Posted by Mike Bruno on Wed, Aug 26, 2009 @ 07:35 PM
In every business there is a Sweet Spot. It's the spot where maximum profits are achieved with the least amount of effort. The systems are built, the customer base is there and it's a fine tuned money making machine. I once heard a speaker talk about the life of a business. The theory is that if a business is not growing and hits a plateau it wont stay there for long. It will either grow & get bigger or head towards a smaller business model or even extinction. Scientifically that is a correct theory since a business cant stay in the same exact position, sales will expand and contract, cost of doing business will do the same. However I do believe that every business does have a sweet spot, where is doesn't make sense to grow and it doesn't make sense to go smaller, it just makes sense to maintain. This theory is applicable for every sized business: global, national or local.
Local Business "Sweet Spot" :When we talk about a local business I am referring to the small mom and pop variety, the pizza shop, dentist, doctor, insurance agent, toy store, dry cleaner, restaurant, sub shop etc. that relies on the local people to survive. Lets use a local Pizza Shop to understand the fundamentals of the "Sweet Spot". (note these figures are estimated) In my town there are approximately 9000 people so lets say that on average each person spends $200 in a pizza shop on a yearly basis. That's a total of $1,800,000 dollars give or take. I understand that some of the population does not eat pizza, or is a child, or eats more so I think that's a fair assumption. There of course is also a "traveling factor" people outside of the town passing through, people living on town borders etc. so for this example lets be generous and double the total amount per year spent in pizza shops to $3,600,000. Now in my town there are 11 pizza shops including 2 national pizza franchises. So if the shops split the gross revenue equally it would total $328,000 per shop. So in theory the sweet spot by default is $328,000 for operating a pizza shop in my town. So if I owned a pizza shop in my town I would want to pull the maximum amount of profit from the business knowing the sweet spot was $328k. My operating costs need to be controlled , my new customer acquisition cost needs to be controlled, my client retention costs need to be minimized and my marketing budget needs to be controlled. It's the more with less approach.
So how do you do that? By using a well designed website, get involved in the community, use print and direct mail advertising, email marketing and social media.