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Sales Pipeline

Business growth

How to take a £1.2m business to over £2m in 24 months

By | Business Growth, Lead Generation, Sales Pipeline | No Comments

Over the coming days and weeks, we are going to be sharing a lot of bite-sized free content with you to help you make the most of the lockdown and to help you come out of the blocks with a plan, not just for recovery, but for growth.

If any areas of your sales and marketing processes need reviewing now is the perfect time to get it sorted, once and for all.

In this blog, we investigate how to grow a business strategically, by the numbers using the 3 ways to grow a business model, made famous by Jay Abraham.

According to Abraham, if you exclude business acquisitions, there are only 3 ways to grow a business.

  • Increase the number of active customers by targeting the right kind of customers similar to your top 10 customers.
  • Increase the average order value by targeting customers that spend more, and add/promote services that add value.
  • Increase the average order frequency by targeting and converting the right kind of customers, becoming preferred suppliers across the customer base and by out promoting your competitors.

For the benefit of these examples we assume that your business is competitive and has comparable quality, delivery and service. The numbers are purely to demonstrate the business model concept.

Here’s an example of a fictitious manufacturing company that has 100 active customers spending on average £2000, 6 times a year.

100 active customers x spending £2000 x 6 times a year = £1.2m in annual revenues.

If we increase each by say 20% then a dramatic change happens:

120 active customers x spending £2400 x 7.2 times a year = £2.1m in annual revenues.

That’s the theory but what about the detail?

Increasing the number of customers

Firstly the number of new customers is a key driver that most companies focus on but they often fail to recognise that customer attrition cancels out much of the good work that went into finding, nurturing, meeting, quoting and closing a new customer.  Customer retention is directly related to customer experience, service levels, relationships and perceived value delivered via regular marketing communications to existing customers.  How often do you market to your existing customers? Is it in the marketing plan and communications schedule?  If it is not on your schedule, this is easily remedied with monthly, fortnightly or weekly emails, posted letters and quarterly printed newsletters.  Regular calls on Zoom are also a great idea to keep your brand at forefront of mind.

New customer acquisition, is a process that requires skill, resolve and consistency.  Results are directly related to inputs, selecting the right tactics and the execution of inbound and outbound marketing activities.  If you skimp on the inputs and execution, then you won’t get the desired results.

The effectiveness of your new customer acquisition process is directly related to:

The number of high-quality leads x your conversion rate = number of new customers.

 

Quality leads/month x conversion rate = the number of new customers/month

 

If your inbound activities from search engine marketing, content marketing, LinkedIn marketing and online advertising generates 10 leads and your outbound telemarketing, direct mail and email activities generate another 10 leads, then you have 20 leads and a repeatable system that can consistently generate new customers.

Let’s say that half the leads are not a good fit.  That leaves 10 good leads and let’s say your conversion rate is 1 in 5.  In this case you would generate 2 new customers every month.

In this scenario after a year our example business would in theory look like this:

124 customers x spending £2000 x 6 times a year = £1.48m, an increase of £280,000

However, if customer attrition rates are running at 10%, then the business will lose 12 customers and the numbers will look like this:

112 customers x spending £2000 x on average, 6 times a year = £1.34m

An increase of £140,000 but leaving £140,000 on the table. Typically, 15% of customers leave a supplier due to a bad experience, which means that 85% will leave for either pricing reasons, because they no longer have a need or because they have been wooed by a competitor.  In this instance, customer attrition can be improved by small tweaks to the customer experience and by improving marketing communications to add value. Re-engagement marketing campaigns to lapsed customers can also result in quick wins.

Let’s go back to our example business and let’s say in year two, we implement the following improvements:

  • Reduce attrition rates by 50%
  • Improve the effectiveness of their digital marketing by 20%
  • Improve their outbound marketing campaigns by 20%
  • Improve their conversion rates from one in five to one in four
  • Start prospecting with better data, based on the avatars of their top 10 customers, which improves the average order values by 10% and order frequency by 10%

These are modest numbers and all attainable.  Now we have a business that looks like this:

Number of inbound leads from digital marketing – 12/month

Number of outbound leads from direct marketing – 12/month

= 24 leads/month.

Better qualification, testing, measuring and optimisation on the campaign can improve lead quality to 15 leads out of 24 being an excellent fit.

Consistent and automated nurturing and follow up processes will help improve conversion rates from one in five to one in four to increase the number of new customers to 3/month (36 year) which if we add to the 112 from year one, will equate to 148 repeat customers.

Attrition at 5% would bring this number down to 140 customers in total.

So with 140 customers, spending on average, 10% more (£2,200 a month) and with an average order frequency of 6.6 times a year our example business looks like this:

140 customers x spending £2200 x 6.6 times per year = £2.03m.  A growth of £832,000.

The final piece in the jigsaw is a question.  If the average customer spends £14,000 per annum, and they keep their top customers on average say 5 years, then the lifetime value of the average customer is £70,000.  So, the killer question is what should this company be willing to spend to buy a new customer?

