RPF0380-Practical_Advice_for_Employees
00:00:00.000 | Last night I took my family grocery shopping at Costco, among other places, and I saw an example of how ridiculously easy it is for most people to really shine at their job and really make a big, big difference at their job and at their work.
00:00:23.000 | If they would just wake up and pay a little bit of attention to the fundamentals of business and their job.
00:00:33.000 | In my family, the way we do shopping, I do probably a majority, I probably do about 50% of the shopping either by myself, food shopping, either by myself or Alvin will take the kids with me, gives my wife a little break, or she probably does about 20% by herself and then we do about 30% together.
00:00:53.000 | And so we hadn't gone food shopping recently and we like to do it all at once and so yesterday, last night, we decided to go out and do our food shopping.
00:01:03.000 | The fridge was looking a little bit bare.
00:01:05.000 | So we generally do food shopping in about three or four stores.
00:01:09.000 | We started at the restaurant supply store.
00:01:11.000 | That's where we buy, I would say, the bulk of our food at the restaurant supply store.
00:01:15.000 | Get really great prices there.
00:01:17.000 | The challenge with the restaurant supply store is the quantities.
00:01:20.000 | You wind up buying huge quantities of stuff and nothing is packaged for individual consumption.
00:01:26.000 | But you can get some really great deals and the dollars go far.
00:01:30.000 | Then we move on to Costco and at Costco, where we get other things that are also excellent in quantities and lower in price.
00:01:39.000 | We shop once a month because we wind up – about once or twice a month because when you shop at these stores where you get massive quantities, it takes a little while to go through things.
00:01:51.000 | But then usually, we follow that up with a trip to Publix for the little sundry items that you can't get at those other stores.
00:01:59.000 | But last night, we were running late.
00:02:01.000 | So we're at Costco and I was finishing up the show and trying to get done.
00:02:05.000 | I try to finish my work by 5 every day so I can go and be with the kids.
00:02:10.000 | So we finish the show and we jump in the car all together and we go to the restaurant supply store and then to Costco.
00:02:17.000 | We decide we're going to eat.
00:02:18.000 | Now Costco, for those of you who remember, has OK food.
00:02:22.000 | That's decent.
00:02:23.000 | It's not necessarily super healthy but it's certainly adequate at tremendously low prices.
00:02:28.000 | I mean they're famous for this big giant hot dog that you can buy.
00:02:31.000 | It's $1.50 for a hot dog and a soda.
00:02:35.000 | It's funny.
00:02:36.000 | I was at FinCon 2016 last week out in San Diego, California and Clark Howard was one of the keynote speakers.
00:02:43.000 | Now Clark is an interesting guy.
00:02:45.000 | He's built a massive financial empire but he is also – practices what he preaches.
00:02:53.000 | He's a pretty frugal guy.
00:02:54.000 | He gave his entire talk on stage in a polo shirt, a pair of cargo shorts, and tennis shoes and socks.
00:03:05.000 | So for a guy from Florida, California is very fashion conscious.
00:03:11.000 | Florida is also that way.
00:03:13.000 | I wore tennis shoes while I was out at FinCon most of the time and I was squirming in my boots – my shoes.
00:03:21.000 | I was just very uncomfortable because here where I live in South Florida, it's not like some places.
00:03:26.000 | You don't go to the mall in tennis shoes.
00:03:28.000 | It's just not done.
00:03:29.000 | There's a different standard of dress.
00:03:31.000 | So to see him on stage giving a keynote presentation in his cargo shorts and his polo shirt was great.
00:03:38.000 | But one of his staff members was with him and the staff member was talking about how Clark practices what he preaches.
00:03:45.000 | One way that he does that is they said that last night we had dinner at Costco.
00:03:50.000 | So I figure if it's good enough for Clark Howard, it's good enough for me to eat – to have dinner with my family at Costco when we're out shopping.
00:03:57.000 | So we get our shopping and we're going and it's getting late at this point in time.
00:04:02.000 | Costco closes at 8.30 and we were finishing up our grocery shopping and it was about a quarter to 8, about 8 o'clock, something like that.
00:04:08.000 | As I'm standing in line to order our sausage – they come in a bun, a sausage in a bun with grilled peppers and onions and things.
00:04:20.000 | Very good.
00:04:22.000 | I am observing what's happening with the clerk at the counter, the person taking the orders.
00:04:30.000 | I was watching it.
00:04:31.000 | I always like to watch the systems of businesses that I'm around and see their efficiency.
00:04:36.000 | I always find Costco very interesting because they have a dramatically different working environment than many other stores.
00:04:44.000 | We for a while had been Sam's Club members but we were just utterly frustrated with the customer service.
00:04:50.000 | Even though the Sam's Club worked really well, they had good stuff, the staff was just horrifyingly slow and rude.
00:04:58.000 | Finally, I just said, "That's it."
00:04:59.000 | I went to Costco.
00:05:01.000 | So I like to see and understand how businesses run their management systems.
00:05:05.000 | Costco is interesting to me.
00:05:06.000 | They allow all of their employees to wear whatever clothes they want.
00:05:10.000 | They just wear a name tag.
00:05:12.000 | So there's no uniform.
00:05:14.000 | In today's world, 2016, I think that's probably a good idea for them.
00:05:18.000 | It allows their employees to be more comfortable and to dress the way they'd like to dress.
00:05:22.000 | I don't think people care so much about uniforms the way they did.
00:05:26.000 | Put it this way.
00:05:27.000 | Sam's Club had their members wear – their workers wear uniforms and I left because their service was so bad.
00:05:33.000 | I don't care about the uniform.
00:05:34.000 | I care about the service.
00:05:35.000 | But as I'm watching this person walk, I'm kind of thinking about how Costco makes money and why they have this little restaurant there.
00:05:45.000 | Because their prices are so low that you wonder, "Is this a loss leader?"
00:05:49.000 | Meaning is this something where they actually lose money but it makes people come into the store?
00:05:55.000 | Why do they run this operation?
00:05:58.000 | Loss leaders are certainly good – it's a good idea in some businesses to sell something at a loss if you can make it up on the profit from other items.
00:06:09.000 | But I don't think that's a loss leader.
00:06:12.000 | They might be breaking even but I don't think that it's necessarily a loss leader.
00:06:15.000 | It seems like they probably make money.
00:06:17.000 | The reason I don't think it's a loss leader is I don't know that anybody joins Costco so that they can get the $1.50 hot dog.
00:06:23.000 | It's one of those member perks.
00:06:25.000 | They might run it as just a break-even point because as I understand the warehouse club business model, basically either all or a majority of the profit at a store like Costco is made up on the membership fees.
00:06:42.000 | My understanding is that they basically sell the goods for their cost plus the cost of running the stores, so the cost of the employees and all of that.
00:06:53.000 | And the profit to the corporation comes just simply with the member fees.
00:06:57.000 | So, don't you love shopping with Joshua Sheets?
00:07:01.000 | These are all the things that I think about when I go shopping.
00:07:04.000 | I try to figure out the business model.
00:07:06.000 | So, the clerk behind the counter was doing a perfectly adequate job, nothing impressive but necessarily nothing bad.
00:07:13.000 | She was just adequate.
00:07:14.000 | She was doing an adequate job.
00:07:16.000 | And I thought, "Okay, this is working fine," until a guy is standing behind me, stands in line for about five minutes because there was quite a line.
00:07:31.000 | And then he asks for a pizza.
00:07:36.000 | He wants to take a pizza and he's obviously gotten all of his shopping done and he just wants to buy a pizza.
00:07:41.000 | Now, picture this.
00:07:42.000 | Costco is sometimes bustling and just packed with people.
00:07:45.000 | But even though the line was a little bit – we had to wait for a few minutes.
00:07:49.000 | It wasn't – five minutes might have been an exaggeration, maybe more three, three, four.
00:07:53.000 | I didn't have a stopwatch out.
00:07:55.000 | I try to be accurate.
00:07:57.000 | Five is a little long.
00:07:59.000 | But the store was pretty empty.
00:08:02.000 | And they had about three pizzas arrayed there in the little window and that's where you buy the slice and they sell you a cheap slice of pizza.
