The Four Ways to Grow Your Business

Step 4 - Increase Effectiveness of Processes Within The Business

This is the last, but definitely not the least, way to grow your business. This is the step that ties it all together. To accomplish thie previous three ways we've talked about, you must make sure that certain processes operate efficiently within your organization. Without changing and improving the way your business operates, it will be very difficult to successfully implement the strategies we've talked about.

Let's discuss briefly some of the basics of improving your business' internal processes:

Increase Process Effectiveness - Develop a Mission and Goals

Understanding the real nature of your business and establishing its overall mission can help you build better processes. Once you have a mission statement, everything you do and say must support that mission. It can help guide you in developing a business plan, and in goal setting. It will also build understanding and trust in your customers' minds and give your team members clearer direction.

Increase Process Effectiveness - S.W.O.T. Your Business

S.W.O.T. translates as Strengths, Weaknesses, Opportunities, and Threats and a S.W.O.T. analysis is an assessment of your current business environment. When you do this you end up with information on your industry, on your customers, on your competition, and on all your business operations; and when you know all these things, then of course you are in a much better position to improve your problem areas, and ensure that you use your strengths and opportunities to full advantage to win more customers, keep them coming back and spending more each time.

Completing a S.W.O.T. analysis can help you improve your processes to make sure that the first 3 ways to grow your business are head and shoulders above your competitors'. It's one of the basic techniques businesses who want to grow use to understand how they can leverage their strengths, remove weaknesses, make the most of opportunities and avoid threats in moving their business forward. And a S.W.O.T. also forms an important part of any business plan - and I believe any business that is interested in growing absolutely needs a business plan to work to.

Increase Process Effectiveness - Work ON Not IN

Do you ever feel that you're stuck day in and day out handling the myriad of little things that pop up in addition to taking care of regular operations? Well if you keep doing that, you certainly won't have the time to implement any of the ideas we've talked about today. By working ON your business instead of IN it, you'll be able to step back from the day-to-day activities and look objectively at your business as a whole - and what needs to be done to help it grow.

One of the most profitable things you can do as a business person is to sort out the things you could do in your business to free up more of your time to work ON rather than IN it.

Increase Process Effectiveness - Systemize Processes

One of the first things you can do to free up more of your time and make your business run more smoothly is to systemize every process that needs to be completed to serve customers and generate profit. We're talking about mapping out and documenting every single step of every single task - from answering the phone to closing up at night.

Edward W. Demming (redesigner of the Japanese car industry) completed a study that showed that only 4% of business misakes were due to direct human error. The other 96% were due to a lack of consistent systemization.

Systems clearly spell out what it takes to run your business. Documenting those systems can help to train team members, delegate responsibility and create consistency. This all works to your advantage because:

1. You now have more free time to do the things you want to do, and
2. It makes your buisness more valuable because it doesn't have to depend entirely on you to operate

Increase Process Effectiveness - Build a Team

Understanding why the word 'team' is so critical could improve your business processes and your working environment dramatically.

Creating processes within your business can allow you to delegate more to team members, making them feel valued and giving you more free time to work ON your business rather than IN it. Building a business based on functions rather than people can help you too. Instead of building jobs around specific people, focus on the functions first and match them with the right people.

Training is an important area for improving processes and keeping good team members. Building team members' skills is the only way to implement change in your business effectively. Whether it's how to answer the phone, computer skills, customer service or financial recordkeeping, it is extremely important to the ongoing development of your business to ensure that your team members are trained and challenged.

The Power of Synergy

These 4 ways work best when used together in an overall strategy. Think about the concept of synergy - the whole is greater than the sum of its parts. The mistake many companies make is to focus on just one of these 4 ways, and thus miss out on significant growth opportunities.

Let's look at a dramatic example of how the 4 ways can work together for you.

