Some of you have been reading and receiving my emails for five or more years. Others of you have just joined my newsletter list. And still others of you are not on my newsletter list, but are reading this article on my blog (more on this important distinction later).  

Regardless of which category you fall into, in this article, I will share many of the email marketing lessons that I've learned over the past several years. Over this time, I've sent out over 20 million emails. Yes, that's a lot of email. And yes, when you send that many emails, you need to spend a lot more time understanding the process of email marketing.  

Here are some of the key email marketing lessons I've learned along the way.   

Email marketing is an exception tool. It allows you to very cost-effectively stay in touch with both your clients and prospective clients.

Which leads me to my first key to email marketing, which is to define how you will use it.

Will you use email marketing to:

• Keep in touch with existing clients/customers?
• Nurture your relationship with prospective clients/customers?
• Sell products and/or services to your customers?
• All of the above?

Whether you are currently using email marketing or not, take a moment to write down how you can use this marketing channel.

Importantly, even if your goal is solely to increase sales, your emails must do more than sell things. We've all been on email lists that send message after message telling us about this offer and that offer. And we all do the same thing in these cases; we unsubscribe from the mailings.

Which leads to the second key to email marketing: you must provide value. You want recipients to be excited to receive your emails. If not, they'll unsubscribe, or they won't open your emails and/or take the actions that you'd like.

By providing value, I'm suggesting that you give the reader tips and advice to help them solve the pains that your products/services solve. Importantly, that's not to say that EVERY email you send must ONLY provide value. But at least half of your emails should provide value or people will unsubscribe or tune you out.

The third key to email marketing is to segment your email list. In my case, some of my email subscribers are focused on developing their business plans; others are focused on raising funding; and others are focused on growing their companies. While I send most emails to all three segments, some emails are sent to only the specific segment that will benefit most from it.

Consider your email list. Do you have discernable customer segments? If so, figure out how to identify (e.g., with a survey) which segment each recipient belongs in, and segment your mailings to better serve them.

The fourth key to email marketing is to test and tweak. The following are key areas to test and tweak:

• Your Email "Subject" Lines: figure out which subject lines your recipients are most likely to open (and then create more Subject lines like them)


• Your Email content: figure out which content/information your recipients like best (based on feedback from replies to your emails, or surveys)


• The time of day which you send your emails (one email marketing expert told me he gets his highest email open rates when he sends out emails at 5:30AM Eastern Time; I have found better results when I email at 6:00AM Eastern Time)


• The days of the week in which you send email (and note that research shows that most marketers see the highest unsubscribe rates on Tuesdays)

 
The fifth key to email marketing (which relates closely to the fourth key) is to maintain your metrics. Here are the email marketing metrics that my team tracks for every email we send out:

• # of emails sent
• # of emails delivered
• # of emails opened
• Open Rate (%)
• # of emails clicked
• Click Rate (%)
• Revenue Generated
• Revenue generated per email sent
• Subject line
• Email content

You've probably heard me and others say this -- you can't improve what you can't measure. By measuring each of these metrics, you can try new things and see which improve your results (and obviously do more of the things that are working).

The sixth key to email marketing is to leverage your content. I alluded to this in the opening paragraph of this article. What I mean by this is that when I write an article for my email subscriber list, I will also at some point post the article to my blog. I do this to generate greater exposure to the article. In many cases, I will change the title of the article on my blog so that it appeals more to the search engines (conversely, the Subject line of my emails have to appeal more to you, my readers).

There are clearly other keys to effectively using email marketing. Such as choosing the right email service provider, and ensuring that you are CAN-SPAM Act compliant. But by following the six keys outlined above, you will be much more effective; you'll be able to use email marketing to increase sales and profits and outperform your competition.

Suggested Resource: Want to learn how to capture more email addresses using your website, how to drive new visitors to your site, and how to maximize your email marketing revenues? Then check out our Ultimate Internet Marketing System to learn how you can build the ultimate online lead generation machine. Click here to learn more.

