A business growth expert, dubbed the “$9 Billion Dollar Man”, has revealed that the three growth strategies he teaches Fortune 500 companies can also be applied to any Aussie small business.
Business and marketing consultant Jay Abraham has mentored business leaders from companies such as Microsoft, FedEx, General Electric, Boeing, IBM, Unisys, AT&T and even the United States Air Force.
His nickname, the ‘$9 Billion Dollar Man’, comes from the amount of revenue he’s added to the bottom lines of more than 100,000 clients.
And though his extensive client list features blue-chip conglomerates with millions of dollars set aside for marketing budgets, anyone can apply what he teaches, he said.
“Over my career, I've been able to identify what I call universal principles that have a powerful impact, no matter the size, type, scope, simplicity, or complexity of a business,” he told Yahoo Finance.
While there may be a million tactics to grow a business, it all boils down to these three ‘primary’ pillars:
Increase your buyers;
Increase the size of the transaction (i.e. the cost of the product or service); and
Increase the frequency of the purchase.
The magic of numbers
Using this formula, increasing any of the three pillars even just marginally will result in a significant pay-off.
Say a hypothetical company has 1,000 buyers who make a purchase of $1,000, twice a year.
This would be 1000 multiplied by $100 multiplied by two, which would be $200,000 revenue a year.
Now raise each ‘principle’ by just 10 per cent.
That’s now 1,100 buyers, a purchase size of $110 at a frequency of 2.2 purchases a year.
You’ve just added $66,200 to your annual bottom line – an increase of 33 per cent.
Now, let’s say you managed to double all of the factors – 2,000 buyers multiplied by $200 multiplied by four – your revenue is $1,600,000, a revenue increase of 800 per cent.
“So the first thing is, realise no matter what size business you're in, you want to work on the geometry of your business. And it's not hard,” Abraham said.
“Keep growing incrementally, because you have in each of those three categories, something like maybe 30 different ways to do it.”
That is, now that you’ve got the basics down, there are an infinite number of methods you can come up with to increase buyers, the purchase size, or raise the frequency of purchases.
But how do I actually apply this?
Businesses of any size can apply this simple formula – even cafe owners, hair salons and grocers, Abraham said.
Most small businesses tend to grow through word of mouth – but there’s a crucial mistake that the owners of these businesses make.
“I'll say to them, ‘Okay, 80 per cent of your business comes from word of mouth or referrals, is that correct?’ They'll say yes.
“I'll say, ‘Okay, tell me how many referral generating strategies and systems you have in place that you apply continuously to everybody that you interact with in that business’.
“And most of them have zero.”
Over Abraham’s career, he’s developed no less than 150 completely different referral-generating strategies that a company could apply.
But you don’t have to apply all these to see profit grow. One strategy can be as simple as telling customers your business is referral-driven, and to encourage them to tell other people.
Other methods might be partnering with other local businesses to offer discounts on each others’ products or services, or holding events that encourage customers to invite three or four others.
“If [business owners] created three or four [strategies] and they applied it reasonably, that could double, re-double and re-double again the number of buyers, clients, patients or guests that come into their business or practice.
“And the cost of getting them? Zero.”
The lesson that changed everything
Abraham recalls being just “marginally successful” earlier in his career.
But there was one lesson that changed his mindset, which would become the foundation of his future successes.
“I [learnt] to think in terms of filling needs in, identifying gaps, getting deeply into the mindset of the market, learning how prospective buyers, consumers and businesses define their problems, and how to really make sure what they wanted was what we provided,” he said.
He remembers being told an “interesting statement” several years ago that has stayed with him.
“When somebody goes to a hardware store to buy a drill, they really don’t want a drill – they want a hole. And they don’t want a hole, they want to fasten something.”
“I learned to think about the result and the benefit people wanted, not just the feature they were buying.”
Jay Abraham will speak in the Profit Maximiser livestream event on Wednesday 27 January at 11am AEDT, live across Australia. Free registration is available at www.profitlivestream.com.