Once you’ve got your business operating on a solid foundation, it’s time to grow. The 5 Ways formula is the most important formula you need to know to grow your business! You may want more customers, revenue and profit… the challenge is that those are results. The 5 Ways are the activity categories to focus on to get those results.
Let’s begin with the first, “Leads”. A Lead is someone who raises their hand and is interested in your product or service. They are ready to engage you in your sales process. It’s your marketing department’s job to provide you with a consistent stream of well-qualified leads… getting people in the door, or getting interested prospects to call or email in.
“Conversion Rate” (or CR) is the percentage of those leads who become customers. If one lead out of ten becomes a customer, your CR is 10%. Eight leads out of ten, 80%. You want to always be improving your CR.
Leads x Conversion Rate = Number of Customers. To increase revenue from those customers, you need to increase their “Number of Transactions” (how many times they do business with you over a certain period of time), and their “Average Dollar Sale” (how much they spend with you each time they buy).
Finally, your “Profit Margin” percentage determines how much profit you get to keep out of that revenue.
The first step in using the 5 Ways is to start measuring them each month. You can’t manage what you don’t measure! Get comfortable with the math and the process of measuring. It’s a discipline that may take a little time and effort for you and your team to implement, so keep at it.
Once you know what’s going on, the next step is to set some improvement goals. Start with Conversion Rate and Profit Margin – these are the easiest and cheapest areas to improve. Next work on Number of Transactions and Average Dollar Sale – these may take some marketing investment to communicate and educate your target markets. Lead generation is your most expensive area, so make sure you’re getting the most from your current lead flow before investing in more marketing.
Do you think you can improve each of the 5 Ways by just 10% over a year? That’s not even 1% a month… when you do that, you’ll see your Revenue grow 46% and your Profit grow by a whopping 61%! Watch my video to see the math in action.
Like to learn more? Read “Instant Cashflow” by Brad Sugars for more on the 5 Ways model, along with hundreds of strategies to consider for your business to grow your revenue and profit. Then talk with one of our coaches to help you get your business on a solid foundation and put this powerful model into action to grow your revenue and profit!
By Jim Palzewicz