How to grow your business part 2

 

In part 2 we look at the impact of doubling all three levers - and then the results are pretty dramatic.
 

So the questions are:
  • Could you get each customer to refer you to one new client? This would double your number of clients
  • Could you get existing customers to buy twice as much? This would double turnover
  • Could you get them to buy twice as often? This would also double turnover.

In this over-simplified example…

  • A company with 100 customers
  • With an average transaction value of £100 and
  • Five sales per customer per year
  • Turning over £50,000 (100 x £100 x 5).

Would become…
  • A company with 200 customers
  • With an average transaction value of £200 and
  • Ten sales per customer per year
  • Turning over £400,000 (200 x £200 x 10).
 
This is an eightfold increase in turnover.

While the ‘quick and dirty’ approach gives ridiculously impressive results, it is worth considering the impact of more realistic changes.

For most businesses, you should be able to

  • Increase the number of customers by, say, 5%
  • Increase the average transaction value by, say, 5%
  • Increase the number of sales per year by, say, 5%.

More...
The impact of these relatively small changes is still pretty dramatic.
 
In this over-simplified example…
  • A company with 100 customers
  • With an average transaction value of £100 and
  • 5 sales per customer per year
  • Turning over £50,000 (100 x £100 x 5).
  •  
This would become…
  • A company with 105 customers
  • With an average transaction value of £105 and
  • 5.25 sales per customer per year
  • Turning over £57,880 (105 x £105 x 5.25).
 
This is a 16% increase in turnover – pretty good for a few small improvements.

When we work through this example to find the result on profit we see that the three 5% changes result in a massive 43% increase in net profit!

 
 
 
 
Robert Craven shows MDs and owners how to grow their sales and profits and focuses on how to do this in recessionary times. His latest book is the runaway success “Beating the Credit Crunch – how to survive and thrive in the current recession” www.directorscentre.com
 
He is a keynote speaker and the author of business best-seller ‘Kick-Start Your Business’ (foreword by Sir Richard Branson) and runs The Directors’ Centre, helping growing businesses to grow.
 
For further information, contact Robert Craven on 01225 851044 rc@directorscentre.com