In the second part of our series, How to grow your business, we have a further five actionable considerations for businesses and individuals aiming to achieve growth. We know that offering you advice on business growth during a recession may seem a little counter intuitive but if anything, it’s as important as ever to be aware and considering how to outsmart the competition and to be making best use of whatever resources you can to maximise profits from sales in a low demand scenario.
For business to succeed in the long term, you need to excel at both the challenge of creating a new idea and building secure foundations to give it every chance to survive. There are all sorts of exciting ways to grow and make improvements, this series will cover as many as we can.
As chartered accountants our advice when it comes to business growth is far-reaching, gained from years of experience, stretching beyond the balance sheet into every aspect of business.
Our advice is based on the four principles of business growth:
- Increase the number of customers
- Increase the number of times each one does business with you
- Increase the average value of each transaction
- Increase your effectiveness and efficiency
How to grow your business – Part 1
In the first part of the series How to grow your business – Part 1, we featured:
- Write a business plan
- Develop targets, forecasts and budgets
- Track your key performance indicators
In Part 2 we feature a further five important strategies:
- Systemise everything
- Apply the latest technology
- Apply the 80/20 rule
- Get your pricing right
- Break some of the compromises
*We have chosen to use the term customer throughout the article while recognising that many professional businesses may prefer the term client. We use the terms synonymously.
- Systemise everything
Nearly everything that happens in a business is repetitive, which means it doesn’t necessarily need you to do it yourself! Free yourself up to manage one of the many other areas of your business by systemising. Here is a two-step approach:
- Take a hard look at what you and your team do each day and write down how it’s done
- Start delegating tasks to other people by, firstly, having them observe how you do it and then, secondly, having them do it themselves with the appropriate oversight
Systemisation is the key concept of The E-myth Revisited by Michael Gerber (1995), one of the great guidebooks for entrepreneurs. Despite the book being nearly 30 years old, and that many businesses’ assets today are intangible or creative, products and services continue to be delivered by systems and people.
All-important user experience and customer satisfaction can be more assured via the use of consistent and monitored systems. Business owners should neglect any opportunities to systemise at their peril!
In 2022, business owners are fortunate that there are more digital ways to systemise than ever before, to ensure we are working as smart and efficiently as possible.
This takes us on to…
- Apply the latest technology
Technology is now a major driver of business profits. Largely advanced by the pandemic, it’s no surprise that most customer journeys start online.
To stay competitive in today’s digital marketplace every business should consider itself a technology business. Increasing revenue, reducing costs, and even creating new revenue streams can be leveraged through the use and development of digital products, for example, using predictive data and analytics to better understand customer behaviour and internal performance.
Digital innovation plays a vital role in transforming businesses, often at an exponential rate. There are opportunities available through innovation and adoption of the latest technologies, which:
- Enhance conventional business models
- Improve current business models and processes
- Build complete engagement/business models
The four big places to start with technology?
Data
Data and analytics need to be at the core of your digital innovation strategy. Our interconnected world means businesses have more access to customer data than they’ve ever had. Business leaders who embrace digital innovation are well-placed to transform this data into the valuable customer insights they need to help them make better decisions about their future.
Customer experience
Today, customers have high expectations for a seamless customer experience, both online and off. From your website’s appeal and usability to the consistency of communications, prioritising digital innovation will ensure you’re staying on top of your game and delivering the superior experience your customers are looking for.
Employee productivity
Embracing digital innovations can improve employee efficiency and productivity in a number of ways. And there is significant potential for automating processes. Core business functions such as HR, for example, can use technology to automate payroll and employee onboarding, giving employees more time to focus on other activities and keep their roles varied.
Security
Cyberattacks are growing in number and sophistication. It’s not just a case of installing antivirus and thinking you have it covered. 2022 figures reveal 39% of UK businesses identified a cyber attack, with one in five of these identifying a sophisticated attack type such as a denial of service, malware or ransomware attack. Cybercriminals are getting better, and businesses that fail to keep up with technological advancement will pay a heavy price.
- Apply the 80/20 rule
The 80/20 rule, also known as the Pareto Principle, states that roughly 20% of your activities generate 80% of your results.
