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The Only How-To You’ll Need To Start A Restaurant

A step-by-step guide to opening your own restaurant in South Africa.

Katie Cubitt

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Decisions to Make Before Starting Your Restaurant

Before you even think about opening a restaurant, there are a few hard decisions you’ll need to make. These choices create the foundations of the business that you are going to be building.

What type of Restaurant is Best for You?

type-of-restaurant

Firstly, you need to choose between opening an independent restaurant, or a franchise. If you’re leaning towards an independent business then you need to make the further choice between whether it will be a completely new concept or a pre-owned business.

An overriding factor in this is decision is who you are and what your goals and ambitions are. To this end, you need to weigh up your options and match your choice to your individual preferences.

Buying into a franchise allows a franchisee to purchase the rights to sell a company’s products or services and use its logo for advertising and branding. The restaurant industry is one of the most popular industries for franchising opportunities. Franchises are a softer, more supportive gateway into the food industry.

Related: 5 Lessons From tashas Founder Natasha Sideris

There are support structures in terms of management training and avenues to find help. Coupled with this are the branding and marketing strategies that are proven and ready to roll out. Being a franchisee means being part of a larger team and oftentimes that is easier than trying to start from scratch.

Opening a franchise also means that there is name recognition and discounted rates on stock due to the larger buying power of the big chains buying in bulk for all their stores.

Franchises do however have downsides. The biggest is that you would need starting capital to buy into the ready-made brand. The amount of capital needed depends on the size and popularity of the restaurant and there is usually a down payment that needs to come from personal, non-borrowed funds.

Another downside is that the franchisee must pay royalty fees to the franchisor and sometimes, even additional advertising fees on top of that.

Related: What To Look For In Restaurant Management Software For Small Business

There is also always the possibility of expensive upgrades that can be determined by the franchisor. Finally, if you choose to buy into a franchise, you must be aware of the strict rules and guidelines that you will have to follow.

If you find yourself better suited to the independent restaurant path then there are once again a number of advantages and disadvantages.

On the positive side, there are no royalty fees to pay. With the exception of partners, the profit belongs to the owner. Owning an independent restaurant also allows for unique concepts and ideas to organically grow and then be implemented as you see fit. This allows for exclusivity and freedom of choice.

Furthermore, the restaurant is then able to adapt to the changing needs of the market, or according to the trial and error process, which is inevitable in any start-up business.

On the down side, there are high failure rates. Rob Davies, the minister for trade and industry said in May last year that five out of every seven small businesses started in South Africa would fold in its first year. That is a huge percentage. On top of that are the difficulties in growing your brand so that it becomes recognisable to a market swamped with choices.

Obviously, a pre-owned restaurant has a slightly different set of pros and cons in terms of starting out. On the positive side the restaurant may already have some familiarity to its target market.

Conversely, a pre-owned restaurant might need to have the brand, marketing strategy or even the physical premise overhauled. There might also be need for you to repair or further amp up any reputation that the restaurant previously had in its target market.

Use this restaurant business plan to help get you started.

What to look for in a restaurant location

The next thing to consider is where you will be opening your business or restaurant. For a franchise that choice will be made in conjunction with the franchisor. A pre-owned restaurant will usually have a location. If that premise is rented – the lease will need to be put into your name; similarly it will need to be transferred if you are buying it outright.

As we know, location is very important and in the restaurant industry it can make or break your business. Your restaurant will not be a successful venture if the location is not suited to your intended customers or to the type of restaurant you are looking to establish.

Related: How tashas Built A Recession Proof Business

Do not get too attached to the idea of a perfect spot – that will more than likely not happen, rather, focus on these five factors:

  1. Population base of the area – is it large enough to support your plan?
  2. Size of your restaurant – too big or too small?
  3. Available parking – enough for a full night at the restaurant?
  4. Accessibility to customers – if it’s a pain to get to, people won’t come as often.
  5. Visibility to motorists and walk ins – same as above, if they don’t see you – they won’t come.

By considering these factors you will ensure that you end up with a location that is customer friendly, visible and it is easy to visit because parking is not a problem. Also – you will have a place that is the right size for your business plan. There is nothing worse than a cavernous space that customers rattle around in. The same goes for a space where you can easily cut the steak for the man sitting at the table next to you.

