The 3+1 Growth Formula

Every business owner should want to grow their business. Growth doesn’t only refer to getting bigger, but to also getting better. Before I share the 3+1 Formula, let’s look at the core elements of sustained growth. Most growth metrics are measured in dollars that eventually translate into increased profits. If profits are the only focus of a business, it’s easy to get a quick boost in profits by simply eliminating some overhead expenses. This can be accomplished by terminating some of your workforce. It will create a short-term solution, but the consequences of this action usually results in your organization providing less service and lower quality, which will eventually lead to fewer sales.

Let’s look at the four multipliers of your business: 1) Purpose-driven, 2) Productivity, 3) Performance, and 4) Profitability. You can see that profitability is the outcome from doing the other three multipliers well, but it starts with understanding the purpose of your business, and that can be accomplished by examining your business model, which includes these three major components: 1) Who you serve – customers, 3) What you serve customers – products, and 3) How you serve customers – operations.

You’ll notice that all three components focus on service, particularly how you effectively serve your customers better. The central purpose of your business is to create a customer by providing a product that will satisfy a need or want, and then operate in a manner that best serves them.

We can now define business growth as the realization of your mission and making a greater contribution to the community (purpose-driven), finding new and better ways to add value with your limited resources (productivity), becoming consistently strong and more capable in what you do (performance), and increasing the value you offer while keeping costs low (profitability). Each of the four multipliers is centered on a strong customer focused business culture.

So now you can imagine that every aspect of the three-step growth formula involves your customers. Everything you do in your business should lead to enhance one or more of the following three components. The last one only improves your profitability, but it alone cannot create sustained growth. Here, then, is the 3+1 Formula for sustained business growth:

1. Increase your number of new customers. Your focus should not be to just bring anyone through your business doors, but to identify the specific demographic or psychographic profile of those you want to serve. These are your ideal (perfect) customers. You should know where they live, and then devise a strategy to get more of them to visit and make a purchase.

2. Increase the average transaction value. Know how much the average customer spends, and identify the goods and services you can offer that will add more benefits and value to their life. Implement ways to up-sell, or cross-sell other products that would enhance the life of your ideal customers. Have your staff share a short presentation about your company or products to let you customers know why you are different from the competition, and then use a series of questions to ensure that they have everything they need before leaving your business.

3. Increase the number of repeat transactions. Do you know how often your customers return? Do you track the length between purchases, or know when someone has become inactive in their purchases? Sometimes it only takes a letter or phone call to get them to return, or to tell you why they won’t be back. Identify how you can operate your business so that it is more convenient, easy, and fun for your ideal customers and encourages them to return more often and remain loyal to your business.

These are the essential three components for sustainable growth because they determine the value you offer to your customers and how much they are willing to spend with your company. All marketing and growth techniques that increase sales can be categorized under one or more of these components. The +1 part of the formula is often the major element that a business owner focuses on first to increase profits. It is important, but by itself it will not create sustainable growth. Here it is:

+ 1. Decrease the costs to efficiently accomplish the three components above. This requires you to optimize all the costs within your business. Identify how to eliminate or minimize the fixed and variable costs that are essential to achieve the three components, while maximizing the actual and intrinsic value you add to your ideal customers. Step back and examine your business and how you currently use the 3+1 Formula, or brainstorm ways you can enhance any of the components to effectively achieve sustainable growth for your business.