In this economy, do we need to be on our game more or less? It’s a rhetorical question, we all know the answer is more.
Brad Sugars’ five ways to grow your business may be the thing to help your business to grow and develop. This model focuses on leads, conversion, transactions, average sales and margins which can increase the number of customers, revenues and profit your business will see as Professor Profit demonstrates below.
We work on these five areas all at once to create maximum efficiency and synergy. An example of working with this model would be your business had 4,000 potential customers last year (leads), of which you sold 25% of (conversion). You would have 1,000 customers. Let’s say that these 1,000 customers would come back twice a year (transactions) and would spend £100 every time (average sales). Your total revenue would be £200,000. With a 25% margin, your total profit would be £50,000. For each year what we would do is work on improving these five areas to make them 10% better.
How we would start on this plan is with your margins. We work on margins first because you need to have base profit before you worry about fixing anything else. If you are already running at a loss and manage to double your leads and customers, you will be running at a bigger loss.
Leads. We would measure how many customers are already coming through the door and how they found out about your business. By finding this out we can start to work on strategies to improve this area.
Next, we would look at conversion. How many of your potential customers are actually buying your products? Even just by measuring your conversion, it can start to improve, as you are focusing on it and are more aware.
Continuing on, looking at transactions. How many of these customers are buying from you? Do you keep a database of all previous customers and keep in touch with them? By keeping in touch with your customers you increase the chance of them coming back. Your next best customer is the one you bought yesterday. They like you, they know your rates, they know where you are.
Finally onto average sales. The best method here is “the McDonald’s method”, asking would you like something else on top of that. 3 out of 10 customers will say yes to that, which is about £3 extra profit, multiplied by the thousands of customers they have daily. At McDonald’s, that question is “Would you like fries with that?”, for a lawyer that could be “Does your will need updating?”. Together we could find what that question is for your business.
So back to that example, it’s been a year and you’ve improved your five areas by 10%. You’ve had 4,400 potential customers this year (leads), of which you sold to 27.5% (conversion). You would have 1,210 customers. Of these 1,210 customers would come back 2.2 times a year (transactions) and would spend £110 every time (average sales). Your total revenue would be £292,820. With a 27.5% margin, your total profit would be £80,525.50. That’s an increase of 61% and who wouldn’t want that?
If you have found this at all helpful and would like to find out more, click here for a free coaching session.
