Starting a business seems like such a simple concept, doesn’t it? You create a product or offer a service and then you sell that product or service over and over again to as many people as you can in order to make a profit.
This kind of thinking seems to make sense to the majority of new small businesses and solopreneurs, and even to many seasoned ones. They mistakenly believe that the point of making a sale is to make money.
Here’s the problem with this kind of thinking….
The problem is that it takes more work to get the customer than it does to create the product or give the service.
And when you believe that the point of making the sale is to make money it keeps your business small because you’re too busy chasing customers to create more products or give more services.
Let me show you an example of what I mean.
Let’s say that you create a product that sells for $10, and now you’re ready to start selling that product. So, you begin the marketing process and you make your first sale. Congratulations. You’ve just made your first $10.
And now you’re looking for the next customer to buy your $10 product. But it takes longer for the next customer to appear. For whatever reason, what you did to get the first customer isn’t working to bring in the second customer. And so you spend some time tweaking your marketing and finally the second customer shows up and buys your $10 product.
You’ve now made a total of $20.
Now let’s say customer number three follows right after customer number two. So you’ve made $30.
At this point you’re excited. You now have visions of expanding your business – offering more products and services and making more money. But, customer number four hasn’t shown up yet, and you don’t know how long that will take.
You’re getting very small amounts of money in spurts. A little here, a little there. And as long as you continue this way your business won’t be able to grow.
Even if you do create a second product – let’s say the next one sells for $20 – you’re still waiting on that next customer to walk through the door or come to your website.
So, let’s say customer four shows up and buys your $20 product. Yes, you’ve doubled your sale this time, but you’ve still only got $50.
Now you’re probably thinking that you’re going to make waaaaaaaaaaay more sales than this – that you’ll make 10 sales or even twenty sales a day.
Let’s say you’re right and you make twenty sales a day of your $10 product. That’s $200 in sales per day which is about $6,000 a month. Not bad, right?
Well, as wonderful as that sounds you’re leaving a TON of money in your customers’ pockets and purses that could be going into your pocket or purse!
You see, all this time you’ve been making sales to each customer who walks in your door or visits your website to get paid. Gotta find another customer so you can make another sale so you can get paid again. And you’ve had to work hard to do it.
Not only that, but if you make $6,000 this month and you want to do it again next month, you’ve got to start all over again getting customers to your site or in the door and getting them to buy your $10 or $20 product. The grind never ends.
It’s a lot of work for very little return. But….
There’s an easier way to make that $6,000 a month and it won’t take as long. Here’s how you do it.
You create that $10 product and get your first customer. Then, you create the $20 product and sell that to your first customer. Now, instead of only making $10 from that first customer, you’ve made $30. That customer’s value to you has just tripled.
Let’s use the example we just used above, and say you make twenty sales per day of your $10 product. That’s $200 a day ($10 x 20 sales = $200).
And let’s say five of those twenty people also buy your $20 product the same day. That’s another $100 ($20 x 5 sales = 100). So now, you’re making $300 a day ($200 in sales + another $100 in sales = $300 in sales per day), or about $9,000 a month with no extra work.
In fact, you have less work because you’ve already got the customer for the next sale.
Less work, more money.
So if you’re goal was $6,000 a month, you’ve exceeded your goal by $3,000, which means that you’re already half way to your next month’s goal!
And next month you may have a few more new customers, and you might create even more products to sell to them after they make their first purchase, as well as to your existing customers.
This is how you build an empire.
All of these numbers are purely hypothetical, of course. I’ve simply chosen easy, round numbers for the sake of our example. But, I hope you can see that it makes more sense to place most of your focus on the customers you already have rather than on getting new ones.
According to an article at Entrepreneur.com by Derek Gehl, creating just one additional product to sell to your current customers (those who have purchased from you before) will lead to a 30 – 50% increase in revenue.
New customers and clients are important to every business. But they shouldn’t consume the majority of your time and efforts.
It costs more to get a new customer to sell to than it does to sell to a customer you’ve already got.
Rain Group, a sales training and consulting company, has done some research and found that it costs 6 – 7 times less to retain a customer than it does to get a new one.
See, the point of the sale isn’t to make money. The point of the sale is to get the customer. And once you have a customer (or client) you want to sell to them over and over again.
And this is where it gets fun. The fun isn’t in getting the customer – which is the front end of your business. The fun is in the back end where all your customers are hanging out.
It’s fun because now you can build a relationship with these people and create more products or services to offer them.
It’s also where you will make most of your money because it’s easier to convince someone to buy from you who has bought from you before than it is to convince someone who has just heard about you but hasn’t bought from you yet.
One final thought….
It costs you time and money to acquire each customer you get. That cost is hopefully offset by the first purchase the customer makes from you, although some companies do acquire customers at a loss and make it up later on the back end of their business.
The second sale to that customer, however, doesn’t cost you anything because you’ve already got that customer. You don’t need to find them again. All you need to do is tell them about your next product or service and how it will help them.
So, the big take-away from this post is you want to make sales to get customers, not to make money. The money will come from the back end of your business. You’ll make a little up front, but the real money isn’t in the first sale. It’s in the next one, and the one after that, and the one after that – all sold to the same customer.
Make sales to get customers and you’ll make money. A lot more money.
To your success,
PS: I look forward to your comments!