00:08:10.000 | And there was another pizza that had just come out of the oven.
00:08:12.000 | And there aren't that many customers standing there in line and it looks like they have lots of pizza sitting there.
00:08:19.000 | So, he asks for a pizza.
00:08:20.000 | Let's take it home with him and eat it home.
00:08:23.000 | And the clerk at the counter says, "No, I'm sorry.
00:08:27.000 | I can't do that.
00:08:28.000 | I have to make one for you."
00:08:31.000 | He says, "We have to have this pizza slices available for the people who are – who might want to buy just a slice."
00:08:39.000 | Remember, the store is getting ready to close.
00:08:42.000 | So, he very reasonably says, "Well, what about – can I have just that one that just came out of the oven and you make another one?"
00:08:46.000 | "No, no.
00:08:47.000 | Sorry.
00:08:48.000 | We've got to have that one as backup."
00:08:50.000 | "Huh?"
00:08:52.000 | Now, I'm certain that there is a protocol.
00:08:56.000 | I'm certain that there is a rule.
00:08:58.000 | There is a rule that says we have to make the order.
00:09:01.000 | So, he asks how long is that going to be.
00:09:03.000 | It's going to be about 10 minutes, 10 or 15 minutes.
00:09:07.000 | And so, he just says, "I can't wait that long," and he walks off and leaves without getting his pizza.
00:09:12.000 | And he takes his business, I'm sure, to somewhere else.
00:09:16.000 | Maybe he orders a pizza later or cooks one from home.
00:09:19.000 | Who knows?
00:09:20.000 | But he didn't sell the pizza.
00:09:22.000 | He didn't buy the pizza there.
00:09:24.000 | And I watched and I just thought, "What a dunder-headed move."
00:09:30.000 | I thought, of course, to myself.
00:09:34.000 | I didn't say anything to the lady that was working there.
00:09:37.000 | I just thought, "Do you not understand the economics of your business?"
00:09:40.000 | You see, you've got three pizzas here and you've got no customers for pizza.
00:09:45.000 | You have very few customers and you're coming up on closing time.
00:09:48.000 | I don't see a long line of 15 people stacked behind.
00:09:51.000 | And if you count the number of slices of pizza that you have sitting here of all varieties,
00:09:55.000 | there's not a reason in the world that you can't give this pizza to the guy who is asking for it.
00:10:02.000 | And that pizza, I think it's about $10.
00:10:05.000 | That pizza could sell for about $10.
00:10:08.000 | And that $10 is basically pure profit because the cost of the materials and actually doing it is relatively low.
00:10:19.000 | It's just the cost of the time of the people doing it.
00:10:22.000 | And that $10 could very well be the necessary amount of revenue to pay for an hour of one of the three people
00:10:30.000 | that were there working at the counter and working in the kitchen.
00:10:34.000 | I'm thinking, "You just sent away a customer who is ready and wanted to give you money?"
00:10:41.000 | And not only did you send them away with their need and their desire unfulfilled,
00:10:46.000 | you sent them away because of a regulation that your department has internally.
00:10:53.000 | And you sent them away with a frown on their face, with a frustrated because the move doesn't make sense.
00:11:00.000 | I'm trying to give you money as a customer to buy something and you're saying, "No,"
00:11:06.000 | because possibly someone else might be a customer in theory, possibly, "I can't give you what you're asking for."
00:11:17.000 | This is a very bad move.
00:11:19.000 | There's an old saying, "A bird in the hand is worth two in the bush," right?
00:11:23.000 | It's a true saying.
00:11:25.000 | It's a very important proverb.
00:11:27.000 | I learned this lesson the hard way when I was a new financial advisor.
00:11:32.000 | One thing that you do in the financial advisory business is you have to get very good at scheduling your time.
00:11:39.000 | It's a very busy business, especially when you are just getting started.
00:11:45.000 | Now, over time, it doesn't become that way.
00:11:48.000 | When you are an established financial planner with a stable of clients that all have a million dollars under your management,
00:11:55.000 | they show up for their meetings generally and it's easy to run a very simple practice and you keep most of your meetings.
00:12:00.000 | But in the beginning, it's not like that.
00:12:03.000 | So in the beginning, the biggest challenge that a new financial person, whether selling life insurance or investments or whatever,
00:12:11.000 | the biggest challenge that you face is managing your calendar and keeping your calendar full.
00:12:16.000 | Because you've got to see so many people in order to find the people that want to work with you,
00:12:21.000 | you learn very quickly how to manage a calendar and you pack a calendar full of appointments.
00:12:28.000 | So the way that I would do it in the morning would be that I would usually start at the office at about 7, 7.30 in the morning.
00:12:33.000 | At least this was the ideal goal.
00:12:35.000 | Sometimes there would be exceptions, of course.
00:12:37.000 | But I would usually start at 7 or 7.30, spend about from 7 to 8.30 doing case preparation, working on client files,
00:12:45.000 | working on suggestions, doing office work.
00:12:47.000 | Then you get on the phone from about 9, 10 in the morning and you set appointments with new referrals, new people that have been referred to you.
00:12:54.000 | You call them and set up more appointments.
00:12:56.000 | Then somewhere around either 10 if you're very efficient in the morning or 11.30, you take your first appointment.
00:13:03.000 | In order to make the calendar work, you line up the appointments on hour and a half slots.
00:13:09.000 | So you would do an appointment at 10 a.m., then at 11.30, then at 1, then at 2.30, then at 4.
00:13:17.000 | Then if you were doing evening appointments, you'd do it at 5.30 and 7.
00:13:20.000 | So this would give you an hour to meet with a client or a prospective client and 30 minutes in between to get to the next appointment.
00:13:26.000 | Well, that gives you a good number of appointments in your slot.
00:13:28.000 | So I would always begin my week with – I used a paper planner and I would put a highlight against all of those marks of those times and you want to fill in those slots.
00:13:39.000 | Now, interestingly, one thing you learn which was scary in the beginning is many people cancel as a new financial rep with life insurance sales, investment sales, things like that.
00:13:51.000 | When you're new, what you find is about 50 percent of your new appointments cancel for various reasons, everything from completely legitimate reasons to just people being rude.
00:14:03.000 | I remember my wife – this was before she was my wife.
00:14:06.000 | She would get so offended that people would cancel appointments with me.
00:14:10.000 | She's like, "Why don't they respect you enough to show up for their appointments?"
00:14:13.000 | I said, "Just relax. It's no problem."
00:14:14.000 | She's like, "They should do it. They should really show up for their appointments."
00:14:17.000 | They could have said no to the appointment if they didn't want to take the appointment.
00:14:21.000 | But they said yes and so because they said yes, they should take it.
00:14:24.000 | I said, "There are reasons. No big deal."
00:14:26.000 | So this is before she was my wife and I was practicing my craft.
00:14:30.000 | She's like, "Well, I'll tell you what. Let's set an appointment. I'll take a financial planning appointment with you."
00:14:33.000 | So she sets an appointment with me.
00:14:35.000 | We set it for the evening and kind of make a show out of it.
00:14:39.000 | That way I could report it to my superiors about my sales numbers and track my points and track all of that.
00:14:46.000 | And so we set the appointment.
00:14:49.000 | The day of the appointment is an evening appointment.
00:14:53.000 | I get a call from her about noon that her grandfather had died that morning.
00:14:57.000 | She had to fly out and go – or was in the hospital.
00:15:02.000 | Excuse me. That's what it was.
00:15:03.000 | She was in the hospital, very sick and was likely going to die.
00:15:06.000 | She had to fly out and she was going to miss our appointment.
00:15:09.000 | So I thoroughly enjoyed the fact that she was the one who stood up most of all for my appointments and my calendar scheduling.
00:15:17.000 | And yet she was the one who wound up canceling an appointment.
00:15:21.000 | But in managing these appointments, you learn the importance of a full calendar.
00:15:24.000 | So what you actually do is in order to keep – make it work, you double book your appointments.
00:15:30.000 | So that means if you go into a day and you've got five appointment slots, again, 10 a.m., 11, 31, 2, 30 and 4 or some variation of that,
00:15:40.000 | then you wind up and you try to put more than five into those slots.
