Could This Gun Dealer’s Story Help You Close More Sales?
When clients ask how to close more sales and free up cash in their business, I like to tell the story of Byron the guns and collectibles dealer. He lives for his business because it gives him the chance to make a living out of doing what he enjoys most: collecting.
He was struggling 12 months ago because he was out of cash and unable to buy new stock. This was a real problem because the strength of his business lay in constantly having new items to show off. New stock encouraged his customers to come back often; no new stock meant they would tend to check out his competitors first.
When I first walked into Byron’s shop, one of the most obvious items was a beautiful old gun, proudly (and securely) displayed in a glass cabinet. I couldn’t help but ask how much it was worth. He explained that it he had bought it for $5,000 dollars, but was looking to sell it for $7,000. Following a hunch that I had hit on his problem straight away, I asked Byron when he had bought the gun. He didn’t remember exactly, he said, but thought it was about five years ago.
I asked Byron how many other, similarly high value items he had in his store. We went for a walk and in the course of showing me around, he pointed out at least a dozen items which he had bought for over $5,000 over the last few years. In each case, he was quick to tell me how much he was intending to sell the item for, and the margin was always 30 to 40%. But the fact was he hadn’t sold these items so they were costing him money and, most importantly, causing him to miss the opportunity of buying new stock.
Byron had spent nearly $100,000 on expensive items over the years. The items were attractive and valuable, but they weren’t particularly rare, so they weren’t appreciating in value significantly. In effect, Byron had put $100,000 on the shelf of his office and left it there for all that time. In other words, while he wasn’t borrowing money from the bank, in effect he was borrowing it from himself. He had missed the opportunity to invest the money somewhere where it would give him a solid return, such as in a term deposit or in blue-chip shares. And he missed the opportunity of using that money to buy smaller, less expensive items that he knew would sell quickly. He needed to do something (and fast) if he wanted to close more sales.
Compounding all of this was the fact that the global financial crisis had caused demand to drop markedly which meant his customers just weren’t coming in or spending as much as they used to.
By making a few simple adjustments, responding to trends in the industry and addressing a need that his customers, Byron was able to turn his business around, close more sales and double his bottom line.
The first thing he did was to free up some cash by actively selling some of his more expensive and slow moving items. He used online auction sites and his own network to find buyers, while keeping his marketing costs low. In some cases he had to sell the items for a little less than he had intended, but the benefit (when he was able to close more sales) was cash in his pocket.
The next thing he did was set up some systems to keep better track of inventory. He started by recording everything and noting the age of all the items (i.e. the length of time he had held it in stock). We agreed that in future, any item that had not sold after 8 months would be reviewed. Byron would investigate the item’s market value and decide whether or not it was increasing in value sufficiently to be worth keeping. If not, he would act to move the item on.
After a few months, Byron was making much smarter purchasing decisions. He was still enjoying ‘collecting’ for his store, but his focus was different. His focus was less on attractive, expensive but not-so-rare items, and more on smaller items he knew he could sell quite quickly. To his pleasant surprise, he increased cash flow by $100,000 in 3 months and found that by using this strategy, he was able to do more shopping rather than less, because he had more cash available to spend.
Lastly, but perhaps most significantly, Byron introduced 2 new complementary strategies which literally transformed his business. To counteract the soft demand for firearms and the relatively fixed, low margins, Byron convinced his customers to purchase 18 months worth of ammunition upfront and he provided storage (if required) onsite. This allowed him to renegotiate terms and pricing with his suppliers, plus generate more cash flow in the short term. Since the margins on bullets was much higher than on the guns themselves, his overall profitability improved. In addition, Byron incorporated training and certification into his standard offering and opened up his target range to paying customers 3 nights a week. This allowed him to create new, highly lucrative income streams and increase the frequency with which his customers came into his business.
While Byron’s story on how to close more sales might seem unique and industry specific, there are many ways to take the overarching philosophy of what he did and utilize it to improve your operating cash position.
How can you identify and start selling silver bullets in your business? Begin by first examining the big picture…
Identify the items in your inventory that are essentially dead stock – i.e. haven’t sold in over 8 months. Determine what the total value of the stock is and devise a plan to convert it quickly into cash using a minimal amount of advertising.
