Do you ever feel that you make business too difficult in your own mind? Or do you ever find yourself getting lost in the complexity of everything you have to do in order to build a fast growing business? If so, then I think you’ll really appreciate the following simple grid of nine profit drivers.
Once you remember what your profit drivers are, you can then refocus your efforts on figuring out how to increase the percentages or numbers for each of these profit points. And once you do that, you’ll see the multiplying effect they have on one another and how they can rapidly accelerate your profits.
That said, here they are.
1. The Size of Your Funnel. In other words, how many total leads do you have. Business is a game of numbers so if you have a small top to your funnel, everything below it will limited by that number–which means that finding a strategic and systematic lead generation system that can predictably deliver an ever-increasing number of leads is critical to any profit growing initiative.
2. The Number of Conversations or Presentations Per Month. In other words, regardless of how big the funnel is, there is always a smaller number of legitimate viable prospects who will buy that month. So figuring out how to increase the number of actual conversations or presentations you make per month is another critical profit driver. Even if your conversion rate is 100%, your total amount of profit is limited by the number of actual conversations or presentations made per month.
3. The Percentage of Prospects You Convert. All things being equal, if you can increase your conversion rate from, let’s say 30% to 40%, you have just grown your profits by 33%.
4. Your Average Transactional Value. This is the MacDonald’s approach to up-selling, cross-selling, and packaging. Yet, most companies and businesses miss out on this profit driver because they don’t take advantage of intentionally increasing the average transactional value per customer–which could easily bring about a 20-30% increase in their profits.
5. Your Profit Margin. Either by increasing the perceived value or price of what you’re selling, or by reducing the cost of goods sold or overhead, you could make substantially more profit every time you sell what you sell.
6. The Percentage of Customers You Retain. Since it costs about six times more to acquire a new customer than to sell to a current one, it just makes sense that you’d want to develop a series of strategies and tactics to ensure that you keep an ever increasing percentage of your new customers.
7. The Frequency of Customer Repurchase. In other words, if you can get your customers to buy more often, everything else being equal, your profits will soar. For example, if a men’s hair salon can get their customers to go from getting their hair cut once every five weeks to once every four weeks, that’s the difference between 10 cuts and 13 cuts–or an increase of 30% in profits.
8. The Number of Years They Continue to Buy From You. Again, if you can increase the longevity of your customers (since they have no cost of client acquisition any more–and they tend to buy more frequently), you will automatically increase the amount of your profits.
9. The Number of Referrals Your Customers Provide. Since warm leads tend to convert at a higher rate than cold leads, if you can increase the number of referrals your current customers provide, you could radically increase both your conversion rate and your profits.
So, there you have it–the Nine Profit Drivers for your business. If you’d like a pdf of these 9 Key Profit Drivers, click on this link and you can put up this graphic in front of you some place to remember that when it’s all said and done, if you focus a fair amount of your time and effort on figuring out how to systematically increase the percentages and/or raw numbers of each of these nine drivers, you could end up making a whole lot more money.
Note: Figuring out how to systematically increase those 9 Drivers isn’t necessarily easy (choosing which strategies and tactics to use, test, adjust, systemize, etc.) but the framework is. So don’t make it too difficult. Just stay focused and work on increasing each of these by a little bit and your profits will begin to soar!.
To your accelerated success!
P.S. If you need help with this, feel free to contact me. It would be an honor to help you!