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How to Create Exponential Growth for Your Business

Every business owner wants to increase their revenue and grow their business. Unfortunately, most of them assume there’s only one way to do this: Get more customers. It’s true that a larger number of customers would increase sales and revenue, but getting those customers usually means expensive advertising and marketing campaigns, which can have uncertain results.

“Standard” Growth

Say you have 100 customers that each spends an average of $1,000 a year buying your products. That means your gross revenue last year was $100,000. If you succeed in growing the number of customers by 10%, you’ll gross $110,000 next year.

But what did that 10% increase cost you? Did you buy ad space on local TV and radio stations? Did you run a pay-per-click social media or Google Adwords campaign? The up-front monetary cost of these marketing channels can be high, often in the thousands of dollars. Let’s say, conservatively, that you spent $5,000 for the year on advertising and marketing to pull in those 10 new customers and the additional $10,000. After you factor in these extra costs, you really only have a $5,000 revenue increase.

Additionally, as a business owner your time itself is worth money! How many hours did you devote to crafting a script and shooting a TV spot or learning how to design and promote an online ad? It’s more difficult to quantify these costs, but they can add up quickly. (Related: Do or Delegate).

The good news is that there are two other less expensive and less risky ways to grow a business. If implemented correctly, these two tactics will allow you to maintain steady revenue growth without large infusions of money or time. And, when used in combination with sensible advertising efforts to increase your customer base, they can achieve exponential results.

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How do you do this? Well, what if instead of getting more clients you just increased the average amount each customer purchased? In other words, we’re talking about quantity upselling. This may require a couple hours of extra training for you and your employees or small tweaks to the organization of the merchandise on the floor, but, by and large, the cost to the business should be minimal.

Let’s compare. If you increase the average purchase of each customer by 10% to $1,100 you would achieve the same $10,000 annual increase in gross revenue as you did by increasing your customer base by 10%. But, and here’s the key point, you spent less money to get that $10,000 increase, meaning that more of this $10,000 is profit.

Obviously, this is much better. But, you can do more.

What if you could also increase the average number of times each customer purchased by 10%? If you can also frequency upsell, now those same 100 customers are buying an average of $1,100 of products or services 1.1 times per year from you. You now have increased total gross revenue to $121,000, a 21% total increase.

Finally, what if you also worked to increase the customer base by 10%? With all three methods in play, you would have 110 customers buying $1,100 worth of products or services 1.1 times per year. This increases total gross revenue to $133,100, a 33.1% total increase. Even though you would still pay the higher advertising costs to get those additional customers, that $5,000 expense is now offset by $33,100 instead of $10,000 dollars.

Interestingly, quantity upselling and frequency upselling are usually much easier to accomplish than getting new customers. Your existing customers have already purchased from you and, presumably, have a good relationship with your company. Therefore, getting the additional purchases doesn’t have to overcome the relationship-risk hurdle.

Achieving these results takes planning and execution, though, and there are some preconditions. The success of both quantity upselling and frequency upselling is largely based on the types of customers you have, what and how you offer products to them, and how you maintain your relationship with them.

The “Right” Customers

Not all customers or clients are the same. Some customers patronize your business because they love what you do and how you do it. The price of your services is really a secondary concern for them. These are you’re A-level customers, and they are your bread and butter.

Other customers, however, do privilege cost over everything else. No matter the level of service or quality of product you provide, these customers will abandon you at the drop of a hat if they find a cheaper option. These are price shoppers or D-level customers.

There are B- and C-level customers as well, but let’s focus on the extremes of the range for now.

Put simply, you want two things: more A customers and fewer D customers. However, many business owners are reluctant to send customers with money packing or to say no to those customers in the first place. But, doing so will free up time for A customers and result in business and profit growth. It’s counter-intuitive, but it is true.

The manner in which you achieve these two objectives depends somewhat on your area of business. For some industries, the owners and operators have much more freedom to choose with whom to do business. Generally, these professional services refer to their customers as “clients.” For example, a CPA may cater to clients with multi-million-dollar incomes instead of part-time employees, or a Personal Injury attorney may exclusively represent clients whose claims exceed $200,000.

These owners may need to “break up” with (i.e. actively reduce the number of) current D-level customers in order to make room for more A-level customers. Then, they must make it a point not to accept any future D-level customers.

