Why Businesses Fail

Reason One why businesses fail or at best remain average:

They don’t fully understand their 100% Financial Capacity so they don’t fully realize how much they are actually “leaving on the table” as additional profit to invest in growth.

Let’s look at a simple example of a Restaurant: If you have 30 tables and average 1 hour to turn the table and you are open 10 hours per day, 6 days a week and average ticket is $25 and average table is 2 people.

30 tables x 10 hours x $50 (2x $25) = $15,000 in sales per day would be 100% Capacity….$90,000 per week.

If you are currently averaging $23,000 per week you are 25% of Capacity.

Now I’m not saying it is going to be easy to get to $90,000 in revenue per week, but at least now the owner fully realizes what his full potential is at this very moment.

When I conducted this exercise with my Service Director of my auto dealership, it suddenly took off his blinders as to the full potential of our fixed operations and suddenly there was innovation born of confidence.

It turned out there were a lot of what I call “low-hanging” fruit solutions to dramatically improve our back-end.

Most of us, unless we receive some sort of external stimulation, just see the world based on past experiences and it taints our possibility thinking.

We get stuck in a certain paradigm and unless we are nudged out by some external force, we accept things the way they have always been.

Here is a story to illustrate.

“At a recent family gathering my wife was helping her mom make dinner. As they were about to put the beef roast into the pan, grandma cut the ends off. My wife asked her why she always cut the ends off; was it to somehow let the juices flow more freely? Her mom said no, I’ve always just done it that way, because my mom always did it that way.
As it happened great-grandma was in the living room, so my wife and her mother went and asked her why she always cut the end of the roast off.
‘I cut the ends off because my pot was too small to hold a full roast!”

This is just one of the advantages to having a consultant, coach or adviser on your team.

We’ll take you to a different level of thinking.

Stephen Covey, author of The 7 habits of Highly Effective People said:

If you want to make minor, incremental changes and improvements, work on practices, behavior or attitudes.  But if you want to make significant, quantum improvement, work on paradigms.   

Learn more at my video: 100% Financial Capacity


Second Reason: They don’t have a clear understanding of who their Ideal Target Audience is and/or what they want.

I’m sure you are somewhat familiar with the 80/20 Principle.

This principle states that 20% of your customers are generating 80% of your revenue.

These are your champions. And these are the people you want to reward and retain, get referrals from and just as importantly, duplicate.

You can actually take this even a step further and identify the 20% of the 20% (4%) that is generating 64% of your revenue.

It is uncanny how accurate this is.

Remember, the single easiest and cost-effective way to double your business is to have each client bring you another client…preferably just like them (assuming they are a 20% ‘er)

To market and sell your business, product or service properly, the very first thing you must do is get clear on WHO your ideal customer is, where they are hanging out, what their challenges are, etc…Every marketing piece must know what your clients and potential clients “hot buttons” are, where they get their information and what’s important or relevant to them.

Customers only care what’s important to them, not what’s important to you.

Cardinal Rule: Always remember that the customer is thinking What’s In It For Me? (WIIFM)

Once you find who the target truly is then you can know how to create your most intriguing message.

The more you know about this Ideal Target Audience the easier it is to duplicate them.  We have found Facebook’s marketing tool to be one of the most effective ways to accomplish this.

There are 5 major components to help identify  your Ideal Target Audience.

In some cases, you’ll need to survey or have conversations with existing customers to accurately flesh out your target audience.

  1. What are their Goals and Values
  2. Where Does Your Target Client Get His or Her information?
  3. Demographic Information
  4. Challenges and Pain Points
  5. Psychographic information

All we need is an email or phone number of your Ideal customers and with Facebook marketing we can find potential new customers who have similar traits. (think birds of a feather, flock together)


That brings us to the third ReasonNot knowing the Lifetime Value of your Customer.

Just like knowing what your 100% Financial Capacity is, knowing what the average Lifetime Value of each customer gives you the advantage over your competition of knowing  exactly how much you can spend or ethically bribe someone to be your client.

And by incorporating our 80/20 Analysis we can help you identify the value of each level of your customers which will allow you to reward each level according to their value to your business.

You won’t believe what an eye-opening experience it is to see in black and white, the difference in values.

I had lunch a few weeks back with the president of a local bank. They inadvertently discovered that approximately 600 of their 12,000 customers were earning them enough to break-even.

Interestingly, this 600 accounted for around 5% of their total clients.

They created 4 categories or quadrants of clients based on their value.

