Business growth strategies
Are the best Business growth strategies marketing strategies? Over the years most of the businesses we have had contact with, which want to grow seem to immediately think the best way to do this is through more marketing.
Focusing on marketing strategies to generate more leads may not be the quickest and best business growth strategies for your business.
What if your follow up and conversion rate of the leads generated is very poor? If you are losing 9 out of 10 leads you generate, this is very costly? What if you have got your margins or product mark up wrong and your losing money on every sale?
In any of these scenarios focusing on marketing strategies seems to be a very costly and a wasteful exercise to grow your business.
So, how do you know what the best business growth strategies are to focus on for your business? At LibAbun Business Coaching and Training, we coach and train all our Business Coaching clients about the ‘Compounding Business Growth Formula’.
This formula helps us determine, which areas of your business you need to focus on and in what priority. As a result, we can quickly identify the best business growth strategies for your business. Ironically, the first few business growth strategies we recommend putting in place, rarely are marketing strategies.
Compounding business growth formula
Our compounding business growth formula comprises of eight key business growth formula criteria. These are;
- Lead Generation Strategies
- Lead to prospect conversion rate strategies
- Prospect to customer conversion rate strategies
- Average value sale per customer strategies
- Number of transactions per customer/year strategies
- Gross profit margin strategies
- Net profit margin strategie
- Monetisation Strategies
These eight key business criteria culminate into the compounding business growth formula to give you the following six key results in your business;
- Number of prospects
- Number of customers
- Sale revenue
- Gross profit
- Net profit
You will note in this illustration of our compounding business growth formula that the eight key business growth criteria are coloured blue, whilst the six key result areas are green.
On the right-hand column of this illustration you will also see another column containing the six business development strategy categories. These are;
- Content marketing strategies
- Sales pipeline strategies
- Customer purchasing strategies
- Reducing Cost Of Goods Sold (COGS) strategies
- Reducing operating costs strategies
- Tax and Investment Strategies to maximise cash out of business.
Focus on the business growth strategies
Most businesses make the fatal mistake of focusing on the six green coloured key result areas in their business. However, none of us can directly change these key result areas. This is because they are simply a result.
If we want to grow any of the key result areas in our business; we need to focus in improving one or more of the 8 blue coloured key business growth criteria in this formula preceding that specific key result area.
We recommend you seek to achieve an average growth of a 10% increase in each of the 8 blue key business growth criteria. Some criteria are easier to grow than others, yet strive for an average of 10% in each criteria.
So for the purpose of this article we will look to apply 3 strategies in each criteria, targeting an average increase of around 3-4%. This means the 3 gains added together will average the targeted 10% gains.
But be careful, there is a smart way to grow your business and a hard way. Most businesses actually attempt to grow the hard way. This is because they don’t understand the compounding business growth formula and how it works. All will become clear as you read this business growth article.
Albert Einstein once called ‘Compounding interest the eighth wonder of the world’. Our compounding business growth formula enables us to activate this ‘compounding’ effect in the growth of our business.
This compounding effect will typically give you an extra 11% boost in annual sales results. If you are achieving average increase of around 10% in each area. The compounding boost is on top of any gains made from individual key growth areas, just by being disciplined to follow the formula. Know who is going to balk at an 11% increase just because you followed a formula?
Understanding the compounding business growth formula
We will explain to you the compounding business growth formula in sequential order as it appears. However, in most cases when we actually start to apply business growth strategies, rarely will we start on Lead Generation strategies.
More on the correct implementation sequence later. For now, lets just take you through each business growth criteria as they appear in the formula.
S1 – Content Marketing Strategies
Both the lead generation strategies and the lead to prospect conversion rate strategies below fall within our Content Market Strategies. Clearly we need to develop content to generate leads and then to convert those leads into prospects.
S1.1 – Lead generation strategies
Every business needs to generate leads. But what is a lead? A lead is someone who actually shows an interest to find out more about your products/services. However you better be ready to handle those leads when they appear or risk letting them go cold or worse, go to your competition.
Even though Lead Generation is first on the list for this formula. Out of the 8 key business growth criteria, increasing your lead generation is usually the most expensive and the most resource intensive business growth strategies when compared to the other 7 criteria. This is why we actually recommend working on this after we have worked on other smarter areas first.
