There Are Only 3 Ways To Grow Your Business
As a business owner, running a business can at times seem complex. It feels like there are hundreds of different strategies and tactics that we could be using to grow and develop our business.
The problem is, it can all begin to feel overwhelming with the result that, at times we all end up thinking: “Where on earth do I start?”
But according to Jay Abraham the well-known American marketing guru there is some good news.
Growing a business is not as complex as you may think – and as Jay Abraham points out, there are in fact only three ways – that’s right – only three ways to grow a business.
And fundamentally, the only 3 ways a business will grow are:
- Increase the number of customers
- Increase the size of the transaction
- Increase the frequency of purchase
There aren’t four things you need to be doing, or even five; but only three!
I’ll explain each of these three variables in more detail in next week’s blog, whilst at the same time also examining ways of increasing these three variables so that they have a positive impact on your business.
However, this week I want to examine how a business can grow exponentially by applying these three variables. And the arithmetic is very enlightening….
The truth is that many businesses seldom look at any of these three variables at all, and if they do, they only focus on one variable at time; and this tends to be the first one – increasing the number of customers.
That’s because finding more people to give you money is the most logical place to start when you need to bring in new business, especially when it’s urgent.
And whilst as a way of growing your business it can work, it’s just not the most effective or efficient way of doing it.
Instead, if a business owner were to concentrate on all three of these variables at the same time the results for the business are nothing short of amazing.
Let me explain by looking at the maths.
By way of example, let’s say a business has 100 customers. The business sells a product or service at a price of £2,000. And for the sake of this example each customer buys from the business twice per year.
That means the annual turnover of the business is:
100 customers x £2,000 x 2 purchases per year = £400,000
Now what would happen if the business owner increased one of these variables by 25%?
Let’s try each variable one at a time and see what happens:
Increasing only the number of customers by 25%:
125 customers x £2,000 x 2 purchases per year – £500,000
An increase in the annual revenue of the business from £400,000 to £500,000 – not bad!
Increasing only the size of the transaction by 25%:
100 customers x £2,500 x 2 purchases per year – £500,000
Or, increasing the frequency of purchasing by 25%:
100 customers x £2,000 x 2.5 purchases per year – £500,000
Basically, if you only work on any one of the variables at a time and increase it by 25% – you get to the same point: an increase in the annual revenue of the business to £500,000.
Now, let’s see the magic that happens when you work on increasing all three of the variables by 25% – but do them all at the same time:
125 customers x £2,500 x 2.5 purchases per year – £781,250
In other words when you optimize just one of the variables, growth in your business will be linear and using the example above your turnover will increase to £500,000.
However, when you optimize all three of the variables at the same time, growth becomes exponential and using the above example, instead of increasing your annual turnover to £500,000; you increase it to £781,250!
Double-check the maths if you wish, but the numbers don’t lie!
Having looked at how a business can grow exponentially by applying these three variables, next week I’ll look at the marketing and business activities you can do in each of the three categories that will help grow your business.
In the meantime, why not take a look at the numbers in your own business.
Apply an increase to each of the variables (it doesn’t have to be 25% – for your business it might be 10% or it might be 50% – that’s for you to decide) and see what it could potentially do to your revenue!