'This book is straightforward, factual and to the point. Any Leader responsible for business growth should read it! A blueprint full of practical ideas and tools to inspire you into action'--Craig Donaldson - Chief Executive Officer, Metro Bank (RANKED NUMBER ONE IN GLASSDOOR'S HIGHEST RATED CEO 2016) If you asked a cross-section of business leaders, business owners and entrepreneurs what their biggest business challenge is, you would probably hear the same recurring thought: growing their business in a sustainable, predictable, yet profitable way - quickly. It's a reality that most businesses and individuals never reach their full potential, always yearning for the 'thing' that will catapult them into significance, but never really finding it. Whether you're an entrepreneur starting out, or a director, executive or business leader climbing the corporate ladder, the building blocks of Built to Grow are universally applicable. Developed in the real world laboratory of thousands of businesses in twenty-seven countries spanning over two decades, Built to Grow is a proven, time-tested model to unlock the real potential in your business. Avoid the common pitfalls of a trial and error approach to business growth. Built to Grow is full of practical strategies, tools and ideas, backed up with real world case studies to illustrate what can be achieved - leaving you equipped to transform your businesses performance and drive tangible results. Built to Grow is destined to become your handbook, your 'go to' guide, your roadmap to accelerated, sustained and profitable business growth.
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About the Author
Why Built to Grow?
What Built to Grow Is Not
How to Use Built to Grow
The Added Benefit to You
Chapter 1: The Fundamentals of Business Growth: Your AMR Strategy
The First BIG Idea
Your AMR Strategy
Your Business Growth Formula: How the Numbers Work
The Profit Impact
AMR in Action
Developing Multiple Strategies
Become Really Curious
Chapter 2: Your Business Growth Transformation Framework® (BGTF)
Adopt a Success Modelling Approach
Your Business Growth Transformation Framework®
Your Recipe for Success
7 Guiding Principles
High Performing Organization Model
Measures that Matter
Summary: Setting a Foundation of Great Habits
Chapter 3: Inspirational Leadership
Developing Your Leadership Culture
Why the Leader-Follower Structure is at Odds With Developing a Leadership Culture
The Solution: Leader-Leader
The Four Types of Leaders
Turning Your Organizational Design Upside Down
Developing Your Leadership Traits and Style
Chapter 4: Building a High Performing Organization
Chapter 5: Business Purpose, Aspirational Goals, and Growth Strategy
The Power of Your WHY
Caution: Two Pitfalls to Avoid in Finding Your WHY
Life is Like a Boomerang
Translating Your Personal WHY into Your Business's WHY
Aligning Your Business's WHY With Your People's Personal WHY
What Business are You Really In?
Your Goal Before You Move on
Chapter 6: Market Potential Strategy
Alignment of Your Aspirational Goals With the Market Potential
Defining the Size of Opportunity
Segmenting and Profiling the Opportunity
Why Consumers Buy and How the Competition Can Impact Your Market Potential
Market Potential and ‘The Four Seasons Calendar'
Chapter 7: Compelling Value Proposition Strategy
What Customers Really Care About
Essentials of a Compelling Value Proposition
Introducing the Benefits Track
Zooming In and Zooming Out
When Technology Impacts Your Compelling Value Proposition
So, Are You Ready?
Market Research Through Your Customer Lens
Chapter 8: Customer Strategy
The Big Idea
The Experience Economy
The Digital Age Is Transforming the Game
Making it Real for Your Business
Measures That Matter
Chapter 9: Marketing and Communications Strategy
The Purpose of Marketing and Communications
Interdependency with Your Other Strategies
Trends Shaping the Marketing Landscape
Defining the Brand
Writing Your Marketing and Communications Strategy
Turning Strategy Into Action Through Your Marketing Plan
Measures That Matter
Summary: A Science . . . and an Art
Chapter 10: Business Development and Sales Strategy
Internal Brand Positioning of Sales
Who’s in Sales in Your Business?
A Scientific Approach
1. Sales Planning and Forecasting
2. Your Customer Classification Framework
3. Your Proposition Matrix – Getting Customers to Buy More
4. Your Customer Contact Strategy
5. Your Sales Map
6. Your Sales Funnel
Summary: Selling Success
Chapter 11: People Strategy
Are People a Cost or an Investment in Your Business?
The Big Idea: Creating Your Employee Value Proposition
Identifying Your People Gap
Building a Robust People Pipeline
Growing and Developing Your People
Chapter 12: Operational Excellence Strategy
Practice Makes Perfect . . . or Does It?