00:15:45.000 | It could be as many as ten.
00:15:46.000 | Although generally it doesn't actually work.
00:15:48.000 | It's hard to make a calendar fit perfectly simply because you're dealing with other people.
00:15:54.000 | But you may go in with seven or eight and these are double booked.
00:15:57.000 | And so then what you do is the night before or the morning of, you call and you confirm all the appointments.
00:16:02.000 | And then usually the people who are going to cancel, when you call to confirm, they go ahead and cancel.
00:16:08.000 | And usually it works out.
00:16:10.000 | Sometimes you wind up with two that are confirming and then you just try to work it out with them
00:16:15.000 | and you either just move them.
00:16:18.000 | So, "Hey, I was going to come by your office at 1. Can I come at 2.30?"
00:16:22.000 | "Yeah, that's fine. No big deal. I'll be here all afternoon."
00:16:24.000 | The vast majority is no problem.
00:16:26.000 | Or if it is a problem, very occasionally you, as the financial guy actually have to – or the sales guy actually have to change the appointment.
00:16:35.000 | And you move on and you say, "OK. Sorry. I can't come today. Tell you what. Let's do it a different day."
00:16:40.000 | And the rule is, of course, when you do that once, you never, ever do it again.
00:16:43.000 | You make a special note. You never do that.
00:16:45.000 | But keeping this calendar can be very stressful because sometimes you're sitting in a meeting and everything is working.
00:16:53.000 | But yet you know, "Hey, I've got another appointment."
00:16:56.000 | And one thing I've always tried very hard to practice is punctuality.
00:17:03.000 | Punctuality is important, especially when you're in a professional capacity and especially when you're working in a professional capacity.
00:17:10.000 | So, you try to be very, very punctual.
00:17:13.000 | But when you're juggling a lot of stuff, it's hard to be punctual.
00:17:19.000 | When you're juggling five appointments and very tight timelines, it's hard to be punctual.
00:17:24.000 | But you might be sitting there and maybe this is Mr. Big or Mrs. Big and they're just telling you everything and they've got problems.
00:17:31.000 | They've got a list 15 items long and yet you know you have another appointment.
00:17:37.000 | But you don't know what the next appointment has.
00:17:40.000 | You don't know what's there.
00:17:42.000 | You don't know, "Am I going to wind up accidentally on the wrong side of town knocking on the front door of a mobile home with a Rottweiler chained to the front porch?"
00:17:51.000 | Here I am in my suit and tie knocking on the front door.
00:17:54.000 | The person greets you at the door with a cigarette hanging out their mouth and a lot of chewing tobacco in their cheek.
00:18:01.000 | And they're not quite such a great insurance risk from a life insurance perspective.
00:18:07.000 | Or, "Is my next appointment going to be over on Palm Beach and all of a sudden I'm going to sit down and there's going to be some $50 million estate planning case?"
00:18:15.000 | Generally, you would know that but you get the point.
00:18:18.000 | So, it's hard to know what's in the next appointment.
00:18:22.000 | And I remember so clearly this one time I was having this appointment and this is a highly qualified A-type prospect where they've got lots of problems, lots of money.
00:18:32.000 | Man, music to a financial guy's ears.
00:18:35.000 | There's lots of money and lots of problems.
00:18:37.000 | Lots of money and lots of problems means lots of sales.
00:18:39.000 | This is great news.
00:18:41.000 | So, you can't – in sales, you got to find both of those things.
00:18:46.000 | There's lots of people with lots of money who don't have any problems.
00:18:49.000 | There's lots of people with lots of problems who don't have any money.
00:18:52.000 | It's really hard to do business with either of those.
00:18:55.000 | But when you find people who have lots of money and lots of problems, now you got somebody that you can help, somebody that you can serve.
00:19:02.000 | So, everything is going great.
00:19:04.000 | But I was new.
00:19:06.000 | I was a novice.
00:19:07.000 | I was a rookie.
00:19:08.000 | So, I say, "I'm sorry.
00:19:10.000 | We're having a great time.
00:19:12.000 | But I'll tell you what.
00:19:13.000 | I need to go on because I got this next appointment.
00:19:15.000 | I don't want to be late."
00:19:17.000 | Because again, I don't want to be late.
00:19:19.000 | Back to pride.
00:19:20.000 | You take pride in how you do things.
00:19:21.000 | I don't want to be late.
00:19:22.000 | So, I got to go.
00:19:23.000 | But I'll tell you what.
00:19:24.000 | I'll come back.
00:19:26.000 | And next time, I'll come back and we'll get this all squared away for you and get you taken care of.
00:19:31.000 | So, I, of course, bustle right out of there and bustle on to my next appointment.
00:19:35.000 | Knock at the door.
00:19:38.000 | Nothing.
00:19:40.000 | And we call that getting porched.
00:19:42.000 | It doesn't happen all that much but it does happen.
00:19:45.000 | Where you show up and the person's not there.
00:19:48.000 | And usually, it's unintentional.
00:19:50.000 | Usually, it's a mistake.
00:19:51.000 | It's a conflict.
00:19:52.000 | But every now and then, it's like, "Ah, whatever.
00:19:54.000 | Forget the sales guy.
00:19:55.000 | I don't care about that.
00:19:56.000 | I don't want life insurance.
00:19:57.000 | I don't want to buy any investments.
00:19:58.000 | It doesn't matter to me."
00:19:59.000 | But you get porched.
00:20:00.000 | And I just sat there just thinking, "What an idiot I was.
00:20:05.000 | Why did I not stay in the meeting and get those things handled?"
00:20:10.000 | And I want to say, although the details at this point are a little questionable, I want
00:20:15.000 | to say that it's one of those cases where it seems great and then all of a sudden, you
00:20:20.000 | can never reach the person again and you never find out what's going on.
00:20:24.000 | Quick tip for those of you who are involved in sales.
00:20:27.000 | First two years of my sales career, I suffered under this impression that it was all about
00:20:33.000 | me.
00:20:35.000 | You reach that you have these appointments.
00:20:37.000 | Sometimes, you can tell in a sales call where it's not really going that well.
00:20:42.000 | They don't like you.
00:20:43.000 | You don't like them and you just kind of agree to go on and part ways.
00:20:47.000 | Sometimes, you get into these calls and you just think everything's going great.
00:20:51.000 | And then all of a sudden, they disappear.
00:20:56.000 | And you call and they don't pick up and you text and they don't respond and you email
00:21:00.000 | and you get nothing.
00:21:02.000 | And you think, "Did I do something wrong?
00:21:04.000 | Did I offend you?
00:21:05.000 | Was I too pushy?
00:21:06.000 | Did you think I was dumb?
00:21:09.000 | What happened?"
00:21:10.000 | And for years, I thought it was about me.
00:21:12.000 | I thought I was making mistakes.
00:21:14.000 | Now, be careful because you might be making mistakes.
00:21:17.000 | You might not see how you are.
00:21:18.000 | You might not see what's going on.
00:21:21.000 | But it might not be about you.
00:21:23.000 | After a little experience, I learned it's usually three things that are happening.
00:21:28.000 | Number one is drugs, especially when you're doing life insurance business.
00:21:33.000 | A person is on drugs and they don't want to tell you about it.
00:21:37.000 | And they know that if they talk about life insurance, even though they need it,
00:21:40.000 | they're doing drugs and they don't want to tell somebody or they don't want it to come out
00:21:43.000 | in the urine sample that they're smoking marijuana or they're doing some kind of hardcore drug.
00:21:48.000 | Number two, it's relationship problems and divorce.
00:21:52.000 | And often, when you're talking about people's finances, they don't open up to you
00:21:57.000 | about their relationships, especially in the early times until they can trust you.
00:22:03.000 | And so you think, "Well, they just disappeared."
00:22:05.000 | Well, what actually happened is they're having tremendous fights with their spouse
00:22:09.000 | and they were headed for divorce.
00:22:10.000 | And of course, if somebody is headed for divorce, all financial planning goes out the window.
00:22:14.000 | You can't plan in any kind of stable way.
