It may sound a little simplistic, but there really are only 4 fundamental ways to successfully grow your business - in other words to make it more valuable:
- Increase the number of customers (of the type you want to have);
- Increase the number of times customers come back;
- Increase the average value of each sale;
- Increase the effectiveness of each process in the business.
It's interesting to contemplate the fact that all of the business development strategies you might implement will fall into one of these 4 categories.
Any other strategy that does not belong in one of those 4 ways, for example cutting costs, may help you temporarily, but it won't grow your business. Cutting costs won't make your business more valuable unless you turn around and re-invest the money into one of the 4 ways.
These 4 ways work best when used together in an overall strategy, but the mistake many companies make is to focus on just one of these 4 ways, and thus miss out on significant growth opportunities. In particular, many business owners focus on winning new customers, often ignoring the other (often less expensive) ways to grow their business.
Let's look at an example of how the 4 ways can work together for you.
Let's say you have a customer base of 1,000.
1. You are able to increase the amount of inquiries (and thus new customers) by 10%. This means your customer base would increase to 1,100.
2. You are able to increase the number of times each customer purchases from you during their lifetime by another 10% (e.g., from once to 1.1.)
3. You manage to increase your average sale (or transaction value) by 10%, taking it from $100 to $110.
4. And improvements in your business processes have allowed the first 3 increases to occur.
Sooooooo, assuming everything else is equal, does it make sense to say that overall business would grow by 10%?
Well simplistically it looks like the business grows by 10% BUT something completely different happens.
When all 4 areas are increased by 10%, it has a multiplier effect of 33.3% - or $33,100 more income!
ie. 1,100 x 1.1 x $110 = $33,100
That's a pretty dramatic effect on the bottom line for a relatively small increase in each area!
For a handy reference diagram on the 4 ways to grow your business, just click here.
And if you'd like to hear more details about the 4 ways to grow your business, click here for a recording of my most recent "You & Your Business" radio segment on 98.1 Radio Eastern (or ask me about a one-on-one session to help identify the 4 ways you could grow your business.)