By Margie Zable Fisher
Congratulations! Your business is booming!
You have more clients than you can handle, and you and your team members are working hard. More growth opportunities are on the horizon.
And yet … there are some cracks.
Customers sometimes have to wait weeks or months for appointments. The team is exhausted, working long hours. And those exciting new opportunities? You don’t have the bandwidth to consider them.
The bottom line: Things need to change to keep you and your team happy and healthy, and help you capitalize on those new opportunities.
Growing vs. Scaling Your Business
Of course, making changes in your business can’t come at the expense of profitability. So consider ways to scale your business instead of just growing it.
People often use the term “scale” interchangeably with “growth.” But it means something different. Technically, business growth can occur even if you’re increasing revenue and expenses equally.
For instance, say you need to spend $60,000 to gain $60,000 in new revenue. Your company is officially growing in revenue and employees, but without much business value. It lacks scale.
“Scaling” means increasing revenue at a higher rate than costs. Steps to scale your business might include hiring a physical therapy assistant at $45,000 who brings in $70,000 in new revenue.
Or implementing technology, such as customer relationship management software, that automates tasks and frees up team members for higher-value activities. Choosing less expensive, but more effective marketing and sales tools is another way to scale your business.
Metrics to Know Before You Scale Your Business
If scaling sounds good to you, a good first step is to consider these five key business metrics.
Customer Acquisition Cost (CAC)
How much does it cost your business (including marketing, sales and overhead) to gain a new customer? Knowing this figure helps you understand your process’s strengths and weaknesses. For example, if it costs your business $90 to acquire a new client, you’ll want to find ways to decrease that cost.
You might start by looking into how marketing tools, instead of people, can help you explain products and services to potential customers. Perhaps you find less expensive marketing tools, or get more out of the tools you already have.
Lifetime Customer Value (LCV)
This measurement can uncover even more scalable opportunities than the CAC. How much value do lifetime customers bring to your company? How much more could they provide? Look to increase the LCV of that customer.
For example, if you offer “one and done” services, such as plumbing, you could grow relationships through complementary services. Consider adding electricians to your team or establish a referral-paid relationship with a heating/cooling company.
Offer a discount or freebie when an existing customer refers a new one. Move some chiropractic customers to weekly visits instead of twice a month.
Measuring revenue or customer growth (or both) also can provide clues to scalable opportunities. Are your revenues in line with your customer growth rate? If not, you might need to reallocate certain responsibilities among team members, use more automation or streamline processes.
If your revenues are growing more than your customer base, you may be attracting higher-value clients. Consider refocusing resources and activities on attracting those type of clients.
How many of your prospects become customers? Most businesses don’t have anything close to 100% conversion rates, so there’s usually room for improvement. If there is high service demand, but the business isn’t closing many sales, that’s the first place to look.
Digging into the reasons why customers don’t convert may lead you to change up staffing or your prospect communication strategies.
While it’s important to track growth, you also need to be aware of the customers you lose, or churn. Churn rate is the percentage of customers lost over a specific time period — usually monthly or annually. If your churn rate exceeds your growth rate, your business might be losing money.
When you analyze the reasons customers leave, you might find some relatively easy fixes. These may include empowering team members to handle issues on their own, automating personalized communications or changing your customer onboarding process.
Use these business performance metrics to scale your business in a thoughtful way. You’ll be able to keep your business not only booming, but booming profitably!