Focus on the gross profit margin of all of your products and services. Are some of these more profitable than others? To improve your overall performance, concentrate on the former, and improve or eliminate the latter. What items or services could you add which would allow you to service a need, improve your relationship with your customers and grow your bottom line?
Negotiate better terms and/or prices with your supplier in order to increase the amount of gross profit you make on each sale. Consider which items you could sell in bulk upfront to your customers and use this new volume to improve your buying leverage or cut out the middle man.
Marketing should not be treated as a fixed and sacred cow in your business. Do not spend another dime on marketing until you ensure that you are maximizing the amount you retain on each sale to cover fixed costs. Also, only spend money chasing customers and sales if you can measure the financial return that you will get. Unless you are a multinational brand, money spent solely on branding is wasted.
Make it easy for your customers to find you and see what you have to offer on the internet. The database of potential shoppers that you have earned the right to speak to, is in fact your greatest asset. What can you do today to add value, enhance their experience and close more sales?
Finally, examine the fixed expenses in your business. Identify whether or not there is a cheaper, faster or superior alternative that doesn’t compromise quality or customer service. Is there a way to shift how and what you do so that fixed expenses can vary (i.e on a pay per use basis) with the level of production and/or sales? And remember, no one has ever grown their business by [exclusively] focusing on cost cutting – so use this tactic as your final step in a comprehensive plan to get your business firing and hitting targets. Your primary goal is to close more sales and increase the amount of gross profit (or contribution margin) that you make from each sale.
16 Comments:
By Justin Holod 17 Nov 2011
Great reminder about dead stock. As a retailer, it’s so easy to accumulate stuff from season to season.
By Avery Leonard 05 Dec 2011
I just went on Blogspot and made a blog. Would you be interested in making some guest posts?
By OJ Bentley 06 Dec 2011
I’ve got my own business blog and I’m always looking for good content? May I repost your work if I give you a link back? Your book Financial Foreplay is one of the best small business books I’ve read in a very long time. You explain financials very clearly and I’ve gotten a lot of great tips that actually made a difference to me financially.
By Ivan Pinnaus 06 Dec 2011
Good point. Everyone always wants to hold onto stuff. Collecting is a hobby not a business. Time to clean out your inventory.
By Ilsa Fishmann 07 Dec 2011
I don’t sell guns myself but I do sell shoes…and we have way too many pairs out the back that haven’t sold in more than a year. We’re having a staff meeting tomorrow to go over the stock and get rid of dead stuff. It’s not getting any fresher, is it?
By Brandy Drinzer 07 Dec 2011
I’m a big fan of your work. It’s so easy to understand and follow.
By Audrey Piguet 07 Dec 2011
You made some great points there. I wasn’t expecting cash flow tips from the title – I thought this was just going to be a marketing article.
By Seth G 09 Dec 2011
You’ve got a great, engaging writing style. And some really useful points.
By Emily Heat 10 Dec 2011
Love your cash flow stuff – can you do some more specifically on this topic. Very few bloggers are writing useful/practical stuff for small business owners on this topic. It’s all mindset and leadership fluff! We need your practical strategies.
By giuseppi monclaire 12 Dec 2011
There are some attention-grabbing points in time in this article. I’d like to know more. Good article.
By David Best 13 Dec 2011
It’s perfect time to make some plans for the future and it’s time to be happy. I have read this post and if I could I desire to suggest you some interesting things or suggestions. Maybe you could write next articles referring to this article. I desire to read more things about it!
By Borse O 14 Dec 2011
Nice post. I study one thing more difficult on completely different blogs everyday. It will at all times be stimulating to read content material from other writers and observe a little bit one thing from their store. I’d choose to use some with the content material on my weblog whether you don’t mind. Natually I’ll offer you a hyperlink on your internet blog. Thanks for sharing.
By Wanita French 27 Aug 2012
Great strategies. Clever stories – was this a real client of yours?
By Rhondalynn Korolak 11 Sep 2012
Yes he was. Right here in Australia. But I’m sure his story resonates with lots of other business owners selling products like shoes, crafts, clothing, books etc.
By Penny Haus 16 Dec 2011
Thanks for the cash flow tips. I need to actually DO more of these.
By Prakash S.N 17 Jun 2013
I agree – although there is no one secret formula per se…. money is clearly not everything. So many business owners treat it like a hobby instead of a job. To be successful you have to sell things, not collect them.