Did you decide whether you wanted to be a high jumper or a pole vaulter? (If you don’t know what I’m talking about please see my last post.) In this article I’m going to focus on the high jump approach so that your business will grow incrementally; but that doesn’t mean you can’t make significant progress in a relatively short space of time. I’m talking about the concept of marginal gains. This is the approach adopted so successfully by British cycling under the leadership of Sir Dave Brailsford. The concept is that if you can make a 1% improvement in every contributing area then the compound effect will be a big improvement in results.
The compound effect
Imagine you have 1000 people on your mailing list, 30% of whom (300) open your monthly emails, 5% (15) of these book an appointment and one on three of these buy with an average spend of £100 giving you sales of £500 per email which would give annual sales of £6000. Now using the principle of marginal gains let’s apply a 1% improvement to each area. So the mailing list grows to 1010, the open rate becomes 31% of whom 6% book an appointment and we maintain the one in three conversion (6) but at an increased spend of £101 then the sales per email become £606 which turns into annual sales of £7272. So our one percent increase in each area turns into a 21% increase in turnover. Now of course if you applied the same ideas to your costs and could increase the profits per sale your profits could show an increase of significantly more than 21%.
Applying the concept of marginal gains
British cycling have looked at everything, from the bikes, training regimes, floor paint at the practice centre, washing hands, pillows and sleep quality and just about everything else you could think of. The idea being if they could make sure the athlete and the bike are in peak condition at their target events then the results will come.
So let’s think how you can apply this in business. One way to grow your business would be to improve the effectiveness of your marketing, as the illustration above shows. You might look at how to drive up traffic to your website, how to get visitors to spend a bit longer on the site and to increase the number of those who sign up to your mailing list or book your discovery call. Once you’ve got them on to your mailing list you want to increase open rates, the number who click on the links which take them to the next step in your sales funnel. Then if you can increase the number of conversions, the value of each sale and the volume of repeat purchases and referrals you could see a significant increase in turnover and profit from small tweaks in every area.
Of course it’s not just your marketing that could benefit from the marginal gains approach. Here are some more things to look at:
- Direct costs i.e. those incurred in producing your product or delivering your service
- Other costs including labour, utilities, marketing, administration, finance etc.
- Production methods, including any machinery and equipment
- Efficiency and working methods
- Working hours
- Sales process including conversion rates
- Filing, record keeping and back-up processes
This list is not exhaustive. Ideally you want to be the fly on the ceiling looking down on every aspect of running your business but given that is impractical I suggest taking a notebook or a large sheet of paper and writing down everything that you do, or should do in your business. The chances are you won’t think of everything so over a period of a week (or longer if there’s no such thing as a typical week in your business) jot down everything you and your team do, every enquiry you get and every result you achieve. Combine those two lists and where you can put numbers against any of the items e.g. time spent, number of calls, conversion rates etc.
Now choose one of the key areas on your list, ideally one that could have a big impact on you or your business. Break that area down into its component parts, think about skills, equipment, time etc. Now think about how you could tweak those areas to get better results. At this point you might need to look outside your own business and this is something I’ll consider in my next post.
In the meantime I’d love to know which area of your business you are going to work on, why not pop a comment below? I’m going to be focusing on my workspace and personal organisation. I need to handle things once and get them off the desk top so that the clutter doesn’t accumulate so if you have any practical tips I’d love to hear them.