If you are leasing the property, your local municipality requires a letter of consent from the owner stating that you may trade from the property.

But before you sign the dotted line of your lease agreement when renting, here are a few tips.

Steps to Get Your Restaurant Started

restaurant-funding

Restaurant Funding Options

At this stage of the process, you will need to consider your options in terms of finding the funding to buy out an existing business, start your own, or buy the rights to a franchise.

As an entrepreneur in South Africa you have a number of options available to you.

  • The first option is to use only your own capital, but that is not possible for most.
  • Second is to obtain a small business loan from your current bank. If your current bank is not open to giving you the loan, then you may also investigate into other financial institutions including credit unions. Loans in the banking sector can range from small micro-loans to enough start-up capital to launch from scratch. The amount you borrow is largely determined by the institution’s willingness to accept the risk.

But the banking sector is not the only place to obtain funding – especially in a country that is aiming to increase the number of small business owners and entrepreneurs. This means that there are a number of government organisations and agencies that aid in SME funding.

The first of these is SEFA – the Small Enterprise Finance Agency. SEFA recommends that the entrepreneur has 10% of their own investment to start off with, but can do funding options ranging from R60 000 to R5 million.

Alongside SEFA is the Small Enterprise Development Agency. SEDA aims to grow and support small enterprises through government funded agencies. They offer help in terms of training, support networks and programmes to aid small businesses in finding their feet and their goals.

Another channel for financing a SME is government grants. The basic difference between a grant and a loan is that a grant does not have to be repaid, but it does come with strict guidelines for applying and using the funds granted to you.

The final option to find the funding to start your own restaurant is to seek out investors. These can be friends or family members who are willing to help you get started, or larger firms and companies looking to aid an entrepreneur in starting a new business in South Africa.

Related: SEFA Funding

It is worthwhile to do the research and see who would be willing to contribute. Note that it is standard practice for investors to want shares in your business in return for their capital.

Here’s a quick guide of how to impress potential partners/investors:

  • Always be professional
  • Build trust in yourself and your brand
  • Be creative in your approach
  • Have the right information easily at hand
  • Know your figures offhand for easy reference
  • Always be on time.

How to Register a Restaurant

Once you have decided to go ahead and make a go of this venture, there are multiple steps that need to be followed in order to legally register your business.

Restaurant Name

Before you get started with registering your business, it is worthwhile to first check that your chosen name doesn’t already exist in South Africa. For more information on how to go about doing that, follow this link .

CIPC

Register your business with the Companies and Intellectual Property Commission (CIPC). This involves lodging a Notice of Incorporation (CoR 14.1) and a Memorandum of Incorporation (CoR 15.1 A-E). These forms are available at www.cipc.co.za. They take roughly five to seven days.

Alternatively, it is possible to use a service that registers your company for you with the CIPC. These services do of course have their own fees attached.

Business Bank Account

Thereafter, you must open a bank account for your business. Depending on the correctness of the application forms, this only takes a day or two and is free of charge.

Related: Starbucks Coffee Is All About Culture… For A Reason

SARS TAX

For an SME, earning less than a million rand a year, the only form that SARS requires is the IT77C that must be accompanied by a certified copy of your ID and a copy of the company’s registration documentation. The IT77C form is available from www.sars.gov.za. If your employees aged 24 – 65 will be earning more than R5 000 per month, then you will need to register for UIF and PAYE.

To register for unemployment insurance – visit www.labour.gov.za for more information on the process and for the forms.

The final step that takes place in conjunction with the step above is to cover your employees in terms of occupational injuries, diseases or death in terms of the Compensation Fund. This is optional. These forms are available from www.labour.gov.za.

Restaurant Permits and Licenses

restaurant-permit

Because you will be selling food and alcohol (usually) there are some permits that you will have to apply for before you open to customers.

Firstly, to sell perishable food, a trading license must be purchased from the Business Licensing Department of your local municipality.

Next, in order to sell liquor under a license, an application must be made with the Liquor Board.