Making All 4 Ways Work for You

1. Let's say you have a customer base of 1,000.
2. You are able to increase the number of inquiries (and thus new customers) by 10%. This means your customer base would increase to 1,100.
3. You are able to increase the number of times each customer purchases from you during their lifetime by another 10% (e.g., from once to 1.1).
4. You manage to increase your average sale (or transaction value) by 10%, taking it from $100 to $110.
5. Improvements in your business processes have allowed the first 3 increases to occur.
6. Here you see that I've increased each factor by 10%. What will the result be in terms of increased profitability - will the overall business grow by 10%?

In fact, something completely different happens. Something that could mean the difference between a profit and a loss, between a comfortable lifestyle for you and a wealthy one. Increasing all areas at the same time has a multiplier effect resulting in an improved profit of not 10% but a staggering 33.3%! That's an increase of $33,100 in income as a result of the synergy of all areas improving together.

So, you see that focusing on all 4 ways to grow your business is the best way to achieve maximum results.

Summary

So now we've looked at the four ways to grow your business:

1. Win new customers
2. Get customers to purchase more often
3. Increase your average sale
4. Improve the processes within the business to ensure the success of the first 3 ways

We've discussed some of the key strategies within each of these 4 ways that you can use to make your business more valuable. And we've looked at how the 4 ways work together. For ways to help your better grow your business, give us a call at (416) 803-5638.  

The 4 Ways to Grow Your Business

Step 3 - Increase the Average Sale Value

Customers come to you for help and guidance. So it's important to let them know about all the options, including additional products or services that are available to add on to the original purchase. You've put a lot of time and money into getting that customer in to your business in the first place, so why not leverage the return on that investment where you can?

Your average transaction value is a simple calculation. Take the total value of sales for a given period and divide it by the number of customers who purchased those things. Let's look at an example:

Last week your business brought in $4,286. Checking your sales records shows that 62 customers actually purchased items last week. This means that $4286/62. or $69.13, is your average sale for the week.

What would happen if you were able to increase that average sale figure to $74.60; only an additional $5.47 per customer. it would take your weekly income from $4,286 to $4,626.50. Now the difference of $339.50 per week might not seem like much, but multiply it by 52 weeks a year and you get an additional $17,654! Now that's something you just can't ignore.

Increase The Average Sale Value - Employ Selling Strategies

Let's talk about some selling strategies you can use to increase your average transaction value.

And by the way - when you have your team trained in a selling system as I suggested earlier, make sure it includes a routine for the use of these strategies since they can really add to the value of sales. Let's look at how they work.

Increase The Average Sale Value - Cross Selling

Cross selling is when you sell other products or services from your range in addition to the customer's original choice. Another term used to describe it is suggestive selling. You suggest additional items to complement the original purchase.

For example, McDonald's makes it a point to cross sell every time you visit. They ask "Would you like fries or an apple pie to go with that Big Mac?" It's so much a part of their culture and training, that if a team member fails to cross sell three times within a shift, they do some retraining.

To start you thinking about possible cross selling opportunities within your business, go back and look at your major product or service offerings and ask: What else could we offer to go with this item that would add value and help the customer get the most out of the purchase? You can then develop cross selling checklists for each item that will guide team members in making suggestions to customers.

Increase The Average Sale Value - Up-Selling

Another strategy to increase your average sale is to up-sell purchases from lower to higher priced items.

A great way to do that is to offer your products or services in three or more tiers, along the lines of good, better and best, or bronze, silver and gold. Your first tier might be your budget items, the ones for price-conscious buyers. Your second tier is the one you actually want the majority of customers to buy, and your third tier items will appeal to those who are happy to spend a little more for their value.

Train your team members to offer three options from your range of items, explaining the tiers. Statistics show that most people will select the second tier item.

Increase The Average Sale Value - Bundling

In bundling items or services together into one single purchase you add value to your customer. It's designed to make your products and services more attractive, create a higher perceived value for the customer and increase your average transaction value.

For example, an electronics retailer might offer six free blank videotapes with any purchase of a VCR. Instead of discounting the price by 20%, a manufacturer might offer free installation. A health professional may bundle together a free assessment if you sign up for a certain number of sessions.

