If you’re struggling to grow the top line of your business, this article is for you. And when it comes to driving business growth one the first things you’ll need to do is to differentiate between ‘outcomes’ and ‘drivers’.

Outcomes are what you want as an end-result, drivers shift the focus to how you get them.

 

Divide to Multiply

Something undesirable happens in your brain when you focus too hard on what and not enough on how.

You stop thinking creatively.

Subconsciously, your brain knows it’s too big and woolly a subject and just moves onto something else. Probably day to day firefighting stuff.

Of the 3 generalised principals of business, Divide to Multiply (with apologies to mathematicians) addresses just this. Thinking in terms of broad challenges results in broad, scattergun solutions. The lack of critical mass in any one area results in a lack of traction.

Then, in the absence of results, ideas get dropped and as you know or at least suspect, inconsistency is a killer when it comes to growing businesses.

If you want to drive the top line – you’ve got to get into the detail.

 

The perils of top line thinking

One of my first coaching assignments was with a business owner who wanted to grow the top line having recently moved into new, larger premises. He’d allocated a marketing budget, and the sum of money involved made it a ‘must win’ situation.

When we had a look at the numbers an interesting statistic emerged: over the previous 12 months he had converted approximately 25% of his quotes to customers.

Given his business was bespoke joinery this seemed too low. Typically, his potential clients would ask for 3 quotes – sometimes only 2. So, it follows that if his product & pricing were on a par with his competition – which they were – he should be converting at least 33% of quotes.

Investing in marketing at this stage would just generate a stack of unnecessary ‘nos’ – at his expense.

Over the next 6 months we worked on sales strategies from positioning to following up and within 12 months his conversion rate was well into the 40’s. That’s 15% growth in the top line. With no additional marketing investment.

 

Focusing on Drivers: A Strategy for Success

Broadly speaking, you can break your business down to 3 parts – all of which have a direct impact on cashflow.

  1. Attracting and converting customers – marketing & sales
  2. Delivering the product / service
  3. Invoicing & Finance

What you’ll notice is when you read on through the list of drivers I’ve used as examples within these parts, is that your cogs will start turning and thinking of ways you could improve that number.

In effect, these Driver KPIs are posing you a challenge at a level that you can start to get your head around.

 

Marketing & Sales

  • Number of leads: you could do way worse things in business than track your number of qualified leads on a chart vs the number you need to be on the right growth trajectory.
  • Cost Per Lead: marketing is the art / science of buying potential customers. The only way of understanding what’s working – what the RoI is – is to track CPL from your existing marketing activities.
  • Active size of database: for those of you who are email marketing, this is a great metric which will correlate with the top of your leads funnel.
  • Sales Conversion Rate: how could you convert more than your fair share of the prospects in your pipeline?
  • Average Value per Transaction: do all of your prospects and customers know about all of your relevant products? What new products could you introduce to the same customer base? Could you introduce ‘offers’ to increase this?

 

Delivery (Including Customer Satisfaction)

  • % of projects that are delivered On Time, On Budget & On Spec: on the face of it this is a very industry-specific number, but it can apply to more industries than you might think.
  • NPS (Net Promoter Score) / Google Ratings / Reviews: no one thinks they’ve got an ugly baby and everyone thinks they give ‘above average’ customer service. Having ways to discover the unvarnished truth will give you something concrete to work on.
  • Customer Lifetime Value: Increasing the average lifespan of your customers. This changes the focus of success from signing a customer to making sure that customer is being valued and looked after.
  • Average Number of Transactions per Client: some businesses have low repeat business (estate agents) and some very high (sweet shops by schools) – but every business has an average and it can usually be increased way easier than by trying to get new clients.
  • Gross Margin %: as a starting point you could find out your actual gross margin and compare that to the industry average.

