The power of compounding interest: How to generate 20% sustainable growth
Thursday, January 17, 2019/
A powerful mathematical law is compounding interest. The wealthiest companies and individuals in the world have this process mastered. However, most companies have never connected this principle to client experience and therefore miss the massive leverage that’s available. What makes this process unique is how you can combine these principles into client experience analytics so you can predict revenue growth.
Every competitive business travels the same roadmap when it comes to client engagement. Business is exactly the same — it’s just what they do that differentiates them. Loyal clients travel the same four-step journey in the compounding revenue formula. How well and far they travel with you is determined by your client experience process.
An essential strategy in business is the structure of client lifetime value and the need for clarity in all four steps. You can’t focus on one and ignore the others. All have to work in synergy and also be given individual focus. This is the reason why so few businesses actually achieve real leverage and profits that result from this process.
Very few businesses become successful without investing in marketing. Many companies feel their marketing is one of the key areas that’s letting them down in cashflow sustainability and business growth. Money is invested, inquiry spikes, sales jump, then as soon as the ads stop the sales slowdown. There are many reasons for this.
‘The market changed’, ‘too many competitors’, ‘the economy’s tight’, and the list of explanations goes on. While there’s some merit to these, often it’s the wrong diagnosis for the lack of sales. It’s nearly always the company’s client experience process that lets them down.
2. Your sales process
Businesses will spend a fortune on marketing and virtually nothing on their client experience or sales process.
The frontline team is recruited and trained on the product, but very little client experience training is provided. You can do all the head work you like on training, but if you don’t get to your clients’ hearts, you don’t have relationships, and emotion is where real loyalty exists.
Any hack can sell on price, it takes skill to sell true quality and value and it isn’t linked to price.
3. Your repeat clients
So much time and investment is spent getting clients to purchase once, and often, rarely anything is done to get them back.
‘If you never lost a client, how many new ones could you handle?’ Every team member needs to have this goal.
If you want to optimise your marketing investment, make sure you keep the clients it generates. So often the new client is forgotten about after the first sale.
4. Your average client $pend
This is a very under-leveraged area of sales.
So often we purchase what we think we need, only to find there was something else that goes with it. With a finely tuned sales process focused on the best interests of your client — and not their wallet — average dollar sale values will climb.
What’s often missed is the connection to your client’s experience and their lifetime value. People try out a business and spend on the essentials as a test drive to see how the business stacks up. If your focus is just in the moment on maximising sales without focusing on repeat transactions then you’ve missed a golden opportunity.
For example, let’s look at a simple business with approximately 12 enquiries each day. Of these, 25% purchase and they repeat purchase an average of two times each year with an average sale value of $500. With a high focus on client experience it’s simple to achieve 5% increase in all four steps.
In summary, a 5% increase will increase new prospects to 3150, times by a 26.25% conversion equals 827 clients, who repeat at 2.1 times each year and spend an average of $525 per transaction. Your revenue has now climbed 21.6% to $911,768.
The power of focusing on the compounding revenue formula will give you an edge in your market.
If you make this a serious focus in your business strategy, you won’t believe what’s possible from simple steps. Master this formula and master how to predictably deliver a 10/10 client experience and you will be unstoppable.
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