How to Equip Your Restaurant

At this point, you have a registered business with funding, a name and a location. Now you need to outfit your space with the necessary equipment, staff, technological necessities as well as look into health and safety regulations and training.

Restaurant Equipment

Obviously, the equipment needed for your restaurant will vary according to the style of food you are looking to produce, as well as the space available in your kitchen.

Finding the right equipment at the right price can be a nightmare – but there are easier ways, such as making use of South Africa Restaurant and Hotel Suppliers Guide which stream lines the process of searching individually.

You can also find a list of approved suppliers here.

The cost of starting a restaurant depends on the size, location and style of eatery you will be kitting out. Also, prices vary according to the finishes you choose and the brand of equipment you purchase.

Below is a list of the basics that your restaurant will more than likely need.

  • Shop fitting
  • Kitchen equipment
  • Refrigeration
  • Storage
  • Dining area (tables, chairs, high chairs etc)
  • Crockery, cutlery, linens, and all the kitchen tools
  • Signage
  • Sound and Lighting
  • A till system
  • TVs (if you go that direction)
  • And possibly a POS or Point of Sale system that allows for the wait staff to be connected with the kitchen staff.

James Brewer is the owner of six successful restaurants in the greater Gauteng are. After 28 years in the industry he knows a thing or two about opening a new business.

Related: Doppio Zero: Paul Christie & Miki Milovanovic

Brewer points out here that “all essential equipment should be bought new because reliable equipment is a must.” Brewer adds that you must always make sure you have tested all your working parts before you open for business.

Branding and Marketing Your Restaurant

restaurant-marketing

An important aspect to your new business is to ensure that you are working with the correct branding and marketing strategy.

When first outlining your brand, remember that you need to develop an identity for your brand – know who you are and stay true to that image. The most successful brands are those that know who they are and where they are going.

Have a marketing plan – use those in the know to help you formulate a plan of attack for what would work best for your target market, your style of restaurant and the food you serve, and for the scale of your business.

Remember with your marketing plan to ensure that you follow the ethos of having an ongoing conversation with your customers. Marketing is there to reach out to the customer and have them respond.

Make use of the platforms and agencies that are there to aid start-up businesses and entrepreneurs. Use them to their full potential.

Embrace social media – it can work wonders at getting your name out in the market.

Related: 7 Creative Strategies For Marketing Your Start-up On A Tight Budget

The POS Sector blog for restaurants and bars has an interesting list of ways to promote your business, keep the customers entertained and keep them coming back. The list includes fun ideas such as hosting a themed dinner party, having wine tasting evenings and even suggests having a happy hour. They also have ideas such as visiting the companies in your area and giving discounts on delivery.

If you would like any road signs near your business, you will need to get approval from the national roads signs committee which falls under the jurisdiction of the Department of Transport.

The trick is to make your restaurant stand out from all of those around you and with the help of an innovative marketing strategy.

Health and Safety

In the food industry there are strict health and safety regulations so as to ensure the well being of your staff and your customers.

One such regulatory body that carries out inspections on behalf of the Department of Health is the NRCS (National Regulator for Compulsory Specifications). They are a internationally recognised and work in close co-operation with other regulators of the Food and Associated Industries (FAI).

It is also good to know that there are a wide variety of courses that aim to train staff in terms of food hygiene and it could be worthwhile to send employees for this kind of training.

Hiring Restaurant Staff

Hiring-Restaurant-Staff

Part of being an entrepreneur is creating jobs. That means hiring staff to fill your books and feed your customers.

With six locations under his direction, James Brewer believes in hiring from existing staff.

“Make sure you survive,” he says, “do not trust anyone and check all CVs.”

When hiring, there are a few more things you need to remember:

  • Conduct proper interviews especially considering you are entering the customer service industry
  • It is worth your while to follow up on recommendations and references of those you interview
  • If you hire foreign nationals – remember to check their work permits.

Under the Basic Conditions of Employment Act, it is a law in South Africa that no matter how small your business is, or whether the employee is part-time, full-time or temporary; you must supply them with a written document stating the details of their employment.

There are bargaining councils for all industries in South Africa. These help solve labour disputes, aid in producing proposals for labour prices and policies and smooth the way for collective agreement. For the restaurant industry it is the Tearoom, Restaurant and Catering Bargaining Council.