The Need for a Robust Operational Strategy
Applying the 7 Guiding Principles in Your Quest for Operational Excellence
Embracing Technology as a Competitive Advantage
Operational Improvement Never Stops
Chapter 13: Finance and Governance
Change Your Mindset . . . Change the Game
Keeping Score . . .
Measures That Matter
Your Three Most Important Financial Tools
The Exciting News
Funding Routes: The Upsides and Downsides
Chapter 14: Control the Controllable
Chapter 15: Your Journey to Mastery
Being Committed and in the Arena
A Never-Ending Pursuit of Personal Mastery
End User License Agreement
Table of Contents
What real Business Leaders, Owners and Entrepreneurs are saying about Built to Grow . . .
‘Now more than ever business leaders need a model that works, is simple and covers all bases. From earnings growth, to people and talent strategies, to deeper customer relationships, in this book finally we've got one.’
Paul Thandi, CEO, NEC Group
‘This book is straightforward, factual and to the point. Any leader responsible for business growth should read it! A blueprint full of practical ideas and tools to inspire you into action.’
Craig Donaldson, Chief Executive Officer, Metro Bank (ranked number one in Glassdoor's highest rated CEO 2016)
‘A must-read for the modern business leader. At last, practical real-world strategy you can understand and act on to get instant but sustainable results. Royston delivers a clear and much-needed blueprint for scalable business growth. No matter how good you think you are, you should read this book to stay at the top of your game.’
Sháá Wasmund MBE, Author of Stop Talking, Start Doingand Do Less, Get More
‘Royston is an inspiring and practiced business leader. His book transcends other management books, by walking us through a practical, simple, yet dynamic framework that really works in unlocking the potential to grow your business. The framework provides clarity on what vision, strategies and measures really matter in achieving growth goals and Royston’s commentary helps agile and progressive thinking. At a time of digital revolution this has never been more critical.’
Louise Swain, CEO, Alliance Homes
‘The entertainment world is chaotic at the best of times, but add the impact of rapid technical disruption and well funded new international entrants and it creates a world where established players have to focus on rapid change and constant market evolution to survive. Royston’s advice and model helped us make sense of this situation and focus on what’s important to compete. So much so, that in the first twelve months of trading since execution we experienced double digit EBITDA growth in a market hemorrhaging value.’
Stuart Cain, Managing Director, The Ticket Factory and Eight Feet Tall
‘Built to Grow is both challenging and thought provoking with a range of practical examples and lessons that are of relevance to leaders in the private, public and third sector who are serious about building a high performing organization.’
Richard Stevens, HR Director, Chief Minister’s Department, States of Jersey
‘Royston is a passionate, practical and engaging business leader, who inspires the commitment of those he leads and advises. Built to Grow is an insightful interpretation of his results driven model, that combines proven practices to unlock the potential in your people and achieve a culture of growth.’
Phil Jones, Global Vice President, CSM Bakery Solutions
‘We have been fortunate enough to work with Royston in building our teams and our business over the past 2 years and he has been instrumental in supporting the growth of our team, providing new ideas, as well as clear, easy to apply guidance. He is an inspirational coach, provides great positive challenge and has played a key role in the transformation and growth of our business through our people. He’s a delight to work with and great to have all of his wisdom and guidance in one book!’
Laura Brown, Retail Director, Harrods
‘Many business books talk about the importance of the customer, however with Built to Grow it’s refreshing to see a business growth strategy where genuinely the customer is the focal point of the entire model. The Customer Strategy Chapter is packed full of practical ideas that any Business Leader could instantly implement to build a customer centric business. Achieve this goal and accelerated and sustained business growth will be inevitable.’
Maggie Wheeler, Managing Director, The Focus Group and Founder of Customer Experience World
‘Royston’s work helps both the individual and the organization reach their full potential by providing simple yet effective techniques that are transformational. His performance and results driven model is balanced by practical concepts that empower people to excel, leading to a dynamic and highly productive organization. Everyone wants to be on a winning team and Royston provides the blueprint for success. Read this book, study and apply his techniques, and you will be a winner!’
Raymond A. Melee, Development Director, Gatwick Airport
‘The finance chapter of Built to Grow is jam packed with insights and thinking which every “commercially savvy” business leader needs to know in order to build a profitable business. Finance is not just the job of the finance team, but an integral part of a high performing businesses performance culture. Built to Grow really delivers this message in a simple, engaging and compelling way.’
Ajay Handa, Chief Financial Officer, GatenbySanderson
‘As an impatient executive team, we found working with Royston to implement the business models and principles in Built to Grow has delivered tangible growth, a committed talent base and a flourishing AMR Strategy!’
