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Track The Five Numbers That Really Matter

Struggling/overwhelmed business owners will spend time to save money, whereas successful owners will spend money to save time.

Why is that distinction important?

Because you can usually get more money, but you can never get more time. So, you need to ensure that the stuff you spend time on makes the biggest impact! If you are building a better business or growing a great business, a key solution is to do what is needed to those metrics that will make a difference. That might sound simple, but sometimes it’s not that easy to specify what it is you are looking for. It’s essential that you know what matters.


WATCH: FIVE Numbers a business needs to monitor and improve these metrics:

  • Leads What was the number of quality leads generated, and even better where did they come from? (Referrals, Google ads, Website, Social Media, Networking, Advertising, etc)

  • Conversion Percentage What percentage of the leads turn into customers who buy something?

  • Average Dollar Sale Per Customer How much is the average sale value per paying customer?

  • Frequency of Transaction How many times a year do customers buy from you?

  • Margin What is the gross margin (dollars and percentage)?


Power of Compounding

Together, these are the basis of the Growth Formula. If these are improved consistently, the business will always grow.


Each month, or preferably weekly, ask how can I improve one or more of these? Do this consistently over time and a business will significantly improve its sales, profit and cash flow.


Again, it sounds simple, but not necessarily easy. You have to choose and implement the strategies and tactics to improve the elements making up the Growth Formula, because as each improves it has a compounding effect through to profit and cash.


Over the page is a simple example to show the amazing effect of small changes and compounding:


 

GROWTH FORMULA

Add Existing Customers + Acquired Customers = Total Customers,

Then, multiply Total Customers by the Average dollar sale per customer,

Multiply again by the Number of Times customers buy from you each year = Total Revenue


Multiply Total Revenue by Gross margin (%) = Gross Profit


Less, Overheads = Operating Profit for year


When each of the numbers improve, it has a compounding effect to Profit and Cash.



IMPROVEMENT = 38%

What was done? More leads from improved marketing, a higher conversion rate, a price increase and some up-selling, ensuring the customer continues to do business with you, better purchasing and less waste.


USING THE GROWTH FORMULA

Just the processing of measuring can improve the results by 10%! Then each week or month, ask “what strategy could improve each metric?” Test the change and if it works for you make it part of your system. The compounding effect can result in a big improvement to your profit and cash.


We use some software which simplifies the calculations, often the improvements at the start are much smaller numbers, but the outcome is still much more money left over for you, because:

  • The Formula helps you to be more certain what will work for you, and

  • Clarifies the strategies necessary to achieve the required outcome.

Call me if you’d like to see how you could benefit from looking at the Growth Formula, and have more profit and cash.

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