By Jason Skinner
If your business needed to grow by 50% this year, where would you even start? Most
business owners assume the answer involves one big, scary change — a major marketing
spend, a new product line, or working twice as hard. Rarely is that true.
Let’s look at the story of a local business owner I’ll call her Sharon. Sharon runs a wellestablished
business with a small team of casual staff. We’d worked through what I call an
“upside-down budget” — starting with the income and lifestyle the business needs to support,
then working backwards to what the business actually has to generate to get there.
The number that came out was $750,000 in annual sales. The business was currently sitting
at around $500,000. A 50% increase felt like an enormous mountain to climb — the kind of
number that makes you want to throw everything at Facebook ads and hope for the best.
But a 50% jump doesn’t need one heroic leap. There’s a formula — originally adapted from
Jay Abraham’s work on business growth — that breaks growth down into five key areas: how
many new enquiries come in, what percentage convert to a sale, the average sale value,
how often a customer buys, and the margin left over once direct costs are paid. Multiply the
first four together and you get turnover; apply the margin and you get profit.
Let’s Look at the Numbers
Sharon’s business was getting 500 new customer enquiries a year, and she was converting
80% of them into paying customers, with an average sale of $25 and her customers were
buying on average 50 times a year from her.
Here’s what a realistic 10% improvement in each of those five areas looks like:
The result: turnover grows from $500,000 to $732,050, and gross profit grows from
$250,000 to $402,628 — a $152,628 improvement. Nobody had to work twice as hard or
double their advertising spend. Five realistic, achievable 10% improvements compounded
on top of each other to increase Sharons profit margin by 61%.
A quick note worth remembering here: where those enquiries come from depends on your
type of business. For a retail business like a newsagency, most new enquiries come from
foot traffic, local reputation, and word of mouth. For a business that relies on referrals or
repeat trade contracts, the enquiry pipeline might run through other trusted providers instead
— in effect, that referrer is your real “customer” to win over, not the end buyer directly.
The Real Lesson: Small Changes, Not Big Leaps
Here’s what actually matters in this story, and it isn’t the dollar figure. It’s that none of the five
changes required Sharon to do anything drastic. A better Google Business listing. A friendlier
upsell at the till. Paying supplier invoices a few days earlier to capture a settlement discount.
None of these are big, scary changes — and that’s exactly why they’re achievable.
That’s the part of this worth remembering: it is the compounding effect of this strategy
that makes the big difference. The 50% growth target is just what it happens to build.
The Bottom Line
If your business needs to grow, don’t go looking for one big lever to pull. Break your revenue
down into these five areas, work out what a realistic 10% improvement in each would look
like, and let the compounding do the heavy lifting for you.
It really is a powerful way to engineer profit in your business.
Once you’ve mapped out your own five areas, you can track them quarterly or monthly —
turning what looks like an impossible growth target into five manageable, trackable goals.
I have put together an excel calculator to help you model this easily in your business. If you
would like a copy drop me a line at jason@jasonskinner.com.au.
Importantly
The figures in this article are illustrative estimates only, based on a hypothetical example; actual
outcomes will vary depending on your business and industry.
This article is general in nature and does not constitute financial, taxation or business advice.
Jason is a CPA Accountant and the principal of Skinner Business Consultants, located
locally in the Bellingen Shire, and can be contacted at jason@jasonskinner.com.au