Author: James Patrick
How to grow revenue? A question many business people ask themselves. It doesn’t matter what type or product or service you choose to sell as an entrepreneur, ultimately there are only four specific levers you can pull to increase your revenue.
Before we dive into each of the four levers it is important to understand the following equation:
L x C x M x F = R
Leads x Conversion percentage x Margin x Frequency of purchase = your Revenue.
For example, 100 people come to your digital store and you convert 10% to purchase your e-book, which you charge $20 for and there is never a reason for them to return to purchase more, gives you the following results:
100 x 10% x $20 x 1 = $200
Once you see the formula laid out with specific numbers you can see how improving just one of the four levers can increase your revenue.
For instance, if you doubled the leads (people coming to your digital store) and left everything else the same, you would double your revenue:
200 x 10% x $20 x 1 = $400
If instead, you worked on your sales pages and were able to double your conversion percentage, leaving everything else the same, you could still double your revenue:
100 x 20% x $20 x 1 = $400
Knowing how each of these four levers work in concert with one another is how you as a business owner seek to maximize your revenue.
Leads are where you will spend the bulk of your marketing efforts. It is not enough to just get more eyeballs on your product or service. You want to get qualified leads, meaning the right people who need what you are selling.
From there, you want to ensure you are consistently testing your sales copy, video sales letters, checkout pages or your 1-to-1 sales approach is improving your conversion percentage. We cannot expect a conversion of 100%, but how effective can you get your sales process to improve that number?
Next comes your margins. This is your opportunity to provide more value to your customers. Consider, for example, a massage therapist who charges $60 for a 60-minute massage. Upon arriving you have several opportunities to upgrade your appointment to a 90-minute massage, to add in hot stones, essential oils for aromatherapy, and a tip on top of it and you are now looking at $120 for what was once a $60 service. It is important to note that increasing your margins is only possible when the client sees value in the additional offerings.
Examples of this could include adding in extra e-books or courses, additional months to a package at a discount or bonus services in addition to the core offering.
Lastly comes your frequency of purchase. How many times in a set period is your client returning to do business with you? With a three-month package, you have the opportunity of four purchases in a year. In a monthly retainer, it is 12. Are there ways to increase the number of times that client will want to do business with you in a given timeframe? Ways to achieve this include follow up appointments, opportunities to upsell into new programs or moving from one course to another.
Despite all the numbers, at every stage it is important that you are focusing on the client, what they truly need and how you can best serve those needs. When you do that, you will notice each of your four levers improve.
James Patrick is an award-winning photographer with more than 500 published magazine covers, entrepreneur coach, podcast host and best-selling author of Fit Business Guide: The Workout Plan for Your Brand. He is the founder of FITposium, an annual conference and online education network for fitness entrepreneurs to thrive in their careers. His work can be seen at JamesPatrick.com