Take a look at your full range of products and services and see if there's any opportunity to package things in this way in your business.

Increase The Average Sale Value - Smart Merchandising

Signage, ticketing, presentation and packaging, traffic flow, and point-of-sale displays are all types of merchandising that can increase your average sale. Having educational information about your products or services, and sales tools like testimonials or brochures, can help build customers' confidence in your business and increase the average sale value.

Surprisingly, even your on-hold messages can spark a customer's interest and result in an increase of the average sale. For example, if you call a business about a specific product or services and you're put on hold for a moment. A recording comes on that tells you about other products or services that you may not otherwise have known about - causing you to ask for more information or come in and see for yourself.

Increase The Average Sale Value - Work Your Margins And Pricing

To increase your average sales, you must have a firm understanding of your margins and how they affect your bottom line. Avoiding discounting and price wars is important to maintain and increase your average sale value.

Let's look at some examples:

If your present margin is 35% and you reduce your prices by 10%, to produce the same profit as before the discount, your sales volume must increase by 40%! That's not to make more profit; it's just to get back to where you were before the disount. And it's not very likely that a 10% discount is going to spur an extra 40% in sales.

On the other hand, if your present margin is 35%, and you increase your prices by 10%, your sales can reduce by up to 22% to maintain the same profit. This probably wouldn't happen either. Why? Because statistics show that only 15% of the market actually purchase on the basis of price alone. If you can differentiate yourself in the market, showing why your products or services are worth more, your sales could actually increase even with a price increase. What you offer suddenly seems more valuable. So increasing, rather than decreasing, your prices could be worth further investigation for your business.

The 4 Ways to Grow Your Business

Step 2 - Increase the Number of Times Customers Come Back

Acquiring new customers is known as 'front end' marketing. Customer retention, or getting your current customers to come back to you, is known as 'back end' marketing. Increasing the number of times your customers buy from you is vital to the long-term health and profitability of your business.

Think about this: It can cost up to 6 times more to win a new customer than it does to have an existing customer purchase again. Why? Because you invested time and money to acquire that customer for the first sale, but every additional sale after that doesn't involve any cost. So for every sale you make to a previous customer, you actually keep more as profit.

Increase Customer Return Rate - Classify Them

One of the first ways to ensure that the right customers keep coming back is to classify your customer base into tiers: A, B, C and D customers. A customers would be your best and most desired, the ones you WANT to work with because they are loyal, dependable, or just plain nice. B's have the potential to become A's with a little work. C's are not ideal, and D customers are ones you'd just rather not deal with again.

This classification process means that your ongoing communication and marketing approach will be more appropriate for each group. For example, your A customers are the ones you most want to keep working with, so you might invite just them to join a preferred customer club, or A's and B's would get special mailings and offers, etc. You could even go so far as to ask your D customers to go elsewhere, freeing up more time and energy for your preferred customers.

Increase Customer Return Rate - Ask Them To!

Could it be that simple? Most businesses fail to recognize the profit potential in inviting past customers back. It really is as easy as that - assuming they were happy with you the first time. Once a customer is delighted with a product or service, they want to continue the relationship. Making them feel important and valued gives them the incentive to do that.

Remember that 68% of customers who leave you for your competitor do so because of the perceived indifference. In other words, they didn't feel that you valued them or were concerned whether they bought from you or not. Not following up to say thank you and please come back, not making them special offers or sending them special mailings, not asking for input, can be perceived as indifference to them as individuals and as customers.

Increase Customer Return Rate - Provide Awesome Service

Another great way to keep customers coming back to you more often is to offer service that goes above and beyond the norm.

Creating a team commitment to service can impress your customer enough to keep them returning and referring others. The commitment could make certain promises of performance standards, and could explain your business ethics and mission. These can make great UCDs as well.

Awesome service, like good telephone technique and selling technique, can actually be systemized so all the team knows what they are expected to do for a customer and just how far their authority extends in bending the rules. You can't stop at saying you want your customers to be given awesome service - you need to train the team so they can deliver it consistently and effectively.

