Having identified your primary engine of growth, let’s explore how you can maximize revenue. This will be relevant to you even if you’re not generating revenue yet. It should provide you with ideas that might motivate you to change your offerings, pricing, or even your business model, which, in turn, will affect your sales process.
Eric’s Engines of Growth approach focuses on growing your company through customer acquisition (even the Sticky Engine, as WoM is a core component of it). It’s important for obvious reasons: you can’t make more money without first having customers. However, we also need to pay attention to how to structure our unit economics. The days when investors were willing to support a company solely based on impressive acquisition metrics (glances at Snapchat) are long gone. Today’s (and tomorrow’s) investors want to see some evidence of a viable business model before they’re willing to invest. If you’re bootstrapping (building and growing your company without external funding from investors or loans), it’s even more crucial to ensure you optimize revenue sooner rather than later.
Per Josh Kaufman’s bestselling book, The Personal MBA, there are ONLY 4 ways of increasing revenue.
- Increase the # of customers.
- Increase average transaction size.
- Increase the frequency of transactions.
- Raise prices.
Sounds oversimplified but it’s true, I’ve attempted to challenge the simplicity of this but every campaign or initiative I’ve been exposed to thus far can indeed be explained in these 4 ways. They are pretty straightforward so I’ll jump right into specific initiatives and example campaigns that might help spark ideas for you.
EXERCISE
STOP: Don’t do this without first reviewing the 4 ways above!
Why does IKEA have a restaurant when they sell furniture?
—Scroll down for answer—
Increase # Of Customers?
Not really.
Raise Prices?
No.
Increase Average Transaction Size? Yes!
Not because of food profits, they barely break even on it. But because longer time in store = More items purchased.
Increase Frequency Of Transactions? Yes, as well!
Some, like myself, visit IKEA for the food and often end up purchasing something while we’re there.
ASSIGNMENT
Pause and consider what adjustments can be made in your offering, pricing, business model, or sales/marketing strategy to optimize growth and revenue.