Donna Baddely, Executive Director, Corporate Services, Curo Group
‘Finally, a book that puts the marketing agenda firmly on the boardroom table. Built to Grow recognizes the role shift of marketing and provides insights and ideas on how to stay one step ahead. Knowing your customers, understanding their needs and building a targeted customer communication strategy is fundamental to any business growth plan. Built to Grow, with its practical tools and ideas, simplifies how you can achieve this and deliver tangible results fast.’
Jane Parry, Head of Marketing and Communications, Canaccord Genuity Wealth Management
‘Our business journey with Royston has been enlightening, enjoyable and tough. Built to Grow has had a fundamental impact on how we operate, with a combined focus on costs, productivity and a pro-active sales strategy we are transforming into a high performing team. We are creating a leader culture that is stretching the organization and has provided a platform for talent to flourish. We believe that we are becoming the provider of choice, employer of choice and the investment of choice in our industry and the partner of choice for trust, fund and pension solutions. Highly recommended a must have!’
Louise Bracken-Smith, Business Owner, Entrepreneur, Fairway Group
‘If I were to sum up the book I would say it’s “written with the reader (and leader!) in mind”. In today’s business landscape I would challenge any leader not to find the content of this book a must have tool to truly stand back and consider the DNA of their approach, their business strategy and most importantly how they are unlocking the potential in their biggest asset...their people.’
Jayne Owen, Group Learning and Development Manager, Princes Limited
‘Royston has supported me within my own growing business and in a corporate environment. In both situations the ideas are practical, effective and universally relevant. At times they may seem simple and mere common sense . . . the key is applying them rigorously to see the long-term growth benefits. Follow his ideas and you, your people and your business will achieve massive growth.’
Graham Nicoll, Advisory, KPMG Enterprise
This edition first published 2017© 2017 PTI Worldwide Limited
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Library of Congress Cataloging-in-Publication Data
Names: Guest, Royston, author.
Title: Great by design : how to deliver accelerated and sustained business growth / Royston Guest.
Description: Chichester, West Sussex, United Kingdom : John Wiley & Sons, 2017. | Includes index.
Identifiers: LCCN 2016029041 (print) | LCCN 2016042883 (ebook) | ISBN 9781119318095 (cloth) | ISBN 9781119318132 (pdf) | ISBN 9781119318156 (epub)
Subjects: LCSH: Strategic planning. | Small business–Growth.
Classification: LCC HD30.28 .G8346 2017 (print) | LCC HD30.28 (ebook) | DDC 338.6/42–dc23
LC record available at https://lccn.loc.gov/2016029041
A catalogue record for this book is available from the British Library
ISBN 978–1–119–31809–5 (hardback) (hardback) ISBN 978–1–119–31813–2 (ebk)
ISBN 978–1–119–31815–6 (ebk)
10 9 8 7 6 5 4 3 2 1
Cover design: Wiley
To my beautiful wife Jane and wonderful children Eloise and Ethan. You give life context, purpose, and meaning.
To reach this point has certainly not been a solitary journey. I have reached out, coached, been coached and mentored, spoken, consulted, had a meal and drunk a few glasses of wine with so many clients, colleagues, friends, and family. To name everyone here would be a book in itself, however you know who you are and from the bottom of my heart a massive thank you to you all.
Without my loyal clients and customers I wouldn’t have the 20 plus years of experience packed in to Built to Grow. I look forward to continuing to work with you and helping you grow your business and realize your personal and professional goals.
Thank you to the many well-known companies, organizations, sportsmen and women, authors, actors, and actresses referenced. The great work you do provides a shining example of what works in the real arena of life and perhaps as importantly . . . what doesn’t.
I’d like to thank my publisher, Wiley, for bringing Built to Grow to life, and together, creating the opportunity to contribute our part in building a more sustained, commercial world one business and organization at a time.
Heartfelt thanks to my team at Pti Worldwide; Kate, you have been with me from the start. Your loyalty, energy, and vision are valued beyond words. Pti is like your second child and you should feel proud of the business you have helped build, the positive difference you make every day, and the businesswoman and mother you have become.
Luke, I have watched you grow and develop into an inspirational leader and great consultant. Your work ethic, commitment, and drive are admired and I have no doubt at some point in the future I will be writing a foreword for your book.
Jane, your talent as a business leader and professional never fails to astonish me. Your ability to zoom out to see the big picture and zoom into the detail is a unique skill. Built to Grow would not be the book it is without your eye for detail, positive challenge, and breakthrough insights.