Increase Customer Return Rate - Nurture Them

It's important to nurture your relationships with your customer in the same way you would any other important relationship. Nurturing is the most cost effective way to make customers feel valued and motivated to keep purchasing from you. The more you stay in touch with them, the more likely they are to remember you.

Here are some ideas on how to nurture existing customers:

• Send regular maiings to build on the relationship such as newsletters, offers, calendars, service reminders, thank you notes, special articles of interest, holiday cards, and so on
• Establish a loyalty program that rewards frequent purchasers
• Make follow-up phone calls to make sure they are 100% delighted with the product or service they received

So set up a system for ensuring that the relationship with your customers stays alive and encourages them to repeat purchase.

Increase Customer Return Rate - Use Customer Comment

Asking for feedback lets customers know that you are truly interested in them and their opinion - something other businesses just may not bother with. And the feedback you get can be extremely valuable for your strategic planning.

One way to do it is with follow-up calls just to make sure they are happy with their purchase or to get in with some damage control if they are not.

Another way is to use a satisfaction survey, although it's sometimes difficult to get them returned, particularly if the customer is happy! You can also ask customers who submit positive comments to be a reference or provide a testimonial for you.

And customer advisory boards can be very useful too. You invite a group of frequent customers to come together and discuss a particular aspect of the service they received, what they valued, what could be improved, and so on.

When you do make the effort to gather feedback, and the customer has made the effort to give it to you, don't waste it. Use the information to continually improve the way you do business, and let customers know that their suggestions are being used.

The 4 Ways to Grow Your Business

As the deadline for launching our new blog looms, I had been giving some thought as to what to discuss. When, I remembered a conversation with a client last week about the state of his affairs. It suddenly dawned on me that the perfect topic was about business growth. As entrepreneurs, we are all concerned with creating and growing a business that will someday have a value to be sold.

It may sound a little simplistic, but there are really only 4 fundamental ways to successfully grow your business - in other words make it more valuable:

1. Increase the number of customers of the type you want to have

2. Increase the number of times customers come back

3. Increase the average value of each sale

4. Increase the effectiveness of each process in the business

This topic looks at some of the key strategies within each of these 4 ways that you can use to make your business more valuable. It also looks at how they should be used synergistically in order to capture the greatest value and not miss out on opportunities to grow the business. Any other strategy that doesn't appear to sit in one of these four ways, for example cutting costs, may help you temporarily, but it won't grow your business. Cutting costs won't make your business more valuable unless you turn around and re-invest the money you save in one of the four ways.

Step 1: Increase the Number of Customers You Want

Today I'm going to go through the first way to improve business value. I will cover a fair bit of ground so be warned that I won't be going into too much detail on specific techniques that you can customize, however in the future I will have related blog entries that will break this subject down further.

Winning new customers, or customer acquisition, is where most business owners focus first, so it's fitting that we begin here. Customer acquisition is known as the 'front end' of marketing - it's about achieving that initial first-time contact with a potential customer. While there are hundreds of ways to win new customers, we'll be looking at the 5 major strategies for this:

• Developing unique core differentiators for your products and services
• Tapping the power of the phone
• Implementing a sales system
• Using Market Research
• Developing a promotions plan

Develop Your Unique Core Differentiators

A Unique Core Differentiator is the reason why customers buy from YOU - something you have that is of real value to them and decides their buying decision in your favor. You may in fact have several UCDs - different ones targeted towards different segments of your customer base.

Good UCDs can come out of simply reviewing the way you do business and deciding to emphasize some aspect of what you already do or of thinking up a different way of doing it. For instance, if you ran an automobile parts business you could offer as UCDs:

• Free same day delivery of parts ordered from repair shops within your area - only you service customers who need fast delivery
• Keep a range of parts for classic cars - only you meet the needs of car enthusiasts in the area
• Offer a top discount to trade customers who spend over a certain sum each month - only you offer this good deal to cost conscious customers

Any one, or maybe all, of these could be effective because each is based on a consideration of what is important to at least one segment of customers, or a particular customer need.

