Peanuts to Profits With Thor Schrock
Peanuts to Profits With Thor Schrock

Every day in the news you hear more bad news about the economy, but great news about your 401-k value. How does this contradiction translate into opportunity for your business?

Easy.

You can hire the best talent available in the marketplace on a contract basis because people are out of work and they will be for some time.

If you hire clearly overqualified people, they will simply take your position until something better comes along.

Instead, hire the people you need on a contract basis. The differences between contract employees and regular employees are subtle (but important).

Most importantly it opens up a door of opportunity that can help your small business get the talent it needs to grow. Eventually you might grow to a point where you can permanently hire your contract help!

How can the stock market keep going up if the economy is tanking?

Remember that stock values are based on company profits and activities. The economy on the other hand, is primarily driven by individual consumers.

Companies can generate huge profits by reducing the number of people they employ, as long as they can manage to somehow continue delivering their products and services with their remaining workforce.

Experts often cite recessions as times when employee productivity goes through the roof. Employee productivity goes up because a company’s remaining staff must pick up the workload of the laid-off employees or face the chopping block themselves.

Fewer people doing more than ever is a recipe for business profits, and hence the stock market does well. On the other hand there are tons of highly trained and qualified people who are stuck on the sidelines polishing their resumes.

Turning on the 1099 Tap

With so many people out of work for such a long period of time, the small business owner has a unique opportunity to leverage talent they otherwise could not afford.

When you hire someone to help your company you can bring them on as an employee or you can hire them as a temporary contractor. There are certain advantages and disadvantages to each:

Regular Employees:

1. Advantage – You control their every activity
2. Advantage – You invest in their training and development to make them more productive
3. Advantage – The employee relies on you as their main income source
4. Disadvantage – You are responsible for benefits, including unemployment payments if things don’t work out
5. Disadvantage – Over-qualified people might take your under-paying position to tide them over while their resume circulates in higher-paying circles
6. Disadvantage – Employees come with HR nightmares like paid time off, sick days, maternity leave, office politics, and government compliance regulations

Contract Employees

1. Advantage – You tell them what needs to be accomplished, and they make it happen
2. Advantage – Lack of a regimented management structure can sometimes lead to better results and new ideas
3. Advantage – Contract employees are less expensive because you don’t have to worry about benefit packages, overtime, or payroll taxes
4. Disadvantage – Contract employees are like for-hire mercenaries. They can work for anyone, including your competitors
5. Disadvantage – Contract employees are typically less committed to big-picture corporate goals
6. Disadvantage – You can’t control them. If you have control and direction of their activities you have to pay taxes on them as regular employees

Using Contractors to Grow

From time to time my company has used contractors as gateway labor when launching a new division, testing out a new product or service, or simply when we could not hire an employee at an agreeable rate.

Eventually, all contract relationships end – abruptly. Typically, the best you can hope for is a 30-day notice provision in your contract.

While that sounds better than a voluntary 2-weeks notice form a regular employee, it can be devastating to lose a key person in the infancy of a product.

Employees are typically more loyal to the corporate goals, so the odds of them seeing a project through to a transition point are typically better.

Once your product, division, or service is viable, transition your contractors to employee status, or replace them with qualified people. Whenever possible, have the new employees train under the contractor.

Opportunity is Everywhere – Even in Bad Times

No matter how you decide to find your people, know taht the “bad economy” has created a pool of very talented labor that can be a game-changer in your business strategy.

All you have to do is know how to tap it affordably and control its growth to cash in.

This afternoon I did some research for marketing a computer repair company resource website. I planned on directly marketing the website to computer repair companies, and to do that I needed a list to work from.

The first name that came to mind was InfoUSA, and I was thrilled to find that their lists can be purchased online through an automated system!

InfoUSA Sells BIG Lists But…

I entered SIC (Standard Industrial Classification) numbers 7378 and 7379 and their system returned just over 38,000 results. The price of the list was a WHOPPING $6,227.00!

For that price I might as well build a bot to harvest names and phone numbers from computer repair web searched on Google. The only down side to that is that harvested lists are rarely accurate, and can lead to wasted marketing dollars (unles you have a desire to become a mass spammer).

Holy Proofreading Batman!

InfoUSA had a cool feature where you could preview an entry from the list you are about to buy. I hovered my mouse over the option to see what my 6K was going to buy.

There is no excuse for a result like this to show up in a database search. I entered SPECIFIC SIC codes that should have returned computer repair companies.