00:22:18.000 | Basically, what you wind up doing then is giving counsel to say,
00:22:21.000 | "How can you screw your spouse in the best way possible and get as much money for yourself?"
00:22:25.000 | It's a terrible, terrible area.
00:22:27.000 | Now, I'm not negating the value of good financial planning in that,
00:22:30.000 | but it's a very different type of planning.
00:22:32.000 | It's planning from contention and from conflict instead of from a positive expectation of a shared future.
00:22:40.000 | And then the third thing is it's something financial as far as usually often with a job,
00:22:45.000 | they're losing a job, their business is not doing well.
00:22:48.000 | And often, this is where people are lying to you.
00:22:52.000 | They want to appear successful.
00:22:54.000 | They want you to think they're successful.
00:22:57.000 | And you learn with experience.
00:22:58.000 | You learn to pick this up, the vague generalities of numbers instead of specifics
00:23:02.000 | or the fact that somebody knows their numbers.
00:23:05.000 | How much do you have in savings?
00:23:09.000 | Thirty grand.
00:23:12.000 | Some people who have 30 grand in savings know and some people make the number up
00:23:15.000 | because they've got a minus $300 balance in their checking account.
00:23:18.000 | So you learn over time that it's not about you.
00:23:21.000 | So, pulling the thread back through, I don't remember if I ever worked with them,
00:23:26.000 | but my impressions distinctly because the story I learned at the hard way is I never got the business.
00:23:32.000 | I never got the case because I was going on to the next potential customer
00:23:37.000 | instead of working with the current customer.
00:23:41.000 | And I learned you work with the customer that you have.
00:23:45.000 | Now, who knows if there is a next customer that's going to be bigger?
00:23:49.000 | If you know that somebody is a hot prospect, make sure that you schedule enough time.
00:23:54.000 | Add another half hour to your schedule.
00:23:57.000 | If you know that somebody is a potential Mr. Big, then you make sure that that's your first appointment of the day.
00:24:04.000 | But when you've got a real live customer sitting in front of you,
00:24:09.000 | you do not do something that would damage that customer
00:24:15.000 | because of some other theoretical customer who might come along.
00:24:19.000 | Pay attention to the person that you're with.
00:24:23.000 | And so, as I watch this Costco clerk do this, I'm just aching inside
00:24:31.000 | because I'm like, "You've got a guy who's got money in his hand
00:24:34.000 | wanting to give it to you for a product that's sitting on the counter,
00:24:37.000 | and he can't buy it from you.
00:24:42.000 | You won't sell it to him.
00:24:44.000 | He's got money in his hand.
00:24:45.000 | He wants your product, and you won't sell it to him.
00:24:48.000 | What is wrong with you?"
00:24:51.000 | Well, it's policy.
00:24:54.000 | Now, policy has its place.
00:24:59.000 | There's a reason why we have rules and regulations.
00:25:02.000 | There's a reason why we have standard operating procedures.
00:25:07.000 | But sometimes you need to step aside from the policy
00:25:11.000 | and look at the actual situation.
00:25:17.000 | And an example like this would be a pretty good time to do it.
00:25:21.000 | Remember the facts that I've described.
00:25:23.000 | You have three pizzas with maybe one or two slices missing total
00:25:28.000 | sitting right there under the heat lamp ready to go.
00:25:31.000 | You have a fresh hot pizza that just came out of the oven
00:25:35.000 | that you could just toss into a box and give to this guy.
00:25:44.000 | You have enough pizza to meet other prospective customers,
00:25:49.000 | but if you would just look around,
00:25:51.000 | you recognize there aren't that many prospective customers.
00:25:53.000 | Remember, it's just before 8 o'clock.
00:25:55.000 | The store is getting empty.
00:25:57.000 | The line is short.
00:25:59.000 | There's nobody in line behind the guy,
00:26:01.000 | but not even everybody who's in line is in line for pizza.
00:26:04.000 | So you don't have to worry about this imaginary customer that might come in.
00:26:08.000 | And I'm pretty confident that what wound up happening is
00:26:12.000 | either those pizzas at the end were sent home with the employees if they do that,
00:26:15.000 | if they allow that, or the pizzas were tossed into the garbage.
00:26:20.000 | And Costco lost out on that $10 sale.
00:26:29.000 | Now why is this so important?
00:26:31.000 | It's not about the $10.
00:26:33.000 | Well, the $10 matters.
00:26:34.000 | I'll come back to that in just a moment.
00:26:36.000 | It's about the fact that you're not thinking about your business and your job
00:26:40.000 | from the perspective of the business owner and their interests.
00:26:47.000 | It's like the kind of thing where you walk up to a store and it's 4.55
00:26:52.000 | and you walk in the front door
00:26:54.000 | and the first thing the employees say to you is, "We're closing."
00:27:00.000 | You're not going to hear an owner say that.
00:27:02.000 | If somebody owns a retail store and they manage it themselves,
00:27:06.000 | you don't hear them just simply call out to you without a question, "We're closing."
00:27:12.000 | You at least hear them ask you a question
00:27:14.000 | or you at least hear them offer you an opportunity of service.
00:27:19.000 | Here would be an example.
00:27:21.000 | See if you can tell which of these is the employee and which of them is the owner.
00:27:26.000 | It's five minutes before 5 o'clock.
00:27:28.000 | The store closes at 5 o'clock.
00:27:30.000 | Walk in the front door.
00:27:32.000 | "Oh, hey. Welcome to our store.
00:27:34.000 | What are you looking for today?"
00:27:37.000 | Blah, blah, blah, blah, blah.
00:27:38.000 | "Okay, we're closing in about five minutes, but I'll tell you what.
00:27:40.000 | If you're willing, I can either help you with that pretty quickly.
00:27:43.000 | We've got three options for you, option one, option two, and option three.
00:27:45.000 | They're right over here.
00:27:46.000 | I can get you in and out in just a couple of minutes.
00:27:48.000 | Or if you'd like more time, my sales staff is gone for the day
00:27:51.000 | and you're welcome to come back.
00:27:53.000 | We open at 9 a.m. tomorrow morning."
00:27:55.000 | "Oh, I just need something quickly."
00:27:56.000 | "Okay, great.
00:27:57.000 | One, two, or three. Which do you want?"
00:28:01.000 | "Option two."
00:28:03.000 | Walk in the door.
00:28:04.000 | "We're closing. Sorry. Come back at 9 a.m. tomorrow."
00:28:07.000 | "Oh, but I just want-- Sorry, we're closing. I've got to go."
00:28:15.000 | Now, it should be fairly obvious which of those is the employee
00:28:17.000 | and which of those is the owner.
00:28:19.000 | Now, the point is not that sometimes you need to go.
00:28:21.000 | Sometimes you've got an appointment scheduled and you've got a court hearing at 5.15.
00:28:26.000 | You've got to leave at 5 o'clock.
00:28:28.000 | There are always exceptions.
00:28:29.000 | Sometimes you need to follow the standard operating procedures.
00:28:32.000 | I wouldn't necessarily recommend that if you've got a line of 20 people deep
00:28:36.000 | and you have two pieces of pizza in the rack and you've got one pie that just came out
00:28:40.000 | and is going to be cut up that you allow the person to take that one pie
00:28:44.000 | because now all of a sudden you might have four customers walk away
00:28:47.000 | because they just wanted the pizza and now you lost four sales.
00:28:51.000 | But there's a way of doing it that maintains the interest of the company
00:28:58.000 | and maintains the goal which is to sell product.
00:29:02.000 | The reason this is so important is because those sales,
00:29:05.000 | those little sales at the end of the day,
00:29:08.000 | those little sales might very well make up the difference between profit and loss.
00:29:14.000 | Many businesses are run on very tight margins,
00:29:17.000 | especially businesses like retail businesses.
00:29:20.000 | And you need every sale to make any decent profit.
00:29:27.000 | Rule of economics, all change occurs at the margin.
00:29:30.000 | You see that everywhere.
00:29:32.000 | You see it in the natural world.
00:29:34.000 | All productivity is in the edge, permaculture principle.
00:29:36.000 | All productivity is at the edge.
00:29:37.000 | The most productive parts of your environment will always be the edge.