Once you know this figure, and you have a system that is proven, marketing budgets can become a thing of the past and growth can be a given.

Your homework:

  • Calculate the number of active customers in your business over the past 12 months.
  • Work out the average order value (annual revenues/number of orders).
  • Assess the average frequency of purchase (number of orders/number of active customers).
  • Now look at the effects of a 10%, 20% and 30% increase across all three.
  • Finally, calculate the lifetime value of your top ten customers and work out what you would be willing to pay to acquire more, like these.
  • Email your top-level numbers to us and we will be happy to give advice on the best strategies to achieve these.

Good luck, stay safe, keep smiling.

Sales Pipeline

Making the best use of self isolation time

By | Lead Generation, Sales Pipeline | No Comments

In these are uncertain times it’s fair to say that many businesses will be adversely affected by current events and that the most prepared companies with the strongest sales pipelines will flourish the most as we come out of it, which of course we will.

If you are required to self-isolate, this is the perfect time to devote quality thinking time to strengthen your marketing and sales pipeline building process, and to tackle the things that always get pushed down the ‘to do’ list.  We have created a checklist below of the things you can do to dramatically improve your marketing, to tip the odds for a speedy recovery and your best sales pipeline to date.

1. Allocate the budget and resources required and concentrate on the multiple marketing pillars below:

  • Follow up and nurture existing customers and prospects to build stronger customer relationships.  Give them multiple reasons to trust you more than your competitors.  When your competitors are desperate for sales, and slashing prices, your OTIF delivery performance may not be enough on its own for retention, so it’s important to keep these relationships strong.  Try printed newsletters, personalised letters, emails and keeping in touch calls.  Reassure them of your preventative plans, and your contingency plans to keep your service levels to them up.
  • Outbound marketing and lead generation to new prospects.  Offline to online.
  • Inbound marketing and lead generation to new prospects.  Online to offline.
  • Evergreen direct marketing to build the list and work the list.

2. To build a stronger sales pipeline start now.

  • Develop your proposition and marketing hook, pick up the phone and let all of the buyers within 60 miles of your business known who you are and how you can help them if their existing suppliers let them down.
  • Follow up regularly with compelling emails.
  • Follow up within days with clever personalised direct mail, (in the post). Don’t leave this to someone who can’t write, doesn’t like cold calling or who has a busy to do list.  If it isn’t an in-house core competence, outsource it to a specialist.  If you need help setting up a campaign or delivering the call our Business Propeller team can help.
  • Follow up within days on the phone and ask to become their backup supplier. Push for the first sample order to become a trusted supplier.

3. Now is the time to sort out your website and inbound marketing once and for all.

  • Sorting out the website so it delivers a steady stream of quality enquiries always gets put to the bottom of the list due to other workloads and self-isolation is the perfect time for quality thinking time and remote collaboration.
  • Think of your core message and your core proposition and how this can be best conveyed to your target audience.
  • Try and sell the sizzle (not the sausage) by focusing on what you can do for them rather than what you do.
  • Make sure the site structure is easy to navigate for the optimum user experience and also for Google.
  • Add video to increase engagement
  • Add keyword rich professional search engine friendly copy to improve your rankings.
  • Run site tests to ensure your site is loading correctly and speedily on desktops, laptops, notepads and mobiles. Google insists on this!
  • Don’t leave your website strategy to a web designer.  A pretty website won’t necessarily deliver the highest ROI so seek expert advice from a digital marketing specialist with experience in your sector. We would love to work with you but if it’s not Stratique, that’s fine but we do recommend that you get expert advice if this isn’t a core competence in-house as it’s a critical factor to your success.
  • Ensure your online advertising strategies are set up correctly and monitored.  Driving targeted traffic to specific landing pages should be high on your to-do list and testing and measuring are key.  If you aren’t an expert we wouldn’t recommend trying to do this yourself as it is easy to waste time and advertising budget on online advertising.
  • Make sure Google Analytics is in place and reporting is set up properly.
  • Ensure conversion tracking is set up properly.
  • Ensure that you are split testing your ads and your landing pages. If digital marketing isn’t your thing outsource it to a specialist and review their monthly reports.
  • Ensure you add regular content and blogs to your site every month.  Content is king with Google and it loves regular pieces of 300-1000 words every month.  Self-isolation is the perfect time for copywriting or drafting some bullet points.  If copywriting isn’t your thing outsource it to a specialist copywriter with sector knowledge.
  • Plan, do, check, act every month.

4. Evergreen marketing is a discipline that should not be underestimated.

  • Your competitors won’t be doing a very good job here as it takes time and effort, so take the time and effort to stand out and build the relationship.

Good luck! If you need help with any of the above we offer free advice to manufacturing companies on building their sales pipeline.  Alternatively, we can help build the systems and run them for you.  We call this our Business PropellerTM Service.  To find out more on how it works, call 01827 69772 or email propeller@stratique.com.