4 tips to find more money in your quilt shop
We all want a rainmaker–someone who is great at getting sales. They could sell ice to an Eskimo. You especially want someone like that during tough times. But it is this type of top-tine thinking that actually gets you into more trouble. Cranking up the sales will not help your quilt shop if you don’t have efficiencies already in place because new sales will have corresponding costs that will take away all of the profits. If you want to increase profits, then you must build efficiencies in your quilt shop.
Money is everywhere. But if you do not have an efficient quilt shop, you’ll just watch the money come in the front door and right out the backdoor. You will barely see any of it. But you must make a profit to stay in business for any amount of time.
But profit is a slippery animal. When profit margins are big, people sniff it out and almost immediately start copying it. And at the same time, they look for ways to do it better, faster, and above all, cheaper. This is why focusing on efficiencies is better than focusing on sales.
Efficiency is Key
Efficiency increases your profit margins. And increased profit margins will boost your quilt shop’s profits without the need for increased sales. And then, when you kick the selling machine back into gear (which we will discuss later), profits will skyrocket. So the method is simple: achieve greater efficiency first, then sell more, then improve efficiencies even more and then sell even more. And over time, speed up the back and forth between efficiency and selling until the two happen at the same time.
Making your quilt shop more efficient is about more than just nixing extra coffee breaks and adjusting the thermostat. To tap into the river of profit flowing just under the surface of your business, you need to look at efficiency in every aspect of your business.
Here are four ways to make your quilt shop more efficient and profitable:
Number 1) Chip away at expenses. Each quarter, I review where I have spent my money. Then I pick a category and dive in even deeper to see if there is an alternative. For example, I stopped paying for Zoom because I was already paying for Google Meet through my Gmail subscription. Google Meet met my requirements, so I canceled Zoom and saved myself a few dollars, increasing my profit. What expenses are you paying for that you are not using, are duplicating, or can swap out for cheaper alternatives?
Number 2) Fire your bad customers or, rather, just stop catering to them. A study facilitated by the Chicago-based growth-consulting firm Strategex analyzed a thousand companies' revenue, cost, and profit breakdown.
Strategex sorted the customers for each company into four sections, in descending order, based on revenue. For example, if a company had a hundred customers, the twenty-five customers who generated the most revenue were put in the top quartile, the next twenty-five highest revenue-generating customers in the second quartile, and so on. Strategex found that the top 25 percent generated 89 percent of the total revenue, while the lowest 25 percent only accounted for a meager 1 percent of total revenue.
It gets worse. The study found that each customer group required the same amount of cost and time. This means that it took the same amount of effort to serve a big-revenue customer as it did a customer who barely affected revenue at all.
Then came the awkward “gulp” moment. Strategex’s profit analysis showed that the top 25 percent of customers generated 150 percent of a company’s profit. The two middle quartiles were effectively break-even, and the bottom quartile, the one that generated 1 percent of the total revenue, resulted in a profit loss of 50 percent! In the end, the profits generated from the top customers are used, in part, to pay for the losses accrued in serving the bottom customers.
I’m sure you know this scenario all too well. Those customers who barely pay you anything, yet constantly complain about how much you charge and how you do nothing right, and do not have the right fabrics, kits, or notions—those customers are costing you money. Stop catering to them. Get rid of them.
Dumping any customer who makes you money (even if it is the worst customer in the world) may seem counterintuitive at first. But never forget: All revenue is not the same. If you remove and stop catering to your worst unprofitable customers and the now-unnecessary costs associated with them, you will see a jump in profitability and a reduction in stress, often within a few weeks. Equally important, you will have more time to pursue and clone your best customers. This brings us to the next point.
Number 3) Clone your best customers. Just for a moment, I want you to think of your favorite customer: the call you will always take, the person you say yes to without hesitation. This is the customer who pays without question. This is the customer who trusts you, respects you and follows instructions. This is the customer you love and who loves you. Now imagine that this customer had five identical twins wanting to buy from you. Wouldn’t that boost your business? Wouldn’t it be easy to serve those customers? Wouldn’t it help you keep your bottom line healthy? Now imagine ten clones or a hundred clones.
For almost any business in the world, attracting a hundred clones of its best customer would put it at the front of the pack. It would dominate. If just a mere 10 percent of their customers behaved like their number one customer, those businesses would have an amazing profit!
Having customers with similar needs and very similar behaviors offers a few magical profit-making benefits:
You will become super efficient because you now serve very few but consistent needs rather than an excessive array of varying needs.
You will love working with your clones, so you will naturally and automatically provide better service. We cater to the people we care about.
Marketing will become automatic. Birds of a feather flock together, meaning your best customers hang out with other customers with the “best customer” qualities you’re looking for. Your best customers are awesome, remember? You love them and they love you, and that means they will talk you up every chance they get. Clones of your best customers are the very definition of efficiency, which is why they are like gold. Find them. Nurture them. And then find out where even more best-customers clones hang out and cultivate them, too.
Number 4) Sell Smart. Selling more is the most difficult way to increase your profits because the expenses generated grow faster than the sales. So by selling fewer things that are of a better quality, you’ll win! What is your expertise? What do you like selling? What products or services give you a lot of stress?
As the variety of things you do increases, you need to buy more tools and equipment and hire more specialized labor. And none of this gets used to its maximum potential because you do many different things, not one thing. You get stuck. You become a Jack (or a Jill) of all trades, not a specialist in a few things. Still confused? Who gets paid more, the general practitioner doctor or the specialist doctor?
You'll win by selling fewer things that you are an expert in or are of a better quality than by selling many different things.
Efficiency increases your profit margins, and increased profit margins will boost your quilt shop’s profits without the need for increased sales.
On May 17th, I am hosting a webinar on the secrets of a profitable quilt shop. I would love to see you there, so please click the link to register.
Again, increase your profits by chipping away at expenses, firing or at least not catering to your worst customers, cloning your best customers, and selling smart.