Laura, my Executive Assistant, you have the patience of a saint. I know I am not always easy to manage, but you do it with relentless energy, consistency, and calmness. You truly are unflappable.
And all my colleagues at Pti. I am so proud of the great work commitment, focus, and drive you demonstrate every day in helping our clients grow their businesses and unlock people potential.
Colin Brown, the hours we spent piecing together Built to Grow making sure every word, every sentence, every paragraph, and every page counted was a labour of love. I hope you look on our time together with fond memories. You are an inspired writer and a man of genuine integrity. Thank you.
And most importantly to my family.
My dad, Bill, for being a friend as well as a father. You created life experiences and opportunities for me to develop and grow which played a significant impact on who I am today. I hope I make you proud of the business professional and father I have become.
Jean, my stepmum for treating me as your own.
My mum, Pat, for your tireless devotion and sacrifice in bringing me up, shaping my values and beliefs about what is right and wrong and how to live a fulfilled life. Being a parent myself, I now know what unconditional love means and on reflection, wish I had appreciated it more as a child growing up.
My sister, Justine, you have always had my back. To watch you grow into the successful businesswoman, mum and wife you are makes me feel proud.
My in-laws, Mary and Eric. Mary, I told you I would include you in my book, or perhaps I was just fearful of the consequence of not including you! On a serious note, in life you can count on one hand the individuals you can call who will drop everything and be there for you in a heartbeat. You both fall into this camp and I am eternally grateful for your love and support.
And finally my wife, Jane, my soulmate and best friend and our two beautiful children, Eloise and Ethan. I am blessed beyond words and so proud to be able to say I am your husband and your daddy.
From an early age Royston nurtured his entrepreneurial spirit spending weekends and summer holidays working in his father’s construction business.
A relentless itch to join the working world saw Royston kick start his career at the age of 16, enrolling on a construction apprenticeship programme. He worked from the ground up, literally.
His thirst for learning and making things happen saw his career fast track at companies like Balfour Beatty managing high profile projects like the Liverpool Institute for Performing Arts, founded by Paul McCartney. A working stint in America gave Royston valuable insight into operating across cultural boundaries and different mindsets.
On returning to the UK, Royston was involved in the privatization of the Rail Industry and major Private Finance Initiatives (PFIs) with Jarvis before joining Hoogovens, a Dutch business, where he was involved in mergers and acquisitions.
The breadth and depth of ‘hands on’ business experience led to Royston starting his own consultancy and people development business in 2005, Pti Worldwide, of which he is CEO.
Driving sustainable and profitable business growth fast whilst unlocking the real potential of individuals are the two professional missions of Royston and the Pti team.
A mission spanning over two decades, 27 countries, and tens of thousands of businesses across a multitude of sectors, enterprises, and governments.
Through exposure to such a broad array of organizations, Royston has created a unique databank and set of breakthrough distinctions and insights into what it takes to build a truly high performing organization, which delivers accelerated, sustained, and profitable growth.
Whether speaking, facilitating, consulting, or coaching, Royston’s passion to make a real tangible difference is at the forefront of his work, and what sets him apart from his peers.
Royston is married with two children and splits his time between Jersey and the UK.
If you asked a cross-section of business leaders, business owners, and entrepreneurs what their biggest business challenge is, I’m confident you’d hear the same recurring thought: growing their business in a sustainable, predictable, yet profitable way, quickly.
It’s a reality that most businesses never reach their full potential, always yearning for the thing that will catapult them into significance, but never really finding it. The simple reason is a mismatch between the lofty vision that guided their founders and eventual leaders, and the ability to turn that vision into anything practical.
Fixing that mismatch is one of the goals of Built to Grow.
The practical strategies of the Business Growth Transformation Framework®, detailed throughout this book, are precisely that: practical, tried, tested, and proven to be effective. As a result, Built to Grow has been a long time in development. Concepts within have been put through their paces in the real world laboratory of some of our most successful clients including large companies such as DHL, Virgin, Harrods, and Santander; mid-tier organizations, SMEs, and small/home businesses, all across a diverse range of sectors.
By reading this book, you’ll learn what business leaders, business owners, and entrepreneurs have done to ensure their greatness isn’t just a coincidence, but an act of purposeful design.
Building a great business rarely happens by accident. Businesses we admire most have been structured for growth by their founders and business leaders, using principles similar or identical to the ones I will share.
There are two non-conflicting concepts at play in Built to Grow. The first is a planned, structured framework, which, if followed closely, is assured to grow your business; the other is the element of speed. Hopefully you view your business as something that will continue to thrive for a long time, but that doesn’t mean it should take a long time to grow. The Built to Grow model is partly in recognition that entrepreneurial and business vision is closely tied to impatience. You’ve got an idea and you want to build it now.
