Six Ways To Grow Your Business
Posted by Robert Norton on
Jay Abrams, an excellent marketing guru, and the speaker says there are only three ways to grow your business: 1) More customers, 2) Higher average sales/revenue per customer and 3) A higher purchase frequency from your customers. Although this is a great model to divide and attack the problem, it is more classified into categories of ways than actual ways to grow your company. Luckily, we can come up with hundreds of ways to grow a business, and the tough part is deciding where to put your efforts. One theory is that with ever-growing sales and marketing costs, it is usually easier to get more revenue from existing customers than to find new customers. Yet, most businesses put more time and effort into customer acquisition than retention and upselling (#2 and #3). This varies greatly from business to business and is a function of the actual acquisition costs of a customer, what else they might need when they need your product, and many other factors.
Every business has lots more ways to look at these categories. The odds are you can do something with most of these ideas eventually.
#1 - Identify your company's weakest link and make it a strength - Every business has many limits, but typically one or two are more of a bottleneck to growth than the others. As each limit is taken away the level of success of the business can leapfrog. This is a great way to grow your business in steps. Often than not these limits are in the areas of sales and marketing, though certainly, they can be anywhere. Minor changes in product and service positioning, or adding options can also have a dramatic effect. So one great way to understand this is to analyze your marketing and sales process, or marketing funnel. Each step, or level, has a cost and a leakage rate of customers that are lost at that level. Companies need to understand the economics of each of these steps. How much does each potential customer cost to get to each level in the process? When you understand these steps well the weak spots will jump out at you to work on. Typically sales and marketing people are not analytical types and so the CEO must drive this process. If you keep identifying the weakest spot and correcting it one to three-time per year your company will grow.
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#2 Be willing to spend more to get a customer - Many companies I coach and consult with are very limited in their methods of customer acquisition. Typically you should have at least three to four good solid ways to acquire customers and maybe more. This diversity in customer acquisition makes your company more stable and gives you a broader base of customers. It also gives you better information to steer your business to success due to the diversity of the customer base and feedback that will result. A common trap is to not understand each way has a real limit on volume and a very different acquisition cost too. Just because you can get a customer for $45 using direct mail does not mean you should limit yourself to this acquisition cost. It may still make lots of sense to spend $500 per customer if your customer lifetime value is high. So consider each customer acquisition strategy, or channel, to be completely independent. Understand that a mix of customer sources is safer and more protected from market changes and also gives you many more ways to grow.
#3 Add channels/Niches - A great way to build a business that is more defensible against big companies is to either build a portfolio of products for the same customer base or build a portfolio of niches in the same core competency. I define a niche as the intersection of a vertical market and a specific application of a product or service. Big companies generally cannot customize products and services for small niches well. They generally must go after large markets (horizontal or vertical plays) just to cover their overhead and get funded internally. By having a plan to develop new niches, after your first niche is stable, you can build a $100+ million company that is very stable with high barriers to entry around it in each individual niche. You have spread your bets well and hence you can also better protect your margins and customers.
#4 Figure Out Your Sales Management Process and Never Stop Scaling Sales - More often than not when I go into a newer business that is in the low millions in revenue the founder or CEO has done some sales and/or hired a couple of salespeople, but not really figured out the sales management process well yet. They have a couple of sales people, who survived from the five or ten hired over the last few years - a Darwinian selection system. These couple people often carry the company, but the company does not really know yet how to hire more salespeople that will be successful without lots of trial and error. The company often does not have a real sales management process in place and needs to do this serious work to get up to 5 to 15 salespeople. This is a completely different job and requires lots of work and experience in sales management, and they usually do not have an experienced sales manager on staff. Sometimes the company has been going sideways, just surviving not growing, even for many years as a result. Selling, hiring salespeople, managing salespeople, and planning sales strategies are all very different skill sets. Few people, except very experienced sales executives with 15+ years experience, know how to do all these things. It is therefore usually a mistake to let one of the current salespeople take on these sales management responsibilities. Yet young companies cannot usually afford this higher level of talent, or justify it until they have five or more salespeople on board. (See my September 2005 article on using virtual executives to fill this experience and knowledge gap cost-effectively). CEOs must spend time working "on" the business, not "in" the business. This means really understanding in-depth how to manufacture more units of the sales machine. A unit might be a single salesperson, but more than likely it is a combination of resources that might include a salesperson, marketing support for enough new leads, sales support functions, and maybe other resources in the proper proportions. To really grow a business well you need to have this unit economics down to a science. You also must understand the human factors that allow you to do it well without a high risk of failure. This means understanding the personality profile and psychology of all the people in the sales unit and how to find, test, and select them. Of course, this may vary significantly by niche and is always being optimized against past benchmark results. Once you have this formula down you can scale your business up without great risk, often to the $100MM plus level. Without really getting this down to a science you are taking a big chance. The economics of adding salespeople is usually compelling so understand these and always be growing your sales force if the market potential is there.