00:29:41.000 | The grass that grows at the edge between the trees and the field will grow the best.
00:29:45.000 | That's where your productivity comes.
00:29:47.000 | Your productivity in your own life will always occur at the edge or at the margin.
00:29:51.000 | All the benefits, remember, we do tax planning, is at the margin.
00:29:53.000 | All change is at the margin.
00:29:56.000 | So that little sale adds up over time cumulatively to a huge amount.
00:30:03.000 | And if you as an employee will simply slow down
00:30:07.000 | and put on your entrepreneurial glasses and think about it,
00:30:11.000 | you'll start to see how important that is,
00:30:16.000 | how important those little decisions are, those little sales.
00:30:21.000 | As an employee, you have one basic job,
00:30:26.000 | and that's to make your company and the owners of your company
00:30:30.000 | more money in profit, in revenue and profit, than you cost them.
00:30:37.000 | That's why you have a job.
00:30:44.000 | If you are costing your company or your employee more than you're making for them,
00:30:49.000 | you will quickly be out of a job.
00:30:52.000 | So you'd better look at your job and look at your occupation
00:30:56.000 | and try to see, "Am I actually productive?
00:31:02.000 | Am I actually making money?
00:31:05.000 | Is there something that I can actually do to help my company make more money?"
00:31:13.000 | You don't look to your boss and say, "Hey, give me more money."
00:31:19.000 | You look to your job and you say, "How can I make my boss more money?"
00:31:27.000 | You don't demand higher wages.
00:31:30.000 | You produce higher profit.
00:31:33.000 | And you can do this at every level on just about any job.
00:31:43.000 | The things you can do to increase profit change based upon what job you're doing
00:31:49.000 | and based upon what the company is, based upon what the industry is.
00:31:52.000 | But there are things that you can do to increase the profit of your company.
00:31:58.000 | And if you will consistently increase the profit of your company,
00:32:01.000 | you will consistently increase your wages.
00:32:08.000 | So I want to be practical and give you some specific ideas.
00:32:12.000 | And then I'll apply this to the young lady working at the Costco selling pizza.
00:32:17.000 | Apply this to somebody doing retail sales.
00:32:20.000 | And you can think about your own particular examples
00:32:27.000 | of how you can apply some of these principles in your own particular scenario.
00:32:34.000 | So there are a number of areas that if you're trying to increase profit in a business
00:32:39.000 | that you can look at.
00:32:41.000 | The initial stage, the very first thing that happens in a business
00:32:46.000 | is they need to attract a prospective customer.
00:32:52.000 | That's called lead generation.
00:32:54.000 | They need to attract a prospective customer.
00:32:58.000 | And so if you can look as a business owner, you look at your business and say,
00:33:01.000 | "How am I generating leads?"
00:33:05.000 | And if you can optimize that and improve that in some way,
00:33:08.000 | then to get more people in the door,
00:33:12.000 | you'll be able to over time increase your profits.
00:33:17.000 | Now for this lady working at Costco,
00:33:20.000 | it's hard for me to imagine any way that she can necessarily get people from the road out front
00:33:25.000 | into the front door of the Costco.
00:33:27.000 | That would be beyond the purview of her job.
00:33:31.000 | But in many businesses, especially retail businesses,
00:33:35.000 | somebody who's behind a counter can influence this.
00:33:40.000 | Simple example, what do you see people doing when they're selling a retail product
00:33:44.000 | and they want to get more customers to come into their store?
00:33:48.000 | You send somebody out with samples of your product
00:33:52.000 | to try to entice people to come into your store.
00:33:55.000 | And this works very, very effectively.
00:33:58.000 | So if you're in retail sales and you're in a position where you can do something like that,
00:34:03.000 | where, again, you don't have a long line, maybe the store is empty,
00:34:07.000 | do something, try to come up with some idea that will help to get people to come in.
00:34:13.000 | This can be as simple as you take your product, put it in little sample cups,
00:34:16.000 | and go out to the passersby, wherever the pedestrians are coming past,
00:34:20.000 | and try to offer them your product.
00:34:22.000 | This could be a matter of you're looking at the front of your store,
00:34:25.000 | and while there are no customers there, you're looking around and saying,
00:34:28.000 | "How can I spiff this place up a little bit?
00:34:30.000 | Maybe we could do something with the window display.
00:34:32.000 | Is there something that we could do that would make our store more attractive?
00:34:35.000 | Do we need to go ahead and replace the burnt-out light bulb
00:34:38.000 | so that the store looks less dingy and looks brighter and more people will want to come?"
00:34:42.000 | So, look around and ask yourself if there's something that you can do
00:34:47.000 | that might have the possibility of helping people to come into your place of business.
00:34:55.000 | This is applicable to every type of business.
00:34:58.000 | I'm just focusing today on simple retail frontline employees.
00:35:04.000 | But it's no different in a web business.
00:35:06.000 | It's no different if you run a podcast.
00:35:08.000 | It's a matter of lead generation.
00:35:10.000 | That's why I bring in interested prospects.
00:35:14.000 | The next step in the sales process is lead conversion,
00:35:18.000 | which is simply how many of your prospective customers become paying customers.
00:35:25.000 | How effective are you? What ratio is that?
00:35:28.000 | If you have 10 people walk into your store,
00:35:31.000 | do five of them buy something and five of them browse,
00:35:34.000 | or do eight of them buy something and eight of them browse?
00:35:39.000 | There's a tremendous amount of work that you can do to improve the ratio here of this conversion.
00:35:49.000 | For this frontline Costco employee, there are not that many.
00:35:55.000 | When people line up, they're generally going to buy something.
00:36:00.000 | But one major way you can do this is by keeping the line moving quickly.
00:36:09.000 | We'll come to that in a moment when we get to the number of transactions.
00:36:11.000 | But things like having a recommendation ready.
00:36:14.000 | One thing that often bothers me is when salespeople don't have a recommendation ready.
00:36:19.000 | I personally don't like making insignificant choices.
00:36:23.000 | This really annoys some people and some people like it when it comes to food.
00:36:28.000 | I'm generally pretty happy to eat just about anything.
00:36:32.000 | I don't care so much. I don't like to actually sit down and make choices.
00:36:35.000 | I get so tired of making choices. I would much rather just be served.
00:36:39.000 | I'm happy to eat what's set before me and I can hardly think of anything that I don't like.
00:36:45.000 | Now, if given the choice between oysters and spaghetti, I'll choose the spaghetti.
00:36:52.000 | But if you're serving oysters, okay, I'm happy to eat them and maybe I'll learn to like them.
00:36:57.000 | So simple things like having recommendations ready can make a big difference in a retail environment.
00:37:03.000 | You have those customers where they come up and I've done this many times and I see other people do it.
00:37:07.000 | They come up and they're looking at the menu board.
00:37:09.000 | Usually, this is when there's not a long line because they passed other people through in the line.
00:37:13.000 | They're like, "What do you think? How was the blah, blah, blah?"
00:37:16.000 | "Well, actually, it's really, really good."
00:37:18.000 | And what I also recommend is in addition to the blah, blah, blah,
00:37:21.000 | you pair it with this other thing that goes really well as a dessert.
00:37:25.000 | You know what? That sounds good.
00:37:27.000 | Even in a simple retail sale, you can convert a higher number of prospects into paying customers.
00:37:40.000 | Now, for the young lady at Costco, those two are possible but they're not the key areas.
00:37:46.000 | Number three is the number of transactions.
00:37:51.000 | Meaning how many transactions do you actually make?
00:37:57.000 | How many things do you sell?
00:37:59.000 | And you can look at this both for each customer, how many transactions do you have with each customer,
00:38:06.000 | and how many transactions do you have per hour?
00:38:10.000 | So for the Costco employees, something like how many transactions per hour would be the best thing to look at.
00:38:15.000 | Meaning how quick can I be? How quickly and efficiently can I serve these customers?
00:38:21.000 | Because in a retail environment like a Costco food stand, the length of the line matters.
00:38:28.000 | And if you can keep the length of the line low, you'll have more people that will go ahead and order something.