Other industries that are more retail-oriented and who refer to customers more often as “customers,” don’t have as much say in who patronizes their business. A restaurant owner can’t actively select for the customers that are going to buy the $100 bottle of wine over the water drinkers any more than the car wash can exclusively service car owners that want the “deluxe wash” instead of the “basic wash.”

Retail businesses can reduce the number of D-level customers by raising their prices. Because D customers are usually price shoppers, they will go elsewhere once your product is more expensive than a similar product. But the higher prices will offset the loss of those customers.

After you’ve separated the wheat from the chaff, you can focus on what these A-level customers want from your business. If these A-level customers want a certain thing, it’s likely that other potential A-level customers want the same service or product.

For both the professional services and the retail-oriented businesses, increasing A-level customers and decreasing D-level customers has additional benefits. First, working with these clients and customers is often easier and less stressful for owners. They appreciate your services, and this ultimately makes your job easier. Second, it’s quite likely that you’re current A-level customers know and interact with consumers that have similar interests and desires—i.e. potential A-level customers. “Birds of a feather, flock together,” as they say.

Accomplishing Quantity Upselling

Increasing the amount of each purchase can be accomplished in a number of ways.

First, never underestimate the power of simply offering additional products or services. Suggestive selling can increase the amount of a sale with minimal work. You’re mowing the lawn, so why not ask if the home-owner would also like the hedges trimmed? You’re washing and waxing the car, so why not also suggest an interior detail? Of course, many of the times, the customer will decline your offer. So, the key is that suggestive selling occurs consistently, for every consumer.

A story: Last week, my wife and I were at a restaurant downtown. We had planned for a regular dinner before we went home to watch a movie. What I mean is that we weren’t going out planning to indulge. When our waiter asked if we’d like anything to drink, I said I’d like a water. The waiter responded, “Would you like Fiji, San Pellegrino, or tap?” I was caught off guard slightly. I don’t think I had ever been asked that question. I fumbled and manage to sputter out “Fiji.” The price of that particular sale went from $0 to $3.99, a 400% increase, all because he asked.

You can also pre-package a product or service with additional services that might not normally be purchased at once. So, instead of offering to trim the hedges every time you mow a lawn, you may offer a “grass and hedges” package that’s cheaper than the cost of the two services separately.

You can consider arranging with a third party to provide complementary products or services to your customers with you receiving a commission.

Accomplishing Frequency Upselling

Increasing the number of purchases is about keeping in touch with (i.e. marketing to) you’re A-level customers on a regular and consistent basis. You need to stay “top of mind,” so that when they think of whatever your product or service is—I need my taxes done, my car is really dirty, etc.—they automatically think of you.

Additionally, it’s vital that your consumers feel that the relationship goes both ways—they appreciate you, and you appreciate them. You might think that most customers no longer frequent a business because they were treated poorly or dissatisfied. That is not the case. Most customers leave because they were neglected; because the relationship becomes one-sided.

This is very costly for your business. Once you’ve developed your relationship with a customer, it is much easier and less expensive to get that customer to do business with you again than it is to find a new customer.

To avoid this, make sure your A-level customers hear from you at least quarterly. You don’t have to be fancy—a simple letter will do. Give them useful information or a valuable outcome, preferential treatment, free gifts, or special deals. Many businesses offer rewards or membership programs to incentivize repeat business. Make it worthwhile for them to keep doing business with you and make sure they remember you.

Finally, don’t forget the other benefit of keeping in communication with your A-level customers. As I said above, they hang around with other people who are like them and who could become new A customers for you. Because they’re happy with your product or service, they’re your best salespeople. But don’t simply rely on them to refer business to you of their own accord. Put a process in place for professionally requesting referrals from A customer. This can yield better results with far less expense than an advertising campaign.

How Can We Help You?

Here at Alexander Abramson, we focus exclusively on business-related legal matters. We have advised closely held businesses and business professionals for years on everything from partnership arrangements to raising startup equity to selling a business. Our staff strives to create a wonderful client-experience by actively listening and maintaining open lines of communication, consistently meeting deadlines, and being upfront about our pricing and services. Don’t trust the legal needs of your business to an attorney that can’t or won’t offer you the best service possible.

We would love to speak with you directly about how we can help you start, grow, or sell your business.

Call us 407-649-7777 to set up an initial consultation.

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