There are fundamentally 3 ways to grow a business:
- Find more customers. Expanding your customer base will generate more revenue.
- Sell more often to existing customers. Increasing the number of transactions/purchases a customer makes throughout the year also increases the amount of revenue.
- Increase your margins. This will generate more revenue + profit out of the existing number of transactions.
Now, you can do any of these tactics or a combination of them.
Keep in mind there is a cost to apply these tactics in real life.
Let me explain…
Finding more customers requires you to spend more money on marketing. A lot of times, businesses make no profit on the initial transaction with a first time customer because of the cost to acquire that customer (CAC).
You have to know the lifetime value of your customer (LTV) in order to calculate how much you can afford to spend on acquiring him.
Selling more to existing customers also requires an investment in marketing, and perhaps certain promotions and discounts.
Increasing your margins can come from 2 places: reducing your costs and raising your prices. When you raise your prices inevitably you lose some customers. But you end up making more money on the existing ones, with less effort.
There you have it…