00:38:34.000 | Costco at the Costco food line, they make these really delicious berry sundaes and they're like a couple of bucks.
00:38:40.000 | They're just delicious. Lots of yogurt, lots of berry, just super yummy stuff.
00:38:45.000 | And I watch people buy these all the time and they're completely an impulse purchase.
00:38:50.000 | The people are just getting their groceries.
00:38:52.000 | You know what, those things are really good and they're really cheap.
00:38:56.000 | I really would like to get a sundae but I don't want to stand in that long line.
00:39:00.000 | So if as a retail clerk you can work to keep people moving through your line quickly,
00:39:08.000 | you can make a substantial difference in the number of transactions that you can process per hour.
00:39:13.000 | So what can you do? Well, when you are empty, make sure you understand your cash register.
00:39:17.000 | Make sure you understand your order entry system.
00:39:19.000 | Make sure you're quick on your feet and with your hands when you're getting orders done.
00:39:24.000 | Work with the kitchen crew to make sure that the systems that you have are the most efficient systems that you can possibly see and do.
00:39:31.000 | Move quickly. Physically move quickly.
00:39:35.000 | When you're filling an order, do it quickly and efficiently.
00:39:39.000 | It's a big deal.
00:39:42.000 | And it doesn't seem like much but let's say that you need eight transactions.
00:39:50.000 | So let's say that you're in your business.
00:39:54.000 | You average ten transactions per hour.
00:39:58.000 | Now the thing you need to recognize as an employee about a business owner is they have a set cost.
00:40:03.000 | They have to pay for the cost of the facility in which you're working.
00:40:06.000 | They have to pay for your set cost, your hourly wage plus the tax base plus the cost of your benefits.
00:40:12.000 | They have to pay for all of the costs of the food and the things that are being done and everyone else.
00:40:17.000 | They have a set cost.
00:40:19.000 | And let's say that in your business, your business owner requires eight transactions per hour to cover their cost.
00:40:28.000 | That means that they make two transactions per hour of profit.
00:40:34.000 | Now imagine this.
00:40:36.000 | You generally do ten transactions per hour but eight transactions per hour is what pays the cost.
00:40:41.000 | It's what pays your salary and what pays all of those expenses.
00:40:46.000 | But you can just simply go from ten transactions per hour to twelve transactions per hour.
00:40:53.000 | Because of your skill and efficiency with running the machine, with knowing what's being done, with moving quickly,
00:40:59.000 | with organizing the team and motivating the team to move quickly, that seems like a small difference to you.
00:41:06.000 | After all, you only went from ten transactions per hour to twelve transactions per hour.
00:41:10.000 | That's a 20% difference.
00:41:12.000 | But to the business owner, you just doubled their profit.
00:41:19.000 | Remember, only two transactions per hour represent profit.
00:41:24.000 | And you went from two transactions per hour to four transactions per hour of profit.
00:41:30.000 | And because the majority of the expenses in that sale are already covered, your hourly salary doesn't change,
00:41:39.000 | the cost of the rent doesn't change, the cost of electricity doesn't change.
00:41:42.000 | You only have a tiny amount of cost for a little bit of flour and a little bit of pizza sauce to put on the product that you're selling.
00:41:49.000 | So you basically just doubled the profit.
00:41:53.000 | Do you think that if I, as an employee, walk into your business, you being the employer, the business owner,
00:42:03.000 | and I start working at the front line and I'm just simply having a job taking orders at the front line
00:42:11.000 | and selling pizza and selling berry sundaes at the Costco.
00:42:15.000 | Now remember, you've got years of data and you're a business owner, so of course you look and you look down at your profit margins.
00:42:22.000 | You have all the transactions. You can look at the transactions in the cafe and you can figure it out.
00:42:26.000 | Your CFO goes through and runs the ratios and you get a monthly report.
00:42:32.000 | And you hire me on October 1st and all of a sudden, each month, the profit from your cafe starts increasing.
00:42:46.000 | And you're looking around and you're saying, "What's going on?"
00:42:49.000 | And you see all of a sudden Joshua, well Joshua when he stands there, he moves quickly.
00:42:54.000 | Joshua, man, he is fast on that cash register.
00:42:57.000 | Man, Joshua processes people through quickly.
00:42:59.000 | Man, Joshua encourages the kitchen crew and says, "Keep it up guys. We can do it. I know it's late, but let's go.
00:43:04.000 | We've got to serve our customers."
00:43:06.000 | Hey, Joshua goes out there with a tray of samples.
00:43:08.000 | Joshua fixes the sign or whatever it is in your business.
00:43:12.000 | Do you think that you as a business owner aren't going to notice me?
00:43:17.000 | And all of a sudden say, "I wonder what Joshua could do in another part of my store."
00:43:23.000 | And guess what? This is a very simple formula.
00:43:27.000 | There's nothing magical about this.
00:43:29.000 | I'm just pulling out the essence of the business and you identify the sources of profit.
00:43:34.000 | And you start tweaking things little by little.
00:43:42.000 | But hopefully you can see how the speed at which you move and the speed at which you take orders
00:43:47.000 | and the speed at which you enter those orders in and the speed at which you swipe the credit cards
00:43:50.000 | and the speed at which you just simply do your job can make to a business owner a huge difference.
00:43:58.000 | You don't think it makes a difference because it's only a 20% increase.
00:44:02.000 | But if you understand the numbers, to your business owner, you doubled the profit.
00:44:07.000 | Now, if all of a sudden you as a business owner have doubled the profit,
00:44:11.000 | do you think you might be feeling a little bit better about doing a profit-sharing plan in your business?
00:44:19.000 | After all, Hillary Clinton wants to take a percentage of your profit and force you as the business owner to give it to me.
00:44:26.000 | But I'll tell you what, I've never met a business owner who's making lots of profit
00:44:30.000 | who when he looks down and sees employees that are doing really well,
00:44:33.000 | doesn't just want to say, "Hey, you guys are doing great. Let me give you some of the profit."
00:44:37.000 | A worker is worthy of his wages.
00:44:44.000 | Now, you can't expect in an enterprise like Costco that your little by little increasing your speed of your transactions by 20%
00:44:59.000 | is going to double the profit of the entire enterprise.
00:45:03.000 | You are a very small cog in a very huge machine.
00:45:08.000 | But people will notice because your supervisor has to do financial reporting.
00:45:20.000 | And your supervisor has a profit margin. They have a budget.
00:45:25.000 | And your supervisor is only managing, say, 15 people.
00:45:29.000 | And although you're only there 30 hours a week, your supervisor will notice which are the most productive hours.
00:45:37.000 | And your supervisor will talk to their supervisor.
00:45:41.000 | And that's probably about as high up as it'll go.
00:45:44.000 | But if you make a habit of this and you apply this habit over time,
00:45:50.000 | you'll be able to make a tremendous difference over time.
00:45:54.000 | And that work will grow and your career will grow exponentially.
00:46:01.000 | Let me just give you a couple of other things.
00:46:04.000 | So we talked about the number of transactions.
00:46:07.000 | That would be the number of transactions, number of sales do you make coming in.
00:46:13.000 | The other thing to consider would be the size of transaction.
00:46:16.000 | And so here would be the size of transaction.
00:46:18.000 | You can think of this as the actual dollar amount that somebody has purchased
00:46:24.000 | or the actual number of transactions that you make per person depending on where you want to categorize these.
00:46:30.000 | You want to think about the transactions per hour, which is what I just focused on.
00:46:33.000 | You want to look at the transactions per person.
00:46:35.000 | So let me give you a couple of examples.
00:46:39.000 | First, let's talk about how you can actually increase the amount of the order.
00:46:42.000 | Now, we all are familiar with the idea and the concept of upsizing.
00:46:47.000 | After all, the classic would you like fries with that, this is a technique of upsizing.
00:46:53.000 | And all good sales funnels, all good sales flows should upsize the order.
00:47:00.000 | You should always have an opportunity to buy more.
00:47:02.000 | Now, not everybody will buy more.
00:47:04.000 | But they should have the opportunity to buy more.
00:47:08.000 | And so there are some very simple ways that you can apply this as a front-line retail clerk at a Costco.