Hewlett-Packard's new CEO, Meg Whitman, will receive an annual salary of just $1.   

Now, on one hand you might think that since Ms. Whitman is a self-made billionaire (she's one of only 5 female self-made billionaires in the world), she doesn't need the money. But clearly, working for $1 is not worth anyone's time, let alone hers.    

You see, Whitman expects to earn a ton more than $1 for her work. In fact, she hopes to earn up to $6 million per year from her new role.     

Here's how. Along with her meager $1 annual salary, Whitman will receive millions of options to purchase shares of HP. And if she's able to improve HP's stock price, her annual salary could effectively go from $1 to several million.

Now, for HP and Whitman, I think this is a great idea. Whitman only gets paid if she performs and improves the stock price. And if she does a great job, she truly gets an amazing salary. This is classic performance-based compensation.

However, for entrepreneurs and heads of non-public companies, I hate this compensation structure. Here's why.

To begin, your stock price is far from a perfect indicator of the value of your company. For a public company, the stock price often reflects short term revenues and profits. So, when a company reaches its quarterly sales and profit goals, its stock price goes up.

Importantly, simply building your revenues and profits (particularly just in the short-term) are not a perfect indicator of the value of your company.

So, what is the perfect indicator of the value of your company? Well, the answer differs for every specific company. And that's why it's critical to determine how YOUR company might be valued.

Your company could be valued on many things. Sure, your revenues and profits will factor into your valuation, but what about things like:

• The quality of your team: do you have well trained employees that expertly perform?


• The quality of your revenues and customers: do you have a handful of huge clients versus tons of smaller clients? Do you need to re-sell tons of new clients every month, or do you have residuals (clients that pay you month-after-month)?


• The quality of your systems: do you have systems in your organization that enables it to run without you? Do your systems ensure consistent and high quality production? Do your systems provide cost or time advantages versus competition?


• The quality of your product or service portfolio: do you have a portfolio of products or services that would be challenging for your competitors to also create and/or offer?


• The quality of your partnerships: do you have marketing or production partnerships that you can leverage to more expertly serve or gain new customers?

I hope you answered "yes" to most if not all of these questions. While answering "yes" doesn't ensure that you're optimizing revenues and profits today, it does ensure that you have and are building ASSETS that will enable you to be more successful in the future.

And that's what you as an entrepreneur need to care more about; not just how much revenue and profits you generated last month, quarter, or year. But rather, what you BUILT in the last month, quarter, or year that will allow you to outperform the competition and generate significant profits in the NEXT month, quarter, and year(s).

Now, I'm not saying that you shouldn't set periodic (e.g., monthly, quarterly, annual) goals for metrics like revenues and profits. You should. And ideally, you will achieve them.

But what I'm saying is that you must ALSO set ASSET goals. Building new business assets (like better or residual customers, like partnerships, like systems, etc.) build the VALUE of your business. Value that will allow your company to generate significant revenues and profits in the future. And value which will make lots of other companies want to buy you for millions.

So, let's get started on this process. Write down one business asset, that if built within the next 12 months, would significantly increase the value of your business. Next, write down the key steps that will be required to build this asset. Finally, put the first step(s) into your list of goals for this month. And make sure you put the remaining steps in future month's goals until the new business asset is attained.

Importantly, doing this doesn't yield as much short-term satisfaction as having a great sales month. But longer-term, you'll be much more successful. And ultra-successful entrepreneurs are ALWAYS in it for the long-term. Like self-made billionaire Meg Whitman, who ran eBay from 1998 to 2007.

Suggested Resource: Would you like to know the thirteen business assets ultra-successful entrepreneurs build to unlevel the playing field and dramatically grow revenues, profits and long-term success? You'll learn this and more in Growthink's 8 Figure Formula. This video explains more.

Many top venture capitalists (VCs) have blogs. And because there's no way I can speak with all the VCs on a regular basis, I read many of their posts so I can understand their latest thinking and decision-making.    

