Big Sales Come With Big Problems

Rugby Bricks, our e-comm business, had its biggest 30-day period from 3 Nov to 2 Dec this year.

We made $208,236 online and nearly another $30,000 in other parts of the business.

Great as a milestone but terrible for our business, here’s why.

1. We presold stock on the premise that our stock would arrive on time from our manufacturer after being assured it would - it didn’t turn up in time

2. Customers who wanted a deal wanted it fast - they didn’t get it

3. We had nearly 1000 customers who were needing support - our customer service team couldn’t handle it

   As a business, we failed them, and they let us know about it.

The issue here is that we set customer expectations that they would get a product on time after purchasing.

This wasn’t the case.

So, how do you remedy this?

You do something that beats their expectations.

You call every customer who had a shit experience.

Last week I started personally calling all customers who had a shit experience with Rugby Bricks and telling them as the CEO, you are personally sorting it out.

Here is a sample of the replies I got.

People love it when things go above and beyond their expectations - surprise and delight.

They hate it when you don’t meet their expectations.

1. Not delivering your products on time - shitty experience and doesn’t meet expectations

2. Getting a personal call from the CEO and saying that they are personally chasing up your order - great experience and goes above most people's expectations

I’ll still be chasing down customers this week trying to call or personally text them.

The lesson?

Customers love to be surprised and delighted.

Try to do this for them as often as possible.

The $200 K we made doesn’t equate to the loss of goodwill with the customers who had a shit experience with us.

Don’t trade money for poor customer experience - it’s never a trade-off worth making.

Our orders are sorted now, but if you are an RB customer and haven’t heard from me in the last week, expect to hear from me before Christmas with an apology.

How We Fixed Our Finances

I used to do the standard things.

Pay bills on the 20th, pay myself when there was money in our accounts and if their was any left over after that, invest it back into the business.

I used a single transaction account, a debit card and I'd pay our GST and taxes as they were due.

It wasn't a bad system, apart from some mad scrambles to cover tax surprises. With a single bank account and a small amounts of payables and receivables I roughly always knew where we stood.

But I did struggle to put money away for rainy days, I constantly underpaid myself and even though I'm a frugal operator we still did lots of unnecessary spending.

This year I tried something different. It's called Profit first. I generally hate these cookie-cutter business advice's....surely I can do better than that. But after seeing a couple of folks who are far more successful than me talk about it online I thought, why not.

Profit first is self explanatory. Instead of paying the bills first, you pay your profits first.

Instead of sales - expenses = profits. It's sales - profits = expenses.

It works like this;

1. Put money aside for profits

2. Put money aside for taxes

3. Put money aside for drawings

4. Leave the rest for your bills

First, you choose your TAPs (target allocation percentages). There's guidelines for these based on your businesses turnover online. Just search "profit first allocation percentages". Then every week allocate money to separate accounts for the "buckets" I mentioned above.

The trick to this system is following it religiously.

Always use the same percentages, always allocate funds in that order, maintain a constant frequency.

I started with conversative allocation amounts. i.e. 5% for profits, 7.5% for taxes, 10% for owners pay and 75% for bills. We struggled with these allocations at first because we were way overspending. But over the year we've ramped these up, one percentage point at a time. And now we're sitting at 10% profits, 10% taxes, 20% owners pay and 60% for bills.

The main benefits for me have been two-fold.

We've become more thoughtful about our expenses. Like I said, I thought I was already frugal, I wasn't. It's so damn easy to spend money when it's there (sitting in your bank account). When it's not there, well you just can't.

As you can see we've reduced our expenses from 75% to 60%. And after GST our gym is operating at about 30% profit. Try find another gym doing those numbers... you won't.

Secondly without fuss we've built up our savings (rainy day account) to almost two months of operating expenses in just a year. Saving money has gone from god mode difficult to it-just-happens.

A couple of final points.

1. If you're interested. You don't need to buy the book - reading a blog post will suffice.

2. We use Kernal for our profit account. They pay a good interest rate on cash and it takes a few days to withdraw funds - so it's hard to spend that money.

3. We apply the TAP's to gross profit, not gross revenue. Our gross profit rate is 87%. So we reduce revenue by 13% and then apply the TAPs to that number.

4. I’ve paid myself more from my businesses this year than I ever have, yet they're in better financial health than they've ever been.

5. If you do it - do not cheat the system!