Help. Thats why we are proud to present your business on msnbc. Hi there, everyone. Im j. J. Ramberg. Welcome to your business, the show dedicated to giving you tips and advice to help your Small Business grow. Over the past seven years of this show, ive been surprised to see how many Small Business owners ive interviewed. Both successful and not, who have no grasp of their finances. They have a general sense of whats going on, but if you dig a little deeper, its clear that theyve not spent much time with the numbers. And that is exactly how it was for a pair of sports carloving shop owners, that is, until they discovered they were sitting on a potential gold mine. After more than 30 years doing auto repair in phoenix, arizona, brothers joe and pat ritz werent looking to change their business model. That is, until one customer, chris myers, asked what seemed like a very odd question. I looked around, sure enough theres a Million Dollar ferrari sitting out there, right next to a 2010 camry. Im like thats kind of interesting. I talked to pat and i said, well you charge more for the ferrari, right . When pat told him they charged the same hourly rate for any customer, chris said he was surprised because theres such a great difference in skill level needed to work on the two kinds of cars. Its not the type of problem that says oh, my god im going out of business tomorrow but its a problem. He loves finding overlooked opportunities hidden inside accounting numbers. We have people who are tracking the wrong numbers in their business. Maybe theyre looking at what type of word of mouth feedback you receive, when in reality, they should be looking at is return of purchases. Chris is a selfdescribed numbers geek. He offered his program to help the ritz brothers understand which numbers have the greatest impact on the value of the company. What they saw was they were not utilizing their assets properly and their assets being, of course, past time as a master craftsmen. We were used to getting our hands dirty and done at any level we were missing the point of what best served our clients a and company. Their company is called sports and Collector Car center. Until chris spoke up they had very little interest in tracking their financials. We used to be, you know, you wait by the mailman to bring the Bank Statement and see if you were still in business. Today, things are different. Joe and pat arent waiting around for the mailman to understand their business. 7498, joe. A Real Estate Agent is showing them around a huge new location. Theres nothing like it anywhere that im aware of. Im just thinking like we put the row of racks and then make an aisle. What happened . These two had found a whole new vision of the company buried in their own account books. We could see day to day where we were at and what we were doing. It puts excitement into the business. By monitoring the daytoday financials they discovered that if they could get customers to pay on time and cut some of their extra costs, it would make a big difference. They found out a way to collect their receivables more efficiently, they tightened up spending on a few issues and they increased their value of the business by Something Like 15 . I have no financial background so now im reading these things and going wow, this is pretty great. The more they looked, the more they found. And then they struck strategy pay dirt when chris asked about the big number of customers backed up at the front desk. They must be busy today. I should probably come back another time. I said that to joe. He said no, these guys are just here to hang out. He said, i hope those guys spend a lot of money here because they waste a lot of your time. I said i wouldnt have it any other way, and i dont consider it a waste of time. They will migrate back here to see whats going on. They like cars. It struck me like a ton of bricks. Youre not an auto shop people like to hang out at. Youre a hangout thats an auto shop. Does that have a air cleaner . Chris realized the garage was more than a repair shop. It had become a community of car collectors that liked to hang out together. I wanted to cultivate a community more so than just a garage. Together, they hatched a new business plan, to create a kind of car collector clubhouse with its own auto maintenance facility. You can come socialize with people who have cars. It will be car oriented like a clubhouse, like a country club, where you come in and you can have a drink, you can have your car worked on. It will be a membership type facility. With this daring new plan in mind, they used the software to run the numbers and assess the risk of giving the business a total makeover. What if we price that a little bit closer to where the Market Pricing is, then you can step out and say wow, thats an entirely new ball game, new business. Now im seeing a direction and road map that can take us to that goal that used to be just a vision. I think they opened their eyes a little bit and said theres so much out there that we could be doing that wouldnt require much effort really, but could tremendously improve the cash flow and value of the business. Like we had talked about, right now, your Current Office is 80 shop and 20 social. And what were doing here is going 80 social and 20 shop. The flip. Exactly. Exactly. It is a new dream. Its at a level that i always wanted to be at, but never had any idea how to get there. Clearly as we just saw in that story, paying attention to your financials is important on so many levels. Lets talk a bit more about this with our guests. Doug is the president of Clarity Consulting and author of the book taking smart risks, how sharp leaders win when stakes are high alexa is the founder and ceo of learn vest. Com leading personal finance and lifestyle website for women and monica is a managing partner at seventh capital and author of the book the entrepreneurial instinct how everyone has the innate ability to start a great Small Business. Great to see all of you. Great to be here. I am shocked at how many