If you want to make substantial improvement to both your top and bottom lines, it’s critical to understand the following 5 key metrics and how to improve them incrementally:
- Leads Generated
- Conversion Rate
- Overall Revenue Per Customer
- Gross Margin
- Fixed Costs
Did you know that if you made just small, incremental improvements of 5-10% in each of these metrics, you would nearly DOUBLE your entire enterprise?
And you could double it again, and again, and again, just by making more small 5-10% improvements over time.
You see, it’s not about reinventing the wheel or throwing everything away and starting from scratch. It’s about doing what you’re already doing a little bit better, then a little better, then a little better over time. CONSISTENT, incremental improvements.
Until all of the sudden you’re sitting on top of a business that is 2x or 3x the size and more cash flow then you ever thought was possible.
Want proof? Here is a simple tool that I use with my clients called The Profit Equation.
You can download it for free HERE.
You’ll see that by making modest 5 or 10% improvements in your leads generated, conversion rate, overall revenue per customer, gross margin, and fixed costs, your bottom line profit grows at an exponential rate! Take some time to experiment with modest improvement %’s in this worksheet.
So here is a quick ACTION PLAN for using The Profit Equation worksheet (remember, ACTION is the foundational key to all success):
Step 1 – State of the Union
To know where you’re going, you must know your starting point. Determine your current metrics and complete the “PAST” column of the worksheet. Without the current metrics, an action plan is rendered useless.
Step 2 – Determine Which 1 of the 5 Metrics You Want to Improve First
Out of the 5 metrics (Leads Generated, Conversion Rate, Revenue/ Customer, Gross Margin, and Fixed Costs), which metric do you have the highest confidence in making a 10% improvement?
Step 3 – Brainstorm
Focusing on just that one metric, brainstorm a list of 7-10 ideas for making that 10% improvement. Now narrow it down to your top 3 ideas.
Step 4 – Implementation
Implement those top 3 ideas, one at a time, over the course of 2-4 weeks.
Step 5 – Monitor Your Progress
Monitor your progress by updating the “FUTURE Column” of the worksheet on a monthly basis.
Step 6 – Repeat
Repeat steps 3-5 for the other metrics – one metric at a time.
Now the pace of your implementation can vary based on your resources. For some business owners, the implementation period could be 4 weeks and for others, 6 months. It’s important not to rush the process and focus on understanding these 5 metrics at a fundamental level.
Over time, you’ll gain a complete understanding of how to move these metrics in the right direction, and you’ll begin to witness how small, incremental improvements make a significant positive impact on your bottom line.
As always, if you have any questions regarding the Profit Equation worksheet or its implementation, I’d be happy to review it with you. Simply book a time here.