From this, we can assume the principle that 20% of your customers generate 80% of your revenue. Test the principle for yourself and do an analysis. Group your customers and see how closely this applies to your business. If it does, it’s time to assess whether you keep serving all the remaining 80% or whether you’re losing money on many of them.
Here’s an exercise to apply the Pareto Principle. It’s called the Biggest Check Exercise. Here’s how it works:
- On a chart, list your five best customers (however you define that term)
- In column A, enter the total revenue you generate annually from each customer and calculate the total of the column
- In column B, enter the total revenue you could generate if you sold each customer your complete range of goods and services and calculate the total
- Compare column A total with column B total and ask yourself, “How should we change the allocation of our marketing and other resources?”.
- Get your pricing right
Many of us resist the idea of raising prices for fear our customers will go elsewhere. But in the current economic state, not raising prices is no longer an option for most businesses – costs are increasing, so too must your prices.
Understand that price is not the only deciding factor behind your customers’ decision to buy from you. Buyers pay for a combination of value, service and convenience. Raising prices is therefore an ideal strategy to improve your profitability.
Look at the following chart:
| 1. If your present profit margin is… | 20% | 25% | 30% | 35% | 40% | 45% | 50% | 55% | 60% | |
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3. Your sales would have to fall by the following percentage before your profits decline…
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2. And you increase your price by…
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2% | 9% | 7% | 6% | 5% | 5% | 4% | 4% | 4% | 3% |
| 4% | 17% | 14% | 12% | 10% | 9% | 8% | 7% | 7% | 7% | |
| 6% | 23% | 19% | 17% | 15% | 13% | 12% | 11% | 10% | 9% | |
| 8% | 29% | 24% | 21% | 19% | 17% | 15% | 14% | 13% | 12% | |
| 10% | 33% | 29% | 25% | 22% | 20% | 18% | 17% | 15% | 14% | |
| 12% | 38% | 32% | 29% | 26% | 23% | 21% | 19% | 18% | 17% | |
| 14% | 41% | 36% | 32% | 29% | 26% | 24% | 22% | 20% | 19% | |
| 16% | 44% | 39% | 35% | 31% | 29% | 26% | 24% | 23% | 21% | |
| 18% | 47% | 42% | 38% | 34% | 31% | 29% | 26% | 25% | 23% | |
| 20% | 50% | 44% | 40% | 36% | 33% | 31% | 29% | 27% | 25% | |
| 25% | 56% | 50% | 45% | 42% | 38% | 36% | 33% | 31% | 29% | |
| 30% | 60% | 55% | 50% | 46% | 43% | 40% | 38% | 35% | 33% | |
- Break some of the compromises
We’ve saved the best for last. Consider how historical precedents within a particular industry force customers to make compromises or concessions.
Why, for example:
- Do most hotels prohibit you from checking in before 3pm?
- Do supermarkets not provide childcare?
- Do retailers quote broad delivery times? For example, “We’ll be at your house between 9am and 5pm”
In your industry, what compromises do your customers have to put up with ‘just because’? Think of the success of those companies that have broken the compromises.
Bloom & Wild, named the “pioneers of letterbox flowers” broke the compromise of flowers not being able to be safely dropped through the letterbox, with astounding success.
Whether it’s eliminating the wait time of roadside recovery with Uber-style tracking or applying security tagging technology to airline luggage labels to let us find our misplaced suitcases. Think outside the box and break some of your own compromises. Change your opening hours, offer a pick-up service or let customers use digital means to make their, and your, experience better.
Tools for growing your business
These five strategies should give you plenty of food for thought when it comes to formulating a plan for your own business growth. And, if you missed How to grow your business – Part 1, make sure you visit our previous post and read it here.
Next up, in How to grow your business – Part 3, will be our thoughts on how to analyse your value differential, the importance of surveying your competitors, and your own team, as well as how to leverage the power of referrals.
Don’t forget your Foxley Kingham account manager is always on hand to soundboard ideas and advise you personally. Through our years of experience, we have a wealth of knowledge to offer when it comes to your business growth and are always at the end of the phone for a free consultation.