If that’s true for you, this book is an essential action guide.
Business growth theories are not hard to come by. A cursory Google search will uncover thousands of ideas of varying quality, some of which may be useful to you. The challenge in all fields of theoretical thinking, however, is that so few of the ideas presented can be backed up with results founded on real-world testing. It’s certainly true that you have little interest in your business being a guinea pig, and that’s where the ultimate strength of Built to Grow lies.
This book rejects any theoretical modelling that my team and I haven’t tested and applied in real life, multiple times. It is not merely a book of ideas. By its very nature, Built to Grow is not intended as a passive read, but as a blueprint for you to achieve accelerated, sustained and profitable business growth.
I am a big believer in coaching, which comprises a substantial share of what I devote my time to on a daily basis. As a result, I chose a coaching framework to demonstrate the Business Growth Transformation Framework® (the model at the core of Built to Grow).
I recommend you dedicate quality time to reading each chapter and consider how you can apply the principles within your own business. One useful technique I adopt, which you may find useful, is to scribble your thoughts and comments in the page margins, underline passages that are most compelling, and refer regularly to the content. This makes it simple to find the most relevant information whilst embedding the behaviours as you read and re-read. It may go against all your instincts to mark a book, so as the author, I am giving you my unreserved permission right now.
The Business Growth Transformation Framework® comprises, at its heart, nine interlocking strategies with each strategy focusing on a particular business area. Consequently, there is a high probability that readers will have a deep affinity with one particular section, and perhaps not others. It may be your instinct as a Financial Director, Financial Manager, or Accountant, for example, to jump straight to the Finance and Governance chapter to find some brand new insights in that field. Please suppress that urge. The intention of Built to Grow is to give you a broad and interlocking insight into all key aspects of business growth; some of which you will be well versed in and others you may have limited or no knowledge of at all.
A marketing expert should be able to read the Finance and Governance chapter and walk away with some real Aha! moments. A finance expert should have Aha! moments having read Marketing Strategy, Business Development, and Sales or any of the other chapters.
Think about how beneficial it would be if your colleagues had a better understanding and appreciation of your job function. And vice versa, the benefits to them of you understanding and appreciating their function at a deeper level.
Specific expertise is invaluable in order to achieve excellence in your area of responsibility, but business owners, business leaders, and entrepreneurs who choose to build companies through purposeful design, smooth their way forward by being familiar with all interlocking strategies and how they add immense power to one another.
As a final note, I wish you every success on your journey of transformation. You’re going to feel challenged at times and frustrated at others, but if you are relentless in your approach, I am confident in saying that your accelerated, sustained and profitable business growth will be inevitable.
Strategically, the primary purpose of a business is to Acquire, Maximize, and Retain the right customers. Everything that contributes to this is an investment; anything which doesn't, is a cost!
Because Built to Grow is focused on how to deliver accelerated, sustained, and profitable growth in your business, it makes perfect sense to launch straight into the fundamentals of business growth . . . and your AMR strategy. In this chapter, we're going to peel back the layers of the onion, get to the root of business growth and, using simple, practical ideas, give you insight into how you can deliver consistent, repeatable, predictable results in your business.
Strategically, the primary purpose of a business is to Acquire, Maximize, and Retain the right customers. Everything that contributes to this is an investment; anything which doesn't, is a cost. Which activities in your business are an investment, and which are a cost?
Without customers, businesses don't exist. That's a simple fact which no business owner can dispute. The challenge is that most business owners, business leaders, and entrepreneurs over-engineer their business growth model, making it more complex than it needs to be. They introduce layers of management that stifle and delay decision-making. They create unnecessary systems, processes, and procedures that dilute the focus of their people from doing what they do best: Acquiring, Maximizing, and Retaining customers. Then they wonder why they're not delivering market or industry leading performance and growth!
You see, regardless of your industry, sector, business type, or whether you're in a B2B or B2C environment, there is a formula for success in delivering accelerated, sustained and profitable business growth. However, most business leaders, business owners, and entrepreneurs are either not aware of the success formula and its fundamental principles, or are simply not following it. I'm going to walk you through the success formula and detail the precise steps to personalize and apply it to your business.
Remember our first BIG idea:
Strategically, the primary purpose of a business is to Acquire, Maximize, and Retain the right customers. Everything that contributes to this is an investment; anything which doesn't, is a cost.
Let me break this into a couple of component parts:
‘Strategically, the primary purpose of a business ...’
