Let me tell you how I discovered the only 5 ways to increase profits in your business (I call them – the 5 “profit levers”).
I was getting frustrated.
I had spent the last several years of my life learning everything I could about increasing profits in business.
I had received training from some of the greatest minds on the planet when it comes to direct-response advertising, digital & off-line marketing, sales, system optimization, strategy, business development, finance, investing etc.
And I had been looking under the hood of successful businesses from all over the world to figure out what made them tick and how it could be transferred to other businesses.
But all my studying only made me more confused.
I needed an overview – some kind of framework to organize all the strategies, tactics and techniques I had discovered, but didn’t know how to take full advantage of, because they were one big mess in my head.
So I decided to create one.
I took everything I had learned and started to organize it and map out how the different elements related to each other.
After a while a pattern emerged and I discovered “the only 5 ways to increase profits in any business” (including yours).
Now, when you understand the simple framework, I’m about to show you. You’ll never again be confused about how any specific technique/strategy/system/approach fits into what you already are doing and if it’s worth your while.
And interestingly enough – an added bonus of the simplicity and clarity of the model, is that it makes you aware that there are several ways to increase profits (most business owners only grow their business in one dimension…).
That’s why it has become one of the primary tools I use; when I help business owners find the hidden assets and overlooked opportunities in their business.
So without further ado…
The 5 “Profit Levers”
As you know by now, there are only 5 ways to increase profits in your business.
I call them “profit levers” – because you can use them to lift profits (just like you can use a normal lever to lift a heavy stone).
And here they are:
Now let’s go through them one by one (keep coming back to the diagram above as we do).
At the top of the model we have profit. And profit is a result of sales and…
Profit lever #1: Expenses
(You can increase profits with “profit lever #1” by cutting costs and increasing investments with a positive ROI).
Sales are determined by how many customers you have and their lifetime value (here’s how to calculate customer lifetime value).
How many customers you have is determined by…
Profit lever #2: Traffic (the number of potential customers who is in contact with your business)
(You can increase profits with “profit lever #2” by getting more traffic from existing sources and adding new sources).
And…
Profit lever #3: Conversion (the percentage of potential customers who ends up buying)
(You can increase profits with “profit lever #3” by raising the perceived value of what you offer and by decreasing buyer resistance).
And your customer lifetime value is determined by…
Profit lever #4: Average Transaction Value (how much a customer spend on average)
(You can increase profits with “profit lever #4” by getting customers to add more of what they are buying and by adding something else to their order).
And…
Profit lever #5: Number of Sales per Customer
(You can increase profits with “profit lever #5” by getting customers to come back more times and more often).
There you have it!
Anything you can imagine that affects profits in your business falls under one or more of these 5 areas.
And knowing this solves two problems many business owners struggle with.
First of all it creates clarity. Many business owners think creating growth is complicated, but as you can see it really is pretty simple when you use the 5 “profit levers”.
And as I said – knowing this also makes you aware that there are several ways to increase profits (most business owners only grow their business in one dimension – if at all…).
Now let me show you something cool.
Let’s say you manage to increase profits by 10% – in each of the 5 areas.
The result:
You don’t just get a 50% increase (5 x 10%) in profits – which I’m guessing you wouldn’t mind.
But because the results stack on top of each other you actually get a 61% increase (110% x 110% x 110% x 110% x 110% = 161%).
And if that doesn’t excite you – I don’t know what will!
But if it does, you’ll love the next part, because now I’ll show you…
How to Use the 5 “Profit Levers” to Generate a Boatload of Profit Boosting Ideas for Your Business
Now let me show you how to turn all this theory into could hard cash…
Are you ready?
Good.
Here’s how to go about it.
First take a look at your own business and ask yourself these 5 questions:
- How can I increase profits by cutting costs and increasing investments with a positive ROI? (“profit lever” #1)
- How can I increase profits by getting more traffic from existing sources and adding new sources? (“profit lever” #2)
- How can I increase profits by raising the perceived value of what I offer and by decreasing buyer resistance? (“profit lever” #3)
- How can I increase profits by getting customers to add more of what they are buying and by adding something else to their order? (“profit lever” #4)
- How can I increase profits by getting customers to come back more times and more often? (“profit lever” #5)
Then look at other businesses (both inside and outside your industry) and ask yourself these 5 questions:
- What are they doing to cut costs and increase investments with a positive ROI that I can implement in my business? (“profit lever” #1)
- What are they doing to generate more traffic from existing sources that I can implement in my business and what sources are they using that I could use too? (“profit lever” #2)
- What are they doing to raise the perceived value of what they offer and decrease buyer resistance that I can implement in my business? (“profit lever” #3)
- What are they doing to get customers to add more of what they are buying and add something else to their order that I can implement in my business? (“profit lever” #4)
- What are they doing to get customers to come back more times and more often that I can implement in my business? (“profit lever” #5)
That should give you a few ideas to work with…
But if you want even more ideas (or just want my perspective on what the greatest opportunities in your business are), then I’d be happy to take a look at your business and tell you exactly how you can use the 5 “profit levers” to grow your bottom line (and where you can get the greatest return on investment).