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How massive profits are really made in business
"The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty." - Winston Churchill
All businesses, large and small, depend on the generation of revenues for their very survival. How many ways do you think there are to grow an enterprise? - 10 ways, 20 ways? Well, good news! No matter what size or type of business you are in, there are only three real ways to grow it, let’s take a look at what they are:
- Increase the number of clients or customers you sell to. (This is the main approach that almost everyone focuses solely upon).
- Increase the size of each client transaction (once you build trust and rapport, getting a buyer to add more products or services - or a larger size or higher quality version to their purchase - is surprisingly easy, once you learn how to do it). It is far more cost-effective to build the transactional value of existing customers as there is little or no acquisition cost. Use this saving to creatively incentivise your existing client base.
- Increase the frequency or number of transactions. Again, strategise how to effectively sell more often to existing customers. Increase the number of times they come back and repurchase from you. If you can ethically compel your customers to increase their frequency of purchase, it will add significantly to your profit potential.
Please do the following calculations with me:
Take a hypothetical business that has 1000 customers who spend R100 each time they purchase and come back twice a year to purchase. This business turns over R200 000 a year. But increase the listed three growth categories each by a mere 10%. (That means the 1 000 customers rise to 1 100, the R100 unit of sale grows to R110 and they start coming back 2.2 times a year instead of 2.)
Not a major increase in any one particular category, right? Well, look at the bottom line impact on your business: the 10% increase, 10% increase and 10% increase doesn’t produce a mere 10% combined growth in revenue; it’s a massive 33. 3%! By the way, particularly if your business has a constant fixed overhead, this could actually double or triple your actual profits and income. But it gets a whole lot better. Take these three numbers up 25% each and your revenue almost triples. And if you actually doubled each figure - making the 1000 customers, become 2000; the R100 average unit of sale, R200; and the 2 purchases a year, 4 - your revenue grows an enormous 800%.
This is a lesson about how to creatively grow your revenues and profits - even if you don’t believe that your business has anything new to sell. Why grow your business incrementally or linearly, if you can grow geometrically or exponentially, with the same time and effort? Never stand still, continually seek ways to increase your revenues. There are always additional strategies available to grow your business.
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