They obviously had this listed in a database somewhere with an Automotive Repair SIC code because they listed it in the result. Why would I pay $.16 per name for a list of businesses that will have no interest in an IT shop website?

If InfoUSA can’t manage their results database, there is no way I am going to trust them to sell me a $6,000 targeted list for a marketing campaign. Anyone know a good coder who can build a bot for me?

Most computer repair companies are started by technicians or IT professionals. They are usually confident in their technology skills, have experience serving customers for others, and believe they can earn a significant income if they were only working for themselves instead.

When an IT professional takes the entrepreneurial leap, the immediate focus usually lands on how to acquire clients, customers, or jobs.

As the newly-born entrepreneur sets out to build a business, he or she finds that for some reason they are having a tough time making ends meet even though they are working twice as hard as they did in their previous job.

That single misstep is why many IT professionals will fail to find success within the first year of their entrepreneurial venture and will be pressured back into servitude as an independent contractor or employee.

What good does it do to ferociously hunt new clients and customers if you are not able to have profitable interactions with them when you do find them?

Before you leave your job, before you invest the first dollar in your future, and before you even attempt to get your first client, you need a revenue model.

What is a Revenue Model?

Simply put, a revenue model is how you plan on making money by satisfying your clients’ needs.

Take a moment to think about the businesses you have interacted with today. Why did you buy what you bought?

Gas stations will offer inexpensive fountain drinks, hoping you will grab a bag of chips or a candy bar to go with it. McDonald’s asks you to try their latest sandwich for free with the purchase of fries and a drink in the hope your come back for more. Even my plumber was using a revenue model when he tried sold me a “hydro-scrub” of my sewer line for $50.

The point of a revenue model is to have a basket of products and services available that your customers might need, and then moving them through those products and services in a way that maximizes the profitability of each interaction with those customers.

Components of a Sales Model

Revenue models have 9 basic components. No matter what mix of products and services you keep in your basket, you need to know exactly what they are and how they interact with each other in your revenue model.
Your revenue model needs to:

1. Have a client (A Customer Who Presents A Problem)
2. Have a solution that resolves your client’s problem
3. Bridge that Solution to Another Item in Your Basket of Products and Services
4. Provide an Opportunity to Investigate for Further Up-Sell Opportunities
5. Close the Sale With the Customer in a Compelling Way
6. Back-sell With Customer to Reaffirm Their Decision
7. Deliver the Products and Services that Were Promised
8. Back-sell Again in Person to Prevent any Buyer’s Remorse Feelings
9. Stand Behind Your Warranty With a SMILE if it is Called in

How to Build Your Revenue Model

Building a revenue model is not a daunting task. In recent years there has even been a counter-push against revenue models in light of hyper-successful companies like Google that did not have a revenue model when they started.

The truth is that for every Google there are hundreds of thousands of business failures that a good revenue model might have prevented.

It is easiest to think about your revenue model as the thread that links your products and services together. Just because you offer a Maintenance Checkup, or Anti-Virus software, or memory upgrades doesn’t mean that people will come to you looking for them.

You need to have a planned way to let your clients know what you have that they can use and give them compelling reasons why they should let you solve their problems.
Steps to creating your revenue model:

1. List all of the products and services you offer. It might be easier to list each one on a note card so you can literally line them up in the order they might happen.
2. Determine which of your products or services will satisfy the largest number of clients. I creat5ed the Maintenance Checkup because it has a little of everything. Every computer problem touches the Maintenance Checkup in some way. It was a great way for me to get my leads into my revenue model. This is called your gateway offering.
3. Starting from your gateway offering, develop lines of reason – based on specific problems – that would lead you to recommend each of your other products or services under certain circumstances. For example, if you offer data recovery services, a customer complaining of a blue screen of death may be suffering from a failing hard drive. When this happens what options will your customer have?
4. Take the model one step further into your product and service basket. Continuing from the example above, does that data recovery customer need a new hard drive? Did the hard drive die because it was being over-used for virtual memory because the computer does not have enough physical memory? Find one more thing that the customer needs (assuming they truly need anything additional) and figure out how you would offer it.
5. Rehearse your pitch. Nothing sounds worse than a person who sounds like they don’t believe what they are saying or know what they are talking about. Find someone who won’t think you are crazy and role play. Ask your partner to challenge you. This is best done with a non-technician because that is who your customer will be.
6. Make real-life adjustments. When you are implementing your revenue model there will be times when you have to make adjustments based on input from your client. For example, if your customer does not have $390, you are better off getting the $100 than having the customer just take the unit back home again. Use your model, and then back pedal if necessary. Never start with a rate lower than your model. People don’t buy what they can’t afford.

