Is there a ‘magic’ way to grow your small business..?
No, not really, but very often the obvious 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 easier 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 key elements of success, therefore, the more experience I can offer you, to help you help yourself how to grow your small business. Then, the more open you will become with the concept of Business Coaching.
The Grow Your Small Business Formula.
So, what is this actual business growth focused formula?
While, most business people see their business growth based on revenues. My clients see their growth based on three separate revenue drivers.
So, what are these drivers?
- The Number of your Clients/Customers.
- The 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 your number of customers.
- Increase the average transaction value per client/customer.
- Increase 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, examine these numbers carefully, 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? Even though 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 this year?
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 in a different way and working a set of numbers that exist in every business, 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.
However, To Grow Your Small 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? As a result, the Entrepreneur mindset focuses ON building the business. But, most business owners’ focus on surviving IN, therefore, if you’re IN your business the majority of your time I guarantee you are missing opportunities right now.
Start on growing your small business TODAY!
Incidentally, when I work with clients, there is a golden rule – A rule that I insist they follow. Measure the numbers. “You can’t manage what you don’t measure” & “The Numbers Tell the Story.”
In conclusion consider these four questions:
1. Do you know where you want to go?
2. Do you fully understand where you are right now?
3. What needs to be done to get where you want to go?
4. Are you totally committed to time you are going to do it?