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Archive for the ‘profit’ Category

Why are you doing what you do?

What is the outcome?

What are you slogging away day to day for?

Most people simply can’t answer these questions within their business. You must be able to clearly state what it is that you want out of the business in an effort to properly move towards that. Do you simply turn up day-in and day-out and do “your very best” or is there some clear plan?

  • How long will you do it?
  • What will you do when you finish?
  • How much money will you sell it for?
  • How much will you grow the business this year?
  • How much money will you make this year?
  • What is the plan for making that money?

And – if you have the answers to these questions. If you clearly know the “So what?” then are you working to a clear plan on a daily basis? Or are you drifting along with your goal little more than a vague wish?

You must, must, must have a clear goal, a clear plan for producing it and a clear system for measuring. Every single week I come across clients who singularly fail to grasp these concepts. They simply “go to work” every day and confuse activity with productivity. They end the week with the vague satisfaction of a job well done but ultimately they haven’t moved themselves one inch closer to some of their larger dreams or goals. The ones who do have a clear “So what?and a clear plan that they stick to and amend in the light of circumstances are worth vastly more than the rest. Trust me, the difference is huge and this should be all the proof you need.

You need effective and efficient action towards your clear goal every day.

Think about this when you arrive in tomorrow morning. Think about the “So What?” in your business and how your daily actions are moving you (or not) towards that goal.

(A slightly esoteric post today but this is more important than almost anything else I write in here)

Johnnie Richardson

How many of the ten big mistakes are you making?

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I’m increasingly obsessed with this concept since it applies to such a large extent in so much of our lives.

Why does Tiger Woods want to keep getting better at golf for example? What drove Michael Schumacher, despite so many years at the top of Formula One, to still work harder than anyone else and even in his last year still be fitter than any of the other guys? Why is one coffee shop owner happy with one site while another needs to grow a huge chain to be content?

Recently I seem to have come across a disproportionate amount of people who regard life in the Coffee Business as the ultimate goal for their lives. It can take some fairly harsh questioning to discover the real “reason why” they are setting up their business and make them understand that the reality is very different from the dream whilst still trying to help them keep their enthusiasm.

The reality is we all have different motivators and different “reasons why” we do anything. But ultimately if you don’t have a strong “reason why” for your customers to visit then they won’t. And your idyllic dream will be brutally shattered.

The harsh reality is that most people think they have a decent reason for customers to visit but they simply don’t.  Too many operators expect to be able to offer mediocrity and get away with it and with a potential “tough time” ahead of us in the market they simply won’t survive.

So here is my, by no means exhaustive, list of “reasons why” customers might want to visit you – and keep visiting!

  • Location – a great location is always a bonus but is not, as I often preach, essential. But generally make life easy for yourself with a great location. But NOT if you end up having to pay huge rent and rates bills.
  • Great Coffee – obvious really. But these days it has to be really great to stand out from the crowd. And you really need to have exceptional consistency too.
  • Great food – again it’s obvious but so often overlooked in the coffee bar business. Sometimes there is this perception that focusing on great food takes the emphasis away from great coffee. Which is, of course, total and utter elitist nonsense.
  • Great staff – people who really care about the product AND care about remembering the customer’s name and their drink. It’s probably the biggest challenge we all face but the clients who really care about recruiting, training and retaining great people are always those with the best businesses. (I’ll give you some tips on this in the next few days too)
  • A great atmosphere – do you provide somewhere that is really special? Do you have an environment that people instantly relax in?
  • A great story – is your business one that people can really “buy into”? A coffee shop stands for so much more than somewhere just to get a drink in many people’s eyes. Increasingly I find with clients, all around the UK, that locals are using them almost like a Post Office or a classic English “local” pub. Do you help to provide this?
  • Something genuinely new and different – do you have something properly unique about your business? How many star products do you have that people talk about and become “raving fans” of? If you don’t have something that is unique and really fires up your customers then you’re doomed to failure unless you have an exceptional location. I have the “mother of all star products” to show you in the next few days from one inspirational client who operates down a little alleyway off the High Street in their town.

You don’t need to be perfect on all counts but you do have to tick a few of these boxes. It’s not about being all things to all people but you have to have a few key areas that really provide a strong reason for customers to visit in the first place, return a second and third time and ideally tell their friends about you.

Why should customers visit your business? What do you do that is so great that they might tell their friends?