Up-Selling is Not Evil Unless You are Evil

Some technicians find the revenue model – or selling in general – to be distasteful. I even consulted with one business owner whose entire reason for going into business was because other repair shops i town were “always trying to sell something.”

A good revenue model does more than generate profits for the company that employs it. Businesses that are successful in the long-term rely on repeat customers and word of mouth.

A good revenue model is designed to extract as much profit from a customer interaction as possible while at the same time providing superior services that are deserving of a premium price.

Life Without a Sales Model

Consider for a moment how awful your experience as a consumer would be if the companies you visited today did not employ a good sales model.

If the gas station didn’t have the inexpensive fountain drinks, you may have never found what has become your favorite snack. If McDonald’s didn’t get you to try that new sandwich you might have eaten the same old thing every day. If my plumber didn’t sell me that hydro-scrub, the scent of old poop might be wafting up my drains right now.

Superior revenue models deliver good products and services at a price the customer is willing – and in most cases eager – to pay.

Failing to recognize the need for a systematized sales model is the single greatest factor in the failure of small businesses in general. Having a good revenue model will put you 10 steps ahead of most of the IT shops and consultants in your market. Ignore the need for a revenue model at your own peril.

There are a lot of ways to measure the effectiveness of a marketing campaign. You can look at market share gained, revenue generated, or response rates. But sometimes the true measure of an ad’s effectiveness is not in these numbers.

A truly brilliant marketing campaign makes your competitors whine. It makes then call their lawyers. It makes them grasp at any straw to make the bleeding stop.

There is truth to the saying “thou dost protest too much.” If you get your competitor to respond in a direct way to an indirect advertisement you know you are doing something right.

If Your Competitors Squawk, Keep Doing It

If something in your advertising – a word, phrase or concept – draws the ire of a competitor there is usually something about what you are doing that they are afraid of.

Take this recent example:

Microsoft recently launched a series of TV ads called Laptop Hunters.

From time to time I do some consulting for computer repair companies outside Schrock’s local trade areas.

Typically these take the form of phone calls about trends or marketing ideas, but York Computer Repair is a whole different story.

Yesterday I received an unexpected thank you letter (yes the postal mail kind) from York Computer Repair’s Owner, Walter Oakhem. Here is what he wrote:

Thank you for all of the help you have given me with starting York Computer Repair.

I especially appreciate the information and advice you have provided, and the contacts you have shared with me. Your assistance has been invaluable to me during this process. I just wanted to say an extra thank you for your mentoring and kindness.

Again, thank you so much. I greatly appreciate your generosity.

What Did I Do to Deserve Such Kind Words?

I have never really talked about Walt, his company, or what I have done to help him get things rolling in York, PA. Even my employees don’t know the details of what we discussed. In one of our calls Walt suggested I document our conversations because he felt other computer repair company owners might benefit from them.

I am going to preface this by stating that no consultant, no home study course, and no business model can bring you success unless you are willing to implement it.

From day one, Walt has had a flame of passion that I have seen in few others over the past few years. While this post will name off some of the suggestions I gave to Walt, by no means am I trying to take any portion of the credit for his work. Anyone can talk, but only an entrepreneur can transform talk into results like Walt has in Pennsylvania.

The Meat & Potatoes of Three Phone Calls

Over the course of our three phone calls we covered topics raging from starting up to scaling to a retail location and everything in between. Walt and I discussed:

* The absolute NEED for a sales model (and how easy it is to make one)
* How to target a small niche in your marketplace and expand outward from there
* Yellow Pages advertising techniques that are proven to bring in hundreds of new customers each month
* How to build an inventory of repair components for next to nothing
* How to hire employees as inexpensively as possible in the first few months
* How to value your time and get your customers to pay a reasonable price for it
* Every reason you should NEVER try to be a low-cost leader
* The need for a work flow management system and where you can get one specifically designed for computer repair shops
* How you can create brands for your physical products and service products and why it is a VITAL step than is often skipped causing others to fail
* Who the key low-cost hardware providers are and how to do business with them (if you think NewEgg is your best value, think again)
* The need to continually remind your customers how wise they are to choose to do business with you

Local Insight Yellow Pages is informing its advertisers that their contracts are being forcibly extended – at their existing monthly rates – for three additional months. 140 of the company’s 900 directories are being delayed.

