As a business leader, there are a thousand and one things to distract you on any given day from driving growth in your business. Just think through all of the different options you’ve faced in the past week. My guess is that you’ve probably had to deal with issues and to do’s like
- Processing way too much email
- Tweaking your website
- Solving a staff conflict
- Dealing with a problem customer
- Doing research
- Putting together a meeting agenda
- Running a meeting
- Responding to requests
- Returning phone calls
- Reviewing financials, etc.
Now, none of those things are bad things in and of themselves. They’re only “bad” when they distract someone like you from focusing on what really matters.
As you may know, last week I ran a quick survey of business owners and entrepreneurs. The number one problem/frustration they identified was,
- “We’re not growing as fast as I’d like.”
And, surprise, surprise, the number one want/aspiration was,
- “To grow my business faster.”
Now, isn’t that interesting?
So, let’s ask, “What hinders growth?” If the number one want is, “To grow faster” why would most business owners and entrepreneurs be frustrated by the lack of it? My answer, because of distractions and lack of focus.
When you strip growth down to it’s core, there are only five dials (only five) that you can adjust to drive the growth of virtually any business (Note: In my coaching club we talk a lot about the 7 dials of growth and profitability, but since the final two are focused on profitability and we’re only focused on growth today, we’ll just discuss the first five here).
The challenge for any business leader is to make sure their time is focused first and foremost on those activities I refer to as HRAs (High Return Activities). As Alec McKenzie said so well years ago,
“Nothing is easier than being busy. Nothing more difficult than being effective.”
Getting distracted from focusing your time and energy on the five dials (first and foremost) is what hinders growth. In other words, if you want to get back on the path to accelerated growth, the solution is relatively easy. Stop focusing your best and highest use hours on well meaning distractions and get laser focused on your HRAs (in this case, the five dials).
So, what are the five dials? Well, here they are. Note: Don’t discount their simplicity. The most powerful things in this world are simple.
Dial #1: Generate More Leads
In a funnel, the size of the opening at the top determines everything else that flows south of it. In the internet marketing world, an email list of 50,000 will, in general, always drive more growth than an email list of 5,000, which will drive more growth than an email list of 500. In a VAR software business, a pipeline with 100 leads will dwarf a pipeline of 10 leads. In the professional services arena, a law office with 50 leads a week will grow infinitely faster than one with three a week. Everything in your business runs south of dial number one.
What surprises me when I talk with business owners and entrepreneurs and ask the question, “So how many qualified leads do you have in your pipeline?” is how frequently the answer is, “I don’t know.”
Listen, if everything in your business runs south of this number, how can you not know? More importantly, how can you not be fixated on this number all of the time?
As a business owner/entrepreneur, you don’t have to be generating and/or qualifying all of the leads, but you should be focused on them. You should be driving awareness about it. You should be generating new ideas for more leads. And you should be holding your team accountable for the number of qualified leads they’re supposed to be generating each week/month/quarter.
So, how are you doing at ratcheting up the dial of generating more leads in your business?
Do you have a weekly focus on it? Are you continually challenging your team with new strategies and ideas to get more leads in the door? Are you testing your tactics? Are you getting out there? Are you considering new marketing channels? Do you need to change your current copy to produce better results? Etc. What can you do this month to drive more new leads for your business?
If you want to drive more growth, you need to make sure you give weekly attention to how your business is doing at lead gen. Everything else runs south.
Dial #2: Increasing Your Lead Conversion
Once you get a new lead in, the next dial is to increase the probability that lead will convert into a new customer. All things being equal, if you have a 100 leads in your pipeline and your current conversion rate is 50%. If you can grow that to 60 or 80 percent, you’ll have an additional 10 to 30 customers per 100 leads. That’s a game changer.
However, this is also one of those dials very few business owners and/or entrepreneurs pay a whole lot of attention to. Just think back over the past month (or six months). How much time have you spent on ensuring that the percentage of leads generated converts at a higher percentage? If you’re like most business owners, probably not much if at all.
Obviously, the first way to increase your lead conversion is to improve the quality of your leads. So, what are you doing to ensure that you’re getting better quality leads?
The second way is to improve your sales process and sales scripts.
And the third is to improve your sales training.
So, looking at those three options, what are you going to do this week and month to increase your lead conversion? That’s dial #2.
Dial #3: Increase the Average Transactional Value
Again, this is another dial that often gets forgotten but has a huge impact on growth and revenue. It’s the old McDonalds, “Would you like fries with that?” principle. If, in general, 30% of people take an upsell and you’re not offering an upsell option, you are by definition “leaving money on the table.”
In the online world, you see this all the time when you go to buy a product. It’s part of their funnel process. You buy a product, then the next screen says, “Wait? Upgrade to the deluxe version for this one-time only special price. Then based on whether you take the offer or not, they offer an even bigger package or a less expensive package. Then based on that choice, they may offer another upgrade (or not). So, instead of a $67 transactional value (the first item), you’ve now opted to spend $397 (with two up or cross or down-sells).