Think about how you'd finish this sentence - 'People buy from me because I'm the only business that...' If you can put in something there that only you are doing, then that's a UCD. If you can't, then its time to start thinking about creating some UCDs for your business.

Tap the Power of the Phone

Many marketing people consider the phone to be one of the most under utilized resources in business today. Too many business owners spend time and money looking for new ways to promote themselves when they could improve sales simply by improving their phone technique. An effective phone technique is really important in keeping prospects interested - there's no percentage in spending money on generating leads only to turn them off the first time they call because of the manner in which you talk on the phone; or by handling the call carelessly and leaving people hanging for long waits; or setting up one of those telephone tag situations. We all know how frustrating those things are.

Among the things your team can learn in customer service skills training there may be none so important as phone skills training. Whether it's doing sales calls, handling information inquiries, or fielding complaints, a great deal of their interaction with your customers will happen over the phone. With the right training, your team will have the focus to handle any call, and make it work to your business' best advantage.

There are some really basic rules for getting the most out of your phone contacts with customers, even if the call began as a customer complaint. Sales reps can learn how to focus on how to up-sell and cross sell as well, ideas I'll return to later. The best way to do this is to develop a systematic way of dealing with phone calls. There are training packages around on how to do that.

Develop a Sales System

Just about everyone knows of someone they'd call a 'natural born' salesperson. And doesn't every business owner wish they had one on the team?

If you observe these people time after time you'll begin to notice a pattern to the way they do things - how they get the prospect interested, how they keep them interested, how they handle objections, how they deal with questions about price and how they finally ask for the sale. All in a way that builds trust and understanding with the prospect as they go along.

In fact, if you watched them often enough, you'd probably begin to recognize that they have systemized their routine - they have a 'sales system'.

Now it is actually possible to learn an effective sales system. We deal with one by a leading sales expert, Rick Solomon, based on a relationship selling approach. This is one of THE most effective selling methods which also has the added advantage of removing a lot of the discomfort many people feel about 'selling' something.

A systemized approach to selling based on effective sales method and shared by you and your team is a must have for increasing your customer base.

Research Your Market

To improve your return on investment in marketing communication pieces such as letters, advertising, emails and direct mail, a targeted rather than shotgun approach is very important. Your marketing should focus on a specific group of people who are the right type to purchase your product or services and give them a message they will relate to. After all, it doesn't matter how good your product or service is if people don't think they have a need for it.

So it's extraordinarily important to understand what makes your customers tick; if you are selling computers then you need to realize that the expert user with knowledge of software and hardware and all the technicalities is going to want different information than a person who just wants something easy to use for their email contact with family and friends.

The point is, to be able to arrive at this knowledge of your actual and potential customers, you need to do some homework identifying your main market segments and profiling them according to their interests - some market research. Then you can market accordingly in a much more focused and cost effective way.

Knowing and understanding their needs is essential to growing your customer base, whether it sells directly to individuals or to other businesses. Once you have that information, you can use it to persuade potential and existing customers that buying from you is in their best interest.

Develop a Promotions Plan

Think about your current spend on advertising and promotions for your product or service and ask yourself these questions:

• Do I have an annual budget specificially for these activities?
• Do I know how successful my advertising really is, that is, how much return on investment I get for my spend?
• Do I know which is the most effective form of advertising for me - trade exhibitions, newspapers, TV, and so on?
• Do I have a schedule, an annual diary, of advertising 'things to do'?

These are the sorts of things incorporated into a promotions plan - an outline of the promotional tools or tactics you plan to use to accomplish your marketing objectives.

Without a set plan based on some specific goals, and without a record of how past efforts have worked out, your advertising efforts must be, at best, hit and miss. To get more customers you need a plan for using the right media at the right time. There's no point in trying to win customers on a scattergun approach - it will just use up your advertising dollar without necessarily adding one extra customer and you wouldn't even know it.

Next Month: we will look at Step 2: Increase the number of times customers come back.