You know, if you think about it, there are really just four ways to grow your business. The four ways are:
1. Increase the number of customers of the type you want to have
2. Increase the number of times customers do business with you
3. Increase the average value of each sale
4. Increase the effectiveness of each process in your business.
That’s it. There are no more.
These four factors will give you critical focal points for your business. When combined together, they also give you leverage. For instance, given that you could increase each one of the factors above by just 10 percent (not too difficult a task), the total combined effect of that is an impressive 46 percent increase in your business.
For example, creating better scripts for incoming phone calls (improving effectiveness) might have a profound effect on the number of new customers your business creates.
That in itself is an interesting example. You see, when you ask most business people how they can increase their number of customers, they believe better advertising is the way to go. Yet unless you maximize the effectiveness of the processes in your business, you might be missing a big opportunity. Let’s explore this a bit.
Suppose you were in a business where the majority of your sales came from phone calls. Further suppose that you wanted to double your sales. And assume you knew that your conversion rate (the number of actual sales you get per 100 calls) was 16 percent. Then, given that you could not change the effectiveness of your advertising, all you need to do to double your sales is to double your conversion rate. You might do that by training, by having much more effective scripts in place, and so on.
Clearly, this strategy, which concentrates on the conversion rate (increasing your effectiveness), is likely to cost far less than doubling the number of advertisements you run. Not only that, but there is also another benefit. Let’s say your current advertisement produces 100 prospects and that you convert 16 of them. The likelihood is that you will turn away those remaining 84 (that is, the group of people who will most likely not deal with you again).
So, as perverse as it may sound, if you double the effectiveness of your advertising without changing the conversion rate, you’re actually creating 168 people who will not deal with you now.
That’s why it’s critically important to always look at the total process by which your business is creating sales!
Paul Svendsen, CPA can be reached at 389-4740 or PaulSvend@aol.com.