Johnnie

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On Sunday and Monday of this week Hugo and I were speaking at the Hotelympia show in London.  Ultimately both talks went very well and we had good audiences at both but it was a graphic illustration of the need to have a strong “reason why” in terms of promotion.   There had been very little promotion for the talk and we were simply billed as “Ireland’s Coffee Boys – John Richardson and Hugh Gilmartin“.  The first days talks were all delayed and we ended up speaking nearly an hour after our billed time.  This meant that people who had specifically come to see us had to rearrange their day to fit in with the disrupted schedule.

But we were the lucky ones.  The lack of “reason why” meant that the previous speaker ended up speaking to the grand total of two people.  When you’re Donald Trump you can rely on people turning up for your name alone but for the rest of us you must provide some clear benefit to spending the time to sit and listen.  Our “reason why” is that we help people to make more profits with less time working in the business of coffee and when clearly articulated it’s a strong message.

But exactly the same principle applies in your business too.  You have to provided a clear, articulate message about why customers should visit you.  We spoke to a great many people at the show who simply weren’t busy enough in their businesses.  We put together a questionnaire to establish what the main problems operators are having and I will be publishing the results of it on here in the very near future.  A quick glance on the plane back home revealed no surprises though.  The big issues are:

  1.  Not busy enough.  Not enough customers, not enough turnover, not enough profit.
  2.  A difficulty in recruiting and keeping great people.

In both cases “reason why” is a big issue.  When pushed and questioned more closely most of the people we talked to clearly were not providing their customers with a strong enough “reason why” to spend money or a strong enough “reason why” for great people to come and work for them.

Times may very well be tough for the next year or two but even as it stands it is a very competitive marketplace out there for coffee bars.  You simply won’t survive if you don’t provide a clear reason for people to visit and spend money with you on a consistent basis.  Likewise it is impossible to expect great people to work for you if you don’t provide a great job and your expectation is that they should be lucky to have a job at all and that you pay 10p more than the average rate.  Those days are long gone.

So why should people visit your business?  What is it that differentiates you from the competition?  What is it that you do so well that the sales rep makes a 5 mile detour just to get the chance to buy?  What is it that you sell that is so great that the office worker in the building across the road cannot concentrate on her work because she can’t stop thinking about the taste of it?  What is it that makes people walk past Starbucks in their prime location to visit you in your location which is a little bit further down the road?

And likewise why would somebody want to work for you?  What is it that makes your business a great place to spend eight hours a day?  What do you provide that makes the person working in the big chain down the road think “I’m fed up here, I’m just a number, I’m going to see if XXXXXX have any jobs – apparently they’re a great place to work”

I’ll give some examples of great “reason whys” in the next couple of days but in between the frantic “doing, doing, doing” of today try to grab five minutes and watch your customers to observe why they might give you money.  Also ask your staff why they like working for you.

Johnnie Richardson 

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When a typical small customer enters your business you should see £100,000 stamped on their forehead. This is why;

If your average spend is £3 and an average customer visits three times a week then that person is likely to spend around £400 per year if they come in regularly. Over five years that adds up to £2,000. Suppose that this loyal customer tells only a couple of people every year how good the experience is then this gets the potential value up to around £6,000. This does not include above average spend that this regular customer is likely to deliver and is very conservative in terms of actual spend and real potential referral power.

Now there is a third step to this idea. Figure out how many customers a member of staff handles in a day and multiply by that to get the lifetime value of your customer portfolio that the individual deals with each day. That person only has to directly deal with only 16 customers a day to get to £100,000!

The implication is clear : If you look at your customers in this or a related way you are likely to take a new view to a complaint from a small customer. It makes it very easy to give them a free coffee without question to keep them happy. This is the why the big multiples offer no quibble money back even if you just change your mind. It also then may change your attitude to your staff and to how you are hiring, training and compensating.

Changing the way we think is vital in a growing business and this simple quantifying device provides a great way to realise people’s potential.

Hugo

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One of the things I preach endlessly to clients is to make a big issue out of stories. To keep the customer educated on the detail of how you do what you do. The glamour of running any coffee business quickly recedes in our minds as we deal with the relentless daily tasks of hiring/firing, disciplining, chasing suppliers, making sure the toilets are clean etc. etc. but most of our customers never realise that.

They actually see the running of a cafe (or any coffee business) as a wonderfully exciting and liberating thing to do. They see the production of a cup of coffee as a wonderfully exciting and almost magical process. And regardless of what you may think they still have little understanding of how it all comes together. You must keep educating them, sometimes subtly and sometimes not so, about how much effort you put into creating great products. If you bake all your food items on site then for goodness sake make sure they know this.

