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The two categories to grow your business.

I am going to give you tangible frameworks that you can use to pick the most optimal methods for your company.
There are a million and one methods and tactics you can use and guess what; using all of the will bankrupt your company. Most methods actually work but it has to be in the right scenario; what works for a competitor may not work for you. Every method is an opportunity cost so you must choose wisely.
It starts by understanding that there are only two ways to grow your business.
Yes, only two ways; I told you I would keep it simple.
The two ways to grow your business are:
1. Increase the number of client
2. Increase the value of each client
Let's look at some examples.
Let's say you have a hundred clients.
Now imagines if you double that to two hundred; you have essentially doubled your growth.
Ok now let's say you sell a $100 product and that each client is worth $100 to you.
Imagine if you doubled that to $200; then you essentially doubled your growth.
Once again you may look at this and question the simplicity of it. The devil is in the details and we will go deeper into this in the later pages. What usually happens is companies and entrepreneurs get caught up in the details and focus on the wrong details because they haven't been able to separate the trees from the woods. This is why you must take a step back and look at the simplicity of true business growth.
Let me repeat it again.
The two ways to grow your business are:
1. Increase the number of client
2. Increase the value of each client

When you continually focus on these two categories you will be surprised just how irrelevant a lot of your activities are. Every action should clearly fall into one of these categories otherwise it is an opportunity cost that you may want to reconsider.
I am staggered when I go into companies and find out no one really knows how many active clients the company has at the present. I am shocked to find out that no one knows how much an average client is worth to them. Just knowing that number alone gives you so much clarity on many executive decisions in your company.
The upcoming pages will focus heavily on these two numbers and will give a company a far more definable and practical insights into growing a business.
The one ratio you must understand

CLV:CA
There are no ifs or buts; you must know this ratio period.
So what does this ratio stand for, lets dig into it.
The two major numbers are:
• Client Lifetime Value (CLV); how much is a client worth to you over a period of time.
• Client acquisition (CA); how much is incurred in acquiring a new client.

If your client lifetime value is higher than the costs incurred to attain that customer, then your company is on the right track.
Let's look at client lifetime value
• Let's say a new client generates $200 per year for your company.
• You know on average a client stays for one year.
• You have a gross margin of 50%.
Thus your Client lifetime value is $100. (100 x 2 x 0.5)
Now let's look at client acquisition.
• Let's say your current lead generation methods convert at 10% through your advertising. (Which means every 100 people you advertise to; 10 people will buy)
• For every 100 people that comes to the store it costs you $500 in advertising.
• Ten people buy out of the 100.
That means you spent $500 on advertising and ten people bought from you.
Thus your client acquisition is $50. (500) divided by (0.1 x 100)
So we have a CLV of $100 and our CA is $50. So for every $1 you put into lead generation you are getting $2 back after one year. This is a great position to be in for most cases.


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