These VC blog posts vary quite a bit. Sometimes they talk about this cool new company they funded. Other times they talk about the startup industry in general. And on the rare occasion, they'll give some blunt feedback to the entrepreneurs that pitch them day in and day out.     

These latter blog posts get me the most excited. Since they tend to express exactly what the VCs are thinking when speaking with you, the entrepreneur.     

Importantly, you need to understand the life of a VC. Every single day they are generally sitting through four or so face-to-face presentations from entrepreneurs, and maybe a couple more on the phone.

So, every year, VCs are probably sitting through 1,000 entrepreneur presentations. That's a lot. And the process inevitably makes them a bit cynical. Why? Because the vast majority of the claims made by the entrepreneurs presenting to them never come true.

So, that being said, I recently read an interesting blog post by Josh Linkner. Josh is the CEO and Managing Partner of Detroit Venture Partners.

Josh's post, entitled, "Five Disaster Moves to Botch Your Pitch" discusses 5 key blunders that he sees entrepreneurs making everyday, both when pitching him and pitching to partners and customers.

Here are Josh's 5 "disaster moves" along with my commentary.

1) THE RUN-ON SENTENCE: One of my pet peeves is listening to someone drone on for a 45-minute monologue.  In your big moment, your instinct is to communicate everything you know, the entire history of your idea, and endless amusing anecdotes.  Avoid this urge!  Your pitch will be 100 times more powerful if you can make it concise.  Make every word count.

Dave commentary: Your PowerPoint presentation should include 12-15 slides. Each slide should only have a few lines of text on it (30 words absolute max per slide). Having and practicing the slides will force you to avoid the "run-on sentence" and rather deliver a succinct, hard-hitting presentation.

 2) THE FACT LEAP: Anyone who is being pitched has turned on their highly-developed BS-detector to full tilt.  We are questioning everything you say and trying to poke holes in your story.  So the minute you exaggerate a stat, make an outrageous claim, or state a fact that can be challenged, your credibility crumbles.
 
Dave commentary: I mention this a lot when discussing business plan writing. Avoid superlatives (e.g., we are the best, the market is absolutely exploding, etc.) unless you can immediately back them up with facts.

3) THE OVERSELL: If you make a strong point once, it resonates.  If you feel the need to make the same point several times you end up diluting the power of the message.  If you keep pushing a point, you transform before our eyes from a passionate world-changer to a used-car-salesperson or infomercial pitchman.  If what you are pitching it that special, you don't need to oversell it.
 
Dave commentary: This goes back to my first point. Having a concise PowerPoint presentation and practicing enables you to avoid this pitfall.

4) THE S.A.T.: When responding to a question, just answer it directly.  If you tell a four-minute story that includes 73 data points, the listener feels like they are taking an S.A.T. exam in which they need to sift through all the irrelevant stuff in order to get the answer.  This does not help you shine or get your message heard.
 
Dave commentary: In practicing your presentation, identify the questions that you might be asked, and answer them. I like to create back-up slides that I show when certain questions are asked; they show you are prepared and ensure you answer them succinctly.

5) THE GREAT GATSBY: Grandiose braggers may entertain at cocktail parties, but they rarely win the battle of the pitch.  Keep it authentic and real.  Your startup with 11 beta customers isn't a billion-dollar company just yet.  Think big, but stay humble.  After hearing a pitch where the daring hero outperforms Groupon and Apple in their second year with trillions of revenue and six billion customers, I'm ready for a shower instead of a closing dinner.
 
Dave commentary: This relates back to my second point about using superlatives. Yes, you want to get the investor excited, but you need to be careful bout appearing too cocky or grandiose.

Thanks to VC Josh Linkner for his list of the 5 "disaster moves." You are now informed; so avoid them.

Suggested Resource: In Venture Capital Pitch Formula, you'll learn exactly how to find and contact venture capitalists, exactly what information to include in your presentation, and how to secure your financing. This video explains more.

There's a great line in the third Godfather movie. The godfather, Michael Corleone (played by Al Pacino), says, "Just when I thought I was out, they pull me back in."

