4 Methods to achieve the growth you want
Growing revenue is essential for small businesses that want to expand and make a profit. While cost control also makes an important contribution to profit, revenue growth ensures the long-term viability of the business. To grow revenue, look for opportunities in your existing business relationships as well as identifying new sources of income.
Believe it or not if you want your business to bring in more money, there are only 4 ways to Increase Revenue: Increasing the number of customers, increasing average transaction size, increasing the frequency of transactions per customer, and raising your prices
Restaurants have just reopened, offering outdoor service, so let’s use them as an example. If you want to increase the amount of revenue that a restaurant brings in. Here’s how to apply these 4 methods:
Photo by IG: ristorante_rossini
Increasing the number of customers means you’re trying to bring more people in the door, or under current restrictions into the outdoor seating area. This strategy is relatively straightforward: more visitors to your restaurant will equal more tabs, which (assuming the average transaction size stays the same), will bring in more money.
Increasing average transaction size means you’re trying to get each customer to purchase more. This is typically done through a process called upselling & cross selling. When a customer purchases an entree, you offer them appetizers, drinks, and dessert. The more of these items the customer purchases, the more they spend, and the more revenue you collect.
Increasing the frequency of transactions per customer means encouraging people to purchase from you more often. If your average customer comes in once a month, convincing them to come to your business once a week will increase your revenue. The more frequently they visit your establishment, the more revenue your restaurant will bring in, assuming the average transaction size stays the same.
Raising your prices means you’ll collect more revenue from every purchase a customer makes. Assuming your volume, average transaction size, and frequency stay the same, raising your prices will bring in more revenue for the same amount of effort.
Remember not every customer is a good customer. Some customers will sap your time, energy, and resources without providing the results that you’re looking for. If you’re spending a lot of energy serving customers who don’t come in often, have a low average transaction size, don’t spread the word, and complain about the price, it doesn’t make sense to attract more of those customers.
Always focus most of your efforts on serving your ideal customers (Do you remember the 80/20 rule?). Your ideal customers buy early, buy often, spend the most, spread the word, and are willing to pay a premium for the value you provide.
The more ideal customers you can attract, the better your business.