Note the key word here is strategically. Over the years, customers and delegates have challenged me by saying ‘Royston, isn't the primary purpose of a business to fulfil a customer need?' My answer to this question is always: ‘Yes, you are 100% right'. However, in the context of your business growth formula, this is a given. Here we are focused on your business growth not your business essence.
My focus is to help you build a business with the potential to deliver sustained growth, and therefore it is important to deepen your understanding of the fundamental principles of business growth and the levers you can pull in your business to achieve it.
‘... Acquire, Maximize, and Retain the right customers’
This statement contains the core principles, the hub of your business growth formula. Attract, Maximize, and Retain are three key words, which together form your AMR strategy. Lock those three letters firmly in your mind, as they are going to be a thread that runs throughout this book.
During good economic times, new business was probably easier to come by, and it didn't really matter if you lost a customer, because there was always another waiting in the wings. However, in a competitive market where multiple providers are chasing the same customers, and those customers are more demanding than ever, a structured, systematic, and sustainable business growth strategy is more important than ever.
Now, you may say ‘but what about reducing costs, surely that will increase my profits and therefore help me grow my business?' Again, this is true, but what I want you to focus on is unlocking the untapped potential of unlimited growth. Reducing costs is finite; you can only ever cut back so far before arriving at a base cost to serve and deliver your customer proposition. It's never a long-term strategy for sustained growth.
Buying other businesses can be another way of driving growth, but with that comes additional cost and usually a significant amount of change to manage.
What I'm focused on is accelerated, sustained and profitable organic, year-on-year growth underpinned by your AMR strategy and the answers to the Four BIG questions. All of which add breadth and depth to the business growth formula.
The Four BIG questions:
How do you increase the number of customers?
How do you increase the average order value?
How do you increase the average order frequency?
How do you increase the retention of customers?
The first question addresses the ‘A' of your AMR strategy, questions two and three the ‘M', and finally question four the ‘R'. Which question do you think most businesses focus their time, effort and resources on? It's the first – increasing the number of customers.
While this is certainly key for business growth, the amount of time you should focus on new customer acquisitions isn't the same for all businesses. The maturity of your business and the size of your existing customer base, when aligned to your growth ambition, will determine how much focus you need to place on the ‘A' part of AMR.
Having worked with tens of thousands of businesses of all different shapes and sizes, experience tells me that most businesses spend too much time on this question altogether. Only a select few businesses have a business growth strategy that integrates all four questions aligned to an overarching AMR strategy and a deep-rooted understanding of the customer lifecycle.
I always remember reading this headline in a UK business newspaper:
‘A million customers come back to energy provider.'
Now, the challenge I have with this headline is: why did they lose a million customers in the first place?
Let me share a compelling story that may suggest they lost those customers because they were looking in all the wrong places. Perhaps the same is true for you.
There's a story called Acres of Diamonds by Russell H. Conwell which describes a Persian man named Al Hafed who lived many years ago and was very contented with his life as the owner of a large farm with orchards, grain fields, and gardens. One evening, however, his world is turned upside down when a Buddhist priest stops by to warm himself by the fire and begins to talk about how the world was made. He concludes his story with a description of diamonds, the rarest gems of all. The old priest tells Al Hafed that if he had a handful of diamonds he could purchase a whole country, and with a mine of diamonds he could place his children upon thrones through the influence of their great wealth.
That night, Al Hafed went to bed feeling poor despite all that he had, because he didn't have a diamond mine. Finally, early in the morning, he woke the priest and asked him: ‘Will you tell me where I can find diamonds?'
The priest said, ‘Diamonds? What do you want with diamonds?'
‘I want to be immensely rich,' said Al Hafed, ‘but I don't know where to go.'
‘Well,' said the priest, ‘if you will find a river that runs over white sand between high mountains, in those sands you will always see diamonds.'
So Al Hafed sold his farm, collected his money, asked a neighbour to look after his family, and went off in search of the river on white sands. For years, he wandered, spending every penny he had, until eventually, frail, hungry, and reduced to rags, he gave in to his despair and threw himself into the sea, never to be seen again.
But that's not the whole story. Shortly after he bought the farm from Al Hafed, the new owner led his camel out to the garden to drink one day, and as the camel put its nose down into the water, he noticed a glint of something shiny. Realizing that the object sparkling in the river that ran over white sands through the back garden of the farm was a diamond, the farmer began to dig for them and so were discovered some of the greatest diamond mines in the world, making the farmer wealthy beyond his wildest dreams.
Al Hafed had never seen them because he had never looked in his own back garden. Had he looked more closely at what was right in front of him, and not been distracted by what he thought would be better elsewhere, he wouldn't have suffered poverty and starvation, but enjoyed acres upon acres of diamonds.
