The home of your ActionCOACH

We have been discussing the 5 Ways Business Chassis as a tool for increasing your revenue and profits. The current economic climate makes driving revenue and profits even more essential to surviving and thriving while most businesses are retracting. If you, as a business owner, are watching your cash flow (acquiring and conserving cash wherever possible) while diligently applying the 5 Ways Business Chassis to your enterprise, you will dramatically improve the likelihood of emerging into the economic sunlight intact with greater market share. You will be poised to accelerate the growth of your business when the economy turns upward. Please read last week’s article to gain an understanding of the 5 Ways Business Chassis.

5 Ways Business Chassis

Remember the 5 Ways Business Chassis: # of Leads x Conversion Rate = # of Customers x Avg. # of Transactions x Average $ Sale = Revenue x Profit Margin = Profit. By making small improvements to each of the 5 Ways we can dramatically improve our revenue and profits. The Business Chassis can actually be divided into more than five ways. For the sake of simplicity I’ll limit this discussion to five ways.

Know the Why to learn How

Stop reading this article right now and think about what a 50% increase in your bottom line would do for your business and lifestyle! Write it down. Or if that seems too unrealistic with the current economy, think about the impact of duplicating your 2007 or 2008 revenue and profits in 2009. Applying the Business Chassis to your business requires additional tracking and effort to generate the gains. That is why most of you reading this will think ‘Interesting concept, but too much trouble to use”. I challenge you to think thoroughly about the ramifications of such an increase in your profitability. Then write it down so that you will have the motivation to follow through in utilizing this tool immediately.

Now let’s create an example to illustrate the power behind this concept. We will assign values to each of the 5 Ways.

# Leads x Conv Rate = # Cust x # Trans x Avg $ Sale = Rev x PM = Profit.

5 Ways base numbers

4000 x 25% x = 1000 x 4 x $500 = $2,000,000 x 25% = $500,000

Let’s assume that you have a business coach that has access to 329 strategies for increasing your 5 Ways:

Number of 5 Ways strategies

# Lead Generation strategies: 74

# Conversion Rate strategies: 82

# Transaction strategies: 53

# Average $ Sale strategies: 50

# Profit Margin strategies: 70

By selecting a few of these strategies that are applicable to your business, do you think that you could improve each of your 5 Ways? By how much? For the sake of discussion, let’s be conservative and assume that by selecting 3 strategies for each of the 5 Ways you can only increase each of the 5 Ways by 10%.

3 Strategies for each of 5 Ways

Lead Generation:

• Unique Selling Proposition (USP)
• Personalized URL campaign
• Effective referral system

Conversion Rate:

• Dynamic sales scripts
• Fear removing guarantee
• Providing 1st buyer incentive

# Transactions:

• Critical NonEssentials (CNE) strategy
• Under promise & over deliver
• Membership VIP program

Average $ Sale:

• Effective Up-sell program
• Gift with $xxx purchase
• Package pricing

Profit Margin:

• Focus on large margin business
• Margin based team incentives
• No discounting

Now it’s time to use your calculator to make sure my math is correct.

# Leads x Conv Rate = # Cust x # Trans x Avg $ Sale = Rev x PM = Profit.

Results for 10 % increase

4400 x 27.5% x = 1210 x 4.4 x $550 = $2,928,200 x 27.5% = $805,255

Can this be true? By increasing each of the 5 Ways by only 10% through deploying 15 of the 329 strategies we’ve increased our revenue by 46.4% and our profit by a massive 61%! Remember my question about what a 50% increase in your bottom line would do for your business and lifestyle? If these numbers represented your business, what would you do with an additional $305, 255 over the previous year?

If you want guidance and accountability to make sure that you implement this concept correctly and achieve the gains, get a business coach.

Rob Garibay is a local business owner and business coach with 30+ years of business experience. Forward your business questions to: 405 573-6537 or robgaribay@actioncoach.com

How is your business fairing in the midst of the doom & gloom? Is the recession kicking you in the teeth, or are you doing well? A lot depends upon your industry and how well you were running your business prior to the banking system troubles. Regardless of how your business is doing currently, would you agree that you can always improve?

Survive or Prosper?

Especially during these challenging times, our attitudes, levels of management prowess and creativity will determine how our businesses emerge from this economic winter. Will you survive, gain market share, and be positioned to prosper? In a down economy, while your competition is going belly-up, survival can be a noble goal. You have more power over your future than you might think.

Today I’m going to introduce to you a way of looking at your business that gives you the power to dramatically improve your prospects of a good, if not great, bill of health when we enter into the spring season of this economic cycle. It is a way to look at your business that empowers you to focus on and make incremental improvements in the basic tenants that comprise every business. By following this approach you will most certainly improve your ability to grow your business and accelerate your profits while your competition is shrinking.

5 Ways Business Chassis

At ActionCOACH we call this The 5 Ways Business Chassis because there are 5 ways to affect the results. The 5 Ways formula is: # of Leads x Conversion Rate = # of Customers x Average # of Transactions/customer x Average Dollar Sale/customer = Revenue x Profit Margin = Profit. The underlined components of this equation are the results of the 5 Ways. It is the 5 Ways upon which we must focus to affect the underlined results.

How well are you implementing?

You might be wondering why I am writing about this topic when I described this concept in two articles last September. The answer is: How well are you implementing it? The importance of The 5 Ways to growing your business cannot be overstated, so let’s take another look. Besides, you might be a new reader, so pay close attention!

Understanding the 5 Ways

The first ingredient in the Business Chassis is number of Leads. This would include anyone with whom you have communicated about doing business, or has walked into your business establishment with the possibility of making a purchase. Conversion Rate is the average percentage of Leads that your business converts into a customer, client, or patient. By multiplying your number of Leads by your Conversion Rate, you arrive at the number of customers that have transacted business with you. You calculate your Conversion Rate by dividing the total number of new customers by the total number of Leads within the same time period.

Number of Transactions is the average number of purchases made by each of your customers. Depending upon the type of business, some will purchase once and some might purchase multiple times per week. This can be calculated by dividing the total number of sale transactions in a time period by the total number of individual customers who purchased from your business during the same time period. For example, let’s say that you had 150 sale transactions in the past month and 50 individuals conducted business with you. Your average Number of Transactions per customer is 3. Some might have purchased 5 times and some only once, but your average Number of Transactions is 3.

The Average Dollar Sale is simply the average amount of money spent per sale. This is calculated by dividing your total revenue for a time period by the total number of sale transactions for the same time period. Continuing the above example, if your total revenue for that month was $30,000, your Average Dollar Sale is $200. Some purchased more than $200 and some purchased less, but the average purchase is $200.

Your total revenue generated is simply your Number of Customers x Average Number of Transactions/customer x the average amount of money spent by each customer (Average Dollar Sale).

Must measure to improve!

Why do we look at business this way? Because this formula provides us with greater power to improve our bottom lines; and that is one of the critical metrics of how well we are running our business and how well we can live! Another reason is a true but often ignored axiom: If we aren’t measuring it we can’t overtly improve it.

We all want more revenue and especially more profits; but how do we generate more? The answer is to focus on all of the contributory factors, measure them, and implement strategies designed to incrementally improve each.

Join me next week when I put numbers to the Business Chassis to illustrate the power behind this concept and show you how you can dramatically improve your prospects for surviving and even prospering during these difficult times.

Rob Garibay is a local business owner and business coach with 30+ years of business experience. Forward your business questions to: 405 573-6537 or robgaribay@actioncoach.com