We have over 70 lead generation strategies to select from and advise on for our clients. Some of the more popular lead generation strategies these days are digital and non-digital. Here are some examples. Remember we are targeting an average of a 3% increase from each strategy;
- Business Networking
- Facebook/Google Ads
- Introducing a Referral System.
S1.2 – Lead to prospect conversion rate strategies
A lead is a person who is prepared to browse your business information, products and services. We now need to convert them into a Prospect and get them into our sales funnel.
It is vital we record, report and review our lead to prospect conversion rate. It doesn’t make any sense to be generating leads if your conversion rate is very low. In this case focus on improving your conversion rate before you look to increase lead generation.
There are many ways to do this. We have over 40 lead to prospects conversion rate strategies to choose from. Here are three examples that can each offer us the targeted 3% increase;
- Segmenting your leads list and personalising communications
- Set up a lead scoring system so you deal with the hottest leads first
- Use scripts in the written and verbal form for team involved in sales
Once the lead becomes a prospect they enter our Sales pipeline. We now move to a different level and different business growth strategies.
S2 – Sales Pipeline Strategies
Your sales pipeline strategies include your prospect to customer conversion rate strategies as well as how you manage your sales pipeline. The best way how is to conduct some business automation strategies using a CRM.
We always recommend you construct and manage your sales pipeline through a CRM – Customer Relationship Management system such as ‘Keap Pro’. There are many benefits of using a CRM. The main benefit is the ton of automation strategies made available to you. Some of the benefits are;
- You get to increase your overall productivity by getting more done;
- Every lead, prospect and customer contact is followed up faster, without fail and managed better;
- You automate as much of your sales pipeline as possible, saving time, money and hassle.
- Your conversion rate will actually improve because of all these gains
S2.1 -Prospect to customer conversion rate strategies
Now your lead has become a Prospect and is starting to focus on specific products or services you offer. So we need to apply Sales Pipeline strategies to maximise our prospect to customer conversion rate.
We have over 50 prospect to customer conversion rate strategies to choose from. Here are three such examples for this area. Again, we are striving for an average 3% increase from each strategy below;
- Map your sales pipeline stages and measure conversion rates for each stage
- Have a written Guarantee/Warranty and make sure the prospects know about it;
- Ensure all communications written and verbal focus on benefits not the features of your products/services.
If you have set up a solid sales pipeline that works and constantly measure and test results to improve it, your prospect to customer conversion rate will improve.
Your prospects will become customers. Remember the number of customers is just a key result. We cannot directly increase the number of customers. We have to improve at least one of the preceding business growth criteria to directly improve our number of customers.
The compounding effect is starting to kick in!
Looking at the 10% gains in each of the first three business growth strategy criteria, you should start to understand how the compounding business growth formula really starts to produce results. We have seen an average 10% increase from each of the first three business growth formula criteria. If we add these up, it would be fair to expect to see a 30% increase – right? In fact the gains equate to a 33.2% increase. Now you are starting to see the secret sauce of this formula!
S3 -Purchasing strategies
Now your prospects have become customers. There are two business growth formula criteria we want to focus on. The first is getting them to spend as much as they can when they are buying. This is know as the ‘Average Value Sale’.
The second criteria is to get them to come back and buy from your business as many times as possible during the year. This is known as ‘Number of Transactions’ per customer.
S3.1 – Ave value sale
The average value sale per customer is just that – an average! Some customers when the buy from you may spend £50, yet others may spend £200.
Your average value sale is calculated by taking your total sales, (E.g. £100,000) divided by total customers (E.g. 1000). This equals your average value sale (E.g £100). £100,000/1000 customers = £100 average value sale.
We want to put strategies in place to get your customers to spend more when they do buy from you. We have over 50 business growth strategies you can choose from to help you grow this area. Here are three examples. Remember we are targeting an average of a 3% increase from each strategy;
- Increase prices at least annually, or sooner if supplier prices rise;
- Install a checklist of upsell items for a large range of your products/services;
- Offer product/service bundles so clients spend more
S3.2 – Number of transactions per customer
The number of transactions per customer, per year is another average! Some customers may purchase from you only once during the year, yet others may buy ten times. What is your average number of transactions?
To work out your total number of transactions per customer we should be collating data on each of our customers through memberships. This is very important. Data is our friend and the empowering factor to make better decisions to get your customers coming back to you time and time again.
