Written by: Richard Eckley, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
Every business has overheads. The larger a business grows, the larger the overheads become, and the profit margin is reduced. A start-up online business may just have to cover the expenses of the owner e.g., the costs of production of the goods/service, the costs of advertising and maybe storage and shipping depending on the product.
Which could give a profit margin of 50-70%, depending on pricing and industry. However, a more traditional retail business, with a shop to rent, equipment, products to fill it, staff to man it, plus insurances, work vehicles, utilities for the shop, warehouses, plus possibly loans to start the business, they would be lucky to have a 10% profit margin, again this does depend on industry and type of business. Each member of staff hired reduces this profit margin, although it does free up the owner to do other tasks, which may bring in more money. But it does start a never-ending circle of having to get more products in to sell, to increase turnover, but then you need more staff to sell these products, which increases your overhead, so you try and get more products in to sell… And on and on. A quick look at Tesco here in the UK shows this, it is a large retail store, and its annual revenue in 2020/21 was over £56 billion, but with all the overheads, its profit was £2191 million, admittedly over £2000 million a year in profit isn’t a bad year, but that works out at a 3.9% profit margin.
Another system is to focus on different avenues to get the customers to you. Imagine your business is the centre of a wheel. Every spoke coming off that wheel should be a way to attract customers to your store.
Spokes to your wheel of fortune
retail (walk-in)
newspaper ads
magazine ads
radio ads
tv ads
email marketing
social media marketing each platform is another spoke, e.g., Facebook, YouTube, Twitter, LinkedIn, Instagram, etc.
podcast marketing
Referrals (word of mouth still the best)
joint ventures
direct mail
mail order
books
website
The more spokes you have for your business, the more securer the wheel and your business. When Richard Branson started his student magazine, (Student) while still at school he had a mail order record business at the back of it, this brought in the income.
However, his mail-order business for his records dried up overnight because of a national postage strike. His 1 spoke to his business was gone. Fortunately, he is solution-focused, so he opened up his first retail store, Virgin Records on the high street and the rest, as they say, is history. As he slowly grew each spoke and each business.
A few years ago Many businesses were shut due to Covid and the lockdown, never to open again, however many with an online business to back it up, stayed in business and even grew. Amazon grew from an annual revenue in 2019 of over $280 billion to an annual revenue in 2022 of over $477 Billion using the internet as the main spoke, but once again, if the internet crashed, that would be gone.
All these spokes take time to build up a consistent flow of customers, and the cost of ads and marketing needs to be monitored, but over the long term, a flow of customers from different methods, is worth the time invested. Make sure you have great customer service to back it up though, along with repeat orders to keep that customer coming back. As the true value of a customer is not what they buy on the first order, but what they buy over a year or a lifetime, that way you know how much you can spend to get a new customer while still remaining in profit with back-end orders and also growing your customer base.
You always need to be checking your overheads and looking at ways to reduce them, as long as it doesn’t affect the quality of your business or customer service, which should always be a priority.
Making sure all costs for the business are covered in the final product, from rental, staff salaries, utilities, stock etc. Because if you’re selling a product for £1,000, but with all costs etc. taken in to account it costs you £1,001, no matter how many you sell you will always be losing money.
I remember a business owner saying how he made £1 million in his first year of business, everyone was impressed, and he was hailed as a success, the only problem was it had cost him £1.5 million to make it. Always negotiate to get the best deal you can at every level. Checking your overheads at regular intervals, will help you remain in business for longer while you build your brand.
The first and still the best form of marketing is referral marketing, asking your customers to recommend a friend or family member of theirs to use your service/product, but only after you have given good
service, so they would want to do this.
J.K. Rowling’s huge success started with children talking about the first Harry Potter book in the playground, asking each other if they had the book and had read it.
As every parent knows, once there is a buzz in the playground about something, every child wants it, and they are masters of getting what they want. The quality of the book got them referring it, without J.K.
Rowling having to do anything, totally free marketing, but she had spent the previous seven years grinding it out to produce the best version of the book she could. Quality will always show through and keep them coming back for more. Which is the ultimate marketing system like a domino effect.
Once you can get the first ones going, it can have a knock-on effect leading to places you haven’t even dreamt of yet.
So the sooner you start to add the spokes to your wheel of fortune. The sooner it will start to pay off.
Richard Eckley, Executive Contributor Brainz Magazine
Richard Eckley is the founder of The Eckley Global Community school, a movement teaching the 4 keys to success health, wealth, relationships and mindset. After his 20-year marriage ended in divorce, he was left a single dad with 3 teenage kids, he wanted to give them a guide to know everything would be ok. He has studied personal development for 30 years giving him an in-depth knowledge. He then wrote his first book ( Your 4 keys to a healthier happier you) a starting point to this process, this led on to deeper dive books in his ( coffee reads) series and the development of the Eckley Global Community School working with local schools and individual students in 5 countries. His ethos: create the life you want
