1. Increase your customers
Increasing your customer base by as little as 5 per cent can have an extraordinary impact on your business. Think about how many more customers you could attract. Try to come up with a realistic target.
2. Increase buying frequency
If your average customer buys from you twice a year, how can you increase this to three times a year? Think of ways that you could encourage your existing customers to buy from you more often.
3. Increase the average value of each sale transaction
If your average sale is $100, how can you increase it to $102? What can you add on to the initial purchase to increase the overall value? Take inspiration from the McDonald’s approach of “do you want fries with that?” What services or products can you bundle together to increase each transaction value?
4. Increase your gross profit margin
Look at your current gross profit margin and ask yourself: how can I make more profit stay in the business? This usually involves improving efficiency somewhere throughout the sales cycle. For example, could you spend less money on marketing and advertising and still generate the same number of sales? Could you use a slightly cheaper supplier and still get the same high quality results? Ask for discounts from your existing suppliers. Explore ways to be more efficient.
Incremental changes make a big impact
Imagine if you increased just three of these factors by a small amount: customers, frequency, and average sale value. The results could be enormous.
For example, imagine you have a business with 2,500 clients that spend an average of $100 per transaction and buy from you twice a year––generating $500,000 of annual revenue.
If you could find a way to increase your client base by 5 per cent, your price by 2 per cent, and your frequency by 2.5 per cent, you could earn an additional $169,000 per year.
|Number of clients||Average transaction ($)||Number of transactions||Total revenue ($)|
As you can see, finding an extra 125 clients, adding just $2 to your asking price, and making a slight increase to the number of transactions can significantly grow your business, in this case by 33.9 per cent.
What about gross profit margin?
Now, take the above scenario and also aim to increase your gross profit margin by just 1 per cent.
Let’s imagine that the starting gross profit margin is 40 per cent––or a gross profit dollar value of $200,000 on $500,000 revenue. If you increase the margin to 41 per cent, alongside the other three changes (customers, price, and frequency), your net gross profit will be $274,000. That’s an increase of 37 per cent, from just a number of changes. This demonstrates the power of 1 per cent changes. Imagine the results if you manage to increase your margin by 2 per cent, 3 per cent, or even 5 per cent?
Tip #1: Make one change at a time
When used together, these four ways to achieve business growth can have an enormous impact. But avoid the temptation to change everything at once. Instead, identify which one or two of these four ways will have the most impact for you.
“If you change everything at once, you won’t know what worked and what didn’t and you won’t be able to learn from your changes,” says Bellingham Wallace Director, Mike Atkinson.
If you change everything at once, you won’t know what worked and what didn’t.
“It’s a bit like car racing. If you want your car to go faster, you make a pit stop, make one change, then go back out on the course and see if it made a difference. If it did, you make another change and see if it makes a further difference. If it didn’t, you try something new. Do one thing at a time, see what works, and then move onto the next thing.”
Tip #2: Focus on what you can change
You might not be able to implement all four changes. For example, if you compete solely on price you probably can’t raise your prices. Focus on what you can change and leave the rest. You don’t need to tackle everything to experience growth.
Tip #3: Set goals and work backwards
A good way to create a business growth plan is to work backwards from an ideal result. Set a revenue goal and then ask yourself the following questions:
- How many customers do you think you could attract?
- How often do you think your customers will buy from you?
- How much money would your customers have to spend?
Do the math until you find a formula that works for you.
Tip #4: Think about ‘how’
“The easy part is identifying what you need to do to grow your business. The hard part is figuring out how to go about it!” says Mike.
“Invest some time into developing a strategic business growth plan. Try to come up with a plan for how you will reach your objectives.”
For example, if you want to increase your customers by 5 per cent, where will those customers come from? What is your customer attraction and conversion strategy?
If you want to increase purchase frequency, how will you convince clients to come back again and again? Will you create a loyalty programme? What incentives can you offer?
An external advisor, such as an accountant or business mentor, can help you tackle these questions, identify opportunities for growth, and execute your ideas.