I was talking to a client yesterday who has some relatively ambitious growth targets for his business. I asked him if he had a specific plan in place and he responded with some high level concepts for growth. Conceptually, these ideas are good but what it lacks is some structure. This post is one in a series that I will release over the next few weeks so if you want to grow your business but don’t yet have the detail, stay tuned.
This weeks post is about one of the three revenue drivers; average value sale. Chunking your targets down into manageable pieces is the key to successfully achieving your goals. Let’s think of your business in terms of the value of the average sale. If you run a business producing and selling flat pack kitchens, the value of the average kitchen is the average value sale (AVS). In this case, let’s call it $6,000. If you sell 1000 per year your revenue is in the ball park of $6m. Increasing the AVS to $9k translates into $9m revenue per year. Nice!
So, if you want to grow your business, one of the ways is to increase the AVS from $6k to $9k. Now, there are several ways you can achieve this. The most obvious is to simply increase your price. Depending on the market this may or may not be possible. Let’s assume that you can get away with a 5% price increase. How will you raise the additional $2700? You can add value to the transaction. You might decide to assemble and/or install for an extra charge. You could easily charge $1100 for this. Still got $1600 to go. What about value enhancements like those nice soft close drawers and doors? There’s another $500. And you could sell appliances for the rest. Before you know it you have successfully increased the amount of the average sale!
This example is a little basic and some may say obvious, which is true. But it’s the concept that’s important. If you want to grow your revenues, look for ways to add value to the sale, sell each and every customer more products and services. If you currently only sell a product, investigate ways to add a service that you can charge for. Survey your customers and find out what else they need and consider selling it to them. At the end of the day, it’s much easier to sell more to your existing customers than it is to acquire new customers, especially in a competitive market.
Next week we’ll talk about the second revenue driver; frequency of purchase.
