There Are Just Three Ways to Grow a Business

There Are Just Three Ways to Grow a Business

1.    You can find new clients, or…

2.    You can have your current clients buy more frequently from you…or…

3.    You can give your current clients more opportunities to increase the size of the purchases they make.

When a business falls into the unwitting habit of limiting its own sales, it’s almost always because the owners have been looking at their marketing methods through a tunnel, instead of through a funnel.

Business A offers its clients too few choices, at too few price points.

Business A’s owner fails to realize that clients would buy more if given the chance – and buy more frequently!

My point is that dynamic business growth can’t flow out of a stodgy, linear strategy. 

You have to think in geometric terms.

Let me give you an example:

Let’s say that you’re running a small business or practice that you inherited from your father. 

He did virtually all of his advertising in the Yellow Pages. 

And, when you took over, you continued the tradition. 

Result: 

The business is doing so-so, and you and a handful of employees are taking modest incomes out of it.

But, down the street, a competitor is getting ready to eat you up! 

He’s in the very same business that you are but, unlike you, he is talking to his clients through more than one medium, talking to them often, and offering them more than just one or two unimaginative purchasing options!

Your competitor realizes that if he remains creatively alert, there is almost no limit to how much his existing clients will buy from him! 

So, he keeps the dialogue going, and tests and retests sales messages. 

He’s not afraid to try anything: TV, direct mail – any available marketing medium. 

And he’s done something else – something that I want you to do right now:

Figure out what a client is worth to you over a purchasing lifetime – the total, aggregate profit that each client can generate for you, minus all advertising, marketing and service expenses!

If you’ve never run out those numbers, by all means do it soon. 

The exercise is technically known as reckoning an individual client’s “marginal net worth” – a bland and book-keepy way of describing something that can be a stunning, eye-opening revelation. 

You will be astonished to learn just how much your clients are worth to you! Consider this hypothetical example: 

The average new client coming through the door brings in an average profit of $150 on the first sale and repurchases three more times a year, in an average reorder amount of $1,000 (each a gross profit of $300 to the business). 

At that rate, and with an average patronage life of two years, every new client is worth $2,850/- 

And, remember: 

We’ve been talking about people who are already clients – the ones who are known quantities, already in the computer database and on the mailing list! 

We haven’t even gotten to the question of how to round up some brand new clients.  

Many business people allocate money to “advertising” or “promotion” or “selling expenses.” 

But there’s no basis for that.

It’s a conjecture-based decision by someone saying,

“I’m going to spend 5% of sales on advertising, or $20,000 a month, or a quarter, or a year.” 

Or, “I’m going to give my salesperson a $2,000-amonth salary or draw against 3% of gross sales.”

There is no real reason behind such figures. 

The moment you understand what you can afford to spend to acquire a new client based on what that client will be worth to your business or practice in terms of profits in transaction one in year one, and in subsequent years, you will stop wasting money on advertising and start only investing in sales generated.

Your waste factor will drop about 90%!

Once you know precisely how to quantify the marginal net worth of a client, then you must work with the data.

If you knew that a client would be worth $2,850, and it costs you $30 to land him, then every $30 you spend is worth $2,820/-

You would be foolish not to increase your ad budget to produce more $30-cost clients.

Theoretically, you could afford to spend up to $2,850/- to bring in a client and still break even. 

In other words, your “allowable cost” for acquiring a client could be as much as $2,850/- per client.