3 Keys to Revenue Success
Tim Ferris wrote an interesting book called the Four-Hour Work Week. The premise was, if you streamlined things enough, you could reduce your work week to four hours and still make the same – or more – money. While this is a great title for selling books, the reality is your chances of being successful in either area is very small. The only way a four-hour work week makes sense is if your competition is only working two hours. If your competition is putting in 70-80 hours a week working on their business, you’d better be re-thinking the four-hour work week strategy. At the same time, you can’t get stuck in the idea that the only way to increase revenue is to work more hours or to work harder. Both of those are really good ideas, but at some point, you must also work smarter. I think the last few years have proven that working harder cannot be the only strategy.
Know the Ways
The first key to increasing revenue is to understand that in ANY business, there are only 3 ways to increase revenue. Here they are: 1. Increase the number of customers, 2. Increase the price per customer, and 3. Increase the number of times a customer returns. That’s it, there are no other ways.
Revenue vs. Profits
It’s important you understand this newsletter is not on increasing profits. There are other ways to do that. You should never mistake revenue with profits. That may sound self-obvious but it is amazing how many times people do just that.
Applying the Ways
If you could increase your number of customers by 10% and increase your revenue per customer by 10%, how valuable would that be? Would that increase top line revenue by 30%? Let’s look. For simplicity sake, let’s say you see 100 patients per year with a revenue of $100/per patient. 100 x $100 = $10,000. If you increase each by 10%, you would then have 110 patients per year with a revenue of $110/per patient. 110 x $110 = $12,100 This equates to a 21% increase in revenue. Would that be worth your time and effort? If you simply increased the number of new customers by 10% and the dollar per customer by 10%, knowing it would equate to a 21% increase in profits, would you focus on doing that?
The Key to Growing Your Business
Here’s the most important part of the three ways to increase revenue. In fact, It’s the key to your business’s success in growth. It is harder to quantify, but it is the most important thing to be spending your time and money on. What’s funny, most people only focus on the first one … bringing new customers in the door! Don’t believe me? Do a quick search on the internet and you’ll find lots of articles on “How to Attract the New Customer” or “The Best Way to Market” or “How to Pimp Your Website” or “Creating Brochures that Sell”. The list really goes on and on. It’s fun to network at functions, create new marketing campaigns, and learn how to improve your SEO! I love it! I am not for a second downplaying the importance of getting new customers. I am a big fan of all of them. I am not, however, a fan of thinking that is all that is important. You have to be thinking about number 2 and 3 on the list as well. What is your plan for improving those? My recommendation for you is to sit down with your team and devise a plan for increasing each of the three Keys to Revenue Success by 10%. Don’t over focus on one and don’t neglect any. They are all important.
Living Every Minute,
Dr. Tim