00:47:17.000 | Simple thing, somebody walks up to your counter and they're going to buy the hot dog.
00:47:21.000 | It's $1.50.
00:47:23.000 | And you know you've got that Italian sausage roll with peppers and onions.
00:47:27.000 | I think it's $2.75.
00:47:29.000 | And you know the Italian sausage roll is delicious.
00:47:32.000 | So I walk up as a customer and I say, "I think I'm going to get a hot dog."
00:47:36.000 | I'm looking at that Italian sausage roll and you say, "Man, that thing is really good.
00:47:41.000 | It's got peppers and onions. It's a really high-quality Italian sausage.
00:47:43.000 | I think you really would like it."
00:47:46.000 | Now, here's what's interesting.
00:47:48.000 | At Costco, the hot dog is a combo meal.
00:47:52.000 | You get the hot dog and a drink for $1.50.
00:47:55.000 | There's a little bit of profit in that for the company but not much.
00:47:59.000 | But the Italian sausage is like $2.75 and there's no drink with it.
00:48:07.000 | At least I don't think there was. I was looking at the menu board last night.
00:48:10.000 | And many people want to have a drink with that.
00:48:13.000 | So if you can offer somebody who's asking, somebody just says, "I want a hot dog," great.
00:48:18.000 | That's why the signage should look good. The signage should look attractive.
00:48:21.000 | You can look at the hot dog and see the sausage and they say, "Actually, I want to go ahead and have the sausage."
00:48:27.000 | And let me just insert a little sales tip.
00:48:30.000 | People like to laugh about when they kind of have these big, big upsizes.
00:48:38.000 | But I heard a statistic years ago when I was in the marketing business.
00:48:41.000 | And I worked with – I was a junior analyst on a project with a very large fast food company,
00:48:49.000 | one of the very large major mainstream top companies in the United States and all over the world for fast food, hamburgers, etc., hamburgers and fries.
00:49:06.000 | And on their menu board, they had a – they sold a hamburger which I think it was the quadruple – it was like a quadruple hamburger with four hamburger patties.
00:49:22.000 | And you say, "That's ridiculous. You've got two inches thick of hamburger meat."
00:49:28.000 | You say, "Why on earth would they have a single hamburger, a double hamburger, a triple hamburger, and a quadruple hamburger?"
00:49:35.000 | The reason has to do with framing.
00:49:38.000 | When you look at any decision choice, the framing of the decision will make a big difference to you.
00:49:45.000 | And pay attention to this for yourself as a consumer and purchaser of products and services.
00:49:51.000 | Pay attention to this as yourself for – as a decision maker in any area of decision or in considering any logical argument or anything you have to make.
00:50:01.000 | And pay attention to this for yourself as a business owner because a lot of times, adjusting the framing can lead to a much bigger opportunity for you.
00:50:10.000 | So let me give you the hamburger example and talk about some of the other areas.
00:50:14.000 | What I learned was that previously, this company had only had the single, double, and triple on their menu.
00:50:20.000 | And I think the average sale of the triple, which was a very high profit margin hamburger, is expensive because of the triple patty.
00:50:27.000 | But they would sell something like three or four or five or six or seven a day.
00:50:31.000 | And most people would buy the doubles.
00:50:35.000 | They sold hundreds of doubles per day.
00:50:37.000 | But when they added the quadruple, the four meat patties, to their menu board, the sales of the triple went from a few to dozens.
00:50:50.000 | And they only sold about three or four or five a day of the quadruple.
00:50:55.000 | But the sales of the triple went from a few to dozens.
00:51:02.000 | And again, in the aggregate, that makes a big difference in profits.
00:51:09.000 | And when you have the quadruple and the triple on there, the double is not going to seem so big.
00:51:14.000 | And so it's going to move people from the single up to the double.
00:51:17.000 | Now think about another couple of examples for you when you look around.
00:51:24.000 | Think about if you're going to buy a car.
00:51:26.000 | And if you're going out and you're choosing to look at used cars that are a few thousand dollars, your framing is very, very tight, very, very narrow.
00:51:36.000 | But if all of a sudden you go to the new car dealership, that changes your frame and now your frame increases.
00:51:46.000 | And the car that looked pretty good as a used car doesn't look so good compared to the new one.
00:51:52.000 | And it's even worse because if you start opening your frame up and now you were going out and you were going to buy a $5,000 car, but you went to the new car dealership and you recognized you could buy a brand new Honda or Toyota or Ford or Chevy for $24,000.
00:52:06.000 | Well, when you were looking at the $5,000 car, the $24,000 seemed really expensive.
00:52:12.000 | But if just for fun you say, "Let me trot down to the Lexus dealership or let me just go look at the Mercedes," or whatever the high-dollar version is.
00:52:20.000 | Now, all of a sudden you're looking at $60,000 cars, but now that $24,000 car doesn't look so expensive.
00:52:28.000 | And there are many, many people who wind up going to the $24,000 car that started originally looking at the $5,000 cars.
00:52:40.000 | So whenever you're making a decision, think about the frame of reference that you have and make sure that you've intentionally built that frame of reference around the criteria that you actually care about.
00:52:50.000 | Let's talk about politics.
00:52:52.000 | Right now, as I record this, it's September 30, 2016.
00:52:56.000 | We are in the middle of one of the most – one of the wackiest presidential elections in the history of the United States of America.
00:53:04.000 | And you have two horrifyingly terrible political candidates.
00:53:10.000 | So you ask, "How do we wind up with two horrifyingly terrible political candidates?"
00:53:16.000 | I don't have the full answer to that question.
00:53:18.000 | But I will say this.
00:53:20.000 | The framing of these candidates is making a tremendous difference on the other candidates.
00:53:26.000 | There are a whole lot of people who are very shortly going to be checking the box for Hillary Rodham Clinton who generally despise her except for the fact that she's running against Donald Trump, who is horrifying.
00:53:48.000 | And there are a whole lot of people who within a few months are going to be checking the box for Donald J. Trump who would generally oppose just about everything he stands for except for the fact that he's framed against Hillary Clinton.
00:54:08.000 | And there are actually a bunch of people who are going to make the same decision for Gary Johnson and Jill Stein and many dozens of other candidates who would generally never vote for those candidates except the frame of reference is so terrible.
00:54:26.000 | So this applies everywhere and it applies at all times and you should look at your business because for a Costco clerk, what this means is you got to make sure – now, this is done on a corporate level.
00:54:36.000 | But in anything, it means you make sure that you have multiple options displayed and you make sure that your display signage looks great.
00:54:43.000 | So when you have a hot dog available for $1.50 and you have a sausage – I guess I call it a sausage dog available for $2.75, make sure that picture looks good and make sure there's a sausage dog on there.
00:54:53.000 | Because last night for dinner, I bought a sausage dog instead of a hot dog because I thought, "Well, I mean it's a hot dog. I mean it's a good deal. But I don't – I mean I'm not that broke. I don't need to buy a $1.50 hot dog.
00:55:10.000 | And besides, I'm 31 years old and hot dogs are for kids and I'll just buy the sausage dog. It will be better anyway." I don't – I really like hot dogs. I think they're really good.
00:55:20.000 | But I like sausage too so I'll go ahead and do that. And they made an extra dollar of profit from me because of that frame.
00:55:27.000 | So look for the size of the transaction. And the point is that when you have that kind of frame and you recognize that the hot dog was a combo but the sausage dog didn't have the drink with it, then there will be a lot of people who will go ahead and buy the soda.
00:55:44.000 | People who drink soda will often drink soda at many opportunities and they'll buy the soda, which soda is pure profit.
00:55:50.000 | Drinks in restaurants and in food service, drinks are generally a major component of the profit margin, especially alcoholic drinks or any kind of drink.
00:56:02.000 | Coffee for breakfast diners, coffee is the margin – is the profit margin. Soda is the profit margin.
00:56:08.000 | Now, one final tip and idea on size of transaction is that upsell. That upsell can look like the hot dog to the sausage.
00:56:22.000 | But the upsell can also look like the extra thing with it. And without being the least bit cheesy or offensive, if you just pay attention to people, you can often upsell them into the dessert.