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#5 Develop a Wholesale or Reseller Strategy - Most businesses can build reseller channels, yet many do not. There may be a different price point, target market, or even product variation(s), but if you are selling a product or a service there are definitely others out there that can resell it. Some might even sell or refer customers at no cost to you for other benefits. The obvious questions are who also serves that exact market and who can benefit as a result of people using your product or service? A challenge is doing this business development work and research without first hiring a business development expert. The CEO must be responsible for keeping up with the market and doing regular competitive intelligence work in any small business. This effort should identify these opportunities. Usually, the best indicators will come from your current customers, so treat this as market research and competitive intelligence project and test it on a small scale before making any big commitments. Lots of "frugal experimentation" will pay off long-term and you will scale the ones that work. Remember there is an 80-20 rule with resellers. Twenty percent of them will generate 80% of the business. So this means you may have to try five to get one that works well. This requires a good training program for your resellers, as they will only be successful if you teach them how to sell and get them focused on it. Usually, they will have other business objectives too. You will eventually need to hire a dedicated business development person to build and manage this reseller network but you should be able to prove it can work before you commit to this expense.
#6 Offer upsells, bundles, and higher-priced offerings with more service included - In almost all businesses there is a price-quality curve that allows multiple offerings. Would you like fries with that? Upsell. Would you like the value meal? Bundle. Would you like that dinner delivered with hot plates, dessert, and clean up services? Yes, we all see these tactics every day, but have you thought about all the options for your business and how it might represent additional markets? Dominos and Staples are great examples of multi-billion dollar companies created quickly with one simple tweak on the industry-standard formula. Staples did retail sales when delivery of office supplies was the standard and Dominos did delivery when retail pick up was standard. Wow! Simple and yet these were two of the most successful growth companies ever! Put simply one decided to focus on delivery the other NOT to when their competition was focused on the opposite. Bundles are often more convenient for customers too because you can provide something else the customer needs in a single transaction saving them time and capturing more profit too. I am told about 40% of calls to Home Shopping Network sell the complementary product that goes with the main product being sold when offered. The upsell is generally a cheaper add-on, but that still maybe a 25% increase in sales to the same customer with no additional marketing costs. Also, the profit margin on the add-on product/service is often higher too. For example, most major real estate firms now offer mortgages. Most car dealers offer financing etc. At one point real estate companies were making more profit on their mortgage businesses than sales commissions on the homes. Jiffy Lube does a great job of this. They have it down to a science. The oil change at $20 generates a slim profit. Then they bring you out with a serious face and show you the recommended maintenance for that car at that mileage. Upsales 1-2-3 - change the hydraulic fluid, wipers, and antifreeze at 50,000 miles. That will be $100 and almost all profit! I would bet they make more profit on these upsells than on the basic oil changes.
There is no end to the creative ways to grow a business. After all, a business is just a legal entity to provide products and services really. The challenge is to stay focused on your "core competencies" and/or best customer base. So odds are you can find several different ways to increase your sales on this list and keep busy on these for a year or more. I would recommend focusing on one at a time though. Good luck.
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Bob Norton is a long-time Serial Entrepreneur and CEO with four exits that returned over $1 billion to investors. He has trained, coached and advised over 1,000 CEOs since 2002. And is Founder of The CEO Boot Camp™ and Entrepreneurship University™. Mr. Norton works with companies to triple their chances of success in launching new companies and products. And helps established companies scale faster using the six AirTight Management™ systems. And helps companies successfully raise capital.
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