{You can watch the 6-second video of the line here: http://www.youtube.com/watch?v=UPw-3e_pzqU or the full scene here: http://www.youtube.com/watch?v=UneS2Uwc6xw}

He says the line because he realized that due to certain events, he had to become involved again in the family business.

I had a similar feeling recently when I spoke at an event and was asked some questions about business plans.

You see, I have written hundreds of articles on business planning over the past decade, so I figured I had nothing knew left to write.

But since questions keep coming up, I figured I should write this essay to clarify the answers. So, below please find my answers to recent business plan questions I've been asked from entrepreneurs like you (and some others that I've seen others asking online).

Q. How important is the business plan?

A. If you are seeking funding, the business plan is critical. Most types of funding sources (e.g., angel funding, venture capital, bank loans, etc.) REQUIRE a business plan. That is, without one you can't raise funding.

If you want to be successful, you also need a business plan. Study after study proves that entrepreneurs who develop formal business plans are much more successful than those who do not.

Q. What is the purpose of a business plan?

The purpose of the business plan is two-fold.

From a strategic perspective, your business plan documents your key goals and action plan to achieve them.

From a communications and investment perspective, your business plan shows investors/lenders that you have a well conceived business opportunity that merits their dollars.

Q. How long should my business plan be?

A. Your business plan should be 15-25 pages including the financials. It should be short enough that the investor can read through it quickly. And it should be long enough to answer the investor's key questions and to show that you really understand the business, the market and the business opportunity.

Q. What elements or sections should I include in my business plan?

A. There are 10 key sections to a business plan. They include:

1. Executive Summary
2. Company Analysis
3. Industry Analysis
4. Customer Analysis
5. Competitive Analysis
6. Marketing Plan
7. Operations Plan
8. Management Team
9. Financial Plan/Projections
10. Appendix

Q. Does your business plan need to include your implementation or action plan?

A. Yes, your implementation or action plan is included in the business plan. The main action plans are included in the Operations Plan section. In this section, you need to detail the key milestones (your "risk mitigating milestones") that you must accomplish and the expected dates for each.

Your action plan must also be closely tied to your financial projections so you know how much money your company needs and when.

Q. Where can I find someone to write my business plan for me?

A. I'm clearly biased here. We have successfully developed business plans for over 2,000 clients since 1999, so I have to recommend our team here at Growthink. You can speak with one of our business plan consultants yourself and/or learn more at http://www.growthink.com/businessplan.

Q. Should I include my resume in my business plan?

A. Yes and no. You should not include a traditional resume in your business plan. But, in the Management Team section, you should detail the highlights of your resume, and focus on what success you have achieved to-date in your career, and how this supports your ability to successfully run/grow the business.

Q. How complete should my business plan be before I approach investors?

A. 100% complete. You generally get only ONE chance with investors and lenders. So your business plan needs to be perfect the first time.

Q. How do you cite statistics when describing your market in the business plan?

A. Particularly in the Industry and Customer sections of your business plan, you should cite industry statistics. There are two things I like to do here. The first is to include the source of the statistics directly in the text rather than footnote it.

For example, I'll say, "According to the U.S. Census, there are ..."  That makes it easier for the reader to digest the information. If there are tons of citations, then you can use footnotes (but not endnotes since the reader needs to be able to access the information quickly).

The second thing that's important is to tie the research to your company. For example, rather than just saying, "According to research from the National Restaurant Association, 18% of diners want this and that," you should add that this fact/trend directly supports your company's success and how.

Q. Can I list more than one product or service idea in a start-up business plan?

A. Yes. However, most successful companies start by offering just ONE key product or service. They gain success with that one product/service. And THEN, they roll out other products and services.

So, in the Operations Plan, you want to explain that you will first focus on penetrating the market with your first product or service and that once you hit a specific milestone (e.g., sell X number of units) will you develop and launch your second product/service.