Just look at some of the successful businesses out there like Amazon, Google, Facebook and the data they have about our behaviours and purchasing history. Small businesses can start collecting this data too. Lets discuss some ways of doing this.
If you aren’t running a membership programme its still possible to work out the ‘Number of transactions per customer’ in your business.
Divide your Total Sales revenue (E.g. £100,000) by the total number of customers on your database (E.g. 250) and divide the total by the ‘Average value Sale’ you have just calculated (E.g. £100). £100,000/250 customer = £400/£100 Average value sale = 4 Transaction per customer, per year.
So the aim is to put into place three strategies to get our customers coming back to our business and buying more often. With a current average of 4 transactions per customer, a 10% increase would give us a target of an average of 4.4 transactions.
We have over 70 business growth strategies to increase the number of transactions per customer. Here are three examples below. Again, we are striving for an average 3% increase from each strategy;
- Conduct a Clients needs assessment to identify upsell opportunities;
- Set up a VIP Membership programme with special benefits
- Offer Loyalty schemes, products of the week/month.
Annual sales revenue is up by 61%!
So far we have achieved an average 10% gain in just five of the business growth formula strategies. 5 x 10% = 50% right? Wrong, now you can truly see the power of our compounding business growth formula.
If you look at the Illustration above you will see a 61% increase in Sales revenue. This extra 11% can only be achieved if you are working on each of the 5 business growth criteria during the year.
So now that we have managed to grow our sales revenue, lets start looking at improving our gross profit and net profit margins.
S4 – Reducing costs of goods sold (COGS) strategies
Costs of Goods Sold are the costs you incur to provide your products or services only when a sale is made. This typically is your actual cost of the ‘widgets’ you are selling as well as any other costs.
For example, if you pay a commission on sales. This would be a cost of good sold. Travel costs to deliver the goods to a customer, would be costs of good sold.
In contrast, rent, rates, utility bills and staff salaries are generally not a cost of good sold because you would incur these costs whether you made a sale or not.
To work out your total COGS, we strongly advice you use an online accounting package, such as Xero. This will allow you to setup your ‘Chart of Accounts’ correctly and more easily classify your costs.
Our sales revenue, minus our cost of goods sold (COGS), equals our Gross Profit. The total(COGS) is generally identified as a percentage of your total sales, known as your Gross Profit Margin. This is a percentage figure.
In this illustration, you can see that Gross Profit Margin is 65%. This means our total COGS in this example was £35,000 of the £100,000 sales revenue. So lets explore ways to improve our gross profit margin
S4.1 – Gross Profit Margin Strategies
Out of all the eight business growth strategies criteria, gross profit margin strategies usually offer us the smallest gains. The reason for this is because we can only reduce our COGs by so much to become more profitable.
In contrast we could double, triple even quadruple our sales and get customers spending more, yet for every widget we sell, we can only reduce the widgets costs as a COGS by a very finite amount.
In saying this, there are still plenty of options. We have over 30 business growth strategies to increase our gross profit margins. Here are three examples. Remember we are targeting an average of a 3% increase from each strategy;
- Set and maintain minimum gross margin targets. If suppliers prices rise, you raise your prices accordingly;
- No Price discounts – Value add only to increase value to customer
- Review your suppliers prices often – minimum annually.
S5 – Reducing operating costs strategies
Our operating costs are all the usual expenses we will incur during the day-to-day running of the business. Some examples are; rent, rates/council tax, staff salaries, utility expenses, training costs etc.
It is important that you understand your operating costs and set some targets ratios to stay within as a percentage of sales revenue.
As your business grows, so will your overall operating costs. It is vital that you are reviewing and managing your operating costs at least on a monthly basis. This will help you maximise your net profit margins as a percentage of sales and your reported net profitability.
You will have more scope in your operating costs to reduce your costs, compared to your COGS. In saying this, there still will be a limited amount you will be able to do to become a lean organisation to maximise profits.
A key realisation and focus for you should be to reduce your operating costs as much as possible. Focus on achieving your break-even point in your business each month as soon as possible. Therefore the lower your break-even point, the easier it is to achieve it.
Once you achieve your break-even point, every sale you make during the month after this is highly profitable. This is because you have already covered all your operating costs by hitting break-even. The only costs you will incur for every sale post your break-even point, is the COGS for the ‘widgets’ you have sold.