Another interesting thing they found was that in the 4th quadrant, or about 80% of their customers, they were actually losing money on them.

This knowledge allowed them to create different levels of service for each quadrant.

They have pulled out all the stops to learn everything they can about these 600, in terms of the 5 major components to help identify  your Ideal Target Audience.

And they stay in constant and consistent communication with things these 600 individually value.

He told me that within 120 days, they almost doubled the business from these 600.

I then opened his eyes to how we can now help him “duplicate” these 600 and take his business to a whole ‘nother level.

Here’s another thing, don’t think of reward as only free stuff, but what extra services can you invest in to reward your clients.

Let me give you an example…
Let’s say that your average client brings an average profit of $75 on the 1st sale. He or she repurchases three more times a year, with an average order amount of $300 and on each $300 reorder you make $150 gross profit.
With the average life of a customer’s patronage being 2 years, every new client is worth $975.
(Note: You need to determine how many years your average customer stays with you; it may be 10 years)

Theoretically you could spend $975 to bring in new clients and still break even.

If you KNOW you can afford to spend up to $975 in acquiring a new customer then you can create advertising, special offers and deals with that key number in mind…

or, here is an example as an auto dealer:

Let’s say that you make a gross profit of $1400 on the sale of a used car.
This customer then typically spends another $100 in that first year of ownership on normal maintenance of which $70 is gross profit.

The first year Value of your average customer then is $1470.

However, let’s also say that your average customer stays with you 3 years and spends an average of $400 a year on service work at $210 gross profit for each visit.

Now you have a Lifetime Value (LTV) of $1470 first year + $210 GP x 3 years = $630, for a total LTV of $2100.

This does not include the number of people he refers to you over that 3 year period that you really didn’t have to spend any money chasing and convincing to buy from you and they have the same $2100 value. 

Now, think of what you might learn if we were to go thru an 80/20 Analysis on these customers and help you discover who the 4% are that are generating 64% of your revenue.

Do you begin to see the why it really is not that hard to DOMINATE your market?

Your competitors who don’t know these Essential Elements will either lose their nerve or lose serious money trying to compete with you because the key metrics for every business are different.


The fourth element that most business owners fail at is not knowing your Unique Message.

Every business and business owner is unique and has a unique story to tell.

It is thinking about and articulating, in every advertising, marketing and sales presentation a consistent message of what makes you and/or what you sell UNIQUE and it’s commonly called your USP.
Learn more here:  USP! What is Your Unique Selling proposition? 

The more clearly you communicate what makes you the better choice (benefits, advantages, guarantee, etc) the more often people will choose you over your competition and see you as more valuable.

You can easily tell people why they should choose you in your marketing and have them come in presold.

All your marketing should be built around explaining and reinforcing your USP to your prospects and current customers.

Here is a great example: An Educated Customer is the Best Customer. The Schlitz Brewery story 


Fifth, is failing to Make it Easy for your customers or clients to do business with you.

Having a Risk Free Guarantee gives you a clear and compelling advantage over your competition.

A Risk Free Guarantee makes it Easier for your clients to say YES than NO.

Look at every aspect of your business from the products or services you provide to your clients and even your employees and make a list of all the obstacles to your clients or employees that could prevent any of them from purchasing from you, dealing with you or choosing you over your competition.

We have a whole series of questions that lead you thru discovering and creating your Risk Free Guarantee.

Learn more here: Always Make It Easy To Do Business With You


Finally, the sixth element, is the failure to realize It’s all about relationships.

Principles, Consistency and Innovation are usually lacking.

Two huge mistakes almost all businesses do that are essential to creating trusting relationships because without these two low-hanging fruit activities, you can’t know enough about who your customers or clients are to build meaningful long-term relationships.

  1. Failure to capture contact information of everyone, and I mean everyone, that visits your web site or your brick & mortar part of your business.
    (You need: name, address, phone# and/or email)
  2. Failure to create a consistent Marketing strategy and system for follow-up.

Building trusting relationships takes constant and consistent communication with information of value to each particular customer.

This is a lot easier than you may think, especially once we’ve helped you create SIMPLE, SIMPLE systems and processes for each of the 6 Essential Elements that are unique to our Principle Centered Marketing, Selling and Business Practices advisory and consulting business.

Not having a trusted adviser or coach on your team certainly isn’t the death knell of your business. But, not having someone on your team who can constantly challenge you and hold you accountable is definitely going to hold you back from ever DOMINATING your market within your industry.


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