Q. How important is the Executive Summary?

A. The Executive Summary is absolutely critical. If the reader isn't excited after reading it (note that the Executive Summary should be 1-3 pages), then they won't read the rest of your plan.

Of critical importance in your Executive Summary is to 1) clearly explain what your venture is/does and its value proposition, and 2) explain your unique success factors (what it is about you, your company, your market, etc., that makes your venture uniquely qualified to succeed).

I hope my answers also answered all of your key business plan questions. If you need more help developing your business plan, here are my best resources:
If you want to use our business plan template to develop your plan, click here.
If you want Growthink to write your business plan for you, click here.

By Odysseas Papadimitriou, founder and CEO of CardHub.com.  Card Hub is the leading online marketplace for the best credit card deals for both small business owners and consumers.

As an entrepreneur, you're most likely accustomed to thinking outside the box.  You're also probably pretty familiar with the importance of funding and debt stability to a growing business venture.  That's good because new laws enacted toward the tail end of the Great Recession necessitate some creative thinking when it comes to small business credit card use. 

The first thing you need to know is that so-called business credit cards aren't as business oriented as you might think.  According to a Card Hub Study, while business credit cards do generally offer some unique services that enhance small business operations, they are fundamentally quite similar to personal, or general-use, credit cards.  More specifically, with either type of card, you will be held personally liable for unpaid debt and usage information will be relayed to your personal credit reports.  That is why your own credit standing, and not that of your business, is the most important aspect of business credit card underwriting.

The second thing you must be aware of is the distinction the Credit CARD Act of 2009 makes between business and personal credit cards.  Despite the obviously close ties between small business credit cards and the individual consumers that use them, bank lobbyists managed to rationalize excluding "business" branded cards from the aforementioned law.  This might not mean much to you at first, but consider that the CARD Act prohibits issuers from increasing interest rates on existing debt without cause.  The omission of business credit cards from the law therefore means that your interest rate can change at any time, for whatever reason.

In light of this information, you must be wondering how an entrepreneur such as yourself can benefit from credit card use in this new environment while also mitigating risk.  That is a very valid concern-one which requires just one more piece of background information to explain fully.  The third and final thing you need to know is that business credit cards are still useful, given that they all tend to offer certain features that simplify the task of running a company.  For example, business credit cards allow you to designate employees as authorized users, establish custom spending limits, and earn rewards on their purchases.  In addition, they simplify business expense tracking, which makes it easier to evaluate company spending and prepare company taxes.

In order to both achieve debt stability and benefit from common business credit card features, you'll therefore want to use two credit cards.  One should be the personal credit card with the best interest rates that you'll use for purchases that you cannot pay off before the end of a single billing period.  The other should be the business rewards credit card with the most lucrative rewards for your biggest expenses, which you will obviously use for purchases that you have the means to pay for in full immediately.  This type of two-card strategy takes its keys from the Island Approach to credit card use, which holds that each credit card you get should be used for a specific purpose.  This allows you to get the absolute best card for each of your needs, rather than a single card that addresses all of them in an average manner. 

With this business credit card game plan in hand, you will be well positioned for entrepreneurial success and a step ahead of the competition.

As you know, I do a lot of marketing.

I market via my website. I market via social networks like Facebook and Twitter. And I market via more traditional means like public relations and direct mail.

But when it comes to several of these marketing channels, there's one thing I NEVER market, and that's equity or securities.

You see, while you can market products or services pretty much anywhere, in the United States there are many laws the regulate the sale of securities, mainly the stock in your company that you may want to sell to individual or "angel" investors.

And specifically, these laws forbid "General Solicitation." Which means that you can't market your equity via Facebook, via Twitter, or via your website, and you can't stand outside of a Wal-Mart and ask passerby's to invest in your company.

So what should you do?

The answer is fairly simple - network.

You've probably heard of 6 degrees of separation. Six degrees of separation refers to the idea that everyone is on average approximately six steps away, by way of introduction, from any other person on Earth, so that a chain of, "a friend of a friend" statements can be made, on average, to connect any two people in six steps or fewer.

