Understanding the “Optimal Selling Strategy” of Your Business

Norm Brodsky wrote something in Inc. magazine several years ago that has stuck with me. It echoes a belief I share with him about the fundamental nature of business:

“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, a friend of his who sold trendy jeans and other casual clothing to young women. He wanted to increase the size of his store. When the space next door became available, he wanted to take it, knock down the adjoining wall, and double his inventory. It sounded like a good idea — given how busy his store was.

But when Brodsky questioned him, it became clear that his friend hadn’t the vaguest idea why people 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 against the move. That was good advice.

How many times have you seen a successful restaurant expand, only to see its business become attenuated and eventually disappear? The same holds true for many retail businesses. Bigger isn’t always better. But you won’t know if that holds true for your business until you have figured out how and why the business works.

There comes a time when the lights come on and you feel like you truly understand your business. This is not likely to happen right away. For some, it takes years and years. But when that “Aha!” moment comes, it brings with it a sense of confidence and energy that makes your successes come more often and more easily.

Often, the secret you discover is disturbingly simple. It is something basic to every business that I call the “optimal selling strategy.” By that, I mean the fundamental things you have to know to make a profitable sale: where to advertise, how much to spend on advertising, how to position your product in terms of the competition, how to price it, what kind of guarantee to give, etc.

In a nutshell, understanding the optimal selling strategy means understanding how to acquire a customer for a reasonable cost.

Until you get that working, the future of your business is uncertain. You are running your business scared, because you sense, deep down inside, that you don’t really “get it.”

As the top guy, you do the best you can. You judge each situation on its own merits. But you long for some general principle that can make your decisions simpler. And that comes with the “Aha!” moment.

If you are a top-guy-in-waiting, it’s important to try to get to the “Aha!” moment before you are put in charge. There’s nothing worse 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 lead with confidence.

Wherever you are in 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.

Do you understand the optimal selling strategy 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 equation that allows you to attract prospects to your product, sell them, deliver your product, and then sell them other things too — all at an acceptable profit.

If you do, good. If you don’t, get to work.

May the “Aha!” moment find you soon.

P.S. Want to start your own business? I recommend you go online. It’s cheaper, easier, and the profit margins can be huge. But before you’ll see true success, you must discover your optimal selling strategy. In the Internet Money Club, Director Brian Edmondson gives you not only a top-notch education in Internet marketing, he helps you discover that fundamental truth about your business. The class of 2010 is launching tomorrow to a select group of ETR readers. It’s not too late. You can still sign up for the IMC “hotlist” here.

[Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]