Every week as SmallBizLady, I conduct interviews with experts on my Twitter talk show #SmallBizChat. The show takes place every Wednesday on Twitter from 8-9pm ET. This is excerpted from my recent interview with Richelle Shaw, @RichelleShaw. Richelle Shaw is an author, speaker and entrepreneur. She is the leading expert and authority in building successful million dollar businesses. Richelle’s experience comes from building her first business to $36 million, losing it all after the 9/11 tragedies, then, successfully rebuilding her million dollar company in approximately 5 months. As the only female African American public utility owner in the nation, Richelle has won local and national awards including Top Woman Entrepreneur of the Year 2010. She wrote How to Build A Million Dollar Business in Las Vegas Without the Casinos and The Million Dollar Equation. For more information visit: http://www.RichelleShaw.com
SmallBizLady: What are the three ways to grow a business?
Richelle Shaw: There are three basic ways to grow a business:
- Get new customers
- Get your existing customers to spend more money with you
- Get your existing customers to come back more often
SmallBizLady: How do you build a million dollar business?
Richelle Shaw: I believe you start with a great solution. Look to solve a problem. Even with a business that currently exists, start with what problems do your customers have. I like to Google your target market and the word “problems”. Then, create the business using your existing assets to solve the problem. For example, I owned a telephone company. What a commodity? How was I to compete with the larger companies? In Nevada, there were 58 other carriers that provided the same service as I did and with huge budgets. The biggest problem my target market had, getting telephone service without a huge deposit. I found that credit challenged customers were being taken advantage of from bigger carriers. I decided to focus on them and “providing a solution to their problems”.
SmallBizLady: Tell us about how successful your businesses have been?
Richelle Shaw: As the only female African American public utility owner in the nation, I built my first business from $300k to $36million and lost it all after the 9-11 tragedies. I then rebuilt back my million dollar business in about 5 months. Not only have I personally built million dollar businesses, but I have coached over 12,140 entrepreneurs on their way to build their own million dollar businesses. Several have been successful, from an auto repair center to an OB/GYN. No one wakes up eager to spend money with the gynecologist. BUT, we grew his business from $384k to $1.2million in 9 months. I have systems that build successful million dollar businesses.
SmallBizLady: What was your greatest obstacle when trying to build your million dollar business?
Richelle Shaw: The first time, I was 27 years old. Everyone in the company was older than me, except for the receptionist. My ideas were sabotaged by my staff. They even called the police on me for parking my new car in a handicap space. BUT, what they could not dispute were results. So I used it as an important lesson. Now, I focus only on results. Results helped me stay focused. Test everything and only use money to expand the ideas that had already proven profitable.
SmallBizLady: What is the Million Dollar Equation and can it work for any type of business?
Richelle Shaw: Here is the entire Million Dollar Equation –
1GS + TM+MC+FU+R³+85W+3GR = Million Dollar Equation
1 Great Solution – You must be solving a problem for your customers
Target Market – Your target market must pass the MDE 5 Step Criteria
Marketing Calendar – Random implementation produces random money
Follow Up – The specific follow up campaigns for both prospects and customers
R³ – Retention, Reactivation, Referrals – All systems that make sure that each customer stays, pays and refers.
85W – Most entrepreneurs only implement a couple of ways to acquire a new customer – in the book I detail out my favorite 85 ways and the 85 ways I used in my million dollar telephone business.
3GR – There are only 3 ways to grow a business and should be your only focus
All businesses need to get a customer, get them to pay and get them to refer. So, my answer is yes. The million dollar equation works for all businesses.
SmallBizLady: How do you determine your marketing budget?
Richelle Shaw: The marketing budget should be broken down by 20% spent on acquiring a new customer and 80% spent on getting existing customers to spend more money and to get them to come back and buy again. Focus the 80% on the R³ portion of the Million Dollar Equation Retention, Reactivation, and Referrals.
SmallBizLady: What kind of team do you need to build a million dollar business?
Richelle Shaw: The first time, I had 52 employees including a big sales team and live operators but the second time only 5.5. The second time, I used every technology available to automate as many systems as possible. What kind of team is needed? I believe you must have people on your team that can implement the strategy. I created the strategy, and my team implemented. I found that you cannot be the one creating the strategy and the one implementing, too. My team the second time around consisted of 5 sales people/customer service agents. The ½ a person was my part-time assistant. I outsourced my controller, billing, IT and graphic/design departments. I exclusively spent my time working on the marketing, strategic partnerships and overall growth strategy for the business.
SmallBizLady: Less than 9% of all businesses reach a million dollars in revenue. Why is it difficult, for business owners to build million dollar businesses?
Richelle Shaw: There are 3 reasons that directly influence:
- Entrepreneurs have a lack of focus.
- Entrepreneurs use money to test instead of using money to grow.
- Entrepreneurs do not set up the business to be a million dollar business – from pricing to systems.
SmallBizLady: What is the most important thing you must have to build a million dollar business?
Richelle Shaw: It is about the Great Solution. Finding the problem that the target market needs to solve is essential to build a million dollar business. Most businesses start with – I like the idea, I think it can make money – before they focus on what problem are they solving. Without asking the right questions or determining what problem you are solving, the business will not be sustainable. No matter how innovative or unique the marketing strategy is, it will not work. Then, we focus on how to determine the best Target Market available. The simple tests to make sure that you have a great solution.
SmallBizLady: What is the best practical step you can suggest for building a million dollar business?
Richelle Shaw: My best practical step is pricing your products or services to grow quickly. How you determine your price can determine if you ever get to a million dollar business. When I ask entrepreneurs how did they come up with their price they tell me:
- Based on the cost of goods sold
- By calling all of their competitors
The price should be only determined on what the market wants to pay for the product or service.
SmallBizLady: You say – Money makes people stupid – can you elaborate?
Richelle Shaw: Money becomes the focus for so many entrepreneurs.
Example of Stupid Entrepreneur: Before they start the business, they are focused on getting a loan or a grant. Instead of simply starting the business. Just start – Run out and get two customers. Don’t wait. If you can’t make money without money, then when you get money, you will be unable to make money, too.
2nd Example: As I watch them build the business and as soon as they reach the $10,000 per month level, they buy an expensive car telling themselves that they deserved it. Big Mistake!
3rd Example: Once the business reaches a certain level, the entrepreneur stops implementing like they did when they were the start up. They stop taking risks. And the risks are what help build the business quickly. I love to tell seasoned entrepreneurs to implement like you are broke.
SmallBizLady: What one piece of advice would you give entrepreneurs trying to reach the million dollar level?
Richelle Shaw: Once you get a customer, make sure that you have systems in place to make sure that they stay with you for life. You need that customer to pay you again and again, plus become referral machine. I show you exactly how in the book- The Million Dollar Equation – How to build a million dollar business in 3 years or less.
For more tips on how start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com.