00:56:39.000 | Those Costco berry sundaes are super yummy. And they're super yummy because it's not just ice cream, because they put that fruit in there.
00:56:48.000 | Now, I can't stand it. When I go and buy one of those sundaes, I want to have a lot of fruit. And I can't stand it when people are parsimonious with the fruit.
00:56:59.000 | It's like, "Oh, let me just – I got to put one scoop in." Even if you can only allow to put one scoop in, here's my suggestion to please your customers.
00:57:06.000 | Put it in a half a scoop at a time. Put in the half a scoop and then the half a scoop and they'll feel better about it.
00:57:12.000 | Even if they know you're only putting one scoop in, they'll feel better about the fact that you're putting the two scoops in.
00:57:19.000 | It's like when you go and order an alcoholic drink in a bar and you order a mixed drink. I don't know about you.
00:57:25.000 | But if you go and order – I assume you agree with me. But if you go and order a mixed drink and they use the jigger where they pour the alcohol into the jigger and they precisely measure it,
00:57:34.000 | I know you got to measure it to get the drink formula right. But man, don't you feel a little bit gypped if they don't just splash the little extra across the top?
00:57:44.000 | I mean you're paying $11 for a drink and a little extra shot of rum on the top is going to make you feel better.
00:57:52.000 | So make your customers feel better because I'll tell you what, I'm sure the bartenders know this, but if you just use the jigger –
00:58:05.000 | second drink, how they measure the drinks. I'll go next door where they put a little extra shot.
00:58:11.000 | So there are all kinds of little things. The lady last night, she could have sold me the Berry Sundaes.
00:58:19.000 | And she should have sold them to me at the time of the original sale before I had eaten.
00:58:26.000 | So I ordered for my whole family. My wife, her favorite thing is ice cream.
00:58:30.000 | And unfortunately, although my body retains ice cream, I really enjoy it as well.
00:58:35.000 | So those Berry Sundaes are really – I mean they're super yummy.
00:58:41.000 | And I thought about getting them. And of course if I get them, I got to get two because we got to split them with my son.
00:58:48.000 | A little bit for him and then for my wife and for me. And my daughter is not yet eating ice cream.
00:58:53.000 | But so there's two. And you're hungry when you order. And I'm thinking there, "Well, the Berry Sundae, it looks good but I'm not going to do it."
00:59:03.000 | If she had asked me if I wanted one, I would have said, "I'm not so sure. I might."
00:59:10.000 | And here's how she could have sold me one. A little twinkle in her eye, said, "I'll put extra fruit in for you."
00:59:17.000 | I mean I'm a sucker for a little bit of extra fruit. I'm a sucker for an ice cream that's got a little extra.
00:59:26.000 | I'm a sucker for breaking the rules.
00:59:28.000 | If somebody tells me, "Joshua, hey, listen, I'll make it – I'll treat you right."
00:59:33.000 | And there's that twinkle in their eye, a little smile from the corner of their mouth.
00:59:37.000 | And if I feel like I'm getting a deal, I'll plunk down my cash in an instant.
00:59:44.000 | Now I'd love to pretend that's not the case. I'd love to pretend that I'm Mr. Rational and I can just sit back and not –
00:59:52.000 | I coldly calculate the caloric deficit that I'm in for the day and I have hereby calculated that my caloric deficit is now gone.
01:00:01.000 | So I can't afford the 452 calories from the ice cream.
01:00:05.000 | But come on, that's not me and that's not you either.
01:00:08.000 | We like to think we're getting a deal. We like to be sold.
01:00:13.000 | She could have turned my transaction last night into a $20 transaction instead of the $10.50.
01:00:23.000 | Now the signs turned it from a $6 transaction into an $11 transaction.
01:00:32.000 | I didn't need anything more than hot dogs all around.
01:00:37.000 | It would have been a $1.50 each times four, six bucks plus soda.
01:00:43.000 | I would have skipped the soda. I mean I skipped the soda anyway and filled it up with water. I don't care about the soda.
01:00:47.000 | But the sign for the sausage dog upsold me on the sausage.
01:00:52.000 | And the sign for the provolone turkey sandwich upsold my wife on the provolone turkey sandwich.
01:01:00.000 | And the lady at the counter could have upsold me into the ice cream and I would have been very happy to have it.
01:01:10.000 | Now she didn't. I just told you how she could have.
01:01:14.000 | A little twinkle, "Hey, you want some berry sundae? We're going to be cleaning out the machine soon. Super delicious. I'll put extra fruit for you."
01:01:21.000 | I would have bought in an instant.
01:01:26.000 | But because she never offered, I was on the fence. I was thinking about it, looking at the sign while I'm standing in line.
01:01:31.000 | And I thought, "Tell you what. I'll eat my food first and then when I'm done with my food, if I still want ice cream, I'll come back and get it."
01:01:38.000 | Well, that was dumb on their part because I ate my food. I was full.
01:01:42.000 | I didn't want to go back up and stand in line again for ice cream even though I don't even think there was a line.
01:01:48.000 | But I was full.
01:01:50.000 | Plus, the kids need to get home, etc. It's past the bedtime. Okay, we're just going to go.
01:01:56.000 | Now, those are some ways that they could have increased the size of transaction.
01:02:04.000 | Now, there are other areas of business and I'm just going to quickly mention a few for those of you who are taking notes.
01:02:11.000 | The profit margin per sale, anything you can do to increase the margin of profit for each sale is a big difference.
01:02:19.000 | I've already explained that slightly in the context of if you do 10 units per hour, one thing you can do is that increases the margin.
01:02:26.000 | But look for a way that you can sell more at a lower margin.
01:02:30.000 | The cost of customer acquisition, anything you can do to decrease the cost of customer acquisition, that's helpful.
01:02:36.000 | Increasing customer referrals, I've just told you all about the Vanilla Sunday, the Berry Sunday, that's increasing customer referrals.
01:02:45.000 | The next time that you're at Costco or if you're thinking about joining Costco, you'll be there.
01:02:50.000 | And the fact that they actually do it and it's good and it's big and it's lots because everything at Costco is big and it's lots.
01:02:56.000 | Some of you will go and buy Sundays because of that.
01:02:59.000 | Eliminating costly services and activities is important.
01:03:03.000 | Reducing your break-even point and raising your prices, these are all things that you can do to address your profit.
01:03:08.000 | Now, I hope you've enjoyed these examples.
01:03:13.000 | A frontline employee cannot change all these things.
01:03:17.000 | You cannot necessarily as a Costco clerk taking an order for Berry Sundays and hot dogs reduce the break-even point of the Costco organization.
01:03:27.000 | But you can start thinking like a business owner and start thinking about ways to increase the profitability of your employer.
01:03:38.000 | And you will go very far in that organization.
01:03:44.000 | Remember, you have one job and that is to make your company more money than you cost them.
01:03:58.000 | So today, look around your company, look around your business and try to figure out how does my company work, how does my business work.
01:04:10.000 | What are the areas of leverage and influence that I can work on in my company and in my business?
01:04:17.000 | Try to think of ways to make them more efficient in order to increase the profit for your company.
01:04:26.000 | And I guarantee you, with that attitude and with results, you will go far in your company, you will go far in your career, and you will go far in life.
01:04:43.000 | Thank you for listening to this episode of Radical Personal Finance.
01:04:46.000 | If you're interested in building financial freedom for yourself and your family, please subscribe to the podcast with our free mobile app so you don't miss a single episode.
01:04:54.000 | Just search the App Store on your mobile device for Radical Personal Finance and download our free app, which also contains an archive of every past episode of the show.
01:05:04.000 | If you have received value and financial benefit from the content of today's show, please consider becoming a supporting patron.
01:05:12.000 | Radical Personal Finance is listener supported and it's your direct financial support which enables me to bring you this content.
01:05:20.000 | In addition to your voluntarily paying for the content you've just heard, as a supporting patron you will receive a number of member only benefits, including a private Facebook group, access to our weekly Q&A calls, and discounts on future products and services.
01:05:34.000 | Details can be found at RadicalPersonalFinance.com/patron.
01:05:38.000 | Again, RadicalPersonalFinance.com/patron.