Related: 4 Steps to Hiring Killer Sales Staff

Since it was enforced in 2007, there is now a minimum wage that employers must grant their wait staff. For businesses with less than ten employees, the minimum wage is R12.39 per hour and for businesses with more than ten employees it is R13.81 per hour. These figures are applicable from 1 July 2013 until 30 June 2014.

There has been no regulation over whether or not employees may then take a percentage of the staff’s tips – but this is a contested issue.

A Day in the Life of a Restaurant Owner

Until your business is running smoothly, you will need to put a lot of energy and time into it. Starting a successful venture means persevering in the industry.

We asked Brewer to describe his average day from opening to closing in the early years of any of his new restaurants, and he surprised us with a short and concise mantra: “Open at 9 am, do ordering, check stock, sell, sell, sell. Check staff, take stock, close at 3am. Clean all the time.”

A restaurant needs nurturing and attention to detail. And as the entrepreneur you need to be the one who is in control of what is going on inside your business on every level, from stock to staff to products and services and most definitely with your clients as well.

Lessons from Restaurant Failures

red-wine-stain-restaurant-failure

We’re not going to beat around the bush and pretend that starting a restaurant is a new concept. This however, holds a bevy of perks because you are able to learn from those who have succeeded before you, and more importantly, from those who have failed.

In general, there are many stories you can glean lessons from. Here is quick list of some of the things to take to heart to ensure your success:

  • Never compromise on hygiene
  • Never compromise your food or service quality – and don’t let your staff either
  • Create and maintain a loyal customer base
  • Play to your strengths
  • Recognise your deficiencies and rectify them early on
  • In the early years, reinvest in your business – it needs nurturing.

Once again, James Brewer puts his 28 years in the industry to good use and gives you these further tips:

  • Stick to the basics
  • Be in your shop
  • Keep control of costing
  • Enjoy what you’re doing
  • Know that equity keeps your partners happy
  • Be positive to your customers
  • And don’t forget to look after your staff – they are your future.

Restaurant Industry Contacts

Equipment Suppliers

Furniture Suppliers

Point of Sale (POS) System Suppliers

Restaurant Associations

Staff Training


Related: How tashas Built A Recession Proof Business

Katie Cubitt completed an internship with Entrepreneur Magazine in 2014. She is a final year Journalism and Linguistics student at the University of Johannesburg.

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1 Comment

1 Comment

  1. Sisasenkosi Sibanda

    Feb 9, 2015 at 16:05

    My name is Sisa, I’m looking forward to starting my own business very soon, a restaurant to be specific. I’m grateful for the support provided by the gorvenment and the private sector. This year i will study towards diploma/certificate in cooking and attend as many enterpreneurship workshops as possible. Im excited yet a bit nervous about it, but i believe i am more than able. The article above was very helpful.Thank you

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Launch

Selling The Dream

When you’re starting a business, the secret to success is getting everyone — from customers to suppliers — buying into your vision.

Alan Knott-Craig

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I started a company in 2016 offering road building in residential areas for local municipalities. I realised that there is too much risk involved and I do not have the capital to purchase machinery. The overheads are also too high. I feel more comfortable supplying municipalities with commodities. I have been in sales and have good people skills and sales experience. However, I’m struggling to get a foot in the door. Manufacturers are reluctant to give me a credit advance. As a result, I had to let go of many opportunities. How do I overcome this obstacle? — Martin

I can only speak from my own experience selling to municipalities. I did it once, successfully. This is how I did it:

  1. I convinced the municipality to roll out public WiFi in low-income communities.
  2. The municipality awarded me a contract.
  3. With that contract in hand I shopped around to find a company that I could sub-contract. That company had to take a risk that the municipality would pay me, and I would in turn pay him. I had to take the risk that the sub-contractor wouldn’t deliver the goods.
  4. I found a sub-contractor.
  5. We deployed the WiFi.
  6. The municipality paid its bills.
  7. There was never a hint of corruption.

In retrospect I realise I was the beneficiary of a succession of benevolent miracles.

Miracle No. 1: Meeting a political leader that shared my vision and was competent.

