You know two things about being in business: You need to make more money and, it being summer, business is slow.
So what do you do? Panic, like any reasonable business owner? Take any junk job that comes your way because you still need to eat? Or do you maybe relax, because you’ve already got this covered?
Salvatore Levatino sincerely hopes you’re in that last category, where his clients tend to be. As the owner of the Princeton branch of ActionCOACH, a business consulting and strategic planning firm, Levatino’s job is to remove the panic button from your executive desk by helping you devise actionable ideas as part of the general operations of your business. If you’re able to break your business operations into components, he says, these more manageable chunks will carry you through the doldrums and keep you traveling well wide of desperation.
Levatino will present “5 Steps to Massive Profits,” a free seminar on Monday, August 22, from 5:30 to 7:30 p.m. at Pellettieri, Rabstein and Altman, 100 Nassau Park Boulevard. E-mail firstname.lastname@example.org
Levatino grew up in New York City, where his U.S. postal carrier father taught him the value of hard work. He earned his bachelor’s in accounting in 1983 from St. Francis University in Brooklyn, before moving to Chicago to become an auditor at Munich American Reinsurance. When the firm created the new American Reinsurance division, Levatino returned to New York to manage the audit team. Back in New York he earned his MBA from Pace.
After 9/11 Levatino managed catastrophe bonds for major corporations, before moving to Crum & Forster as an auditor. He then became a financial consultant and, briefly, an auditor at Bank of America. In 2010 Levatino decided to put his love of business and problem solving to new use helping entrepreneurs and business owners, and bought an ActionCOACH franchise.
Five easy pieces. As Levatino sees it, most business owners are somewhat misguided in how they approach the whole profit thing. “A frequent conversation I have,” he says, “is, ‘I need to make more money.’ That’s fine, but that’s not actionable.”
In other words, making more money doesn’t come from needing money, it comes from identifying aspects of business that help generate more income and using the information as the basis for action. Ever the accountant at heart, Levatino breaks business profit down into five stages — lead generation, conversion, repeat business, average dollar sale, and profit margin — that he calls “a mathematical formula.” By attacking each component in a certain order, business owners can boost their bottom lines and set into action a plan that carries them through lean and fat times.
Say, for example, you have 1,000 leads in a year. You convert 25 percent of them, which means 250 clients. Now you know a solid number of clients, but also solid numbers for your marketing (lead generation) and selling (conversion; your ability to close on a deal).
Knowing these numbers can have a profound effect on how you do business. You might decide that you’re marketing yourself great, but your conversion rate is no good. Maybe you’re only closing 10 percent and you want to be closing 30. Knowing where you stand, Levatino says, lets you see where you need to go.
Whatever the number, you can now look at what those customers are spending, and how often they spend. Let’s say your customers spend on average $100 per visit. One visit a year from your 250 customers means $25,000. But is one visit enough? How do you get customers to come back more often?
That, of course, depends on the business model, Levatino says. A car dealer will not get much return business for new cars every year — but he can offer services to bring customers back in.
“Think about the last time you bought a cell phone,” he says. “The first thing the salesperson asked was, ‘Do you need a case for that? Do you need a charger?’”
Cell phone buyers don’t buy phones every few weeks. It might be a couple of years between visits. So to boost income, add-ons become an important aspect of the revenue stream. Rather than relying on making that $100 per customer per year, there are ways to add $10 here, $12 there. And suddenly that $25,000 from 250 customers becomes $30,500.
To raise prices, or to not raise prices? A major revenue booster that a lot of smaller companies in particular shy away from is raising prices, Levatino says.
“People have this fear that if I raise my prices, I’m going to lose all my clients,” he says. “That’s simply not true.”
The truth is, many businesses are behind on the prices, Levatino says. This is especially a problem for businesses that have been around for seven or eight years. They started out with competitive prices, but never raised them. New competing companies that have come along in the past two years or so have higher prices that match the industry standard, and you are suddenly far underpriced.
That’s great for thrifty shoppers, but hardly good for your bottom line. Now, will there be some customer falloff? Sure, Levatino says. Maybe 20 percent will abandon you for having raised your prices, but 80 percent will not. The math you need to learn here, of course, is: does that 80 percent bring in more money under the new price structure.
In practical terms, Levatino says, you won’t lose all your customers for raising prices to keep up with inflation and competition. But that fear is there, and that’s something business owners need to vanquish.
“It’s not true that you’ll lose customers, but whether it’s true or not, that’s the perception,” he says.
Being a psychologist is part of Levatino’s job, and since 2010, he’s talked many an entrepreneur in from the ledge. He’s helped numerous business owners find the numbers and build from them, with the overarching goal of getting those to know they’re going to be all right when the lean times hit, because they have a plan of action.
And it helps to know you’re not alone in your fears, regardless.
“Part of my job as a coach is to keep people from feeling desperate,” he says. “Sometimes you want to run and hide, and people think that makes them a failure. It doesn’t. Everybody goes through that. Maybe the difference between successful business owners and not-successful business owners is a willingness to ask for help.”