people ive said this before, you get to their business and its pretty successful and they have no idea whats going on in terms of money. Yeah. Whats the first step these people should take . What i loved about this story, they took the time to look at the data. They had a Great Customer that came in and gave them some insights which is great, but they took the time. So many businesses, theres data everywhere, theres great insights about what customers are good, high profit, low profit, because youre a Small Business just trying to make money and work hard, every dollar looks like a dollar i need to have and you dont stop and say, which of these dollars arent smart to pursue. Which ones are. It really only takes a couple hours often times to understand that. How do you start . One of the things i talked about in the piece was looking at the wrong metrics. How do you decide what are the right metrics and wrong metrics . The most important metric for them to look at, why i think theyre shifting is time. They have limited time in their Auto Repair Shop. Focus on the highest margins which fixing normal cars, everyday cars, has a lot less margin than fixing Collector Cars. And i think that was probably the most important metric for them to look at, was margins against the time they had and utilization. I think that was a powerful switch for them and going to pay off. Do you suggest, monica, one of the issues is a lot of people are scared of numbers, right. They look at all of these numbers, all this data and they shut down. For someone like that, what do you suggest . Hire someone to help you . Just suck it up and sit down and look at it yourself . Its very much important to look at these numbers at periodic moments in your business. Most people dont bother to do it unless its time to go raise financing and i think what the story really explains is that the praydo principle applies to most businesses, whether a car shop or apirl company. Youre going to make 80 of profit in revenue from 20 of your skews. The software is fantastic because it guides you through and provides a framework, even if you are scared of numbers youve got this kind of cant go wrong, step one two three way to process all of the financial day date ta. Eric, came on the other day, and he said something really interesting. We were talking about metrics, people often look at the wrong metrics. The example he gave was, you are converting 50 of your customers and what you want to do is increase conversion. Then you do a Big Marketing campaign and instead of 100 people coming in you get 200 people coming in, but you only sold 100 things. You still only have 50 conversion but if you look at the raw numbers you think wow, i did great in my sales and so even if youre looking at all of this data, how do you catch yourself to say, you know, make sure youre still looking at the right things . Yeah. I think that the the trick is to really spend time with your customers, to understand what your customers are what theyre willing to pay for, what the best way that you can kind of create value for them and so it may be that were Building Customer base and were spending a lot of money to get the customers but we see the long tail on those customers as being really important. Thats valuable. Sometimes we may say those customers arent going to be around long, thats not valua e valuable. One thing i would say, often times you want to hire a financial expert to stop and say heres a way to model the business not just for the six months but the next year or two years to help where you make the longer term decisions. Its very important. I was going to add to that, its important to hire someone if youre not sure what to look at but its critical you understand it. You cant sort of understand it. You need to get into the weeds and understand whats driving your business. I think, you know, for one of the things here then, is also you have to test your hypotheses. One thing that scares me about this idea theyre shifting from 80 being an Auto Repair Shop and 20 a hangout and they have some concept people like to spend there but theyre going to shift it to being an 80 hangout. How do they know people will want to spend 10,000 hp look at the numbers and test your hypotheses, test, feedback, focus groups, whatever it may be. Thats a big risk to take without having data. I think the upshot of this discussion and that story, if youre one of the people waiting for the mailman to come to see if you have enough money to stay in business the next month, take some time out and dig into those numbers. Thanks a lot. Looking to earn true Customer Loyalty . The kind that translates into recommendations, referrals and overall a better bottom line . Here are five ways to help customers find the love courtesy of bisbest. Com. One, end of the obstacle course. Make sure your clients know how to reach you if they need help. Send out emails periodically to check in. Two, avoid customer hot potato. Whenever possible, the person who speaks to a Customer First should stay with that customer for the duration of their visit. Passing them off to someone else can make the shopper feel like they werent important enough for your undivided attention. Number three, streamline your website. Keep it simple. Figure out one look and message you want to send and stick with it. Four, invest in Customer Loyalty. Offer something without them having to ask or pay extra for it. And number five, offer customers real choices. Dont bind them into the fakes choice of letting them opt out of something. Let them know up front that they can decide to get emails and offers from you and give them a choice. We say it all of the time here on this show, a good idea does not always lead to a good business. So, how do you evaluate if your idea has the potential to actually make money . Steve blank is a retired entrepreneurial and lecturer at Stanford University and author of the book the startup Owners Manual, the stepbystep guide for building a great company. Great to see you, steve. Glad to be here. Thanks