With HOURS spent non stop analysing the monthly performance of your business, you started to feel a bit light-headed. There was too much information for you to handle and they were out of your expectations, in a bad way. You sit down with your partners to have a discussion and they made it loud and clear to you that it is time to find ways to increase the sales of your business. It is all a hazy idea to you, because your business has been surviving in the comfort zone for way too long now. You have been only depending on your existing clients, and it has been years where you do not have new clients. You partners think the only way your business can survive in the long run is by having more sales with new customers, just like the heartbeat, to result in having more cash to keep the business going, like blood running through a person’s veins to keep them alive. At the same time, you are still responsible for retaining your existing clients. The worst-case scenario? Your old customers leave and your sales show no increase at all. How long more could your business survive?
Winson is involved in the sales industry and he has a very high desire to make his business grow further. His usual method of getting new customers is through the means of referrals, where his customers would introduce other customers to him. He realised this was not enough. It did not bring him any sense of fulfilment and the process of getting new customers is rather slow-paced. This was not enough to make his business grow. Winson attended some networking events to learn more and also posted advertisements regularly on various social media platforms with the aim to attract new customers. However, after a year, there is only an increase of 2% and this was nothing but a disappointment to him. The results were too low, it was unexpected, and there was no return on investments (ROI). Anyhow, Winson was still standing strong with his stance that sales will come in naturally. He believed in farming, not hunting. He was not a fan of engaging with people to convince them to buy his products and services, he believed in solving people’s problems to provide greater value, and it actually makes sense!
Realising how difficult it is for him to increase his sales, Winson finally decided to talk to a CFO and have a few coaching sessions. First things first, the CFO requested Winson to show him the sales report. From there, more questions were asked and formulas were filled up based on the information given. Both of them analysed the results together.
A Marketing theory based on Jay Abraham, to come up with achieving revenue for your business, you need three major components: Customer, Size, and Frequency. Simply put together,
Revenue (R) = Customer (C) x Size (S) x Frequency (F)
Based on this formula, increasing the component of C, S, and/or F, will effectively increase your revenue! So, what are each of these components all about? We’ll see:
Customer (C)
The people who contribute to your business’ revenue. A client is usually reserved for someone who pays for highly specialized professional services; so you should treat everyone you meet as a client even if he or she is not your customer yet. People either come in the form of traffic, act as potential clients, and finally, they are the people really interested in your products and services and you need to put extra converting effort on them – your clients. Traffic represents the people that walk into your store with no intentions to purchase anything yet. Once they show some interest, the traffic is converted into potential clients, known as prospect. Potential clients, however, are not 100% sure of what they want yet. So here comes your converting effort, entertain your potential clients, promote your products and services as much as possible and, there you have it, a confirmed client is a paying customer that contributes to your business revenue.
For instance, if you plan to open a bakery, do a comparison for the expected traffic of your store. Higher traffic means that the chances of people walking into your store is much higher. All you need is to choose a location where traffic is more visible. People can SEE you. Before going further into converting them into your potential clients, your main aim is to be SEEN. Converting is larger depending on your sales script, or how you close the sales.
To figure out how you could perform and attract better, you can use a financial projection to give an answer to this. It is a marketing strategy for you to help you sell your product better.
C = Target X ___% Traffic x ___ % Prospect x ___% Clients
C = Targeted population X Conversion Rate of Traffic x Conversion Rate of Prospect x Conversion Rate of Clients
With more traffic, you will have more conversion; and as a result, more customers, more revenue, more profits.
Size (S)
Size here represents the size of your invoice or transaction. It could be split into six categories:
S1: Make more sell low
You could produce more products so that the cost of production per unit is lower in costs, with this, you can sell these products to your customers at a lower price. When it is cheaper, customers have the tendency to purchase in a higher volume, making you have more sales compared to selling them at a more expensive price but in lower volume. The important factor here is time – you make more profit at a shorter time, like hypermarket sales bundles compared to mini markets that sell you conveniently but expensively.
S2: Backend product
Backend products are the products that are offered after your customers purchase a product from you. By this, you can make more sales with the same customers, rather than finding new customers. Give your customers special offers to attract them into purchasing your backend product and as a result, their transaction is bigger rather than only purchasing the initial product. For example, you are selling cameras but you could also offer a camera tripod at a good price.
S3: Cross-selling
Often confused with backend products, cross-selling is selling additional products that work together with the main product your customer is purchasing. For instance, when your customer purchases a camera, cross-sell by asking if they would like printing services and framing products for photos. Customers may consider their needs and if they see these goods as necessary, they will agree to your suggestion and there you have it, a bigger transaction.
S4: Referral
When you see the opportunity to ask your satisfied customers to recommend your product to other friends and family that will benefit the same as them – do it! You’ve got nothing to lose with this simple request. Referrals actually make a huge impact on the size of sales of a business. Referrals may be in the word of mouth, or these days, through viral social media posts. It is the best way for you to get new customers to increase your sales. Once you have these new customers, retain them!
