What is the impact of a 1% change in everything in your business?  It's so simple it takes more than 1 page to explain, but I promise you, it's well worth your time.

Dave Brailsford in 2010 was appointed Performance Director for a UK cycling team and told to win the Tour de France within 5 years; he achieved it in 2012.  He also was involved with the British cycling team at the 2012 Olympics, and the team won 70% of the available gold medals.

His theory of 'aggregation of marginal gains' was that if you improve every area by just 1% then the total would add up to a remarkable improvement.  And not just the obvious: nutrition, training, equipment but others like a pillow for best sleep, a more effective massage gel, even reduction of infections.

As I know nothing about that sport, let's change the topic and ask "how would that work for your business?"

It's more appealing if there is a large and immediate outcome, but what if the strategy doesn't work?  Even though improving several things each by 1% may not seem notable, it can in the end be more meaningful and more sustainable.  In the beginning there may not look to be much impact, but over time there can be a big difference and your business will be streets ahead of competitors.

Consider the several key drivers of a business, and the possible ways to increase each one (at least the most obvious ones from the chart on the wall in my office):

- retain more existing customers (42 strategies)

- obtain more leads/prospects (61)

- convert more prospects into customers (60)

- improve prices/project value (49)

- increase the number of times a customer transacts with you (41)

- reduce the cost of obtaining product/services

- reduce overheads

What happens?  The "rule of 38 = 43" says to target a 5% increase in clients, a 3% improvement in client retention, a 10% increase in price or project value, a 20% increase in the number of projects per client a year (which means only 20% of clients buy 1 more time each year).  If we add these (5 + 3 + 10 + 20 = 38), this is a 43% increase in revenue, so in two years you almost double your revenue and your profit could perhaps increase by 84%.

For the sceptics, let's set out examples:  only 1% improvement, then 5%, and the numbers I used above, and compare them to a present situation (just the results, not the calculations, to keep it simple):

                                                                Now                           +1%                                 +5%                   "38 = 43"

        existing customers                  400                             400                                 400                             400

        no. of leads                                   70                               71                                   74                               74

        conversion rate                        80%                            81%                                84%                            85%

        retention rate                           50%                            51%                                53%                            53%

        average project value          $700                           $707                               $735                           $770

        transactions p/a                             1                              1.1                                  1.2                              1.3

        revenue                             $179,200                  $203,376                      $241,809                  $275,175

        cost of sales                               40%                            39%                                38%                            37%

        overheads                           $55,000                     $54,000                         $52,000                     $52,000

        Net profit                             $52,520                      $70,060                          $97,922                   $121,360

        increase                                                                        +34%                                87%                         131%

The lesson from Brailsford is to improve everything, not just the obvious.  Even a small change can have a big benefit, and all aspects of the business need to come under scrutiny.

Would it be worth your while to spend a few minutes and see how you could achieve more profit and cash.  We'd be delighted to spend 30 minutes with you and work through your business metrics:  no charge for preparing a Profit Improvement model for 12 clients.