very much. Okay. So you are starting a business or you have an idea. Whats the first thing you need to do to decide, okay, this is a viable idea or not. The first thing you need to do is realize all your passion and energy has made you start on day one of faithbased enterprise. Even though you think its a rationale business, on day one, all you have is your passion. And your job is to turn that faith, that is your assumptions, about everything you think you would believe about customers and markets and pricing into facts and we kind of now say there are no facts inside your building or office, so get the heck outside. And the whole idea is, we believe you need to get outside your office and test some of your Key Assumptions about your business. Yeah. I always talk about this. Dont get tunnel vision. You and your husband or wife or your senior managers or cofounder, you have one idea. You dont know if thats going to really fly when you get out your doors. What problem youre solving. Thats a great way to frame what youre doing. Right. So most startups are either solving problems or solving or fulfilling needs. And so while you will have a strong belief about yes, of course, people have this problem, or they have this need, then it should be really easy to go out and talk to people and see if they believe that. And almost all the time you get surprised and go, oops, i was the only one who believed that people would actually pay to solve that problem. You talk about finding out who cares. How do you figure that out . You know, when you start a company, you have a series of assumptions. Hypotheses about these are going to be my customers, this is what they look like, this is where they live, and, you know, thats kind of your customer segment. You get out of your office and building and start calling them and meeting them and you start doing what i call you watch their pupils die late as you actually describe or demo your product or service. And if youre right, theyll grab it out of your hands and if youre wrong, theyll say well, you know, not particularly interested. Boy, thats a great time to find that out is before you invest tons of time and money in your startup based on faulty assumptions. You get to the point where youve figured out what problem youre solving, who cares about it. Heres the key, is someone willing to pay you enough so that it makes a viable business and how do you figure out what you can charge for this . You know, one of the things we usually believe as founders is, of course people are going to value this at whatever price i just said. And you set a price and youre usually surprised you dont get enough sales or people think its too expensive or worse is you leave a lot of money on the table. The nice part is today you can actually use the internet and direct sales techniques to kind of do ab testing, that is, test different prices, test different categories, test different revenue models. Do i do a subscription, is it a direct sale, something fremum, give a base product away and have people upgrade. I could run a series of scientific experiments about whats the right pricing. When you talk about how you know what someone would pay youre going out and doing a real test and seeing them open up their pocketbooks and seeing how much theyll pay . You bet. The startup Owners Manual for anyone out there who has an idea and thinking about turning it into a business. Steve, thanks, we appreciate it. Thank you, j. J. When we come back, we answer your Small Business questions including how to transition your networking skills from offline to online. And what time is it . Its time for another president ial inauguration and todays elevator pitcher says he has products worth watching. Weve all had those moments. When you lost the thing you cant believe you lost. When what you just bought, just broke. Or when you have a little trouble a long way from home. As an American Express cardmember you can expect some help. But what you might not expect, is you can get all this with a prepaid card. Spends like cash. Feels like membership. An essential part of making the game work is providing methods of progress and also rewards to consumers for a job well done. The most common game of rewards system is called the badge. It can be an item, virtual on someones facebook profile or real world that gives them a reward for a job well done. Customers being the 1,000th person into your store or an employee coming in to work on time five days in a row. Using badges and rewards together as part of a strategy youre well on your way to creating unprecedented engagement to consumers and employees and getting your business into the game. In the last few weeks weve been talking about how companies are using it to increase their user base. Weve learned a lot ourselves about the process and why weve tried to incorporate gamefication at your business. We asked you to send your entry for our most creative logo, and after serious deliberation, drum roll please, the winner is von cochran of jacksonville, florida, sent us his logo from his Company Black fly. He says the logo represents a lifestyle brand that combines fly fishing, art and Adventure Travel rolled into one. He wins a copy of our book its your business a coveted your business coffee mug and i will call him to talk about how to tackle some of his companys challenges. Congratulations. President obama will be inaugurated for his second term this week which means time is running out for todays elevator pitcher to capitalize on the event with his commemorative watches. Hi. Im jack goldenburg, president obama watches. Nice to meet you. Since 2008 weve sold 30 obama watches. Its not that hard because president obama is the political rock star of the free world. Weve had watches like yes, we can, serious like yes we can and the biggest one is brot be rack around the clock. I came up with the idea around 2008 when i wore one obama watch to a party and wasnt planning to wear any more and the next day people called and asked where to get the watches. Let m