How to grow your business – Is there a ‘magic’ way..? No, not really, but very often the apparent way is ignored or misunderstood. For years, I’ve used and taught a simple formula to massively drive growth in any small business that I’ve owned, or helped. I adopted this simple method from the fantastic book Getting Everything You Can Out Of All You’ve Got by Jay Abraham. His simple formula is the basis of this post.
Interestingly, those business owners in the category of small to medium enterprises (SME’s) seem to embrace this formula far more natural than those “big business” owners who have been in business a long time.
So what is this simple formula…and why am I sharing it?
Since real business knowledge is one of the critical elements of business success, therefore, the more experience I can offer to help you help yourself how to grow your small business. Then, the more open you will become with the concept of lifecycle marketing and my consultancy services.
How To Grow Your Business – The Formula
So, what is this actual business growth focused formula?
While most business people see their business growth based on revenues, my clients understand underpinning their business growth is three separate revenue drivers.
So, what are these business growth drivers?
- The number of your Clients/Customers.
- Average transaction value per Client/Customer.
- The average number of transactions of your Clients/Customers per year.
So, how does this all relate to your revenues and how to grow your small business?
Let’s look at a simple example.
But first, let’s get familiar with your numbers. Consider the last twelve months, and.
- Calculate your number of Clients/Customers.
- Work out the average amount they spent on each transaction.
- Determine how often they came back and spent more, in the year.
Rather than complicate things, let’s keep it simple and say you have 1000 customers. And, they spend £100 on each transaction. Additionally, they buy on average twice per year.
So now, here’s where the maths come into play.
# Clients/Customers x (times)
Average Transaction Value per Client/Customer x (times)
Average # Transactions per Year
(Equals) = Revenues
Remember, this formula multiplies factors, not adds them.
So, to grow your small business, there are only three strategies to consider:
- Increase the number of customers you get.
- Raise the average transaction value per client/customer.
- Improve the number of times a customer returns to buy again.
Then, what would happen if, over the course of the next year, you could improve your results in each of the three revenue driver areas? Imagine for a moment; you were able to increase all your numbers by 10%. As a result, how would that small increase reflect in this example?
Remember, this formula multiplies factors, not adds them. The cumulative impact on your revenues is massive.
How a 10% Increase Across The Board Becomes an Increase in Revenues of £66,200 or 33.1%
Furthermore, scrutinise these numbers, and you’ll see the 10% increase is incremental – which means, with some focused effort you could easily nudge your numbers up by that amount over a period of months. – Or even weeks.
The main point is that the new revenue line looks fascinating. Doesn’t it? Although we’ve increased each factor by only 10%, we’ve managed to boost bottom-line revenues by 33.1% – or a total £66,200.
Pause for a moment and consider, what could you do with an extra £66,200 in your business?
You think 10% is impressive?
Here’s the impact of a 25% increase – Almost Double.
Do some maths of your own and see what your numbers look like if you grow 30%, 50% or even 100% in each area. Remember you are multiplying factors, not adding – which has a massive impact on your revenue.
This approach to growing your small business isn’t a complicated numbers game. It’s only looking at your business differently and working a set of numbers that exist in every market, in every industry.
You’ll be pleasantly surprised how measuring your numbers is easy to do. And you’ll be more than happy with the ultimate results.
How to Grow
Your Business – It’s Not About What You Know
Right so, you’ve read the theory. It’s not about what you know. It’s what you DO with what you know that makes the difference.
Are you prepared to put the effort in and put what you now know into practice?
Ok, Let’s Make a Start
Example: How to Grow Your Business
As a result, of their mindset, an entrepreneur focuses ON growing their business. But, most business owners’ focus on surviving IN their business.
Therefore, if you’re IN your business the majority of your time I guarantee you are missing opportunities right now.
Incidentally, when I work with clients to help them grow their business, there is a golden rule – A rule that I insist they follow. Measure the numbers. So, if you don’t measure your numbers – do that first. Because you can not manage what you don’t measure.