Miracle No. 2: Getting a legitimate contract out of a municipality.

Miracle No. 3: Finding a sub-contractor I could trust, and that trusted me.

Miracle No. 4: Successfully working with the municipality to fulfil the contract.

Miracle No. 5: Getting paid by the municipality.

Miracle No. 6: Avoiding corruption.

If you believe in miracles, keep going. If you’re slightly more risk-averse (or less desperate) than I was, then rather don’t target municipalities to build your business.

You’ll note that I solved the supplier credit problem by finding a sub-contractor that trusted me. That’s the only way to do it. Not only do you have to sell the dream to the customer, you must sell the dream to the supplier. I recommend reading Shoe Dog, the story of Phil Knight and Nike.

Related: Alan Knott-Craig Answers You Questions From Business Idea To Start-up

I want to start a business, but I don’t know how to approach my local bank or investors, probably because I don’t have any experience in the business field. I am currently in a full-time job and holding on to the security of the monthly salary (which I know is wrong) but I have responsibilities. How do I break out? — Lorenzo

First, the security of a monthly salary is under-rated. Don’t be so quick to wish it away! Of course, a salary is a long-term dead-end. When you’re forced to retire at 65, you’re likely to be staring at 35 years of supporting yourself and your family relying on pension and savings alone. Assuming they don’t retrench you before age 65.

Be grateful for a salary, but be on the look-out for a way to make a living on your own terms.

That way you will learn skills that can be used after forced-retirement age, and even more important, you will be able to keep yourself busy rather than spending your old age pottering around the house in boredom and driving your significant other mad.

Forget about banks and investors. If you want to start a business, you must do it without ‘other people’s money’. Find a problem in your industry, solve that problem, get paid for solving the problem. Repeat.

Ideally find a like-minded colleague that you trust, pool your efforts and partner to find a way to make a living in your own business. Partnership massively de-risks entrepreneurship.

Related: Pay Your Dues Before Raising Capital


3-rules-for-being-an-entrepreneurAlan Knott-Craig’s latest book, 13 Rules for being an Entrepreneur is now available.

What it’s about

It’s easy to be an entrepreneur. It’s also easy to fail. What’s hard is being a successful entrepreneur. For an entrepreneur, there is only one important metric of success: Money. But life is not only about making money. It’s about being happy. This book is a collection of tips and wisdom that will help you make money without forgoing happiness.

Get it now

To download the free eBook or purchase a hard copy, go to www.13rules.co.za.  To browse Alan’s other books, visit bigalmanack.com/books/

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Launch

5 Lessons To Follow As You Take Your Product To Market

Don’t overly complicate things when launching your business. Instead, follow this advice from a successful entrepreneur so you’ll do things right.

Scott Duffy

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When launching a new business, product, or service, the most common mistake entrepreneurs make is trying to do too many things at once in the belief that going to market with “more” is better.

It isn’t. During your initial launch period, or when relaunching new products or services, “more” means additional risk. More also means unnecessary complexity, as well as additional time to market, so more capital will be required.

Below are some important things to remember as you prepare to take your product to market:

1. Don’t try to build Rome in a day

I have a good friend who raised $2 million in a very tough market to start a consumer internet business. Finding that much money to start a new business was amazing, and I congratulated him on a big win. He was ecstatic and told me he couldn’t wait to get to work on the site.

One year later, I ran into him again and asked how it was going. He sang the blues. He said he was doing terribly. In fact, he was on his way to his attorney’s office to shut the company down. They had launched a few months before but had already run out of money. I asked how that was possible, and he talked about his big vision, how his company aimed to provide everything their target customer could possibly want to buy in the category. Their goal was to be a one-stop shop. He and his team invested all their time and money building something big and comprehensive, confident their target customer wouldn’t want to go anywhere else once their website was up and running.

When the company got started, they were solving one problem for one target customer. It was a simple concept. But when the money came in, everyone started working on other “great ideas” and “shiny objects.” They kept building and building and building. They went from solving one problem for one very specific target customer to building a one-stop shop that did a lot of things for a lot of different people. Then they started running low on cash, so they decided to push the product out.