There is a danger for every business owner, business leader, and entrepreneur of obsessing about finding new customers, all the while failing to notice the ‘acres of diamonds' – the customers we've already invested the time, effort, and money to acquire.
Business growth is about acquiring the right customers through the front door of your business, and building a compelling value proposition that fulfils their needs and wants. It's about delivering your products and services through an exceptional customer experience and maximizing the value and worth of each customer.
And finally, because of the great value and experience you deliver, it's about keeping the back door of your business firmly shut by giving customers good reasons to stay with you for the long term, thus driving your retention strategy.
So let's look at how AMR works in practice and why AMR working in unison is how successful businesses deliver accelerated, sustained, and profitable business growth.
In Table 1.1, you can see the turnover/revenue effect of the ‘A' and the two ‘M's: 100 customers, each of whom spends £100 per year and buys from you twice. A quick calculation shows that you'll have £20,000 per year in revenue.
Now, let's do what most companies do and only look at acquiring new customers. A sound idea, but one that, as we've already demonstrated, is not a true growth strategy alone.
In Table 1.2 look at the second line and you'll see that a 10% increase in customers, without any change to the other two variables, leads to a 10% increase in revenue. Increase one of the variables and you get a linear, incremental revenue uplift.
Table 1.1 The turnover/revenue effect
Number of Customers (A)
Average order value (M)
Average order frequency (M)
Table 1.2 The turnover/revenue effect; increasing the number of customers
Number of Customers (A)
Average order value (M)
Average order frequency (M)
Table 1.3 The turnover/revenue effect; increasing the number of customers, average order value, and frequency
Number of Customers (A)
Average order value (M)
Average order frequency (M)
Business growth really starts to become fun when you focus on all three variables of your AMR strategy at the same time. In the third line of Table 1.3, we've increased all three variables by 10%, and you can see how the uplift in growth is totally different.
If you focus on one variable, you get 10% growth. Work all three variables at the same time and you get 33.1% uplift!
You see, the fundamentals of business growth are not complicated. When you have an AMR strategy, underpinned by the Four BIG questions and you work all variables of the formula at the same time, you don't just achieve linear growth. The multiplying effect of the variables working together gives you exponential business growth – hence the 33.1% uplift through just a 10% increase in each of the three variables.
In Table 1.4 you'll see a more realistic picture of differential uplift across all three variables: 23% growth in customers, 16% in order value, and 5% in order frequency. The impact on your turnover/revenue is nearly a 50% uplift!
Table 1.4 The turnover/revenue effect; increasing the number of customers, average order value, and frequency
Number of Customers (A)
Average order value (M)
Average order frequency (M)
This business growth formula is not just a model to drive top line revenue growth. It's no good getting to the end of a financial year to discover you've made no profit. Taking two of our examples, let's work the formula to understand what impact driving the top line in the right way can have on the bottom line profit.
In Table 1.5, Example 1 illustrates £20,000 turnover/revenue, assumed fixed costs of £9,000, and variable costs of another £9,000. Profits therefore equate to £2,000.
In Example 2 in Table 1.5, the turnover/revenue line of £26,620 was created through increasing each of the three variables: number of customers (A), average order value (M), and average order frequency (M) by 10% (as demonstrated in Table 1.3). Now, it is prudent to factor in a slight increase in our variable costs in order to manufacture or deliver the increase in product or services as a result of the 10% uplift. However, as we're only talking about a relatively small increase of 10% across the variables, let's assume no impact on our fixed costs. Look at what happens to our profits. A 231% uplift! Now that is the business growth formula in action.
We still have one final BIG question to consider, the ‘R' in our AMR strategy: How do you increase the retention of customers? If you keep your customers for a second year, you can earn a second year's spend (remember in our first example, Table 1.1, 100 customers spent an average of £100 twice per year for an annualized revenue of £20,000).
Table 1.5 The turnover/revenue effect; impact to bottom line profit
Profit increase %
Imagine if you retained all 100 customers for five years . . . that would equate to £100,000 of locked-in revenue. This is a dynamic I refer to as Lifetime Value (LTV) and it's the essence of our ‘R'. Let's look at how this works in real life.
What is the lifetime value of a customer in your business? Understanding this is fundamental in creating your sustained business growth model. Let's use a real world scenario, in order to bring this to life: your weekly grocery shop.
An average family of four living in the UK will probably visit the supermarket at least once a week for their main family shop and let's say spend on average of £100 each time. During any average year, they'll probably go on holiday for two weeks, so if we factor this into the model, we can predict they will visit their local supermarket 50 times per year. That makes the average value per year £5,000 (50 times x £100 average spend).
