How to grow my business is a common question asked by many business owners?
To answer this simply…it is by targeting your key profit drivers.
But what are my key profit drivers you might ask?
Different businesses will be more sensitive to each of the different business growth methods. The key is to find out which one will give you the best returns.
There’s absolutely no reason not to target all your profit drivers, but why not start with the one that’s going to give the greatest impact in the fastest time.
Many businesses I’ve come across usually think that one of the only way to increase profits is to increase prices. Many protest at this thought for fear of losing our customers.
Others think that increasing turnover by getting more customers is the answer, this is correct and is one of my ways. But what about your existing customers? If you have happy customers, then they are more likely to spend more with you.
This is why customer service is my No. 1 Tip in my article on 53 Tips To Increase Profits In Business.
So how many ways are there to grow a business?
These can be boiled down to 7-ways to grow, which are as follows:
1. Increase the number of customers of the kind you want to have.
So as already mentioned, increasing the number of customers your business serves will have the affect of growing your business. However, I always add the caveat…’of the kind you want to have.’
Why would you want to deal with customers that are either difficult to deal with, bad at paying your bills or take up all of your time? What you really want is great customers that pay on time and are not looking to feel like they are the only customer you have. Although, it’s always a good thing to make each of your customers feel like they are the only customer.
2. Increase the prices charged on your products/Services.
Increasing prices will add profits directly to your bottom line. However, depending on how much competition there is in your market, you may find that putting prices up will lose customers.
This then becomes a balance between how many customers are lost versus, how much your profits are increased by. For this very reason is why I give away for free my Increase Price Calculator Tool.
3. Increase the number of times customers return.
Once someone buys from you, then it is much easier to get that same person to buy again, than it is to get a new customer.
There are a number of different figures, but it ranges from 4 and 10 times more expensive to acquire a new customer than it does to keep an existing one. Also, it’s a well known statistic that 44% of companies have a greater focus on customer acquisition vs. 18% that focus on retention.
So again it’s back to customer service, good products or services and keeping your customers happy. This way they are more likely to come back more often and chose you every time over the competition.
4. Increase the average value of each sale.
When a customer spends money with your business, they are giving you a thumbs up and a vote of confidence. So why not see if your customer would be happy to spend more with you at each transaction.
This is similar to the McDonald’s trick of ‘Do You Want Fries With That’ question, which is a simple up-sale of the transaction. And do you know what, McDonald’s make more money on the fries than they do on the burgers.
I have found that by targeting this one key profit driver can out-weight most of the other profit drivers. Also, I’ve often found that to implement the ideas behind getting customer to spend more doesn’t cost that much to do so.
Take the McDonald’s example, how much does it cost the company to ask that question? Nothing, other than a bit of training.
5. Improve your gross profit margin by selling more of your higher margin products.
This is where working out your break even point is so important, and knowing the profit you make on each service or product you sell is to running a successful business.
If you don’t know what margin you are making on your products, how can you maximise your profits.
So you could do some promotions on your higher margin items, or give away or reduce your prices on complimentary items when bought with your higher margin lines.
Also, going back to price increases, you should look at increasing your prices on only certain product lines to increase the margins on those items, thereby increasing your profits.
6. Increase the effectiveness of each process in the business and reduce costs.
This is especially important for manufacturers. Having a good layout in your factory to make things as efficient as possible, not only saves time, but it will ultimately save you money too. By optimising your factory layout will improve productivity and allow you to get maximum output from your factory staff.
7. Reduce your attrition rate of your existing clients/Increase the number of clients you serve.
This is back to customer services once more. Providing the best customer experience will ensure your customers stay with you. Make a customer unhappy and they will leave. Thus making it more difficult and expensive to grow your business, remembering how much it costs to acquire new customers.
So where do you begin?
So now you have the 7 ways at your fingertips, what do you do now?
Well firstly, it would be a good idea to work out how each way impacts on your business. Secondly, it’s about working out what is a reasonable growth target for each key profit driver.
You’ll probably need to set up a spreadsheet to enter all your numbers in the first place, before you begin to ask how you are going to achieve the targets you set.
Then ask lots of questions…brainstorm ideas with your staff and have fun with it. Trial things and work with your customers.
One thing is for sure, by going through this process and by setting targets, you are more likely to grow your business than not. Plus you are more likely to increase your profits.
One way to make this process much easier is to buy some specific targeted software, like our Increase Profit Software. Using this software will speed up the analysis part of this exercise and get you to asking those important questions of ‘How to grow my business’.
Increase Profit Software has been designed around the ‘7 Ways To Grow Your Business‘ and will provide you with one of the best returns on investment ever in business.