You may recall that I have mentioned that my Sales almost quadrupled in the first year of running my corporate limousine service business during my first year of ownership.
In this week’s edition of this newsletter, I would like to add a bit more insight as to how we made that happen, and how you may be able to make some of the same moves in your business in order to increase your results.
As you may remember from the last two entries of this newsletter (if you haven’t read it, feel free to find the previous editions and get familiar with the insights), I made some drastic price changes that helped me increase my EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization.
Here’s the thing, all things being equal, in this case if you don’t lose an exorbitant amount of your clients or business as a result of your price increases, the price increases will help to increase your Sales.
To spell it out in details, if you have a certain amount of products or services you sell, and you increase your prices by say 10%, and if you then sell the exact same amount of products and services, then effectually you have now increased your Sales by 10% without actually having sold any more units than before.
In other words, a price increase can be part of achieving an increase in Sales, and with the rather drastic price changes I made, it certainly was a significant factor to my large increase in Sales also.
However, ideally you typically do not want to just make your increases in Sales merely stemming from increases in your prices, but actually as a result of selling more units of products or services.
To this end, we did a lot of things in our pursuit to make that happen.
First of all, seeing we had new ownership, complete new management personnel of all client handlings, and introduced new prices which had drastically increased, we visited with as many of the larger accounts as we could, in order to introduce ourselves to them, inform them of the many changes, and not least in seeking their approval and continued support and business.
These meetings were critical, especially with so many and such significant changes, and happily we were met with a lot of support.
Naturally, there were many of the clients that gave us pushback on our large price increases, and it was evident that in some cases we would need to make some concessions. Some of the concessions were made in the form of discounts.
But instead of making the discounts across the board, we introduced volume-based discounts, which was something that had not been used at all to my knowledge in the industry in Denmark this then.
The benefit of these are of course that they don’t apply unless certain volumes are achieved, which helps you as the vendor secure more business, or at least not paying discounts on all the business unless you’re given something in return (volume).
Also, so as not to give up discounts all across the board, we would find out with the clients which specific services were most important to look at for possible revisions. That way we would only have to compromise on (in our case) certain services as opposed to discounting on all our services. This difference is important and really can mean a lot to your results.
It means that you may have to compromise a bit on some of the changes that you were hoping to achieve, but that you could get all the changes on all other services that you were looking for, which means you gain the full effect of your full changes on most of your services, while compromising only on the changes on some of the services.
Again, there are more details to this end, that helped us even further than I will be describing here, but the main gist of this is that there are things you can do to get even large changes into effect without losing important business, and to get you desired results.
In our case, we increased our EBITDA 32-fold within the first year of my ownership of the business. Of course, I am here comparing the previous owner’s last result with my result of the first year of ownership.
If you wish to learn many more key insights into all the pricing aspects of pricing for profits for your business, feel free to send me a private message to mp@theautomatedmillionaire.com or book a free strategy call with me at https://calendly.com/theautomatedmillionaire/free-business-strategy-session
Well, back to growing our Sales. As mentioned, I would typically much more like to see increases in Sales stem predominantly from growth of the actual business, meaning stemming from having sold more units of products or services. Because there is such a things as inflation, I would like to adjust prices ongoing accordingly, but ideally most growth in Sales should be coming from growing the business.
To that end, we commenced several outbound sales activities that had some success.
In a country like Denmark, where the population typically is very modest and where you’re not really “allowed” to be too flashy or stand out too much, selling limousine services can be a challenge.
However, Denmark does house a lot of really professional and successful companies, both Danish and of foreign origin, and for many of these, timeliness, professionalism, safety and several other factors can mean a lot, and they know how to appreciate corporate transportation services for some of their uses, especially in regards to important visits coming inbound from abroad to their businesses.
But volumes of businesses in these areas can be tough to pick up.
So, in my pursuit, I racked my brain about where I could search out more volume business. Who would have a better or more need or usage of limousine transportation services?
The immediate answer lands of embassies, hotels, and cruise ships.
But everybody (including all your competitors) is focused on these already. But nevertheless, we did what we could do to knock on more doors, and forge stronger relationships. Some successfully, while other we married to whichever other current supplier they had.
For the cruise ship business, I found that a great majority of the passengers who were relevant to our service were handled by incoming bureaus, most notably by two companies that handled the bulk of them.
One of them we had no business with and they were the largest.
Evidently, we had to make some sort of advance to court them.
It so happened that the owner and director of this company also headed up the important cruise ship organization at the time (not sure that organization is still there in that format), so I figured that it would make sense that I showed support by becoming a full member of that organization.
The investment for a small company like mine, honestly was a bit high, especially because, I don’t necessarily believe that it landed me more business. Nevertheless, I felt the members, including the important ones I wanted to land as clients, could recognize that here was a limousine service company that showed full support and was willing to invest in something that helped them all gain business.
Denmark is a very popular cruise ship destination and it is a big business for the country. The Copenhagen Cruise organization had a yearly stand at the cruise ship tradeshow in Miami (every year, I believe), and I found that perhaps it would be a good idea to go and attend with them.
In truth, I would be able to gain pretty much zero clients from the attendees of said tradeshow, except for me to forge a relationship with the aforementioned incoming bureau.
It all panned out. It took a bit of time, but soon they directed some of their business towards us, and within a few more months, I believe we handled most of their business and they became a big account with us for years.
When looking at the Sales over the course of a year in Denmark, the distribution of Sales form a very predominant Bell-curve, with the large peak during the brief summer months. Denmark is a small, yet really beautiful country, especially when it’s summer and the weather is nice, so it attracts most of the visitors during the summer months.
The Bell curve and the income and expenses of the business also pretty much meant that my net profits had the shape of a Bell curve when looking at it month-by-month over the course of the year.
As it was (drastically so before my take over, but also in initial years subsequent to my take over) it actually meant that I was making good money during the summer, but would have to give much of this back over the course of fall, winter and spring till business would pick up again. In other words, I was profitable comfortably during summer, but endured negative net profits during pretty much all the other months.
I figured that if I could stretch out the season in the fall, and find something to pick up earlier in the Spring, it would improve the business. If I could find some more business for the holiday season of Christmas or so, it would certainly also help me a lot.
As I dove in further, I found that there were several conferences that took place in the months of September and October, and sometimes that such events could stretch a bit into November. Similarly I found a few smaller such events in the months at times of February, March, and April.
I went to work to seek out the companies that organized these or had guest attending these. Many of the participants were foreign visitors, and that was a good thing, because they are more accustomed to using private car services or corporate limousine services for transportation rather than just taxies (this is before Uber services and the like).
To make a long story short, again we were successful in finding our volumes. Again, our results spell out the big changes: Almost a quadrupling of Sales and a 32-fold increase of our EBITDA within our first year of operation under my ownership.
I am saying none of this in order to boast or make any remarkable claims to anything, but so as to relay some of the many lessons I have picked up in the hopes that they can serve you in your business. So far, I can count many, many, many great pieces of information that can be used in pretty much any business, but I fear many a casual reader will miss them. But they are there. If you have missed them, just go back to reread these entries and editions.
I truly hope that you will find one or two great ideas and make them work for you in your business. I would of course love to hear of any successes you may achieve from it or about any value you find in any of these write ups.