McDonalds have recently employed housewives to investigate what they do and blog about it. They discovered that many customers thought that most of their products were frozen and then microwaved to order.

Full Story here

As ever many of you will be thinking “Oh that’s McDonalds – we’re a million miles away from what they do” but you’d be wrong. I never fail to be surprised at how many customers have a totally warped view of what happens in food and coffee businesses at every level. Some customers assume we have incredible suppliers who provide “catering” food at a fraction of a price that they pay and in a form that requires almost no processing to be served. Whilst there are a few revolting examples of this occasionally touted by the frozen food suppliers we all know just how disgusting they are and how little they actually sell.

You need to keep reinforcing how much care and passion you out into your food and coffee and how much you still love what you do. Creating a blog of your own about your business is actually a great idea so that your customers can see how much thought and effort you put into the menu and making sure your offer is great. Just make sure you keep in mind that you are selling the glamour and not the “toilet cleaning” side of the business.

Johnnie 

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Now that I’m not actually employing anyone or not actually directly managing any coffee business myself I tend to look back and think “am I making it all too simple?” I wonder am I forgetting just how much hassle it is to employ people, to deal with the EHO, to ensure that rotas are efficient and that the bills get paid.

And then I realise that it is simple. That you just have to keep moving yourself above those factors and keep focusing on moving the business forward and stop the day to day “doing it”.

Today there was a great example of this. I chose to work from home this morning and at about 11.00 a.m. my wife came home, busied herself in the kitchen, and then brought me over a plate of bread and butter with two words “try this”

I did – and it was absolutely delicious. Truly wonderful. It was a wheaten bread from our local home bakery with added seeds and made with organic yoghurt from the local Clandeboye Estate. And how do I know this? Because they told her. And why did she buy it? Because they were sampling it and she couldn’t resist.

It’s that simple. Stand back from the day to day hassles (via training and systems) and focus on what you love about the business and what drove you into it in the first place.

  • Create great products.
  • And then tell the customer.
  • And then give them a sample.

It works – time and time again I’ve proved it. But it’ll never work if you don’t keep trying and testing new ideas.

And everybody wins. The bakery wins because they are continuing to develop new and exciting products which keeps it interesting for them and their bakers and they sell more! The customer wins because they get something new and delicious.

It IS that simple and don’t let anyone (including yourself) convince you otherwise.

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Within much of our consulting work and our book and cafe profits course we extensively teach taking every area of your business and just making it better. Much of the process involves breaking it all down and putting it back together in a more profitable way. It’s a great system and we have yet to find any coffee business that doesn’t respond well to it in a more profitable way.

But it isn’t the only way to grow your business. Sometimes you need to look at it from an entirely different angle. Sometimes it pays to look at the business in the same way that Howard Schultz did with Starbucks and Tom Monahan did with Dominos pizza. They helped to totally reinvent an industry and created huge businesses off the back of their bravery.

The world was hardly short of places to buy coffee back in the eighties and yet Schultz created and popularised a model that meant charging up to three times what other people were for coffee and in a totally different format. As ever we all have our different views on Starbucks as a supplier of quality coffee but that isn’t the issue. The issue is that he took a different coffee culture (Italian coffee) transformed it into a global brand making himself a cool billion along the way.

cup_coffee-stabucks.jpg“You want how much for that cup of coffee?!”

Likewise the world wasn’t exactly short of places to buy pizza when Tom Monaghan created Dominos but he just looked at it the industry differently. He created a system to get hot pizza delivered in thirty minutes or less. He didn’t talk about taste – he just talked about speed and convenience. And since he located the early stores near colleges and military bases he knew his market well. These days there are more than 5000 Dominos branches worldwide.

Once more you certainly have your own opinion about the quality of their product but again that isn’t the point. The point is about looking at an established industry a little differently and then taking a huge leap of faith to create a radically different product.

It isn’t always easy. Monahan for example worked 100 hour weeks for 13 years. But sometimes, for the really big rewards, you have to work very hard. And, as Monahan says:

“No matter what an individual decides to become, hard work and determination is very important in today’s competitive world. You may also encounter hardships along the way, but you must not get discouraged and you push on in order to fulfill your goals.” It may not be for everyone but coupled with incremental improvements in your business sometimes it is worthwhile to sit back and really look at how you could create a radically better or different business. What could you do to really transform it? To create something that might conceivably become a global brand.

Johnnie

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