Now, I'm not saying that you should set your sights on Bill Gates or Donald Trump as an angel investor in your company and figure out the six or less connections you need to make to meet them.

But rather, there are literally millions of successful entrepreneurs and business people all around you with the means, interest and ability to fund your company. These are the folks you should be trying to meet.

You need to start by making a list of these individuals. But more important than just finding wealthy individuals to meet, create a list of people who could really help your business.

For example, is there a top person in your industry whose credibility and/or connections could help you?

Or is there someone you've come across who has amazing marketing or technical skills that would improve your company?

It inevitably turns out that these same people generally have the means to invest in your company. And, if not, they generally have vast networks of contacts they can refer you to who might invest.

When you find angel investors this way, you get what we call "smart money." That is, investors who not only give you the funding you need, but who provide the expertise, guidance and connections to make your company more successful.

In finding "smart money" angel investors, you'll need to think more like an executive recruiter or "headhunter" than a fundraiser. Importantly, the following are the five key skills and qualities of a great executive recruiter that you'll need to embody:

1. Identify the right candidates: a great recruiter can specify the ideal qualifications of and create a comprehensive list of potential candidates

2. Be outgoing: a great recruiter needs to get meetings with and speak with the right candidates; to do this, they can't be shy

3. Have good listening skills: a great recruiter needs to conduct interviews and really listen to the needs of their clients and candidates

4. Be well organized: a great recruiter needs to create a big list of candidates and methodically and repeatedly contact them until they get their desired results

5. Be persistent: a great recruiter follows up on great candidates; they don't let initial rejection deter them

To summarize, avoid mass marketing on the web when raising angel funding, and look for the "smart money" -- people that can help you both fund and grow your company. And act like an executive recruiter; in doing so, you'll be able to find tons of smart money angel investors for your business.

Suggested Resource: In Angel Funding Formula, you'll learn exactly how to find and contact angel investors, exactly what information to convey to them and how, and how to secure your financing check. This video explains more.

When starting a business, most entrepreneurs dream about the finish line; specifically how their lives will be radically better once their business becomes a huge success.   

But, soon after they start their businesses, entrepreneurs/business owners become trapped in the day-to-day, week-to-week, and month-to-month goals of generating more sales and profits, improving employee performance, and trying to reduce their hours and stress.    

At some point, the vast majority of entrepreneurs become 100% focused on these short-term goals and lose sight of their long-term visions. As a result, they begin to wander, and never achieve the vision they initially hoped to achieve.    

The solution is rather simple: you need to stop what you're doing and dream again about the finish line. Specifically, you need to reassess what it is that you're trying to accomplish with your business.

In many cases, this long-term vision will be the same as the long-term vision you had when you started your business. In other cases, your long-term vision might have changed.

But in EVERY case, you must reassess what your long-term vision is, or you'll have virtually no chance of achieving it.

And importantly, once you identify this vision, you need to reverse engineer it.

That's right, you need to fully imagine how your business will look once you have achieved your long-term vision, and then create the action plan for achieving it. For example, if your dream includes a company with 300 employees, you need to create the plan now for hiring and training these employees.

To help you achieve this, follow my step by step plan below for identifying your long-term vision and reverse engineering it.

1: Identify your long-term vision

• Write down what your ultimate goal is for your business.

For example, do you want to sell it to another company? Sell/give it to your employees or children? Take it public? Continue to run it forever and reap ongoing profits?


2: Identify your key end-game metrics

• By what date would you like your vision to be achieved?


• What will your company's annual revenues be at this date?


• How many customers will you have at this date?


• How many employees will you have at this date?


• On this date, what will your day to day responsibilities be?


• On this date, what will be your top selling products and/or services?

3: Reverse Engineer Success within the Key Functional Areas

Answer the following questions as if today was the future date in which you achieved your long-term vision and you were looking backwards.

Marketing:

• What marketing channels allowed you to attract/gain the most customers?


• What have you done to fully satisfy your customers?


