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Too often entrepreneurs and executives chase after more clients, higher sales or turnover and profits without realising that they are chasing the wrong things. If you think about it, these things are outcomes and results rather than things that you can directly affect. They themselves are affected but other ‘levers’ in your business. Here’s a list of some of the seven key levers that exist in almost every business that you should be focusing on. Small maths fact: if you improve performance in each of these ‘lever’ areas by around 10% or more over the course of the next year it could lead top over 40% growth in sales and over 60% growth in profit. Don’t believe me? Ask and I’ll show you the maths. Here’s that list:
The Seven Levers of Profit Growth
- 1. Generate more leads: this is a critical one, but it often gets TOO much attention and is the most expensive of the whole list.
- 2. Convert a higher percentage of leads into clients: do you follow up with each lead IMMEDIATELY and continue with positive communications through multiple rounds of follow up, even when there is no response?
- 3. Number of transactions: what are you doing to entice your customers to come back more often?
- 4. Average transaction value: are you and your partners, sales people, order takers systematically recommending complementary products, including any bulk discounts when more is purchased, and pointing out the bundle of products or services that the customer should review before making a decision? Could you improve a bit?
- 5. Profit margin: as your business grows, you likely have more leverage with suppliers, may be buying in higher quantities, and may otherwise be able to realize the benefits of scale. Have you reviewed your operating margins lately?
- 6. Generate referrals from customers: so now you have more customers (from the above activities); what can you do to derive more benefit for your business from each customer than your competitors can? Nurture those relationships to generate referrals. Guess what — it’s a win-win. Provide over-the-top service, keep in touch with your customers regularly, and provide them the means and the incentive to refer you, and they will do it gladly.
- 7. Extend customer buying lifetime: the number one reason why your customers will try one of your competitors? It’s not because they’re dissatisfied (not usually), price isn’t even the number one reason — the number one reason people try buying from someone else is that they don’t feel their primary provider cares all that much. Keep in touch, continually offer incentives for them stick with you, thank them for their business in creative ways, and you will keep them around MUCH longer.
So what do you get when you improve in each of the above aspects — flexing each “lever” just a bit? Fantastic growth. Your business may not be conducive to modifications of each variable, but make improvements of just 10 to 20% in a handful of areas and you’ll add 50%, 100% or more to your bottom line!
How many of these areas are you focusing on?
Thanks to macca for the photo