S5.1 – Net profit margin strategies
Of your operating costs, usually your building costs and team wages or salaries are the largest of your costs.
Whatever your costs are you should set each operating cost line in your Profit and Loss statement as a percentage of sales to stay within. For example; Total monthly sales revenue = £10,000; Total Wages £2000; as a percentage of sales =(20%); Target to stay within(<25%).
Note: Once you have got past your break-even your Net Profit Margins will soar way more than the standard 10% increase. However, for the purpose of this article we will stick with the 10% gain to further demonstrate the power of the compounding business growth formula.
We have over 40 business growth strategies to increase our net profit margins. Here are three examples. Remember we are targeting an average of a 3% increase from each strategy;
- Set and maintain net profit margins for each operating cost.
- Keep team remuneration costs down to hit break-even faster by offering a base salary and then a profit share scheme, when in profit win/win.
- Know your actual costs and review them often. At least every 6 months preferably quarterly. If you have a team, delegate costs champions to monitor and reduce specific costs.
S6 – Tax & investment strategies
Have you ever heard the saying “Sales is vanity, profit is sanity, yet cash is king”? The reason why this statement is true is because profit is not cash. It might surprise you to read that profit is a theory. Let me explain some more.
If your business makes multiple sales to your customers, you may not get paid by these customers for 30 days or longer. The sales invoices for these sales get entered into your accounting software and will go towards your monthly sales and profitability. So your accounts could show you have made a profit, but you haven’t received the cash yet, because the clients have yet to pay you.
Once you do get paid by your customers, let’s assume you have made a good profit, how do you get the actual cash out of your business into your pocket personally the most efficient way by paying the least amount of tax?
Now please understand, if I had my way I’d be paying the Government £20 billion a year in tax. How much must I have earned to have to pay that? However, I want to pay the least amount of tax necessary as a percentage of my profit, whilst paying the most amount of overall tax.
There are many ways to be very efficient at this. How you best can do it will greatly depend on which country you are in and the tax incentives offered by your Government.
I personally believe that considering businesses create most of the wealth and collect most of the taxes for your government, business owners rightly so deserve some perks and recognition for the wealth creation and tax collection process.
S6.1 – Monetary Conversion
There are many ways to improve your monetary conversion situation when considering how to create as much benefit to you as possible. Here are some examples;
- When possible, make travel and other costs business related and tax deductible to save paying sales, corporation and personal taxes on it.
- Use Government Pension and Investment schemes wisely
- Put your own commercial premises into a pension fund
- Pay yourself the tax free allowances then dividends (Seek your Accountants advice on this)
Most Businesses Are Leaving Money On The Table!
We have conducted Business Growth Audits with thousands of businesses over the years. The reality is most businesses only ever work on up to 3-4 of the 8 business growth strategy criteria. This results in most businesses leaving a lot of money on the table simply because they aren’t disciplined enough to focus on all eight areas during the year.
Take a look at this illustration above where we take an example already shared with you, yet this time, we only work on 3 of the 8 business growth areas. Look at the dramatic loss in business as a result.
This small business loses over £40,000 in sales revenue and over £19,000 in net profit! For business larger than this the opportunity cost of not focusing on all eight areas and the monetary losses are much greater. All because they weren’t disciplined enough to focus on all eight business growth criteria.
Your businesses compounding business growth formula
Would you like have one of our Libabun team apply this compounding business growth formula into your business absolutely Free? Would you like to discover all the business growth opportunities available to you?
We offer small businesses like yours, to undergo a complimentary ‘Business Growth Audit’ with us to identify the business growth opportunities in their business.
Now – you might be a little sceptical about this offer, wondering why we would offer this service for free.
It’s quite simple really. We believe, the best way to show someone we can help them is by actually helping them.
Additionally, we also want to identify and ensure our Business Coaching and Training services will be a profitable strategy for you. This is because every client we work with, gets a ‘26 week Profit Guarantee’. This means we guarantee profitable results inside 26 weeks or our services become free until we have achieved it!
Webinar on the compounding business growth formula
If you want to better understand this formula yourself, another option is to register to watch our ‘free on-demand’ webinar on the compounding business growth formula You can register to view this webinar.
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