While the company says the move is to allow time to install new printing equipment, it is also obvious that the delay will prevent advertisers who wished to cut back their ads from doing so. In Lincoln, the billing of yellow page directory advertising is linked to your telephone service. If you refuse to pay the bill, Windstream will cut off your phones.

In effect, the delay will allow Local Insight to delay what would most certainly be cuts in small businesses yellow pages advertising budgets.

A few weeks ago I received a letter form Local Insight Yellow Pages informing me that they were delaying the release of their 2010 book by three months. Instead of its normal release in November 2009, the 2010 book was being pushed back to February of 2010.

A recession is a massive opportunity for a small business that is willing to take a few calculated risks for a big reward. While your competitors are petrified by fear – real or manufactured – about what the future holds, your business needs to seize the present. By moving aggressively with calculated marketing moves you can snatch customers and marketshare for your company while your competitors’ fears become their reality.

Over the past few months I have written about:

* Yellow Page Advertising Strategies for a Start-up Business
* Radio Advertising Strategies that Work Fast
* Why a Recession is the Best Time to Lead Your Industry
* How to Use Dunn & Bradstreet to Identify & Target Weak Competitors

I know these strategies work because I employ them in my computer repair company, Schrock Innovations. Schrock was started in 1999 and controls a commanding share of the Lincoln and Omaha computer repair marketplace. We have zero debt, great cash flow, and we are taking in an average of 162 new customers each and every month in 2009. We are GROWING in a recession.

When new web clients come to me they all seem to want one thing – They want to rank well in Google to get FREE business leads. Before you start to navigate the thorny paths of search engine optimization, take advantage of what Google gives you for FREE.  Take 5 minutes to list your business […]

You read that right! Schrock Innovations is teaming up with 104.1 The Blaze in Lincoln, NE to give away one FREE netbook computer EVERY DAY for a whole month!

How to Win One of the Schrock Netbooks:

All you have to do to win is listen to 104.1 the Blaze on the air or on the Internet and wait for the cue to call in. When you hear the sounder, be caller #10 at 402-464-1041. They will air the sounder once each day.

Improve Your Odds of Winning:

If you are trying to win by listening online I have a couple pointers for you. The online feed is delayed by upto 45 seconds. Since you have to be caller #10 to win the computer a time delay will make that challenging for online listeners.

You can improve your odds (and get more sleep) if you follow the Blaze on Twitter. They will tweet specific details about when the sounder will be going off so you can be one of the first people to call in. Knowing WHEN the souder will happen dramatically improves your odds of winning!

What Are You Trying to Win:

You are trying to win an Asus netbook from Schrock Innovations. The netbook has a retail price of $349. Because the promotion is called PCs and Pudding, the radio station will throw in a box of instant pudding as well. If you don’t know how to use a netbook, the instant pudding is a nice addition to any office.

I have no inside information about when the sounders are going to air, and I can’t do anything more than what I already have to improve your odds of winning, so enjoy the great music and have fun trying to win!

Those who read my posts regularly know that I believe that a recession is the best time to attempt to expand your business.

Durring a recession your competition:

* Will be reluctant to match your moves
* Will cut back on service to increase the bottom line
* Avoid investing in people and equipment

How Do You Expand Your Business When Your Customers are Spending Less?

The answer is pretty straight forward – you get more customers. You take them from your competitors.

While your competitors are cutting like mad, you reach out and entice disgruntled customers into your fold.

To do this you have to increase your marketing budget, and radio auctions are a nifty tool to convert your unsold inventory or service certificates into needed advertising dollars!

How Do Radio Auctions Work?

Typically, radio stations sell air time for money. In a tough economic climate,advertisers cut back, so stations have to get more cretive to hit their sales goals.

For example, lets say you own a website design company. You might provide a $1,000 gift certificate to the radio station to auction on the air. You would receive $1,000 in trade to spend on commercials, et. in exchange for your certificate.

The station would then auction the certificate on-air to its listeners who call in to make their bids. The certificates often sell for less than their value, so the callers feel like they are getting a good deal.

You get the free commercials (not to mention a 5-minute plug during the auction its self), the customer gets a great value, and the station gets money. Everyone is happy.