here is a variable that at least some business owners do measure. Some customers might spend R500, and others R100, but the average is what you are after. To calculate your average rand sale, divide your total Rand sales by the number of sales.
TURNOVER
To calculate your turnover, multiply the total number of customers with the number of visits on average and then by the average amount spent with each visit. This is another area most business owners will know the answer to. The variables here that businesses can improve upon are the number of transactions and the average rand sale per customer.
MARGINS
This is the percentage profit generated with each sales transaction after all costs have been taken into account.
PROFITS
All business owners strive to achieve greater profits. Higher profit can only be achieved by increasing the margins on turnover.
The Business Chassis is the basic model that dictates the profit levels of every business on earth. By breaking down your business and marketing efforts (selling is married to marketing) into these five areas and understanding how each affects the other, you are halfway there and way ahead of 90 percent of business owners.
So does the thought of increasing your level of profitability set your pulse racing?
Do you find the concept of increasing how much you make by tweaking these few variables in the Business Chassis fascinating?
Have you already identified a few things you just can’t wait to try out? If you answered yes to these questions, then you may have the entrepreneurial mindset that it takes to be successfully self-employed.
ActionCOACH has 1,000 offices across 32 countries including South Africa. For further advice on franchising or to enquire about an ActionCOACH franchise, visit http://www.actioncoachsa.co.za/ or call 082 881 3729
Before you jump in and buy a franchise, there’s one very important question you must ask: “Am I an entrepreneur”?
Success in business comes down to one fundamental characteristic that you absolutely must have, and that is an entrepreneurial mindset.
What exactly is an entrepreneur? An entrepreneur can be defined as a person who organizes a business venture and assumes the risk for it. If you do not possess a natural, built in instinct for business, running a company will be a challenge.
Achieving profitability means keeping a keen eye on the five main business areas that impact turnover, what we call the Business Chassis. Below we explain the parts of the Chassis. Think of it as your formula for success.
1. NUMBER OF LEADS
This is the total number of potential buyers that you had contact with in the last year. People often confuse the number of responses or potential buyers with results. Just because the phone is ringing doesn’t mean the cash register is. Very few business people know how many leads they receive a week, let alone from each and every marketing campaign. While receiving leads is great, remember that it is the conversion rate that counts.
2. CONVERSION RATE
The conversion rate is a potential goldmine in every business. This is the percentage of people who did buy as opposed to those who could have bought. For example, if you had ten people walk into your store today and you sold to only three of them, your conversion rate was three out of ten or 30 percent. When asking business owners what their conversion rate is, most take a stab in the dark and judge it between 60 and 70 percent. When asked to measure it over the next couple of weeks they find it closer to 20 or 30 percent. You should be excited with those figures because it means you are still getting by at that rate. Now imagine how your business would run at a 60 percent conversion rate. Double your conversion rate and you potentially double your turnover.
3. NUMBER OF CUSTOMERS
This is the total number of potential buyers that you came into contact with in a one year period. This can be calculated by multiplying the total number of leads by the conversion rate. Remember, it’s not about getting more customers, you can’t change that number. It’s about getting more leads and then improving your conversion rate. These are the variables that lead to the result.
4. NUMBER OF TRANSACTIONS
Some customers will purchase weekly and some monthly, while others purchase only on the odd occasion or just once in a lifetime. What you want to know now is the average. Not your best or worst, but the average number of times customers buy from you in a year. Once again, this is another potential goldmine, yet most business people never collect a database of their past customers, let alone contacting them with an incentive offer to return.
5. YOUR AVERAGE RAND SALE
Here is a variable that at least some business owners do measure. Some customers might spend R500, and others R100, but the average is what you are after. To calculate your average rand sale, divide your total Rand sales by the number of sales.
TURNOVER
To calculate your turnover, multiply the total number of customers with the number of visits on average and then by the average amount spent with each visit. This is another area most business owners will know the answer to. The variables here that businesses can improve upon are the number of transactions and the average rand sale per customer.
MARGINS
This is the percentage profit generated with each sales transaction after all costs have been taken into account.
PROFITS
All business owners strive to achieve greater profits. Higher profit can only be achieved by increasing the margins on turnover.
The Business Chassis is the basic model that dictates the profit levels of every business on earth. By breaking down your business and marketing efforts (selling is married to marketing) into these five areas and understanding how each affects the other, you are halfway there and way ahead of 90 percent of business owners.
So does the thought of increasing your level of profitability set your pulse racing?
Do you find the concept of increasing how much you make by tweaking these few variables in the Business Chassis fascinating?
Have you already identified a few things you just can’t wait to try out? If you answered yes to these questions, then you may have the entrepreneurial mindset that it takes to be successfully self-employed.
ActionCOACH has 1,000 offices across 32 countries including South Africa. For further advice on franchising or to enquire about an ActionCOACH franchise, visit http://www.actioncoachsa.co.za/ or call 082 881 3729
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