S5: Unique Selling Point (USP)
Your product and services may be different than others that are currently in the market and this gives you a strong competitive advantage. You are unique, what do people acknowledge about your product? What are you good at? And what did they praise you for? You should use this opportunity to focus on delivering this value, because people do not mind paying more for value that could not be obtained from somewhere else. Having a unique product is great to attract customers and increase sales, so use your USP to gain more revenue with a higher, but still relevant price. You heard that pizza companies offer guaranteed deliveries not more than 40 minutes or it’s free. They know their process in a heartbeat; so that they dare you for Free, to ‘try me’.
S6: LifeTime Value (LTV)
The LifeTime Value (LTV) is the average net worth of a customer spending with you in life, and this could be obtained by multiplying the size (S) by frequency (F) and number of years (N). In simpler representation,
LTV = S x F x N
Frequency (F)
To derive the frequency of sales that generates your revenue, you place your focus on two areas:
Focus on Process
This is all about building a good relationship with your customers. Do you contact your customers? How frequently do you contact them? Do you give them good offers to make them consistent in purchasing your products and services? It is a good idea to contact your customers often to build rapport with them. In this way, your customer will feel a good sense of connection with your business and they will come back to you more frequently to repurchase your products.
Focus on People
Based on Jay Abraham, it is essential to focus on three groups of people: the people who pay you, the people whom you pay internally in your business (e.g. your people), and also the people whom you pay externally (e.g. your suppliers). Be resourceful and work around these three focus groups to find a way you could increase the frequency of your business. Better still, approach them and ask them a favour to refer you to new customers. The more frequently you emphasize this the more they will be reminded to do for you.
As you know the three major components of revenue “CSF”, a simple coaching process with bosses could be used to get a clear idea of each component to formulate how you can increase your revenue.
Guide on C
– C2: Are your people selling relationships currently? Which is consultative and advisory in nature? If not, what strategies can you put in place to implement these changes? Write out the strategies.
– C3: What is your current conversion rate? Given the example above, how could you increase the conversion rate by 50%? Write out the strategies.
– C1: What is your current channel to let people know your products and services? What is your traffic size? What can you target more to dramatically improve your client base? Write out the examples that your business can focus on.
Guide on S
– S2: What additional products or services do you offer to backend customers? How could you add value to your clients?
– S3: Are you currently implementing the cross-selling strategy? Is your sales team effective and informed on how to do so? If not, how can you do more cross-selling in your business? Write out how. – S1: Based on the ‘Make more sell low’ method, is there a way that you could increase the size of transactions in your business? If yes, write out how.
– S4: What are the current referral systems that you use? List three referral systems that you can implement for your business. Download Free Referral System Template here
– S5: What is your unique selling point in your industry? What is your advantage and strength you have (that your competitors do not have)? If you believe that you have yet to have one, create it. Write out your concept and action plan.
– S6: What is your current commission system? Are your salespeople motivated by the commission? If not, what is the worst-case lifetime value of your existing clients? List the qualifications.
– S6: Based on the LTV formula, establish the profit available and compare it to your current commission system. Should you offer a better option?
– S6: How have you structured your sales team commission for new prospective clients? Could you be open to give more profit as commission to acquire new clients? If yes, what initiative would you need to take to do so? List them out.
Guide on F
Now taking Winson’s business as an example, let’s try to formulate how he could increase his sales by using the formula.
Revenue = C x S X F
Revenue = 100 clients x $1000 x 2x per year,
therefore, Revenue = $200,000
Now taking Winson’s business as an example, let’s try to formulate how he could increase his sales by using the formula.
2,500 traffic, 20% conversion = 500 potential customers,
20% conversion from potential customers = 100 clients
In other words, out of 2,500 people, 20% will want to talk to him, i.e. 500 people are willing to sit down and know more (in this case, it is a good opportunity to make them friends!). From these 500 people, 20% become customers/clients. If we keep following this strategy, Winson can have an additional 100 clients every time a traffic of 2,500 people comes in.
How can he double up his activity so the revenue reaches ten-fold? Via networking or appearing on social media to find new people. There is potential to increase the traffic to 5,000 people. If that is not enough after increasing the traffic, he can double the conversion rate to 40% instead of 20%.
Get the figures and just plug them into the formula. Information is the most critical element in establishing a well-developed strategy. If you are still struggling, get a coach, or consultant, or even a CFO like me, to help you in strategic planning. Trust me, it is worth the investment.
Using calculations, Winson tends to see things in a clearer manner. The CFO taught him to utilise LTV and the revenue calculation to open his eyes on setting new strategies for his business in attracting new customers and increasing sales. With this, he successfully doubled his manpower by duplicating his mindset to his people. He had the right people that are willing to help him multiply his sales and the outcome was mind blowing – his business is now earning tenfold! Winson now believes that getting new clients is merely more than farming. He needs to go to the right place to hunt and farm and he never regretted his decision to get the CFO’s help to get his heart pumping new blood into his business.