Invoicing, Finance & Admin

  • Inventory Days (or Work In Progress for service businesses): if your accountant tells you you’re profitable but the bank manager says you need an overdraft – this is a great place to look for that missing cash.
  • Average Debtor Days (how long it takes to get paid): and this is the other!
  • Revenue per Employee:a simple and effective measure of operational productivity and helps you understand if your business is balanced (optimised) as you grow. Keep track of this KPI and learn what the Goldilocks number is for you.
  • Net Margin %:again this is easy to compare to the industry average and work from there.
  • Profit Per X:you can run this on anything from a pair of shoes to a cabinet to a plumbing job. Remember to include the proportionate amount of fixed overheads.
  • Cost as a % of turnover:as businesses grow, it’s easy for expenses to get proportionately fatter. You should always include tracking what’s happened to individual expense lines as a percentage of revenue.
  • Pricing:when was the last time you conducted an accurate survey to understand how you compare in your sector? Your customer feedback will help you understand what your customers really value – and are happy to pay for.

 

Top Down vs Bottom Up

Don’t panic – things aren’t getting weird here!

Strategic thinking and business planning normally starts with ‘top down’ thinking. This is where you reach a conclusion of what you want to achieve and then start to plan how you’ll get there. This makes perfect sense and is one of the bedrocks of Stephen R Covey’s 7 Habits of Highly Effective People: Begin with the end in mind.

But for setting credible targets you also need a bit of bottom up thinking to literally build them up. This acts as a ‘sanity check’ for your plan.

To do this you’d identify the 5-10 of the most important drivers or variables for your business. The ones listed above is a good place to start but there are plenty of others to choose from.

Then ask yourself by how much you could increase these numbers – realistically – over the time period of the plan. You might be super-confident that you can increase leads by 30% but are convinced that Gross Margins are already as high as they can be.

You then crunch those (this is a little long winded for an article so drop me a line if you’re stuck here) to work out what that would equate to as a Revenue / Gross Profit / Net Profit Target in your plan.

For some people the Top Down number is usually higher, and for some it’s lower. But everyone has more faith in the Bottom Up number.

 

Which ones should you choose for your business plan?

It’s a good idea to make sure that the 3 parts of business are at least represented in your shortlist.

But each business is unique in terms of its challenges, priorities and ambitions. Each business will therefore have its own strategic bias.

In other words, it’s fine if one area is more heavily represented than the other two.

 

Aligning Drivers with Business Strategy

By starting from this point – by really understanding the drivers behind your business outcomes – you can then design a business plan around them.

You can use your own creativity, ask your network, and your coach to help you create a shortlist of actions to improve each driver or variable – with the target in mind.

This way your long-term goals, your business strategy and your week-to-week plans of action are all aligned.

The more you involve your team with this, the more aligned your whole business will become.

NB: our team of coaches have spent the last 25 years collating successful strategies for 6 of the core drivers listed above. There are now around 350 in total so if you’re stuck we’ll have more than enough ideas for you.

 

Measuring Success: The Role of KPIs

I’ve written about creating KPI dashboards elsewhere, but by taking action on the points above, you’ll have built your own.

Fundamentally, it makes sense to measure & track the thing you’re trying to improve.

And the act of doing this will keep those ideas flowing and also be a great accountability tool.

 

Conclusions: A Driver-Focused Approach to Growth

 Driving business growth requires more than just setting ambitious goals.

It necessitates a deeper understanding of the specific actions and strategies—your drivers—that create those outcomes.

By focusing on the right drivers, aligning them with your overall business strategy, and continually measuring their effectiveness through KPIs, you will create a road-map that is both actionable and measurable.

A road-map that you believe in and want to follow.

 

Displacing Anxiety with (the correct) Activity

And there’s a great additional side-effect of doing this.

Most business owners I’ve spoken to have at some point found running their businesses stressful. In many cases this is bad enough to impact on other areas of their lives.

One deep-seated solution is to create a plan of action that gives you more confidence in the future.

A plan that focusses on how rather than what.

All the best,

Tim

P.S. If you’re ready to take action and you’d like to talk about your approach to business strategy and planning – or anything else to do with your business – please do get in touch.