Getting It: Understanding The “Basic Selling Dynamic” Of Your Business

There comes a time in your career when the lights come on and you feel like you truly understand your business. This is not likely to happen right away. For some of us, it takes years and years. But when that moment comes, it brings with it a sense of confidence and energy that makes your successes come more often and more easily. I’m talking about a major “Aha!” moment, a time when your conscious mind finally figures out what your unconscious mind has been noticing all along. (See Messages #311 and #312.)

Generally, the secret you discover is disturbingly simple. Yet, if it is a good insight, it is also profound. The insight is sometimes about the nature of your business itself (e.g., “I am not really in the fast-food business, I’m in the real-estate business) and sometimes personal (e.g., “I’m a discount guy. Selling price is what I do best.”).

Until you hit that point, you are probably running your business scared, because you sense deep down inside that you don’t really “get it.” You understand the basics, of course, but you can’t figure out many of the most critical issues: the fluctuations in sales, the varying responsiveness to your advertising, the attitudes of your key employees. You do the best you can. You judge each situation on its own merits. But you long for — and sense there is — some general principle that can make your decisions simpler.

And that comes with the “Aha!” moment. Until then — if you are the top guy — you will sometimes feel like you are faking it. If you are a top-guy-in-waiting, it’s very important to try to get to the “Aha!” moment before you are put in charge. There’s nothing worse for your career than taking on a fast-growing business and watching it sputter and stall under your leadership.

Conversely, there’s nothing better than taking on a stalled operation and making it work. But unless you really know what you are doing, you will never be sure you can make it keep working. And that means you will never work with confidence. Wherever you are in the range of your career, you have to do this: You have to understand what makes your business grow and what the secrets are to making it profitable. If you don’t know these things, you’ll never have peace and prosperity in your business life.

As Norm Brodsky says in the March issue of Inc., “If you don’t really know what’s driving your success, you have to be careful about the strategy you adopt. There’s a risk, after all, that you may accidentally undermine whatever made your company successful in the first place.” Brodsky cites, as an example of that, a friend of his who wanted to increase the size of his store, which sold trendy jeans and other casual clothing to young women.

When a space next door became available for lease, his friend wanted to take it, knock down the adjoining wall, and double his inventory. It sounded like a good idea at first — given how busy the store was — but when Brodsky questioned him, it became clear that his friend hadn’t the vaguest idea why so many young women liked to shop there.

When Brodsky analyzed the plan in detail and considered, among other things, the higher per-foot rate the landlord wanted to charge, he realized that his friend would need more than $1 million in extra sales each year just to break even. Since his friend admitted that he wasn’t losing any sales to overcrowding, Brodsky advised him against the move. That was good advice. How many times have you seen a successful local restaurant expand only to see its business diminish and eventually disappear?

The same holds true for many retail businesses. Bigger isn’t always better. But you will never be able to figure out if that holds true for your business until you have really figured out how and why your business works. There is something basic to every business that I call, for lack of an MBA education, the “basic selling dynamic.” By that, I mean the fundamental things you have to do to make a single profitable sale: figuring out where to advertise, how much to spend on advertising, how to position your product/service in terms of the competition, how to price it, what kind of guarantee to give, etc.

Until you get that working, the future of your business is uncertain. The basic selling dynamic is different from the deeper insight you get later — the insight that gives you the “Aha!” moment. Understanding the basic selling dynamic means understanding how to acquire a customer for a reasonable cost. It’s not the same thing as understanding the nature of your business. As I’’ve suggested above, many businesses are, in essence, real-estate deals. Yet, their owners don’t know that until late (or too late) in the game.

But the first step toward understanding the true nature of your business is to figure out the basic selling dynamic — and that you have to do before you start spending a lot of money to expand your business. Do you understand the basic selling dynamic of your business? Don’t answer too quickly. It’s more than just knowing how things are usually done.

I’m asking if you think you understand the underlying psychological equation that allows you to attract prospects to your product and sell them, deliver your product/service and then sell them other things too — all at an acceptable profit? If you do, good. If you don’t, get to work.

Once you understand how to acquire a customer — where to find him, how much to pay for him, what to say to him when you meet him (and so on), you can begin the longer and eventually even more fruitful pondering process on the true nature of your business. May the “Aha!” moment find you soon.