If you want exponential revenue growth for your business, then this will probably be the most exciting message you'll read today.
There are three levers that you need to pull on when it comes to growing your firm and improving all three of them incrementally will create exponential revenue growth.
The 3 levers are:
Leads - How many leads are you bringing in a monthly basis?
Close Rate - How many leads are you converting into paying clients?
Avg. Client Value - What is an average client worth to you this year?
Then, you plug them into the Exponential Revenue Growth Equation:
Leads x Close Rate x Avg. Client Value
Let's say that your business drives on average 10 leads per month from all sources.
So, in the equation you would write down "10" in leads.
Next...
Let's say that you close 2 out of every 10 leads.
You'd have a 20% close rate.
In the equation, put "20%" for close rate.
Lastly... hypothetically, let's say that your average client is worth £20,000 annually to you (retainer = £20,000 over 12 months, or you do project that equals £20,000).
Write "£20,000" for avg. client value.
Your formula should now look like this:
10 leads x 20% close rate x £20,000 avg. client value.
Now this is where I'll put your math skills to the test.
10 times 20% equals 2.
So, we'll close 2 deals.
2 deals times £20,000 equals.... £40,000.
So, you'll close £40,000 this month.
Then, it is reasonable to assume that if you close £40,000 in new business this month and this continues for 12 months your business will do £40,000 times 12 (months), which equals £480,000 in yearly revenue.
So we're doing £480,000.
Now, let's inject some even fancier numbers.
Let's say you want to double your business.
So, go from £480,000 to £960.000.
How would you do it?
Well, if we're looking at the formula there's a bunch of ways to skin a cat (side note: no cats were harmed in this formula).
One could assume that if you double their amount of leads then you would double your firm.
10 leads doubled is 20, so... 20 leads x 20% win rate = 4 deals closed this month.
4 deals x £20,000 Avg. Client Value = £80,000 in revenue.
Multiplied by 12 months and you're at £960,000.
SCORE! You did it.
Or...
You could keep your leads the same but double your close rate.
So instead of closing 2 out of every 10 leads, you close 4 out of 10.
40% close rate.
10 leads x 40% = 4 deals... 4 deals x £20,000 = £80,000 multiplied by 12 months...
£960,000.
OK.
That's hard to pull off but theoretically, yes... you can double your business by doubling your close rate.
Last obvious optimization here would be to double your pricing.
£20,000 avg. client value to £40,000.
Plug that in.
10 Leads x 20% close rate x £40,000 avg. client value = £80,000...
£960,000 in 12 months.
You get the picture.
Listen, if you have the opportunity to double any one of those then go for it, but I'd argue...
1) Doubling any one of those is either really hard or really expensive.
2) So what if you do double it, is it sustainable to keep up?
Here's where the magic comes in.
Buckle up...
I want you to embed this number I'm about to tell you in your mind.
Ready?
26
More specifically, I want you to remember 26 percent.
This magical little number, when you understand it's implications, is going to revolutionize the growth of your firm.
The name of the game here is not to double any one of those categories.
It's to impact all three of those categories by 26%.
A minor 26%.
Watch this...
10 leads increased by 26% equals 12.6 leads per month on average.
So, we just need to find 2.6 more Leads per month.
That's a lot easier than finding 10 more leads... and cheaper.
Now, instead of going from 20% close rate to 40%, what if you improved it by 26%?
Well, then you go from closing 20% to closing 25.2% (let's round down to 25%).
To put that in perspective, that means you have to go from closing 1 in 5 deals, to closing 1 in 4 deals.
It's tough... but doable.
Last, instead of doubling your pricing, let's work our way up by 26%.
Average client goes from £20,000 to £25,200.
Much easier than doubling all of a sudden, right?
New inputs:
12.6 leads x 25% Close Rate x £25,200 avg. client value
12.6 x 25% = 3.15....
So, over the course of the year you will average 3.5 deals per month.
That's 1.15 more deals than before.
Now, 3.15 deals times £25,200 equals £79,380, or £80,000 if we round it up.
£80,000 multiplied by 12 months equals...
£960,000
So what does this tell us?
Incremental improvement in all three categories equals to exponential growth and it's easier to accomplish and more sustainable over the long term.
Now, I'd like to challenge you to strongly pull your 3 levers this year.
What are your numbers?
Grow them by 26% each.
Double your firm.
Then, the year after that, and the year after that...
That, my friend, is hockey stick growth.