Depending on the kind of business you’re in, there are plenty of ways to increase your average transactional value. For example, you could …
- Increase your prices
- Make sure your customers know of your other products/services (they probably don’t)
- Productize your services
- Create more packages
- Use a point of sale promotion
- Systematize a cross-sell or up-sell or down-sell
- Add bonuses to your current services or packages to justify a larger investment
- Offer varying levels of service (silver, gold, platinum, etc.)
- Set a minimum purchase level, etc.
The key is to make sure you and your business are actively helping your customers to choose a higher level of investment because it’ll help them get the results they want, faster, better, cheaper, more comprehensively, etc.
So, what are you going to do this month to increase the average transactional value of each customer? That’s dial #3.
Dial #4: Increase the Frequency of Repurchase
In some businesses this is more difficult than others. For example, if you’re in real estate, most people won’t buy more than one home in a year. However, most businesses have some influence over the frequency of repurchase. For example, a hair salon can either accept that most men will get their hair cut every six to seven weeks or they can be proactive and try to reduce that down to once every four weeks.
Now, going from every six weeks down to every four weeks might not seem like a big deal, but it is. If you divide 52 weeks by 6-7 weeks, you end up with roughly eight hair cuts per year. If you divide 52 by four, you end up with 13 hair cuts. If you then divide 13 by eight you end up with a 62.5% increase in revenue. Did you catch that? A 62.5% increase in revenue just by increasing the frequency from once every six or seven weeks down to once every four weeks. Can you imagine what a 62.5% increase in revenue could do for your business? That’s the power of the frequency dial.
As you think of ways to increase frequency be creative. You’ve seen this with software products. In the past, you would have bought the program and then bought a new version three or five years later. However, now, they’re selling it to you with a monthly recurring charge for, let’s say, $4.99/month.
You can also increase frequency with add on services. For example, if you’re a pool company. You could just sell someone a pool (a one time sale). However you could also sell them an annual maintenance package with a monthly charge.
You could also create a customer loyalty or rewards program. Or offer your customers more special sales. Or you could increase the number of emails and contacts you have with your customers. Or you could develop a more intentional follow up system. Etc.
There are a ton of ways you can increase the frequency of repurchase dial, but the question for today is, what are you going to do this month to increase the frequency of repurchase by your customers? That’s dial #4.
Dial #5: Increase Your Retention Rate
The fifth and final dial that you can adjust to rapidly grow your business is to increase your retention rate. In my old church days, we used to call this, “Closing the back door.” As much as you want to grow new clients and customers, if you’re bleeding them out the back door, all your efforts on the front end are being thwarted by your leaky back door.
To help you realize how impactful this is on your business, if you only retain six out of every ten of your customers (a 60% retention rate), that means that the next four new customers you attract to your business are simply replacing those you’ve lost so you’re not really gaining. You thought you had a 40% increase in new customers but you didn’t. Those four customers were simply returning you to what you had. Even worse, at a 60% retention rate, one of those four won’t be retained so you actually need five or more just to stay where you were.
Let’s play this out in real life. Let’s say you have a million dollar business, your average transactional value is $10,000 and you have 100 clients (i.e. let’s make the math simple :-). If you want to grow by 25% this year, the typical business owner would say, “We need to attract 25 new customers.” But, he or she would be wrong. If your retention rate is, let’s say, 80% (which sounds good), that means you have to replace those 20 lost customers first (plus possibly four more … 20% of the 20 who won’t be retained). So, the reality is, you have to land 45-49 new customers just to grow by 25% (i.e. you would basically have to acquire twice as many new customers as you though you needed to grow by 25%).
On the other hand, if you could increase your retention rate from 80% to 90%, then you’d only have to replace 10 client defectors vs. 20 (plus you’d only need one more vs. four more) for a total of 35-36 new customers to get to your 25% growth objective. That sounds a whole lot more achievable and that’s why focusing on increasing your retention rate is so critical.
So, what are you going to do this month to increase your retention rate?
- Will you improve your on boarding?
- Share more customer success stories?
- Eliminate some customer unWOW?
- Create a customer community?
- Work on your Moments of Truth?
- Assign your customers a customer advocate?
- Send some follow up notes?
- Improve your follow up system?
- Offer more hours of operation?
- Speed up your response times?
- Or something else?
Every week, a thousand and one things will try to suck your time away from what matters most. But if you want to scale your business quickly, you have to focus on those activities/dials that have the greatest potential impact for your business (your HRAs). And when you boil all of your options down to their core, they usually fit within one of the following five dials for growth.
- Generating more leads
- Increasing your conversion rate
- Increasing your average transactional value
- Increasing your frequency of repurchase
- Increasing your retention rate
Even better, when you focus on all five, you can rapidly accelerate the growth of your business. For example, at just a 10% increase in each of the five dials, you can end up with a 61% growth rate. Think about that. What would a 61% increase mean for you and your business?
If you’re serious about growth, get serious about these five dials and make sure you and your people work on them every week!
To your accelerated success!
P.S. If you find this subject interesting, and you want to accelerate the growth of your business by scaling it, these are the kinds of discussions we have at our WTG Coaching Club meetings. To find out more, check out our WTG Coaching Club page