Let me ask you something… Aside from the dead give-away coming from the title, how many ways do you, or did you, think there was to grow a business? Any business.
1? 3? 10? 150?
When ever I ask this to an audience I get countless people shouting out a variety of answers ranging from 1 to, well, unlimited.
It’s true… People actually think there are “unlimited” ways to grow a business!
Truth be told, there are only three ways to grow and business.
THREE?! Have you lost your mind?
Nope, and I welcome you to challenge that.
There are only THREE ways to grow ANY business.
Here they are:
First, you can increase the amount of clients you have.
Second, you can increase the size of the transaction.
And third, you can increase the amount of transactions that occur per year.
When you apply pressure or focus on all three of these ways to grow your business, you can grow GEOMETRICALLY, anything is linear and limiting.
Let me explain…
The sad truth is that most people focus primarily on number 1, growing the client base, without realizing that this is by far the slowest, most expensive and time consuming method there is, and is very linear.
Often, the cost to constantly acquire new clients is high, and usually doesn’t become incrementally MORE profitable as the business grows because, unless the business is under-performing, typically the overhead goes up alongside with the increase in clients. If you had 10 clients and running at max capacity, and you add 10 new clients, you need more staff, products, staff, etc.
Let’s play this out…
Let’s say you had 100 clients, and those 100 clients purchase once per year, and they spend 100 bucks. (Just to keep the math easy!)
100 clients x 1 per year x $100 = $ 10 000
So 100 clients spend 100 bucks with you once a year, you’re bringing in 10K.
Now let’s say you bust your butt and generate a 10% increase in your client base, so now you have 110 clients. Of course, for this example we’ll assume you didn’t lose any of those original 100. (a joke, I know, but that’s okay)
Now your business is doing…
110 clients x $100 x 1 year = $11 000
10% increase right? Seems pretty good?
But that’s a hard, slow approach. And expensive. I mean, when your business is new, just starting off and still in its infantile stages, 10% increase may not seem that tough, but that’s because a new business picks off the easy, low hanging fruit. Once all the easy clients have come and (hopefully not all) gone, that’s when we find out what it really cost to bring in a new client.
So bringing in new clients is by far the most expensive method of growth. (and there’s nothing wrong with that… )
But what if we took that same 10% and applied it across the board. What if you not only increased your client base by 10%, but you added a 10% increase to each transaction (you can raise your prices, bundle in related product or services, etc.). And let’s be honest, most people can raise their prices 10%. (more on that later)
So now we have…
110 clients x $110 per person, x 1/year = $12 100
That’s an extra $2000 a year without any extra effort.
But let’s take this even further…
What if you convinced them to make a purchase twice a year as oppose to once per year…
110 clients x $110 per person x 2/year = $24 200
Now we’re talking.
Now, don’t get me wrong, I’m not naive enough to say it’s that easy. I get that this is just math and there are a million and one things that could change this formula and it’s success. BUT, to discount the fact that most people only focus on growing the client base and nothing else would be foolish.
It all boils down to what kind of lifestyle you want…
If you want to spend every day going out and getting new clients, and that makes you happy, go nuts.
Or, if you’re like some of my clients who, maybe for personal or family time, want to work LESS, there’s lots you can do! For example, I’ve had clients RAISE their prices by 80, 100, 250% (Yes!), lose half their clients which means less overhead, less work, less time, and end up making MORE money.
The beauty of business is that you CAN choose and design life on your terms.
Of course there are a million ways to increase your client base, there are a million ways to increase the size of each transaction, there are a million ways to increase the amount of times they transact business with you, but at the end of the day all of business boils down to three basic things: clients, size of purchase, purchases per year.
Clearly, we’re always talking average, or even below average figures to be conservative (it’s always better to be surprised on the upside not downside), but what if…
If you own a restaurant, you have 100 clients spending 50 bucks a meal coming in twice a year… and you got those same clients to spend a few bucks more each time, or come in two extra times?
If you own a fitness studio and you got your clients to invest in an added, specialty program and running it twice per year above their regular membership.
If you own a hair dresser and your clients come in on average once every 3 months but you got them to come in every 2.5 months instead, and upsold them a wash or color or product each time.
If you’re an independent sales rep and had 100 clients ordering twice per year, you can spend all day trying to get new clients, or give your existing clients reasons to buy three times per year.