As I type this, America is in the second calendar year of the COVID Pandemic. It is 2021 and businesses are having to pivot to find steady ground in an increasingly dynamic marketplace. Some gigantic names in industry have closed their doors forever. Some new businesses have rocketed to the forefront. What are we to make of all of this? Is anything predictable anymore? Moreover, what should leaders do to protect the businesses they have worked so hard to establish?
Look around, you will find no shortage of strategies on how to grow your business, it would seem as if there are experts everywhere. In fact, there are so many niche strategies on how to approach your market, the fundamentals of a healthy business can get lost in the shuffle.
Before you shift gears and overhaul your business in a different direction, make sure you are also paying attention to the three fundamental ways you can boost your business.
The Big Three
In any business, there are three basic ways to increase revenue.
1. Increase the number of customers.
2. Increase the price per customer.
3. Increase the number of times a customer purchases.
Revenue vs. Profit
Before we talk about the currency of customer activity, let’s make an important distinction. Revenue is not profit. Read that again.
That may seem like the most obvious statement ever, but you’d be surprised how many people make the mistake of ignoring this distinction. Revenue, or your “top line” is the income your business generates without subtracting the cost of the goods or services you provide.
Profit, or the “bottom line” is what remains of your income after you subtract your costs, debts, etc. Businesses often get into trouble by focusing too much on the former with little regard to the latter. This is a huge liability. I’ve said it many times, “don’t be so busy making money that you go broke.”
If you could increase your number of customers by 10% and increase your revenue per customer by 10%, how valuable would that be? Just how would that increase top line revenue? 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
Most people primarily focus on the first of The Big Three… 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 Emails 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. But it’s five times more costly to attract a new customer than to leverage one that you already have. Your sales chains need to have scope, run deep and provide multiple levels of value to prospective clients.
The real key is monitoring what components of your business are working well and what needs work. Set a goal to continually improve new customers, customer purchases and customer return visits by 10% and spend your time growing to that.
Continue to monitor your particular industry and market, watch for trends and look for ways your business can pivot and funnel them through the three endeavors I mentioned above. But always act with discipline considering The Big Three. Do that, and you can’t go wrong.
Living Every Minute,