Digging Deeper Into The 3 Ways To Grow

The three ways to grow a business are simple – more customers, more transactions and a higher transaction spend.

But let’s dig a bit deeper into these drivers.

The number of customers you will have next year is made up of:

  • The number of customers you have now
  • Plus the number of new customers you attract …and
  • Minus the number of customers you lose.

Customer satisfaction and retention is covered in Pillar 6 and there is a Hidden Profit bonus module on reviving old and lapsed customers.

So if you want more customers, you should be thinking about customer acquisition and customer retention.

Focusing on one without the other is like trying to fill a bath with a leak.

The more you put in, the more that escapes through the hole.

If we  go deeper into the drivers of new customers, we can see it’s a combination of the number of leads you attract …and the proportion of leads you convert.

In the Eight Pillars Of Business Prosperity, Pillar 4 will help you to attract more leads and Pillar 5 will help you to convert more into paying customers.

The other driver I want to draw your attention to is the value of transactions.

In some businesses, first transactions can be similar values to later transactions – a travel agent won’t have a pattern but a mix of long holidays and short breaks as the first purchase.

Other businesses may start with a big transaction and then go small or start small and then go big.

Thing of a car, the dealership receives a lot of money when the car is bought but the later servicing costs are much smaller.

Consultants can work the other way around.

A client may have a small trial project to start and then when the consultant is proven, have a much bigger project.

In cases where there is a clear pattern, it can be worth splitting your business model to stop you getting your statistics confused by having an unusual proportion of new customers.

For other businesses, it’s best to keep things simple or even apply the model on a customer by customer basis if you have a very small number of big customers

This Three Ways To Grow A Business model has been very influential and it underpins many of the business development programs I’ve seen.

My only criticism is that it focuses on top line sales growth and not profit growth.

We saw from the what-if examples in the last module, we can’t assume that just because Sales increase, profit will increase.

Return to P1M4 Four Ways To Increase Profit

(If you don’t want to go back to the main training module but want to check on the changes made to create the Four Ways To Increase Profits see this summary which repeats information from the main training module.

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