How to Grow Business Profits Geometrically

When I talk to business owners and look at the growth plans for many businesses, I usually see one fatal theme running though many of them … they are trying to grow linearly.  That means their planning is narrowed to one area of growth such as always wanting to add new customers.  That’s not a bad thing but it is expensive, and usually slow.  There are better ways to go about the business of massively increasing profits.

If you look “under the hood” of my successful business coaching clients you would see their plans and subsequent actions leverage many of the 5 sources of geometric profit growth.  I originally learned about the “5 Ways” more than a decade ago from a book called “Instant Cashflow” by B. Sugars (we have some available from our office or checkout Amazon) and I have continually shared and implemented them with clients since then.
These 5 sources of geometric growth are:

  • Leads – These are the total number of people who you contact or contact you.  This is the only one many people utilise but it is the most expensive in most cases. Typically is centralised around advertising online/offline, telemarketing, flyer drops etc which result in some sort of action or response.  Getting referrals and referral transactions is my favourite strategy set for this area. There are many methods for obtaining names of potential customers from current customers.  I recommend employing several methods at the same time, letting their customers know the importance of referrals, the generously rewarding them when a referral turns into a customer.
  • Conversion Rate –  The percentage of those who bought against those who could have bought (ie. 2 out of every 10 leads bought is 20%).  This is one of the first that I start on as it is usually one of the cheapest and easiest to implement. It could involve training the sales team to sell or teach them more about their product, measure leads and conversion rate by salesperson (This one alone will normally get 15-20% increase sales within a few months).  Look for ways to make it easier for the client to buy with guarantees, finance, better, faster processes.
  • Number of Transactions – The frequency of purchases or the number of times they buy from you. (ie. Do they buy from you weekly, monthly).  The goal here is to lift the number of times that you can get them back to buy again at the same or more each transaction. The key here is follow-up leads to repeat sales, which as we know cost one-sixth as much as first time sales.  Nobody knows your benefits as well as your past customers.
  • Average Dollar Sale – On average what is the dollar value of a sale.  The quickest way to work this out is to divide your total sales by the number of invoices generated or cash register transactions.  Even increasing this just a few dollars can make a big difference at the end of the year.  Success can be achieved here by simply raising your prices, packaging your offerings, selling greater quantities and focusing on your highest profit items.
  • Margin –  This is the percentage of each and every sale that’s profit (ie. If you sold $100 and you made $25 profit that’s 25% margin). Remember: This is after costs are taken out. This is another favourite area for quick results.  You can increase your margin by lifting your sale amount and/or lowering your costs. Raising prices is an obvious and simple strategy (but emotionally challenging for many business owners).  Reducing costs of overhead/burden and your product will usually produce results.  In most businesses your two biggest costs are generally your products and labour. Obviously you should negotiate better on your inventory.  I don’t generally recommend cutting heads, but I do recommend getting more from them.  Just fifteen minutes of idle time each working day adds up to one and a half weeks lost productivity per year, you lose 6 weeks productivity if your team are losing one hour per day.  Image how your margin would be if your team worked for 6 weeks per year for free.  Reclaim that idle time and turn it into a better margin for your business.

Even if you only increase each of these sources by just 10% then the geometric effect of compounding will be an increase of 61% in your bottom line (ie 1.1 * 1.1 * 1.1 *1.1 *1.1 = 1.61).
There are literally hundreds of ideas you could implement to increase each of these 5 areas in your own business.  The book “Instant Cashflow” listed well over 300 and I’m sure there would be a lot more if you included all the things you could do on the web now.
So my call to action today is;
get the book, get a coach, get your plan done, get cracking.

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