Three Ways To Grow A Business Model

The model I want to introduce you to has developed by marketing great Jay Abraham …and is called the Three Ways To Grow A Business.

Jay Abraham is one of my favourite business gurus. I give a huge recommendation to his book “Getting Everything You Can Out Of Everything You’ve Got” and his Nightingale Conant audio “The Mastermind Marketing System”. (See Resources)

For many years he has been known as the world’s most expensive marketing consultant …on a combination of high hourly rates and a reward fee based on success.

He’s also had many of his ideas adapted by others without credit so you may think this sounds familiar.

I want you to be able to go back to original sources when you want to.

The Three Ways To Grow A Business model focuses on the sales or revenue drivers.

There are only three ways to grow a business…any business:

  • To increase the number of customers
  • To increase the number of times the average customer buys
  • To increase the average transaction value of customer.

Previously we talked about Sales being volumes sold multiplied by price.

Now we are breaking down the volume into more detail.

When you think about wanting your business to grow  it’s very natural to think about finding more customers.

The other two ideas, increasing the number of times a customer buys and increasing the amount they spend are often neglected but represent hidden profit opportunities.

It is said that it is between 500% and 1,000% easier and cheaper to sell to an existing customer who already trusts you than to persuade a new customer to buy for the first time.

That sounds right to me, both as a marketer and a buyer.

Our aim will be to work on all three of these factors so you can create exponential growth.

Three Ways To Grow Numbers Example

It’s time to look at an example.

Imagine we have 200 customers who buy 4 times per year and spend £300 each time.

We can calculate the Total Sales

200 multiplied by 4 multiplied by 300 = £240,000

If the business runs an advertising campaign to increase the numbers of customers by 10% we would have

220 customers multiplied by 4 multiplied by 300 = £264,000

Increase any single factor by 10% and the total increases by 10%

If you increase all three by 10% things get interesting.

That’s 220 customers multiplied by 4.4 transactions multiplied by £330 average value we get a new total of £319,440…a 33.1% increase.

This is the compounding effect or what Jay Abraham calls geometric growth or exponential growth.

It’s more impressive if we look at increasing everything by 20%.

That gives us:

240 customers multiplied by 4.8 transactions multiplied by £360 average value

A total of £414, 720 or 72.8% growth

See what I mean?

And when was the last time you put together a strategy to get your customers to buy more in a transaction or to buy more often?

Return to P1M4 Four Ways To Increase Profit

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