• What business partnerships (if any) have you forged that have resulted in significant numbers of new clients?

R&D

• What have you done to develop your top selling products and/or services?

Human Resources

• Who are your key managers that motivate and manage your other employees? When did you find these key managers? Where did you find them? How did you develop them?


• When did you start ramping up your hiring process?

Operations:

• What systems have you built to ensure your business runs smoothly and without your required day-to-day involvement?

Finance:

• Who funded you along the way? How did you meet these funding sources?

4: Create Your Action Plans

Create action plans from your answers above.

For example, if you answered "direct mail" as your top marketing channel, document your direct mail strategy. For example, document who you will mail to, what your message will be, what your direct mail timeline will be, etc.

The exercise above is critical in ensuring your success.

The key is to not only dream about what your business looks like when it has achieved success, but to reverse engineer that dream. You need to think through how your business got to its successful state. And then work backwards in creating action plans that will get you there. And once you create these action plans, be sure that you and your team stay focused on executing them.

I've been interviewed twice over the past couple of weeks about the recent Crowdfunding legislation that was recently introduced. And each time, I've found myself correcting the misinformation about it that the media has been spreading. So in this article, I'll give you the truth about what's going on, and how to leverage it.

A recent survey of business owners showed that 41.4% of businesses count on referrals for over 80% of their sales.    

I actually don't believe this statistic; I think it's way too high.    

But the statistic is very exciting. Because it means that these 41.4% of entrepreneurs are doing it right; because getting referrals is absolutely critical to your business' success.    

Let me explain.

To begin, referrals generally don't cost you any money. So rather than spending $X to acquire the new client, you spend $0. This dramatically boosts your profitability.

Second, getting referrals boosts your average profit per client. For example, let's say your average profit per client is $50. Now, let's also assume that 20% of your clients refer you one additional client.

What that means is that for every 10 new clients you get, you actually receive 12 new clients (including the 2 referrals). Since each client gives you a profit of $50, you've generated $600 in profit from the 10 initial clients. So, your profit per new client goes from $50 ($500 divided by 10) to $60 ($600 divided by 10).

Yes, it's exciting that your profit has gone up 20%. But what's even more exciting is that you can use this increased profit to dominate your competitors. For instance, if your competitors are still only earning $50 profit per client, they can only spend up to $50 per client in marketing expenses. But since you're earning $60 profit per client, you can actually spend more than $50 in marketing to acquire a new client.

This allows you to advertise in more places and in places that your competitors can't afford. This will drive tons of new clients to you instead of your competition.

In summary, getting referrals can allow you to significantly boost revenues and profits, and allow you to dominate competitors.

Now, if referrals offer such a great benefit, why do 58.6% of entrepreneurs fail to effectively use them?  The answer is that they haven't set up an effective referral system.

So here are the keys to an effective referral system.

Step 1: Make the Client Want to Give You a Referral

Clearly, your clients must be happy in order for them to give you a referral. So, make sure you satisfy their needs and fulfill the promises you made them when they purchased your product or service.

Step 2: Ask for the Referral

With a job well done, some clients will give you referrals on their own. But you'll dramatically increase the number of referrals you receive if you simply ask for them.

Of critical importance is to ask 1) at the right time, and 2) multiple times. With regards to the former, if a client needs to use your product/service in order to be satisfied, then you clearly can't ask for the referral immediately. Rather, you'll have to wait until they've used your product/service and can vouch for its success.

With regards to the latter, it is critical that you ask clients multiple times for referrals. You need to do this for several reasons. The first is that clients are often busy and if you ask at the wrong moment, they simply might not have time to give the referral.

Secondly, it's possible that today one of your clients does not have a new client they can refer to you. But maybe in a month they meet someone that would be a perfect fit for you company. But unless you ask for the referral again then, they'll probably forget to give it to you.

In asking clients for referrals, don't just ask them who they think might be a good fit for your product/service. Rather, it's more effective if you guide their thinking. For instance, you should ask, "I know you're a member of the XYZ organization; do you know anyone else in the XYZ organization that could benefit from our product/service?" This allows your client to focus their thinking in order to find more potential names for you.

