The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future (27 page)

O
ver and over, the subjects of our case studies discussed how growing the business wasn’t nearly as hard as starting the business. “It took a while to find something that worked,” a common statement began, “but once we were rolling, we gained traction and quickly took off.”

As we saw with Nick’s story in
Chapter 6
—the guy who was thrilled about selling his first $50 print—sometimes the first sale is the hardest but also the most rewarding. Several others said much the same thing: “The day I got my first sale was when I knew the business was going to work out. Everything that came afterward was reinforcement of the initial success.”

I call it “the first $1.26 is the hardest” principle, because one day many years ago I made my first $1.26 with a new project while on a layover in Brussels. I couldn’t afford a single Belgian waffle on the day’s take, but I had a good feeling about the future. In this chapter, we’ll look at ways to move on up by increasing income in an existing business.

How does this happen? No doubt there are a few different factors. Momentum is important, as is the ongoing attention of the business owner. The longer a microbusiness is around, with customers and onlookers saying good things about it, the more the word will spread. In addition to these natural factors, a series of small, regular actions is all it takes for many businesses to go from zero to hero in a short period of time. These actions are called tweaks.

Nev Lapwood was a classic ski bum. He lived in Whistler, British Columbia, and worked “off and on” in restaurants at night while snowboarding during the day. Life was basic but good … until the limited employment ended when Nev was laid off. Needing to make ends meet, he began offering snowboard lessons, a part-time gig that was highly valued by his students.

Teaching students in person on the Whistler slopes was fun and rewarding, but it also had a number of built-in unavoidable limitations: lots of competition, relatively few clients, and limited times of year when he could work. Nev knew that people all over the world wanted to learn about snowboarding—what if he could teach them all virtually, without needing to be in the same place? Getting his act together, Nev worked with a couple of close friends to create Snowboard Addiction, a worldwide series of snowboarding tutorials.

It was an instant hit, drawing customers from twenty countries and making $30,000 in year one—not bad for a ski bum. (Since Nev had never been that focused on making money, that was the highest annual income he had ever had at that point.) The next year, he put more thought into the business, scaling up with affiliates and a broader range of products. The result: just under $100,000 in net income. Nev was still on the slopes during the day but worked
closely with his new partners during the downtimes to scale the business even further. The next plan was foreign language translation: Snowboard Addiction went out around the world in nine languages, with more versions scheduled to roll out based on customer demand.

Naturally, the growing business had its challenges. An untrained and accidental entrepreneur, Nev had to learn a lot about strategy, accounting, and marketing. Stickers that were ordered from China arrived months late and in an unusable condition. Just two years in, however, the business was on track to earn at least $300,000. As we’ve heard over and over in other stories, Nev speaks proudly of his new independence. “Frankly, starting this business after being laid off has been the best decision of my life,” he says. “The greatest benefit has been the freedom and ability to do what I like. My plan is to travel for six months of every year and run the business for the other six months of each year.” And of course, while he’s running the business, he still finds plenty of time to hit the slopes.

The not-so-secret to improving income in an existing business is through
tweaks:
small changes that create a big impact. If a product typically has a 1.5 percent conversion rate and you increase the rate to 1.75 percent, the difference adds up to a lot of money as time goes on. If a business normally attracts four new customers a day and begins attracting five, the impact is tremendous. Not only is the business now earning 25 percent more income, it has diversified its customer base.
^*

If you grow your traffic
a little
and also increase your conversion
rate
a little
while also increasing the average sales price
a little
 … your business grows
a lot
. These are the most important areas on which to focus your tweak efforts, so let’s look at them closely.

INCREASE TRAFFIC
.
Whether you have a website or a storefront, without people who regularly drop by to see your offer, you have no business. Traffic means
attention
. How much attention is your business getting? I heard from a new business owner who was disappointed in the results of her first product launch because only four people had purchased. “How many prospects were on your list?” I asked.

“I’m not entirely sure,” she said. “Maybe one hundred?”

I said I was impressed, because 4 percent is a great conversion rate for many businesses. The problem wasn’t getting more of her limited audience to purchase. It was getting more of an audience in the first place. The best thing to do in this situation is to focus on increasing traffic, thereby bringing in more potential customers.
^†

INCREASE CONVERSION
.
Once you have a stable base of attention (whether measured in site traffic or another way), you’ll want to look closely at the conversion rate: the percentage of prospects who become customers. The classic way to increase the conversion rate is through testing by measuring one copywriting attempt (or offer, or headline, or something else) against another and going with the winner.

After you have a winner, you move on to another test, always challenging the “champion” against another idea. (Google Optimizer allows you to do this for free.)

This can indeed be a good strategy. One tip, however: It may be more important to pay close attention to where customers come from than to what you can do to convert them once they arrive. “Testing is important, but it pales in comparison to the traffic source,” author and entrepreneur Ramit Sethi told me. “People love to spend time split-testing headlines, copy, graphics, even tiny boxes. They can usually achieve greater returns by focusing on the source.”

INCREASE AVERAGE SALES PRICE
.
If you can increase the average sales price per order, this will increase your bottom line, just as increasing traffic or conversion will. You can do this most easily through upsells, cross-sells, and sales after the sale. If you shop on
Amazon.com
, you’ve probably seen its “related items” and “customers who bought this item also bought these items” features. These features are highlighted (and widely replicated elsewhere) for a simple reason: They work extremely well.

The difference between upsells, cross-sells, and sales after the sale is illustrated below:

(A good shopping cart and payment processor will allow you to add these items easily. If yours doesn’t, it’s time to change services.)

SELL MORE TO EXISTING CUSTOMERS
.
Your existing customers are likely to respond to sales, promotions, or additional offers of any kind. By reaching out to them more frequently, you’ll almost certainly bring in additional income. You’ll want to be careful about not pushing them too much, but the key is balance: Your customers
want
to hear from you. They have given you money in exchange for something they value. Make it easy for them to do so again and again.

When I talked with business owners about the kind of tweaks they worked on, many said things such as “The most important thing is to keep taking action.” Others mentioned setting aside half an hour every morning to work strictly on business improvements before diving in to the actual running of the business. All of this sounds good, but it also begs the question: If you decide to take action, what does action look like? How do you spend your daily half hour on business improvements?

Here are some common examples of action-based tweaking.

CREATE A HALL OF FAME
.
Shine a spotlight on your best customers; let them tell their own stories about how they’ve been helped through your business. It helps to provide a variety of stories, as people will relate to different perspectives and backgrounds. This provides “social proof” that your product or service works for all kinds of people.

INSTITUTE A NEW UPSELL
.
Adding a good upsell offer—or several—is probably the easiest and most powerful strategy you can use to ramp up your average order size. Some business owners are initially apprehensive about upsells, not wanting to apply a high-pressure
or “sleazy” technique. But a good upsell isn’t sleazy at all; it’s contextually appropriate and inspires appreciation from customers. “Wow, thanks for the offer!” is a common response. Think about going to a restaurant where you hadn’t planned on eating dessert, but the waiter’s recommendation of the chocolate bread pudding is so compelling that you have to try it … and it’s delicious. You were successfully upsold, and you were happy about it.