After the launch, they learned, much to their surprise, that about 95 percent of their users used just 5 percent of the site! And that 5 percent was the original product to solve the original problem.

So that means 95 percent of the time and money invested was essentially wasted. What can you learn from this?

Related: Hello Group’s Initial Product Failed The Night Before Launch. Today They Are An Industry Disruptor

2. Focus on one thing, the simplest thing

When kicking off a new product or service, put all your energy and focus into that product or service. Focus on one thing at a time. It shouldn’t be the hardest thing; it should be the simplest, what we’ll call the minimum viable product (MVP). The MVP provides the opportunity to learn the most about your customers, with the least amount of time, money and effort.

The MVP puts you in a position to go to market quickly, collect valuable feedback and not waste time building things customers don’t want. This strategy significantly mitigates your risk and helps avoid the trap my friend fell into. Remember, Amazon started just as an online bookseller.

3. Follow the 85-percent rule: Good is good enough

good-is-good-enough

Striving for perfection is the enemy of any product launch. As a rule of thumb, when the new business or product is 85 percent of the way there, you’re ready to go. In my experience, the level of effort required to reach 100 percent isn’t worth the additional time and expense at this stage. You’d be much better off getting something into the market and beginning to test.

4. Be great at collecting, and learning from, feedback

Once you’ve launched, listen to and learn from your users. Develop feedback loops to learn everything you possibly can.

  • What do users like and dislike about the product or service?
  • What features would they like to see added to enhance their experience?
  • Which features don’t work or generate little interest?

Do whatever you have to do to engage with your users. That may include offering incentives to get feedback on surveys or in focus groups, reaching out on social media, or generating outbound calls to learn more.

The hardest part of this process for many entrepreneurs is to be completely receptive to what customers tell you. Given your passion and all the time you’ve spent on the project, you may not want to hear negative feedback. You may be inclined to think the customer just doesn’t get it. But feedback is the most valuable tool you have as an entrepreneur. So listen, consider, and use what you learn to iterate, improve, or even throw out some of what you have built or planned.

Related: 3 Start-up Funding Tips To Help Launch Your Company

5. Avoid the shiny ball syndrome

As you start developing your MVP, you must fight “feature creep” at every step. You, your team, partners, and everyone else you share your vision with will have ideas about what should be added. While many of them will sound good at the time, they are instead shiny objects that distract you.

Your job is to stay focused on one thing, get it to market and then deliver the next thing. By focusing on one thing at a time, you can get to market quickly, learn a great deal about your product or service from actual customers and make changes based on their feedback And if your launch doesn’t fly, you have significantly mitigated your risk.

This article was originally posted here on Entrepreneur.com.

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How To Launch An Online Coaching Business

Cut through the noise and create a viral product.

Bedros Keuilian

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Work from home? Control your own schedule? Impact people across the world with your product or service?

Internet marketing is on the rise for a reason. It gives you the ability to scale your business to a global level without forfeiting your personal freedom. Still, there’s one question that still prevents entrepreneurs from entering the online space: “Is it really possible to make a living off the internet?”

Not only is it possible, it’s lucrative when done correctly. We live in the Golden Age of internet marketing. Thanks to social media, everyone can get in front of a camera and pitch their idea to the masses. Good enough, right?

Not quite. These days a big idea will only get you started; it’s what you do to bundle and package that idea that matters. Here are the three steps you need to take to launch a profitable online business.

Flesh out your idea

Of course, before you create your product, you need an idea. Your idea must solve a specific problem that a specific group of people face. Make sure you establish that before you move forward.

Now, before you begin creating your product, you need to write your sales copy. Your sales copy (or sales video, if that’s what you prefer) should be enticing enough to take prospects from “I’m interested in this” to “I need to buy this now.”

Related: Paddy Upton: People Centred Coaching

But, why write your sales copy before creating your product? Too many entrepreneurs write copy that promises a lot but delivers next to nothing. When you write your copy before creating your product, you build the blueprint to create a product that satisfies your customers’ needs –without overpromising.

Your sales copy should address the prospect’s problem, explain how your product is the solution to that problem, and include a list of bullet points that summarise the benefits of your product. Make sure you nail the first 500 words – easily the most read section of your sales copy. Finally, always create a sense of urgency or people at home won’t be motivated to buy your product.