But that's not even close to being their lifetime value. If they are a regular shopper over five years, the LTV to that supermarket is £25,000 from all those £100 trips (50 times per year x £100 average spend x 5 years). Retaining a customer suddenly becomes a very valuable thing to do.
This information becomes a fundamental piece of a very important puzzle: how much to spend on customer acquisition. If you know how much a customer is going to be worth to you over their lifetime, their LTV, you can calculate how much you're prepared to spend to acquire them. Without this insight, you're acquiring new customers blind, adding more pressure to your business model, particularly if you're overwhelmingly ‘A' focused.
It also enables us to gain some important perspective. If you lose a customer, you don't forfeit someone who could earn you £100 next week, but someone who could earn you £25,000 over the next five years! Culturally, that is a different way of thinking and certainly should propel you to focus on the importance of retaining customers.
What is a customer worth to your business? Not just during year one, but over their lifetime . . . what's their LTV? Be careful not to just calculate the turnover or revenue figure, think about what they are worth in terms of profitability. After all, as we've demonstrated, that's the real measure of success of the business growth formula in action.
It's amazing when you actually calculate the real lifetime value of a customer, how it changes your priorities. With this clear focus, you can calculate what you are prepared to spend on sales and marketing to acquire new customers. Let's look at some well-known companies to help crystallize our thinking:
Gillette and other leading shaver brands charge a premium for refill razor blades. However, the first purchase you make, the razor itself, is comparatively cheap. They're prepared to sacrifice the initial profits on the first purchase, knowing they will recover them with each successive purchase. Hence during a new campaign launch, a new razor will be heavily discounted by as much as 50%. Of course, all the additional ‘back end' products – shaving foam, face wash, moisturizer – are the add-ons focused on maximizing the customer LTV.
Inkjet printer manufacturers adopt the same approach. You buy a printer for virtually nothing, in comparison to what it can do for you, but to keep it running you have to purchase ink refills, which have been calculated as the most expensive liquid on Earth – more than premium vintage champagne!
Websites that offer a premium product, such as LinkedIn Premium, will often allow users to enjoy a month or two for free in order to get you hooked. They make up the cost of those two free months over the next 24 months or even over an open-ended contract with no fixed termination date.
Gyms do the same thing: they'll offer you the first month for free, on the signing of a contract, because over the LTV of that contract, they have factored in the profit margins they require.
In the last two examples, there are usually cancellation clauses, which enable you to stop your contract before your first payment. Of course this is a risk providers face. However, they rely on the laws of probability, in that far more people will activate their contract after their first free month than will cancel, so the majority of projected revenue isn't at risk.
These acquisition strategies work because the business understands the LTV of its customer; they are therefore able to offset a higher cost of acquisition.
Another consideration, once you have acquired customers, is how much does it cost to serve them?
Nowadays, many businesses use multiple channels to promote and sell their products (i.e. online, face-to-face, or through a contact centre), so perhaps a more pointed question should be: what does it cost to serve your customers by channel? The competitive and challenging business landscape has definitely focused the minds of business professionals to interrogate their cost base and understand the cost/profitability of customers more than ever.
This topic could be the focus of a whole book in itself. However, for now, we'll focus on two key drivers of analysing cost to serve: advancements in technology and the changing demand and sophistication of the customer.
It's no big surprise that there has been phenomenal growth in web-based businesses such as Amazon, CompareTheMarket.com, ASOS, and Play.com. This e-business model gives the consumer complete control over when and where they choose to shop. For the business, it can deliver a leading edge ‘cost to serve' business model centred on automation, therefore reducing people, bricks and mortar, and infrastructure costs.
A traditional business model may need a rethink, particularly if there is an expensive face-to-face component. A high people head-count and a network of real estate might be critical components of the proposition, yet they drive up the cost to serve. Without an in-depth understanding of cost to serve and conscious decision-making in relation to LTV, AMR, and the Four BIG questions, many business growth models are fundamentally flawed.
The principles of business growth are certainly not complex, and you shouldn't over-engineer them. To help you on your journey of tailoring the business growth formula to your business here are two case studies which apply the AMR formula and are reaping the benefits through accelerated, sustained and profitable business growth.
When you think of AMR in action, there's a good chance that McDonald's comes to mind because of one simple, yet powerful question: do you want fries with that? That simple question is symbolic of McDonald's mastery of customer maximization, but let's be honest, the company delivers in outstanding fashion across the entire spectrum of AMR.
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