Week 7 - Incremental Gains

Growing your revenue and profitability can actually be easy if you focus on exponential rather than linear gains. What this means is that you focus on multiple avenues of growth which combine to produce a much greater result than single, isolated campaign you might run from time to time. For example, a business owner I know just declared that he is going to double the number of customers coming to his business over the next year. Naturally I feel that he faces a big challenge; the business is already running at or near capacity with the staff and resources he has, so creating and then coping with twice the work will be a daunting task indeed.

Rather than focussing on simply doubling the number of customers, why not look for a small gain in a few key areas? As every business is different in some way, you can probably think of many things that could be improved. For the purposes of this exercise, I will focus on five areas which apply to nearly every business.

1. Number of Leads – The number of phone calls or visits generated each year by your marketing

2. Conversion Rate – the rate at which you convert prospects into actual customers

3. Average Value of Sale – the average amount that customers spend with you each year

4. Number of Visits per Customer – the average number of times per year your customer purchases your service or product.

5. Your Margins – the gross profit you make on the service or product you provide

At this point, don’t worry how you would achieve these gains. You should focus on the impact of increasing each of these areas 15% during your next year of business. If last year you repaired 200 cars, can you see yourself repairing 230 this year? If you filed 600 tax returns for your clients last year can you increase that to 690 this year and increase your fee by 15%? Take a look at the following table and the effect that these gains can have on your bottom line: