It’s true. There are 4 fundamental ways to grow your business:
- Increase the number of customers (of the type you want)
- Increase the transaction frequency
- Increase the transaction value or 'average sale'
- Increase the effectiveness of each process in your business
If you're at all skeptical about whether there really are just 4 ways (obviously with multitudes of strategies under each) think of a strategy to expand your business - any strategy - and you'll find it very probably falls under one of these 4 areas.
Conversely, think about a strategy like 'cutting costs' - realistically that won't expand or grow your business unless you use the money you save to promote your business. It may let you control your business better and return greater profits, but it won't help you to actually grow your business.
1. Increase the number of customers (of the type you want)
If you're like most business owners, your primary focus will be on the first way to grow your business - winning new customers. You may have often thought 'I need more leads', 'I've got to get more inquiries', 'if I could just get the phone to ring and more people to walk through the door we'd be doing really well' and so you invest heavily in advertising for instance. Often there are other ways to win increased sales that don't cost nearly as much and usually those strategies go untouched.
Focusing on this way to grow your business is often far more expensive and the least leveraged. It costs up to 6 times more to win a new customer than it does to have an existing client do more work with you, and that directly affects your profit potential.
The team at Larry N. Harrison & Co. will work with you to find other leveraged ways of winning new customers and show you how to improve the advertising you are doing. They will make sure you're winning the right type of customer - someone who's 'qualified' to buy from you! They'll also work with you on the 3 remaining ways to expandbusiness so you're maximizing all of your opportunities rather than focusing on just one way to grow.
2. Increase the transaction frequency
Increasing the 'transaction frequency' - or the number of times someone deals with you - is an important step to increasing your profitability. In fact, some scholars say this second way is the most important of all. It's a fancy definition of loyalty, or customer retention, which in and of itself is closely related to value.
An author named Frederick Reichheld has done extensive work on the subject of customer retention. It was most recently captured in his brilliant book, 'The Loyalty Effect'. Reichheld discovered that a 5% increase in retention (of the right customers) can produce as much as a 125% increase in profit. He didn't say a $5,000 or $50,000 investment in marketing can produce a change of 125% in profits. He said just a 5% change in retention of the right customers.
Staggering isn't it? And, of course, you effect loyalty by delivering value and by nurturing your customers. The team at Larry N. Harrison & Co. knows how to develop your customer targeting and retention strategies.
You'll be able to use the 'Profit Calculator' to find out the effect on your business.
3. Increase the transaction value, or 'average sale'
This is a 'Blinding Flash of the Obvious' or 'BFO'! However, few businesses realize its importance (in fact, they do the exact opposite).
There are two fundamental ways to increase the average sale. First, by 'cross selling' or 'up-selling'. Both mean you encourage the customer to buy more. The team at Larry N. Harrison & Co. can teach you how do to this in a systematic fashion so it happens every time and adds value to the customer.
The second way to increase the average sale is to raise your prices. When you suggest "raise your prices" to the average business person they think you're crazy, but when you sit with your team from Larry N. Harrison & Co., we'll guide you through what's called "The Margin Chart". It shows the direct relationship between 4 key variables in your business - price, volume, fixed costs and variable costs. You'll be amazed at the possibilities!
To grasp the possible effects on your business of increasing the average sale, you'll be given an opportunity to use the 'Profit Calculator' soon!
4. Increase the effectiveness of each process in your business
The fourth way to grow your business is more of an all-encompassing strategy than the other 3 ways. You see, increasing the effectiveness of the way you do business is central to everything, but so few people work at it.
When you think about it, a business is nothing more than a group of people carrying out a variety of processes - the quality of the processes defines and determines the quality of the outcomes. Makes sense doesn't it?
So, going back to the example earlier of a business owner needing 'more leads', we might discover that in fact, the business doesn't need any more leads, rather to convert more of the ones they're already receiving! That's a sales 'process' that needs improving.
Truth is, most people don't see their businesses as a series of processes. That's exactly what they are, so we'll look at exactly what results your current processes are generating and see if we can't improve those!
Find out what potential your business has for increasing revenues and profits by visiting the Profit Calculator area.