Step 3: Effectively Contact the Referral

Clearly, once you receive the referral, you need to contact them and try to close the sale.

A key tip here is to ask the referral source to let the referral know you'll be contacting them. As such, rather than contacting the referral cold, you'll receive a warm introduction that will make the referral more likely to speak with you and buy your products/services.

Step 4: Putting it All Together

The key to a successful referral program is to formalize and systematize it. It shouldn't be something that one of your employees does once in a while. But rather, it should be a sequence of events that always happens.

For example, your system might include the following: Ten days after a sale is made your client gets an email requesting referrals. Fifteen days after a sale they receive a postcard. And then 28 days after the sale, your salesperson calls them to request referrals.

In addition to systematizing your referral program, you need to maintain statistics so you can see what's working and what's not working. For example, you should track each of your referral attempts and see which ones lead to new clients and which do not. And then you should tweak them (e.g., change your email to offer an incentive for the client to give you a referral), and track which tweaks work and which don't (and clearly keep using the ones that did work).

A quality referral program will increase your revenues and profits, and can give you real competitive advantage. So build your referral program today!

Suggested Resource: Growthink's Ultimate Marketing Plan Template allows you to quickly and expertly create your marketing plan; and exponentially increase your customers and revenues by developing your referral program and orchestrating the 5 key marketing levers. Click here to learn more.

If you're looking for funding and/or to successfully grow your business, a little known secret is to find and leverage Advisors.    

So, who or what are Advisors? Advisors are successful people that you respect and that agree to help your company. Advisors are generally successful and/or retired executives, business owners, service providers, professors, or others that could help your business.    

Advisors generally will not cost you any money (you don't pay them), although I do recommend giving them stock options to incentivize them to contribute as much as possible.   

Getting Advisors is not a requirement for raising money, but they have multiple benefits as follows:

1. Practice: if you can't successfully pitch an advisor to invest time in your business, then you're not going to successfully pitch anyone to invest money in your business. So, practice your pitch on prospective advisors first, and use that practice to perfect it.

2. Connections to capital: as successful individuals, advisors often have the ability to invest directly in your company; and/or they tend to have large, high quality networks of individuals they can introduce you to.

3. Credibility: having quality advisors gives your company instant credibility in the eyes of lenders and investors.  For example, if you started a new hockey stick company, having Wayne Gretzky as an advisor would certainly give you great credibility (and connections). But even having much smaller names than Wayne Gretzky as advisors can build enormous credibility.

4. Operational success: In an interview I did with Dr. Basil Peters (a wonderfully successful entrepreneur, angel investor and VC), Dr. Peters said that mentors and advisors are an entrepreneur's "single most controllable success factor."  Having Advisors with whom you can discuss key business matters as you grow your venture will help ensure you make the right decisions, particularly if they have encountered and dealt with the same challenges already in their careers.

I have seen these four benefits first-hand for my own companies and for companies that we've helped build their own boards. Click here if you'd like to see the list and bios of Growthink's Board of Advisors.

So, how do you build your Board of Advisors?

The steps are fairly simple:

1. Create a list of people you would like to be on your Board
2. Contact and meet with them
3. Secure the best Advisors you meet with

The final step is to hold formal and informal meetings with your Board members to leverage them -- to get them to fund your company or introduce you to other funding sources; to answer key challenges that you are facing, etc.

I must admit that years ago I wasn't thrilled about investing the time to go through the steps of creating a Board of Advisors. But I can assure you; those hours spent have yielded an enormous return on investment. In fact, I should have developed my Board much sooner than I did.

So, go out there and start building your Board of Advisors today. And start reaping the enormous benefits.
   
Suggested Resource: Want advisors? Want funding for your business? Then check out our Truth About Funding program to learn how you can gain advisors and access the 41 sources of funding available to entrepreneurs like you. Click here to learn more.