People always ask me, “Well, what if I’m not a good writer?” That’s OK. Just say your pitch out loud, record it and send it to an online transcribing service. For a relatively inexpensive price, you’ll get your sales copy written out for you. Just review it, copy it and paste it to your website and boom – there’s your sales copy!

Build the “know, love and trust” factor

Most people believe you need to sell prospects first, then deliver results. But, what if you flip it? It’s much easier to sell someone once they know, love and trust you as an authority in your space, rather than selling them on your product before they even know if you can deliver the results you’re promising.

That’s why the most successful internet marketers – including myself – give away boatloads of free content via blogs and videos. Granted, the stuff we give away for free could easily be packaged together into a high-priced course, but that would be short-sighted. You don’t want prospects to buy from you once and move on – you want them to become long-term paying clients.

See, you deliver free quality content to your prospects, then they take it and implement it into their businesses. They start to see results in advance, which leads them to trust you more and more. Soon, they begin to crave more knowledge from you, and their willingness to pay for your products and services increases.

Eventually those prospects become your most loyal clients. They buy your front-end products, your upsells and your flagship products – all of which I’ll get to in just a second. But, before you get that far, make sure your prospects know, love and trust you before you worry about selling them anything.

Create your front-end product and upsells

Once your copy is written and you’re building the know, love and trust factor, your next move is to create a front-end product – a product that’s easy to sell. This could be an ebook, a membership site or a course that comes with follow-along videos.

Now, you might be tempted to charge a high price for that product. Here’s the thing: Most of the money is made on the back end. I’ll talk more about this in a second, but for now just remember that the front-end product is not the final product you’re really trying to sell them. I – along with many of my fellow internet marketers – don’t mind breaking even or losing money on front-end products because I know I’ll more than make my money back with my flagship product.

Instead, your aim should be to use that front-end product to upsell them instead. So, after they purchase your front-end product, offer them three different upsells. An upsell is a higher-priced product or service you offer a customer after they’ve bought something from you. These upsells should be done-for-you, and they should enhance the front-end product by making it easier to understand or more efficient at getting results.

Why are upsells so important? Besides adding value to your front-end product, you’ll be able to recruit more affiliates to promote your business. An affiliate promotes your product to their own audience for a commission fee. If you make money through upsells, affiliates will choose to work with your business over your competitors because you can pay them higher commissions. The payoff? You get more traffic going to your webpage and ultimately more bottom line revenue.

Related: 6 Questions You Should Be Asking When Coaching

Move them to your flagship product

That’s how you set up the front end of your online business. But, what about the back end? Remember I said that most of your money will be made on the back end and not the front end?

That’s why you need a flagship product to pitch your clients once they’re done with your front-end product. But, what in the world does a flagship product look like?

It could be high-end coaching sessions. It could be a spot in your exclusive mastermind group. It could even be a suite of software that teaches them everything they need to know about their industry. The front-end product is a way to get your clients through the door; your back-end product is the money-maker product, the one they’re more likely to buy once they’ve already purchased something from you.

I’ll give you an example. People will often find my products online. Usually when they finish using those products, they’re still hungry for more knowledge and advice. At this point, they’re considered qualified leads for my mastermind program, so we make sure they know about that programme and how to become a member of it.

That leaves you with one problem: How do you send marketing emails to every single person that buys your front-end product/upsells? It’s basically impossible, unless you’re in front of your computer screen 24/7 (which I’m sure you’re not). Fear not, because it’s actually easy to do when you use an auto-responder system to send out all those emails on your behalf.

It’s simple: When your clients purchase your front-end product, the system automatically sends them emails from you. That way, you can build a sequence where you give away even more of your best free content before sending them an offer for your flagship product. By the time they get to your flagship product, they’ll be so confident in your expertise and results that they happily pay the higher price for your higher level of service.

That’s the simple science behind converting your prospects into clients, and your clients into fiercely loyal clients. It’s how you sell your highest-priced online programmes without running into any of the typical sales objections. Follow these three steps and start building your own online business empire today.

This article was originally posted here on Entrepreneur.com.

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