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3 Ways To Grow Your Business - a Powerful Formula for Growth
By Haydn Rowe
The three ways to grow your business formula was developed more than 20 years ago by one of the original founders of The Results Corporation, Paul Dunn.
Much copied and even sometimes modified, this simple yet powerful business growth formula has withstood the test of time and is an excellent tool for quickly identifying the best, quickest, most effective ways to grow your sales revenue.
The Three Ways to Grow Your Business Formula
There are only 3 ways to grow your business and increase your sales revenue.
1. You get more clients or customers
2. You increase the average value of an order or invoice
3. You increase the frequency of purchase - you get your clients
buying more often
Today, your sales revenue is already a function of this formula...
Clients x Value x Frequency = Sales Revenue
For example, if you have 1,000 clients, who on average spend £1,000 per order and who on average order twice per year, your business will have a revenue of £2,000,000.
Clients x Value x Frequency = Sales Revenue
1,000 x £1,000 x 2 = £2,000,000
The numbers for your business will be different, but whatever your numbers when you multiply your number of clients, by your average order value and your average purchase frequency - the sum will match your current annualised sales revenue.
So, how do you use this to grow your business? The first step is to examine the effect of applying an increase in each area of the formula. In this example we will assume that you can increase your clients, value and frequency by 10%...
Clients x Value x Frequency = Sales Revenue
1,000 x £1,000 x 2 = £2,000,000
10% 10% 10%
1,100 x £1,100 x 2.2 = £2,662,000
The net effect is not a 10% increase in your sales, but because of the compounding effect an increase is sales of 33.1%!
For you, if you have a new fast growing business in a new industry, 33.1% may be way too low. On the other hand, if you have a well established business in a mature industry, 10% may be more than you can handle. Whatever your ambition level, the formula will work and you can plug in your own growth percentages.
Let me explain how to relate this formula to the specifics of growing your business and why this formula is so powerful.
In addition to the dramatic compounding effect as explained above, the formula forces you to consider more ways to grow your business than just getting new customers. Whilst almost every business needs new customers, most instinctively always drive for new customers as the only way to increase sales revenue, ignoring the vast untapped potential of existing clients.
When you consider that existing clients are 5 to 7 time more likely to buy than the cold market, are easier to sell to and the "cheapest" market for you to sell to - you can see the mistake most businesses make, and the opportunity open to you.
And one final point. As I point out in seminars, you should NOT look for one way to get 10% more clients, another way to get 10% more average value and another to get 10% more purchase frequency.
Rather, break it down to bite sized, achievable chunks. Over the next twelve months, find...
5 ways to get 2% more customers (for example from Pay Per Click, Yellow Pages or Quotes)
4 ways to get 2% or 3% more value per order or invoice (for example by avoiding Discounting)
3 ways to get 3% or 4% more purchase frequency (for example by Thanking and Selling More to Clients)
This means you just have to find one 2%, 3% or 4% improvement each month - easily achievable even when you are running a busy and demanding business and when you begin testing and applying the strategies outlined in the articles you can find in Results Academy and in our free Newsletter, Results Report.
To find out how Results Corporation can help you get more for your business, contact us online or call us on 01933 373000.
To read more articles related to this go to Marketing Foundations.
You will also find other useful articles in Generating Leads, Online Marketing, Converting Prospects, Increase Average Transaction Value and Increase Purchase Frequency.